<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 22, 1997
REGISTRATION NO. 333-28609
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 5
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AVIS RENT A CAR, INC.
(Exact Name Of Registrant As Specified In Its Charter)
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<CAPTION>
<S> <C> <C>
DELAWARE 7514 11-3347585
(State or other jurisdiction of (Primary standard industrial classification (I.R.S. employer
incorporation or organization) code number) identification number)
</TABLE>
900 OLD COUNTRY ROAD
GARDEN CITY, N.Y. 11530
(516) 222-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOHN H. CARLEY, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
AVIS RENT A CAR, INC.
900 OLD COUNTRY ROAD
GARDEN CITY, N.Y. 11530
(516) 222-3000
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
COPIES TO:
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<CAPTION>
<S> <C>
VINCENT J. PISANO, ESQ.
SUSAN J. SUTHERLAND, ESQ. STEPHEN H. COOPER, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP WEIL, GOTSHAL & MANGES LLP
919 THIRD AVENUE 767 FIFTH AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10153
(212) 735-3000 (212) 310-8000
(212) 735-2000 (FAX) (212) 310-8007 (FAX)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an offering in the United States and Canada (the
"U.S. Prospectus"), and one to be used in a concurrent offering outside the
United States and Canada (the "International Prospectus"). The prospectuses
are identical except for the front and back cover pages. The form of U.S.
Prospectus is included herein and is followed by the alternate pages to be
used in the International Prospectus. Each of the alternate pages for the
International Prospectus included herein is labeled "International
Prospectus--Alternate Pages." Final forms of each Prospectus will be filed
with the Securities and Exchange Commission pursuant to Rule 424(b) under the
Securities Act of 1933.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 22, 1997
PROSPECTUS
GRAPHIC OMITTED
19,500,000 SHARES
AVIS RENT A CAR, INC.
COMMON STOCK
All of the shares of Common Stock offered hereby will be sold by Avis Rent
A Car, Inc. (the "Company"). A total of 15,600,000 shares (the "U.S. Shares")
are being offered in the United States and Canada (the "U.S. Offering") by
the underwriters of the U.S. Offering named herein (the "U.S. Underwriters")
and 3,900,000 shares (the "International Shares") are being offered outside
the United States and Canada (the "International Offering") by the managers
of the International Offering named herein (the "Managers"). The initial
public offering price and the underwriting discounts and commissions are
identical for both the U.S. Offering and the International Offering
(collectively, the "Offerings").
Prior to the Offerings, there has been no public market for the Company's
Common Stock. It is currently estimated that the initial public offering
price will be between $15.00 and $17.00 per share. For a discussion of the
factors to be considered in determining the initial public offering price,
see "Underwriting."
The Company is a wholly owned indirect subsidiary of HFS Incorporated
("HFS"). Upon consummation of the Offerings, HFS will beneficially own
approximately 30% of the then outstanding shares of the Company's Common
Stock (approximately 27.5% if the over-allotment options granted to the U.S.
Underwriters and the Managers are exercised in full). HFS has informed the
Company that it has no present plans to reduce its ownership interest through
sales or other dispositions.
The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "AVI," subject to official notice of issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- -----------------------------------------------------------------------------
<TABLE>
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------- ---------------- ----------------- ----------------
<S> <C> <C> <C>
Per Share..... $ $ $
- ------------- ---------------- ----------------- ----------------
Total (3)..... $ $ $
- ------------- ---------------- ----------------- ----------------
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(1) See "Underwriting" for indemnification arrangements with the U.S.
Underwriters and the Managers.
(2) Before deducting expenses payable by the Company estimated at $2,500,000.
(3) The Company has granted the U.S. Underwriters and the Managers 30-day
options to purchase in the aggregate up to 2,925,000 additional shares
of Common Stock, solely to cover over-allotments, if any. If the
options are exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
<PAGE>
The U.S. Shares are offered by the several U.S. Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them and subject to
certain conditions, including the approval of certain legal matters by
counsel. The U.S. Underwriters reserve the right to withdraw, cancel or
modify the U.S. Offering and to reject orders in whole or in part. It is
expected that delivery of the U.S. Shares will be made against payment
therefor on or about , 1997, at the offices of Bear, Stearns & Co. Inc.,
245 Park Avenue, New York, New York 10167.
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MONTGOMERY SECURITIES
ROBERTSON, STEPHENS & COMPANY
BLAYLOCK & PARTNERS, L.P. CHASE SECURITIES INC.
, 1997
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial
statements and notes thereto appearing elsewhere in this Prospectus. Unless
the context otherwise requires, references in this Prospectus to (i) the
"Company" refer to Avis Rent A Car, Inc. and its operating subsidiaries and
predecessors, (ii) "ARACS" refer to Avis Rent A Car System, Inc., a wholly
owned subsidiary of the Company, (iii) "HFS" refer to HFS Incorporated and
its subsidiaries, (iv) the "Franchisor" refer to HFS Car Rental, Inc., a
wholly owned subsidiary of HFS, and (v) "WizCom" refer to WizCom
International Ltd., an indirect wholly owned subsidiary of HFS. Unless
otherwise indicated or unless the context otherwise requires, all information
contained in this Prospectus (i) assumes that the over-allotment options are
not exercised and (ii) gives effect to an 85,000 to 1 split of the Company's
common stock currently outstanding and the authorization of additional shares
of common stock and a new class of preferred stock, each of which will be
effected immediately prior to the consummation of the Offerings. Statistical
information contained herein with respect to the domestic car rental industry
has been derived from publicly available sources, including trade
publications, which the Company has not independently verified but believes
to be reliable.
HFS owns all of the outstanding equity of the Franchisor which, in turn,
owns the Avis worldwide vehicle rental system (the "Avis System"). The
Franchisor has entered into a 50 year franchise agreement with the Company
granting the Company the right to operate as a franchisee under the Avis
System. WizCom, the owner of the data processing and information system used
in connection with the vehicle rental business and which forms a part of the
Avis System (the "Wizard System"), has entered into a 50 year computer
services agreement with the Company with respect to its use of the Wizard
System.
THE COMPANY
The Company is a holding company which, through its operating subsidiary,
ARACS, operates the second largest general use car rental business in the
world, based on total revenue and volume of rental transactions. The Company
rents vehicles to business and leisure travelers through approximately 536
rental locations in both airport and non-airport (downtown and suburban)
markets in the United States, Canada, Puerto Rico, the U.S. Virgin Islands,
Argentina, Australia and New Zealand. During 1996, the Company completed
nearly 13 million rental transactions with a fleet that averaged 174,000
vehicles and generated total revenue of approximately $1.9 billion, of which
approximately 87% was derived from its operations in the United States. On
August 20, 1997, the Company purchased The First Gray Line Corporation
("First Gray Line"), the second largest Avis System franchisee in North
America.
The Avis brand name is owned by the Franchisor and is licensed for use by
its franchisees, including the Company, which is the largest Avis System
franchisee in the world. As an Avis System franchisee, the Company has
entered into certain arrangements with the Franchisor and its affiliates that
requires the Company to make payments to the Franchisor and its affiliates,
including monthly payments under the Master License Agreement consisting of a
monthly base royalty of 3.0% of the Company's gross revenue and a
supplemental royalty of 1.0% of gross revenue payable quarterly in arrears
(which will increase 0.1% per year commencing in 1999 and in each of the
following four years thereafter to a maximum of 1.5%). Until the fifth
anniversary of the effective date of the Master License Agreement, the
supplemental royalty or a portion thereof may be deferred if the Company does
not attain certain financial targets. See "Relationship With HFS." The Avis
System is comprised of approximately 4,200 rental locations, including
locations at the largest airports and cities in the United States and
approximately 160 other countries and territories, and a fleet of
approximately 370,000 vehicles during the peak season, all of which are
operated by franchisees. During 1996, the Company's 414 domestic rental
locations produced approximately 77% of the Avis System's revenue in the
United States, with the balance derived from 490 locations operated by 75
other Avis System franchisees, of whom five (including First Gray Line)
accounted for approximately 16% of the Avis System's U.S. revenue. The
Company is the sole franchisee of the Avis System in the international
markets in which it operates. The Avis System in Europe, Africa, part of Asia
and the Middle East is operated under franchise by Avis Europe Ltd. ("Avis
Europe"), which is not
3
<PAGE>
affiliated with the Company. Management believes that the strong recognition
of the Avis brand name, the breadth of the Avis System and the sophistication
of the Wizard System enable the Company and other Avis System franchisees to
provide consistent quality, pricing and service to business and leisure
customers worldwide.
The domestic vehicle rental industry has experienced significant growth
over the past five years. According to information provided by major U.S.
airports, vehicle rental industry revenues have increased at a compound
annual rate of approximately 11% since 1992. Management believes that factors
such as increases in airline passenger traffic, increased business travel and
demographic trends, among others, continue to expand the demand for rental
vehicles. Based on concessionable revenues reported by 157 airports in the
United States at which the Company operates, the Company has historically
maintained the second leading market share in the industry, with a 25% share
for 1996. The Company's network of airport rental locations, which it
believes is among the nation's largest, accounted for approximately 85% of
its domestic revenue in 1996.
The Company has historically targeted its marketing efforts toward
business travelers, who accounted for approximately 61% of the Company's
domestic revenue in 1996. The Company believes that business travelers, many
of whom rent the Company's vehicles pursuant to agreements between the
Company and their employers, have represented an important factor in the
growth and stability of its business. While the Company continues to focus on
business travelers, it intends to leverage its strong airport presence by
expanding its marketing efforts toward the leisure travel market in order to
increase its fleet utilization during non-peak business periods and extend
the average length of its rentals. During 1996, leisure travelers accounted
for approximately 39% of the Company's domestic revenue.
The Company utilizes the Wizard System, which it believes is one of the
most sophisticated information management systems in the car rental industry.
Key functions of the Wizard System include: (i) global reservations
processing, (ii) rental agreement generation and administration and (iii)
fleet accounting and control. The Company has also developed software
applications that utilize the data gathered by the Wizard System and third
party reservation systems to achieve centralized control of its major
business operations. These applications include: (i) a yield management
system that is designed to increase profit by controlling vehicle
availability by length of rental and providing decision support for rate
changes, (ii) a competitive rate information system that monitors industry
rate changes by market on a daily basis at different vehicle rental locations
and (iii) a business mix model that analyzes potential profit contribution
data by segment based upon business mix and fleet optimization
recommendations.
The Company is currently a wholly owned subsidiary of the Franchisor,
which was acquired by HFS in October 1996 (the "Acquisition"). The Company is
the successor to the car rental operations previously owned by the Franchisor
and its subsidiaries (collectively referred to as the "Predecessor
Companies"). HFS is a global provider of real estate and travel services with
a base of approximately 100 million consumer contacts annually. It is the
world's largest franchisor of real estate brokerage offices and lodging
facilities and owns leading providers of timeshare exchange services,
corporate relocation services, mortgage services for consumers and vehicle
fleet management services. On May 27, 1997, HFS announced that it had entered
into a merger agreement with CUC International Inc. ("CUC"). CUC is a leading
member services and direct marketing organization offering shopping, travel,
dining, vehicle purchasing, home buying and other services to approximately
68 million consumer members worldwide. Upon consummation of the Offerings,
HFS, through the Franchisor, will own approximately 30% of the then
outstanding shares of Common Stock of the Company (approximately 27.5% if the
over-allotment options granted to the U.S. Underwriters and the Managers are
exercised in full).
THE FIRST GRAY LINE ACQUISITION
On August 20, 1997, the Company purchased (the "First Gray Line
Acquisition") all of the outstanding capital stock of First Gray Line for
approximately $210.0 million in cash, including expenses. The net proceeds
from the Offerings will be used, among other things, to repay indebtedness
incurred to finance the First Gray Line Acquisition. See "Use of Proceeds."
4
<PAGE>
First Gray Line was the second largest Avis System franchisee in North
America with 70 locations in Southern California, Nevada and Arizona. Its
operations represented approximately 10% of the Avis System's domestic
revenue in 1996. First Gray Line's principal operation is located at Los
Angeles International Airport, one of the world's largest airport rental
vehicle markets based on vehicle rental revenues.
STRATEGY
The Company's objective is to improve its profitability through a strategy
that consists of the following key elements:
Capitalizing on Changing Industry Dynamics. The domestic car rental
industry is beginning to emerge from a period during which rental rates did
not keep pace with rising fleet and operating costs. Management believes that
the current restructuring of ownership of the Company's major competitors
will lead to an increased focus on profitability and shareholder return,
rather than upon transaction volume and market share, and, ultimately, to
more rational pricing behavior. Management intends to use its proprietary
software applications, including its sophisticated yield management, rate
information and business mix modeling systems, to capitalize upon the
improving pricing and profit outlook in the industry.
Improving Business Mix and Fleet Utilization. Historically, the Company
has capitalized on its strong network of airport rental locations by focusing
its sales and marketing resources principally toward business travelers.
While this has enabled the Company to leverage its overhead costs by
capturing a large share of transaction volume at relatively few locations,
fleet utilization historically has been characterized by peak business travel
demand during the middle of the week and reduced demand during and
immediately before and after the weekend. Management believes that the
Company's substantial presence at the nation's leading airports provides it
with the opportunity, without significant incremental cost, to capitalize on
increased air travel by leisure travelers, who tend to initiate air travel
during or close to the weekend. Accordingly, while continuing to concentrate
on its core presence in the business travel market, the Company plans to
increase its marketing efforts toward the leisure market in order to improve
fleet utilization and extend the average length of rental. In addition, the
Company believes that it can further enhance the utilization of its fleet
during non-peak periods by selectively expanding its presence in non-airport
markets through both internal growth and, if appropriate opportunities arise,
acquisitions of other car rental operators including, where feasible, other
Avis System franchisees.
Increasing Brand Loyalty Through Target Marketing. Management believes
that the domestic car rental industry will become increasingly focused on
such factors as customer service and loyalty. The customer base of the major
domestic car rental companies, including the Company, has become increasingly
diverse. Management plans to utilize the Company's proprietary software
applications to analyze its extensive customer database to identify
distinguishing characteristics and preferences of those customers who have
been historically associated with its most profitable rental transactions and
to focus its sales and marketing efforts and service features to attract
additional customers with similar characteristics and preferences. Management
believes that this analysis will enhance the quality of the car rental
experience of such customers and increase their loyalty to the Avis brand.
Capitalizing on Cross Marketing and Other Synergistic Arrangements with
HFS. The Company has initiated and is expanding cross marketing relationships
with HFS's corporate relocation and resort timeshare exchange businesses, its
lodging franchise systems, which include the Days Inn(Registered Trademark),
Howard Johnson(Registered Trademark) and Ramada(Registered Trademark) brands,
and its real estate brokerage franchise systems, including the CENTURY
21(Registered Trademark) and Coldwell Banker(Registered Trademark) brands. As
a result of the proposed merger of HFS and CUC, additional cross marketing
opportunities with CUC's membership-based consumer services are expected to
arise. The Company also expects to reduce its costs of purchasing media and
other non-fleet goods and services through arrangements with HFS.
5
<PAGE>
The following sets forth a summary organizational chart for the Company
immediately prior to the consummation of the Offerings.
HFS Incorporated
100%
HFS Car Rental Holdings, Inc.
100%
HFS Car
Rental, Inc.
100% (a)
Avis Rent A
Car, Inc.
100%
Avis Rent A Car
System, Inc.
(including operating
subsidiaries)
100%
WizCom
International,
Ltd.
100%
Wizard Co., Inc.
- ------------
(a) Upon consummation of the Offerings, HFS Car Rental, Inc. will own
approximately 30% of the then outstanding shares of Common Stock of
the Company (approximately 27.5% if the over-allotment options
granted to the U.S. Underwriters and the Managers are exercised in
full).
6
<PAGE>
THE OFFERINGS
Common Stock to be sold by the
Company:
U.S. Offering .............. 15,600,000 shares
International Offering ..... 3,900,000 shares
Total .................... 19,500,000 shares
Common Stock to be outstanding
after the Offerings .......... 28,000,000 shares(a)
Use of Proceeds ............... The net proceeds to the Company from the
Offerings are estimated to be approximately
$290.0 million (approximately $334.0 million
if the over-allotment options granted to the
U.S. Underwriters and the Managers are
exercised in full), assuming an initial
offering price of $16.00 per share, the
midpoint of the price range shown on the
cover of this Prospectus, after deducting
underwriting discounts and expenses related
to the Offerings. The Company expects that
approximately $210.0 million of the net
proceeds from the Offerings will be used to
repay amounts outstanding under the
Acquisition Credit Facility (as defined),
and certain acquisition expenses incurred to
complete the First Gray Line Acquisition.
The remaining net proceeds will be used to
prepay outstanding indebtedness. See "Use of
Proceeds" and "Business--The First Gray Line
Acquisition."
New York Stock Exchange
("NYSE") symbol .............. AVI
- ------------
(a) Does not include 4,183,908 shares of Common Stock reserved for issuance
under the Company's stock option plan (the "Stock Option Plan"), for
which options to purchase 3,460,674 shares will be outstanding upon
consummation of the Offerings. If the over-allotment options granted to
the U.S. Underwriters and the Managers are exercised in full, 4,620,977
shares of Common Stock will be reserved for issuance under the Stock
Option Plan and options to purchase 3,822,191 shares will be
outstanding. See "Management -- Stock Option Plan."
RISK FACTORS
See "Risk Factors" for a discussion of certain risks that should be
considered in connection with an investment in the Common Stock offered
hereby.
7
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The summary pro forma financial data are derived from the Unaudited Pro
Forma Consolidated Financial Statements and the related notes thereto
included elsewhere in this Prospectus. The summary pro forma financial data
give effect, as of January 1 of the earliest period presented, to (i) the
Acquisition, (ii) the settlement of a net intercompany receivable with HFS
and its affiliated companies, (iii) adjustments to reflect a 4% royalty fee
pursuant to the Master License Agreement (as defined) with HFS, and (iv) the
refinancing of substantially all of the Company's domestic fleet under
facilities consisting of: (a) a $2.0 billion commercial paper program, (b) a
$1.65 billion medium term notes program with maturities extending 3 and 5
years and (c) a $470.0 million credit facility (collectively, the
"Refinancing"). See "Description of Certain Indebtedness -- New Credit
Facility." The "Pro Forma as Adjusted" net income and earnings per share
amounts give effect, as of January 1 of the earliest period presented, to (i)
the First Gray Line Acquisition and (ii) the Offerings and the application of
the net proceeds therefrom. The pro forma adjustments are based upon
available information and certain assumptions that management of the Company
believes are reasonable. The pro forma financial data do not purport to
represent the results of operations or the financial position of the Company
which actually would have occurred had such events been consummated on the
aforesaid dates. All of the pro forma financial data presented below should
be read in conjunction with (i) the Audited Consolidated Financial Statements
and related notes thereto, (ii) the Unaudited Condensed Consolidated
Financial Statements for the six months ended June 30, 1997 and related notes
thereto, (iii) the Unaudited Pro Forma Consolidated Financial Statements and
related notes thereto, and (iv) "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," in
each case included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- ---------------
<S> <C> <C>
Statements of Operations Data:
Revenue.............................................. $1,867,517 $945,647
Costs and expenses:
Direct operating.................................... 818,432 398,548
Vehicle depreciation, net........................... 415,184 223,298
Vehicle lease charges............................... 29,208 10,833
Selling, general and administrative (a)............. 419,597 196,463
Interest, net ...................................... 183,461 89,702
Amortization of cost in excess of net assets
acquired........................................... 4,945 2,570
----------------- ---------------
Income (Loss) before provision for income taxes ..... (3,310) 24,233
Provision for income taxes........................... 2,897 11,206
----------------- ---------------
Net income (loss) ................................... $ (6,207) $ 13,027
================= ===============
Pro Forma as Adjusted:
Net income ......................................... $ 4,323 $ 19,765
================= ===============
Earnings per share (b) ............................. $ .15 $ .71
================= ===============
</TABLE>
- ------------
(a) Reflects a $74.7 million pro forma increase for the year ended
December 31, 1996 resulting from the net adjustment relating to a 4%
royalty fee payable to HFS.
(b) "Pro forma as Adjusted" earnings per share amounts were computed on
the basis of 28,000,000 shares of Common Stock, the number of shares
of Common Stock outstanding after giving effect to an 85,000 to 1
stock split to be effected immediately prior to the consummation of
the Offerings and the issuance of 19,500,000 shares of Common Stock
in the Offerings.
8
<PAGE>
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE REVENUE PER VEHICLE RENTAL TRANSACTION)
The summary financial data for the years ended December 31, 1992 and 1993
are derived from the Unaudited Consolidated Financial Statements of the
Company. The financial data for the years ended December 31, 1994 and 1995
and for the periods ended October 16, 1996 and December 31, 1996 are derived
from the Audited Consolidated Financial Statements of the Company. The
financial data for the six month periods ended June 30, 1996 and 1997 are
derived from the Unaudited Condensed Consolidated Financial Statements of the
Company. The financial data for the years ended December 31, 1992 and 1993
and the six month periods ended June 30, 1996 and 1997 are unaudited but, in
the opinion of management, have been prepared on the same basis as the
Audited Consolidated Financial Statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for fair
presentation of the financial position and results of operations for the
periods presented. Results for the six months ended June 30, 1996 and 1997
are not indicative of results for a full year. The pro forma Statements of
Financial Position Data are derived from the Unaudited Pro Forma Consolidated
Financial Statements included elsewhere in this Prospectus. The pro forma
amounts give effect, to (i) the Refinancing and (ii) the settlement of a net
intercompany receivable with HFS and its affiliated companies as if it had
been consummated on June 30, 1997. The "Pro Forma as Adjusted" amounts give
effect to (i) the First Gray Line Acquisition and (ii) the Offerings and the
application of the net proceeds therefrom as if it had been consummated on
June 30, 1997. All of the financial data presented below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the Audited Consolidated Financial
Statements and related notes thereto, the Unaudited Condensed Consolidated
Financial Statements for the six months ended June 30, 1997 and related notes
thereto and the Unaudited Pro Forma Consolidated Financial Statements and
related notes thereto, in each case included elsewhere in this Prospectus.
9
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<TABLE>
<CAPTION>
PREDECESSOR COMPANIES (A)
---------------------------------------------------------------
YEARS ENDED DECEMBER 31, JANUARY 1, 1996
--------------------------------------------- TO
1992 1993 1994 1995 OCTOBER 16, 1996
---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue........................ $1,228,560 $1,333,477 $1,412,400 $1,615,951 $1,504,673
Costs and expenses:
Direct operating.............. 621,838 646,821 664,993 724,759 650,750
Vehicle depreciation, net .... 142,602 208,090 266,637 324,186 275,867
Vehicle lease charges......... 57,666 49,633 42,778 86,916 100,318
Selling, general and
administrative (c)........... 204,927 222,629 252,024 269,434 283,180
Interest, net................. 123,362 114,036 128,898 145,199 120,977
Amortization of cost in
excess of net assets
acquired..................... 4,266 4,439 4,754 4,757 3,782
---------- ---------- ---------- ----------------
Income before provision for
income taxes.................. 73,899 87,829 52,316 60,700 69,799
Provision for income taxes .... 4,857 34,375 30,213 34,635 31,198
---------- ---------- ---------- ---------- ----------------
Net income .................... $ 69,042 $ 53,454 $ 22,103 $ 26,065 $ 38,601
========== ========== ========== ========== ================
Pro Forma as Adjusted: (d)
Net income....................
Earnings per share(e).........
SELECTED OPERATING DATA:
Number of vehicle rental
locations at period end....... 582 656 576 541 550
Peak number of vehicles during
period........................ 146,630 151,964 150,966 167,511 196,077
Average number of vehicles
during period................. 125,993 134,926 137,715 150,853 174,813
Number of rental transactions
during period (in thousands) 9,076 10,003 10,577 11,544 10,272
Average revenue per rental
transaction during period ... $ 135 $ 133 $ 134 $ 140 $ 146
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
OCTOBER 17, 1996
(DATE OF COMBINED PREDECESSOR
ACQUISITION) YEAR ENDED COMPANIES (A) SIX MONTHS
TO DECEMBER 31, 1996 SIX MONTHS ENDED ENDED
DECEMBER 31, 1996 (B) JUNE 30, 1996 JUNE 30, 1997
<S> <C> <C> <C> <C>
------------------- ------------------- ---------------- -------------
STATEMENTS OF OPERATIONS DATA:
REVENUE........................ $362,844 $1,867,517 $887,566 $945,647
COSTS AND EXPENSES:
DIRECT OPERATING.............. 167,682 818,432 390,125 398,548
VEHICLE DEPRECIATION, NET .... 66,790 342,657 163,746 179,418
VEHICLE LEASE CHARGES......... 22,658 122,976 60,862 69,025
SELLING, GENERAL AND
ADMINISTRATIVE (C)........... 68,215 351,395 168,042 203,383
INTEREST, NET................. 34,212 155,189 73,153 68,343
AMORTIZATION OF COST IN
EXCESS OF NET ASSETS
ACQUIRED..................... 1,026 4,808 2,382 2,570
------------------- ------------------- ---------------- -------------
INCOME BEFORE PROVISION FOR
INCOME TAXES.................. 2,261 72,060 29,256 24,360
PROVISION FOR INCOME TAXES .... 1,040 32,238 13,077 11,254
------------------- ------------------- ---------------- -------------
NET INCOME .................... $ 1,221 $ 39,822 $ 16,179 $ 13,106
=================== =================== ================ =============
PRO FORMA AS ADJUSTED: (D)
NET INCOME.................... $ 4,323 $ 19,765
=================== =============
EARNINGS PER SHARE(E)......... $ .15 $ .71
=================== =============
SELECTED OPERATING DATA:
NUMBER OF VEHICLE RENTAL
LOCATIONS AT PERIOD END....... 546 546 549 536
PEAK NUMBER OF VEHICLES DURING
PERIOD........................ 177,839 196,077 183,334 185,290
AVERAGE NUMBER OF VEHICLES
DURING PERIOD................. 172,461 174,226 165,767 174,993
NUMBER OF RENTAL TRANSACTIONS
DURING PERIOD (IN THOUSANDS) 2,534 12,806 6,243 6,505
AVERAGE REVENUE PER RENTAL
TRANSACTION DURING PERIOD ... $ 143 $ 146 $ 142 $ 145
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ -------------
<S> <C> <C> <C>
STATEMENTS OF FINANCIAL POSITION DATA:
Vehicles, net.............................. $2,312,109 $2,852,828 $3,145,122
Total assets............................... 3,029,073 3,656,315 4,162,622
Debt....................................... 2,183,769 2,837,874 2,976,374
Stockholders' equity....................... 87,086 87,086 377,086
Total liabilities and stockholders'
equity.................................... 3,029,073 3,656,315 4,162,622
</TABLE>
- ------------
(a) See Note 1 to the Audited Consolidated Financial Statements of the
Company.
(b) Presented on a combined twelve-month basis and include the results of
the Predecessor Companies for the period January 1, 1996 to October 16,
1996 and the results of the Company for the period October 17, 1996
(Date of Acquisition) to December 31, 1996. See Note 1 to the Audited
Consolidated Financial Statements.
(c) The amounts for the periods October 17, 1996 (Date of Acquisition) to
December 31, 1996 and the six months ended June 30, 1997 include
charges from HFS. See Note 3 to the Audited Consolidated Financial
Statements.
(d) See Unaudited Pro Forma Consolidated Financial Statements.
(e) "Pro forma as Adjusted" earnings per share amounts were computed on the
basis of 28,000,000 shares of Common Stock, the number of shares of
Common Stock outstanding after giving effect to an 85,000 to 1 stock
split to be effected immediately prior to the consummation of the
Offerings and the issuance of 19,500,000 shares of Common Stock in the
Offerings.
10
<PAGE>
RISK FACTORS
Prospective investors should consider carefully all of the information in
this Prospectus and, in particular, should evaluate the following risks in
connection with an investment in the Common Stock being offered hereby.
FRANCHISEE STATUS; ROYALTY PAYMENTS; DEPENDENCE ON AVIS SYSTEM
As an Avis System franchisee, the Company must coordinate significant
matters relating to the Company's growth and operational strategies with the
Franchisor. Effective January 1, 1997, the Company was required to pay
royalties to the Franchisor based upon the Company's revenue, not its
profits, which could result in increasing royalty payments during a period of
declining profits. On an unaudited pro forma basis, if the royalties had been
charged to the Company beginning on October 17, 1996, net income for the
period October 17, 1996 to December 31, 1996 would have been reduced by $4.3
million resulting in a pro forma net loss of $3.1 million. The royalties
resulted in a charge to the Company for the six months ended June 30, 1997 of
$37.8 million and resulted in a reduction in net income of approximately
$20.4 million. The Company is required to maintain certain standards and meet
certain guidelines relating to its operations. The Franchisor has the right
to terminate the Company's franchise for certain violations of its franchise
agreement, including, among others, certain bankruptcy or insolvency events,
if the Company purports to transfer any rights or obligations thereunder
without compliance with its terms, or if the Company fails, refuses or
neglects to promptly pay monies owing to the Franchisor, WizCom or HFS on
three or more occasions and upon the occurrence of a Change of Control Event.
A Change of Control Event (as more fully defined herein) refers to any
transaction pursuant to which (a) a party other than HFS or its affiliates
acquires control of specified percentages of the voting stock of the Company,
(b) another corporation merges into the Company or the Company merges into or
consolidates with another corporation, (c) the Company sells or otherwise
conveys substantially all of its assets or (d) a majority of the Board of
Directors leaves office during any two year period. Any such termination
would have a material adverse effect on the Company. See "Relationship with
HFS -- Master License Agreement."
LEVERAGE; LIMITATIONS UPON LIQUIDITY; CAPITAL RAISING; INTEREST RATE RISK
Leverage
At June 30, 1997, the Company had approximately $2.2 billion of
indebtedness outstanding, of which approximately $2.2 billion was incurred
for fleet financing and secured by purchased vehicles. At June 30, 1997, the
Company had approximately $900.0 million of additional credit availability
under its fleet financing facilities. On a pro forma basis, at June 30, 1997,
after giving effect to the Refinancing, the Company had approximately $2.8
billion of debt outstanding which included approximately $553.5 million of
debt related to vehicles which were previously accounted for as operating
leases. In addition, on a pro forma basis, at June 30, 1997, the Company had
approximately $1.1 billion of additional credit available. This high level of
indebtedness could have important consequences to the Company's operations,
including: (i) the potential limitation on the Company's ability to obtain
additional financing for certain purposes, (ii) the commitment of a
substantial portion of the Company's cash flow from operations to debt
service and (iii) the limitation of the Company's ability to react to changes
in the vehicle rental industry and general economic conditions.
Restrictions Imposed by Indebtedness
The agreements with the Company's lenders include a number of significant
covenants that, among other things, restrict its ability to dispose of
non-fleet assets, incur additional indebtedness, create liens, pay dividends,
enter into certain investments or acquisitions, repurchase or redeem capital
stock, engage in mergers or consolidations or engage in certain transactions
with affiliates and otherwise restrict corporate activities. Certain of these
agreements also require the Company to maintain specified financial ratios. A
breach of any of these covenants or the inability of the Company to maintain
the required financial ratios could result in a default in respect of the
related indebtedness. In the event of a default, the lenders could elect,
among other options, to declare the indebtedness, together with accrued
interest
11
<PAGE>
and other fees, to be immediately due and payable, failing which the lenders
could proceed against the collateral securing that indebtedness. See
"--Dividends."
Availability of Financing; Requirements for Capital
The Company depends upon third-party financing to purchase its fleet
vehicles. Continued availability of such financing upon favorable terms is
critical to the Company's operations. Since a substantial portion of such
financing is obtained in connection with Repurchase Programs, a significant
change in the financial condition of the vehicle manufacturers, particularly
General Motors Corporation ("GM") and Chrysler Corporation ("Chrysler"),
would significantly affect the Company's ability to obtain such financing on
favorable terms. In addition, under the terms of certain of the Company's
credit facilities, including the Company's fleet financing arrangements, the
failure of a repurchase party (such as GM or Chrysler) to maintain an
investment grade rating for its own senior debt or the bankruptcy of a
repurchase party or any other event that has a material adverse effect on the
repurchase party's ability to perform, or upon a material default of a
repurchase party under a Repurchase Program, may result in termination of the
Company's credit lines for the purchase of vehicles from such repurchase
party, a requirement to repay a portion of the indebtedness that is secured
by vehicles purchased from that repurchase party and removal of those
vehicles from the applicable collateral pool for such facilities. The
inability of the Company to obtain fleet financing on favorable terms would
have a material adverse effect on the Company's financial condition and
results of operations.
Interest Rate Risk
The Company has developed an interest rate management policy, including a
target mix for average fixed rate and floating rate indebtedness on a
consolidated basis. However, an increase in interest rates may have a
material adverse impact on the Company's profitability. Approximately 44% of
the Company's outstanding debt at August 1, 1997 was interest rate sensitive
and had a weighted average interest rate at such date of 5.9%. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of Certain
Indebtedness."
IMPORTANCE OF MANUFACTURERS' REPURCHASE PROGRAMS
At June 30, 1997, approximately 92% of the vehicles in the Company's
rental fleet were covered by vehicle manufacturers' repurchase programs (the
"Repurchase Programs"). Under a Repurchase Program, a buyer, such as the
Company, agrees to purchase a specified minimum number of vehicles directly
from franchised dealers of the manufacturer at a specified price and the
manufacturer agrees to buy those vehicles back from the buyer at a future
date at a price that is based upon the capitalized cost of the vehicles less
an agreed-upon depreciation factor and, in certain cases, an adjustment for
damage and/or excess mileage. The Repurchase Programs limit the Company's
risk of a decline in the residual value of its fleet and enable the Company
to fix its depreciation expense in advance. Vehicle depreciation is the
largest cost factor in the Company's vehicle rental operations. The Company
could be adversely affected if automobile manufacturers reduce the
availability of Repurchase Programs or related incentives. See "--Dependence
on GM" and "Business -- Fleet Acquisition and Management."
The Company could be at a competitive disadvantage if U.S. automobile
manufacturers selectively restrict eligibility to participate in their
Repurchase Programs. Certain U.S. automobile manufacturers have direct or
indirect equity stakes in certain of the major domestic car rental companies,
and each of these companies maintains a close relationship with one or more
U.S. automobile manufacturers. At June 1, 1997, Ford Motor Company ("Ford")
owned a controlling interest in The Hertz Corporation ("Hertz") and a
minority interest in Budget Rent A Car Corporation ("Budget") and Chrysler
had equity interests in Dollar Rent a Car Systems, Inc. ("Dollar") and
Thrifty Rent-A-Car Systems, Inc. ("Thrifty"). Any effort by GM to reduce the
scope of the Company's GM Repurchase Program could adversely affect the
Company's ability to compete with those of its competitors whose access to
similar programs is not reduced or that have well established alternative
vehicle disposition facilities.
INCREASING PRICE OF VEHICLES
In recent years, the average price of new cars has increased. From time to
time, automobile manufacturers sponsor sales incentive programs that tend to
lower the average cost of vehicles for fleet
12
<PAGE>
purchasers such as the Company. The Company anticipates that new vehicle
prices will continue to increase, and there can be no assurance that sales
incentive programs will remain available, that the Company will be able to
effectively control the average cost of its fleet by purchasing a mix of less
expensive vehicles or that, because of competitive pressures, the Company
will be able to pass on the increased cost of vehicles to its rental
customers.
DEPENDENCE ON GM
GM, through its franchised dealers, has been the Company's principal
supplier of vehicles for nearly twenty years. From 1989 until the date of the
Acquisition, GM was a minority shareholder of the Company. The number of
vehicles purchased by the Company varies from year to year. In model year
1996, approximately 83% of the Company's vehicle fleet purchases in the
United States consisted of GM vehicles. In model year 1997, approximately 69%
of the Company's vehicle fleet purchases in the United States are expected to
consist of GM vehicles. During the term of the agreement, at least 51% of the
Company's domestic fleet must consist of GM vehicles. Shifting significant
portions of fleet purchases to other manufacturers would require lead time.
As a result, GM's inability to supply the Company with the planned number and
type of vehicles could have a material adverse effect on the Company's
financial condition and results of operations. In addition, if GM is not able
to offer competitive terms and conditions and the Company is not able to
purchase sufficient quantities of vehicles from other automobile
manufacturers on competitive terms and conditions, then the Company may be
forced to purchase vehicles at higher prices or on otherwise less favorable
terms. Such a situation could adversely affect the Company's results of
operations through increased vehicle acquisition and depreciation costs if it
is unable to pass these costs on to its customers through increases in rental
rates. See "Business -- Fleet Acquisition and Management."
AVAILABILITY AND PRICE OF FUEL
The Company's operations could be adversely affected by limitations on
fuel supplies, the imposition of mandatory allocations or rationing of fuel
or significant increases in fuel prices. A severe and protracted disruption
of fuel supplies or significant increases in fuel prices could materially
adversely affect the Company's operating results.
DEPENDENCE ON AIR TRAVEL INDUSTRY
In 1996, approximately 85% of the Company's revenue from its domestic
operations was generated at its airport rental locations. A sustained
material decrease in airline passenger traffic in the United States could
have a material adverse effect on the Company's results of operations. Events
that could reduce airline passenger traffic include, in addition to a general
economic downturn (discussed below), labor unrest, airline bankruptcies and
consolidations, substantially higher air fares, the outbreak of war,
high-profile crimes against tourists and incidents of terrorism.
RISK OF ECONOMIC DOWNTURN
The Company's results of operations are affected by certain economic
factors, including the level of economic activity in the markets in which it
operates. A decline in economic activity either in the United States or in
international markets may adversely affect the Company. In the vehicle rental
business, a decline in economic activity typically results in a decline in
both business and leisure travel, and accordingly a decline in the volume of
vehicle rental transactions. In the case of a decline in vehicle rental
activity, the Company may reduce rental rates to meet competitive pressures,
which could adversely affect the Company's results of operations. A decline
in economic activity also may have an adverse effect on residual values
realized on the disposition of those of the Company's vehicles that are not
covered by Repurchase Programs. At June 30, 1997, the Company was subject to
residual risk with respect to 8% of the vehicles in its fleet.
SEASONALITY
The Company's third quarter, which covers the peak summer travel months,
has historically been its strongest, accounting in 1996 for approximately 28%
and 53% of the Company's revenue and pre-tax
13
<PAGE>
income, respectively. Any occurrence that disrupts travel patterns during the
summer period could have a material adverse effect on the Company's annual
operating results. The Company's first quarter is generally its weakest
because of reduced leisure travel and the greater potential for adverse
weather conditions. Many of the Company's operating expenses, such as rent,
insurance and personnel, are fixed and cannot be reduced during periods of
decreased rental demand. As a result, there can be no assurance that the
Company would have sufficient liquidity under all conditions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Seasonality."
COMPETITION
The vehicle rental industry is characterized by intense competition,
particularly with respect to price and service. In addition, recent changes
in ownership of a number of the major domestic vehicle rental companies could
further intensify competition. See "Business --Industry Overview" and
"Business -- Competition." In any geographic market, the Company may
encounter competition from national, regional and local vehicle rental
companies. The Company's main competitors for vehicle rentals are Hertz,
Budget, Alamo Rent-a-Car Inc. ("Alamo"), National Car Rental System, Inc.
("National"), Dollar, Enterprise Rent a Car ("Enterprise") and Thrifty.
From time to time, either because of overcapacity or reduced demand, the
major vehicle rental companies have been subject to industry-wide price
pressures, and the Company has, on such occasions, adjusted its rental rates
in response to such pressures. The Company has taken steps to address its
fixed cost structure to improve its overall competitive position and industry
overcapacity has declined. However, a recurrence of oversupply or a marked
reduction in overall demand could adversely affect the Company's ability to
maintain or increase its rental rates.
REGULATION OF LOSS DAMAGE WAIVERS
A significant source of profits for the vehicle rental industry has been
the sale of loss damage waivers, by which rental companies agree to relieve a
customer from financial responsibility arising from vehicle damage incurred
during the rental period. Approximately 3.6% of the Company's total revenue
during 1996 was generated by the sale of loss damage waivers. The U.S. House
of Representatives has from time to time considered legislation that would
regulate the conditions under which loss damage waivers may be sold by
vehicle rental companies. House Bill H.R. 175, introduced in January 1995,
seeks to prohibit the imposition of liability on renters for loss of, or
damage to, rented vehicles, except in certain circumstances, and would
prohibit the sale of loss damage waivers. To date, no action has been taken
on this bill. In addition, approximately 40 states have considered
legislation affecting loss damage waivers. To date, 24 states have enacted
legislation regulating the sale of loss damage waivers, most of which
requires disclosure to each customer at the time of rental that damage to the
rented vehicle may be covered by the customer's personal automobile insurance
and that loss damage waivers may not be necessary. In addition, in the late
1980's, New York and Illinois enacted legislation which eliminated the
Company's right to offer loss damage waivers for sale and limited potential
customer liability to $100 and $200, respectively. The Illinois legislature
has passed legislation increasing the limit on potential customer liability
to the fair market value of the vehicle or the cost of the repairs, whichever
is less. The legislation is awaiting the approval of the Governor of
Illinois. Adoption of national or additional state legislation affecting or
limiting the sale of loss damage waivers could result in the loss of this
revenue source and additional limitations on potential customers' liability
could increase the Company's costs.
ENVIRONMENTAL RISKS INHERENT IN ON-SITE PETROLEUM STORAGE
Approximately 241 of the Company's domestic and international facilities
contain tanks for the storage of petroleum products, such as gasoline, diesel
fuel and waste oils. At approximately 213 of the Company's locations, one or
more of these tanks are located underground. The Company maintains an
environmental compliance program that includes the replacement of steel tanks
and the implementation of required technical and operational procedures
designed to minimize the potential for leaks and spills, maintenance of
records and the regular testing of tank systems for tightness. However, there
can be no assurance that these tank systems will at all times remain free
from leaks or that the use of these tanks
14
<PAGE>
will not result in spills. In addition, historical operations at certain of
the Company's properties, including activities relating to automobile and bus
maintenance, may have resulted in leaks or spills to soil or groundwater. Any
such leak or spill, depending on such factors as the material involved,
quantity and environmental setting, could result in interruptions to the
Company's operations and expenditures that could have a material adverse
effect on the Company's results of operations and financial condition. At
certain facilities, the Company presently is remediating soil and groundwater
contamination. Based on currently available information, the Company does not
believe that the related expenditures will be material. In the United States,
Canada and Puerto Rico, the Company carries environmental impairment
liability coverage with annual limits of $4.0 million per site and $4.0
million in the aggregate per site and a deductible generally of $250,000
against liability to third parties and clean-up costs, but does not cover
business interruption in the Company's own operations.
UNINSURED LIABILITY RISK
The Company's business exposes it to claims for personal injury, death and
property damage resulting from the use of the vehicles rented by the Company.
The Company either self-insures or maintains coverage for such risk up to
$1.0 million per occurrence in its countries of operation and maintains
insurance with unaffiliated carriers in excess of such level up to $200.0
million per occurrence. There can be no assurance that the Company will not
be exposed to uninsured liability at levels in excess of historical levels
resulting from multiple payouts or otherwise, that liabilities in respect of
existing or future claims will not exceed the level of the Company's
insurance, that the Company will have sufficient capital available to pay any
uninsured claims or that insurance with unaffiliated carriers will continue
to be available to the Company on economically reasonable terms. See
"Business -- Insurance" and "--Legal Proceedings."
FUTURE SALES OF COMMON STOCK BY HFS
Subject to applicable federal securities laws and the restrictions set
forth below, after completion of the Offerings, HFS may sell any or all of
the shares of Common Stock beneficially owned by it or distribute any or all
of such shares of Common Stock to its stockholders. Sales or distributions by
HFS of substantial amounts of Common Stock in the public market or to its
stockholders, or the perception that such sales or distributions could occur,
could adversely affect prevailing market prices for the Common Stock. HFS has
advised the Company that its current intent is to continue to hold all of the
Common Stock beneficially owned by it following the Offerings. However, HFS
is not subject to any contractual obligation to retain its interest, except
that HFS and the Company have agreed, subject to certain limited exceptions,
not to sell or otherwise dispose of any shares of Common Stock for a period
of 180 days after the date of this Prospectus without the prior written
consent of Bear, Stearns & Co. Inc. See "Underwriting." As a result, there
can be no assurance concerning the period of time during which HFS will
maintain its beneficial ownership of Common Stock owned by it following the
Offerings. HFS will have registration rights with respect to the shares of
Common Stock owned by it following the Offerings, which would facilitate any
future disposition. See "Relationship with HFS -- Registration Rights
Agreement" and "Shares Eligible for Future Sale."
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of Delaware law, the Company's Amended and Restated
Certificate of Incorporation and the Company's Amended and Restated By-laws
could delay or impede the removal of incumbent directors and could make it
more difficult for a third party to acquire, or could discourage a third
party from attempting to acquire, control of the Company. Such provisions
could limit the price that certain investors might be willing to pay in the
future for shares of the Common Stock. In addition, shares of preferred stock
may be issued by the Board of Directors of the Company without stockholder
approval on such terms and conditions, and having such rights, privileges and
preferences, as the Board of Directors may determine. The rights of the
holders of the Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any preferred stock that may be issued in
the future. The Company has no current plans to issue any shares of preferred
stock. See "Description of Capital Stock -- Preferred
15
<PAGE>
Stock" and "Descriptions of Capital Stock -- Section 203." The Franchisor has
the right to terminate the Company's franchise upon a Change of Control Event
which would discourage a third party from acquiring control of the Company.
See "Relationship with HFS --Master License Agreement."
LACK OF PUBLIC MARKET FOR COMMON STOCK; DETERMINATION OF PUBLIC OFFERING
PRICE
Prior to the Offerings, there has been no public market for the Common
Stock. Although the Common Stock has been approved for listing on the NYSE,
subject to official notice of issuance, there can be no assurance as to the
development or liquidity of any trading market for the Common Stock or that
investors in the Common Stock will be able to resell their shares at or above
the initial public offering price. The initial public offering price for the
shares of Common Stock will be determined through negotiations between the
Company and representatives of the U.S. Underwriters and the Managers, and
may not be indicative of the market price of the Common Stock after the
Offerings. See "Underwriting."
DILUTION
Purchasers of the Common Stock will experience immediate and substantial
dilution in net tangible book value per share of Common Stock from the
initial offering price. See "Dilution."
RELATIONSHIP WITH HFS; POTENTIAL CONFLICTS OF INTEREST
HFS's continuing beneficial ownership of the Company's Common Stock, and
the ownership of HFS common stock by directors or officers of the Company or
their service as directors or officers of both the Company and HFS, could
create conflicts of interest when those directors and officers are faced with
decisions that could have different implications for the Company and HFS,
including potential acquisitions of businesses, the issuance of additional
securities, the election of new or additional directors, the payment of
dividends by the Company and other matters. The Company has not instituted
any formal plan or arrangement to address potential conflicts of interest
that may arise among the Company, HFS and their affiliates. However, under
Delaware corporate law, officers and directors of the Company owe fiduciary
duties to the Company and its stockholders. See "Relationship with HFS."
The Company is party to various agreements with HFS and its subsidiaries
that were entered into when HFS beneficially owned all of the outstanding
Common Stock of the Company. While these agreements, including the Company's
franchise agreement with the Franchisor, were not negotiated on an arms'
length basis, these agreements, taken together, are generally consistent with
other agreements HFS has negotiated with third parties. In addition, the
Company is required to pay the Franchisor royalties based on a percentage of
the Company's revenue, not its profits. As a result, the Company's strategy
to increase profitability may conflict with the Franchisor's interest in
increasing revenue. See "Relationship with HFS -- Master License Agreement."
DIVIDENDS
The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future. The New Credit Facility (as defined)
prohibits the payment of cash dividends until the fiscal year ending December
31, 1998 and, thereafter, permits the payment of dividends only if the
Company meets a minimum leverage ratio, the amount of such dividend does not
exceed a designated percentage of the Company's cash flow and no default
exists under the New Credit Facility. See "Dividend Policy."
16
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein under "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" including, without limitation, those
concerning (i) the Company's strategy, (ii) the Company's expansion plans,
(iii) the Company's capital expenditures, (iv) the percentage of vehicles
expected to be acquired from GM in the future, (v) the terms upon which
vehicles will be acquired, (vi) the development of the Company's strategic
information system and (vii) the cross-marketing opportunities with HFS and
CUC, contain certain forward-looking statements concerning the Company's
operations, economic performance and financial condition. Because such
statements involve risks and uncertainties, actual results may differ
materially from those expressed or implied by such forward-looking
statements. Factors that could cause such differences include, but are not
limited to, those discussed under "Risk Factors."
17
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offerings are estimated to be
approximately $290.0 million (approximately $334.0 million if the
over-allotment options granted to the U.S. Underwriters and the Managers are
exercised in full), assuming an initial offering price of $16.00 per share,
the midpoint of the price range shown on the cover of this Prospectus, after
deducting underwriting discounts and estimated expenses related to the
Offerings. The Company expects that approximately $210.0 million of the net
proceeds from the Offerings will be used to repay amounts outstanding under
the Acquisition Credit Facility which was entered into in connection with the
First Gray Line Acquisition and certain acquisition expenses. The Company
entered into a credit agreement dated as of August 19, 1997 (the "Acquisition
Credit Facility") with ARACS, the lenders party thereto (the "Lenders") and
The Chase Manhattan Bank, as administrative agent. The Company borrowed
$200.0 million pursuant to the Acquisition Credit Facility at an interest
rate equal to the rate for loans in the London interbank market as determined
therein plus a margin of 0.225%. The Acquisition Credit Facility matures on
November 19, 1997, but the borrowings thereunder are required to be prepaid
prior to such date out of the net cash proceeds of the Offerings. The
remaining net proceeds will be used to prepay approximately $80.0 million of
indebtedness under debt instruments bearing interest, at a weighted average
interest rate of 5.63% as of June 30, 1997, with maturities not in excess of
90 days. See "Business -- The First Gray Line Acquisition."
DIVIDEND POLICY
The Company anticipates that for the foreseeable future all earnings will
be retained for use in its business and does not anticipate paying cash
dividends. Any future declaration and payment of dividends will be subject to
the discretion of the Board of Directors of the Company and subject to
certain limitations under the General Corporate Law of the State of Delaware.
The timing, amount and form of dividends, if any, will depend, among other
things, on the Company's results of operations, financial condition, cash
requirements and other factors deemed relevant by the Board of Directors of
the Company. The Company, as a holding company, will be dependent on the
earnings and cash flow of, and dividends and distributions from, ARACS to pay
any cash dividends or distributions on the Common Stock. In addition, the
Company's ability to pay cash dividends is restricted under various of its
debt instruments. See "Risk Factors -- Dividends," "Business -- Regulatory
Matters," "Description of Certain Indebtedness" and "Management's Discussion
and Analysis of Financial Condition -- Liquidity and Capital Resources."
Prior to the acquisition by HFS of the parent of the Company's Predecessor
Company in October 1996, the Company's Predecessor Company paid dividends to
its parent of $1.4 million and $8.7 million during 1996 and 1995,
respectively, which are not indicative of those that may be paid by the
Company in the future.
18
<PAGE>
DILUTION
At June 30, 1997, the Company had a net tangible book value (deficiency)
of approximately $(112.0) million, or $(13.17) per share. "Net tangible book
value" per share represents net tangible assets (total assets less
liabilities and cost in excess of net assets acquired) of the Company on a
consolidated basis, divided by the total number of shares outstanding before
the Offerings (after giving effect to an 85,000 to 1 stock split). Without
taking into account any changes in net tangible book value after June 30,
1997, other than to give effect to the Offerings and the application of the
net proceeds therefrom (at an assumed public offering price of $16.00 per
share), the pro forma net tangible book value of the Common Stock as of June
30, 1997 would have been approximately $178.0 million, or $6.36 per share.
The following table gives effect to the Offerings as if they had occurred at
June 30, 1997 and illustrates the immediate increase in net tangible book
value of $19.53 per share to the Franchisor and an immediate dilution of
$9.64 per share to new investors:
<TABLE>
<CAPTION>
<S> <C> <C>
Public offering price per share...................... $16.00
--------
Net tangible book value (deficiency) per share as of
June 30, 1997 .................. .................. $(13.17)
Increase in net tangible book value per share
attributable to the Offerings....................... 19.53
----------
Pro forma net tangible book value per share as of
June 30, 1997, after giving effect to the Offerings 6.36
--------
Immediate dilution per share to new investors in the
Offerings........................................... $9.64
========
</TABLE>
The calculation in the table above excludes 4,183,908 shares reserved for
issuance under the Stock Option Plan (4,620,977 shares if the over-allotment
options granted to the U.S. Underwriters and the Managers are exercised in
full). See "Management -- Stock Option Plan."
The following table sets forth as of June 30, 1997, on a pro forma basis,
the respective positions of the Franchisor and new investors with respect to
the number of shares of Common Stock purchased from the Company, the total
consideration paid therefor and the average price paid per share, at an
assumed public offering price of $16.00 per share.
<TABLE>
<CAPTION>
SHARES TOTAL CONSIDERATION
----------------------------- ----------------------------- AVERAGE
APPROXIMATE APPROXIMATE PRICE PER
NUMBER PERCENTAGE AMOUNT PERCENTAGE SHARE
-------------- ------------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
New Investors . 19,500,000 70% $312,000,000 81% $16.00
The Franchisor 8,500,000(a) 30 75,000,000 19 8.82
-------------- ------------- -------------- ------------
Total......... 28,000,000 100% $387,000,000 100% 13.82
============== ============= ============== ============= ===========
</TABLE>
- ------------
(a) Reflects an 85,000 to 1 stock split to be effected immediately prior to
the consummation of the Offerings.
19
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1997 (a) on an actual basis, (b) as adjusted to give effect to (i)
the Refinancing, (ii) additional indebtedness related to vehicles previously
accounted for as operating leases and (iii) the settlement of a net
intercompany receivable with HFS and its affiliated companies and the
application of the net proceeds therefrom to reduce indebtedness and (c) as
further adjusted to give effect to the sale of the shares of Common Stock
offered hereby and application of the net proceeds therefrom as described
under "Use of Proceeds." This table should be read in conjunction with the
Unaudited Condensed Consolidated Financial Statements of the Company included
elsewhere in this Prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------------------------
AS FURTHER
ACTUAL(A) AS ADJUSTED ADJUSTED
------------ ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Vehicle Financing--Short-term ................. $1,954,987 $ 908,805 $1,047,305
Vehicle Financing--Term Notes ................. -- 1,650,000 1,650,000
Vehicle Financing--Subordinated ............... 69,713 -- --
Debt of foreign subsidiaries .................. 138,067 138,067 138,067
Other debt .................................... 21,002 141,002 141,002
------------ ------------- ------------
Total debt ................................... 2,183,769 2,837,874 2,976,374
------------ ------------- ------------
Stockholders' equity:
Preferred Stock, $.01 par value, 20,000,000
shares authorized; none issued(d) ............ -- -- --
Common Stock, $.01 par value, 100,000,000
shares authorized; 8,500,000 shares issued
and outstanding, actual and as adjusted;
28,000,000 shares issued, as further
adjusted(b)(c)(d) ............................ 85 85 280
Additional paid-in capital(c) ................. 74,915 74,915 364,720
Retained earnings ............................. 14,290 14,290 14,290
Foreign currency translation adjustment ...... (2,204) (2,204) (2,204)
------------ ------------- ------------
Total stockholders' equity.................... 87,086 87,086 377,086
------------ ------------- ------------
Total capitalization ........................ $2,270,855 $2,924,960 $3,353,460
============ ============= ============
</TABLE>
- ------------
(a) Excludes $254.0 million of subordinated vehicle financing due to an
affiliate of HFS.
(b) Excludes 4,183,908 shares of Common Stock reserved for issuance under
the Stock Option Plan (4,620,977 shares if the over-allotment options
granted to the U.S. Underwriters and the Managers are exercised in
full). See "Management -- Stock Option Plan."
(c) The actual number of shares issued and outstanding and additional
paid-in capital as of June 30, 1997 have been restated to reflect the
85,000 to 1 stock split to be effected immediately prior to the
consummation of the Offerings.
(d) Reflects an increase in the number of authorized shares of Common Stock
and Preferred Stock to be effected immediately prior to the
consummation of the Offerings.
20
<PAGE>
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE REVENUE PER VEHICLE RENTAL TRANSACTION)
The selected financial data for the years ended December 31, 1992 and 1993
are derived from the Unaudited Consolidated Financial Statements of the
Company. The financial data for the years ended December 31, 1994 and 1995
and for the periods ended October 16, 1996 and December 31, 1996, are derived
from the Audited Consolidated Financial Statements of the Company. The
financial data for the six month periods ended June 30, 1996 and 1997 are
derived from the Unaudited Condensed Consolidated Financial Statements of the
Company. The financial data for the years ended December 31, 1992 and 1993
and the six month periods ended June 30, 1996 and 1997 are unaudited but, in
the opinion of management, have been prepared on the same basis as the
audited consolidated financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for fair
presentation of the financial position and results of operations for the
periods presented. Results for the six months ended June 30, 1996 and 1997
are not indicative of results for a full year. All of the financial data
presented below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and with the
Audited Consolidated Financial Statements and related notes thereto and the
Unaudited Condensed Consolidated Financial Statements for the six months
ended June 30, 1997 and related notes thereto included elsewhere in this
Prospectus.
21
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANIES(A)
---------------------------------------------------------------
YEARS ENDED DECEMBER 31, JANUARY 1, 1996
--------------------------------------------- TO
1992 1993 1994 1995 OCTOBER 16, 1996
---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue.......................................... $1,228,560 $1,333,477 $1,412,400 $1,615,951 $1,504,673
Costs and expenses:
Direct operating................................ 621,838 646,821 664,993 724,759 650,750
Vehicle depreciation, net ...................... 142,602 208,090 266,637 324,186 275,867
Vehicle lease charges........................... 57,666 49,633 42,778 86,916 100,318
Selling, general and administrative(d) ......... 204,927 222,629 252,024 269,434 283,180
Interest, net................................... 123,362 114,036 128,898 145,199 120,977
Amortization of cost in excess of net assets
acquired....................................... 4,266 4,439 4,754 4,757 3,782
---------- ---------- ---------- ---------- ----------------
Income before provision for income taxes ........ 73,899 87,829 52,316 60,700 69,799
Provision for income taxes....................... 4,857 34,375 30,213 34,635 31,198
---------- ---------- ---------- ---------- ----------------
Net income ...................................... $ 69,042 $ 53,454 $ 22,103 $ 26,065 $ 38,601
========== ========== ========== ========== ================
STATEMENTS OF FINANCIAL POSITION DATA:
Vehicles, net.................................... $1,452,197 $1,716,518 $1,873,158 $2,167,167 $2,404,275
Total assets..................................... 2,189,008 2,419,684 2,603,113 2,824,898 3,187,697
Debt............................................. 746,532 842,541 1,060,123 1,109,747 1,355,595
Vehicle financing notes--due to affiliates ..... 1,000,000 1,010,000 1,050,000 1,180,000 1,289,500
Stockholder's equity............................. 465,856 628,256 658,351 688,360 741,307
Total liabilities and stockholders' equity ...... $2,189,008 $2,419,684 $2,603,113 $2,824,898 $3,187,697
SELECTED OPERATING DATA:
Number of vehicle rental locations at period
end............................................. 582 656 576 541 550
Peak number of vehicles during period............ 146,630 151,964 150,966 167,511 196,077
Average number of vehicles during period ........ 125,993 134,926 137,715 150,853 174,813
Number of rental transactions during period
(in thousands) ................................. 9,076 10,003 10,577 11,544 10,272
Average revenue per rental transaction during
period ......................................... $ 135 $ 133 $ 134 $ 140 $ 146
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
OCTOBER 17, 1996 PREDECESSOR
(DATE OF COMBINED COMPANIES(A) SIX MONTHS
ACQUISITION) YEAR ENDED SIX MONTHS ENDED
TO DECEMBER 31, ENDED JUNE 30,
DECEMBER 31, 1996 1996(B) JUNE 30, 1996 1997(C)
------------------- ------------------ ------------- --------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
REVENUE.......................................... $ 362,844 $1,867,517 $ 887,566 $ 945,647
COSTS AND EXPENSES:
DIRECT OPERATING................................ 167,682 818,432 390,125 398,548
VEHICLE DEPRECIATION, NET ...................... 66,790 342,657 163,746 179,418
VEHICLE LEASE CHARGES........................... 22,658 122,976 60,862 69,025
SELLING, GENERAL AND ADMINISTRATIVE(D) ......... 68,215 351,395 168,042 203,383
INTEREST, NET................................... 34,212 155,189 73,153 68,343
AMORTIZATION OF COST IN EXCESS OF NET ASSETS
ACQUIRED....................................... 1,026 4,808 2,382 2,570
------------------- ------------------ ------------- --------------
INCOME BEFORE PROVISION FOR INCOME TAXES ........ 2,261 72,060 29,256 24,360
PROVISION FOR INCOME TAXES....................... 1,040 32,238 13,077 11,254
------------------- ------------------ ------------- --------------
NET INCOME ...................................... $ 1,221 $ 39,822 $ 16,179 $ 13,106
=================== ================== ============= ==============
STATEMENTS OF FINANCIAL POSITION DATA:
VEHICLES, NET.................................... $2,243,492 $2,243,492 $2,476,530 $2,312,109
TOTAL ASSETS..................................... 3,131,357 3,131,357 2,730,057 3,029,073
DEBT............................................. 2,295,474 2,295,474 1,314,921 2,183,769
VEHICLE FINANCING NOTES--DUE TO AFFILIATES ..... 247,500 247,500 1,239,500 254,029
STOCKHOLDER'S EQUITY............................. 76,540 76,540 706,713 87,086
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...... $3,131,357 $3,131,357 $2,730,057 $3,029,073
SELECTED OPERATING DATA:
NUMBER OF VEHICLE RENTAL LOCATIONS AT PERIOD
END............................................. 546 546 549 536
PEAK NUMBER OF VEHICLES DURING PERIOD............ 177,839 196,077 183,334 185,290
AVERAGE NUMBER OF VEHICLES DURING PERIOD ........ 172,461 174,226 165,767 174,993
NUMBER OF RENTAL TRANSACTIONS DURING PERIOD
(IN THOUSANDS) ................................. 2,534 12,806 6,243 6,505
AVERAGE REVENUE PER RENTAL TRANSACTION DURING
PERIOD ......................................... $ 143 $ 146 $ 142 $ 145
</TABLE>
- ------------
(a) See Note 1 to the Audited Consolidated Financial Statements of the
Company.
(b) Presented on a combined twelve-month basis and include the results of
the Predecessor Companies for the period January 1, 1996 to October 16,
1996 and the results of the Company for the period October 17, 1996
(Date of Acquisition) to December 31, 1996. See Note 1 to the Audited
Consolidated Financial Statements.
(c) The six months ended June 30, 1997 includes a 4% royalty fee payable to
HFS.
(d) The amounts for the periods October 17, 1996 (Date of Acquisition) to
December 31, 1996 and the six months ended June 30, 1997 include
charges from HFS. See Note 3 to the Audited Consolidated Financial
Statements.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL OVERVIEW
On October 17, 1996, HFS acquired the Franchisor and its subsidiaries,
which included the operations presently conducted by the Company. The
Acquisition was accounted for as a purchase. In connection with the
Offerings, the Franchisor has entered into a 50 year franchise agreement with
the Company granting the Company the right to operate as a franchisee under
the Avis System. WizCom, the owner of the data processing and information
system known as the Wizard System used in connection with the vehicle rental
business, has entered into a 50 year computer services agreement with the
Company with respect to its use of the Wizard System.
The Company conducts vehicle rental operations through wholly owned
subsidiaries in the United States, Canada, Puerto Rico, the U.S. Virgin
Islands, Argentina, Australia and New Zealand. Revenue is derived principally
from time and mileage charges for vehicle rentals and, to a lesser extent,
the sale of loss damage waivers, liability insurance and other products and
services.
The Company's expenses consist primarily of:
o Direct operating expenses (primarily wages and related benefits,
concessions and commissions paid to airport authorities, vehicle
insurance premiums and other costs relating to the operation of the
rental fleet).
o Depreciation and lease charges relating to the rental fleet (including
net gains or losses upon the disposition of vehicles).
o Selling, general and administrative expenses (including advertising,
reservations and marketing costs, and commissions paid to airlines and
travel agencies).
o Interest expense relating primarily to financing of the rental fleet.
The Company's profitability is primarily a function of the volume and
pricing of its rental transactions and the utilization of its rental fleet.
Significant changes in the Company's net cost of vehicles or in interest
rates can also have a material effect on the Company's profitability,
depending on its ability to adjust its rental rates. In addition, pursuant to
its franchise agreement with the Franchisor, the Company is required to pay
royalties based on its revenue, not its profits, which could increase royalty
payments during a period of declining profits. The Company's royalty fee
obligations and its significant expenditures for vehicles and facilities
impose a significant need for liquidity. See "Relationship with HFS -- Master
License Agreement."
The following discussion and analysis provides information that management
believes to be relevant to understanding the Company's consolidated financial
condition and results of operations. For comparative purposes, results for
1996 are presented on a combined twelve-month basis and include the results
of the Predecessor Companies for the period January 1, 1996 to October 16,
1996 and the results of the Company for the period October 17, 1996 (Date of
Acquisition) to December 31, 1996. As a result of the Acquisition, the
Consolidated Financial Statements for the period subsequent to the
Acquisition are presented on a different basis of accounting than those for
the period prior to the Acquisition and, therefore, are not directly
comparable. A separate discussion of the results of operations for the
Company has been presented for the period October 17, 1996 through December
31, 1996 compared to October 17, 1995 through December 31, 1995 in light of
the reporting of separate results from the date of Acquisition (October 16,
1996) and the different basis of accounting for the period prior to the
Acquisition. This discussion should be read in conjunction with the Audited
Consolidated Financial Statements and the notes thereto included elsewhere in
this Prospectus.
23
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of revenue represented by certain items in the Company's consolidated
statements of operations:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------
COMBINED
1994(A) 1995(A) 1996(B) 1996(A) 1997
-------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue ....................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Direct operating ............. 47.1 44.9 43.8 44.0 42.1
Vehicle depreciation, net and
lease charges ............... 21.9 25.4 25.0 25.3 26.3
Selling, general and
administrative .............. 17.9 16.7 18.8 18.9 21.5
Interest, net ................ 9.1 9.0 8.3 8.2 7.2
Amortization of cost in
excess of net assets
acquired .................... 0.3 0.3 0.3 0.3 0.3
-------- -------- ---------- -------- --------
96.3 96.3 96.2 96.7 97.4
-------- -------- ---------- -------- --------
Income before provision for
income taxes ................. 3.7 3.7 3.8 3.3 2.6
Provision for income taxes ... 2.1 2.1 1.7 1.5 1.2
-------- -------- ---------- -------- --------
Net income .................... 1.6% 1.6% 2.1% 1.8% 1.4%
======== ======== ========== ======== ========
</TABLE>
- ------------
(a) Represents the results of operations of the Predecessor Companies. See
Note 1 to the Audited Consolidated Financial Statements.
(b) For comparative purposes, results for 1996 are presented on a combined
twelve-month basis and include the results of the Predecessor Companies
for the period January 1, 1996 to October 16, 1996 and the results of
the Company for the period October 17, 1996 (Date of Acquisition) to
December 31, 1996. See Note 1 to the Audited Consolidated Financial
Statements. A separate discussion has been presented below for the
period October 17, 1996 to December 31, 1996 compared to the period
October 17, 1995 to December 31, 1995.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenue
Revenue for the six months ended June 30, 1997 increased 6.5%, from $887.6
million to $945.6 million, over the corresponding period in 1996, reflecting
a 4.2% increase in the number of rental transactions and a 2.3% increase in
revenue per rental transaction. The revenue increase resulted from greater
overall market demand.
Costs and Expenses
Total costs and expenses for the six months ended June 30, 1997 increased
7.3%, from $858.3 million to $921.3 million, over the corresponding period in
1996. A portion of the increase (5.2%) represents fees of $44.7 million paid
to HFS. Direct operating expenses for the six months ended June 30, 1997
increased 2.2%, from $390.1 million to $398.5 million, over the corresponding
period in 1996. As a percentage of revenue, direct operating expenses for the
six months ended June 30, 1997 declined to 42.1% from 44.0% for the
corresponding period in 1996. Operating efficiencies were derived primarily
from lower field administration costs (0.7% of revenue), lower facility costs
(0.4% of revenue), lower vehicle insurance costs (0.3% of revenue) and a
decline in wages and benefits as a percentage of revenue (0.3% of revenue).
Vehicle depreciation and lease charges for the six months ended June 30,
1997 increased 10.6%, from $224.6 million to $248.4 million, over the
corresponding period in 1996. As a percentage of revenue, vehicle
depreciation and lease charges for the six months ended June 30, 1997 were
26.3% of revenue, as compared to 25.3% of revenue for the corresponding
period in 1996. The change reflected a 5.6% increase in the average rental
fleet required to service higher rental day activity, partially offset by a
lower monthly
24
<PAGE>
cost per vehicle. In addition, the net proceeds received in excess of book
value upon the disposition of used vehicles was $12.1 million higher in the
1996 period as compared to the 1997 period. This was primarily due to
favorable market conditions for the sale of certain model vehicles.
Selling, general and administrative expenses for the six months ended June
30, 1997 increased 21.0%, from $168.0 million to $203.4 million, over the
corresponding period in 1996. This increase reflected fees of $44.7 million
paid to HFS in the 1997 period, which were partially offset by lower
reservation costs due to operating efficiencies and reduced marketing costs
as a result of the elimination of certain marketing programs in place during
the first half of 1996.
Interest expense, net, for the six months ended June 30, 1997 decreased
6.6%, from $73.2 million to $68.3 million, over the corresponding period in
1996, due primarily to (i) higher borrowings required to finance the growth
of the rental fleet, partially offset by lower average interest rates and
(ii) $6.9 million of interest income earned on a $194.1 million note
receivable from a subsidiary of HFS.
The provision for income taxes for the six months ended June 30, 1997
decreased 13.9% to $11.3 million from $13.1 million for the corresponding
period in 1996. The effective tax rate for the six months ended June 30, 1997
was 46.2% as compared to 44.7% for the 1996 period. The decrease in the tax
provision was primarily due to lower income before provision for income
taxes. The required amount includes differences between the foreign income
tax rates and the statutory income tax rate, tax on the repatriation of
foreign earnings, and foreign withholding taxes on dividends paid to the
Company.
Net income for the six months ended June 30, 1997 decreased 19.0%, from
$16.2 million to $13.1 million, over the corresponding period in 1996. The
decrease reflects higher revenue and decreased operating costs and expenses
as a percentage of revenue (before fees paid to HFS), which were more than
offset by fees of $44.7 million paid to HFS and a higher effective tax rate
in the 1997 period as explained above.
PERIOD FROM OCTOBER 17, 1996 TO DECEMBER 31, 1996 COMPARED TO PERIOD FROM
OCTOBER 17, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
OCTOBER 17, 1996
OCTOBER 17, 1995 TO (DATE OF
DECEMBER 31, 1995 PERCENTAGE ACQUISITION) PERCENTAGE
PREDECESSOR COMPANIES OF REVENUE TO DECEMBER 31, 1996 OF REVENUE
--------------------- ------------ -------------------- ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue ................................ $333,503 100.0 $362,844 100.0
Costs and expenses:
Direct operating ...................... 154,141 46.2 167,682 46.2
Vehicle depreciation, net and lease
charges .............................. 87,862 26.3 89,448 24.7
Selling, general and administrative .. 62,774 18.8 68,215 18.8
Interest, net ......................... 31,222 9.4 34,212 9.4
Amortization of cost in excess of net
assets acquired ...................... 987 0.3 1,026 0.3
--------------------- ------------ -------------------- ------------
336,986 101.0 360,583 99.4
--------------------- ------------ -------------------- ------------
Income (loss) before provision
(benefit) for income taxes ............ (3,483) (1.0) 2,261 0.6
Provision (benefit) for income taxes .. (1,989) (0.6) 1,040 0.3
--------------------- ------------ -------------------- ------------
Net income (loss) ...................... $ (1,494) (0.4) $ 1,221 0.3
===================== ============ ==================== ============
</TABLE>
Revenue
Revenue for the period October 17, 1996 to December 31, 1996 (the "1996
Period") increased 8.8%, from $333.5 million to $362.8 million, over the
corresponding period in 1995 (the "1995 Period"), reflecting a 7.0% increase
in the number of rental transactions and a 1.7% increase in revenue per
rental transaction. The revenue increase resulted from greater overall market
demand.
25
<PAGE>
Costs and Expenses
Total costs and expenses for the 1996 Period increased 7.0%, from $337.0
million to $360.6 million, over the 1995 Period. Direct operating expenses
for the 1996 Period increased 8.8%, from $154.1 million to $167.7 million,
over the 1995 Period. For both the 1996 and 1995 Periods, direct operating
expenses were 46.2% of revenue. The 1996 Period reflected lower manpower
(0.8% of revenue), as well as lower facility costs (1.2% of revenue), offset
by higher maintenance and damage costs (2.0% of revenue).
Vehicle depreciation and lease charges for the 1996 Period increased 1.8%,
from $87.9 million to $89.4 million, over the 1995 Period. As a percentage of
revenue, vehicle depreciation and lease charges for the 1996 Period decreased
to 24.7% of revenue as compared to 26.3% of revenue for the 1995 Period. The
change reflected a 10.8% increase in the average rental fleet required to
service higher rental day activity and a 7.5% decrease in the average monthly
cost per vehicle. In addition, the net proceeds received in excess of book
value upon the disposition of used vehicles improved by $1.7 million or 0.4%
of revenue in the 1996 Period over the 1995 Period. This was primarily due to
favorable market conditions for the sale of certain model vehicles.
Selling, general and administrative expenses for the 1996 Period increased
8.7%, from $62.8 million to $68.2 million, over the 1995 Period. The increase
was due primarily to fees of $6.5 million payable to HFS for the 1996 Period.
Interest expense, net, for the 1996 Period increased 9.6%, from $31.2
million to $34.2 million, over the 1995 Period, primarily due to higher
borrowings required to finance the increased cost and size of the rental
fleet.
The provision for income taxes for the 1996 Period income increased to
$1.0 million from a benefit for income taxes of $2.0 million for the 1995
Period. The increase in the tax provision was primarily due to having income
before taxes for the 1996 Period as compared to a loss before taxes for the
1995 Period. The effective tax rate for the 1996 Period was 46.0% as compared
to 57.1% for the 1995 Period. The decrease in the effective tax rate was
primarily due to a reduction in the tax effect of foreign operations. The tax
effect of foreign operations includes differences between the foreign income
tax rates and the statutory U.S. income tax rate, tax on the repatriation of
foreign earnings, and foreign withholding taxes on dividends paid to the
Company.
COMBINED YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31,
1995
Revenue
Revenue for the year ended December 31, 1996 increased 15.6%, from
$1,616.0 million to $1,867.5 million, over 1995, reflecting a 10.9% increase
in the number of rental transactions and a 4.3% increase in revenue per
rental transaction. The revenue increase resulted from greater overall market
demand as well as the benefits of specific marketing initiatives implemented
by the Company.
Costs and Expenses
Total costs and expenses for 1996 increased 15.4%, from $1,555.3 million
to $1,795.5 million, over 1995. Direct operating expenses for 1996 increased
12.9%, from $724.8 million to $818.4 million, over 1995. As a percentage of
revenue, direct operating expenses for 1996 decreased to 43.8% of revenue as
compared to 44.9% of revenue in 1995. The improvement was primarily
attributable to lower vehicle insurance costs (0.4% of revenue) resulting
from improved claims experience, as well as lower facility costs (0.6% of
revenue), offset in part by higher maintenance and damage costs (0.8% of
revenue). In addition, 1995 expenses included environmental remediation costs
and organizational restructuring charges which approximated 0.6% of revenue.
Vehicle depreciation and lease charges for 1996 increased 13.3%, from
$411.1 million to $465.6 million, over 1995. As a percent of revenue, vehicle
depreciation and lease charges for 1996 were 24.9% of revenue in 1996, as
compared to 25.4% of revenue in 1995. The change reflected a 15.5% increase
in the average rental fleet required to service higher rental day activity,
and a 1.0% increase in the average monthly cost per vehicle. In addition, the
net proceeds received in excess of book value upon the disposition of used
vehicles improved by $17.0 million or 0.7% of revenue in 1996 over 1995. This
was primarily due to favorable market conditions for the sale of certain
model vehicles.
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Selling, general and administrative expenses for 1996 increased 30.4%,
from $269.4 million to $351.4 million, over 1995. The increase was primarily
due to higher advertising and marketing expenditures. In addition, the
increase reflected fees of $6.5 million payable to HFS for the period October
17, 1996 to December 31, 1996.
Interest expense, net, for 1996 increased 6.9%, from $145.2 million to
$155.2 million, over 1995, due to higher borrowings required to finance the
growth of the rental fleet, partially offset by lower average interest rates.
The provision for income taxes for 1996 decreased 6.9%, from $34.6 million
to $32.2 million, over 1995. The effective tax rate for 1996 was 44.7% as
compared to 57.1% for 1995. The decrease in the tax provision was primarily
due to a reduction in the tax effect of foreign operations. The tax effect of
foreign operations includes differences between the foreign income tax rates
and the statutory U.S. income tax rate, tax on the repatriation of foreign
earnings, and foreign withholding taxes on dividends paid to the Company.
YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
Revenue
Revenue for the year ended December 31, 1995 increased 14.4%, from
$1,412.4 million to $1,616.0 million, over 1994, reflecting a 9.1% increase
in the number of rental transactions and a 4.8% increase in revenue per
rental transaction. The revenue increase resulted from greater overall market
demand as well as the benefits of specific marketing initiatives implemented
by the Company.
Costs and Expenses
Total costs and expenses for 1995 increased 14.3%, from $1,360.1 million
to $1,555.3 million, over 1994. Direct operating expenses for 1995 increased
9.0%, from $665.0 million to $724.8 million, over 1994. As a percentage of
revenue, direct operating expenses decreased to 44.9% in 1995 from 47.1% in
1994. This improvement reflected a reduction in vehicle insurance costs as a
result of improved claims experience, lower wages and benefits as a percent
of revenue and higher recoveries from customers on damage to rental vehicles.
Vehicle depreciation and lease charges for 1995 increased 32.9%, from
$309.4 million to $411.1 million, over 1994, as a result of higher
contractual depreciation rates under the Company's domestic Repurchase
Programs. The change also reflected a 9.5% increase in the average rental
fleet which was required to service higher rental day activity.
Selling, general and administrative expenses for 1995 increased 6.9%, from
$252.0 million to $269.4 million, over 1994. The increase reflected $24.5
million of higher costs for various marketing programs implemented to
stimulate rental activity, partially offset by $3.9 million of lower
advertising expenditures and a $3.2 million reduction in general and
administrative expenses.
Interest expense, net, for 1995 increased 12.6%, from $128.9 million to
$145.2 million, over 1994, primarily due to higher borrowings required to
finance the increased cost and size of the rental fleet.
The provision for income taxes for 1995 increased 14.6%, from $30.2
million to $34.6 million, over 1994. The effective tax rate for 1995 was
57.1% as compared to 57.8% for 1994. The increase in the provision for income
taxes was primarily due to higher income before provisions for income taxes.
The required amount includes differences between the foreign income tax rates
and the statutory U.S. income tax rate, tax on the repatriation of foreign
earnings and foreign withholding taxes on dividends paid to the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's domestic and foreign operations are funded by cash provided
by operating activities and by financing arrangements maintained by the
Company in the United States, Canada, Puerto Rico, Argentina, Australia and
New Zealand. The Company's primary use of funds is for the acquisition of new
vehicles. In 1996, the Company's expenditures for new vehicles were
approximately $2.9 billion and its proceeds from the disposition of used
vehicles were approximately $2.4 billion. For 1997, the Company expects its
expenditures for new vehicles (net of proceeds from the disposition of used
vehicles) to be higher than in 1996. New vehicles are generally purchased by
the Company in accordance with the terms
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of Repurchase Programs. The financing requirements for vehicles typically
reaches an annual peak during the second and third calendar quarters, as
fleet levels build up in response to increased rental demand during that
period. The typical low point for cash requirements occurs during the end of
the fourth quarter and the beginning of the first quarter, coinciding with
lower levels of fleet and rental demand. The Company has established methods
for disposition of its used vehicles that are not covered by Repurchase
Programs.
The Company expects that cash flows from operations and funds from
available credit facilities will be sufficient to enable the Company to meet
its anticipated cash requirements for operating purposes for the next twelve
months.
The Company also makes capital investments for property improvements and
non-revenue earning equipment. Capital investments for property improvements
and non-revenue earning equipment were $29.4 million in 1996, and management
estimates such expenditures will approximate $35.0 million in 1997. The
Company's customer receivables also provide liquidity with approximately 12
days of daily sales outstanding.
The Company has entered into a consolidated fleet financing program that
provides for up to $3.65 billion in financing for vehicles covered by
Repurchase Programs, with up to 25% of the facility available for vehicles
not covered by Repurchase Programs. The fleet program provides for the
issuance of up to $2.0 billion of asset backed variable funding notes (the
"Commercial Paper Notes") and $1.65 billion of asset backed medium term notes
(the "Medium Term Notes"). The Commercial Paper Notes and the Medium Term
Notes will be backed by, among other things, a first priority security
interest in the Company's vehicle fleet. The Commercial Paper Notes are rated
A-1 by Standard & Poor's Ratings Group ("Standard & Poors") and P-1 by
Moody's Investors Services, Inc. ("Moody's"). The Medium Term Notes are
supported by a Surety Bond issued by MBIA and Rated AAA by Standard & Poor's
and Aaa by Moody's.
ARACS is party to a $470.0 million secured credit agreement that provides
for (i) a revolving credit facility in the amount of up to $125.0 million
which is available on a revolving basis until December 31, 2000 (the "Final
Maturity Date") in order to finance the general corporate needs of ARACS in
the ordinary course of business (with up to $75.0 million of such amount
available for the issuance of standby letters of credit to support worker's
compensation and other insurance and bonding requirements of ARACS, the
Company and their subsidiaries in the ordinary course of business), (ii) a
term loan facility in the amount of $120.0 million to finance general
corporate needs in the ordinary course of business, which is repayable in
four installments, the first three of which shall be in the amount of $1.0
million payable on June 30, 1998, June 30, 1999 and June 30, 2000 and the
remainder of which is due on the Final Maturity Date, and (iii) a standby
letter of credit facility of up to $225.0 million available on a revolving
basis to fund (a) any shortfall in certain payments owing pursuant to fleet
lease agreements and (b) maturing Commercial Paper Notes if such Commercial
Paper Notes cannot be repaid through the issuance of additional Commercial
Paper Notes or draws under the liquidity facility supporting the Commercial
Paper Notes (the "Liquidity Facility"). Borrowings under the credit agreement
are secured by substantially all of the tangible and intangible assets of the
Company including its intellectual property and its rights under the Master
License Agreement, except for those assets which are subject to a negative
pledge. Approximately 44% of the Company's outstanding debt at August 1, 1997
was interest rate sensitive and had a weighted average interest rate at such
date of 5.9%. The Company has developed an interest rate management policy,
including a target mix for average fixed rate and floating rate indebtedness
on a consolidated basis. However, an increase in interest rates may have a
material adverse impact on the Company's profitability. On a pro forma basis,
at June 30, 1997, after giving effect to the Refinancing, the Company had
approximately $2.8 billion of debt outstanding which included approximately
$553.5 million of debt related to vehicles which were previously accounted
for as operating leases. In addition, on a pro forma basis, at June 30, 1997,
the Company had approximately $1.1 billion of additional credit available.
See "Description of Certain Indebtedness -- New Credit Facility."
Borrowings for the Company's international operations consist mainly of
loans obtained from local and international banks. All borrowings for
international operations are in the local currencies of the countries in
which those operations are conducted and are unsecured. The Company
guarantees only the borrowings of its subsidiaries in Australia and Puerto
Rico. At June 30, 1997, the total debt for the Company's international
operations was $138.0 million, of which $134.4 million was short term
(original maturity of one year) and $3.6 million was long term. The impact on
liquidity and financial condition due to exchange rate fluctuations regarding
the Company's foreign operations is not material.
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RESTRICTIONS IMPOSED BY INDEBTEDNESS
The agreements with the Company's lenders include a number of significant
covenants that, among other things, restrict its ability to dispose of
non-fleet assets, incur additional indebtedness, create liens, pay dividends,
enter into certain investments or acquisitions, repurchase or redeem capital
stock, engage in mergers or consolidations or engage in certain transactions
with affiliates and otherwise restrict corporate activities. Certain of these
agreements also require the Company to maintain specified financial ratios. A
breach of any of these covenants or the inability of the Company to maintain
the required financial ratios could result in a default in respect of the
related indebtedness. In the event of a default, the lenders could elect,
among other options, to declare the indebtedness, together with accrued
interest and other fees, to be immediately due and payable, failing which the
lenders could proceed against the collateral securing such indebtedness. As
of June 30, 1997, the Company was in compliance with all such covenants
related to these agreements. See "Risk Factors -- Dividends."
INFLATION
The increased acquisition cost of vehicles is the primary inflationary
factor affecting the Company's operations. Many of the Company's other
operating expenses are inflation sensitive, with increases in inflation
generally resulting in increased costs of operations. The effect of
inflation-driven cost increases on the Company's overall operating costs is
not expected to be greater for the Company than for its competitors.
SEASONALITY
The Company's third quarter, which covers the peak summer travel months,
has historically been its strongest quarter accounting for 28% and 53% of the
Company's revenue and pre-tax income, respectively, in 1996. Any occurrence
that disrupts travel patterns during the summer period could have a material
adverse effect on the Company's annual operating results. The Company's first
quarter is generally its weakest, when there is limited leisure travel and a
greater potential for adverse weather conditions. Many of the Company's
operating expenses, such as rent, insurance and personnel, are fixed and
cannot be reduced during periods of decreased rental demand. As a result,
there can be no assurance that the Company would have sufficient liquidity
under all conditions.
RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD
Recent pronouncements of the Financial Accounting Standards Board
("FASB"), which are not required to be adopted at this date, include
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure
about Segments of an Enterprise and Related Information" ("SFAS No. 131"),
SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"), SFAS No.
129, "Disclosure of Information about Capital Structure" ("SFAS No. 129") and
SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No. 131 requires
that a public business enterprise report financial and descriptive
information about its reportable segments on the same basis that it uses
internally for evaluating segment performance and deciding how to allocate
resources to segments. SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. SFAS No. 129 requires an entity to
explain, in summary form within its financial statements, the pertinent
rights and privileges of its securities outstanding. SFAS No. 128 specifies
guidelines as to the method of computation as well as presentation and
disclosure requirements for earnings per share ("EPS"). The objective of SFAS
No. 128 is to simplify the calculation and to make the U.S. standard for
computing EPS more compatible with the EPS standards of other countries and
with that of the International Accounting Standards Committee. SFAS No. 131
and SFAS No. 130 are effective for fiscal year ending December 31, 1998. SFAS
No. 129 and SFAS No. 128 are effective for fiscal year ending December 31,
1997. The adoption of these statements will not have a material effect on the
Company's consolidated financial statements.
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BUSINESS
INDUSTRY OVERVIEW
The car rental industry is composed of two principal markets: general use
(mainly airport) and local/replacement (mainly downtown and suburban
locations). In 1996, general use rental companies, which include the Company,
accounted for approximately 69% of vehicle rental revenue in the United
States. General use rental companies rent primarily to business and leisure
travelers. Local/replacement rental companies typically rent vehicles to
individuals who have lost the use of their vehicles through accident, theft
or breakdown. In addition to revenue from vehicle rentals, the industry
derives revenue from the sale of rental related products such as liability
insurance, refueling services and loss damage waivers.
The domestic general use car rental market includes five major companies:
Alamo, Avis, Budget, Hertz and National. Certain of the Company's major
competitors are owned by or affiliated with major automobile manufacturers.
The following table sets forth the airport market share of each of the major
vehicle rental companies at 157 airports in the United States where the
Company operates that report concessionable revenues (i.e., revenues on which
airport authorities assess fees from vehicle rental companies) for the
periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1994 1995 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
The Company .. 24% 22% 23% 25%
Hertz......... 28 30 30 29
National...... 13 14 15 16
Budget........ 15 14 13 11
Alamo......... 8 10 10 10
</TABLE>
The domestic vehicle rental industry has experienced significant growth
over the past five years. According to information provided by major U.S.
airports, vehicle rental industry revenues have increased at a compound
annual rate of approximately 11% since 1992. Management believes that factors
such as increases in airline passenger traffic, increased business travel and
demographic trends, among others, continue to expand the demand for rental
vehicles. The Company's network of airport rental locations, which it
believes is among the nation's largest, accounted for approximately 85% of
its domestic revenue in 1996.
Customers of general use vehicle rental companies generally are (i)
business travelers renting under negotiated contractual arrangements between
their employers and the rental company, (ii) business and leisure travelers
who may receive discounts through travel, professional or other
organizations, (iii) small corporate accounts that are provided with a rate
and benefits package that does not require a contractual commitment and (iv)
leisure travelers with no organizational or corporate affiliation programs.
Travelers who do not have the benefits of negotiated contractual arrangements
generally are influenced by price, advertising, reputation for reliability
and service.
Since the late 1980's, vehicle rental companies have acquired vehicles
primarily pursuant to Repurchase Programs. Repurchase prices under the
Repurchase Programs are based on either (i) a specified percentage of
original vehicle cost determined in the month the vehicle is returned or (ii)
the original capitalization cost less a set daily depreciation amount. These
Repurchase Programs limit a vehicle rental company's residual risk with
respect to vehicles purchased under the programs. This enables vehicle rental
companies to determine depreciation expense in advance. The Company believes
that most vehicles in the fleets of U.S. vehicle rental companies are these
"non-risk" vehicles. See "Risk Factors -- Importance of Manufacturers'
Repurchase Programs."
At present, the domestic vehicle rental industry is recovering from a
period that was characterized by substantial increases in fleet costs and
significant rental rate pressure. In the early 1990's, the then prevailing
economic recession in the United States led to decreased new vehicle demand
and subsequent overcapacity among automotive manufacturers. In response,
manufacturers offered significant incentives
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to car rental companies, which allowed them to significantly expand the size
of their fleets and eventually resulted in excess capacity, intensified
competition and depressed rental rates. As general economic conditions in the
United States improved during the years 1992 through 1994, manufacturers
increased their new vehicle prices and substantially reduced incentives to
fleet purchasers, but continued competitive pressure within the rental
industry inhibited corresponding increases in average daily rental rates.
Recently, the domestic car rental industry has experienced greater
profitability as average daily rental rates have increased and oversupply
conditions have been reduced.
Significant changes in the ownership of participants in the domestic
vehicle rental industry have occurred over the past year. Republic
Industries, Inc. acquired Alamo and National, Team Rental Group, Inc.
acquired control of Budget from Ford and Ford sold approximately 20% of the
equity of Hertz in an initial public offering. The Company believes that
these companies will increasingly focus on profitability, resulting in a
trend toward increasing vehicle rental rates in the United States.
COMPANY OVERVIEW
The Company is a holding company which, through its operating subsidiary,
ARACS, operates the second largest general use car rental business in the
world, based on total revenue and volume of rental transactions. The Company
rents vehicles to business and leisure travelers through approximately 536
rental locations in both airport and non-airport (downtown and suburban)
markets in the United States, Canada, Puerto Rico, the U.S. Virgin Islands,
Argentina, Australia and New Zealand. During 1996, the Company completed
nearly 13 million rental transactions with a fleet that averaged 174,000
vehicles and generated total revenue of approximately $1.9 billion, of which
approximately 87% was derived from its operations in the United States. On
August 20, 1997, the Company purchased First Gray Line, the second largest
Avis System franchisee in North America. See Note 12 to the Audited
Consolidated Financial Statements for financial information attributable to
the Company's major geographic areas.
The Avis brand name is owned by the Franchisor and is licensed for use by
its franchisees, including the Company, which is the largest Avis System
franchisee in the world. As an Avis System franchisee, the Company has
entered into certain arrangements with the Franchisor and its affiliates that
require the Company to make payments to the Franchisor and its affiliates,
including monthly payments under the Master License Agreement consisting of a
monthly base royalty of 3.0% of the Company's gross revenue and a
supplemental royalty of 1.0% of gross revenue payable quarterly in arrears
(which will increase 0.1% per year commencing in 1999 and in each of the
following four years thereafter to a maximum of 1.5%). Until the fifth
anniversary of the effective date of the Master License Agreement, the
supplemental royalty or a portion thereof may be deferred if the Company does
not attain certain financial targets. See "Relationship with HFS." The Avis
System is comprised of approximately 4,200 rental locations, including
locations at the largest airports and cities in the United States and
approximately 160 other countries and territories, and a fleet of
approximately 370,000 vehicles during the peak season, all of which are
operated by franchisees. During 1996, the Company's 414 domestic rental
locations produced approximately 77% of the Avis System's revenue in the
United States, with the balance derived from 490 locations operated by 75
other Avis System franchisees, of whom five (including First Gray Line)
accounted for approximately 16% of the Avis System's U.S. revenue. The
Company is the sole franchisee of the Avis System in the international
markets in which it operates. The Avis System in Europe, Africa, part of Asia
and the Middle East is operated under franchise by Avis Europe, which is not
affiliated with the Company. Management believes that the strong recognition
of the Avis brand name, the breadth of the Avis System and the sophistication
of the Wizard System enable the Company and other Avis System franchisees to
provide consistent quality, pricing and service to business and leisure
customers worldwide.
The Company has historically targeted its marketing efforts toward
business travelers, who accounted for approximately 61% of the Company's
domestic revenue in 1996. The Company believes that business travelers, many
of whom rent the Company's vehicles pursuant to agreements between the
Company and their employers, have represented an important factor in the
growth and stability of its business. While the Company continues to focus on
business travelers, it intends to leverage its strong airport presence by
expanding its marketing efforts toward the leisure travel market in order to
increase its fleet utilization during non-peak business periods and extend
the average length of its rentals. During 1996, leisure travelers accounted
for approximately 39% of the Company's domestic revenue.
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The Company utilizes the Wizard System, which it believes is one of the
most sophisticated information management systems in the car rental industry.
Key functions of the Wizard System include: (i) global reservations
processing, (ii) rental agreement generation and administration and (iii)
fleet accounting and control. The Company has also developed software
applications that utilize the data gathered by the Wizard System and third
party reservation systems to achieve centralized control of its major
business operations. These applications include: (i) a yield management
system that is designed to increase profit by controlling vehicle
availability by length of rental and providing decision support for rate
changes, (ii) a competitive rate information system that monitors industry
rate changes by market on a daily basis by vehicle rental location and (iii)
a business mix model that analyzes potential profit contribution data by
segment based upon business mix and fleet optimization recommendations.
The Company is currently a wholly-owned subsidiary of the Franchisor,
which was acquired by HFS in October 1996. The Company is the successor to
the car rental operations of the Predecessor Companies. Prior to the
Acquisition, the principal shareholder of the Franchisor and the Predecessor
Companies was an Employee Stock Ownership Plan and the minority shareholder
was GM. The Company was incorporated in Delaware on October 17, 1996 in
connection with the Acquisition. ARACS was incorporated in Delaware on
September 18, 1956. The principal executive offices of the Company are
located at 900 Old Country Road, Garden City, New York 11530, and its
telephone number at that location is (516) 222-3000.
THE FIRST GRAY LINE ACQUISITION
On August 20, 1997, the Company purchased all of the outstanding capital
stock of First Gray Line for approximately $210.0 million in cash, including
expenses. The net proceeds from the Offerings will be used, among other
things, to repay indebtedness incurred to finance the First Gray Line
Acquisition. See "Use of Proceeds."
First Gray Line was the second largest Avis System franchisee in North
America with 70 locations in Southern California, Nevada and Arizona. Its
operations represented approximately 10% of the Avis System's domestic
revenue in 1996.
First Gray Line operates 13 airport vehicle rental locations, including
Los Angeles International Airport ("LAX"), McCarran International Airport
(Las Vegas) and San Diego International Airport. The Company estimates that
First Gray Line's share of the overall airport markets which it serves was
approximately 18% for the first three months of 1997, placing it among the
top five rental car companies in those markets. First Gray Line also operates
57 other locations throughout Southern California and in Las Vegas, Nevada,
and Yuma, Arizona.
First Gray Line's principal operation is located at LAX, one of the
world's largest airport rental vehicle markets based on vehicle rental
revenues. First Gray Line's operation at LAX is well-integrated with most of
its other Southern California operations which operate largely in contiguous
geographical areas. First Gray Line's Las Vegas and San Diego operations have
experienced substantial growth in recent years reflecting the continued high
growth of these areas as destination resorts and convention sites.
First Gray Line's average fleet size for fiscal 1996 was approximately
18,000 vehicles.
STRATEGY
The Company's objective is to improve its profitability through a strategy
that consists of the following key elements:
Capitalizing on Changing Industry Dynamics. The domestic car rental
industry is beginning to emerge from a period during which rental rates did
not keep pace with rising fleet and operating costs. Management believes that
the current restructuring of ownership of the Company's major competitors
will lead to an increased focus on profitability and shareholder return,
rather than upon transaction volume and market share, and, ultimately, to
more rational pricing behavior. Management intends to use
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its proprietary software applications, including its sophisticated yield
management, rate information and business mix modeling systems, to capitalize
upon the improving pricing and profit outlook in the industry.
Improving Business Mix and Fleet Utilization. Historically, the Company
has capitalized on its strong network of airport rental locations by focusing
its sales and marketing resources principally toward business travelers.
While this has enabled the Company to leverage its overhead costs by
capturing a large share of transaction volume at relatively few locations,
fleet utilization historically has been characterized by peak business travel
demand during the middle of the week and reduced demand during and
immediately before and after the weekend. Management believes that the
Company's substantial presence at the nation's leading airports provides it
with the opportunity, without significant incremental cost, to capitalize on
increased air travel by leisure travelers, who tend to initiate air travel
during or close to the weekend. Accordingly, while continuing to concentrate
on its core presence in the business travel market, the Company plans to
increase its marketing efforts toward the leisure market in order to improve
fleet utilization and extend the average length of rental. In addition, the
Company believes that it can further enhance the utilization of its fleet
during non-peak periods by selectively expanding its presence in non-airport
markets through both internal growth and, if appropriate opportunities arise,
acquisitions of other car rental operators including, where feasible, other
Avis System franchisees.
Increasing Brand Loyalty Through Target Marketing. Management believes
that the domestic car rental industry will become increasingly focused on
such factors as customer service and loyalty. The customer base of the major
domestic car rental companies, including the Company, has become increasingly
diverse. Management plans to utilize the Company's proprietary software
applications to analyze its extensive customer database to identify
distinguishing characteristics and preferences of those customers who have
been historically associated with its most profitable rental transactions and
to focus its sales and marketing efforts and service features to attract
additional customers with similar characteristics and preferences. Management
believes that this analysis will enhance the quality of the car rental
experience of such customers and increase their loyalty to the Avis brand.
Capitalizing on Cross Marketing and Other Synergistic Arrangements with
HFS. The Company has initiated and is expanding cross marketing relationships
with HFS's corporate relocation and resort timeshare exchange businesses, its
lodging franchise systems, which include the Days Inn(Registered Trademark),
Howard Johnson(Registered Trademark) and Ramada(Registered Trademark) brands,
and its real estate brokerage franchise systems, including the CENTURY
21(Registered Trademark) and Coldwell Banker(Registered Trademark) brands. As
a result of the proposed merger of HFS and CUC, additional cross marketing
opportunities with CUC's membership-based consumer services are expected to
arise. The Company also expects to reduce its costs of purchasing media and
other non-fleet goods and services through arrangements with HFS.
RENTAL OPERATIONS
General. The Company's fleet includes various categories of automobiles,
most of which are of the current and immediately preceding model years.
Rentals are generally made on a daily, weekend, weekly or monthly basis.
Rental charges in the United States usually are computed on the basis of the
duration of the rental and may include a mileage charge and vary based upon
vehicle category, the day on which the rental begins and local competitive
and cost factors. Additional charges are made for optional refueling
services, loss damage waivers (a waiver of the Company's right to make a
renter pay for damage to the vehicle), personal accident insurance, personal
effects protection, optional products such as cellular phones, child seats
and ski racks and, in some instances, additional liability insurance. Most
rentals are made utilizing rate plans under which the customer is responsible
for gasoline used during the rental. The Company also generally offers its
customers the convenience of leaving a rented vehicle at an Avis location in
a city other than the one in which it was rented under Avis's "Rent it Here
- -- Leave it There" program, although, consistent with industry practices, a
drop-off charge or special intercity rate may be imposed.
United States Operations. At June 30, 1997, the Company operated 406
vehicle rental facilities at airport, near-airport and downtown locations
throughout the United States. During 1996, approximately
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<PAGE>
85% of the Company's United States revenue was generated at 175 airports in
the United States with the balance generated at the Company's 239 non-airport
locations. The Company's emphasis on airport traffic has resulted in
particularly strong market position in the major domestic rental revenue
airports.
At most airports, the Company is one of five to seven vehicle rental
concessionaires. In general, concession fees for airport locations are based
on a percentage of total commissionable revenues (as determined by each
airport location), subject to a minimum guaranteed amount. Concessions are
typically awarded by airport authorities every three to five years based upon
competitive bids. As a result of airport authority requirements as to the
size of the minimum guaranteed fee, smaller vehicle rental companies
generally are not located at airports. The Company's concession arrangements
with the various airport authorities generally include minimum requirements
for vehicle age, operating hours, employee conduct, and provide for
relocation in the event of future construction and abatement of fees in the
event of extended low passenger volume.
International Operations. The Company operates in Canada, Puerto Rico, the
U.S. Virgin Islands, Argentina, Australia and New Zealand. Its operations in
Canada and Australia were the principal contributors of revenue, accounting
for 35% and 45%, respectively, of international revenues in 1996. Revenue
from international operations in 1996 were approximately $241.7 million.
The Company holds a solid market position in each of the countries in
which it operates internationally. The operations in Australia and New
Zealand are acknowledged as the largest in their respective markets in terms
of revenue.
AVIS SYSTEM AND WIZARD SYSTEM SERVICES
As a participant in the Avis System, the Company has the benefits of a
variety of services, including (i) comprehensive safety initiatives,
including the "Avis Cares" Safe Driving Program, which offers vehicle safety
information, directional assistance such as satellite guidance, regional
maps, weather reports and specialized equipment for travelers with
disabilities; (ii) standardized system-identity for rental location
presentation and uniforms; (iii) training program and business policies,
quality of service standards and data designed to monitor service commitment
levels; (iv) marketing/advertising/public relations support for national
consumer promotions including Frequent Flyer/Frequent Stay programs and the
Avis System internet website; and (v) brand awareness of the Avis System
through the familiar "We try harder" service announcements.
Under a long-term computer services agreement, the Company, like other
Avis System franchisees, is provided with access to the Wizard System, a
reservations, data processing and information management system for the
vehicle rental business. See "Relationship with HFS -- Computer Services
Agreement." The Wizard System is linked to all major travel networks on six
continents through telephone lines and satellite communications. Direct
access with other computerized reservations systems allows real-time
processing for travel agents and corporate travel departments. Among the
principal features of the Wizard System are:
o an advanced graphical interface reservation system;
o "Rapid Return," which permits customers who are returning vehicles
to obtain completed charge records from radio-connected "Roving
Rapid Return" agents who complete and deliver the charge record at
the vehicle as it is being returned;
o "Preferred Service," an expedited rental service that provides
customers with a preferred service rental record printed prior to
arrival, a pre-assigned vehicle and fast convenient check out;
o "Wizard on Wheels," which enables the Avis System locations to
assign vehicles and complete rental agreements while customers are
being transported to the vehicle;
o a flight arrival notification system that alerts the Company's
rental location when flights have arrived so that vehicles can be
assigned and paperwork prepared automatically;
o "Flight Check," a system that provides flight arrival and departure
times and the next three available flights to the roving rapid
return terminals and Wizard System terminals;
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o "Avis Link," which automatically identifies the fact that a user of
a major credit card is entitled to special rental rates and
conditions, and therefore sharply reduces the number of instances in
which the Company inadvertently fails to give renters the benefits
of negotiated rate arrangements to which they are entitled;
o interactive interfaces through third party computerized reservation
systems described under "--Marketing"; and
o sophisticated automated ready-line programs that, among other
things, enable rental agents to ensure that a customer who rents a
particular type of vehicle will receive the available vehicle of
that type which has the lowest mileage.
In 1996, the Wizard System enabled the Company to process approximately
30.8 million incoming customer calls, during which customers inquired about
locations, rates and availability and placed or modified reservations. In
addition, millions of inquiries and reservations come to the Company through
travel agents and travel industry partners, such as airlines. Regardless of
where in the world a customer may be located, the Wizard System is designed
to ensure that availability of vehicles, rates and personal profile
information is accurately delivered at the proper time to the customer's
rental destination.
MANAGEMENT INFORMATION SYSTEMS
The Company also uses data supplied from the Wizard System and third party
reservation systems in its proprietary management information systems to
maintain centralized control of major business processes such as fleet
acquisition and logistics, sales to corporate accounts and determination of
rental rates. The principal components of the systems employed by the Company
include:
o Fleet Planning Model. The Company has created a comprehensive
decision tool to develop fleet plans and schedules for the
acquisition and disposition of its fleet, along with fleet age, mix,
mileage and cost reports based upon such plans and schedules. This
tool allows management to monitor and change fleet volume and
composition on a daily basis and to develop the lowest cost fleet
alternative based on business levels and available Repurchase
Programs.
o Yield Management. The Company's yield management system is designed
to optimize profit by providing greater control of vehicle
availability and rate availability changes at its rental locations.
The system monitors and forecasts supply and demand to insure that
the Company is able to capture the combination of rentals that will
produce the highest return over time at each location. Integrated
into the Company's yield management system is a fleet distribution
module that takes into consideration the costs as well as the
potential benefits associated with distributing vehicles to various
rental locations within a geographic area to accommodate rental
demand at these locations. The fleet distribution module makes
specific recommendations for movement of vehicles between the
locations.
o Pricing Decision Support System. Pricing in the vehicle rental
industry is highly competitive and complex. To insure its ability to
respond to rental rate changes in the marketplace the Company has
developed sophisticated systems to gather and report competitive
industry rental rate changes each day. The system, using data from
third party reservation systems as its source of information,
automatically scans rate movements and reports significant changes
to a staff of pricing analysts for evaluation. The system greatly
enhances the Company's ability to gather and respond to rate changes
in its markets.
o Business Mix Model. The Company has also developed a strategic
planning model to evaluate the discrete segments of its business
relative to each other. The model considers revenues and costs to
determine the potential margin contribution of each discrete
segment. Using data from the Company's financial systems, the Wizard
System, the fleet and revenue management systems along with
management objectives and targets, the model develops business mix
and fleet optimization recommendations.
o Profitability Model. The Company has developed a sophisticated model
that blends a corporate customer's individual rental into a pattern
that determines fleet costs by developing a profile of
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such corporate customer's utilization. The model also combines local
operations costs with division overhead expenses with a resulting
benchmark profitability which is used to determine the financial
merit of individual corporate accounts.
o Sales and Marketing System. The Company has also developed a
sophisticated system of on-line data screens which enables its sales
force to analyze key account information of its corporate customers
including historical and current rental activity, revenue and
booking sources, top renting locations, rate usage categories and
customer satisfaction data. This information, which is updated
weekly and captured on a country-by-country basis, is utilized by
management to determine opportunities for revenue growth,
profitability and improvement.
FLEET ACQUISITION AND MANAGEMENT
Fleet Purchasing
The Company participates in a variety of vehicle purchase programs with
major domestic and foreign manufacturers, principally GM, although actual
purchases are made directly through franchised dealers. The average price for
automobiles purchased by the Company in 1996 for its U.S. rental fleet was
approximately $16,100. For the 1996 model year, approximately 83% of new
vehicle purchases were comprised of GM vehicles, 13% of Chrysler vehicles and
4% of Toyota, Nissan, Subaru, Hyundai, Ford and Land Rover vehicles. In model
year 1997, approximately 69% of the Company's fleet in the United States will
consist of GM vehicles, 15% will be Chrysler vehicles and the balance will be
provided by other manufacturers. Manufacturers' vehicle purchase programs
sometimes provide the Company with sales incentives for the purchase of
certain models, and most of these programs allow the Company to serve as a
drop-ship location for vehicles, thus enabling the Company to receive a fee
from the manufacturers for preparing newly purchased vehicles for use. There
can be no assurance that the Company will continue to benefit from sales
incentives in the future. For its international operations, vehicles are
acquired by way of negotiated arrangements with local manufacturers and or
dealers using operating leases or Repurchase Programs.
Under the terms of the Company's agreement with GM, which expires at the
end of GM's model year 2000, the Company is required to purchase at least
116,650 GM vehicles for model year 1997 and maintain at least 51% GM vehicles
in the Company's domestic fleet at all times. The GM Repurchase Program is
available for all vehicles purchased pursuant to the agreement.
Impact of Seasonality
The Company's business is subject to seasonal variations in customer
demand, with the summer vacation period representing the peak season for
vehicle rentals. This general seasonal variation in demand, along with more
localized changes in demand at each of the Company's operations, causes the
Company to vary its fleet size over the course of the year. In 1996, the
Company's average monthly fleet size ranged from a low of 152,000 vehicles in
January to a high of 196,000 vehicles in August. Fleet utilization, which is
based on the number of hours vehicles are rented compared to the total number
of hours vehicles are available for rental, ranged from 67% in December to
83% in August and averaged 75% for all of 1996.
Vehicle Disposition
The Company's current operating strategy is to hold vehicles not more than
12 months with the average fleet age being less than six months.
Approximately 93% of the vehicles purchased for its domestic fleet under the
model year 1997, including most GM vehicles, were eligible for Repurchase
Programs. These programs impose certain return conditions, including those
related to mileage and repair condition over specified allowances. Less than
2.5% of the Repurchase Program vehicles purchased by the Company and returned
in 1996 were ineligible for return. Upon return of a Repurchase Program
vehicle, the Company receives a price guaranteed at the time of purchase and
is thus protected from a decrease in prevailing used car prices in the
wholesale market. The Company also disposes of its used vehicles that are not
covered by Repurchase Programs to dealers in the United States through
informal arrangements
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or at auctions. The future percentage of Repurchase Program vehicles in the
Company's fleet will depend on the availability of Repurchase Programs, over
which the Company has no control. See "Risk Factors -- Importance of
Manufacturers' Repurchase Programs."
Maintenance
The Company places a strong emphasis on vehicle maintenance since quick
and proper repairs are critical to fleet utilization. To accomplish this task
the Company employs two full-time National Institute for Automotive Service
Excellence ("ASE") fully certified technician instructors at its headquarters
who have developed a unique training program for the Company's 250
technicians who operate at 75 repair centers. The technicians also maintain a
strong relationship with General Motors Service Technology Group (STG). The
Company uses "state of the art" diagnostic equipment including GM's
"Techline" and "Tech 2" diagnostic computers, and is the only vehicle rental
fleet to utilize GM's "Pulsat Satellite Training Network." The Company's
technician training department also prepares their own technical service
bulletins that can be retrieved electronically at all of the Company's repair
locations. Approximately 70% of the Company's technicians are ASE certified
versus the national average of 44%.
MARKETING
United States
In the United States, approximately 77% of the Company's 1996 rental
transactions were generated by travelers who used the Avis System under
contracts between the Company and their employers or organizations of which
they were members. The Company's corporate sales organization is the
principal source of contracts with corporate accounts. Unaffiliated business
travelers are solicited by direct mail, telesales and advertising campaigns.
The Company's telesales department consists of a centralized staff that
handles small corporate accounts, travel agencies, meetings and conventions,
tour operators and associations. Working with a state-of-the-art system in
Tulsa, Oklahoma, the telesales operation produced revenue for the Avis System
that exceeded $200.0 million in 1996.
The Company solicits contractual arrangements with corporate accounts by
emphasizing the Wizard System's customer service, rental rates, a worldwide
rental network, advanced technology and centralized account servicing. The
Wizard System plays a significant part in securing business of this type
because the Wizard System enables the Company to offer a wide variety of
rental rate combinations, special reports and tracking techniques tailored to
the particular needs of each account, and to assure adherence to agreed-upon
rates.
The Company's presence in the leisure market is substantially less than
its presence in the business market. Leisure rental activity is important in
enabling the Company to balance the use of its fleet. Typically, business
renters use vehicles from Monday through Thursday, while in most areas of the
United States leisure renters use vehicles primarily over weekends. The
Company's concentration on serving business travelers has led to excess
capacity from Friday through Sunday of most weeks. The Company intends to
increase its leisure market penetration by capitalizing on its strength at
airports and by increased focusing of its marketing efforts toward leisure
travelers. An important part of the Company's leisure marketing strategy is
to develop and maintain contractual arrangements with associations that
provide member benefits to their constituents. In addition to developing
arrangements with traditional organizations, the Company has created
innovative programs such as the Affinity Link Program that cross references
bankcard numbers with Avis Worldwide identification numbers and provides
discounts to the cardholders for participating bankcard programs. The Company
also uses coupons in dine-out books and provides discounts to members of
shopping and travel clubs whose members generated approximately $60.0 million
of leisure business revenue in 1996. Preferred supplier agreements with
select travel agencies and contracts with tour operators have also succeeded
in generating leisure business for the Company.
The Company maintains strong links to the air travel industry. It has
arrangements with most major airlines, including American Airlines, American
West Airlines, Continental Airlines, Delta Airlines, Trans World Airlines,
United Airlines, USAirways and Northwest Airlines, under which participants
in the airlines' frequent flier programs can earn mileage credits whenever
they rent Avis System vehicles.
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Frequent flier programs (under which travelers can earn reduced fares or free
flights based upon miles flown on particular airlines) are a significant
sales incentive to U.S. travelers, and the Company believes it benefits
significantly from its frequent flier arrangements with the airlines. All the
other major vehicle rental companies also participate in a number of airline
frequent flier programs.
Travel agents can make Avis System reservations through all four major
U.S. based global distribution systems and several international based
systems. Users of the U.S. based global distribution systems can obtain
access through these systems to the Company's rental locations, vehicle
availability and applicable rate structures. An automated link between these
systems and the Wizard System gives them the ability to reserve and confirm
rentals directly through these systems. The Company also maintains strong
links to the hotel industry. The Company has arrangements with the Hilton
Corporation, the Hyatt Corporation and Best Western frequent traveler
programs, which provide various incentives to all program participants. The
Company also has an arrangement with HFS whereby lodging customers who are
making reservations by telephone will be transferred to the Company if they
desire to rent a vehicle.
International
The Company utilizes a multi-faceted approach to sales and marketing
throughout its global network. In its principal international operations, the
Company employs teams of trained and qualified account executives to
negotiate contracts with major corporate accounts and leisure and travel
industry partners. In addition, the Company utilizes centralized
telemarketing and direct mail initiatives to continuously broaden its
customer base. Sales efforts are designed to secure customer commitment and
support customer requirements for both domestic and international car rental
needs.
International sales and marketing activities promote the Company's
reputation for delivering a high quality of service, contract rates,
competitive pricing and customer benefits from special services such as
Preferred Service, Roving Rapid Return and other benefits of the Wizard
System.
The Company's international operations maintain close relationships with
the travel industry including participation in airline frequent flyer
programs operated by Air Canada and Ansett Airlines (Australia).
COMPETITION
The vehicle rental industry is characterized by intense price and service
competition. In any given location, the Company may encounter competition
from national, regional and local companies, many of which, particularly
those owned by the major automobile manufacturers, have greater financial
resources than the Company. The Company's principal competitors for
commercial accounts in the United States are Hertz and National. Its
principal competitors for unaffiliated business and leisure travelers in the
United States are Budget, Hertz and National, and, particularly with regard
to leisure travelers, Alamo and Dollar. In addition, the Company competes
with a variety of smaller vehicle rental companies throughout the country.
Competition in the U.S. vehicle rental business is based primarily upon
price, reliability, ease of rental and return and other elements of customer
service. In addition, competition is influenced strongly by advertising and
marketing. The Company believes it is capable of competing for virtually all
aspects of the vehicle rental business, except the insurance replacement
vehicle business (in which the Company has agreed not to engage until June
13, 2000 pursuant to an agreement relating to the sale of its replacement
vehicle rental business). In part because of the Wizard System, the Company
has been particularly successful in competing for commercial accounts. There
have been many occasions during the history of the vehicle rental industry in
which all of the major vehicle rental companies have been adversely affected
by severe industry-wide rental rate cutting, and the Company has, on such
occasions, lowered its rates in response to such rate cutting. However,
during the past two years, industry-wide rates have increased, reflecting, in
part, both increased costs of owning and maintaining vehicles and the need to
generate returns on invested capital.
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INSURANCE
The Company generally assumes the risk of liability to third parties
arising from vehicle rental services in the United States, Canada, Puerto
Rico and the U.S. Virgin Islands, for up to $1.0 million per occurrence,
through a combination of certificates of self-insurance, insurance coverage
provided by its wholly owned domestic subsidiary, Pathfinder Insurance
Company ("Pathfinder"), and insurance coverage secured from an unaffiliated
domestic insurance carrier. The Company maintains additional insurance with
unaffiliated carriers in excess of such level up to $200.0 million per
occurrence.
Currently, the Company provides primary automobile insurance for a
majority of its fleet through Pathfinder or through self-insurance. In
addition, the Company provides claims management services from its
headquarters in New York to all of its locations in the United States,
Canada, Puerto Rico and the U.S. Virgin Islands.
The Company insures the risk of liability to third parties in Argentina,
Australia and New Zealand through a combination of unaffiliated carriers and
Global Excess and Reinsurance, Ltd., a wholly owned subsidiary established
under the laws of Bermuda ("Global Excess"). These carriers provide coverage
supplemental to minimum local requirements. The Company additionally
maintains excess coverage to a limit up to $200.0 million per occurrence.
To further control its insurance costs, the Company reinsures some of its
risks through its wholly owned subsidiary, Constellation Reinsurance Company
Limited ("Constellation"), an insurance company established under the laws of
Barbados.
Under its standard rental contract, the Company provides its renters
liability coverage up to the minimum financial responsibility limits required
by applicable law. Higher limits are provided to some United States national
corporate accounts and the Company makes available to renters, for an
additional daily charge, participation in a group policy of "Additional
Liability Insurance" underwritten by CNA (Continental Group), which increases
renters' liability coverage up to $1.0 million. The Company also offers
renters, for additional daily charges, "Personal Accident Insurance," which
pays medical expenses and accidental death benefits for accidents during the
rental period, and "Personal Effects Protection," which insures against loss
or damage to the renters' personal belongings during the rental period.
Coverages are underwritten by Gulf Insurance Company.
REGULATORY MATTERS
The Company is subject to federal, state and local laws and regulations
including those relating to taxing and licensing of vehicles, franchising,
consumer credit, environmental protection, retail vehicle sales and labor
matters. The principal environmental regulatory requirements applicable to
the Company's operations relate to the ownership or use of tanks for the
storage of petroleum products, such as gasoline, diesel fuel and waste oils;
the treatment or discharge of waste waters; and the generation, storage,
transportation and off-site treatment or disposal of solid or liquid wastes.
The Company operates 233 locations at which petroleum products are stored in
underground or aboveground tanks. The Company has instituted an environmental
compliance program designed to ensure that these tanks are in compliance with
applicable technical and operational requirements, including the replacement
of underground steel tanks and periodic testing of underground storage tanks.
The Company believes that the locations where it currently operates are in
compliance, in all material respects, with such regulatory requirements.
The Company may also be subject to requirements related to the remediation
of, or the liability for remediation of, substances that have been released
to the environment at properties owned or operated by the Company or at
properties to which the Company sends substances for treatment or disposal.
Such remediation requirements may be imposed without regard to fault and
liability for environmental remediation can be substantial. See "Risk Factors
- -- Environmental Risks Inherent in On-Site Petroleum Storage."
The Company may be eligible for reimbursement or payment of remediation
costs associated with future releases from its regulated underground storage
tanks. Certain of the states in which the Company maintains underground
storage tanks have established funds to assist in the payment of remediation
costs for releases from certain registered underground tanks. Subject to
certain deductibles, the availability of
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funds, compliance status of the tanks and the nature of the release, these
tank funds may be available to the Company for use in remediating future
releases from its tank systems.
A traditional revenue source for the vehicle rental industry has been the
sale of loss damage waivers, by which rental companies agree to relieve a
customer from financial responsibility arising from vehicle damage incurred
during the rental period. Approximately 3.6% of the Company's revenue during
1996 was generated by the sale of loss damage waivers. The U.S. House of
Representatives has from time to time considered legislation that would
regulate the conditions under which loss damage waivers may be sold by
vehicle rental companies. House Bill H.R. 175, introduced in January 1995,
seeks to prohibit the imposition of liability on renters for loss of, or
damage to, rented vehicles, except in certain circumstances, and would
prohibit the sale of loss damage waivers. To date, no action has been taken
on this bill. In addition, approximately 40 states have considered
legislation affecting the loss damage waivers. To date, 24 states have
enacted legislation which requires disclosure to each customer at the time of
rental that damage to the rented vehicle may be covered by the customer's
personal automobile insurance and that loss damage waivers may not be
necessary. In addition, in the late 1980's, New York enacted legislation
which eliminated the Company's right to offer loss damage waivers for sale
and limited potential customer liability to $100. Moreover, California and
Nevada have capped rates that may be charged for loss damage waivers to $9.00
and $10.00 per day, respectively. Texas requires that the rate charged for
loss damage waivers be reasonably related to the direct cost of the repairs.
Adoption of national or additional state legislation affecting or limiting
the sale of loss damage waivers could result in the loss of this revenue
source and additional limitations on potential customers liability could
increase the Company's costs.
The Company is also subject to regulation under the insurance statutes,
including insurance holding company statutes, of the jurisdictions in which
its insurance company subsidiaries are domiciled. These regulations vary from
state to state, but generally require insurance holding companies and
insurers that are subsidiaries of insurance holding companies to register and
file certain reports including information concerning their capital
structure, ownership, financial condition and general business operations
with the state regulatory authority, and require prior regulatory agency
approval of changes in control of an insurer and intercorporate transfers of
assets within the holding company structure.
Pathfinder, as a licensed stock insurance company in the State of
Colorado, is subject to the applicable rules and regulations of the Colorado
Insurance Department. The Colorado Insurance Law provides that no person may
acquire control of the Company, and thus indirect control of Pathfinder,
unless it has obtained prior approval of the Colorado Insurance Commissioner
for such acquisition. "Control" is generally presumed to exist through the
ownership of 10% or more of the voting securities of a Colorado domestic
insurance company or of any company which controls a Colorado domestic
insurance company. Any purchaser of 10% or more of the outstanding Common
Stock would be presumed to have acquired control of the Company, unless such
presumption is rebutted by a showing that such control does not exist in
fact. Accordingly, any purchase of shares of Common Stock representing 10% or
more of the voting power of the Company would require prior approval by the
Colorado Insurance Department.
Global Excess is subject to Bermuda Insurance Laws, which require Global
Excess to file at least a Bermuda statutory financial return in the form
prescribed by Bermuda Insurance Laws. Furthermore, any transfer of shares of
Global Excess by the Company will require the approval of the Bermuda
Monetary Authority, Foreign Exchange Control. In addition, Constellation is
required to file an annual financial return in accordance with Barbados
Insurance Regulations.
The payment of dividends to the Company by its insurance company
subsidiaries, Pathfinder, Global Excess and Constellation, will be restricted
by government regulations in Colorado, Bermuda and Barbados affecting
insurance companies domiciled in those jurisdictions.
EMPLOYEES
The Company has more than 16,000 employees worldwide, of whom
approximately 15,000 serve in various capacities at the Company's rental
locations and the balance are engaged in executive, financial, sales and
marketing, and administrative capacities. Approximately 32% of the Company's
employees are
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represented by various unions under contracts expiring at various dates. No
local union represents more than 2.5% of the Company's employees. The Company
believes its relationships with its employees are good.
PROPERTIES
The Company leases or has concessions relating to space at 394 locations
in the United States and 129 locations outside the United States. Of those
locations, 175 in the United States and 53 outside the United States are at
airports. Typically, an airport receives a percentage of vehicle rental
revenues, with a guaranteed minimum. Because there is a limit to the number
of vehicle rental locations in an airport, vehicle rental companies
frequently bid for the available locations, usually on the basis of the size
of the guaranteed minimums. The Company and other vehicle rental firms also
rent parking space at or near airports and at their other vehicle rental
locations.
The Company leases all of its vehicle rental facilities. The airport
facilities are located on airport property owned by airport authorities or
located near the airport in locations convenient for bus transport of
customers to and from the airport. The Company's airport locations serve as
the administrative headquarters for the Company's non-airport locations
nearest to those airport locations and, as a general rule, each airport
location includes vehicle storage areas, a vehicle maintenance facility, a
car wash, a refueling station and rental and return facilities. The Company's
non-airport facilities generally consist of a limited parking facility and a
rental and return desk and are generally subject to long-term leases with
renewal options. Certain of these leases also have purchase options at the
end of their terms.
The Company's principal offices are in Garden City, New York where the
Company leases approximately 269,000 square feet under a sublease agreement
with WizCom which, by exercising renewal options, can be extended through the
year 2015. The Avis reservation system is operated by HFS from leased space
in Tulsa, Oklahoma where the Company subleases approximately 28,000 square
feet from WizCom pursuant to a sublease agreement for certain marketing
activities. The Company maintains terminal network facilities which it uses
in connection with the Wizard System in Garden City and Tulsa. The Company
also leases 94,000 square feet in a building owned by WizCom in Virginia
Beach, Virginia that serves as a satellite administrative and reservation
facility. See "Relationship with HFS -- Lease Agreements."
LEGAL MATTERS
From time to time, the Company is subject to routine litigation incidental
to its business. The Company maintains insurance policies that cover most of
the actions brought against the Company and has indemnification rights from
HFS covering certain pending litigation. See "--Insurance," "Relationship
with HFS -- Separation Agreement" and Note 13 to the Audited Consolidated
Financial Statements. The Company is not currently involved in any legal
proceeding which it believes would have a material adverse effect upon its
financial condition or operations.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers, directors and significant employees of the Company
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
- ------------------------ ----- ----------------------------------------------------------
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND
<S> <C> <C>
R. Craig Hoenshell ...... 53 Director
F. Robert Salerno ....... 46 President, Chief Operating Officer and Director
Kevin M. Sheehan ........ 44 Executive Vice President and Chief Financial Officer
John H. Carley .......... 56 Executive Vice President and General Counsel
Kevin P. Carey .......... 49 Senior Vice President, Human Resources
Patricia D. Yoder ....... 57 Senior Vice President, Communications
Gerard J. Kennell ....... 52 Vice President and Treasurer
Timothy M. Shanley ...... 48 Vice President and Controller
John Forsythe ........... 52 Vice President--Operations U.S. Rent A Car
Michael P. Collins ...... 50 Vice President--International
Robert D. Cardillo....... 47 Vice President--Worldwide Marketing
Thomas J. Byrnes......... 52 Vice President--Sales North America
Stephen P. Holmes ....... 40 Director
Michael P. Monaco ....... 48 Director
W. Alun Cathcart ........ 53 Nominee for Director (1)
Leonard S. Coleman, Jr. 48 Nominee for Director (1)
Martin L. Edelman........ 55 Nominee for Director (1)
Deborah L. Harmon........ 38 Nominee for Director (1)
Michael J. Kennedy....... 60 Nominee for Director (1)
Michael L. Tarnopol...... 61 Nominee for Director (1)
</TABLE>
- ------------
(1) Messrs. Cathcart, Coleman, Edelman, Kennedy, Tarnopol and Ms. Harmon
will be nominated by the Company and elected Directors of the Company
by the Board of Directors upon the consummation of the Offerings.
All directors are elected annually to serve until the next annual meeting
of stockholders and until their successors have been elected and qualified.
Upon completion of the Offerings, the Company will have a Board of Directors
consisting of the four current members of the Company's Board of Directors
identified above. After completion of the Offerings, the Company anticipates
that the size and composition of the Board of Directors will be changed and
will include two directors who will be officers of the Company, four
directors who will be officers or directors of HFS and four directors who
will be persons not associated with the Company or HFS. See "Relationship
with HFS."
The Company's Board of Directors is expected to appoint two directors who
are not affiliated with the Company or HFS to a compensation committee of the
Board of Directors (the "Compensation Committee") and an audit committee of
the Board of Directors (the "Audit Committee") after such directors are
elected. The Compensation Committee will establish remuneration levels for
certain officers of the Company and perform such functions as may be
delegated to it under the Company's employee benefit programs and executive
compensation programs. The Audit Committee will select and engage, on behalf
of the Company, the independent public accountants to audit the Company's
annual financial statements. The Audit Committee also will review and approve
the planned scope of the annual audit.
The Board of Directors may, from time to time, establish certain other
committees to facilitate the management of the Company.
Officers are elected at the organizational meeting of the Board of
Directors held each year for a term of one year, and they are elected to
serve until the next annual meeting.
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MR. HOENSHELL has been Chairman, Chief Executive Officer and a Director of
the Company and ARACS since March 1997. From 1995 to March 1997, Mr.
Hoenshell was the principal in his own consulting firm which focused on
future payment technologies. From 1993 to 1995, Mr. Hoenshell was president
of American Express International. From 1990 to 1993, Mr. Hoenshell was the
President of American Express Travelers Cheques and from 1986 to 1990 he was
President of American Express Centurion Bank. Prior to 1986, Mr. Hoenshell
spent ten years as a principal and senior executive of First Data Resources,
Inc., which provides back-office data processing services to financial
institutions that issue debit and credit cards.
MR. SALERNO has been President and Chief Operating Officer of the Company
and ARACS since November 1996 and has been a director of the Company since
May 29, 1997. From September, 1995 to November 1996, Mr. Salerno was
Executive Vice President of Operations of the Franchisor and ARACS. From July
1990 to September, 1995, Mr. Salerno was Senior Vice President and General
Manager Rent A Car of the Franchisor and ARACS.
MR. SHEEHAN has been Executive Vice President and Chief Financial Officer
of the Company and ARACS since December 1996. From September 1996 to
September 1997, Mr. Sheehan was a Senior Vice President of HFS. From December
1994 to September 1996, Mr. Sheehan was the Chief Financial Officer for STT
Video Partners, a joint venture between Time Warner, Telecommunications,
Inc., Sega of America and HBO. Prior thereto, he was with Reliance Group
Holdings, Inc., an insurance holding company, and some of its affiliated
companies for ten years and was involved with the formation of the Spanish
language television network, Telemundo Group, Inc. and from 1991 through 1994
was Senior Vice President -- Finance and Controller.
MR. CARLEY has been Executive Vice President and General Counsel of the
Company and ARACS since January 1997. From January 1995 to December 1996, Mr.
Carley served as Deputy Attorney General for Public Advocacy for New York
State. From December 1987 to March 1994, Mr. Carley was a partner at the New
York City law firm of Donovan, Leisure, Newton & Irvine. Previous positions
include General Counsel to the Reagan Administration's Office of Management
and Budget, and General Counsel to the Federal Trade Commission.
MR. CAREY has been Senior Vice President -- Human Resources of the Company
and ARACS since April 1997. From 1987 to 1996, Mr. Carey was a Senior Vice
President -- Human Resources for American Express International. From June
1982 to September 1985, Mr. Carey was Vice President -- Human Resources and
Administration for Warner Leisure Inc. (a division of Time Warner).
MS. YODER has been Senior Vice President -- Corporate Communications of
the Company since August 1997. From 1995 through 1996, Ms. Yoder was
Corporate Vice President, Public Affairs and Communications for GTE
Corporation, where she was a member of the Executive Leadership Committee.
From 1991 through 1995, Ms. Yoder held the position of Vice President,
Corporate Public Relations and Advertising and was a member of the Corporate
Executive Council for GE Capital, the financial services arm of the General
Electric Company.
MR. KENNELL has been Vice President and Treasurer of the Company and ARACS
since February 1987.
MR. SHANLEY has been Vice President and Controller of the Company and
ARACS since November 1996. From November 1989 to November 1996, Mr. Shanley
was Vice President -- Planning and Analysis of the Franchisor and ARACS.
MR. FORSYTHE has been Vice President -- Operations U.S. Rent A Car for
ARACS since 1990. From 1982 until 1990, Mr. Forsythe was Vice President --
Fleet and Vehicle Sales of ARACS.
MR. COLLINS has been Vice President -- International for ARACS and General
Manager of its international operations since 1987.
43
<PAGE>
MR. CARDILLO has been Vice President -- Worldwide Marketing of the Company
and ARACS since September 1995. From July 1990 until September 1995, Mr.
Cardillo was Vice President -- Sales and Marketing -- U.S. Rent A Car.
MR. BYRNES has been Vice President -- Sales North America of the Company
and ARACS since January 1987.
MR. HOLMES has been a Director of the Company and ARACS since October
1996. Mr. Holmes was appointed Vice Chairman of HFS in September 1996 and has
served as a director of HFS since June 1994. From July 1990 through September
1996, Mr. Holmes served as Executive Vice President, Treasurer and Chief
Financial Officer of HFS. Mr. Holmes also serves as a director and officer of
several subsidiaries of HFS. Mr. Holmes also serves as a Director and, from
November 1994 to February 1996, was the Executive Vice President and Chief
Financial Officer, of Chartwell. Mr. Holmes also serves as a director of Avis
Europe.
MR. MONACO has been a Director of the Company since May 29, 1997. Mr.
Monaco has been Vice Chairman and Chief Financial Officer of HFS since
October 1996 and has been a Director of HFS since January 27, 1997. Mr.
Monaco also serves as a director and officer of several subsidiaries of HFS.
Mr. Monaco served as Executive Vice President and Chief Financial Officer of
the American Express Company from September 1990 to June 1996.
MR. CATHCART has been the Chairman and Chief Executive of Avis Europe plc
since February 1988.
MR. COLEMAN has been President of the National League of Professional
Baseball Clubs since March 1994. From 1992 to March 1994, Mr. Coleman served
as Executive Director --Market Development of Major League Baseball. Mr.
Coleman also serves on the Board of Directors of HFS, Beneficial Corporation,
Omnicom Group, the Advisory Board of the Martin Luther King, Jr. Center for
Non-Violent Social Change, The Metropolitan Opera, The Newark Museum, the
Schuman Fund, the Clark Foundation, the Children's Defense Fund and Seton
Hall University.
MR. EDELMAN has been a Director of HFS since November 1993. Mr. Edelman
also serves as President and a Director of Chartwell Leisure Inc. He has been
a partner with Battle Fowler, a New York City law firm, from 1972 through
1993 and as of January 1, 1994 is Of Counsel to that firm. Mr. Edelman is
also a partner of Chartwell Hotels Associates, Chartwell Leisure Associates
L.P., Chartwell Leisure Associates L.P. II, and of certain of their
respective affiliates.
MS. HARMON has been a Principal in the Office of the President at JER Real
Estate Partners, L.P., an institutional, private equity fund for investment
in real estate assets since 1991. Prior to joining JER, Ms. Harmon served as
Managing Director of the Real Estate Finance Group at Banker's Trust Company.
MR. KENNEDY has been an attorney with his own law firm since 1976. Mr.
Kennedy also serves as a Director of Chartwell Leisure Inc.
MR. TARNOPOL has been Vice Chairman of The Bear Stearns Companies Inc.
since July 1996 and has been a Director of The Bear Stearns Companies Inc.
since 1985. Mr. Tarnopol has been a Senior Managing Director of Bear, Stearns
& Co. Inc. since 1985 and has been the Chairman of the Investment Banking
Division of Bear, Stearns & Co. Inc. since 1987.
44
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation earned by the
Chief Executive Officer and certain other executive officers of the Company
for the year ended December 31, 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
- ---------------------------- ------ ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Joseph V. Vittoria(4) ....... 1996 $550,000 $251,646 $23,000
Chairman & CEO
F. Robert Salerno ........... 1996 239,000 103,825 7,750
President and
Chief Operating Officer
Robert D. Cardillo .......... 1996 171,461 53,896 --
Vice President,
Worldwide Marketing
John Forsythe ............... 1996 170,154 56,430 7,750
Vice President,
Operations
Michael P. Collins .......... 1996 166,615 53,483 --
Vice President,
International
James E. Collins ............ 1996 228,673 79,477 7,250
Executive Vice President(5)
Lawrence Ferezy ............. 1996 209,961 76,021 7,250
Executive Vice
President and CFO(7)
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------------
SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION OPTIONS(2) COMPENSATION(3)
- ---------------------------- --------------------- ---------------
<S> <C> <C>
Joseph V. Vittoria(4) ....... 450,000 $ 44,370
Chairman & CEO
F. Robert Salerno ........... 200,000 4,584
President and
Chief Operating Officer
Robert D. Cardillo .......... 30,000 3,120
Vice President,
Worldwide Marketing
John Forsythe ............... 60,000 5,225
Vice President,
Operations
Michael P. Collins .......... 40,000 4,234
Vice President,
International
James E. Collins ............ 50,000 1,339,148(6)
Executive Vice President(5)
Lawrence Ferezy ............. 75,000 1,406,939(8)
Executive Vice
President and CFO(7)
</TABLE>
- ------------
(1) Includes value of management preferential lease arrangements and
insurance associated with leased cars.
(2) Amounts listed represent options to acquire HFS common stock.
(3) Includes only the value of group term life insurance, unless otherwise
indicated.
(4) Mr. Vittoria ceased to serve as an employee of the Company in January
1997.
(5) Mr. James E. Collins ceased to serve as an employee of the Company in
November 1996.
(6) Includes value of benefits paid as a result of termination of
employment. The cost of group term life insurance for Mr. J. Collins
was $21,648.
(7) Mr. Ferezy ceased to serve as an employee of the Company in November
1996.
(8) Includes value of benefits paid as a result of termination of
employment. The cost of group term life insurance for Mr. Ferezy was
$11,939.
45
<PAGE>
OPTION GRANTS DURING FISCAL 1996
The following tables describe the stock options granted to the Chief
Executive Officer and certain other executive officers of the Company in the
last fiscal year.(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE PER EXPIRATION
NAME GRANTED FISCAL YEAR(3) SHARE DATE
- ---------------------- ------------ ---------------- -------------- ------------
<S> <C> <C> <C> <C>
Joseph V. Vittoria(4) 450,000 4% $76.75 10/17/2006
F. Robert Salerno .... 150,000 2% 76.75 10/17/2006
50,000 57.25 12/17/2006
Robert D. Cardillo ... 30,000 * 76.75 10/17/2006
John Forsythe ......... 60,000 * 76.75 10/17/2006
Michael P. Collins ... 40,000 * 76.75 10/17/2006
James E. Collins(4) .. 50,000 * 76.75 10/17/2006
Lawrence Ferezy(4) ... 75,000 * 76.75 10/17/2006
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
- ---------------------- ----------------------------
NAME 5% 10%
- ---------------------- ------------- -------------
<S> <C> <C>
Joseph V. Vittoria(4) $21,636,000 $54,828,000
F. Robert Salerno .... 7,212,000 18,276,000
1,800,000 4,561,500
Robert D. Cardillo ... 1,442,400 3,655,200
John Forsythe ......... 2,884,800 7,310,400
Michael P. Collins ... 1,923,200 4,873,600
James E. Collins(4) .. -- --
Lawrence Ferezy(4) ... -- --
</TABLE>
- ------------
* Represents less than 1% of all options to acquire HFS common stock
granted within the last fiscal year.
(1) Options shown in the table are options to acquire HFS common stock.
(2) The amounts shown in these two columns represent the potential
realizable values using the options granted and the exercise price. The
assumed rates of stock price appreciation are set by the Securities and
Exchange Commission's executive compensation disclosure rules and are
not intended to forecast the future appreciation of HFS common stock.
(3) Figures represent the percentage of all options to acquire HFS common
stock granted within the last fiscal year.
(4) Options granted to Messrs. Vittoria, Ferezy and J. Collins were
cancelled in connection with the termination of their employment.
46
<PAGE>
CANCELLATION OF SARS
AND EQUIVALENT SHARES IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NAME NUMBER OF SECURITIES VALUE REALIZED
- ------------------- -------------------- --------------
<S> <C> <C>
Joseph V. Vittoria 350,000 $5,181,050(1)
71,123 2,485,038(2)
F. Robert Salerno . 200,000 2,960,600(1)
17,883 624,837(2)
Robert D. Cardillo 110,000 1,628,330(1)
13,795 482,021(2)
John Forsythe ...... 150,000 2,220,450(1)
13,141 459,162(2)
Michael P. Collins 110,000 1,628,330(1)
12,954 452,624(2)
James E. Collins .. 170,000 2,516,510(1)
23,559 823,151(2)
Lawrence Ferezy ... 180,000 2,664,540(1)
21,275 743,349(2)
</TABLE>
- ------------
(1) In connection with the Acquisition on October 17, 1996, all outstanding
stock appreciation units (the "Units") held under the Avis, Inc.
Phantom Stock Plan and the Avis, Inc. Stock Appreciation Rights Plan
(together the "SAR Plans") by the named executives were cancelled, the
SAR Plans were terminated, and each of the named executives received a
lump sum cash payment equal to $14.803 (the difference between the
value of the Units on their date of grant and the agreed purchase price
of $25.00) times the number of Units held by each such executive.
Amounts reflected above include payments received in connection with
the cancellation of SAR Units.
(2) In connection with the Acquisition on October 17, 1996, all outstanding
equivalent shares (the "Equivalent Shares") held under the Avis, Inc.
Nonqualified Employee Stock Ownership Equivalent Plan by the named
executives were cancelled and each of the executives received a lump
sum cash payment equal to $34.94 times the number of Equivalent Shares
held by each such executive. $5.00 of the consideration paid per
Equivalent Share was paid to the named executives in HFS Common Stock.
* Amounts shown under "Option Grants During Fiscal 1996" on the prior
page represent all outstanding Options held by the named officers at
fiscal year end. None of these options were exercisable at such time.
Only the grant of 50,000 options to Mr. Salerno was in-the-money at the
end of the fiscal year and its value at such time was $125,000.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Pursuant to the terms of an offer letter from HFS, Mr. Hoenshell is
entitled to an annual base salary of $600,000 and a target bonus of 60% of
his base salary, which bonus is guaranteed for the first year of employment
with the Company. Mr. Hoenshell is also eligible for a grant of 300,000
options to acquire HFS common stock, and a grant of options equivalent to at
least 3% of the Company's Common Stock. The letter does not contain a
specified term of employment.
Under the terms of the offer letter, if Mr. Hoenshell's employment is
involuntarily terminated within the first 90 days of such employment for
reasons other than willful misconduct, he is entitled to receive a grant of
100,000 options to acquire HFS common stock, which options will be fully
vested and exercisable for a period of one year. If his employment is
similarly terminated in the next 90 days, all 300,000 options will become
fully vested and exercisable for a period of one year. In addition, if Mr.
Hoenshell's employment is involuntarily terminated for reasons other than
willful misconduct in the first six months of his employment, he is entitled
to receive a payment equal to six months salary and a pro
47
<PAGE>
rated bonus. If his employment is similarly terminated after the first six
months, Mr. Hoenshell is entitled to receive a payment equal to one year's
base salary or such greater payment as the Board may determine.
Mr. Salerno and Mr. Forsythe have employment agreements with a predecessor
of the Company which terminate on February 8, 2001. Mr. Salerno and Mr.
Forsythe receive an annual base salary of $300,000 and $175,000,
respectively, which salary may be increased by the Board of Directors during
the term of the agreement. If the employment of either of these executives is
terminated by the Company for reasons other than "just cause" or if either of
these executives terminates his employment for "good reason" (as each term is
defined in the agreement), he is entitled to receive his remaining salary and
full bonus and certain perquisites through the term of the agreement.
Mr. M. Collins has an employment agreement with a predecessor of the
Company which renews automatically each year unless notice of termination is
given to Mr. Collins at least 60 days prior to the anniversary date of the
agreement. Mr. M. Collins receives an annual base salary of $172,000. If the
employment of Mr. M. Collins is terminated by the Company without "just
cause" (as defined in the agreement), he is entitled to receive his base
salary for a period equal to one month for every year of service with the
Company and such Company's predecessor, plus a pro rata share of the bonus
for the year during which he is terminated.
DEFINED BENEFIT PLAN
The Company maintains a defined benefit pension plan for employees who met
the eligibility requirements as of December 31, 1983. The eligibility
requirements were non-union full time employees hired prior to December 31,
1983 who were age 25 or above on January 1, 1985. The plan provides that the
benefit for each participant, payable monthly, be equal to 1-1/2% of his or
her final average compensation (average compensation being the average of the
highest five consecutive years of compensation in the last ten years of
employment) for each year of service, not to exceed 35, minus 1 3/7% of the
estimated Social Security benefit for each year of service, not to exceed 35.
In general, the effect is to provide a participant who has worked for the
company for 35 years prior to retirement with a pension, including Social
Security, equal to at least 52% of the average compensation (including bonus,
overtime and commissions) earned during the highest five consecutive years of
his or her employment.
To the extent that applicable federal laws limit a participant's pension
plan benefit to an amount less than the amount otherwise provided by the
plan's formula, the company has adopted a Retirement Equalization Benefit
Plan to compensate the participant for the reductions in the retirement
benefit.
The following table shows the estimated annual pension benefit payable
under the plans under normal retirement in 1996 after selected periods of
service (assuming such employees and their spouses elect a straight life
annuity rather than a form of joint and survivor or other form of annuity, in
which case the benefits would generally be lower than shown in the following
table.) The estimated maximum benefits for employees who retire in years
other than 1996 will be different from the amount shown in the table because
pension benefits will be offset by different Social Security benefits,
however, the benefit shown in the table will not be reduced by the amount of
Social Security benefits actually paid.
48
<PAGE>
PENSION PLAN TABLE
ESTIMATED ANNUAL PENSION BENEFIT(A)
YEARS OF SERVICE
<TABLE>
<CAPTION>
ANNUAL PAY 15 20 25 30 35
- ------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$200,000 $ 39,819 $ 53,091 $ 66,364 $ 79,637 $ 92,910
250,000 50,506 67,341 84,177 101,012 117,848
300,000 61,194 81,591 101,989 122,387 142,785
350,000 71,881 95,841 119,802 143,762 167,723
400,000 82,569 110,091 137,614 165,137 192,660
450,000 93,256 124,341 155,427 186,512 217,598
500,000 103,944 138,591 173,239 207,887 242,535
</TABLE>
- ------------
(a) A portion of the benefit will be paid by the Company under its
Retirement Equalization Benefit Plan, if the benefit exceeds the
maximum pension payable from the tax qualified retirement plan under
federal law.
Except for the age 70-1/2 minimum distributions, all payments are made in
lump sums upon death, disability, age 65 or termination of employment.
As of December 31, 1996 (or as of the date the executive's employment with
the Company terminated, if earlier), the named executives had the following
years of service under the defined benefit plan: Mr. Vittoria, twenty-seven
years; Mr. J. Collins, thirteen years, eight months; Mr. Ferezy, fourteen
years, six months; Mr. Salerno, fourteen years, seven months; Mr. Cardillo,
thirteen years, nine months; Mr. Forsythe, fourteen years, eight months; Mr.
M. Collins, twenty-one years, six months.
STOCK OPTION PLAN
Introduction
The Avis Rent A Car, Inc. 1997 Stock Option Plan (the "Stock Option Plan")
will be adopted by the Board of Directors prior to the consummation of the
Offerings. 4,183,908 shares of Common Stock (4,620,977 shares if the
over-allotment options granted to the U.S. Underwriters and the Managers are
exercised in full) will be reserved for issuance upon the exercise of options
granted to officers, key employees, independent contractors and non-employee
Directors of the Company and its designated subsidiaries pursuant to the
Stock Option Plan. The primary purpose of the Stock Option Plan is to provide
additional incentive to officers, key employees, independent contractors and
non-employee Directors of the Company and to strengthen their commitment to
the Company and its subsidiaries. The Stock Option Plan is intended to
qualify for the performance-based exclusion from the deduction limitation of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
General
A committee (the "Committee") will be appointed by the Board of Directors
to administer the Stock Option Plan. The Committee generally will select the
recipients of options under the Stock Option Plan, the exercise price of such
options and other terms and conditions of the option grant. Options granted
under the Stock Option Plan may be "incentive stock options" ("ISOs") (within
the meaning of Section 422 of the Code) or options not subject to Section 422
of the Code ("NSOs"). Each such option (ISO or NSO), when it becomes
exercisable, entitles the holder thereof to purchase a share of Common Stock
for an amount equal to the exercise price of the option, payable in cash. The
Company may also provide for payment of the exercise price of the option in
shares of Common Stock with an aggregate value equal to the exercise price of
the option, or pursuant to a cashless exercise procedure.
Non-employee Directors of the Company receive an initial automatic grant
of an option to purchase 25,000 shares of Common Stock under the Stock Option
Plan. Subsequently elected non-employee
49
<PAGE>
Directors will receive a like grant under the Stock Option Plan upon election
or appointment to the Board of Directors.
The exercise price of each option under the Stock Option Plan may not be
less than the fair market value of a share of Common Stock on the date the
option is granted. Options held by an optionee will generally become
exercisable as to 20% of the shares covered by such options on the first
anniversary of the date of grant and with respect to an additional 20% of the
shares covered by such options on each of the four succeeding anniversaries
of the date of grant (if the optionee continues to be employed [or retained
as an independent contractor] by the Company on each such date). All options
held by an optionee will become fully exercisable (to the extent not already
exercisable) if a "change of control transaction" (as defined in the Stock
Option Plan) occurs. Shares of Common Stock acquired upon the exercise of
options may be subject to restrictions on transfer which will be set forth in
the agreement evidencing the grant of the option. All options granted under
the Stock Option Plan, to the extent not exercised, expire on the earliest of
(i) the tenth anniversary of the date of grant, (ii) two years following the
optionee's termination of employment on account of death, retirement,
disability or (iii) one year following the optionee's termination of
employment for any other reason. Grants of options under the Stock Option
Plan are subject to an annual per-participant maximum grant of shares of
Common Stock.
Generally, the Board of Directors of the Company may from time to time
amend or terminate the Stock Option Plan, provided that (i) no such amendment
or termination may adversely affect the rights of any participant without the
consent of such participant and (ii) to the extent required by any law,
regulation or stock exchange rule, no amendment shall be effective without
the approval of the Company's stockholders.
Certain Federal Income Tax Consequences
The following discussion is a brief summary of the principal federal
income tax consequences under current federal income tax laws relating to
awards under the Stock Option Plan. This summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
income and other tax consequences.
Nonstatutory Stock Options. An optionee generally will not be taxed upon
the grant of an NSO. Rather, at the time of exercise of such NSO (and in the
case of an untimely exercise of an ISO), the optionee will recognize ordinary
income for federal income tax purposes in an amount equal to the excess of
the fair market value of the shares purchased over the option price. The
Company will generally be entitled to a tax deduction at such time and in the
same amount that the optionee recognizes ordinary income.
If shares acquired upon exercise of an NSO (or upon untimely exercise of
an ISO) are later sold or exchanged, then the difference between the sales
price and the fair market value of such stock on the date that ordinary
income was recognized with respect thereto will generally be taxable as
long-term or short-term capital gain or loss (if the stock is a capital asset
of the optionee) depending upon whether the stock has been held for more than
one year after such date.
Incentive Stock Options. An optionee will not be in receipt of taxable
income upon the grant of an ISO. Exercise of an ISO will be timely if made
during its term and if the optionee remains an employee of the Company or a
subsidiary at all times during the period beginning on the date of grant of
the ISO and ending on the date three months before the date of exercise (or
one year before the date of exercise in the case of a disabled optionee).
Exercise of an ISO will also be timely if made by the legal representative of
an optionee who dies (i) while in the employ of the Company or a subsidiary
or (ii) within three months after termination of employment. The tax
consequences of an untimely exercise of an ISO will be determined in
accordance with the rules applicable to NSOs.
If stock acquired pursuant to the timely exercise of an ISO is later
disposed of, the optionee will, except as noted below, recognize long-term
capital gain or loss (if the stock is a capital asset of the optionee) equal
to the difference between the amount realized upon such sale and the option
price. The
50
<PAGE>
Company, under these circumstances, will not be entitled to any federal
income tax deduction in connection with either the exercise of the ISO or the
sale of such stock by the optionee.
If, however, stock acquired pursuant to the exercise of an ISO is disposed
of by the optionee prior to the expiration of two years from the date of
grant of the ISO or within one year from the date such stock is transferred
to him upon exercise (a "disqualifying disposition"), any gain realized by
the optionee generally will be taxable at the time of such disqualifying
disposition as follows: (i) at ordinary income rates to the extent of the
difference between the option price and the lesser of the fair market value
of the stock on the date the ISO is exercised or the amount realized on such
disqualifying disposition and (ii) if the stock is a capital asset of the
optionee, as short-term or long-term capital gain to the extent of any excess
of the amount realized on such disqualifying disposition over the fair market
value of the stock on the date which governs the determination of his
ordinary income. In such case, the Company may claim a federal income tax
deduction at the time of such disqualifying disposition for the amount
taxable to the optionee as ordinary income. Any capital gain recognized by
the optionee will be long-term capital gain if the optionee's holding period
for the stock at the time of disposition is more than one year; otherwise it
will be short-term.
RELATIONSHIP WITH HFS
Immediately prior to the sale of shares of Common Stock in the Offerings,
HFS, through a wholly owned subsidiary, will own all of the issued and
outstanding Common Stock. As a result of the Offerings, HFS's ownership will
be reduced to approximately 30% of the outstanding shares of Common Stock (or
approximately 27.5% of the outstanding shares of Common Stock if the
over-allotment options granted to the U.S. Underwriters and the Managers are
exercised in full). HFS has advised the Company that its current intent is to
continue to hold all of the Common Stock beneficially owned by it following
the Offerings. However, HFS is not subject to any contractual obligation to
retain its interest, except that each of the Company and HFS has agreed,
subject to certain exceptions, not to sell or otherwise dispose of any shares
of Common Stock for a period of 180 days after the date of this Prospectus
without the prior written consent of Bear, Stearns & Co. Inc. As a result,
there can be no assurance concerning the period of time during which HFS will
maintain its beneficial ownership of Common Stock owned by it following the
Offerings. See "Underwriting."
The Company is a wholly owned subsidiary of the Franchisor, which was
acquired by HFS in October 1996. HFS is a global provider of real estate and
travel services with a base of approximately 100 million consumer contacts
annually. It is the world's largest franchisor of real estate brokerage
offices and lodging facilities and owns leading providers of timeshare
exchange services, corporate relocation services, mortgage services for
consumers and vehicle fleet management services. On May 27, 1997, HFS
announced that it had entered into a merger agreement with CUC, a leading
member services and direct marketing organization offering shopping, travel,
dining, vehicle purchasing, home buying and other services to approximately
68 million consumer members worldwide.
For purposes of governing the on-going relationships between HFS, the
Franchisor, WizCom and the Company after the Offerings, HFS, the Franchisor,
WizCom and the Company have entered or will enter into various agreements
setting forth the on-going responsibilities regarding various matters
outlined below. The agreements summarized below are included as exhibits to
the Company's Registration Statement of which this Prospectus is a part. The
following summaries are qualified in their entirety by reference to such
exhibits.
SEPARATION AGREEMENT
The Company and the Franchisor have entered into a Separation Agreement
which provides for, among other things, the principal corporate transactions
required to effect the Offerings, the assumption by the Company of all
liabilities relating to the vehicle rental business, other than liabilities
related to alleged acts of illegal discrimination against customers in the
rental of vehicles which are alleged to have occurred prior to the
consummation of the Offerings, and the allocation between the Company and the
Franchisor of certain other liabilities, certain indemnification obligations
of the Company and the
51
<PAGE>
Franchisor and certain other agreements governing the relationship between
the Company and the Franchisor with respect to or in consequence of the
Offerings (the "Separation"). The Separation Agreement provides that the
Offerings are subject to the prior satisfaction of certain conditions
including, among other things, the transfer of the vehicle rental business to
the Company, the execution of all ancillary agreements, certain of which are
described below, to the Separation Agreement and the formal approval of the
Offerings by the Board of Directors of the Company and HFS. See Notes 4 and
13 to the Audited Consolidated Financial Statements.
Cross-Indemnification. Subject to certain exceptions, the Company has
agreed to indemnify the Franchisor and its subsidiaries against any loss,
liability or expense incurred or suffered by the Franchisor or its
subsidiaries arising out of or related to the failure by the Company to
perform or otherwise discharge liabilities allocated to and assumed by the
Company under the Separation Agreement, and the Franchisor has agreed to
indemnify the Company and its subsidiaries against any loss, liability or
expense incurred or suffered by the Company or its subsidiaries arising out
of or related to the failure by the Franchisor to perform or otherwise
discharge the liabilities retained by the Franchisor under the Separation
Agreement, including any liabilities arising out of alleged acts of illegal
discrimination against customers in the rental of vehicles which are alleged
to have occurred prior to the consummation of the Offerings. The Separation
Agreement also includes procedures for notice and payment of indemnification
claims and provides that the indemnifying party may assume the defense of a
claim or suit brought by a third party.
Expenses. The Separation Agreement provides that, except as otherwise
specifically provided, all costs and expenses incurred in connection with the
preparation, execution, delivery and implementation of the Separation
Agreement and with the consummation of the transactions contemplated by the
Separation Agreement shall be paid by the party incurring such cost or
expense. Notwithstanding the foregoing, the Company shall be obligated to pay
the legal, filing, accounting, printing and other accountable and
out-of-pocket expenditures in connection with the preparation, printing and
filing of the Registration Statement of which this Prospectus forms a part
and obtaining financing.
MASTER LICENSE AGREEMENT
The Company's status as an Avis System franchisee is governed by an
agreement among the Company, the Franchisor and Wizard Co. (the "Master
License Agreement") which grants to the Company the non-exclusive right to
operate the Avis vehicle rental business in the territories specified therein
and the exclusive right to operate the Avis vehicle rental business in
certain specified territories for a period of 50 years.
Pursuant to the Master License Agreement, the Company has agreed to pay
the Franchisor a monthly base royalty of 3.0% of the Company's gross revenue.
In addition, the Company has agreed to pay a supplemental royalty of 1.0% of
gross revenue payable quarterly in arrears which will increase 0.1% per year
commencing in 1999 and in each of the following four years thereafter to a
maximum of 1.5% (the "Supplemental Fee"). These fees have been paid by the
Company since January 1, 1997. Until the fifth anniversary of the effective
date of the Master License Agreement, the Supplemental Fee or a portion
thereof may be deferred if the Company does not attain certain financial
targets. Any Supplemental Fees that are deferred shall bear interest at a
market rate until paid and shall be expressly subordinated to indebtedness of
the Company. On an unaudited pro forma basis, if the royalties had been
charged to the Company beginning on October 17, 1996, net income for the
period October 17, 1996 to December 31, 1996 would have been reduced by $4.3
million resulting in a pro forma net loss of $3.1 million. The royalties
charged to the Company for the six months ended June 30, 1997 amounted to
$37.8 million and resulted in a reduction in net income of approximately
$20.4 million.
The Company has the exclusive right to open Avis franchises in 28 selected
standard metropolitan statistical areas in the United States, in territories
outside the United States that are not currently licensed to other Avis
System franchisees and in territories that the Company purchases from
existing franchisees that have exclusivity. The Company has the non-exclusive
right to open new franchises in any other market not currently served by
another Avis System franchisee. In the markets where the Company has a
non-exclusive right to open new franchises, the Company will have a right of
first refusal to develop such
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area prior to the Franchisor's granting a license to a third party. In the
event HFS acquires another car rental company, the Company has a right of
first refusal to negotiate a grant of a license to operate the rental
locations for such car rental company within any territory in which the
Company operates.
The Master License Agreement provides the Franchisor with significant
rights regarding the business and operations of the Company. The Company is
required to operate each of its Avis franchises in accordance with certain
standards contained in the Avis operating manual (the "Operating Manual").
Pursuant to the Master License Agreement, the Franchisor may impose certain
guidelines relating to the Avis System, the vehicle rental operations and the
amount of advertising and promotion expenditures. In general, the Master
License Agreement provides that the Company shall not (i) engage in any other
vehicle rental business or (ii) disclose the terms of the Operating Manual or
any other confidential information relating to the Avis System to any third
party. In addition, the Company agrees not to use any of the licensed
trademarks other than in its vehicle rental business without the Franchisor's
consent.
The Master License Agreement shall terminate without offering the Company
an opportunity to cure its default, if (i) certain bankruptcy and insolvency
events occur, (ii) the Company purports to transfer any rights and
obligations under the Master License Agreement without compliance with the
terms of the Master License Agreement, (iii) the Company competes with the
Franchisor in violation of the Master License Agreement, (iv) the Company
discloses the confidential information of the Franchisor in violation of the
Master License Agreement, (v) the Company challenges Wizard Co.'s rights to
the licensed proprietary marks, (vi) upon a Change of Control Event (as
defined) or (vii) the Company receives three or more notices of termination
for Curable Defaults (as defined) which are cured or not cured (collectively,
the "Non-Curable Defaults"); provided that, except for (i) above, the
Franchisor shall give the Company 30 days notice of such Non-Curable Default.
The Franchisor may also terminate the Master License Agreement if the Company
(i) fails, refuses or neglects to promptly pay monies owing to the
Franchisor, WizCom or HFS under certain specified agreements, (ii) misuses or
makes any unauthorized use of the licensed proprietary marks or otherwise
materially impairs the goodwill associated with such marks, (iii) engages in
any business or markets any service or product under a name or mark which, in
the Franchisor's opinion, is similar to the licensed proprietary marks, (iv)
fails to maintain material compliance with the standards prescribed by the
Franchisor in the Master License Agreement, in the Operating Manual or
otherwise in writing or (v) with respect to any facility, fails to maintain
compliance with the standards or procedures prescribed by the Franchisor at
such facility (collectively, the "Curable Defaults"), provided, however, that
the Company shall have 30 days (10 days in the case of (i) above) after its
receipt from the Franchisor of written notice of such default to remedy such
default and, provided further, that other than with respect to (i) above, in
the event such default is not cured within 30 days but the Company has
commenced to cure such default within 30 days and is diligently prosecuting
such cure to completion, the Company shall have up to an additional 60 days
to cure such default. In the event of a termination of the agreement, HFS has
the option to acquire the Company's rental locations, leases and fleet for
fair value.
Change of Control Event means a transaction or series of related
transactions by which (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) other than HFS or an affiliate
or successor to HFS, is or becomes after the date hereof the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act as in
effect on the date hereof), of more than 25% of the total voting power of all
voting stock of the Company then outstanding when HFS controls 20% or more of
such voting power and otherwise 20% of the total voting power (the "Relevant
Percentage"); (b)(1) another corporation merges into the Company or the
Company consolidates with or merges into any other corporation or (2) the
Company conveys, transfers or leases all or substantially all its assets to
any person or group, in one transaction or a series of related transactions
other than any conveyance, transfer or lease between the Company and a wholly
owned subsidiary of the Company, with the effect that a person or group,
other than a person or group which is the beneficial owner of more than the
Relevant Percentage of the total voting power of all voting stock of the
Company immediately prior to such transaction becomes the beneficial owner of
more than the Relevant Percentage of the total voting power of all voting
stock of the surviving or transferee corporation of such transaction or
series; or (c) during any period of two consecutive years, individuals who at
the beginning of such period constituted
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the Company's Board of Directors (together with any new directors whose
election by the Company's Board of Directors, or whose nomination for
election by the Company's shareholders, was approved by a vote of a majority
of the Directors then still in office who were either Directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Directors then in office.
REGISTRATION RIGHTS AGREEMENT
Prior to the consummation of the Offerings, the Company will enter into
the Registration Rights Agreement, pursuant to which HFS and certain
transferees of Common Stock held by the Franchisor (the "Holders") will have
the right to require the Company to register all or part of the Common Stock
owned by such Holders under the Securities Act (a "Demand Registration");
provided that the Company (i) will not be obligated to effect a Demand
Registration within 180 days of the closing date in connection with the
Offerings unless Bear, Stearns & Co. Inc. has given its consent and (ii) must
postpone giving effect to a Demand Registration up to a period of 30 days if
the Company believes such registration might have a material adverse effect
on any plan or proposal by the Company with respect to any financing,
acquisition, recapitalization, reorganization or other material transaction,
or the Company is in possession of material non-public information that, if
publicly disclosed, could result in a material disruption of a major
corporate development or transaction then pending or in progress or in other
material adverse consequences to the Company. HFS has advised the Company
that it does not have any present intention to request any such registration.
In addition, the Holders will have the right to participate in registrations
by the Company of its Common Stock (a "Piggyback Registration"). The Holders
will pay all out-of-pocket expenses incurred in connection with any Demand
Registration. The Company will pay any expenses incurred in connection with a
Piggyback Registration, except for underwriting discounts, commissions and
expenses attributable to the shares of Common Stock sold by such Holders.
COMPUTER SERVICES AGREEMENT
The Wizard reservation and rental processing system, with the associated
back office and accounting systems, are owned and operated by WizCom at a
computer center in Garden City, New York. The Company purchases use of the
Wizard System for the purpose of processing reservation and rental
transactions, and for accounting purposes, under the terms of a Computer
Services Agreement entered into with WizCom in connection with the Offerings.
The Computer Services Agreement provides the Company with access to all
functions of the Wizard System. The Company participates in the funding of
the development costs for any new features which it agrees with other
relevant users to be desirable. Once developed, any such additional features
also become available to the Company. WizCom will charge the Company the full
cost of providing computer services each month. The method of calculating
costs chargeable to the Company will vary depending on the service being
provided. The Computer Services Agreement is coterminous with the Master
License Agreement.
Under the Computer Services Agreement, WizCom may, from time to time,
provide the Company with software or system development services. The Company
has the exclusive right to use any such software or systems from the date of
implementation thereof.
Pursuant to a Termination Services Agreement, WizCom has agreed to provide
services to ARACS for a period of up to six months in the event the Computer
Services Agreement is terminated in accordance with certain provisions
thereof.
RESERVATION SERVICES AGREEMENT
The Company has entered into a Reservation Services Agreement with HFS,
pursuant to which HFS has agreed to operate and maintain (directly or by
subcontracting with affiliates or one or more third parties) reservation
center services consistent with the services historically provided to the
Company. The Company is obligated to obtain and maintain at its vehicle
rental locations the computer equipment and communication equipment and
service required to participate in the reservation system. The Company has
agreed to pay HFS (i) a per call charge for each call received in the call
centers operated by HFS for
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the Avis System, (ii) for manually entered transactions, a per booking charge
for every booking made through direct electronic interface with the global
distribution systems utilized by the airlines and (iii) a per booking charge
for every booking made through an internet connection for the Avis System.
Such fees are subject to adjustment annually to reflect the cost of providing
such service. The Reservation Services Agreement shall terminate upon the
termination of the Master License Agreement, unless earlier terminated in
accordance with the terms thereof.
Pursuant to an Employee Management Agreement with HFS, certain employees
of the Company who perform certain reservations related services will be
managed by, and under the direction of, HFS in the performance of such
services. The aggregate of the costs and expenses incurred by the Company for
services performed by the Company's employees pursuant to the Employee
Management Agreement shall be considered part of the cost of receiving
services pursuant to the Reservation Services Agreement.
PURCHASING SERVICES AGREEMENT
On or prior to the consummation of the Offerings, HFS and ARACS will enter
into a Purchasing Services Agreement pursuant to which HFS has agreed with
the assistance of ARACS, to identify vendors and programs which would benefit
ARACS and pursue establishing a preferred alliance program with such vendors
for the benefit of ARACS. Any commissions, related access fees or other
amounts paid by preferred alliance partners in connection with an agreement
relating to sales to ARACS shall be shared by the parties.
EMPLOYEE BENEFITS ALLOCATION AGREEMENT
The Franchisor, ARACS and HFS have entered into an Employee Benefits and
Other Employment Matters Allocation Agreement (the "Employee Benefits
Allocation Agreement") providing for the allocation of certain
responsibilities with respect to employee compensation, benefit and labor
matters. Among other things, the Employee Benefits Allocation Agreement
provides that, effective as of the date of the public offering (the
"Separation Date"), ARACS and HFS will generally provide the employees of
each company with such employee benefits as each company deems appropriate.
ARACS will assume any severance, employment or similar agreement entered into
between the Franchisor or ARACS and any individual who is intended to be
employed by ARACS on an ongoing basis after the Separation Date. As of the
Separation Date, ARACS will also become the sole sponsor of (a) the Avis
Voluntary Savings Plan (the "Savings Plan"), (b) the Retirement Plan for
Employees as of June 30, 1985 of Avis Rent A Car System, Inc. (the "Retirement
Plan"), (c) the Avis, Inc. Employee Stock Ownership Plan and (d) the Avis Rent
A Car System, Inc. Pension Plan for Bargaining Hourly Employees. Under the
terms of the Employee Benefits Allocation Agreement, HFS employees currently
participating in the Savings Plan, the Retirement Plan and certain welfare
benefit plans will continue to participate in such plans during a specified
transition period; HFS will be required to make payments to the Company with
respect to such continued participation. Further, pursuant to the Employee
Benefits Allocation Agreement, ARACS will, as of the Separation Date, assume
and discharge certain obligations and liabilities of ARACS and its
subsidiaries relating to collective bargaining agreements. ARACS will also
assume responsibility for certain employee welfare, and other employee benefit
plans under the Employee Benefits Allocation Agreement.
CALL TRANSFER AGREEMENT
ARACS and HFS are parties to a Call Transfer Agreement, dated March 4,
1997 (the "Call Agreement"). Pursuant to the Call Agreement, HFS has agreed
to transfer telephone calls from its lodging customers if such customers wish
to rent vehicles. Pursuant to the Call Agreement, ARACS has agreed to pay to
HFS a fee of $1.75 per call transferred to ARACS by HFS. Further, ARACS has
agreed to pay to HFS a fee of $8.00 for each car rental that results from a
call transferred by HFS. ARACS has guaranteed that it will pay HFS no less
than $2.25 million in recurring fees during each of the five years of the
contract term which expires on March 4, 2002. The Company incurred $750,000
in fees payable to HFS for the period ended June 30, 1997. The Company also
paid a one-time access fee of $1.0 million to HFS pursuant to such agreement.
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LOANS BETWEEN THE COMPANY AND HFS
Intercompany Note
In connection with the Acquisition, the Franchisor assigned to ARACS a
note, dated October 1996, made by Wizard Co., Inc. and originally payable to
the Franchisor in the principal amount of $194,100,000 (the "Wizard Note").
ARACS subsequently assigned the Wizard Note to Reserve Claims Management Co.,
a subsidiary of the Company. In connection with the Separation, the Company
assumed Wizard Co., Inc.'s obligations under the Wizard Note pursuant to an
Assignment, Assumption and Release Agreement dated July 30, 1997 among ARACS,
Wizard Co., Inc. and Reserve Claims Management Co. in exchange for payment by
Wizard Co., Inc. to the Company of the amount due under the Wizard Note. The
Wizard Note matures on October 1, 2006, bears interest at a rate per annum
equal to 7.13% and is payable annually on each anniversary thereof commencing
October 1, 1997.
Vehicle Financing Notes
At December 31, 1996 and June 30, 1997, the Company had loans outstanding
from the Franchisor of $247.5 million and $254.0 million, respectively, which
provide subordinated vehicle financing. See Note 3 to the Audited
Consolidated Financial Statements.
Other
The Company had a net receivable due from HFS and its affiliated companies
at December 31, 1996 and June 30, 1997 of $112.3 million and $65.6 million,
respectively. These amounts primarily represent the transfer of assets from
the Company in connection with the Acquisition, as well as intercompany
transactions relating to management, service and administrative fees since
the Acquisition. See Note 3 to the Audited Consolidated Financial Statements.
TAX DISAFFILIATION AGREEMENT
Prior to the completion of the Offerings, HFS and the Company will enter
into a tax disaffiliation agreement (the "Tax Disaffiliation Agreement") that
will set forth each party's rights and obligations with respect to payments
and refunds, if any, for taxes relating to taxable periods before and after
the completion of the Offerings and related matters such as the filing of tax
returns and the conduct of audits and other proceedings involving claims made
by taxing authorities.
On or prior to October 16, 1997 (the "Acquisition Date"), Franchisor was
the common parent of an affiliated group of corporations within the meaning
of Section 1504(a) of the Internal Revenue Code of 1986, as amended, whose
members included the Franchisor, the Company and certain of their respective
subsidiaries (the "Old Avis Group"). Generally, under the Tax Disaffiliation
Agreement, the Company will agree to indemnify HFS for (i) taxes of or
attributable to the Old Avis Group, any member of the Old Avis Group and any
nonconsolidated subsidiary of the Franchisor for any period or portion
thereof ending on or before the Acquisition Date, (ii) taxes incurred
pursuant to Section 1.1502-6 of the U.S. Treasury regulations (or similar
provisions under state, local or foreign law imposing several liability upon
members of a consolidated, combined, affiliated or unitary group) as a result
of any member of the Old Avis Group having been a member of another
affiliated group, (iii) taxes of or attributable to the Company and its
subsidiaries for periods or portions thereof beginning the day after the
Acquisition Date and (iv) transfer taxes incurred as a result of the
transactions contemplated by the Offerings.
LEASE AGREEMENTS
The Company and WizCom currently share three facilities, which are located
in (i) Virginia Beach, Virginia, (ii) Tulsa, Oklahoma and (iii) Garden City,
New York (which houses the Company's principal executive offices). The
Virginia Beach property is owned by WizCom. The Garden City property (which
houses the Company's principal executive offices) and the Tulsa property are
each owned by third parties unrelated to the Company or WizCom and are leased
by WizCom.
In connection with the Separation, the Company and WizCom intend to enter
into a lease or a sublease agreement with respect to each property, as
applicable. WizCom will lease space at its Virginia
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Beach property to the Company pursuant to a lease agreement. The lease
agreement will have a term of 18 years and will require the Company to pay
WizCom its proportionate share based on allocated space, of the cost of
operating such facility. In addition, WizCom will sublease space at its Tulsa
and Garden City properties to the Company pursuant to sublease agreements for
each respective property. The sublease agreements will have a term
coterminous with the terms under WizCom's existing lease agreements and will
require the Company to reimburse WizCom for its proportionate share, based on
allocated space, of the rent and other charges required under WizCom's
existing leases relating to such properties, together with its proportionate
share, based on allocated space, of the cost of operating such facilities.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have 28,000,000 shares
of Common Stock issued and outstanding (30,925,000 shares if the
over-allotment options granted to the U.S. Underwriters and the Managers are
exercised in full). All of the shares of Common Stock to be sold in the
Offerings will be freely tradeable without restrictions or further
registration under the Securities Act, unless purchased by an "affiliate" of
the Company (as that term is defined in Rule 144 adopted under the Securities
Act ("Rule 144")), in which case such shares would be subject to the resale
limitations of Rule 144. All of the outstanding shares of Common Stock
beneficially owned by HFS have not been registered under the Securities Act
and may not be sold in the absence of an effective registration statement
under the Securities Act other than in accordance with Rule 144 or another
exemption from registration. HFS has certain rights to require the Company to
effect registration of shares of Common Stock owned by HFS, which rights may
be assigned. See "Relationship with HFS -- Registration Rights Agreement."
In general, under Rule 144, a person (or persons whose shares are required
to be aggregated) who has beneficially owned shares of Common Stock for at
least one year, including a person who may be deemed an "affiliate", is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of one percent of the total number of shares of the
class of stock sold or the average weekly reported trading volume of the
class of stock being sold or the average weekly reported trading volume of
the class of stock being sold during the four calendar weeks preceding such
sale. A person who is not deemed an "affiliate" of the Company at any time
during the three months preceding a sale and who has beneficially owned
shares for at least two years is entitled to sell such shares under Rule 144
without regard to the volume limitations described above. As defined in Rule
144, an "affiliate" of an issuer is a person that directly or indirectly
through the use of one or more intermediaries controls, is controlled by, or
is under common control with, such issuer. Rule 144A adopted under the
Securities Act ("Rule 144A") provides a non-exclusive safe harbor exemption
from the registration requirements of the Securities Act for specified
resales of restricted securities to certain institutional investors. In
general, Rule 144A allows unregistered resales of restricted securities to a
"qualified institutional buyer", which generally includes an entity, acting
for its own account or for the account of other qualified institutional
buyers, that in the aggregate owns or invests at least $100 million in
securities of unaffiliated issuers. Rule 144A does not extend an exemption to
the offer or sale of securities that, when issued, were of the same class as
securities listed on a national securities exchange or quoted on an automated
quotation system. The shares of Common Stock outstanding as of the date of
this Prospectus would be eligible for resale under Rule 144A because such
shares, when issued, were not of the same class as any listed or quoted
securities. The foregoing summary of Rule 144 and Rule 144A is not intended
to be a complete description thereof.
Prior to the Offerings, there has been no market for the Common Stock, and
no prediction can be made as to the effect, if any, that market sales of
outstanding shares of Common Stock by HFS, or the availability of such shares
for sale, will have on the market price of the Common Stock prevailing from
time to time. Nevertheless, sales of substantial amounts of Common Stock
beneficially owned by HFS in the public market, or the perception that such
sales could occur, could adversely affect prevailing market prices for the
Common Stock offered in the Offerings.
Although HFS in the future may effect or direct sales or other
dispositions of Common Stock that would reduce its beneficial ownership
interest in the Company, HFS has advised the Company that its current intent
is to continue to hold all of the Common Stock beneficially owned by it
following the Offerings. However, HFS is not subject to any contractual
obligation to retain its controlling interest
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except that HFS and the Company have agreed, subject to certain limited
exceptions, not to sell or otherwise dispose of any shares of Common Stock
for a period of 180 days after the date of this Prospectus without the prior
written consent of Bear, Stearns & Co. Inc. As a result, there can be no
assurance concerning the period of time during which HFS will maintain its
beneficial ownership of Common Stock owned by it following the Offerings. See
"Underwriting."
DESCRIPTION OF CAPITAL STOCK
Immediately prior to consummation of the Offerings, the Company will
effect an 85,000 to 1 stock split of its current outstanding common stock and
amend its Certificate of Incorporation to change its authorized capital stock
to 100,000,000 shares of Common Stock, $.01 par value per share, of which
28,000,000 shares will be issued and outstanding (30,925,000 shares if the
over-allotment options granted to the U.S. Underwriters and the Managers are
exercised in full), and 20,000,000 shares of preferred stock, par value $.01
per share (the "Preferred Stock"), of which none will be issued and
outstanding. The following summary description of the capital stock of the
Company is qualified in its entirety by reference to the form of Amended and
Restated Certificate of Incorporation of the Company (the "Amended
Certificate") and form of Amended and Restated By-Laws of the Company, a copy
of each of which is filed as an exhibit to the Registration Statement of
which this Prospectus forms a part.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in the election
of directors and on all other matters on which stockholders are entitled and
permitted to vote. Such holders are not entitled to vote cumulatively for the
election of directors. Holders of Common Stock have no redemption,
conversion, preemptive or other subscription rights. There are no sinking
fund provisions relating to the Common Stock. In the event of the
liquidation, dissolution or winding up of the Company, holders of Common
Stock are entitled to share ratably in all of the assets of the Company
remaining, if any, after satisfaction of the debts and liabilities of the
Company. The outstanding shares of Common Stock are, and the shares of Common
Stock offered hereby will be, upon payment therefor as contemplated herein,
validly issued, fully paid and nonassessable.
Holders of Common Stock are entitled to receive dividends when and as
declared by the Board of Directors of the Company out of funds legally
available therefor. The Company does not anticipate paying cash dividends in
the foreseeable future. See "Dividend Policy."
PREFERRED STOCK
The Amended Certificate provides that shares of Preferred Stock may be
issued from time to time in one or more series. The Board of Directors of the
Company is authorized to fix the voting rights, if any, designations, powers,
preferences and the relative participation, optional or other rights, if any,
and the qualifications, limitations or restrictions thereof, of any unissued
series of Preferred Stock, to fix the number of shares constituting such
series, and to increase or decrease the number of shares of any such series
(but not below the number of shares of such series then outstanding). Upon
consummation of the Offerings, no shares of Preferred Stock will be issued
and outstanding.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 ("Section 203") of the General Corporation Law of the State of
Delaware (the "DGCL") provides, in general, that a stockholder acquiring more
than 15% of the outstanding voting stock of a corporation subject to the
statute (an "Interested Stockholder") but less than 85% of such stock may not
engage in certain Business Combinations (as defined in Section 203) with the
corporation for a period of three years subsequent to the date on which the
stockholder became an Interested Stockholder unless (i) prior to such date
the corporation's board of directors approved either the Business Combination
or the transaction in which the stockholder became an Interested Stockholder
or (ii) the Business Combination is approved by the corporation's board of
directors and authorized by a vote of at least 66 2/3% of the outstanding
voting stock of the corporation not owned by the Interested Stockholder. The
Amended Certificate contains a provision electing not to be governed by
Section 203.
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LISTING
The Common Stock has been approved for listing on the NYSE under the
symbol "AVI," subject to official notice of issuance.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Harris Trust
and Savings Bank.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
ARACS has entered into a $470.0 million secured credit facility (the "New
Credit Facility") which will be guaranteed by the Company and certain of
ARACS's subsidiaries to replace the Company's current credit facility. The
following is a summary of the material terms and conditions of the New Credit
Facility.
The New Credit Facility consists of (i) a revolving credit facility in the
amount of up to $125.0 million and will be available on a revolving basis
until the Final Maturity Date in order to finance the working capital needs
of ARACS in the ordinary course of business (with up to $75.0 million of such
amount available for the issuance of standby letters of credit to support
worker's compensation and other insurance and bonding requirements of ARACS,
the Company and their subsidiaries in the ordinary course of business), (ii)
a term loan facility in the amount of $120.0 million to finance working
capital needs in the ordinary course of business, which will be repayable in
four installments, the first three of which shall be in the amount of $1.0
million payable on June 30, 1998, June 30, 1999 and June 30, 2000 and the
remainder of which will be due on the Final Maturity Date, and (iii) a
standby letter of credit facility of up to $225.0 million available on a
revolving basis to fund (a) any shortfall in certain payments owing to AESOP
Leasing or AESOP Leasing Corp. II, as applicable, pursuant to fleet lease
agreements and (b) maturing Commercial Paper Notes if such Commercial Paper
Notes cannot be repaid through the issuance of additional Commercial Paper
Notes or draws under the Liquidity Facility.
Interest accrues on borrowings outstanding under the New Credit Facility,
at a rate equal to, at the option of ARACS, (A) the sum of (i) the highest of
(a) the rate of interest publicly announced by Chase Securities Inc. as its
prime rate in effect at its principal office in New York City, (b) the
secondary market rate for three-month certificates of deposit (adjusted for
statutory reserve requirements) plus 1% and (c) the federal funds effective
rate from time to time plus 0.5%, and (ii) an applicable margin; or (B) the
sum of (i) the rate (adjusted for statutory reserve requirements) at which
eurodollar deposits for one, two, three or six months (as selected by ARACS)
are offered in the interbank eurodollar market and (ii) an applicable margin.
The New Credit Facility is secured by the tangible and intangible assets
of ARACS and the Company (including, without limitation, its intellectual
property, its rights under the Master License Agreement and related
agreements, real property and all of the capital stock or equivalent equity
ownership interests of ARACS and each of its direct and indirect domestic
subsidiaries and 65% of ARACS's first-tier foreign subsidiaries), except for
those assets which are subject to a negative pledge or as to which the agents
for the New Credit Facility shall determine in their sole discretion that the
costs of obtaining such a security interest are excessive in relation to the
value of the security to be afforded thereby.
The New Credit Facility contains a number of customary affirmative
covenants, including covenants which require ARACS and the Company to deliver
financial statements and other reports; pay other obligations; maintain
corporate existence and material rights and privileges; comply with laws and
material contracts; maintain properties and insurance; maintain books and
records; grant the lenders certain inspection rights; provide notices of
defaults, litigation and material events; and comply with environmental
matters. The New Credit Facility also contains a number of customary negative
covenants, including limitations on indebtedness (including preferred stock
of subsidiaries); liens; guarantee obligations; mergers; consolidations;
liquidations and dissolutions; sales of assets; leases; dividends and other
payments in respect of capital stock, capital expenditures; investments;
loans and advances; optional payments and modifications of subordinated and
other debt instruments; modification to certain franchise agreements
transactions with affiliates; sale and leaseback transactions; changes in
fiscal year; negative pledge clauses; and changes in lines of business. ARACS
will be required to meet certain financial covenants, including (i) certain
maximum leverage ratios and (ii) certain minimum interest coverage ratios.
The New Credit Facility includes certain events of defaults, including:
nonpayment of principal when due; nonpayment of interest when due, fees or
other amounts after a grace period; material inaccuracy of representations
and warranties; violation of covenants (subject, in the case of certain
affirmative
60
<PAGE>
covenants, to a period to cure such violations); cross-default; default under
franchise agreements; bankruptcy events; certain ERISA events; material
judgments; actual or asserted invalidity of any guarantee or security
document or security interest; and a change of control of the Company.
For a description of the Company's fleet financing arrangements, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
61
<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership and
disposition of Common Stock by a Non-United States Holder. For purposes of
this discussion, a "Non-United States Holder" is any holder other than (i) a
citizen or an individual considered under the United States tax laws to be a
resident of the United States, (ii) a corporation or partnership created or
organized in the United States or under the laws of the United States or of
any political subdivision thereof, (iii) an estate whose income is includible
in gross income for United States federal tax purposes regardless of its
source or (iv) a trust for which a court within the United States is able to
exercise primary jurisdiction over the administration of the trust, and for
which one or more United States fiduciaries has the authority to control all
substantial decisions of the trust. This discussion does not address all
aspects of United States federal tax that may be relevant to Non-United
States Holders in light of their specific circumstances. Prospective
investors are urged to consult their tax advisors with respect to the
particular tax consequences to them of acquiring, holding and disposing of
Common Stock, as well as any tax consequences which may arise under the laws
of any foreign, state, local or other taxing jurisdiction. This discussion is
based upon the United States federal income and estate tax law now in effect,
which is subject to change, possibly retroactively, and is for general
information only.
DIVIDENDS
Dividends paid to a Non-United States Holder will generally be subject to
withholding of United States federal income tax at the rate of 30% of the
gross amount of such dividends (or at such lower rate as may be specified by
an applicable income tax treaty) unless such dividends are effectively
connected with the conduct of a trade or business within the United States by
the Non-United States Holder ("effectively connected"), in which case the
dividends will be subject to the United States federal income tax on net
income on the same basis that it applies to United States persons. In the
case of a Non-United States Holder which is a corporation, such dividends
might also be subject to the United States branch profits tax (which is
generally imposed on a foreign corporation on the repatriation from the
United States of effectively connected earnings and profits at a 30% rate).
An applicable income tax treaty may, however, change these rules. A
Non-United States Holder may be required to satisfy certain certification
requirements in order to claim treaty benefits or otherwise obtain any
reduction of or exemption from withholding under the foregoing rules.
SALE OR OTHER DISPOSITION OF COMMON STOCK
A Non-United States Holder will generally not be subject to United States
federal income tax on gain recognized on a sale or other disposition of
Common Stock unless (i) the gain is effectively connected with the conduct of
a trade or business within the United States by the Non-United States Holder
(or by a partnership, trust or estate in which the Non-United States Holder
is a partner or beneficiary), (ii) in the case of a Non-United States Holder
who is a nonresident alien individual and holds Common Stock as a capital
asset, such holder is present in the United States for 183 days or more in
the taxable year of disposition and (x) has a "tax home" in the United States
(as specifically defined under the United States federal income tax laws) or
(y) maintain as an office or other fixed place of business in the United
States to which the gain from the sale of the stock is attributable, (iii)
the Non-United States Holder is subject to tax, pursuant to the provisions of
United States tax law applicable to certain United States expatriates whose
loss of United States citizenship had as one of its principal purposes the
avoidance of United States taxes, or (iv)(A) the Company is or becomes a
"United States real property holding corporation" for United States federal
income tax purposes and (B) assuming the Common Stock continues to be
"regularly traded on an established securities market" for tax purposes, the
Non-United States Holder held, directly or indirectly, at any time during the
five year period ending on the date of disposition, more than 5% of the
outstanding Common Stock. The Company believes that it is not currently, and
is not likely to become, a United States real property holding corporation.
Any such gain that is (or is treated as being) effectively connected will not
be subject to withholding, but will be subject to United States federal
income tax (and, in the case of corporate holders, possibly the United States
branch profits tax).
62
<PAGE>
Non-United States Holders should consult applicable treaties, which may
provide for different rules (including possibly the exemption of certain
capital gains from tax).
BACKUP WITHHOLDING AND REPORTING REQUIREMENTS
DIVIDENDS. United States backup withholding tax will generally not apply
to dividends paid on Common Stock to a Non-United States Holder at an address
outside the United States. The Company must report annually to the Internal
Revenue Service and to each Non-United States Holder the amount of dividends
paid to, and the tax withheld with respect to, such holder, regardless of
whether any tax was actually withheld. This information may also be made
available to the tax authorities in the Non-United States Holder's country of
residence.
SALE OR OTHER DISPOSITION OF COMMON STOCK. Upon the sale or other taxable
disposition of Common Stock by a Non-United States Holder to or through a
United States office of a broker, the broker must backup withhold at a rate
of 31% and report the sale to the Internal Revenue Service, unless the holder
certifies its Non-United States Holder status under penalties of perjury or
otherwise establishes an exemption. Upon the sale or other taxable
disposition of Common Stock by a Non-United States Holder to or through the
foreign office of a United States broker, or a foreign broker with certain
types of relationships to the United States, the broker must report the sale
to the Internal Revenue Service (but not backup withhold) unless the broker
has documentary evidence in its files that the seller is a Non-United States
Holder and/or certain other conditions are met, or the holder otherwise
establishes an exemption.
BACKUP WITHHOLDING IS NOT AN ADDITIONAL TAX. Amounts withheld under the
backup withholding rules are generally allowable as a refund or credit
against such Non-United States Holder's United States federal income tax
liability, if any, provided that the required information is furnished to the
Internal Revenue Service.
PROPOSED REGULATIONS. On April 22, 1996, the Internal Revenue Service
issued proposed regulations relating to withholding, backup withholding and
information reporting that, if adopted in their current form, would, among
other things, unify current certification procedures and forms and clarify
reliance standards. The proposed regulations would, among other things,
eliminate the general current law presumption that dividends paid to an
address in a foreign country are paid to a resident of that country and would
impose certain certification and documentation requirements on Non-United
States Holders claiming the benefit of a reduced withholding rate with
respect to dividends under a tax treaty. These regulations generally are
proposed to be effective with respect to payments made after December 31,
1997, although in certain cases they are proposed to be effective only with
respect to payments made after December 31, 1999. Proposed regulations are
subject to change, however, prior to their adoption in final form.
FEDERAL ESTATES TAXES
Common Stock owned or treated as owned by an individual who is neither a
citizen nor a resident (as defined for United States federal estate tax
purposes) of the United States at the date of death will be included in such
individual's estate for United States federal estate tax purposes and subject
to such tax, except to the extent that an applicable estate tax treaty
provides otherwise.
63
<PAGE>
UNDERWRITING
The underwriters of the U.S. Offering named below (the "U.S.
Underwriters"), for whom Bear, Stearns & Co. Inc., Blaylock & Partners, L.P.,
Chase Securities Inc., Goldman, Sachs & Co., Lehman Brothers Inc., Montgomery
Securities and Robertson, Stephens & Company LLC are acting as
representatives, have severally agreed with the Company, subject to the terms
and conditions of the U.S. Underwriting Agreement (the form of which has been
filed as an exhibit to the Registration Statement on Form S-1 of which this
Prospectus is a part), to purchase from the Company the aggregate number of
U.S. Shares set forth opposite their respective names below:
<TABLE>
<CAPTION>
NUMBER OF
NAME OF U.S. UNDERWRITER U.S. SHARES
- ---------------------------------- -------------
<S> <C>
Bear, Stearns & Co. Inc............
Blaylock & Partners, L.P. .........
Chase Securities Inc. .............
Goldman, Sachs & Co. ..............
Lehman Brothers Inc. ..............
Montgomery Securities .............
Robertson, Stephens & Company LLC
-------------
Total............................ 15,600,000
=============
</TABLE>
The managers of the concurrent International Offering named below (the
"Managers"), for whom Bear, Stearns International Limited, Bayerische
Vereinsbank AG, Chase Manhattan International Limited, Credit Lyonnais
Securities, Goldman Sachs International, Lehman Brothers International
(Europe), Montgomery Securities and Robertson, Stephens & Company LLC are
acting as lead Managers, have severally agreed with the Company, subject to
the terms and conditions of the International Underwriting Agreement (the
form of which has been filed as an exhibit to the Registration Statement on
Form S-1 of which this Prospectus is a part), to purchase from the Company
the aggregate number of International Shares set forth opposite their
respective names below:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL
NAME OF MANAGER SHARES
- --------------------------------------- ---------------
<S> <C>
Bear, Stearns International Limited ....
Bayerische Vereinsbank AG...............
Chase Manhattan International Limited ..
Credit Lyonnais Securities .............
Goldman Sachs International ............
Lehman Brothers International (Europe)
Montgomery Securities ..................
Robertson, Stephens & Company LLC ......
---------------
Total................................. 3,900,000
===============
</TABLE>
The nature of the respective obligations of the U.S. Underwriters and the
Managers is such that all of the U.S. Shares and all of the International
Shares must be purchased if any are purchased. Those obligations are subject,
however, to various conditions, including the approval of certain matters by
counsel. The Company has agreed to indemnify the U.S. Underwriters and the
Managers against certain liabilities, including liabilities under the
Securities Act, and, where such indemnification is unavailable, to contribute
to payments that the U.S. Underwriters and the Managers may be required to
make in respect of such liabilities.
The Company has been advised that the U.S. Underwriters propose to offer
the U.S. Shares in the United States and Canada and the Managers propose to
offer the International Shares outside the United States and Canada,
initially at the public offering price set forth on the cover page of this
Prospectus and to certain selected dealers at such price less a concession
not to exceed $ per share; that the U.S. Underwriters and the Managers may
allow, and such selected dealers may reallow, a concession to certain other
dealers not to exceed $ per share; and that after the commencement of the
Offerings, the public offering price and the concessions may be changed.
64
<PAGE>
The Company has granted the U.S. Underwriters and the Managers options to
purchase in the aggregate up to 2,925,000 additional shares of Common Stock
solely to cover over-allotments, if any. The options may be exercised in
whole or in part at any time within 30 days after the date of this
Prospectus. To the extent the options are exercised, the U.S. Underwriters
and the Managers will be severally committed, subject to certain conditions,
including the approval of certain matters by counsel, to purchase the
additional shares of Common Stock in proportion to their respective purchase
commitments as indicated in the preceding tables.
Pursuant to an agreement between the U.S. Underwriters and the Managers
(the "Agreement Between"), each U.S. Underwriter has agreed that, as part of
the distribution of the U.S. Shares and subject to certain exceptions, (a) it
is not purchasing any U.S. Shares for the account of anyone other than a U.S.
or Canadian Person (as defined below) and (b) it has not offered or sold, and
will not offer, sell, resell or deliver, directly or indirectly, any U.S.
Shares or distribute any prospectus relating to the U.S. Offering outside the
United States or Canada or to anyone other than a U.S. or Canadian Person or
a dealer who similarly agrees. Similarly, pursuant to the Agreement Between,
each Manager has agreed that, as part of the distribution of the
International Shares and subject to certain exceptions, (a) it is not
purchasing any of the International Shares for the account of any U.S. or
Canadian Person and (b) it has not offered or sold, and will not offer, sell,
resell or deliver, directly or indirectly, any of the International Shares or
distribute any prospectus relating to the International Offering in the
United States or Canada or to any U.S. or Canadian Person or to a dealer who
does not similarly agree. As used herein, "U.S. or Canadian Person" means any
individual who is a resident or citizen of the United States or Canada, any
corporation, pension, profit sharing or other trust or any other entity
organized under or governed by the laws of the United States or Canada or of
any political subdivision thereof (other than the foreign branch of any U.S.
or Canadian Person), any estate or trust the income of which is subject to
United States or Canadian federal income taxation regardless of the source of
such income, and any United States or Canadian branch of a person other than
a U.S. or Canadian Person; "United States" means the United States of America
(including the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction; "Canada" means the provinces of
Canada, its territories, its possessions and other areas subject to its
jurisdiction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the Managers of such number of shares of Common Stock as may
be mutually agreed upon. The price of any shares so sold shall be the public
offering price as then in effect for the Common Stock being sold by the U.S.
Underwriters and the Managers, less an amount not greater than the selling
concession allocable to such Common Stock. To the extent that there are sales
between the U.S. Underwriters and the Managers pursuant to the Agreement
Between, the number of shares of Common Stock initially available for sale by
the U.S. Underwriters or by the Managers may be more or less than the amount
specified on the cover page of this Prospectus.
Each Manager has represented and agreed that (i) it has not offered or
sold, and, prior to the expiration of six months following the consummation
of the Offerings, it will not offer or sell, any shares of Common Stock to
any person in the United Kingdom other than persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their business or otherwise in
circumstances that have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995, (ii) it has complied and will comply with
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Common Stock in, from or otherwise
involving the United Kingdom, and (iii) it has only issued or passed on, and
will only issue or pass on, in the United Kingdom any document received by it
in connection with the issue of the Common Stock to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom such document
may otherwise lawfully be issued or passed on.
Purchasers of the International Shares offered in the International
Offering may be required to pay stamp taxes and other charges in accordance
with the laws and practices of the country of purchase in addition to the
initial public offering price set forth on the cover page hereof.
65
<PAGE>
The U.S. Underwriters and the Managers have reserved for sale at the
initial public offering price up to 975,000 shares of Common Stock for sale
to employees of the Company and its affiliates. The number of shares
available for sale to the general public will be reduced to the extent any
reserved shares are purchased. Any reserved shares not so purchased will be
offered by the U.S. Underwriters and the Managers on the same basis as the
other shares offered hereby. Any employee of the Company who purchases
reserved shares will be required to agree not to dispose of such shares for a
period of 180 days following the date of this Prospectus.
The Company and HFS have agreed that, subject to certain limited
exceptions, for a period of 180 days after the date of this Prospectus,
without the prior written consent of Bear, Stearns & Co. Inc., they will not,
directly or indirectly, offer or agree to sell, sell or otherwise dispose of
any shares of Common Stock (or securities convertible into, exchangeable for
or evidencing the right to purchase shares of Common Stock).
Prior to the Offerings, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined
through negotiations among the Company and representatives of the U.S.
Underwriters and the Managers. Among the factors to be considered in making
such determination will be the Company's financial and operating history and
condition, its prospects and prospects for the industry in which it does
business in general, the management of the Company, prevailing equity market
conditions and the demand for securities considered comparable to those of
the Company.
In order to facilitate the Offerings, certain persons participating in the
Offerings may engage in transactions that stabilize, maintain or otherwise
affect the price of the Common Stock during and after the Offerings.
Specifically, the U.S. Underwriters and the Managers may over-allot or
otherwise create a short position in the Common Stock for their own account
by selling more shares than have been sold to them by the Company. The U.S.
Underwriters and the Managers may elect to cover any such short position by
purchasing shares in the open market or by exercising the over-allotment
options granted to the U.S. Underwriters and the Managers. In addition, such
persons may stabilize or maintain the price of the Common Stock by bidding
for or purchasing shares in the open market and may impose penalty bids,
under which selling concessions allowed to syndicate members or other
broker-dealers participating in the Offerings are reclaimed if shares
previously distributed in the Offerings are repurchased in connection with
stabilization transactions or otherwise. The effect of these transactions may
be to stabilize or maintain the market price of the Common Stock at a level
above that which might otherwise prevail in the open market. The imposition
of a penalty bid may also affect the price of the Common Stock to the extent
that it discourages resales thereof. No representation is made as to the
magnitude or effect of any such stabilization or other transactions. Such
transactions may be effected on the NYSE or otherwise and, if commenced, may
be discontinued at any time.
Certain of the U.S. Underwriters and the Managers and their affiliates
have from time to time provided, and may continue to provide, investment
banking services and general financing and banking transactions to the
Company and certain of its affiliates for which such U.S. Underwriters,
Managers or affiliates have received and will receive fees and commissions.
The Chase Manhattan Bank ("CMB"), an affiliate of Chase Securities Inc., one
of the U.S. Underwriters ("CSI"), is the administrative agent and a lender
under the New Credit Facility. CSI was the arranger of such facility. Each of
CMB and CSI received compensation for their roles in connection therewith.
CMB is also the administrative agent and the sole lender under the
Acquisition Credit Facility that financed the The First Gray Line
Acquisition. A substantial portion of the proceeds of the Offerings will be
paid to CMB in order to retire the Acquisition Credit Facility. See "Use of
Proceeds." Accordingly, the Offerings are being made pursuant to Section
2710(c)(8) of the NASD Conduct Rules and Bear, Stearns & Co. Inc. is assuming
the responsibilities of acting as Qualified Independent Underwriter in
pricing the Offerings and conducting due diligence.
66
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Skadden, Arps, Slate, Meagher & Flom LLP, New York,
New York. Certain legal matters in connection with the Offerings will be
passed upon for the U.S. Underwriters and the Managers by Weil, Gotshal &
Manges LLP, New York, New York. Skadden, Arps, Slate, Meagher & Flom LLP has
from time to time represented, and may continue to represent, HFS and certain
of its affiliates (including the Company) in connection with certain legal
matters.
EXPERTS
The consolidated financial statements as to the Company as of December 31,
1996 and the period October 17, 1996 (Date of Acquisition) to December 31,
1996 and as to the Predecessor Companies as of December 31, 1995 and for the
period January 1, 1996 to October 16, 1996 and for each of the two years in
the period ended December 31, 1995 included in this Prospectus and the
related financial statement schedule included elsewhere in the Registration
Statement of which this Prospectus is a part have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports appearing herein
and elsewhere in the Registration Statement, and are included in reliance
upon the reports of such firm given their authority as experts in accounting
and auditing.
The consolidated financial statements of First Gray Line as of September
30, 1996 and 1995 and for each of the two years in the period ended September
30, 1996 included elsewhere in the Registration Statement of which this
Prospectus is a part have been audited by Ernst & Young LLP, independent
auditors, as stated in their report appearing herein and elsewhere in the
Registration Statement, and are included in reliance upon the report of such
firm given their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington D.C. a Registration Statement on Form S-1 (as
amended, the "Registration Statement") of which this Prospectus is a part
under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement or other document are summaries of the
material terms of such contract, agreement or other document. With respect to
each such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved. The Registration Statement (including the
exhibits and schedule thereto) filed by the Company with the Commission may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and will also be available for inspection and copying at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at Citicorp Center, 500 West Madison
Street (Suite 1400), Chicago, Illinois 60661. Copies of such material may
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
Commission also maintains a website that contains reports, proxy and
information statements and other information. The website address is
http://www.sec.gov.
Upon completion of the Offerings, the Company will be subject to the
informational requirements of the Exchange Act and, in accordance therewith,
will file reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information can be inspected and copied at the addresses set forth above. The
Company reports its financial statements on a year ended December 31. The
Company intends to furnish its stockholders with annual reports containing
consolidated financial statements audited by its independent certified public
accountants and with quarterly reports containing unaudited condensed
consolidated financial statements for each of the first three quarters of
each fiscal year.
67
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE #
----------
<S> <C>
AVIS RENT A CAR, INC.
Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Statement of Financial Position at June 30, 1997 ........... F-2
Condensed Consolidated Statements of Operations for the six months ended
June 30, 1996 and 1997............................................................ F-3
Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and 1997............................................................ F-4
Notes to the Unaudited Condensed Consolidated Financial Statements ............... F-5
Audited Consolidated Financial Statements:
Independent Auditors' Report....................................................... F-7
Consolidated Statements of Financial Position at December 31, 1995 and 1996 ....... F-8
Consolidated Statements of Operations for the years ended December 31, 1994 and
1995, and for the periods January 1, 1996 to October 16, 1996 and October 17,
1996 (Date of Acquisition) to December 31, 1996................................... F-9
Consolidated Statements of Stockholder's Equity for the years ended December 31,
1994 and 1995, and for the periods January 1, 1996 to October 16, 1996 and
October 17, 1996 (Date of Acquisition) to December 31, 1996....................... F-10
Consolidated Statements of Cash Flows for the years ended December 31, 1994 and
1995, and for the periods January 1, 1996 to October 16, 1996 and October 17,
1996 (Date of Acquisition) to December 31, 1996 .................................. F-11
Notes to the Audited Consolidated Financial Statements............................. F-12
THE FIRST GRAY LINE CORPORATION
Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheet at June 30, 1997.............................. F-30
Condensed Consolidated Statements of Income for the nine months ended June 30,
1997 and 1996 ..................................................................... F-31
Condensed Consolidated Statements of Cash Flows for the nine months ended June 30,
1997 and 1996 ..................................................................... F-32
Notes to the Unaudited Condensed Consolidated Financial Statements ................ F-33
Audited Consolidated Financial Statements:
Report of Independent Auditors .................................................... F-34
Consolidated Balance Sheets at September 30, 1996 and 1995......................... F-35
Consolidated Statements of Income for the years ended September 30, 1996
and 1995.......................................................................... F-36
Consolidated Statements of Changes In Stockholders' Equity for the years ended
September 30, 1996 and 1995....................................................... F-37
Consolidated Statements of Cash Flows for the years ended September 30, 1996
and 1995.......................................................................... F-38
Notes to Audited Consolidated Financial Statements................................. F-39
AVIS RENT A CAR, INC.
Unaudited Pro Forma Consolidated Financial Statements:
Pro Forma Consolidated Statement of Financial Position at
June 30, 1997 .................................................................... P-2
Pro Forma Consolidated Statements of Operations for the year ended December 31,
1996 ............................................................................. P-3
Pro Forma Consolidated Statements of Operations for the six months ended
June 30, 1997 .................................................................... P-4
Notes to the Unaudited Pro Forma Consolidated Financial Statements ............... P-5
</TABLE>
F-1
<PAGE>
AVIS RENT A CAR, INC.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1997
------------
<S> <C>
ASSETS
Cash and cash equivalents........................................ $ 57,479
Accounts receivable, net......................................... 190,292
Due from affiliates, net......................................... 15,477
Prepaid expenses................................................. 35,076
Vehicles, net.................................................... 2,312,109
Property and equipment, net...................................... 100,331
Other assets..................................................... 13,320
Deferred income tax assets....................................... 105,937
Cost in excess of net assets acquired, net....................... 199,052
------------
Total assets................................................... $3,029,073
============
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable................................................. $ 228,264
Accrued liabilities.............................................. 268,209
Current income tax liabilities................................... 3,794
Deferred income tax liabilities.................................. 34,478
Public liability, property damage and other insurance
liabilities..................................................... 223,473
Debt............................................................. 2,183,769
------------
Total liabilities.............................................. 2,941,987
------------
Commitments and contingencies
Stockholder's equity:
Common stock.................................................... --
Additional paid-in capital...................................... 75,000
Retained earnings............................................... 14,290
Foreign currency translation adjustment......................... (2,204)
------------
Total stockholder's equity..................................... 87,086
------------
Total liabilities and stockholder's equity..................... $3,029,073
============
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
F-2
<PAGE>
AVIS RENT A CAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANIES
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
1996 1997
-------------- --------------
<S> <C> <C>
Revenue ............................................... $887,566 $945,647
-------------- --------------
Cost and expenses:
Direct operating...................................... 390,125 398,548
Vehicle depreciation, net............................. 163,746 179,418
Vehicle lease charges................................. 60,862 69,025
Selling, general and administrative................... 168,042 203,383
Interest, net.......................................... 73,153 68,343
Amortization of cost in excess of net assets acquired 2,382 2,570
-------------- --------------
858,310 921,287
-------------- --------------
Income before provision for income taxes............... 29,256 24,360
Provision for income taxes............................. 13,077 11,254
-------------- --------------
Net income ............................................ $ 16,179 $ 13,106
============== ==============
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
F-3
<PAGE>
AVIS RENT A CAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANIES
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1997
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................................... $ 16,179 $ 13,106
Adjustments to reconcile net income to net cash provided by
operating activities:
Vehicle depreciation.............................................. 178,085 184,510
Depreciation and amortization of property and equipment .......... 7,676 5,499
Amortization of cost in excess of net assets acquired ............ 2,382 2,570
Amortization of debt issuance costs............................... 1,604 --
Deferred income tax provision..................................... 9,410 6,050
Undistributed (charges) earnings of associated companies, net .... (245) 75
Provision for losses on accounts receivable....................... 707 1,340
Provision for public liability, property damage and other
insurance liabilities............................................ 44,606 44,996
Change in operating assets and liabilities:
Increase in accounts receivable.................................. (29,183) (18,464)
(Increase) decrease in prepaid expenses.......................... (10,714) 4,685
Decrease in other assets......................................... 3,422 1,054
Increase in accounts payable..................................... 28,604 24,261
Increase (decrease) in accrued liabilities....................... 10,027 (65,595)
Decrease in public liability, property damage and other
insurance liabilities........................................... (34,796) (35,240)
--------------- ---------------
Net cash provided by operating activities........................ 227,764 168,847
--------------- ---------------
Cash flows from investing activities:
Payments for vehicle additions.................................... (1,347,799) (1,435,234)
Vehicle deletions................................................. 914,766 1,342,420
Payments for additions to property and equipment.................. (18,606) (9,509)
Sales of property and equipment................................... 1,522 2,075
--------------- ---------------
Net cash used in investing activities............................ (450,117) (100,248)
--------------- ---------------
Cash flows from financing activities:
Changes in debt:
Proceeds......................................................... 401,533 188,507
Repayments....................................................... (188,755) (298,410)
--------------- ---------------
Net increase (decrease) in debt.................................. 212,778 (109,903)
Deferred debt issuance costs...................................... (1,701) --
Proceeds from intercompany loans.................................. 28,552 48,164
--------------- ---------------
Net cash provided by (used in) financing activities ............. 239,629 (61,739)
--------------- ---------------
Effect of exchange rate changes on cash............................ 245 (267)
--------------- ---------------
Net increase in cash and cash equivalents.......................... 17,521 6,593
Cash and cash equivalents at beginning of period................... 39,081 50,886
--------------- ---------------
Cash and cash equivalents at end of period......................... $ 56,602 $ 57,479
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.......................................................... $ 79,114 $ 90,113
=============== ===============
Income taxes...................................................... $ 4,510 $ 6,187
=============== ===============
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
F-4
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
financial position at June 30, 1996 and 1997, and the results of operations
and cash flows for the six month periods then ended. The results of
operations for interim periods are not indicative of the results for a full
year.
For a summary of significant accounting policies and additional financial
information, see the Company's consolidated financial statements which are
included elsewhere in this Prospectus.
NOTE 2--BASIS OF FINANCIAL STATEMENT PRESENTATION
On January 1, 1997, HFS Car Rental, Inc. (formerly known as, and
hereinafter referred to as, Avis, Inc.) contributed the net assets of its
corporate operations and all of its common stock ownership in Avis
International, Ltd., Avis Enterprises, Inc., Pathfinder Insurance Company and
Global Excess & Reinsurance, Ltd. to Avis Rent A Car, Inc.
NOTE 3--FINANCING AND DEBT
Debt outstanding at June 30, 1997 is not guaranteed by HFS and is
comprised of the following (in thousands):
<TABLE>
<CAPTION>
<S> <C>
VEHICLE TRUST FINANCING
- --------------------------------------------------------------
Short Term:
Short-term vehicle trust financing revolving credit
facilities .................................................. $1,839,700
------------
Long Term:
Vehicle manufacturer's floating rate notes due September 1998
($50,912 senior at 8.5% and $16,088 subordinated at 10.0%) .. 67,000
Vehicle manufacturer's floating rate notes due October 2001
($64,375 senior at 7.4% and $53,625 subordinated at 9.2%) .. 118,000
------------
Total long-term portion of vehicle trust financing ......... 185,000
------------
OTHER FINANCING
- --------------------------------------------------------------
Short Term:
Short-term notes--foreign at 4.1% to 10.5%.................... 134,401
7.50% capital lease terminating November 1997 and current
portion of long-term debt ................................... 18,595
------------
Total current portion of other financing debt ............... 152,996
------------
Long Term:
Other domestic................................................ 2,407
Debt of foreign subsidiaries:
Floating rate notes due February 1998 at 4.8%................. 2,164
Floating rate notes due August 1998 at 6.4%................... 1,502
------------
Total long-term portion of Other Financing .................. 6,073
------------
$2,183,769
============
</TABLE>
NOTE 4--SUBSEQUENT EVENTS.
On August 20, 1997, the Company purchased The First Gray Line Corporation
and its subsidiaries for approximately $210 million, including expenses. The
fair value of unaudited assets and liabilities, exclusive of cost in excess
of the fair value of net assets acquired, at June 30, 1997 are $332.3 million
and $296.3 million, respectively. The transaction is subject to customary
closing conditions and regulatory approval.
On July 31, 1997, the Company refinanced all of its domestic debt. This
debt was refinanced by utilizing a $3.65 billion asset-backed structure,
which consisted of (i) a $2.0 billion Commercial Paper Program and (ii) a
$1.65 billion Medium Term Note Issuance with maturities of 3 and 5 years.
F-5
<PAGE>
ARACS is party to a $470.0 million secured credit agreement that provides
for (i) a revolving credit facility in the amount of up to $125.0 million
which is available on a revolving basis until December 31, 2000 (the "Final
Maturity Date") in order to finance the general corporate needs of ARACS in
the ordinary course of business (with up to $75.0 million of such amount
available for the issuance of standby letters of credit to support worker's
compensation and other insurance and bonding requirements of ARACS, the
Company and their subsidiaries in the ordinary course of business), (ii) a
term loan facility in the amount of $120.0 million to finance general
corporate needs in the ordinary course of business, which will be repayable
in four installments, the first three of which shall be in the amount of $1.0
million payable on June 30, 1998, June 30, 1999 and June 30, 2000 and the
remainder of which will be due on the Final Maturity Date, and (iii) a
standby letter of credit facility of up to $225.0 million available on a
revolving basis to fund (a) any shortfall in certain payments owing pursuant
to fleet lease agreements and (b) maturing Commercial Paper Notes if such
Commercial Paper Notes cannot be repaid through the issuance of additional
Commercial Paper Notes or draws under the Liquidity Facility. Under terms of
this facility, the Company will be required to meet the following covenants
(i) certain maximum leverage ratios, (ii) certain minimum interest coverage
ratios, and (iii) certain minimum fixed charge coverage. In addition, the
Credit Facility prohibits the payment of cash dividends until the fiscal year
ending December 31, 1998 and, thereafter, permits the payment of dividends
only if the Company meets a minimum leverage ratio, the amount of such
dividend does not exceed a designated percentage of the Company's cash flow
and no default exists. Interest rates under these new facilities ranged from
5.6% to 7.8% at July 31, 1997.
F-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder of
Avis Rent A Car, Inc.
Garden City, New York
We have audited the accompanying consolidated statements of financial
position of Avis Rent A Car, Inc. and subsidiaries (successor to Avis Rent A
Car Systems Holdings, Inc. and subsidiaries, Avis International, Ltd. and
subsidiaries, Avis Enterprises, Inc. and subsidiaries, Pathfinder Insurance
Company and Global Excess & Reinsurance, Ltd., all previously wholly-owned by
Avis, Inc., collectively the "Predecessor Companies"), (collectively referred
to as "Avis Rent A Car, Inc." or the "Company") as of December 31, 1996 and
as to the Predecessor Companies as of December 31, 1995, and the related
consolidated statements of operations, stockholder's equity and cash flows
for the period October 17, 1996 (Date of Acquisition) to December 31, 1996
and as to the Predecessor Companies the related consolidated statements of
operations, stockholder's equity and cash flows for each of the two years in
the period ended December 31, 1995 and the period January 1, 1996 to October
16, 1996. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated 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 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 audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company at
December 31, 1996, and the results of its operations and its cash flows for
the period October 17, 1996 to December 31, 1996 (period after the change in
control referred to in Note 1 to the consolidated financial statements), and
with respect to the Predecessor Companies as of December 31, 1995, and for
each of the two years in the period ended December 31, 1995 and the period
January 1, 1996 to October 16, 1996 (period up to the change in control
referred to in Note 1 to the consolidated financial statements) in conformity
with generally accepted accounting principles.
As more fully discussed in Note 1 to the consolidated financial statements,
the Predecessor Companies were acquired in a business combination accounted
for as a purchase. As a result of the acquisition, the consolidated financial
statements for the period subsequent to the acquisition are presented on a
different basis of accounting than those for the periods prior to the
acquisition and, therefore, are not directly comparable.
Deloitte & Touche LLP
New York, New York
May 12, 1997
(August 20, 1997 as to Note 15)
F-7
<PAGE>
AVIS RENT A CAR, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANIES
DECEMBER 31, DECEMBER 31,
1995 1996
-------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................ $ 39,081 $ 50,886
Accounts receivable, net......................................... 194,971 311,179
Due from affiliates, net......................................... 61,807
Prepaid expenses................................................. 35,053 40,155
Vehicles, net.................................................... 2,167,167 2,243,492
Property and equipment, net...................................... 140,992 98,887
Other assets..................................................... 20,882 14,526
Deferred income tax assets....................................... 81,974 113,660
Cost in excess of net assets acquired, net....................... 144,778 196,765
-------------- --------------
Total assets................................................. $2,824,898 $3,131,357
============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable................................................. $ 228,146 $ 175,535
Accrued liabilities.............................................. 183,595 329,245
Due to affiliates, net........................................... 385,687
Current income tax liabilities................................... 6,696 4,790
Deferred income tax liabilities.................................. 27,990 35,988
Public liability, property damage and other insurance
liabilities..................................................... 194,677 213,785
Debt............................................................. 1,109,747 2,295,474
-------------- --------------
Total liabilities............................................ 2,136,538 3,054,817
-------------- --------------
Commitments and contingencies
Stockholder's equity:
Common stock ($.01 par value, 1,000 shares authorized;
100 shares outstanding at December 31, 1996)................... 2,977 --
Additional paid-in capital...................................... 344,531 75,000
Retained earnings............................................... 340,596 1,184
Foreign currency translation adjustment......................... 256 356
-------------- --------------
Total stockholder's equity................................... 688,360 76,540
-------------- --------------
Total liabilities and stockholder's equity................... $2,824,898 $3,131,357
============== ==============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-8
<PAGE>
AVIS RENT A CAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANIES OCTOBER 17, 1996
-------------------------------------------- (DATE OF
YEAR ENDED DECEMBER 31, JANUARY 1, 1996 ACQUISITION)
-------------------------- TO TO
1994 1995 OCTOBER 16, 1996 DECEMBER 31, 1996
------------ ------------ ---------------- -------------------
<S> <C> <C> <C> <C>
Revenue........................ $1,412,400 $1,615,951 $1,504,673 $362,844
------------ ------------ ---------------- -------------------
Cost and expenses:
Direct operating.............. 664,993 724,759 650,750 167,682
Vehicle depreciation, net .... 266,637 324,186 275,867 66,790
Vehicle lease charges......... 42,778 86,916 100,318 22,658
Selling, general and
administrative............... 252,024 269,434 283,180 68,215
Interest, net................. 128,898 145,199 120,977 34,212
Amortization of cost in
excess of net assets
acquired .................... 4,754 4,757 3,782 1,026
------------ ------------ ---------------- -------------------
1,360,084 1,555,251 1,434,874 360,583
------------ ------------ ---------------- -------------------
Income before provision for
income taxes.................. 52,316 60,700 69,799 2,261
Provision for income taxes .... 30,213 34,635 31,198 1,040
------------ ------------ ---------------- -------------------
Net income..................... $ 22,103 $ 26,065 $ 38,601 $ 1,221
============ ============ ================ ===================
</TABLE>
See accompanying notes to the consolidated financial statements.
F-9
<PAGE>
AVIS RENT A CAR, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON PAID-IN RETAINED TRANSLATION
STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL
-------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994..................... $2,827 $318,125 $309,902 $(2,598) $628,256
Net income for the year ended December
31, 1994.................................... 22,103 22,103
Tax benefit of ESOP income tax deductions ... 13,104 13,104
Foreign currency translation adjustment ..... 3,466 3,466
Cash dividends............................... (8,578) (8,578)
Stock dividends.............................. 150 (150)
-------- ------------ ---------- ------------- ----------
Balance, December 31, 1994................... 2,977 331,229 323,277 868 658,351
Net income for the year ended December
31, 1995.................................... 26,065 26,065
Tax benefit of ESOP income tax deductions ... 13,302 13,302
Foreign currency translation adjustment ..... (612) (612)
Cash dividends............................... (8,746) (8,746)
-------- ------------ ---------- ------------- ----------
Balance, December 31, 1995................... 2,977 344,531 340,596 256 688,360
Net income for the period ended October
16, 1996.................................... 38,601 38,601
Tax benefit of ESOP income tax deductions ... 12,939 12,939
Foreign currency translation adjustment ..... 2,805 2,805
Cash dividends............................... (1,398) (1,398)
-------- ------------ ---------- ------------- ----------
Balance, October 16, 1996.................... $2,977 $357,470 $377,799 $ 3,061 $741,307
======== ============ ========== ============= ==========
Avis Rent A Car, Inc. ($.01 par value, 1,000
shares authorized; 100 shares outstanding
at October 17, 1996 (Date of Acquisition)) . $ -- $ 75,000 $ 75,000
Net income for the period from
October 17, 1996 to December 31, 1996 ...... $ 1,221 1,221
Foreign currency translation adjustment for
the period October 17, 1996 to December 31,
1996........................................ $ 356 356
Additional minimum pension liability
for the period October 17, 1996 to December
31, 1996.................................... (37) (37)
-------- ------------ ---------- ------------- ----------
Balance, December 31, 1996................... $ -- $ 75,000 $ 1,184 $ 356 $ 76,540
======== ============ ========== ============= ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-10
<PAGE>
AVIS RENT A CAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANIES OCTOBER 17, 1996
---------------------------------------------- (DATE OF
YEARS ENDED DECEMBER 31, JANUARY 1, 1996 ACQUISITION)
---------------------------- TO TO
1994 1995 OCTOBER 16, 1996 DECEMBER 31, 1996
------------- ------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 22,103 $ 26,065 $ 38,601 $ 1,221
Adjustments to reconcile net income to net cash
provided by operating activities:
Vehicle depreciation............................ 291,360 342,048 306,159 71,343
Depreciation and amortization of property and
equipment...................................... 12,782 13,387 12,333 2,212
Amortization of cost in excess of net assets
acquired....................................... 4,754 4,757 3,782 1,026
Amortization of debt issuance costs ............ 3,454 2,660 2,423
Deferred income tax provision................... 19,384 25,852 22,342 33
Undistributed earnings of associated companies . (65) (376) (232)
Provision for (benefit from) losses on accounts
receivable..................................... 305 (48) 1,238 227
Provision for public liability, property damage
and other insurance liabilities................ 73,900 81,800 74,109 17,355
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable .... 53 (22,644) (204,137) 10,327
Decrease (increase) in prepaid expenses ....... 4,640 (863) (2,125) (2,664)
(Increase) decrease in other assets............ (595) 1,988 3,266 (3,459)
(Decrease) increase in accounts payable ....... (44,087) (5,733) 82,354 (18,712)
Increase (decrease) in accrued liabilities .... 26,399 42,176 101,069 (24,718)
Decrease in public liability, property damage
and other insurance liabilities............... (72,363) (71,159) (56,364) (16,015)
------------- ------------- ---------------- -------------------
Net cash provided by operating activities .... 342,024 439,910 384,818 38,176
------------- ------------- ---------------- -------------------
Cash flows from investing activities:
Payments for vehicle additions.................. (3,218,613) (2,553,324) (2,325,460) (561,117)
Vehicle deletions............................... 2,680,535 2,028,474 1,795,562 565,896
Payments for additions to property and
equipment...................................... (24,487) (36,939) (25,953) (3,484)
Sales of property and equipment................. 2,898 3,715 1,849 361
Investment in associated companies.............. (100)
Investment in Canadian Licensees................ (3,134)
------------- ------------- ---------------- -------------------
Net cash (used in) provided by investing
activities.................................... (559,767) (558,074) (557,136) 1,656
------------- ------------- ---------------- -------------------
Cash flows from financing activities:
Changes in debt:
Proceeds....................................... 423,502 320,940 519,167 63,903
Repayments..................................... (161,523) (287,271) (267,317) (133,457)
------------- ------------- ---------------- -------------------
Net increase (decrease) in debt................ 261,979 33,669 251,850 (69,554)
Deferred debt issuance costs.................... (4,637) (5,515) (2,604)
(Payments on) proceeds from intercompany loans . (29,090) 104,209 (27,696) (6,661)
Cash dividends.................................. (8,578) (8,746) (1,398)
------------- ------------- ---------------- -------------------
Net cash provided by (used in) financing
activities.................................... 219,674 123,617 220,152 (76,215)
------------- ------------- ---------------- -------------------
Effect of exchange rate changes on cash ......... 119 (197) 260 94
------------- ------------- ---------------- -------------------
Net increase (decrease) in cash and cash
equivalents..................................... 2,050 5,256 48,094 (36,289)
Cash and cash equivalents at beginning of
period.......................................... 31,775 33,825 39,081 87,175
------------- ------------- ---------------- -------------------
Cash and cash equivalents at end of period ...... $ 33,825 $ 39,081 $ 87,175 $ 50,886
============= ============= ================ ===================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest....................................... $ 131,877 $ 149,885 $ 135,733 $ 28,170
============= ============= ================ ===================
Income taxes................................... $ 7,576 $ 8,688 $ 6,220 $ 827
============= ============= ================ ===================
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTION
--
$ $ $
Recapitalization at Date of Acquisition ........ -- -- -- $ 666,307
============= ============= ================ ===================
</TABLE>
See accompanying notes to the consolidated financial statements.
F-11
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include Avis Rent A
Car, Inc. (name changed from and formerly known as Rental Car System
Holdings, Inc. which was incorporated on October 17, 1996) and subsidiaries
(including the carved out corporate operations of HFS Car Rental, Inc. (name
changed from and formerly known as, and hereinafter referred to as, Avis,
Inc.), which is the holding company of Rental Car System Holdings, Inc., and
Prime Vehicles Trust (the "Vehicle Trust")), Avis International, Ltd. and
subsidiaries, Avis Enterprises, Inc. and subsidiaries, Pathfinder Insurance
Company and Global Excess & Reinsurance, Ltd. (collectively referred to as
"Avis Rent A Car, Inc."). All of the foregoing companies are ultimately
wholly-owned subsidiaries of Avis, Inc., which was acquired by HFS
Incorporated ("HFS") on October 17, 1996 (the "Date of Acquisition") for
approximately $806.5 million. The purchase price was comprised of
approximately $367.2 million in cash, $100.9 million of indebtedness and
$338.4 million of HFS common stock. Prior to October 16, 1996, the
above-named entities were wholly-owned by Avis, Inc. and are referred to
collectively as the "Predecessor Companies". Avis Rent A Car, Inc. and the
Predecessor Companies are referred to throughout the notes as the "Company".
The major shareholder of Avis, Inc. was an Employee Stock Ownership Plan
("ESOP") and the minority shareholder was General Motors Corporation
("General Motors"). The Company purchases a significant portion of its
vehicles, obtains financing, and receives certain financial incentives and
allowances from General Motors (see Notes 2, 4, 7 and 14). As a result of the
acquisition, the consolidated financial statements for the period subsequent
to the acquisition are presented on a different basis of accounting than
those for the periods prior to the acquisition and, therefore, are not
directly comparable. On January 1, 1997, Avis, Inc. contributed the net
assets of its corporate operations and all of its common stock ownership in
Avis International, Ltd., Avis Enterprises, Inc., Pathfinder Insurance
Company and Global Excess & Reinsurance, Ltd. to the Company. After the
transfer, the remaining operations of Avis, Inc. consist of an investment in
a wholly-owned subsidiary which owns the Avis trade names and trademarks.
Pursuant to a plan developed by HFS prior to the Date of Acquisition, HFS
will cause the Company to undertake an initial public offering ("IPO") within
one year of the Date of Acquisition, which will reduce HFS' equity interest
in the Company to 25%. HFS owns and operates the reservation system as well
as the telecommunications and computer processing systems which service the
rental car operations for reservations, rental agreement processing,
accounting and vehicle control. HFS will charge a fee for such services (see
Note 3). In addition, HFS will retain the Avis trade name and charge the
Company a royalty fee for the use of the Avis name.
The acquisition was accounted for under the purchase method and includes
the operations of the Company subsequent to the Date of Acquisition. A
portion of this purchase price has been allocated to the estimated fair value
of the Company. This estimate is calculated assuming that the Company is an
independent franchisee of Avis, Inc. and is required to pay certain fees for
use of the Avis trade name, reservation services and other franchise related
services. HFS and its advisors have estimated that the value of the Company
at the Date of Acquisition was $75 million. The value of the Company is
expected to increase to approximately $300 million upon completion of the IPO
(with the IPO proceeds retained by the Company) with HFS's equity interest to
be reduced to 25% equal to $75 million. If the results of the IPO do not
confirm the preliminary value as of the Date of Acquisition, then the
allocated purchase price will be adjusted with a corresponding adjustment to
cost in excess of net assets acquired. The estimated fair value of the
Company has been allocated to individual assets and liabilities based on
their estimated fair value at the Date of Acquisition. The final asset and
liability fair values may differ from those set forth in the accompanying
consolidated statement of financial position on December 31, 1996; however,
the changes are not expected to have a material effect on the consolidated
financial position of the Company.
F-12
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The preliminary purchase cost allocation at the Date of Acquisition has
been allocated to the Company as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Allocated purchase cost ........................... $ 75,000
-----------
Fair Value of:
Liabilities assumed .............................. 3,145,395
Assets acquired .................................. 3,022,712
-----------
Net Liabilities ................................... 122,683
-----------
Excess of purchase price over net assets acquired $ 197,683
===========
</TABLE>
PRINCIPLES OF CONSOLIDATION
All material intercompany accounts and transactions have been eliminated.
ACCOUNTING ESTIMATES
Generally accepted accounting principles require the use of estimates,
which are subject to change, in the preparation of financial statements.
Significant accounting estimates used include estimates for determining
public liability, property damage and other insurance liabilities, and the
realization of deferred income tax assets. Management has exercised
reasonableness at deriving these estimates. However, actual results may
differ.
REVENUE RECOGNITION
Revenue is recognized over the period the vehicle is rented.
CASH AND CASH EQUIVALENTS
The Company considers deposits and short-term investments with an original
maturity of three months or less to be cash equivalents.
VEHICLES
Vehicles are stated at cost net of accumulated depreciation. In accordance
with industry practice, when vehicles are sold, gains or losses are reflected
as an adjustment to depreciation. Vehicles are generally depreciated at rates
ranging from 10% to 25% per annum. Manufacturers provide the Company with
incentives and allowances (such as rebates and volume discounts) which are
amortized to income over the holding period of the vehicles.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost net of accumulated depreciation
and amortization. Depreciation is calculated using the straight-line method
over the estimated useful life of the assets. Estimated useful lives range
from five to ten years for furniture and office equipment, to thirty years
for buildings. Leasehold improvements are amortized over the shorter of
twenty years or the remaining life of the lease. Maintenance and repairs are
expensed; renewals and improvements are capitalized. When depreciable assets
are retired or sold, the cost and related accumulated depreciation are
removed from the accounts with any resulting gain or loss reflected in the
consolidated statement of operations.
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired is amortized over a 40 year period
and is shown net of accumulated amortization of $37.5 million and $1.0
million at December 31, 1995 and 1996, respectively.
F-13
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
IMPAIRMENT ACCOUNTING
In 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 Company reviews the recoverability
of its long-lived assets, including cost in excess of net assets acquired,
when events or changes in circumstances occur that indicate that the carrying
value of the assets may not be recoverable. The measurement of possible
impairment is based on the Company's ability to recover the carrying value of
the asset from the expected future pre-tax undiscounted future cash flows
generated. The measurement of impairment requires management to use estimates
of expected future cash flows. If an impairment loss existed, the amount of
the loss would be recorded under the caption Costs and Expenses in the
consolidated statement of operations. It is at least reasonably possible that
future events or circumstances could cause these estimates to change. The
adoption of this statement had no material effect on the consolidated
financial statements of the Company.
PUBLIC LIABILITY, PROPERTY DAMAGE AND OTHER INSURANCE LIABILITIES
Insurance liabilities on the accompanying consolidated statements of
financial position include additional liability insurance, personal effects
protection insurance, public liability and property damage ("PLPD") and
personal accident insurance claims for which the Company is self-insured. The
Company is self-insured up to $1 million per claim under its automobile
liability insurance program for PLPD and additional liability insurance.
Costs in excess of $1 million per claim are insured under various contracts
with commercial insurance carriers. The liability for claims up to $1 million
is estimated based on the Company's historical loss and loss adjustment
expense experience and adjusted for current trends.
The insurance liabilities include a provision for both claims reported to
the Company as well as claims incurred but not yet reported to the Company.
This method is an actuarially accepted loss reserve method. Adjustments to
this estimate and differences between estimates and the amounts subsequently
paid are reflected in operations as they occur.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of foreign companies are translated at the
year-end exchange rates. The resultant translation adjustment is included as
a component of consolidated stockholder's equity. Results of operations are
translated at the average rates of exchange in effect during the year.
INCOME TAXES
The Company is included in the consolidated federal income tax return of
HFS. Pursuant to the regulations under the Internal Revenue Code, the
Company's pro rata share of the consolidated federal income tax liability of
HFS is allocated to the Company on a separate return basis. The Predecessor
Companies were included in the consolidated federal income tax return of
Avis, Inc. The Company files separate income tax returns in states where a
consolidated return is not permitted. In accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), deferred income tax assets and liabilities are measured based upon the
difference between the financial accounting and tax bases of assets and
liabilities.
PENSIONS
Costs of the defined benefit plans are actuarially determined under the
projected unit credit cost method and include amounts for current service and
interest on projected benefit obligations and plan assets. The Company's
policy is to fund at least the minimum contribution amount required by the
Employee Retirement Income Security Act of 1974.
ADVERTISING
Advertising costs are expensed as incurred. Advertising costs were $60.4
million, $48.4 million, $66.1 million and $10.3 million for the periods ended
December 31, 1994, December 31, 1995, October 16, 1996 and December 31, 1996,
respectively.
F-14
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ENVIRONMENTAL COSTS
The Company's operations include the storage and dispensing of gasoline.
The Company accrues losses associated with the remediation of accidental fuel
discharges when such losses are probable and reasonably estimable. Accruals
for estimated losses from environmental remediation obligations generally are
recognized no later than completion of the remedial feasibility study. Such
accruals are adjusted as further information develops or circumstances
change. Costs of future expenditures for environmental remediation
obligations are not discounted to their present value. Recoveries from
insurance companies and other reimbursements are generally not significant.
In October 1996, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 96-1
Environmental Remediation Liabilities ("SOP 96-1"). SOP 96-1 provides
guidance on the timing and measurement of liabilities associated with
environmental remediation. The statement is effective for fiscal years
beginning after December 15, 1996. The adoption of this statement is not
expected to have a material effect on the results of operations or financial
position of the Company.
NOTE 2 -- ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1995 and 1996 consist of the following
(in thousands):
<TABLE>
<CAPTION>
1995 1996
---------- ---------
<S> <C> <C>
Vehicle rentals....................... $ 90,290 $ 94,480
Due from vehicle manufacturers ...... 11,308 14,758
Due from General Motors .............. 69,504 168,546
Damage claims ........................ 5,969 10,697
Due from licensees ................... 3,297 3,903
Other ................................ 17,349 19,022
---------- ---------
197,717 311,406
Less allowance for doubtful accounts (2,746) (227)
---------- ---------
$194,971 $311,179
========== =========
</TABLE>
Amounts due from vehicle manufacturers include receivables for vehicles
sold under guaranteed repurchase contracts and amounts due for incentives and
allowances. Incentives and allowances are based on the volume of vehicles to
be purchased for a model year, or from the manufacturers' willingness to
encourage the Company to retain vehicles rather than return the vehicles back
to the manufacturer or arise from the purchase of particular models not
subject to repurchase under "buyback" arrangements. Incentives and allowances
are amortized to income over the holding period of the vehicles (see Notes 4
and 14).
NOTE 3 -- DUE (TO) FROM AFFILIATES, NET
Due (to) from affiliates, net at December 31, 1995 and 1996 consist of the
following balances due to or from HFS or its consolidated subsidiaries which
will be settled on or before the previously mentioned IPO (in thousands):
F-15
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
1995 1996
------------- -----------
<S> <C> <C>
Note receivable from Wizard Co., Inc. (a) .. $ 196,965
Subordinated vehicle financing notes (b) .... $ (180,000) (247,500)
Due to Avis, Inc. for tax advantaged vehicle
financing (c) .............................. (1,000,000)
Non-interest bearing advances (d) ........... 794,313 112,342
------------- -----------
$ (385,687) $ 61,807
============= ===========
</TABLE>
NOTES:
(a) Consists of a $194.1 million note receivable from Wizard Co., Inc., an
indirect wholly-owned subsidiary of HFS, plus accrued interest. The
note bears interest at 7.13% and is due on October 1, 2006 and is
guaranteed by HFS.
(b) Represents loans from Avis, Inc. to the Vehicle Trust, as described in
Note 7, to provide additional subordinated financing. The amounts
provided reduce, within certain limits, the amount of subordinated
financing required from other lenders. The loans are made under terms
of a credit agreement which terminates on October 29, 2003. At December
31, 1995 and 1996, the weighted average interest rate under these loans
was 11.16% and 10.75%, respectively.
(c) Represents a $1 billion ESOP related tax advantaged vehicle trust
financing consisting of loans under various agreements with banks,
insurance companies and vehicle manufacturer finance companies. The tax
advantaged notes were issued in September 1987 with a final maturity of
25 years and annual principal reductions commencing in 1998. At
December 31, 1995, the weighted average interest rate under these loans
was 6.0%. Included within the $1 billion ESOP related vehicle trust
financing is $118 million that is ultimately due to General Motors.
This loan was retired as of the Date of Acquisition.
(d) Primarily represents the transfer of assets from the Company to HFS and
subsidiaries, recorded in connection with the October 17, 1996
acquisition of Avis, Inc. by HFS, as well as intercompany transactions
relating to management, service and administrative fees since the Date
of Acquisition. The amounts due to or from HFS and subsidiaries are
interest free and are guaranteed by HFS.
Expense and (income) items of the Company include the following charges
from (to) Avis, Inc. and subsidiaries prior to the Date of Acquisition for
the period ended December 31, 1994, December 31, 1995 and October 16, 1996
(in thousands).
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JANUARY 1, 1996
DECEMBER 31, TO
--------------------- OCTOBER 16, 1996
1994 1995
--------- ----------
<S> <C> <C> <C>
Vehicle related costs ........ $(3,954) $(25,134)
Data processing .............. $28,671 29,833 30,209
Employee benefits allocation (2,975) (3,385) (2,776)
Rent ......................... (1,730) (2,188) (2,459)
</TABLE>
These charges seek to reimburse the affiliated company for the actual
costs incurred. These amounts reflect the effect of various intercompany
agreements, which are subject to renegotiation from time to time, and certain
allocations which are based upon such factors as square footage, employee
salaries, computer usage time, etc.
F-16
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Expense items of the Company include the following charges from HFS and
affiliates of HFS for the period October 17, 1996 (Date of Acquisition) to
December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Reservations ................................ $10,900
Data processing ............................. 8,772
Management, service and administrative fees 8,568
Interest on intercompany debt, net .......... 2,561
Rent ........................................ 950
----------
$31,751
==========
</TABLE>
Reservations and data processing services are charged to the Company based
on actual cost. Effective January 1, 1997, HFS will charge the Company a
royalty fee of 4.0% of revenue for the use of the Avis trade name. On an
unaudited pro forma basis, had the royalty fee been charged to the Company
beginning on October 17, 1996, net income for the period October 17, 1996 to
December 31, 1996 would have been reduced by $4.3 million resulting in a pro
forma net loss of $3.1 million.
NOTE 4 -- VEHICLES
Vehicles at December 31, 1995 and 1996 consist of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Vehicles ................................................ $2,283,003 $2,250,309
Vehicles acquired under long-term capital lease (Note 7) 95,084 19,324
Buses and support vehicles .............................. 42,075 45,868
Vehicles held for sale .................................. 42,332 36,378
------------ ------------
2,462,494 2,351,879
Less accumulated depreciation ........................... (295,327) (108,387)
------------ ------------
$2,167,167 $2,243,492
============ ============
</TABLE>
Depreciation expense recorded for vehicles was $266.6 million, $324.2
million, $275.9 million and $66.8 million, for the periods ended December 31,
1994, December 31, 1995, October 16, 1996 and December 31, 1996,
respectively. Depreciation expense reflects a net gain on the disposal of
vehicles of $24.8 million, $17.8 million, $30.3 million and $4.5 million for
the periods ended December 31, 1994, December 31, 1995, October 16, 1996 and
December 31, 1996, respectively. It also reflects the amortization of certain
incentives and allowances from various vehicle manufacturers (the most
significant of which was received from General Motors) of approximately $74
million, $77 million, $61 million and $14 million for the periods ended
December 31, 1994, December 31, 1995, October 16, 1996 and December 31, 1996,
respectively.
During the periods ended December 31, 1994, December 31, 1995, October 16,
1996 and December 31, 1996, the Company purchased from General Motors $2.7
billion, $2.0 billion, $1.8 billion and $0.4 billion of vehicles, net of
incentives and allowances, respectively (see Notes 1 and 14).
In November 1988 and April 1990, the Company entered into seven year
operating leases under which an original amount of $324.3 million of vehicles
were leased, with the ability to exchange such leased vehicles for newly
manufactured vehicles with the same value to the lessor. The leases are
cancelable at the Company's option, however, additional costs may be incurred
upon termination based upon the fair value of the vehicles at the time the
option is exercised. At the termination of the leases, the Company may
purchase the vehicles at the agreed upon fair market value or return them to
the lessor.
F-17
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In December 1994, the Company entered into a financing arrangement
whereby it may lease up to $503 million of vehicles. This arrangement was
amended on October 17, 1996 to increase the amount to $650 million. Under
this arrangement, at December 31, 1995 and 1996, there were $219 million and
$322 million of vehicles under operating leases. The vehicles leased under
this arrangement may be leased for periods of up to 18 months. The lease cost
charged to the Company varies with the number of vehicles leased and the
repurchase agreement offered by the vehicle manufacturer to the lessor and
includes all expenses including the interest costs of the financing company.
The rental payments due in each of the years ending December 31 for the
operating leases as described above are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 ... $69,444
1998 ... 15,388
</TABLE>
Rental expense for those vehicles under operating leases as described
above was $59.2 million, $106.1 million, $93.0 million and $16.1 million for
the periods ended December 31, 1994, December 31, 1995, October 16, 1996 and
December 31, 1996, respectively.
NOTE 5 -- PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1996 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1995 1996
---------- ---------
<S> <C> <C>
Land .......................................... $ 19,702 $ 19,523
Buildings ..................................... 13,321 11,862
Leasehold improvements ........................ 139,938 48,898
Furniture, fixtures and equipment ............. 30,779 10,997
Construction-in-progress ...................... 15,813 9,946
---------- ---------
219,553 101,226
Less accumulated depreciation and
amortization.................................. (78,561) (2,339)
---------- ---------
$140,992 $ 98,887
========== =========
</TABLE>
NOTE 6 -- ACCRUED LIABILITIES
Accrued liabilities at December 31, 1995 and 1996 consist of the following
(in thousands):
<TABLE>
<CAPTION>
1995 1996
---------- ---------
<S> <C> <C>
Payroll and related costs ..... $ 54,706 $ 73,142
Taxes, other than income taxes 10,740 29,522
Rents and property related .... 10,594 30,889
Interest ....................... 12,081 18,531
Sales and marketing ............ 20,567 20,395
Vehicle related ................ 24,492 18,784
Other various .................. 50,415 137,982
---------- ---------
$183,595 $329,245
========== =========
</TABLE>
F-18
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- FINANCING AND DEBT
Debt outstanding at December 31, 1996 is not guaranteed by HFS and debt
outstanding at December 31, 1995 and 1996 is comprised of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
VEHICLE TRUST FINANCING
Commercial paper........................................... $ 3,000
Short-term vehicle trust financing--revolving credit
facilities ............................................... $1,970,000
Current portion of long-term debt ......................... 56,000
------------ ------------
Total current portion of vehicle trust financing ......... 59,000 1,970,000
------------ ------------
Long-term vehicle trust revolving credit facilities ...... 476,000
Vehicle manufacturer's floating rate notes due September
1998 ($50,719 senior at 8.50% and $16,281 subordinated at
10.00%) .................................................. 67,000
Vehicle manufacturer's floating rate notes due October
2001 ($63,731 senior at 7.16% and $54,269 subordinated at
8.91%) ................................................... 118,000
Floating rate notes due September 1998 .................... 115,000
Insurance company notes due from December 1997 to December
1999 at 7.53% to 8.23% ................................... 112,000
Insurance company notes due from June 1998 to June 2003 at
6.75% to 7.92% ........................................... 150,500
------------ ------------
Total long-term portion of vehicle trust financing ..... 853,500 185,000
------------ ------------
OTHER FINANCING
Short-term notes--foreign at 6.63% to 18.00% in 1995 and
3.89% to 13.00% in 1996 .................................. 37,264 65,516
Short-term floating rate capital lease terminating in 1996 12,801
Current portion of 7.50% capital lease terminating
November 1997 ............................................ 19,153 40,169
Current portion of long-term debt--other .................. 13,605 1,060
------------ ------------
Total current portion of other financing ................ 82,823 106,745
------------ ------------
7.50% capital lease terminating November 1997 ............. 40,169
Other domestic............................................. 3,974 2,916
Debt of foreign subsidiaries:
Floating rate notes due April 1997 at 8.26% to 8.44% .... 51,891
Floating rate notes due July 1997 at 9.42% to 9.63% ..... 10,378
Floating rate notes due February 1998 at 7.65% in 1995
and 4.75% in 1996 ....................................... 8,012 2,935
Floating rate notes due August 1998 at 6.94% to 8.65% ... 27,878
------------ ------------
Total long-term portion of other financing .............. 114,424 33,729
------------ ------------
$1,109,747 $2,295,474
============ ============
</TABLE>
F-19
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Currently, the primary source of funding for domestic vehicles is
provided by the Vehicle Trust (a grantor trust). The Vehicle Trust consists
of loans from banks, vehicle manufacturer finance companies and Avis, Inc.
The Predecessor Companies' financing structure of the Vehicle Trust consisted
of loans from banks, insurance companies, vehicle manufacturer finance
companies and Avis, Inc. Amounts drawn against this facility may be used to
purchase vehicles and pay certain expenses of the Vehicle Trust. The security
for the Vehicle Trust financing facility consists of a lien on the vehicles
acquired under the facility, which at December 31, 1995 and 1996, totaled
approximately $1.9 billion and $2.1 billion, respectively, exclusive of
related valuation reserves. The security for the Vehicle Trust financing
facility also consists of security interests in certain other assets of the
Vehicle Trust. In addition, the Vehicle Trust and its security agreement
require that there be outstanding, at all times, subordinated debt in a
specified percentage range (10% -25%) of the net book value of the vehicles
owned by the Vehicle Trust. Pursuant to the agreement, the subordinated debt
is to be provided by vehicle manufacturer finance companies and Avis, Inc. At
December 31, 1995 and 1996, subordinated debt of $292.1 million and $318.0
million, respectively, was required under the Vehicle Trust financing of
which $180.0 million and $247.5 million, respectively, was due to Avis, Inc.
(Note 3).
At December 31, 1995, the weighted average interest rate on commercial
paper was 6.4%. For the periods ended December 31, 1994, December 31, 1995
and October 16, 1996, the average outstanding borrowings of commercial paper
were $19.9 million, $33.5 million and $30.4 million, respectively, with a
weighted average interest rate of 5.3%, 6.5% and 6.0%, respectively.
The short-term notes are issued pursuant to a $2.5 billion revolving
credit facility dated as of October 17, 1996 which matures on October 16,
1997. At December 31, 1996, the weighted average interest rate on borrowings
under this facility was 6.00%. For the period from October 17, 1996 to
December 31, 1996, the average outstanding borrowings under this facility
were $2.0 billion with a weighted average interest rate of 5.98%. This
facility requires a fee of 1/8 of 1% on the committed amount.
The long-term vehicle trust revolving credit facility consisted of $850
million revolving credit facility expiring on September 30, 1997. The
interest rate on these loans is based on the London interbank rate ("LIBOR")
plus a spread negotiated at the time of borrowing. At December 31, 1995, the
weighted average interest rate on outstanding borrowings under this facility
was 6.3%. For the periods ended December 31, 1994, December 31, 1995 and
October 16, 1996, the average outstanding borrowings under this facility were
$366.5 million, $288.0 million and $516.9 million, respectively, with a
weighted average interest rate of 5.2%, 6.5% and 5.7%, respectively. This
facility was retired on the Date of Acquisition.
The Company also had Vehicle Trust financing outstanding from vehicle
manufacturer finance companies under terms of loan agreements dated October
17, 1996. Under these agreements, the maximum amount of borrowings allowed is
$267 million, of which up to $260 million may be used as subordinated debt.
On December 31, 1996, $185 million was outstanding of which $70.5 million of
the outstanding debt was deemed subordinated. At December 31, 1996, the
weighted average interest rate of borrowings under this facility was 8.5%.
For the period October 17, 1996 to December 31, 1996, the average outstanding
borrowings under this facility was $185 million with a weighted average
interest rate of 8.41%. The Predecessor Companies, through its parent, Avis,
Inc., had substantially similar financing arrangements under a portion of a
$1 billion ESOP related tax advantaged vehicle trust financing facility (Note
3). At December 31, 1995, the outstanding borrowings under this arrangement
was $185 million, of which $112.1 million was subordinated. The average
borrowings under this facility for the periods ended December 31, 1994,
December 31, 1995 and October 16, 1996 were $317.0 million, $268.2 million
and $185.0 million, respectively. The weighted average interest rate on these
average borrowings were 6.2%, 7.7% and 7.3%.
The floating rate notes were issued pursuant to a loan agreement, dated
September 1, 1995, for a period of three years. The interest rate on these
notes is based on the LIBOR, plus a spread of 0.45%. The
F-20
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
interest rate on these notes at December 31, 1995 was 6.2%. For the periods
ended December 31, 1995 and October 16, 1996, the average outstanding
borrowings under this facility were $35.1 million and $115.0 million,
respectively, with a weighted average interest rate of 6.2% and 6.0%,
respectively. The notes were retired on the Date of Acquisition.
In December 1992 and May 1993, the Company borrowed a total of $318.5
million from a group of insurance companies. The maturities on these notes
ranged from 3 to 10 years, with an average life, when issued, of 6.1 years.
The effective interest rate on these notes was 7.3% at December 31, 1995. The
average amounts outstanding for the periods ended December 31, 1994, December
31, 1995 and October 16, 1996 were $318.5 million, $318.5 million and $287.1
million, respectively, with a weighted average interest rate of 7.3%, 7.3%
and 7.4%, respectively. These notes were retired as of the Date of
Acquisition.
In November 1992, the Predecessor Companies entered into a five year
capital lease under which $96.7 million of vehicles were leased. The lease is
cancelable at the Company's option, however, additional costs may be incurred
upon termination based upon the fair value of the vehicles at the time the
option is exercised. At the termination of the lease, the Company may
purchase the vehicles at an agreed upon fair market value or return them to
the lessor. The future minimum lease payments due under the Company's capital
lease obligation, which terminates on November 30, 1997, are $41.5 million
(including interest of $1.3 million).
Included in total debt at December 31, 1995 and 1996 is indebtedness to
General Motors of $10.1 million and $118.3 million, respectively (see Note
14).
Under the terms of the Company's loan agreements, the Company must
maintain a minimum net worth, minimum earnings and cash flow ratios.
Mandatory maturities of long-term obligations for each of the next five
years ending December 31, and thereafter, are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 ......... $ 41,229
1998 ......... 98,950
1999 ......... 1,086
2000 ......... 209
2001 ......... 118,228
Thereafter .. 256
</TABLE>
OTHER CREDIT FACILITIES
At December 31, 1995 and 1996, the Company has letters of credit/working
capital agreements totaling $102.6 million and $102.6 million, respectively,
which may be renewed biannually at the Company's option and the banks'
discretion. The collateral for certain of these agreements consists of a lien
on property and equipment and certain receivables with a carrying value of
$140.9 million and $136.9 million, respectively. At December 31, 1995 and
1996, the Company has outstanding letters of credit amounting to $47.6
million and $55.1 million, respectively.
In addition, for certain of its international operations, the Company has
available at December 31, 1995 and 1996, unused lines of credit of $176.9
million and $224.3 million, respectively. The unused lines of credit
agreements require an annual fee of 0.2% to 0.5% of the unused line.
INTEREST RATE SWAP AGREEMENTS
The Company has entered into interest rate swap agreements to reduce the
impact of changes in interest rates on certain outstanding debt obligations.
These agreements effectively change the Company's interest rate exposure on
$29.1 million and $44.0 million of its outstanding debt from a weighted
average
F-21
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
variable interest rate to a fixed rate of 7.7% and 7.1% at December 31, 1995
and 1996, respectively. The variable interest element with respect to these
interest rate swap agreements is reset quarterly. The interest rate swap
agreements will terminate in March 1997, July 1998 and November 1998. The
differential to be paid or received is recognized ratably as interest rates
change over the life of the agreements as an adjustment to interest expense.
The net interest differential charged to interest expense for the periods
ended December 31, 1994, December 31, 1995, October 16, 1996 and December 31,
1996 was $179,000, $146,000, $582,000 and $285,000, respectively. The Company
is exposed to credit risk in the event of nonperformance by counterparties to
its interest rate swap agreements. Credit risk is limited by entering into
such agreements with primary dealers only; therefore, the Company does not
anticipate that nonperformance by counterparties will occur. Notwithstanding
this, the Company's treasury department monitors counterparty credit ratings
at least quarterly through reviewing independent credit agency reports. Both
current and potential exposure are evaluated as necessary, by obtaining
replacement cost information from alternative dealers. Potential loss to the
Company from credit risk on these agreements is limited to amounts
receivable, if any.
NOTE 8 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount and the estimated fair value of the Company's interest
rate swap agreements represent liabilities of approximately $123,600 and
$843,100 at December 31, 1995, and $578,000 and $1.4 million at December 31,
1996, respectively.
For instruments including cash and cash equivalents, accounts receivable
and accounts payable, the carrying amount approximates fair value because of
the short maturity of these instruments. The fair value of floating-rate debt
approximates carrying value because these instruments re-price frequently at
current market prices. The fair value of fixed-rate debt approximates
carrying value.
The Company believes that it is not practicable to estimate the current
fair value of the amounts due from (to) affiliates because of the related
party nature of the instruments.
NOTE 9 -- INCOME TAXES
The provision for income taxes for the periods ended December 31, 1994,
December 31, 1995, October 16, 1996 and December 31, 1996 consists of the
following (in thousands):
<TABLE>
<CAPTION>
OCTOBER 17, 1996
YEARS ENDED DECEMBER 31, (DATE OF
------------------------ JANUARY 1, 1996 ACQUISITION)
TO TO
1994 1995 OCTOBER 16, 1996 DECEMBER 31, 1996
--------- --------- ---------------- -------------------
<S> <C> <C> <C> <C>
Current:
State..................... $ 735 $ 1,422 $ 2,176 $ 719
Foreign .................. 10,094 7,361 6,680 288
--------- --------- ---------------- -------------------
10,829 8,783 8,856 1,007
--------- --------- ---------------- -------------------
Deferred:
Federal .................. 16,020 19,057 19,614 (85)
Foreign .................. 3,364 6,795 2,728 118
--------- --------- ---------------- -------------------
19,384 25,852 22,342 33
--------- --------- ---------------- -------------------
Provision for income
taxes..................... $30,213 $34,635 $31,198 $1,040
========= ========= ================ ===================
</TABLE>
F-22
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The effective income tax rate for the periods ended December 31, 1994,
December 31, 1995, October 16, 1996 and December 31, 1996 varies from the
statutory U.S. federal income tax rate due to the following (dollars amounts
in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1995
------------------ ------------------
<S> <C> <C> <C> <C>
Statutory U.S. federal
income tax rate........... $18,311 35.0% $21,245 35.0%
Tax effect of foreign
operations and dividends 9,447 18.1 8,984 14.8
Amortization of cost in
excess of net assets
acquired and other
intangibles .............. 1,633 3.1 1,633 2.7
State income taxes, net of
federal tax benefit ...... 478 .9 924 1.5
Other non-deductible
business expenses ........ 550 .9
Other ..................... 344 .7 1,299 2.2
--------- ------- --------- -------
Effective income tax rate . $30,213 57.8% $34,635 57.1%
========= ======= ========= =======
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
OCTOBER 17, 1996
(DATE OF
JANUARY 1, 1996 ACQUISITION)
TO TO
OCTOBER 16, 1996 DECEMBER 31, 1996
--------- ------- -------------------
<S> <C> <C> <C> <C>
Statutory U.S. federal
income tax rate........... $24,429 35.0% $ 791 35.0%
Tax effect of foreign
operations and dividends 5,134 7.4 (1,073) (47.5)
Amortization of cost in
excess of net assets
acquired and other
intangibles .............. 1,045 1.5 359 15.9
State income taxes, net of
federal tax benefit ...... 1,413 2.0 469 20.8
Other non-deductible
business expenses ........ 462 .6 494 21.8
Other ..................... (1,285) (1.8)
--------- ------- --------- --------
Effective income tax rate . $31,198 44.7% $ 1,040 46.0%
========= ======= ========= ========
</TABLE>
In accordance with SFAS 109, the net deferred income tax assets at
December 31, 1995 and 1996 include the following (in thousands):
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
GROSS DEFERRED INCOME TAX ASSETS:
Accrued liabilities ........................................ $ 108,914 $ 171,050
Net operating loss carryforwards ........................... 68,474 78,172
Alternative minimum income tax credit carryforwards ....... 3,025 3,025
----------- -----------
180,413 252,247
----------- -----------
GROSS DEFERRED INCOME TAX LIABILITIES:
Tax depreciation in excess of book depreciation ........... (116,304) (152,346)
Tax amortization in excess of book amortization of cost in
excess of net assets acquired and difference in book and
tax basis of intangibles .................................. (13,547)
Prepaids and other ......................................... (10,125) (8,682)
----------- -----------
(126,429) (174,575)
----------- -----------
Net deferred income tax assets.............................. $ 53,984 $ 77,672
=========== ===========
</TABLE>
The Company, under its tax disaffiliation agreement with HFS, has
allocated alternative minimum tax net operating loss carryforwards of $139.8
million. The net operating loss carryforward is $223.3 million. The net
operating loss carryforwards expire as follows: 2001, $4.3 million; 2002,
$2.5 million; 2005, $32.6 million; 2008, $23.7 million; 2009, $15.1 million.
The Company also has available unused investment tax credits of approximately
$5.8 million which expire on February 28, 2002.
F-23
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- RETIREMENT BENEFITS
The Company, through its subsidiary, Avis Rent A Car System, Inc.
("ARACS"), sponsors non-contributory defined benefit plans covering employees
who are members of certain collective bargaining units and non-union
full-time employees hired prior to December 31, 1983 who were age 25 or above
on January 1, 1985. ARACS also contributes to union sponsored pension plans.
Through ARACS, the Company sponsors a Voluntary Investment Savings Plan
under a "qualified cash or deferred arrangement" under Section 401(k) of the
Internal Revenue Code. For the periods ended December 31, 1994, December 31,
1995, October 16, 1996, and December 31, 1996, the cost of the plan was $1.6
million, $1.7 million, $1.4 million and $352,000, respectively. Included in
the Investment Savings Plan, ARACS sponsors a defined contribution plan for
substantially all non-union full-time employees not otherwise covered. Costs
for this plan are determined at 2% of each covered employee's compensation.
Employer contributions and costs of the plan for the periods ended December
31, 1994, December 31, 1995, October 16, 1996 and December 31, 1996 amounted
to $1.7 million, $1.8 million, $1.5 million and $394,000, respectively.
The defined benefit plans provide benefits based upon years of credited
service, highest average compensation and social security benefits. Annual
retirement benefits, at age 65, are equal to 1 1/2% of the participating
employee's final average compensation (average compensation during the
highest five consecutive years of employment in the ten years prior to
retirement) less 1 3/7% of the Social Security benefits for each year of
service up to a maximum of 35 years. In addition, the plan provides for
reduced benefits before age 65 and for a joint and survivor annuity option.
The Company also sponsors several foreign pension plans. The most
significant of these is the Canadian pension plan.
The status of the defined benefit plans at December 31, 1995 and 1996 is
as follows (in thousands):
<TABLE>
<CAPTION>
1995
----------------------------
U.S. PLANS
----------------------------
SALARIED AND
HOURLY
EMPLOYEES
AS OF JUNE BARGAINING CANADIAN
30, 1985 PLAN PLAN
-------------- ------------ ----------
<S> <C> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested................................................ $(37,040) $(5,327) $(2,349)
Nonvested ............................................ (4,186) (201)
-------------- ------------ ----------
Total ............................................... $(41,226) $(5,528) $(2,349)
============== ============ ==========
Actuarial present value of projected benefit
obligation............................................ $ 57,780 $ 5,528 $ 2,566
Plan assets at fair value ............................. 51,633 4,426 7,072
-------------- ------------ ----------
Projected benefit obligation (in excess of) less than
plan assets .......................................... (6,147) (1,102) 4,506
Unrecognized net actuarial loss (gain) ................ 4,713 455 (557)
Prior service cost (gain) not yet recognized in net
periodic pension cost ................................ (2,798) 996
Remaining unrecognized obligation ..................... (1,451)
Unrecognized net transition asset ..................... (2,944)
-------------- ------------ ----------
Pension (liability) asset included in the statement of
financial position.................................... $ (4,232) $(1,102) $ 1,005
============== ============ ==========
</TABLE>
F-24
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
1996
----------------------------
U.S. PLANS
----------------------------
SALARIED AND
HOURLY
EMPLOYEES
AS OF JUNE BARGAINING CANADIAN
30, 1985 PLAN PLAN
-------------- ------------ ----------
<S> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested ............................................... $(43,406) $(7,147) $(3,389)
Nonvested ............................................ (4,671) (284)
-------------- ------------ ----------
Total ............................................... $(48,077) $(7,431) $(3,389)
============== ============ ==========
Actuarial present value of projected benefit
obligation ........................................... $ 66,083 $ 7,431 $ 3,703
Plan assets at fair value ............................. 60,697 6,623 8,323
-------------- ------------ ----------
Projected benefit obligation (in excess of) less than
plan assets .......................................... (5,386) (808) 4,620
Unrecognized net actuarial loss (gain) ................ 1,440 37 (336)
Prior service cost not yet recognized in net periodic
pension cost ......................................... 878
Remaining unrecognized obligation ..................... (915)
Unrecognized net transition asset ..................... (2,833)
-------------- ------------ ----------
Pension (liability) asset included in the statement of
financial position.................................... $ (3,946) $ (808) $ 1,451
============== ============ ==========
</TABLE>
Net pension costs of the defined benefit plans for the periods ended
December 31, 1994, December 31, 1995, October 16, 1996 and December 31, 1996,
include the following components (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
--------------------- ----------------------
U.S. CANADIAN U.S. CANADIAN
PLANS PLAN PLANS PLAN
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Service cost--benefits earned during the
period .................................. $ 2,820 $ 102 $ 2,566 $ 76
Interest cost on projected benefit
obligation .............................. 3,708 271 4,069 304
Return on assets--Actual loss (gain) on
plan assets ............................. 1,626 (586) (10,768) (578)
Net amortization of actuarial (gain) loss
and prior service cost .................. (5,702) 6,184
Contributions to union plans and other .. 2,057 2,211
Amortization of unrecognized net asset at
transition .............................. (134) (130)
--------- ---------- ---------- ----------
Net pension cost (benefit) ............... $ 4,509 $ (347) $ 4,262 $ (328)
========= ========== ========== ==========
</TABLE>
F-25
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
OCTOBER 17, 1996
(DATE OF
JANUARY 1, 1996 ACQUISITION)
TO TO
OCTOBER 16, 1996 DECEMBER 31, 1996
--------------------- --------------------
U.S. CANADIAN U.S. CANADIAN
PLANS PLAN PLANS PLAN
--------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Service cost--benefits earned during the
period .................................. $ 2,401 $ 59 $ 302 $ 28
Interest cost on projected benefit
obligation .............................. 3,679 206 357 54
Return on assets--Actual (gain) on plan
assets .................................. (3,194) (538) (551) (115)
Net amortization of actuarial (gain) loss
and prior service cost .................. (794) 390
Contributions to union plans and other .. 2,029 733
Amortization of unrecognized net asset at
transition .............................. (106) (28)
--------- ---------- -------- ----------
Net pension cost (benefit) ............... $ 4,121 $ (379) $1,231 $ (61)
========= ========== ======== ==========
</TABLE>
At December 31, 1995 and 1996, the measurement of the projected benefit
obligation was based upon the following:
<TABLE>
<CAPTION>
1995 1996
------------------- -------------------
U.S. CANADIAN U.S. CANADIAN
PLANS PLAN PLANS PLAN
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Discount rate ................... 7.50% 9.50% 7.75% 7.00%
Compensation increase ........... 5.00 5.50 5.00 4.00
Long-term return on plan assets 8.75 9.50 8.75 7.00
</TABLE>
The U.S. plans' assets are invested in corporate bonds, U.S. government
securities and common stock mutual funds. The Canadian plan's assets are
invested in Canadian stocks, bonds, mutual funds, real estate and money
market funds.
The Company also sponsors a non-qualified defined benefit pension plan.
The liability for this unfunded plan was $4.6 million and $8.8 million at
December 31, 1995 and 1996, respectively, and is included in accrued
liabilities on the accompanying statement of financial position. The
projected benefit obligation of the plan was $6.0 million and $10.0 million
at December 31, 1995 and 1996, respectively.
NOTE 11 -- LEASES, AIRPORT CONCESSION FEES AND COMMITMENTS
The Company is committed to make rental payments under noncancelable
operating leases relating principally to vehicle rental facilities and
equipment. Under certain leases, the Company is obligated to pay certain
additional costs, such as property taxes, insurance and maintenance. Airport
concession agreements usually require a guaranteed minimum amount plus
contingent fees which are generally based on a percentage of revenues.
F-26
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Operating lease payments and airport concession fees charged to expense
for the periods ended December 31, 1994, December 31, 1995, October 16, 1996
and December 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
OCTOBER 17, 1996
YEARS ENDED DECEMBER
(DATE OF
31,
JANUARY 1, 1996 ACQUISITION)
---------------------- TO TO
1994 1995 OCTOBER 16, 1996 DECEMBER 31, 1996
---------- ---------- ---------------- -------------------
<S> <C> <C> <C> <C>
Minimum fees........... $102,104 $108,965 $ 88,787 $23,576
Contingent fees ....... 45,633 56,624 61,290 13,220
---------- ---------- ---------------- -------------------
147,737 165,589 150,077 36,796
Less sublease rentals (4,082) (4,427) (3,843) (1,000)
---------- ---------- ---------------- -------------------
$143,655 $161,162 $146,234 $35,796
========== ========== ================ ===================
</TABLE>
Future minimum rental commitments under noncancelable operating leases
amounted to approximately $338.0 million at December 31, 1996. The minimum
rental payments due in each of the next five years ending December 31, and
thereafter, are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 ......... $86,264
1998 ......... 62,400
1999 ......... 43,179
2000 ......... 32,669
2001 ......... 20,805
Thereafter .. 92,709
</TABLE>
In addition to the Company's lease commitments, the Company has
outstanding purchase commitments of approximately $1.5 billion at December
31, 1996, which relate principally to vehicle purchases.
F-27
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 -- SEGMENT INFORMATION
The Company operates in the United States and in foreign countries. The
operations within major geographic areas for the periods ended December 31,
1994, December 31, 1995, October 16, 1996 and December 31, 1996 are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
OCTOBER 17, 1996
YEARS ENDED DECEMBER 31, (DATE OF
-------------------------- JANUARY 1, 1996 ACQUISITION)
TO TO
1994 1995 OCTOBER 16, 1996 DECEMBER 31, 1996
------------ ------------ ---------------- -------------------
<S> <C> <C> <C> <C>
Revenue:
United States................. $1,241,465 $1,414,380 $1,313,619 $ 312,194
Australia/New Zealand ........ 92,929 113,744 105,401 31,107
Canada ....................... 59,571 67,809 69,814 13,467
Other foreign operations .... 18,435 20,018 15,839 6,076
------------ ------------ ---------------- -------------------
$1,412,400 $1,615,951 $1,504,673 $ 362,844
============ ============ ================ ===================
Income (loss) before provision
for income taxes:
United States................. $ 21,759 $ 32,122 $ 48,098 $ (2,346)
Australia/New Zealand ........ 14,736 17,198 15,884 4,706
Canada ....................... 7,434 6,838 8,433 (1,752)
Other foreign operations .... 8,387 4,542 (2,616) 1,653
------------ ------------ ---------------- -------------------
$ 52,316 $ 60,700 $ 69,799 $ 2,261
============ ============ ================ ===================
Total assets at end of period:
United States................. $2,344,723 $2,535,621 $2,859,202 $2,750,119
Australia/New Zealand ........ 109,649 133,629 115,082 120,216
Canada ....................... 96,660 97,426 147,617 122,657
Other foreign operations .... 52,081 58,222 65,796 138,365
------------ ------------ ---------------- -------------------
$2,603,113 $2,824,898 $3,187,697 $3,131,357
============ ============ ================ ===================
</TABLE>
NOTE 13 -- LITIGATION
Certain litigation has been initiated against the Company which has arisen
during the normal course of operations. Since litigation is subject to many
uncertainties, the outcome of any individual matter is not predictable with
any degree of certainty, and it is reasonably possible that one or more of
these matters could be decided unfavorably against the Company. The Company
maintains insurance policies that cover most of the actions brought against
the Company. Two legal actions have been filed against ARACS alleging
discrimination in the rental of vehicles. HFS has agreed to indemnify the
Company from any unfavorable outcome with respect to these matters upon the
consummation of an IPO. The Company is currently not involved in any legal
proceeding which it believes would have a material adverse effect upon its
consolidated financial condition or results of operations.
NOTE 14 -- RELATED PARTY TRANSACTIONS
The Company and Avis Europe, plc cooperate jointly in marketing and
promotional activities, the exchange of reservations, the honoring of charge
cards and vouchers, and the transfer of the related billings. A member of the
board of directors and an executive officer of HFS serve on the board of Avis
Europe Limited (formerly Cilva), the parent company of Avis Europe, plc.
F-28
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Vehicle manufacturers offer vehicle repurchase programs on an ongoing
basis to assist in the acquisition and disposition of vehicles. These
programs generally allow the Company, at its option, subject to certain
provisions, to sell the vehicles back to the manufacturers at pre-determined
prices. Amounts included under these programs are reflected in "Accounts
receivable" (see Note 2). Under the terms of certain financing agreements
with General Motors, the Company is required to purchase a significant
percentage of its fleet from local dealers of General Motors subject to
market conditions. In addition, the Company participates in an arrangement
whereby General Motors provides payments for purchasing and promoting a
specified number and mix of vehicles (see Note 4). At December 31, 1995 and
1996, the Company has a $450.0 million and a $250.0 million line of credit,
respectively, from General Motors which may be used for either ESOP or
vehicle trust financing (see Note 7). Of this facility, $300.0 million and
$200.0 million is available for subordinated debt at December 31, 1995 and
1996, respectively. As of December 31, 1995 and 1996, the Company utilized
$118.0 million of this facility, of which $93.4 million and $54.3 million was
subordinated, respectively. This facility requires a fee of 1/4 of 1% on the
unused portion.
NOTE 15 -- SUBSEQUENT EVENTS
On August 20, 1997, the Company purchased The First Gray Line Corporation
and its subsidiaries for approximately $210 million, including expenses. The
fair value of unaudited assets and liabilities, exclusive of cost in excess
of the fair value of net assets acquired, at June 30, 1997 are $332.3 million
and $296.3 million, respectively. The transaction is subject to customary
closing conditions and regulatory approval.
On July 31, 1997, the Company refinanced all of its domestic debt. This
debt was refinanced by utilizing a $3.65 billion asset-backed structure,
which consisted of (i) a $2.0 billion Commercial Paper Program and (ii) a
$1.65 billion Medium Term Note Issuance with maturities of 3 and 5 years.
ARACS is party to a $470.0 million secured credit agreement that provides
for (i) a revolving credit facility in the amount of up to $125.0 million
which is available on a revolving basis until December 31, 2000 (the "Final
Maturity Date") in order to finance the general corporate needs of ARACS in
the ordinary course of business (with up to $75.0 million of such amount
available for the issuance of standby letters of credit to support worker's
compensation and other insurance and bonding requirements of ARACS, the
Company and their subsidiaries in the ordinary course of business), (ii) a
term loan facility in the amount of $120.0 million to finance general
corporate needs in the ordinary course of business, which will be repayable
in four installments, the first three of which shall be in the amount of $1.0
million payable on June 30, 1998, June 30, 1999 and June 30, 2000 and the
remainder of which will be due on the Final Maturity Date, and (iii) a
standby letter of credit facility of up to $225.0 million available on a
revolving basis to fund (a) any shortfall in certain payments owing pursuant
to fleet lease agreements and (b) maturing Commercial Paper Notes if such
Commercial Paper Notes cannot be repaid through the issuance of additional
Commercial Paper Notes or draws under the Liquidity Facility. Under terms of
this facility, the Company will be required to meet the following covenants
(i) certain maximum leverage ratios, (ii) certain minimum interest coverage
ratios, and (iii) certain minimum fixed charge coverage. In addition, the
Credit Facility prohibits the payment of cash dividends until the fiscal year
ending December 31, 1998 and, thereafter, permits the payment of dividends
only if the Company meets a minimum leverage ratio, the amount of such
dividend does not exceed a designated percentage of the Company's cash flow
and no default exists. Interest rates under these new facilities ranged from
5.6% to 7.8% at July 31, 1997.
F-29
<PAGE>
THE FIRST GRAY LINE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash...................................................................... $ 3,585
Accounts receivable, less allowance for doubtful Accounts of $248 ........ 9,025
Prepaid expenses.......................................................... 5,120
Rental cars, at cost less accumulated depreciation of $30,278 ............ 299,941
Property and equipment (including land of $7,140) at cost less
accumulated depreciation of $16,505...................................... 18,328
Franchises and other intangibles, at cost................................. 1,705
----------
Total assets.............................................................. $337,704
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable......................................................... $ 20,488
Accrued liabilities...................................................... 12,083
Self-insurance liability accrual......................................... 17,068
Revenue equipment obligations and other debt............................. 218,500
Deferred taxes based on income........................................... 22,984
----------
Total liabilities....................................................... 291,123
Stockholders' equity:
Capital stock, 1,000,000 shares authorized and 640,000 shares issued .... 715
Retained earnings........................................................ 91,265
Less unearned ESOP shares................................................ (45,384)
Less treasury stock, at cost............................................. (15)
----------
Total stockholders' equity.............................................. 46,581
----------
Total liabilities and stockholders' equity................................ $337,704
==========
</TABLE>
See accompanying notes.
F-30
<PAGE>
THE FIRST GRAY LINE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED JUNE 30,
1997 1996
---------- ----------
<S> <C> <C>
Revenues............................ $156,384 $143,918
Costs and expenses:
Payroll and fringe benefits ....... 26,421 24,712
Vehicle owning and operating
costs.............................. 60,081 55,898
Commissions, rents and fees ....... 36,236 33,860
Other costs........................ 9,190 7,913
Interest........................... 11,904 11,095
---------- ----------
143,832 133,478
---------- ----------
Income before taxes based on
income............................. 12,552 10,440
Provision for taxes based on
income............................. 5,010 4,232
---------- ----------
Net income.......................... $ 7,542 $ 6,208
========== ==========
</TABLE>
See accompanying notes.
F-31
<PAGE>
THE FIRST GRAY LINE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED JUNE 30,
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ..................................................... $ 7,542 $ 6,208
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation .................................................. 46,885 41,520
ESOP compensation expense ..................................... 1,559 1,500
Increase in accounts receivable ............................... (1,234) (1,438)
Increase in prepaid expenses .................................. 1,321 710
Decrease in accounts payable and accrued liabilities ......... 9,737 9,409
Increase in self-insurance liability accrual .................. 1,241 1,504
Increase in deferred taxes based on income .................... 2,577 2,600
----------- -----------
Net cash provided by operating activities .................... 69,628 62,013
----------- -----------
INVESTING ACTIVITIES
Additions to rental cars........................................ (251,328) (208,862)
Book value of rental cars sold.................................. 184,485 127,643
Net additions to property and equipment ........................ (2,343) (1,831)
----------- -----------
Net cash used in investing activities ......................... (69,186) (83,050)
FINANCING ACTIVITIES
Net borrowings under revenue equipment obligations ............ (1,000) 27,500
Payments of other debt ......................................... (7,527) (7,574)
Purchase of Capital Stock....................................... (9) (3)
----------- -----------
Net cash provided by financing activities ..................... (8,536) 19,923
----------- -----------
Decrease in cash ................................................ (8,094) (1,114)
Cash at beginning of period ..................................... 11,679 4,965
----------- -----------
Cash at end of period ........................................... $ 3,585 $ 3,851
=========== ===========
</TABLE>
See accompanying notes.
F-32
<PAGE>
THE FIRST GRAY LINE CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the financial
position at June 30, 1997 and the results of operations and cash flows for
the nine month periods ended June 30, 1997 and 1996. The results of
operations for the interim periods are not indicative of the results for a
full year.
NOTE 2. PRINCIPLES OF CONSOLIDATION
The First Gray Line Corporation, through its operating subsidiary Grand
Rent A Car Corp., d.b.a. Avis Licensee, provides car rental services in
Southern California, Las Vegas, Nevada, and Yuma, Arizona. Grand Rent A Car
Corp. operates independently under exclusive Avis Rent A Car licenses.
The accompanied consolidated financial statements includes the accounts of
The First Gray Line Corporation and its wholly owned subsidiaries. All
significant intercompany transactions and balances have been eliminated in
the consolidation.
F-33
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
The First Gray Line Corporation
We have audited the accompanying consolidated balance sheets of The First
Gray Line Corporation as of September 30, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for
the years then ended. 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 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 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 The First Gray
Line Corporation at September 30, 1996 and 1995, and the consolidated results
of its operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Los Angeles, California
November 22, 1996
F-34
<PAGE>
THE FIRST GRAY LINE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------------
1996 1995
---------- ----------
(IN THOUSANDS, EXCEPT
SHARE INFORMATION)
<S> <C> <C>
ASSETS
Cash..................................................................... $ 11,679 $ 4,965
Accounts receivable, less allowance for doubtful accounts of $207 in
1996 and $195 in 1995................................................... 7,791 5,666
Prepaid expenses......................................................... 4,100 3,499
Rental cars, at cost less accumulated depreciation of $29,807 in 1996
and $23,873 in 1995..................................................... 278,781 231,625
Property and equipment (including land of $7,140 in 1996 and 1995), at
cost less accumulated depreciation of $15,701 in 1996 and $14,871 in
1995.................................................................... 17,187 15,984
Franchises and other intangibles, at cost ............................... 1,705 1,705
---------- ----------
Total assets............................................................. $321,243 $263,444
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities ............................... $ 16,493 $ 12,885
Self-insurance liability accrual........................................ 15,827 13,931
Revenue equipment obligations and other debt............................ 231,027 196,627
Deferred taxes based on income ......................................... 20,441 14,472
---------- ----------
Total liabilities........................................................ 283,788 237,915
Commitments .............................................................
Stockholders' equity:
Capital stock, 1,000,000 shares authorized and 640,000 shares issued in
1996 and 1995, at stated value ........................................ 715 715
Retained earnings....................................................... 83,692 74,130
Less unearned ESOP shares............................................... (46,946) (49,313)
Less treasury stock, at cost............................................ (6) (3)
---------- ----------
Total stockholders' equity............................................... 37,455 25,529
---------- ----------
Total liabilities and stockholders' equity............................... $321,243 $263,444
========== ==========
</TABLE>
See accompanying notes.
F-35
<PAGE>
THE FIRST GRAY LINE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER
30
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Revenues ........................... $198,557 $172,535
Costs and expenses:
Payroll and fringe benefits ....... 33,049 29,296
Vehicle owning and operating
costs............................. 76,718 66,476
Commissions, rents and fees ....... 46,184 39,948
Other costs........................ 11,688 8,659
Interest........................... 15,030 18,799
---------- ----------
182,669 163,178
---------- ----------
Income before taxes based on
income............................. 15,888 9,357
Provision for taxes based on
income............................. 6,100 3,671
---------- ----------
Net income.......................... $ 9,788 $ 5,686
========== ==========
</TABLE>
See accompanying notes.
F-36
<PAGE>
THE FIRST GRAY LINE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNEARNED TOTAL
CAPITAL RETAINED ESOP TREASURY STOCKHOLDERS'
STOCK EARNINGS SHARES STOCK EQUITY
--------- ---------- ----------- ---------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1994 ........... $715 $68,907 $(52,142) $17,480
Net income ............................. 5,686 5,686
Shares released for allocation, at cost 2,829 2,829
Cost of ESOP shares released in excess
of fair value, net of tax ............. (463) (463)
Purchase of capital stock .............. $(3) (3)
--------- ---------- ----------- ---------- ---------------
Balance at September 30, 1995 ........... 715 74,130 (49,313) (3) 25,529
Net income ............................. 9,788 9,788
Shares released for allocation, at cost 2,367 2,367
Cost of ESOP shares released in excess
of fair value, net of tax ............. (226) (226)
Purchase of capital stock .............. (3) (3)
--------- ---------- ----------- ---------- ---------------
Balance at September 30, 1996 ........... $715 $83,692 $(46,946) $(6) $37,455
========= ========== =========== ========== ===============
</TABLE>
See accompanying notes.
F-37
<PAGE>
THE FIRST GRAY LINE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
------------------------
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income........................................................ $ 9,788 $ 5,686
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation..................................................... 56,676 48,652
ESOP compensation expense ....................................... 1,998 2,070
Increase in accounts receivable.................................. (2,125) (464)
(Increase) decrease in prepaid expenses.......................... (601) 2,009
Increase (decrease) in accounts payable and accrued liabilities . 3,608 (1,338)
Increase (decrease) in self-insurance liability accrual ......... 1,896 (799)
Increase in deferred taxes based on income....................... 6,112 2,854
----------- -----------
Net cash provided by operating activities ........................ 77,352 58,670
----------- -----------
INVESTING ACTIVITIES
Additions to rental cars.......................................... (289,862) (296,760)
Book value of rental cars sold.................................... 187,628 260,627
Net additions to property and equipment........................... (2,801) (2,856)
----------- -----------
Net cash used in investing activities............................. (105,035) (38,989)
----------- -----------
FINANCING ACTIVITIES
Net borrowings (payments) under revenue equipment obligations ... 27,000 (30,154)
Borrowings of other debt.......................................... 15,000 20,000
Payments of other debt ........................................... (7,600) (7,687)
Purchase of capital stock......................................... (3) (3)
----------- -----------
Net cash provided by (used in) financing activities............... 34,397 (17,844)
----------- -----------
Increase in cash.................................................. 6,714 1,837
Cash at beginning of year......................................... 4,965 3,128
----------- -----------
Cash at end of year............................................... $ 11,679 $ 4,965
=========== ===========
</TABLE>
See accompanying notes.
F-38
<PAGE>
THE FIRST GRAY LINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996 and 1995
1. ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND PRESENTATION OF FINANCIAL STATEMENTS
The First Gray Line Corporation, through its operating subsidiary Grand
Rent A Car Corp., d.b.a. Avis Licensee, provides car rental services in
Southern California; Las Vegas, Nevada; and Yuma, Arizona. Grand Rent A Car
Corp. operates independently under exclusive Avis Rent A Car licenses.
The accompanying consolidated financial statements include the accounts of
The First Gray Line Corporation and its wholly owned subsidiaries (the
Company). All significant intercompany transactions and balances have been
eliminated in consolidation.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Included in costs and expenses are selling, general and administrative
expenses of $32,366,000 in 1996 and $25,422,000 in 1995.
DEPRECIATION
The Company depreciates rental cars and property and equipment on the
straight-line method.
RENTAL CARS
The Company recognizes car rental revenue at the time the car is returned.
Included in rental cars are amounts receivable from car manufacturers of
$15,304,000 in 1996 and $10,307,000 in 1995 for cars disposed of under
various repurchase and guaranteed value programs. The majority of rental cars
are acquired from one of the U.S. automobile manufacturers.
SELF INSURANCE
The Company self-insures for automobile liability losses and workers'
compensation losses up to specified limits. Insurance coverage is maintained
for losses in excess of those limits. Accruals have been provided to fully
reserve for the Company's loss responsibility.
CREDIT RISK
The Company has no significant off-balance sheet risks or concentrations
of credit risk.
2. REVENUE EQUIPMENT OBLIGATIONS AND OTHER DEBT
Revenue equipment obligations and other debt at September 30, 1996,
include $151,000,000 due under the credit line and $80,027,000 of other debt.
The Company has a secured bank credit line available for the purchase of
rental cars and other working capital requirements of $175,000,000 and a
secured credit line from a car manufacturer's finance subsidiary of
$25,000,000, which expire at various dates through 1999. The bank credit line
provides for borrowings and the issuance of letters of credit equal to the
lesser of the credit commitment or the eligible vehicle and vehicle
receivable collateral. At September 30, 1996, borrowings of $151,000,000 and
letters
F-39
<PAGE>
THE FIRST GRAY LINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. REVENUE EQUIPMENT OBLIGATIONS AND OTHER DEBT (Continued)
of credit of $4,473,000 were outstanding under the bank credit line with
$18,000,000 available for borrowings and $1,527,000 available for letters of
credit. There was no outstanding balance with the manufacturer's finance
subsidiary at September 30, 1996. Interest on the bank credit line is based
on market-directed commercial paper rates and at September 30, 1996, the
effective interest rate on the bank credit line was 6.0%. During 1995, the
Company wrote off $3,000,000 of capitalized loan costs, related to a prior
year financing, to interest expense.
Other debt consists of the following at September 30 (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Notes payable at various rates ranging from 7.55% to 10.23%, secured
by eligible vehicle and vehicle receivable collateral, due in
varying amounts through 2007 ....................................... $80,000 $72,500
Note payable at 9.25%, secured by assets (net book value of $29 in
1996 and $115 in 1995), due in 1997 ................................ 27 127
--------- ---------
$80,027 $72,627
========= =========
</TABLE>
The effective interest rates on Other debt at September 30, 1996 and 1995,
were 8.8% and 9.1%, respectively.
The bank credit line and the other debt contain certain covenants
restricting payments of dividends, incurrence of additional long-term debt
and requiring maintenance of certain financial ratios.
The aggregate amount of maturities for other debt for the five years
following September 30, 1996, and beyond are: $7,527,000 in 1997, $7,500,000
in 1998, $10,000,000 in 1999, $9,375,000 in 2000, $9,375,000 in 2001, and
$36,250,000 in 2002 and beyond
Interest payments were $14,130,000 in 1996 and $15,887,000 in 1995.
3. TAXES BASED ON INCOME
Significant components of the Company's deferred tax liabilities and
assets are as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Tax over book depreciation .......... $29,947 $21,658
Prepaid expenses..................... 1,737 1,610
Other................................ 1,848 1,985
--------- ---------
Deferred tax liabilities............ 33,532 25,253
Self insurance liability accrual .... 6,569 5,796
Payroll and payroll related
expenses............................ 1,695 1,013
Other accrued expenses............... 3,206 2,717
Other................................ 1,621 1,255
Deferred tax assets ................ 13,091 10,781
--------- ---------
Net deferred tax liabilities ....... $20,441 $14,472
========= =========
</TABLE>
Deferred tax liabilities relate primarily to the use of accelerated
depreciation for tax purposes, while deferred tax assets relate primarily to
estimated self-insurance expenses on automobile liability and workers'
compensation and other expenses that are accrued for book purposes but are
not deductible currently for income tax purposes.
F-40
<PAGE>
THE FIRST GRAY LINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. TAXES BASED ON INCOME (Continued)
During 1995, the Company adopted a qualified like-kind exchange program
under which the Company can defer the gain associated with the sale of
certain vehicles in its rental fleet by reducing, for income tax purposes,
the basis in the replacement vehicle.
The provision for taxes based on income is composed of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1996
---------------------------
FEDERAL STATE TOTAL
--------- ------- -------
<S> <C> <C> <C>
Current.... $ 113 $ 20 $ 133
Deferred .. 5,753 214 5,967
--------- ------- -------
Total...... $5,866 $234 $6,100
========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995
---------------------------
FEDERAL STATE TOTAL
--------- ------- -------
<S> <C> <C> <C>
Current.... $ 630 $248 $ 878
Deferred .. 2,316 477 2,793
--------- ------- -------
Total...... $2,946 $725 $3,671
========= ======= =======
</TABLE>
A reconciliation of income tax expense computed by applying the statutory
federal income tax rate to income before taxes and reported tax expense is
summarized in the following table (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30
------------------
1996 1995
-------- --------
<S> <C> <C>
Federal income tax at 34%...................... $5,402 $3,181
State income taxes, net of federal tax
benefit....................................... 154 479
Other.......................................... 544 11
-------- --------
Income tax expense as reported................. $6,100 $3,671
======== ========
</TABLE>
Tax payments made during 1996 and 1995 were $1,340,000 and $2,887,000,
respectively. Tax refunds received during 1996 were $549,000.
4. COMMITMENTS
The Company and its subsidiaries are committed under the terms of
operating lease agreements, principally for sales facilities, for aggregate
minimum rental payments of $19,481,000 due as follows: $9,550,000 in 1997;
$4,893,000 in 1998; $3,195,000 in 1999; $1,186,000 in 2000; $539,000 in 2001;
and $118,000 in 2002 and beyond. Certain major leases require minimum
payments plus a percentage of revenue. Minimum rent expense amounted to
$10,193,000 in 1996 and $10,331,000 in 1995. Additional rent expense based on
a percentage of revenue amounted to $6,191,000 in 1996 and $4,486,000 in
1995.
5. PENSION PLANS
Substantially all car rental employees are covered by a defined
contribution Section 401(k) plan. Certain employees covered by the 401(k)
plan are also covered by a nonqualified supplemental employee retirement
plan. The plans provide for participant contributions based on salaries.
F-41
<PAGE>
THE FIRST GRAY LINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors a leveraged Employee Stock Ownership Plan (ESOP) that
covers all eligible employees. The Company makes annual contributions to the
ESOP equal to the ESOP's debt service. The ESOP shares initially were pledged
as collateral for its debt. As payments are made for debt and interest,
shares are released from collateral and allocated to active employee
accounts, based on the proportion of debt service paid in the year. The
Company accounts for its ESOP in accordance with Statement of Position 93-6.
Accordingly, the shares pledged as collateral are reported as unearned ESOP
shares in the consolidated balance sheet. As shares are released from
collateral, the Company reports compensation expense equal to the fair value
of the shares (based upon the valuation at the beginning of the period). ESOP
compensation expense was $1,998,000 and $2,070,000 for 1996 and 1995,
respectively. As employees retire or otherwise terminate their employment,
the Company would be obligated to buy back their ESOP shares at the fair
value at the time of repurchase. The ESOP shares are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30
---------------------------
1996 1995
------------- ------------
<S> <C> <C>
Allocated shares ........................ 29,214 19,757
Less shares purchased from participants (32) (16)
------------- ------------
Net allocated shares .................... 29,182 19,741
Shares released for allocation .......... 3,003 2,990
Unreleased shares ....................... 187,783 197,253
------------- ------------
Total ESOP shares ....................... 219,968 219,984
============= ============
Fair value of unreleased shares ........ $39,622,000 $36,097,000
============= ============
</TABLE>
F-42
<PAGE>
AVIS RENT A CAR, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated statements of operations for the year
ended December 31, 1996 and for the six month period ended June 30, 1997 give
effect to the following transactions as if they had occurred on January 1 of
the earliest period presented: (a) the Acquisition, (b) settlement of a net
intercompany receivable with HFS and its affiliated companies, (c)
adjustments to reflect a 4% royalty fee pursuant to the Master License
Agreement with HFS and (d) the refinancing of substantially all of the
Company's domestic fleet under credit facilities which consist of:
(i) a $2.0 billion commercial paper program,
(ii) a $1.65 billion medium term notes program with maturities extending
3 and 5 years and
(iii) a $470 million credit facility (the "Refinancing").
(See "Description of Certain Indebtedness -- New Credit Facility.")
The unaudited pro forma consolidated statement of financial position as of
June 30, 1997 gives effect to the following transactions as if they had
occurred on June 30, 1997: (a) the application of the proceeds from the
settlement of a net intercompany receivable from HFS and its affiliated
companies and (b) the Refinancing.
The "Pro Forma as Adjusted" consolidated statement of financial position
amounts give effect to: the Offering and the application of the net proceeds
therefrom to purchase The First Gray Line Corporation and repay certain debt
as if they had been consumated on June 30, 1997. The "Pro Forma as Adjusted"
consolidated statements of operations for the year ended December 31, 1996
and for the six month period ended June 30, 1997 give effect to the purchase
of The First Gray Line Corporation and the repayment of certain debt as if
they had occurred on January 1 of the earliest period presented.
The Company believes that the accounting used to reflect the above
transactions provides a reasonable basis on which to present these unaudited
pro forma financial data. The pro forma consolidated statement of financial
position and consolidated statements of operations are unaudited and were
derived by adjusting the historical financial statements of the Company. THE
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS ARE PROVIDED FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED TO BE INDICATIVE OF
THE COMPANY'S CONSOLIDATED FINANCIAL POSITION OR RESULTS OF OPERATIONS HAD
THE TRANSACTIONS BEEN CONSUMMATED ON THE DATES ASSUMED AND DO NOT PROJECT THE
COMPANY'S CONSOLIDATED FINANCIAL POSITION OR RESULTS OF OPERATIONS FOR ANY
FUTURE DATE OR PERIOD.
The unaudited pro forma consolidated financial statements and accompanying
notes should be read in conjunction with the audited consolidated financial
statements and the unaudited condensed consolidated financial statements of
the Company and The First Gray Line Corporation and the financial information
pertaining to the Company, in each case included elsewhere in this
Registration Statement.
P-1
<PAGE>
AVIS RENT A CAR, INC.
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
(3)
HISTORICAL PRO FORMA HISTORICAL OFFERING AND
AVIS RENT A AND REFINANCING PRO FORMA FIRST GRAY LINE FIRST GRAY LINE PRO FORMA
CAR, INC. ADJUSTMENTS CONSOLIDATED CORPORATION ACQUISITION AS ADJUSTED
------------- --------------- -------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents . $ 57,479 $ 57,479 $ 3,585 $ 61,064
Accounts receivable, net .. 190,292 190,292 9,025 $ 1,094 (4) 200,411
Due from affiliates, net .. 15,477 $ (203,885)(1a)
254,029 (1b)
(65,621)(1c)
Prepaid expenses .......... 35,076 35,076 5,120 2,877 (4) 43,073
Vehicles, net ............. 2,312,109 540,719 (2) 2,852,828 299,941 (7,647)(4) 3,145,122
Property and equipment,
net ...................... 100,331 100,331 18,328 (16)(4) 118,643
Other assets .............. 13,320 34,000 (2)
68,000 (2) 115,320 1,705 (1,705)(4) 115,320
Deferred income tax
assets ................... 105,937 105,937 105,937
Cost in excess of net
assets acquired, net ..... 199,052 199,052 174,000 (4) 373,052
------------- --------------- -------------- --------------- --------------- -------------
Total assets ............ $3,029,073 $ 627,242 $3,656,315 $337,704 $168,603 $4,162,622
============= =============== ============== =============== =============== =============
LIABILITIES AND
STOCKHOLDER'S EQUITY
Accounts payable .......... $ 228,264 $ (12,863)(2)
(14,000)(2) $ 201,401 $ 20,488 $ 221,889
Accrued liabilities ....... 268,209 268,209 12,083 $ 12,438 (4) 292,730
Current income tax
liabilities .............. 3,794 3,794 3,794
Deferred income tax
liabilities .............. 34,478 34,478 22,984 (7,254)(4) 50,208
Public liability, property
damage and other
insurance liabilities .... 223,473 223,473 17,068 240,541
Debt ...................... 2,183,769 (2,024,700)(2)
2,678,805 (2) 2,837,874 218,500 (80,000)(5) 2,976,374
------------- --------------- -------------- --------------- --------------- -------------
Total liabilities ....... 2,941,987 627,242 3,569,229 291,123 (74,816) 3,785,536
------------- --------------- -------------- --------------- --------------- -------------
Commitments and
contingencies
Stockholder's equity:
195 (5)
Common stock ............. 85(17) 85 715 (715)(4) 280
Additional paid-in
capital ................. 74,915(17) 74,915 289,805 (5) 364,720
Retained earnings ........ 14,290 14,290 91,265 (91,265)(4) 14,290
Less unearned ESOP
shares .................. (45,384) 45,384 (4)
Less treasury stock, at
cost .................... (15) 15 (4)
Foreign currency
translation adjustment .. (2,204) (2,204) (2,204)
------------- --------------- -------------- --------------- --------------- -------------
Total stockholder's
equity ................. 87,086 87,086 46,581 243,419 377,086
------------- --------------- -------------- --------------- --------------- -------------
Total liabilities and
stockholder's equity ... $3,029,073 $ 627,242 $3,656,315 $337,704 $168,603 $4,162,622
============= =============== ============== =============== =============== =============
</TABLE>
See accompanying notes to the unaudited pro forma consolidated financial
statements.
P-2
<PAGE>
AVIS RENT A CAR, INC.
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL AVIS RENT A
CAR, INC.
-------------------------
PREDECESSOR OCTOBER 17,
COMPANIES 1996
JANUARY 1, (DATE OF
1996 ACQUISITION)
TO TO COMBINED PRO FORMA AND
OCTOBER 16, DECEMBER 31, YEAR ENDED REFINANCING PRO FORMA
1996 1996 DECEMBER 31, 1996 ADJUSTMENTS CONSOLIDATED
----------- ------------ ----------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue............................. $1,504,673 $362,844 $1,867,517 $1,867,517
----------- ------------ ----------------- ------------- ------------
Costs and expenses:
Direct operating................... 650,750 167,682 818,432 818,432
Vehicle depreciation............... 275,867 66,790 342,657 $ 72,527 (7) 415,184
Vehicle lease charges.............. 100,318 22,658 122,976 (93,768)(7) 29,208
Selling, general and
administrative.................... 283,180 68,215 351,395 (6,499)(8)
74,701 (9) 419,597
Interest, net....................... 120,977 34,212 155,189 14,083 (6)
21,241 (7)
2,865 (10)
(9,917)(11) 183,461
Amortization of cost in excess of
net assets acquired................ 3,782 1,026 4,808 137 (12) 4,945
----------- ------------ ----------------- ------------- ------------
1,434,874 360,583 1,795,457 75,370 1,870,827
----------- ------------ ----------------- ------------- ------------
Income (loss) before provision for
(benefit from) income taxes........ 69,799 2,261 72,060 (75,370) (3,310)
Provision for (benefit from) income
taxes.............................. 31,198 1,040 32,238 (29,341)(16) 2,897
----------- ------------ ----------------- ------------- ------------
Net income (loss)................... $ 38,601 $ 1,221 $ 39,822 $(46,029) $ (6,207)
=========== ============ ================= ============= ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
(3) OFFERING
HISTORICAL AND
FIRST FIRST
GRAY LINE GRAY LINE PRO FORMA
CORPORATION ACQUISITION AS ADJUSTED
----------- ------------ -----------
<S> <C> <C> <C>
Revenue............................. $197,830 $2,065,347
----------- ------------ -----------
Costs and expenses:
Direct operating................... 97,480 $(2,165)(13) 913,747
Vehicle depreciation............... 46,811 461,995
Vehicle lease charges.............. 2,102 31,310
Selling, general and
administrative....................
19,812 (8,830)(14)
7,913 (14) 438,492
Interest, net.......................
15,087 (4,504)(15) 194,044
Amortization of cost in excess of
net assets acquired................ 4,350 (12) 9,295
----------- ------------ -----------
181,292 (3,236) 2,048,883
----------- ------------ -----------
Income (loss) before provision for
(benefit from) income taxes........ 16,538 3,236 16,464
Provision for (benefit from) income
taxes.............................. 6,361 2,883 (16) 12,141
----------- ------------ -----------
Net income (loss)................... $ 10,177 $ 353 $ 4,323
=========== ============ ===========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated financial
statements.
P-3
<PAGE>
AVIS RENT A CAR, INC.
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
(3)
HISTORICAL PRO FORMA AND HISTORICAL
AVIS RENT A REFINANCING PRO FORMA FIRST GRAY LINE
CAR, INC. ADJUSTMENTS CONSOLIDATED CORPORATION
------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenue................................... $945,647 $945,647 $103,594
------------- -------------- ---------------
Costs and expenses:
Direct operating......................... 398,548 398,548 47,889
Vehicle depreciation..................... 179,418 $ 43,880 (7) 223,298 26,514
Vehicle lease charges.................... 69,025 (58,192) (7) 10,833 9
Selling, general and administrative ..... 203,383 (6,920)(8) 196,463 10,231
Interest, net............................ 68,343 5,085 (6)
14,312 (7)
6,920 (10)
(4,958)(11) 89,702 8,067
Amortization of cost in excess of net
assets acquired......................... 2,570 2,570
------------- --------------- -------------- ---------------
921,287 127 921,414 92,710
------------- --------------- -------------- ---------------
Income (loss) before provision for
(benefit from) income taxes.............. 24,360 (127) 24,233 10,884
Provision for (benefit from) income
taxes.................................... 11,254 (48)(16) 11,206 4,343
------------- --------------- -------------- ---------------
Net income (loss) ........................ $ 13,106 $ (79) $ 13,027 6,541
============= =============== ============== ===============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
OFFERING AND
FIRST GRAY LINE PRO FORMA
ACQUISITION AS ADJUSTED
--------------- -------------
<S> <C> <C>
Revenue................................... $1,049,241
--------------- -------------
Costs and expenses:
Direct operating......................... $ (1,163) (13) 445,274
Vehicle depreciation..................... 249,812
Vehicle lease charges.................... 10,842
Selling, general and administrative ..... (4,683) (14)
4,144 (14) 206,155
Interest, net............................
(2,252)(15) 95,517
Amortization of cost in excess of net
assets acquired......................... 2,175 (12) 4,745
--------------- -------------
(1,779) 1,012,345
--------------- -------------
Income (loss) before provision for
(benefit from) income taxes.............. 1,779 36,896
Provision for (benefit from) income
taxes.................................... 1,582 (16) 17,131
--------------- -------------
Net income (loss) ........................ $ 197 $ 19,765
=============== =============
</TABLE>
See accompanying notes to the unaudited pro forma consolidated financial
statements.
P-4
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) The due from affiliates net account represents an intercompany
account with HFS and its affiliates (together, the "affiliates") and
is net of intercompany payables to (i.e., loans and advances from)
the affiliates.
(a) Reflects the proceeds from the settlement of a $194,100 note
receivable from Wizard Co., Inc., an indirectly wholly-owned
subsidiary of HFS (the "Wizard Note"), which bears interest at
7.13% and is due October 1, 2006. The principal amount of the
note plus accrued interest of $9,785 at June 30, 1997 is
guaranteed by HFS.
(b) Reflects the repayment of loans from an HFS affiliate (HFS Car
Rental, Inc. formerly known as Avis, Inc.), which provided
additional subordinated fleet financing.
(c) Reflects the settlement of net non-interest bearing intercompany
receivables at June 30, 1997 with HFS and its affiliated
companies. The net intercompany receivables principally consist
of assets transferred from the Company to HFS in connection with
the October 17, 1996 acquisition of Avis, Inc. by HFS, as well as
intercompany transactions relating to management, service and
administrative fees since the Date of Acquisition.
(2) Reflects the Refinancing of $2,125,223 debt and the inclusion of
$553,582 of additional debt related to vehicles which were previously
accounted for under operating leases. In connection with the
Refinancing and the settlement of the Wizard Note discussed in Note
(1a), financing and other fees of $48,000 and an escrow account of
$68,000 was funded.
(3) Represents The First Gray Line Corporation historical consolidated
financial statements as of and for the six months ended June 30, 1997
and for the year ended December 31, 1996.
(4) To allocate the purchase price of The First Gray Line Corporation
based on the estimated fair values of the assets acquired and the
liabilities assumed. The allocation of the purchase price is subject
to adjustment when additional information concerning asset and
liability valuations are obtained. The final asset and liability fair
values may differ from those set forth in the accompanying pro forma
consolidated balance sheet; however, the changes are not expected to
have a material effect on the consolidated financial position of the
Company.
(5) Reflects net proceeds of $290,000 from the Offering used to purchase
The First Gray Line Corporation for $210,000 (including expenses) and
the retirement of $80,000 of commercial paper included in the
Refinancing discussed in Note (2).
(6) Reflects the change in interest expense resulting from the
Refinancing including amortization of deferred financing costs as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
RATE 1996 1997
------ -------------- --------------
<S> <C> <C> <C>
Assumed interest on the new credit
facility................................... 6.6% $171,795 $87,712
Interest on historical debt................. 6.4% 166,912 86,727
-------------- --------------
Incremental interest on debt............... 4,883 985
Amortization of deferred financing costs ... 9,200 4,100
-------------- --------------
$ 14,083 $ 5,085
============== ==============
</TABLE>
P-5
<PAGE>
AVIS RENT A CAR, INC.
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS)
An increase or decrease in the interest rate of 1/8 percent (.00125) with
respect to the pro forma balances on the above New Credit Facility would
increase or decrease interest expense and income before provision for
income taxes by approximately $3,200 and $1,600 for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively,
based on the average outstanding balance of the debt to be refinanced for
these periods.
(7) Reflects the reclassification of lease charges to depreciation and
interest on vehicles which were capitalized pursuant to the
Refinancing discussed in Note (2).
(8) Reflects the elimination of management, service and administrative
fees from HFS for the year ended December 31, 1996, which was
replaced effective January 1, 1997 by a royalty fee calculated at 4%
of revenue pursuant to the Master License Agreement with HFS. The six
month period ended June 30, 1997 amount represents the elimination of
an administration fee from HFS related to the Wizard Note.
(9) Reflects the royalty fee of 4% of revenue pursuant to the Master
License Agreement with HFS.
(10) Reflects the elimination of the interest income relating to the
Wizard Note described in Note (1a).
(11) Reflects the reduction to interest expense as a result of the
application of the net proceeds realized from the settlement of the
Wizard Note and the net non-interest bearing intercompany receivables
due from HFS and its affiliated companies described in Note (1a) and
(1c) adjusted for the effects of the refinancing transactions
described in Note (2).
<TABLE>
<CAPTION>
SIX MONTHS
ASSUMED YEAR ENDED ENDED
REDUCTIONS DECEMBER 31, JUNE 30,
OF PRINCIPALS 1996 1997
--------------- -------------- ------------
<S> <C> <C> <C>
Interest expense on commercial paper
(interest rate of 5.63%).................. $94,777 $5,336 $2,668
Interest expense on the Term Loan Facility
(interest rate of 7.8%)................... 58,729 4,581 2,290
-------------- ------------
Reduction in interest expense.............. $9,917 $4,958
============== ============
</TABLE>
(12) Reflects the amortization of cost in excess of net assets acquired as
a result of the acquisition of the Company by HFS and the acquisition
by the Company of The First Gray Line Corporation; as if it had
occurred on January 1 of each period presented and the elimination of
the amortization of cost in excess of net assets acquired of the
Predecessor Companies. The unamortized cost in excess of net assets
acquired is being amortized over 40 years.
(13) Reflects the elimination of ESOP related compensation expense for The
First Gray Line Corporation.
(14) Reflects the elimination of advertising, marketing and franchise fee
due to the Company from The First Gray Line Corporation under its
former franchise agreement and the recognition of the 4% royalty fee
described in Note (9).
(15) Reflects the reduction in interest expense at the commercial paper
rate of 5.63%, as a result of the application of the net proceeds of
the Offering described in Note (5).
(16) Reflects the income tax effects of the pro forma adjustments at
statutory income tax rates.
(17) Reflects the 85,000 to 1 stock split which will be effective
immediately prior to consummation of the Offerings.
P-6
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE U.S. UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS
OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 11
Special Note Regarding Forward-Looking
Statements ................................ 17
Use of Proceeds ............................ 18
Dividend Policy ............................ 18
Dilution ................................... 19
Capitalization ............................. 20
Selected Financial Data .................... 21
Management's Discussion and Analysis of
Financial Conditions and Results
of Operations ............................. 23
Business ................................... 30
Management ................................. 42
Relationship with HFS ...................... 51
Shares Eligible for Future Sale ............ 57
Description of Capital Stock ............... 58
Description of Certain Indebtedness ....... 60
Certain United States Federal Tax
Consequences to Non-United States Holders 62
Underwriting ............................... 64
Legal Matters .............................. 67
Experts .................................... 67
Available Information ...................... 67
Index to Consolidated Financial
Statements ................................ F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS U.S. UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
19,500,000 SHARES
GRAPHIC OMITTED
COMMON STOCK
PROSPECTUS
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MONTGOMERY SECURITIES
ROBERTSON, STEPHENS &
COMPANY
BLAYLOCK & PARTNERS, L.P.
CHASE SECURITIES INC.
, 1997
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
[INTERNATIONAL PROSPECTUS--ALTERNATE PAGES]
SUBJECT TO COMPLETION, DATED SEPTEMBER 22, 1997
PROSPECTUS
GRAPHIC OMITTED
19,500,000 SHARES
AVIS RENT A CAR, INC.
COMMON STOCK
All of the shares of Common Stock offered hereby will be sold by Avis Rent
A Car, Inc. (the "Company"). A total of 3,900,000 shares (the "International
Shares") are being offered outside the United States and Canada (the
"International Offering") by the managers of the International Offering named
herein (the "Managers") and 15,600,000 shares (the "U.S. Shares") are being
offered in the United States and Canada (the "U.S. Offering") by the
underwriters of the U.S. Offering named herein (the "U.S. Underwriters"). The
initial public offering price and the underwriting discounts and commissions
are identical for both the International Offering and the U.S. Offering
(collectively, the "Offerings").
Prior to the Offerings, there has been no public market for the Company's
Common Stock. It is currently estimated that the initial public offering
price will be between $15.00 and $17.00 per share. For a discussion of the
factors to be considered in determining the initial public offering price,
see "Underwriting."
The Company is a wholly owned indirect subsidiary of HFS Incorporated
("HFS"). Upon consummation of the Offerings, HFS will beneficially own
approximately 30% of the then outstanding shares of the Company's Common
Stock (approximately 27.5% if the over-allotment options granted to the
Managers and the U.S. Underwriters are exercised in full). HFS has informed
the Company that it has no present plans to reduce its ownership interest
through sales or other dispositions.
The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "AVI," subject to official notice of issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------- ---------------- ----------------- ---------------
<S> <C> <C> <C>
Per Share..... $ $ $
- ------------- ---------------- ----------------- ---------------
Total (3)..... $ $ $
- ------------- ---------------- ----------------- ---------------
</TABLE>
- -----------------------------------------------------------------------------
(1) See "Underwriting" for indemnification arrangements with the Managers
and the U.S. Underwriters.
(2) Before deducting expenses payable by the Company estimated at $2,500,000.
(3) The Company has granted the Managers and the U.S. Underwriters 30-day
options to purchase in the aggregate up to 2,925,000 additional shares
of Common Stock, solely to cover over-allotments, if any. If the
options are exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
The International Shares are offered by the several Managers, subject to
prior sale, when, as and if delivered to and accepted by them and subject to
certain conditions, including the approval of certain legal matters by
counsel. The Managers reserve the right to withdraw, cancel or modify the
International Offering and to reject orders in whole or in part. It is
expected that delivery of the International Shares will be made against
payment therefor on or about , 1997, at the offices of Bear, Stearns &
Co. Inc., 245 Park Avenue, New York, New York 10167.
BEAR, STEARNS INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
LEHMAN BROTHERS
MONTGOMERY SECURITIES
ROBERTSON, STEPHENS & COMPANY
BAYERISCHE VEREINSBANK AG
CREDIT LYONNAIS SECURITIES CHASE MANHATTAN INTERNATIONAL LIMITED
, 1997
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE MANAGERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS
OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 11
Special Note Regarding Forward-Looking
Statements ................................ 17
Use of Proceeds ............................ 18
Dividend Policy ............................ 18
Dilution ................................... 19
Capitalization ............................. 20
Selected Financial Data .................... 21
Management's Discussion and Analysis of
Financial Conditions and Results
of Operations ............................. 23
Business ................................... 30
Management ................................. 42
Relationship with HFS ...................... 51
Shares Eligible for Future Sale ............ 57
Description of Capital Stock ............... 58
Description of Certain Indebtedness ....... 60
Certain United States Federal Tax
Consequences to Non-United States Holders 62
Underwriting ............................... 64
Legal Matters .............................. 67
Experts .................................... 67
Available Information ...................... 67
Index to Consolidated Financial Statements . F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS MANAGERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
19,500,000 SHARES
GRAPHIC OMITTED
COMMON STOCK
PROSPECTUS
BEAR, STEARNS INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
LEHMAN BROTHERS
MONTGOMERY SECURITIES
ROBERTSON, STEPHENS & COMPANY
BAYERISCHE VEREINSBANK AG
CREDIT LYONNAIS SECURITIES
CHASE MANHATTAN INTERNATIONAL LIMITED
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses in connection with the issuance
and distribution of the securities being registered, all of which will be
paid by the Company:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration
fee................................................ $ 115,523
NASD filing and expenses............................ 30,500
NYSE listing fee.................................... 174,000
Transfer agents' fees............................... 10,000
Printing and engraving expenses..................... 400,000
Legal fees and expenses............................. 800,000
Accounting fees and expenses........................ 725,000
Miscellaneous....................................... 244,977
----------
Total............................................. $2,500,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the General Corporation Law of the State of Delaware
("GCL") provides that a corporation has the power to indemnify any director
or officer, or former director or officer, 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
(other than an action by or in the right of the corporation) against
expenses, (including attorney's fees), judgments, fines or amounts paid in
settlement actually and reasonably incurred by them in connection with the
defense of any action by reason of being or having been directors or
officers, if such person shall have acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceedings,
provided that such person had no reasonable cause to believe his conduct was
unlawful, except that, if such action shall be in the right of the
corporation, no such indemnification shall be provided as to any claim, issue
or matter as to which such person shall have been judged to have been liable
to the corporation unless and to the extent that the Court of Chancery of the
State of Delaware, or any court in which such suit or action was brought,
shall determine upon application that, in view of all of the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses as such court shall deem proper.
As permitted by Section 102(b)(7) of the GCL, the Amended and Restated
Certificate of Incorporation of the Company (filed herewith as Exhibit 3.1)
(the "Restated Certificate of Incorporation") provides that no director shall
be liable to the Company or its stockholders for monetary damages for breach
of fiduciary duty as a director other that (i) for breaches of the director's
duty of loyalty to the Company and its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for the unlawful payment of dividends or
unlawful stock purchases or redemptions under Section 174 of the GCL and (iv)
for any transaction from which the director derived an improper personal
benefit.
The Company's Amended and Restated Bylaws (filed herewith as Exhibit 3.2)
(the "Bylaws") provide indemnification of the Company's directors and
officers, both past and present, to the fullest extent permitted by the GCL,
and allow the Company to advance or reimburse litigation expenses upon
submission by the director or officer of an undertaking to repay such
advances or reimbursements if it is ultimately determined that
indemnification is not available to such director or officer pursuant to the
Bylaws. The Company's Bylaws will also authorize the Company to purchase and
maintain insurance on
II-1
<PAGE>
behalf of an officer or director, past or present, against any liability
inserted against him in any such capacity whether or not the Company would
have the power to indemnify him against such liability under the provisions
of the Restated Certificate of Incorporation or Section 145 of the GCL.
The Company has entered into indemnification agreements with each of its
directors and certain of its executive officers. The indemnification
agreements require the Company, among other things, to indemnify such
directors and officers against certain liabilities that may arise by reason
of their status or service as directors of officers (other than liabilities
arising from willful misconduct of a culpable nature), and to advance their
expenses incurred as a result of any preceding against them as to which they
could be indemnified.
The Underwriting Agreements filed herewith as Exhibits 1.1 and 1.2 provide
for the indemnification by the U.S. Underwriters and the Managers of
directors and certain officers of the Company against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- ------------------------------------------------------------------------------------
<S> <C>
1. UNDERWRITING AGREEMENTS
1.1 Form of U.S. Underwriting Agreement***
1.2 Form of International Underwriting Agreement***
3. CERTIFICATE OF INCORPORATION AND BY-LAWS
3.1 Form of Amended and Restated Certificate of Incorporation of the Registrant**
3.2 Form of Amended and Restated By-Laws of the Registrant**
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITYHOLDERS, INCLUDING INDENTURES
4.1 Form of Certificate of Common Stock***
4.2 Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP
Funding II L.L.C., as issuer, and Harris Trust and Savings Bank, as trustee.**
4.3 Series 1997-1 Supplement, dated as of July 30, 1997 between AESOP Funding II L.L.C.
and Harris Trust and Savings Bank, as trustee, to the Amended and Restated Base
Indenture, dated as of July 30, 1997, between AESOP Funding II and the Trustee.**
4.4 Series 1997-2 Supplement, dated as of July 30, 1997 between AESOP Funding II L.L.C.
and Harris Trust and Savings Bank, as trustee, to the Amended and Restated Base
Indenture, dated as of July 30, 1997, between AESOP Funding II and the Trustee.**
4.5 Loan Agreement, dated as of July 30, 1997, between AESOP Leasing L.P., as borrower,
and AESOP Funding II L.L.C., as lender.**
4.6 Loan Agreement, dated as of July 30, 1997, among AESOP Leasing L.P., as borrower, PV
Holding Corp., as a permitted nominee of the borrower, Quartx Fleet Management,
Inc., as a permitted nominee of the borrower, and AESOP Funding II L.L.C., as
lender.**
4.7 Loan Agreement, dated as of July 30, 1997, between AESOP Leasing Corp. II, as
borrower, AESOP Leasing Corp., as permitted nominee of the borrower, and AESOP
Funding II L.L.C., as lender.**
II-2
<PAGE>
EXHIBIT
NO. DESCRIPTION
- ----------- ------------------------------------------------------------------------------------
4.8 Master Motor Vehicle Finance Lease Agreement, dated as of July 30, 1997, by and
among AESOP Leasing L.P., as lessor, Avis Rent A Car System, Inc., as lessee,
individually and as the Administrator and Avis Rent A Car, Inc., as guarantor.**
4.9 Master Motor Vehicle Operating Lease Agreement, dated as of July 30, 1997, by and
among AESOP Leasing L.P., as lessor, Avis Rent A Car System, Inc., individually and
as the Administrator, certain Eligible Rental Car Companies, as lessees, and Avis
Rent A Car, Inc., as guarantor.**
4.10 Master Motor Vehicle Operating Lease Agreement, dated as of July 30, 1997, by and
among AESOP Leasing Corp. II, as lessor, Avis Rent A Car System, Inc., individually
and as the Administrator, certain Eligible Rental Car Companies, as lessees and Avis
Rent A Car, Inc., as guarantor.**
4.11 Credit Agreement, dated as of July 30, 1997, among Avis Rent A Car, Inc., Avis Rent
A Car System, Inc., The Chase Manhattan Bank, as administrative agent, Lehman
Commercial Paper, Inc., as syndication agent and the other lenders party thereto
(the "Credit Agreement").**
4.12 Guarantee, dated as of July 30, 1997, in favor of The Chase Manhattan Bank, as
administrative agent for the lenders from time to time parties to the Credit Agreement.**
4.13 Security Agreement, dated as of July 30, 1997, in favor of The Chase Manhattan Bank, as
administrative agent for the lenders from time to time parties to the Credit Agreement.**
4.14 Pledge Agreement, dated as of July 30, 1997, in favor of The Chase Manhattan Bank, as
administrative agent for the lenders from time to time parties to the Credit Agreement.**
5 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding legality of the Common
Stock**
10. MATERIAL CONTRACTS
10.1 Form of Registration Rights Agreement***
10.2 Separation Agreement between HFS Car Rental, Inc. and Avis Rent A Car, Inc.**
10.3 Master License Agreement among HFS Car Rental, Inc., Avis Rent A Car System, Inc.
and Wizard Co., Inc.**
10.4 Computer Services Agreement between Avis Rent A Car System, Inc. and WizCom
International, Ltd.**
10.5 Reservation Services Agreement between HFS Incorporated and Avis Rent A Car System,
Inc.**
10.6 Form of Tax Disaffiliation Agreement among HFS Incorporated, HFS Car Rental, Inc.
and Avis Rent A Car, Inc.**
10.7 Form of Lease Agreement by and between WizCom International, Ltd., as lessor, and
Avis Rent A Car System, Inc., as lessee (Virginia Beach, Virginia).**
10.8 Form of Sublease Agreement by and between WizCom International, Ltd., as sublessor,
and Avis Rent A Car System, Inc., as sublessee (Tulsa, Oklahoma).**
10.9 Form of Sublease Agreement by and between WizCom International, Ltd., as sublessor,
and Avis Rent A Car System, Inc., as sublessee (Garden City, New York).**
10.10 Wizard Note Assignment, Assumption and Release Agreement, dated as of July 30, 1997
by and between Wizard Co., Inc., Avis Rent A Car System, Inc. and Reserve Claims
Management Co.**
10.11 Termination Services Agreement, among Harris Trust and Savings Bank, AESOP Funding
II L.L.C., Avis Rent A Car System, Inc. and Wizcom International, Ltd.**
10.12 Agreement, dated October 23, 1996, between General Motors Corporation and HFS Car
Rental, Inc.***
10.13 Call Transfer Agreement, dated March 4, 1997, between HFS Incorporated and Avis Rent
A Car System, Inc.***
10.14 Form of Amended and Restated Employment Agreement, dated as of February 9, 1996,
between HFS Car Rental, Inc. and F. Robert Salerno***
10.15 Offer Letter, dated as of February 24, 1997, between Craig Hoenshell and HFS
Incorporated.***
II-3
<PAGE>
EXHIBIT
NO. DESCRIPTION
- ----------- ------------------------------------------------------------------------------------
10.16 Amended and Restated Employment Agreement, dated February 9, 1996, between HFS Car
Rental, Inc. and John Forsythe.***
10.17 Employment Agreement, dated September 28, 1987, between HFS Car Rental, Inc. and
Michael P. Collins.***
10.18 Avis Rent A Car, Inc. 1997 Stock Option Plan**
10.19 Form of Employee Benefits and Other Employment Matters Allocation Agreement among HFS Car
Rental, Inc., Avis Rent A Car System, Inc. and HFS Incorporated.**
10.20 Employee Management Agreement, among Avis Rent A Car System, Inc. and HFS Incorporated.**
21 Subsidiaries of the Registrant***
23.1 Consent of Deloitte & Touche LLP, Independent Auditors of the Company.**
23.2 Consent of Ernst & Young LLP, Independent Auditors of The First Gray Line
Corporation.**
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5)**
23.4 Consent of Alun Cathcart***
23.5 Consent of Michael L. Tarnopol***
23.6 Consent of Martin K. Edelman***
23.7 Consent of Leonard S. Coleman, Jr.***
23.8 Consent of Michael J. Kennedy***
23.9 Consent of Deborah L. Harmon***
24 Powers of Attorney (included on signature page)***
27 FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule--December 31, 1996***
27.2 Financial Data Schedule--June 30, 1997***
</TABLE>
- ------------
* To be filed by amendment
** Filed herewith
*** Previously filed
(b) Financial Statement Schedule. Schedule II -- Valuation and Qualifying
Accounts
All other schedules are omitted because the information is not required
or because the information is included in the combined financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions referred to in Item 14 or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
The Company hereby undertakes to provide to the U.S. Underwriters and the
Managers at the closing specified in the Underwriting Agreements (filed
herewith as Exhibits 1.1 and 1.2) certificates in such denominations and
registered in such names as required by the U.S. Underwriters and the
Managers to permit prompt delivery to each purchaser.
The Company hereby undertakes that:
1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New York, State of New York, on September 22, 1997.
AVIS RENT A CAR, INC.
(Registrant)
By: /s/ Kevin M. Sheehan
Name: Kevin M. Sheehan
Title: Executive Vice President
and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ---------------------------------------- ---------------------
<S> <C> <C>
/s/ R. Craig Hoenshell Chairman of the Board, September 22, 1997
-------------------------- Chief Executive Officer and Director
R. Craig Hoenshell (Principal Executive Officer)
/s/ F. Robert Salerno President, Chief Operating Officer September 22, 1997
-------------------------and Director
F. Robert Salerno
/s/ Kevin M. Sheehan Executive Vice President and September 22, 1997
-------------------------- Chief Financial Officer
Kevin M. Sheehan (Principal Financial Officer)
/s/ Timothy M. Shanley Vice President and Controller September 22, 1997
-------------------------- (Principal Accounting Officer)
Timothy M. Shanley
/s/ Stephen P. Holmes Director September 22, 1997
--------------------------
Stephen P. Holmes
/s/ Michael P. Monaco Director September 22, 1997
--------------------------
Michael P. Monaco
</TABLE>
II-6
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Avis Rent A Car, Inc.
We have audited the accompanying consolidated statements of financial
position of Avis Rent A Car, Inc. and subsidiaries (successors to Avis Rent A
Car Systems Holdings, Inc. and subsidiaries, Avis International, Ltd. and
subsidiaries, Avis Enterprises, Inc. and subsidiaries, Pathfinder Insurance
Company and Global Excess & Reinsurance, Ltd., all previously wholly-owned by
Avis, Inc., collectively the "Predecessor Companies") (collectively referred
to as "Avis Rent A Car, Inc." or the "Company") as of December 31, 1996 and
as to the Predecessor Companies as of December 31, 1995, and the related
consolidated statements of operations, stockholder's equity and cash flows
for the period October 17, 1996 (Date of Acquisition) to December 31, 1996
and as to the Predecessor Companies the related consolidated statements of
operations, stockholder's equity and cash flows for each of the two years in
the period ended December 31, 1995, and the period January 1, 1996 to October
16, 1996, and have issued our report thereon dated May 12, 1997 (August 20,
1997 as to Note 15); such report is included elsewhere in this Registration
Statement. Our audits also included the financial statement schedule of the
Company and the Predecessor Companies, listed in Item 16.(b). This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
Deloitte & Touche LLP
New York, New York
May 12, 1997
(August 20, 1997 as to Note 15)
S-1
<PAGE>
AVIS RENT A CAR, INC.
FINANCIAL STATEMENT SCHEDULE
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND END OF
DESCRIPTION PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------------------ -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
PREDECESSOR COMPANIES
YEAR ENDED
DECEMBER 31, 1994:
Allowance for doubtful
accounts--accounts receivable ...... $ 3,363 $ 305 $ (63) $ 3,731
============== ============ ============ ============
Accumulated amortization--goodwill .. $ 27,960 $ 4,754 $ 32,714
============== ============ ============ ============
Public liability and property damage
and other insurance liabilities .... $182,556 $73,900 $72,454 $184,002
============== ============ ============ ============
YEAR ENDED
DECEMBER 31, 1995:
Allowance for doubtful
accounts--accounts receivable ...... $ 3,731 $ (48) $ 937 $ 2,746
============== ============ ============ ============
Accumulated amortization--goodwill .. $ 32,714 $ 4,757 $ 37,471
============== ============ ============ ============
Public liability and property damage
and other insurance liabilities .... $184,002 $81,800 $71,125 $194,677
============== ============ ============ ============
JANUARY 1, 1996 TO
OCTOBER 16, 1996:
Allowance for doubtful
accounts--accounts receivable ...... $ 2,746 $ 1,238 $ 794 $ 3,190
============== ============ ============ ============
Accumulated amortization--goodwill .. $ 37,471 $ 3,782 $ 41,253
============== ============ ============ ============
Public liability and property damage
and other insurance liabilities .... $194,677 $74,109 $56,315 $212,471
============== ============ ============ ============
</TABLE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
OCTOBER 17, 1996 (DATE OF ACQUISITION)
TO
DECEMBER 31, 1996:
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts--accounts receivable......... $ 227 $ 227
Accumulated amortization--goodwill .... $ 1,026 $ 1,026
Public liability and property damage
and other insurance liabilities ...... $212,471 $17,355 $16,041 $213,785
</TABLE>
S-2
<PAGE>
APPENDIX DESCRIBING GRAPHIC MATERIAL
PURSUANT TO RULE 304 OF REGULATION S-T
INSIDE FRONT COVER
Picture of five Avis employees with a rental car in front of an Avis
rental station.
INSIDE BACK COVER.
Picture 1.
Picture of a family on vacation with an Avis rental car.
Picture 2.
Picture of a preferred representative helping a businessman to a rental
car.
Picture 3.
Picture of two businessmen checking into an Avis rental counter.
Picture 4.
Picture of four General Motors cars.
OUTSIDE BACK COVER.
Picture of the Avis logo with a "We Try Harder" button.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- --------------- ----------------------------------------------------------------------------------- ------------
<S> <C> <C>
1. UNDERWRITING AGREEMENTS
1.1 Form of U.S. Underwriting Agreement***
1.2 Form of International Underwriting Agreement***
3. CERTIFICATE OF INCORPORATION AND BY-LAWS
3.1 Form of Amended and Restated Certificate of Incorporation of the Registrant**
3.2 Form of Amended and Restated By-Laws of the Registrant**
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITYHOLDERS, INCLUDING INDENTURES
4.1 Form of Certificate of Common Stock***
4.2 Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP
Funding II L.L.C., as issuer, and Harris Trust and Savings Bank, as trustee.**
4.3 Series 1997-1 Supplement, dated as of July 30, 1997 between AESOP Funding II L.L.C.
and Harris Trust and Savings Bank, as trustee, to the Amended and Restated Base
Indenture, dated as of July 30, 1997, between AESOP Funding II and the Trustee.**
4.4 Series 1997-2 Supplement, dated as of July 30, 1997 between AESOP Funding II L.L.C.
and Harris Trust and Savings Bank, as trustee, to the Amended and Restated Base
Indenture, dated as of July 30, 1997, between AESOP Funding II and the Trustee.**
4.5 Loan Agreement, dated as of July 30, 1997, between AESOP Leasing L.P., as borrower,
and AESOP Funding II L.L.C., as lender.**
4.6 Loan Agreement, dated as of July 30, 1997, among AESOP Leasing L.P., as borrower,
PV Holding Corp., as a permitted nominee of the borrower, Quartx Fleet Management,
Inc., as a permitted nominee of the borrower, and AESOP Funding II L.L.C., as
lender.**
4.7 Loan Agreement, dated as of July 30, 1997, between AESOP Leasing Corp. II, as
borrower, AESOP Leasing Corp., as permitted nominee of the borrower, and AESOP
Funding II L.L.C., as lender.**
4.8 Master Motor Vehicle Finance Lease Agreement, dated as of July 30, 1997, by and
among AESOP Leasing L.P., as lessor, Avis Rent A Car System, Inc., as lessee,
individually and as the Administrator and Avis Rent A Car, Inc., as guarantor.**
4.9 Master Motor Vehicle Operating Lease Agreement, dated as of July 30, 1997, by and
among AESOP Leasing L.P., as lessor, Avis Rent A Car System, Inc., individually and
as the Administrator, certain Eligible Rental Car Companies, as lessees, and Avis
Rent A Car, Inc., as guarantor.**
4.10 Master Motor Vehicle Operating Lease Agreement, dated as of July 30, 1997, by and
among AESOP Leasing Corp. II, as lessor, Avis Rent A Car System, Inc., individually
and as the Administrator, certain Eligible Rental Car Companies, as lessees and
Avis Rent A Car, Inc., as guarantor.**
4.11 Credit Agreement, dated as of July 30, 1997, among Avis Rent A Car, Inc., Avis Rent
A Car System, Inc., The Chase Manhattan Bank, as administrative agent, Lehman
Commercial Paper, Inc., as syndication agent and the other lenders party thereto
(the "Credit Agreement").**
4.12 Guarantee, dated as of July 30, 1997, in favor of The Chase Manhattan Bank, as
administrative agent for the lenders from time to time parties to the Credit Agreement.**
4.13 Security Agreement, dated as of July 30, 1997, in favor of The Chase Manhattan Bank, as
administrative agent for the lenders from time to time parties to the Credit Agreement.**
4.14 Pledge Agreement, dated as of July 30, 1997, in favor of The Chase Manhattan Bank, as
administrative agent for the lenders from time to time parties to the Credit Agreement.**
5 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding legality of the
Common Stock**
10. MATERIAL CONTRACTS
10.1 Form of Registration Rights Agreement***
10.2 Separation Agreement between HFS Car Rental, Inc. and Avis Rent A Car, Inc.**
10.3 Master License Agreement among HFS Car Rental, Inc., Avis Rent A Car System, Inc.
and Wizard Co., Inc.**
10.4 Computer Services Agreement between Avis Rent A Car System, Inc. and WizCom
International, Ltd.**
10.5 Reservation Services Agreement between HFS Incorporated and Avis Rent A Car System,
Inc.**
10.6 Form of Tax Disaffiliation Agreement among HFS Incorporated, HFS Car Rental, Inc.
and Avis Rent A Car, Inc.**
<PAGE>
EXHIBIT NO. DESCRIPTION PAGE NO.
- --------------- ----------------------------------------------------------------------------------- ------------
10.7 Form of Lease Agreement by and between WizCom International, Ltd., as lessor, and
Avis Rent A Car System, Inc., as lessee (Virginia Beach, Virginia).**
10.8 Form of Sublease Agreement by and between WizCom International, Ltd., as sublessor,
and Avis Rent A Car System, Inc., as sublessee (Tulsa, Oklahoma).**
10.9 Form of Sublease Agreement by and between WizCom International, Ltd., as sublessor,
and Avis Rent A Car System, Inc., as sublessee (Garden City, New York).**
10.10 Wizard Note Assignment, Assumption and Release Agreement, dated as of July 30, 1997
by and between Wizard Co., Inc., Avis Rent A Car System, Inc. and Reserve Claims
Management Co.**
10.11 Termination Services Agreement, among Harris Trust and Savings Bank, AESOP Funding
II L.L.C., Avis Rent A Car System, Inc. and Wizcom International, Ltd.**
10.12 Agreement, dated October 23, 1996, between General Motors Corporation and HFS Car
Rental, Inc.***
10.13 Call Transfer Agreement, dated March 4, 1997, between HFS Incorporated and Avis
Rent A Car System, Inc.***
10.14 Form of Amended and Restated Employment Agreement, dated as of February 9, 1996,
between HFS Car Rental, Inc. and F. Robert Salerno***
10.15 Offer Letter, dated as of February 24, 1997, between Craig Hoenshell and HFS
Incorporated.***
10.16 Amended and Restated Employment Agreement, dated February 9, 1996, between HFS Car
Rental, Inc. and John Forsythe.***
10.17 Employment Agreement, dated September 28, 1987, between HFS Car Rental, Inc. and
Michael P. Collins.***
10.18 Avis Rent A Car, Inc. 1997 Stock Option Plan**
10.19 Form of Employee Benefits and Other Employment Matters Allocation Agreement among HFS Car
Rental, Inc., Avis Rent A Car System, Inc. and HFS Incorporated.**
10.20 Employee Management Agreement, among Avis Rent A Car System, Inc. and HFS Incorporated.**
21 Subsidiaries of the Registrant***
23.1 Consent of Deloitte & Touche LLP, Independent Auditors of the Company.**
23.2 Consent of Ernst & Young LLP, Independent Auditors of The First Gray Line
Corporation.**
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5)**
23.4 Consent of Alun Cathcart***
23.5 Consent of Michael L. Tarnopol***
23.6 Consent of Martin K. Edelman***
23.7 Consent of Leonard S. Coleman, Jr.***
23.8 Consent of Michael J. Kennedy***
23.9 Consent of Deborah L. Harmon***
24 Powers of Attorney (included on signature page)***
27 FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule--December 31, 1996***
27.2 Financial Data Schedule--June 30, 1997***
</TABLE>
- ------------
* To be filed by amendment
** Filed herewith
*** Previously filed
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AVIS RENT A CAR, INC.
The undersigned, John H. Carley, certifies that he is the
Executive Vice President and General Counsel of Avis Rent A Car, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Corporation"), and does hereby further certify as follows:
(1) The name of the Corporation is Avis Rent A Car, Inc.
(2) The name under which the Corporation was originally incorporated
was Rental Car System Holdings, Inc. and the original Certificate of
Incorporation of the Corporation was filed with the Secretary of State of the
State of Delaware on October 17, 1996.
(3) This Amended and Restated Certificate of Incorporation was duly
adopted by the Board of Directors of the Corporation (the "Board of Directors")
and by the sole stockholder of the Corporation in accordance with Sections 228,
242 and 245 of the GCL.
(4) This Amended and Restated Certificate of Incorporation restates
and integrates and further amends the certificate of incorporation of the
Corporation, as heretofore amended or supplemented.
<PAGE>
(5) Upon the filing (the "Effective Time") of this Amended and
Restated Certificate of Incorporation pursuant to the GCL, each share of the
Corporation's common stock, $.01 par value per share, issued and outstanding
immediately prior to the Effective Time (the "Old Common Stock") shall be
reclassified as and changed into 85,000 shares of validly issued, fully paid,
and non-assessable Common Stock authorized by subparagraph (a) of Article
FOURTH of this Amended and Restated Certificate of Incorporation (totaling
8,500,000 shares of Common Stock) without any action by the holder thereof (the
"Reclassification"). Each certificate that theretofore represented a share or
shares of Old Common Stock shall thereafter represent that number of shares of
Common Stock into which the share or shares of Old Common Stock represented by
such certificate shall have been reclassified.
(6) The text of the Certificate of Incorporation is amended and
restated in its entirety as follows:
FIRST: The name of the Corporation is Avis Rent A Car, Inc. (the
"Corporation").
2
<PAGE>
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware (the "GCL").
FOURTH: (a) Authorized Capital Stock. The total number of shares of
stock which the Corporation shall have authority to issue is 120,000,000 shares
of capital stock, consisting of (i) 100,000,000 shares of common stock, par
value $.01 per share (the "Common Stock") and (ii) 20,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock").
(b) Common Stock. The powers, preferences and rights, and the
qualifications, limitations and restrictions, of the Common Stock are as
follows:
(1) Ranking. Except as otherwise expressly provided in this Amended
and Restated Certificate of Incorporation, the powers, preferences and rights
of
3
<PAGE>
the holders of Common Stock, and the qualifications, limitations and
restrictions thereof, shall be in all respects identical.
(2) Voting. Except as otherwise expressly required by law or
provided in this Amended and Restated Certificate of Incorporation, and subject
to any voting rights provided to holders of Preferred Stock at any time
outstanding, the holders of any outstanding shares of Common Stock shall vote
together as a single class on all matters with respect to which stockholders
are entitled to vote under applicable law, this Amended and Restated
Certificate of Incorporation or the By-Laws of the Corporation, or upon which a
vote of stockholders is otherwise duly called for by the Corporation. At each
annual or special meeting of stockholders, each holder of record of shares of
Common Stock on the relevant record date shall be entitled to cast 1 vote in
person or by proxy for each share of the Common Stock standing in such holder's
name on the stock transfer records of the Corporation.
(3) No Cumulative Voting. The holders of shares of Common Stock shall
not have cumulative voting rights.
4
<PAGE>
(4) Amendments Affecting Stock. So long as any shares of Common Stock
are outstanding, the Corporation shall not, without the affirmative vote of at
least a majority (or such higher percentage, if any, as may then be required by
applicable law) of the outstanding shares of Common Stock voting as a single
class, (A) amend, alter or repeal any provision of Subsections 2 through 9 of
this Article FOURTH so as to affect the relative rights, preferences,
qualifications, limitations or restrictions of the Common Stock or (B) take any
other action upon which class voting is required by law.
(5) Dividends; Stock Splits. Subject to the rights of the holders of
Preferred Stock, and subject to any other provisions of this Amended and
Restated Certificate of Incorporation, as it may be amended from time to time,
holders of shares of Common Stock shall be entitled to receive such dividends
and other distributions in cash, stock or property of the Corporation when, as
and if declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefor.
(6) Liquidation, Dissolution, etc. In the event of any liquidation,
dissolution or winding up (either voluntary or involuntary) of the Corporation,
the
5
<PAGE>
holders of shares of Common Stock shall be entitled to receive the assets and
funds of the Corporation available for distribution after payments to creditors
and to the holders of any Preferred Stock of the Corporation that may at the
time be outstanding, in proportion to the number of shares held by them,
respectively, without regard to class.
(7) Merger, etc. In the event of a merger or consolidation of the
Corporation with or into another entity (whether or not the Corporation is the
surviving entity), the holders of each share of Common Stock shall be entitled
to receive the same per share consideration on a per share basis.
(8) No Preemptive or Subscription Rights. No holder of shares of
Common Stock shall be entitled to preemptive or subscription rights.
(9) Power to Sell and Purchase Shares. Subject to the requirements of
applicable law, the Corporation shall have the power to issue and sell all or
any part of any shares of any class of stock herein or hereafter authorized to
such persons, and for such consideration, as the Board of Directors shall from
time to time, in its discretion, determine, whether or not greater
consideration could be received upon the issue or sale of
6
<PAGE>
the same number of shares of another class, and as otherwise permitted by law.
Subject to the requirements of applicable law, the Corporation shall have the
power to purchase any shares of any class of stock herein or hereafter
authorized from such persons, and for such consideration, as the Board of
Directors shall from time to time, in its discretion, determine, whether or not
less consideration could be paid upon the purchase of the same number of shares
of another class, and as otherwise permitted by law.
(c) Preferred Stock. The Board of Directors is hereby expressly
authorized to provide for the issuance of all or any shares of the Preferred
Stock in one or more classes or series, and to fix for each such class or
series such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions adopted by the
Board of Directors providing for the issuance of such class or series,
including, without limitation, the authority to provide that any such class or
series may be (i) subject to redemption at such time or times and at such price
or
7
<PAGE>
prices; (ii) entitled to receive dividends (which may be cumulative or
non-cumulative) at such rates, on such conditions, and at such times, and
payable in preference to, or in such relation to, the dividends payable on any
other class or classes or any other series; (iii) entitled to such rights upon
the dissolution of, or upon any distribution of the assets of, the Corporation;
or (iv) convertible into, or exchangeable for, shares of any other class or
classes of stock, or of any other series of the same or any other class or
classes of stock, of the Corporation at such price or prices or at such rates
of exchange and with such adjustments; all as may be stated in such resolution
or resolutions.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(b) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner
8
<PAGE>
provided in, the By-Laws of the Corporation. Election of directors need not be
by written ballot unless the By-Laws so provide.
(c) A director shall hold office until the annual meeting for the year
in which his or her term expires and until his or her successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
(d) Subject to the terms of any one or more classes or series of
Preferred Stock, any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the Board of
Directors then in office, provided that a quorum is present, and any other
vacancy occurring on the Board of Directors may be filled by a majority of the
Board of Directors then in office, even if less than a quorum, or by a sole
remaining director. Any director elected to fill a vacancy resulting from an
increase in the number of directors shall hold office for a term that shall
coincide with the remaining term of the directors then in office. Any director
elected to fill a vacancy not resulting from an increase in the number of
directors shall have the same remaining term as that of his predecessor.
9
<PAGE>
Subject to the rights, if any, of the holders of shares of Preferred Stock then
outstanding, any or all of the directors of the Corporation may be removed from
office at any time, but only for cause and only by the affirmative vote of the
holders of at least a majority of the voting power of the Corporation's then
outstanding capital stock entitled to vote generally in the election of
directors. Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the terms of this Amended and Restated Certificate of Incorporation
applicable thereto.
(e) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject, nevertheless, to the provisions of the GCL, this
Amended and Restated Certificate of Incorporation, and any By-Laws adopted by
the stockholders; provided, however, that no By-Laws
10
<PAGE>
hereafter adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been adopted.
(f) The Corporation shall not be governed by Section 203 of the
GCL.
SIXTH: No director shall be personally liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the GCL as the same exists or may hereafter be
amended. If the GCL is amended hereafter to authorize the further elimination
or limitation of the liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
authorized by the GCL, as so amended. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not adversely affect
any right or protection of a director of the Corporation existing at the time
of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
SEVENTH: The Corporation shall indemnify its directors and officers
to the fullest extent authorized or permitted by law, as now or hereafter in
effect, and such
11
<PAGE>
right to indemnification shall continue as to a person who has ceased to be a
director or officer of the Corporation and shall inure to the benefit of his or
her heirs, executors and personal and legal representatives; provided, however,
that, except for proceedings to enforce rights to indemnification, the
Corporation shall not be obligated to indemnify any director or officer (or his
or her heirs, executors or personal or legal representatives) in connection
with a proceeding (or part thereof) initiated by such person unless such
proceeding (or part thereof) was authorized or consented to by the Board of
Directors. The right to indemnification conferred by this Article SEVENTH shall
include the right to be paid by the Corporation the expenses incurred in
defending or otherwise participating in any proceeding in advance of its final
disposition.
The Corporation may, to the extent authorized from time to time by the
Board of Directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those conferred
in this Article SEVENTH to directors and officers of the Corporation.
The rights to indemnification and to the advance of expenses
conferred in this Article SEVENTH shall
12
<PAGE>
not be exclusive of any other right which any person may have or hereafter
acquire under this Amended and Restated Certificate of Incorporation, the
By-Laws of the Corporation, any statute, agreement, vote of stockholders or
disinterested directors or otherwise.
Any repeal or modification of this Article SEVENTH by the stockholders
of the Corporation shall not adversely affect any rights to indemnification and
to the advancement of expenses of a director or officer of the Corporation
existing at the time of such repeal or modification with respect to any acts or
omissions occurring prior to such repeal or modification.
EIGHTH: Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation, and the ability of the
stockholders to consent in writing to the taking of any action is hereby
specifically denied.
NINTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation
may be kept (subject to any provision contained in the GCL) outside the State
13
<PAGE>
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the By-Laws of the Corporation.
TENTH: In furtherance and not in limitation of the powers conferred
upon it by the laws of the State of Delaware, the Board of Directors shall have
the power to adopt, amend, alter or repeal the Corporation's By-Laws. The
affirmative vote of at least a majority of the entire Board of Directors shall
be required to adopt, amend, alter or repeal the Corporation's By-Laws. The
Corporation's By-Laws also may be adopted, amended, altered or repealed by the
affirmative vote of the holders of at least eighty percent (80%) of the voting
power of the shares entitled to vote at an election of directors.
ELEVENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed in this Amended and
Restated Certificate of Incorporation, the Corporation's By-Laws or the GCL,
and all rights herein conferred upon stockholders are granted subject to such
14
<PAGE>
reservation; provided, however, that, notwithstanding any other provision of
this Amended and Restated Certificate of Incorporation (and in addition to any
other vote that may be required by law), the affirmative vote of the holders of
at least eighty percent (80%) of the voting power of the shares entitled to
vote at an election of directors shall be required to amend, alter, change or
repeal, or to adopt any provision as part of this Amended and Restated
Certificate of Incorporation inconsistent with the purpose and intent of
Articles FIFTH, EIGHTH and TENTH of this Amended and Restated Certificate of
Incorporation or this Article ELEVENTH.
15
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be executed and attested to on its
behalf this __th day of September, 1997.
AVIS RENT A CAR, INC.
By:
-------------------------------
Name: John H. Carley
Title: Executive Vice
President and General
Counsel
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AMENDED AND RESTATED
BY-LAWS
of
AVIS RENT A CAR, INC.
A Delaware Corporation
Effective September __, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - OFFICES....................................................... 1
Section 1. Registered Office................................... 1
Section 2. Other Offices....................................... 1
ARTICLE II - MEETINGS OF STOCKHOLDERS..................................... 1
Section 1. Place of Meetings................................... 1
Section 2. Annual Meetings..................................... 2
Section 3. Special Meetings.................................... 2
Section 4. Quorum.............................................. 3
Section 5. Proxies............................................. 4
Section 6. Voting.............................................. 6
Section 7. Nature of Business at Meetings
of Stockholders..................................... 6
Section 8. List of Stockholders Entitled
to Vote............................................. 9
Section 9. Stock Ledger........................................ 10
Section 10. Record Date. ...................................... 10
Section 11. Inspectors of Election.............................. 12
ARTICLE III - DIRECTORS................................................... 13
Section 1. Number and Election of Directors.................... 13
Section 2. Nomination of Directors............................. 13
Section 3. Vacancies........................................... 17
Section 4. Duties and Powers................................... 17
Section 5. Organization........................................ 18
Section 6. Resignations and Removals
of Directors........................................ 18
Section 7. Meetings............................................ 19
Section 8. Quorum.............................................. 20
Section 9. Actions of Board.................................... 20
Section 10. Meetings by Means of Conference
Telephone........................................... 21
Section 11. Committees.......................................... 21
Section 12. Compensation........................................ 22
Section 13. Interested Directors................................ 23
ARTICLE IV - OFFICERS..................................................... 24
Section 1. General............................................. 24
Section 2. Election............................................ 25
Section 3. Voting Securities Owned by the Corporation.......... 25
Section 4. Chairman of the Board of Directors.................. 26
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PAGE
Section 5. President............................................ 27
Section 6. Vice Presidents...................................... 28
Section 7. Secretary............................................ 28
Section 8. Treasurer............................................ 30
Section 9. Assistant Secretaries................................ 31
Section 10. Assistant Treasurers................................. 31
Section 11. Other Officers....................................... 32
ARTICLE V - STOCK.......................................................... 32
Section 1. Form of Certificates................................. 32
Section 2. Signatures........................................... 33
Section 3. Lost, Destroyed, Stolen or
Mutilated Certificates............................... 33
Section 4. Transfers............................................ 34
Section 5. Transfer and Registry Agents......................... 35
Section 6. Beneficial Owners.................................... 35
ARTICLE VI - NOTICES....................................................... 35
Section 1. Notices.............................................. 35
Section 2. Waivers of Notice.................................... 36
ARTICLE VII - GENERAL PROVISIONS........................................... 37
Section 1. Dividends............................................ 37
Section 2. Disbursements........................................ 38
Section 3. Fiscal Year.......................................... 38
Section 4. Corporate Seal....................................... 38
ARTICLE VIII - INDEMNIFICATION............................................. 38
Section 1. Power to Indemnify in Actions, Suits or Proceedings
Other than Those by or in the Right of the
Corporation.......................................... 38
Section 2. Power to Indemnify in Actions, Suits or Proceedings
by or in the Right of the Corporation................ 40
Section 3. Authorization of Indemnification..................... 41
Section 4. Good Faith Defined................................... 42
Section 5. Indemnification by a Court........................... 43
Section 6. Expenses Payable in Advance.......................... 44
Section 7. Nonexclusivity of Indemnification and Advancement
of Expenses.......................................... 44
Section 8. Insurance............................................ 45
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PAGE
Section 9. Certain Definitions.................................. 46
Section 10. Survival of Indemnification and
Advancement of Expenses.............................. 47
Section 11. Limitation on Indemnification........................ 47
Section 12. Indemnification of Employees and Agents.............. 48
ARTICLE IX - AMENDMENTS.................................................... 48
Section 1. Amendments........................................... 48
Section 2. Entire Board of Directors............................ 49
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AMENDED AND RESTATED
BY-LAWS
OF
AVIS RENT A CAR, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. 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.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall
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be designated from time to time by the Board of Directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The annual meetings of stockholders shall
be held on such date and at such time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect directors, and transact such other
business as may properly be brought before the meeting. Written notice of the
annual meeting stating the place, date and hour of the 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.
Section 3. Special Meetings. Unless otherwise prescribed by law or by
the certificate of incorporation of the Corporation, as amended and restated
from time to time (the "Certificate of Incorporation"), special meetings of
stockholders, for any purpose or purposes, may be called by either (i) the
Chairman of the Board of Directors, (ii) the President, or (iii) the Board of
Directors. Such request shall state the purpose or purposes of the proposed
meeting. At a special meeting of the stockholders, only such business shall be
conducted as
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shall be specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than ten nor
more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise required by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established, shall
not be broken by the withdrawal of enough votes to leave less than a quorum.
If, however, such quorum shall not be present or represented at any meeting of
the stockholders, the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to 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 represent-
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ed, any business may be transacted which might have been transacted at the
meeting as originally noticed. 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
entitled to vote at the meeting not less than ten nor more than sixty days
before the date of the meeting.
Section 5. Proxies. Any stockholder entitled to vote may do so in
person or by his or her proxy appointed by an instrument in writing subscribed
by such stockholder or by his or her attorney thereunto authorized, delivered
to the Secretary of the meeting; provided, however, that no proxy shall be
voted or acted upon after three years from its date, unless said proxy provides
for a longer period. Without limiting the manner in which a stockholder may
authorize another person or persons to act for him or her as proxy, either of
the following shall constitute a valid means by which a stockholder may grant
such authority:
(i) A stockholder may execute a writing authorizing another
person or persons to act for him or her as proxy. Execution may be
accomplished by the stockholder or his or
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her authorized officer, director, employee or agent signing such
writing or causing his or her signature to be affixed to such writing by
any reasonable means, including, but not limited to, by facsimile
signature.
(ii) A stockholder may authorize another person or persons to act
for him or her as proxy by transmitting or authorizing the transmission of
a telegram or other means of electronic transmission to the person who will
be the holder of the proxy or to a proxy solicitation firm, proxy support
service organization or like agent duly authorized by the person who will
be the holder of the proxy to receive such transmission, provided that any
such telegram or other means of electronic transmission must either set
forth or be submitted with information from which it can be determined that
the telegram or other electronic transmission was authorized by the
stockholder.
Any copy, facsimile telecommunication or other reliable reproduction of the
writing or transmission authorizing another person or persons to act as proxy
for a stock-
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holder may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used; provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
Section 6. Voting. At all meetings of the stockholders at which a
quorum is present, except as otherwise required by law, the Certificate of
Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the affirmative vote of the holders of a
majority of the total number of votes of the capital stock present in person or
represented by proxy and entitled to vote on such question, voting as a single
class. The Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in his or her discretion,
may require that any votes cast at such meeting shall be cast by written
ballot.
Section 7. Nature of Business at Meetings of Stockholders. No business
may be transacted at an annual meeting of stockholders, other than business
that is either (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the
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Board of Directors (or any duly authorized committee thereof), (b) otherwise
properly brought before the annual meeting by or at the direction of the Board
of Directors (or any duly authorized committee thereof) or (c) otherwise
properly brought before the annual meeting by any stockholder of the Company
(i) who is a stockholder of record on the date of the giving of the notice
provided for in this Section 7 and on the record date for the determination of
stockholders entitled to vote at such annual meeting and (ii) who complies with
the notice procedures set forth in this Section 7.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary
of the Company.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company not less than sixty (60) days nor more than ninety (90) days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
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anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was made, whichever
first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such stockholder, (iii) the
class or series and number of shares of capital stock of the Company which are
owned beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such
business by such stockholder and any material interest of such stockholder in
such business and (v) a representation that such stockholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting.
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No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 7, provided, however, that, once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 7 shall be deemed to preclude discussion by
any stockholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
Section 8. List of Stockholders Entitled to Vote. The officer of the
Corporation 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
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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 of the Corporation who is present.
Section 9. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 8 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 10. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, 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 record date shall not
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precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors and which record date: (1) in the case of determination
of stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall not be more than sixty nor less than ten days before the date of
such meeting; and (2) in the case of any other action, shall not be more than
sixty days prior to such other action. If no record date is fixed: (1) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; and (2) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. 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.
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Section 11. Inspectors of Election. In advance of any meeting of
stockholders, the Board by resolution or the Chairman or President shall
appoint one or more inspectors of election to act at the meeting and make a
written report thereof. One or more other persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate is present, ready and willing to act at a meeting of stockholders,
the Chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Unless otherwise required by law, inspectors may be officers,
employees or agents of the Corporation. Each inspector, before entering upon
the discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspector shall have the duties prescribed by
law and shall take charge of the polls and, when the vote is completed, shall
make a certificate of the result of the vote taken and of such other facts as
may be required by law.
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ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors
shall consist of ten members. Except as provided in Section 3 of this Article
III, directors shall be elected by the stockholders at the annual meetings of
stockholders, and each director so elected shall hold office until such
director's successor is duly elected and qualified, or until such director's
death, or until such director's earlier resignation or removal. Directors need
not be stockholders.
Section 2. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of the Company, except as may be otherwise provided in the
Certificate of Incorporation with respect to the right of holders of preferred
stock of the Corporation to nominate and elect a specified number of directors
in certain circumstances. Nominations of persons for election to the Board of
Directors may be made at any annual meeting of stockholders, or at any special
meeting of stockholders called for the purpose of electing directors, (a) by or
at the direction of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stock-
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holder of the Company (i) who is a stockholder of record on the date of the
giving of the notice provided for in this Section 2 and on the record date for
the determination of stockholders entitled to vote at such meeting and (ii) who
complies with the notice procedures set forth in this Section 2.
In addition to any other applicable requirements, for a nomination to
be made by a stockholder, such stockholder must have given timely notice
thereof in proper written form to the Secretary of the Company.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company (a) in the case of an annual meeting, not less than sixty (60) days nor
more than ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting is called for a date that is not within thirty (30)
days before or after such anniversary date, notice by the stockholder in order
to be timely must be so received not later than the close of business on the
tenth (10th) day following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure of the date of the annual
meeting
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was made, whichever first occurs; and (b) in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the tenth (10th) day following the day on which notice of
the date of the special meeting was mailed or public disclosure of the date of
the special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital stock of the
Company which are owned beneficially or of record by the person and (iv) any
other information relating to the person that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder; and (b) as to the stockholder
giving the notice (i) the name and record address of such stockholder, (ii) the
class or
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series and number of shares of capital stock of the Company which are owned
beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in its notice and (v) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of
the Exchange Act and the rules and regulations promulgated thereunder. Such
notice must be accompanied by a written consent of each proposed nominee to
being named as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the Company
unless nominated in accordance with the procedures set forth in this Section 2.
If the Chairman of the meeting determines that a nomination was not made in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the nomination
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was defective and such defective nomination shall be disregarded.
Section 3. Vacancies. Subject to the terms of any one or more classes
or series of preferred stock, any vacancy on the Board of Directors that
results from an increase in the number of directors may be filled by a majority
of the directors then in office, provided that a quorum is present, and any
other vacancy occurring on the Board of Directors may be filled by a majority
of the Board of Directors then in office, even if less than a quorum, or by a
sole remaining director. Notwithstanding the foregoing, whenever the holders of
any one or more class or classes or series of preferred stock of the
Corporation shall have the right, voting separately as a class, to elect
directors at an annual or special meeting of stockholders, the election, term
of office, filling of vacancies and other features of such directorships shall
be governed by the Certificate of Incorporation.
Section 4. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as
are not by statute or by the Certifi-
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cate of Incorporation or by these By-Laws required to be exercised or done by
the stockholders.
Section 5. Organization. At each meeting of the Board of Directors,
the Chairman of the Board of Directors, or, in his or her absence, a director
chosen by a majority of the directors present, shall act as Chairman. The
Secretary of the Corporation shall act as Secretary at each meeting of the
Board of Directors. In case the Secretary shall be absent from any meeting of
the Board of Directors, an Assistant Secretary shall perform the duties of
Secretary at such meeting; and in the absence from any such meeting of the
Secretary and all the Assistant Secretaries, the Chairman of the meeting may
appoint any person to act as Secretary of the meeting.
Section 6. Resignations and Removals of Directors. Any director of the
Corporation may resign at any time, by giving written notice to the Chairman of
the Board of Directors, the President or the Secretary of the Corporation. Such
resignation shall take effect at the time therein specified or, if no time is
specified, immediately; and, unless otherwise specified in such notice, the
acceptance of such resignation shall not be necessary to make it effective.
Except as otherwise required by
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law and subject to the rights, if any, of the holders of shares of preferred
stock then outstanding, any director or the entire Board of Directors may be
removed from office at any time, but only for cause, and only by the
affirmative vote of the holders of at least a majority in voting power of the
issued and outstanding capital stock of the Corporation entitled to vote in the
election of directors.
Section 7. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held at such time
and at such place as may from time to time be determined by the Board of
Directors and, unless required by resolution of the Board of Directors, without
notice. Special meetings of the Board of Directors may be called by the
Chairman of the Board of Directors, the Vice Chairman, if there be one, or a
majority of the directors then in office. Notice thereof stating the place,
date and hour of the meeting shall be given to each director either by mail not
less than forty-eight (48) hours before the date of the meeting, by telephone,
facsimile or telegram on twenty-four (24) hours' notice, or on such shorter
notice as the person or persons calling such
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meeting may deem necessary or appropriate in the circumstances.
Section 8. Quorum. Except as may be otherwise required by law, the
Certificate of Incorporation or these By-Laws, at all meetings of the Board of
Directors, a majority of the entire Board of Directors shall constitute a
quorum for the transaction of business and the act 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. 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 of the time
and place of the adjourned meeting, until a quorum shall be present.
Section 9. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these ByLaws, 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 the members of the Board of
Directors 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 of
Directors or committee.
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Section 10. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws,
members of the Board of Directors of the Corporation, or any committee
designated by the Board of Directors, may participate in a meeting of the Board
of Directors or such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 10 shall constitute presence in person at such meeting.
Section 11. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting,
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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
absent or disqualified member. Any committee, to the extent permitted by law
and provided in the resolution establishing such committee, 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. Each committee shall
keep regular minutes and report to the Board of Directors when required.
Section 12. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary, or such other emoluments as the Board of Directors shall from time to
time determine. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
Section 13. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and
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any other corporation, partnership, association, or other organization in which
one or more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because such person's or their votes are counted for
such purpose if (i) the material facts as to such person's or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (ii) the material facts
as to such person's or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Direc-
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tors, a committee thereof or the stockholders. Common or interested directors
may be counted in determining the presence of a quorum at a meeting of the
Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, may also choose a Chairman of the
Board of Directors (who must be a director) and one or more Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers. Any number of
offices may be held by the same person, unless otherwise prohibited by law, the
Certificate of Incorporation or these By-Laws. The officers of the Corporation
need not be stockholders of the Corporation nor, except in the case of the
Chairman of the Board of Directors, need such officers be directors of the
Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation
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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 of
Directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President and any
such officer may, in the name of and on behalf of the Corporation, take all
such action as any such officer may deem advisable to vote in person or by
proxy at any meeting of security holders of any corporation in which the
Corporation may own securities and at any such meeting shall possess and may
exercise any and all rights and power incident to the
25
<PAGE>
ownership of such securities and which, as the owner thereof, the Corporation
might have exercised and possessed if present. The Board of Directors may, by
resolution, from time to time confer like powers upon any other person or
persons.
Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. The Chairman of the Board of
Directors shall be the Chief Executive Officer of the Corporation, and except
where by law the signature of the President is required, the Chairman of the
Board of Directors shall possess the same power as the President to sign all
contracts, certificates and other instruments of the Corporation which may be
authorized by the Board of Directors. During the absence or disability of the
President, the Chairman of the Board of Directors shall exercise all the powers
and discharge all the duties of the President. The Chairman of the Board of
Directors shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him or her by these By-Laws or
by the Board of Directors. Section 5. President. The President shall, subject
to the control of the Board of Directors and, if
26
<PAGE>
there be one, the Chairman of the Board of Directors, have general supervision
of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The President
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
that the other officers of the Corporation may sign and execute documents when
so authorized by these By-Laws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the President shall preside at all meetings of the stockholders and the
Board of Directors. If there be no Chairman of the Board of Directors, the
President shall be the Chief Executive Officer of the Corporation. The
President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him or her by these By-Laws or
by the Board of Directors.
Section 6. Vice Presidents. At the request of the President or in his
or her absence or in the event of his or her inability or refusal to act (and
if there be no Chairman of the Board of Directors), the Vice Presi-
27
<PAGE>
dent or the Vice Presidents if there is more than one (in the order designated
by the Board of Directors) shall perform the duties of the President, and when
so acting, shall have all the powers of and be subject to all the restrictions
upon the President. Each Vice President shall perform such other duties and
have such other powers as the Board of Directors from time to time may
prescribe. If there be no Chairman of the Board of Directors and no Vice
President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be
28
<PAGE>
prescribed by the Board of Directors or President, under whose supervision the
Secretary shall be. If the Secretary shall be unable or shall refuse to cause
to be given notice of all meetings of the stockholders and special meetings of
the Board of Directors, and if there be no Assistant Secretary, then either the
Board of Directors or the President may choose another officer to cause such
notice to be given. The Secretary shall have custody of the seal of the
Corporation and the Secretary or any Assistant Secretary, if there be one,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by the signature of the Secretary or by the
signature of any such 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 or her signature. The Secretary shall see that
all books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case may
be.
Section 8. Treasurer. 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
29
<PAGE>
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. The Treasurer 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 President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer 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 the office of Treasurer and for the restoration to the Corporation,
in case of the Treasurer's death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in the Treasurer's possession or under control of the Treasurer belonging
to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise provided
in these By-Laws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned
30
<PAGE>
to them by the Board of Directors, the President, any Vice President, if there
be one, or the Secretary, and in the absence of the Secretary or in the event
of his or her disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in
the event of the Treasurer's disability or refusal to act, shall perform the
duties of the Treasurer, and when so acting, shall have all the powers of and
be subject to all the restrictions upon the Treasurer. If required by the Board
of Directors, an Assistant Treasurer 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 the office of Assistant
Treasurer and for the restoration to the Corporation, in case of the Assistant
Treasurer's death, resignation, retirement or removal from office, of all
31
<PAGE>
books, papers, vouchers, money and other property of whatever kind in the
Assistant Treasurer's possession or under control of the Assistant Treasurer
belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation, (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number
of shares owned by such holder of stock in the Corporation.
Section 2. Signatures. Any or all of the signatures on a certificate
may be a facsimile. In case
32
<PAGE>
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 such person were such
officer, transfer agent or registrar at the date of issue.
Section 3. Lost, Destroyed, Stolen or Mutilated Certificates. The
Board of Directors may direct a new certificate to be issued in place of any
certificate 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, 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 such person's legal
representative, to advertise the same in such manner as the Board of Directors
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.
33
<PAGE>
Section 4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-Laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, properly endorsed for transfer
and payment of all necessary transfer taxes; provided, however, that such
surrender and endorsement or payment of taxes shall not be required in any case
in which the officers of the Corporation shall determine to waive such
requirement. Every certificate exchanged, returned or surrendered to the
Corporation shall be marked "Cancelled," with the date of cancellation, by the
Secretary or Assistant Secretary of the Corporation or the transfer agent
thereof. No transfer of stock shall be valid as against the Corporation for any
purpose until it shall have been entered in the stock records of the
Corporation by an entry showing from and to whom transferred.
Section 5. Transfer and Registry Agents. The Corporation may from time
to time maintain one or more transfer offices or agencies and registry offices
or agencies at such place or places as may be determined from time to time by
the Board of Directors.
34
<PAGE>
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at such
person's 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. Written notice may also
be given personally or by telegram, facsimile, telex or cable.
35
<PAGE>
Section 2. Waivers of Notice.
(a) Whenever any notice is required by law, the Certificate of
Incorporation or these By-Laws, to be given to any director, member of a
committee or stockholder, 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 equivalent to notice. Attendance of a person at a
meeting, present by person or represented by proxy, shall constitute a waiver
of notice of such meeting, except where the person attends the meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.
(b) Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice unless
so required by law, the Certificate of Incorporation or these By-Laws.
ARTICLE VII
GENERAL PROVISIONS
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<PAGE>
Section 1. Dividends. Subject to the requirements of the GCL and the
provisions of the Certificate of Incorporation, dividends upon the capital
stock of the Corporation may be declared by the Board of Directors at any
regular or special meeting of the Board of Directors, and may be paid in cash,
in property, or in shares of the Corporation's capital stock. 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 Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for purchasing any of the shares of capital stock, warrants,
rights, options, bonds, debentures, notes, scrip or other securities or
evidences of indebtedness of the Corporation, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for any other
proper purpose, and the Board of Directors may modify or abolish any such
reserve.
Section 2. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
37
<PAGE>
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other
than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify 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 (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer,
38
<PAGE>
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, such
person had no reasonable cause to believe his or her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that such person did not act in good faith and in
a manner which such person 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 reasonable cause to believe that his or her conduct was
unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a
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<PAGE>
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the Corporation, or is or was a director or officer of
the Corporation serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemni-
40
<PAGE>
ty for such expenses which the Court of Chancery or such other court shall deem
proper.
Section 3. Authorization of Indemnification. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (iii) by the stockholders.
To the extent, however, that a director or officer of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith, without the necessity of authorization in the specific case.
41
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Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the Corporation, or, with respect to any criminal
action or proceeding, to have had no reasonable cause to believe his or her
conduct was unlawful, if such person's action is based on the records or books
of account of the Corporation or another enterprise, or on information supplied
to such person by the officers of the Corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the Corporation
or another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used in
this Section 4 shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 4 shall not be deemed to
42
<PAGE>
be exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Section 1 or
2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery of the State of Delaware or any
other court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable
standards of conduct set forth in Section 1 or 2 of this Article VIII, as the
case may be. Neither a contrary determination in the specific case under
Section 3 of this Article VIII nor the absence of any determination
thereunder shall be a defense to such application or create a presumption that
the director or officer seeking indemnification has not met any applicable
standard of conduct. Notice of any application for indemnification
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<PAGE>
pursuant to this Section 5 shall be given to the Corporation promptly upon the
filing of such application. If successful, in whole or in part, the director or
officer seeking indemnification shall also be entitled to be paid the expense
of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under the Certificate of Incorporation or any By-Law,
agreement, contract, vote of stockholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any
44
<PAGE>
court of competent jurisdiction or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, it being the policy of the Corporation that indemnification of the
persons specified in Section 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall not
be deemed to preclude the indemnification of any person who is not specified in
Section 1 or 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the GCL, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Corporation would have the power or
45
<PAGE>
the obligation to indemnify such person against such liability under the
provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer
of such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include
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any service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VIII shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director or
officer (or his or her heirs, execu-
47
<PAGE>
tors or personal or legal representatives) or advance expenses in connection
with a proceeding (or part thereof) initiated by such person unless such
proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These By-Laws may be altered, amended or
repealed, in whole or in part, or new By-Laws may be adopted by the Board of
Directors or by the stockholders as provided in the Certificate of
Incorporation.
Section 2. Entire Board of Directors. As used in this Article IX and
in these By-Laws generally, the term "entire Board of Directors" means the
total number
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of directors which the Corporation would have if there were no vacancies.
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AESOP FUNDING II L.L.C.,
as Issuer
and
HARRIS TRUST AND SAVINGS BANK,
as Trustee
------------------------------
AMENDED AND RESTATED
BASE INDENTURE
Dated as of July 30, 1997
------------------------------
Rental Car Asset Backed Notes
(Issuable in Series)
<PAGE>
AMENDED AND RESTATED BASE INDENTURE, dated as of July 30,
1997, between AESOP FUNDING II L.L.C., a special purpose limited liability
company established under the laws of Delaware, as issuer ("AFC-II"), and
HARRIS TRUST AND SAVINGS BANK, an Illinois banking corporation, as trustee (in
such capacity, the "Trustee").
W I T N E S S E T H:
WHEREAS, AESOP Funding Corp. II ("Original AFC-II") and
Harris Trust and Savings Bank are parties to a Base Indenture, dated as of May
1, 1996 (the "Prior Indenture");
WHEREAS, Original AFC-II and AFC-II have merged with AFC-II
as the surviving entity pursuant to an Agreement of Merger, dated as of July
30, 1997 (the "Merger Agreement"), between Original AFC-II and AFC-II, and AFC-
II has assumed all the rights and obligations of Original AFC-II under the
Prior Indenture pursuant to the Merger Agreement;
WHEREAS, AFC-II desires to amend and restate the Prior
Indenture in its entirety as herein set forth, and Harris Trust and Savings
Bank, as trustee under the Prior Indenture, hereby consents thereto;
WHEREAS, AFC-II has duly authorized the execution and
delivery of this Indenture to provide for the issuance from time to time of one
or more series of AFC-II's Rental Car Asset Backed Notes (the "Notes"),
issuable as provided in this Indenture; and
WHEREAS, all things necessary to make this Indenture a legal,
valid and binding agreement of AFC-II, in accordance with its terms, have been
done, and AFC-II proposes to do all the things necessary to make the Notes,
when executed by AFC-II and authenticated and delivered by the Trustee
hereunder and duly issued by AFC-II, the legal, valid and binding obligations
of AFC-II as hereinafter provided;
NOW, THEREFORE, for and in consideration of the premises and
the receipt of the Notes by the Noteholders, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Noteholders, that the
Prior
<PAGE>
Indenture be amended and restated in its entirety as follows:
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
Certain capitalized terms used herein (including the preamble
and the recitals hereto) shall have the meanings assigned to such terms in the
Definitions List attached hereto as Schedule I (the "Definitions List"), as
such Definitions List may be amended or modified from time to time in
accordance with the provisions hereof.
Section 1.2. Cross-References.
Unless otherwise specified, references in this Indenture and
in each other Related Document to any Article or Section are references to such
Article or Section of this Indenture or such other Related Document, as the
case may be and, unless otherwise specified, references in any Article, Section
or definition to any clause are references to such clause of such Article,
Section or definition.
Section 1.3. Accounting and Financial Determinations;
No Duplication.
Where the character or amount of any asset or liability or
item of income or expense is required to be determined, or any accounting
computation is required to be made, for the purpose of this Indenture, such
determination or calculation shall be made, to the extent applicable and except
as otherwise specified in this Indenture, in accordance with GAAP. When used
herein, the term "financial statement" shall include the notes and schedules
thereto. All accounting determinations and computations hereunder or under any
other Related Documents shall be made without duplication.
Section 1.4. Rules of Construction.
In this Indenture, unless the context otherwise requires:
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(i) the singular includes the plural and
vice versa;
(ii) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and
assigns are permitted by this Indenture, and reference to any Person
in a particular capacity only refers to such Person in such capacity;
(iii) reference to any gender includes
the other gender;
(iv) reference to any Requirement of Law means such
Requirement of Law as amended, modified, codified or reenacted, in
whole or in part, and in effect from time to time;
(v) "including" (and with correlative meaning
"include") means including without limiting the generality of any
description preceding such term; and
(vi) with respect to the determination of any period
of time, "from" means "from and including" and "to" means "to but
excluding".
ARTICLE 2.
THE NOTES
Section 2.1. Designation and Terms of Notes.
Each Series of Notes shall be substantially in the form
specified in the applicable Supplement and shall bear, upon its face, the
designation for such Series to which it belongs so selected by AFC-II. All
Notes of any Series shall, except as specified in the related Supplement, be
equally and ratably entitled as provided herein to the benefits hereof without
preference, priority or distinction on account of the actual time or times of
authentication and delivery, all in accordance with the terms and provisions of
this Indenture and the applicable Supplement. The aggregate principal amount of
Notes which may be authenticated and delivered under this Indenture is
unlimited. The Notes shall be in denomina-
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tions of $200,000 and integral multiples of $1,000 in excess thereof.
Section 2.2. Notes Issuable in Series.
The Notes may be issued in one or more Series. Each Series of
Notes shall be created by a Supplement. Notes of a new Series may from time to
time be executed by AFC-II and delivered to the Trustee for authentication and
thereupon the same shall be authenticated and delivered by the Trustee upon the
receipt by the Trustee of a Company Request at least two (2) Business Days in
advance of the related Series Closing Date and upon delivery by AFC-II to the
Trustee, and receipt by the Trustee, of the following:
(a) a Company Order authorizing and directing the
authentication and delivery of the Notes of such new Series by the
Trustee and specifying the designation of such new Series, the
aggregate principal amount of Notes of such new Series to be
authenticated and the Note Rate (or the method for allocating interest
payments or other cash flow) with respect to such new Series;
(b) a Supplement in form satisfactory to the Trustee executed
by AFC-II and the Trustee and specifying the Principal Terms of such
new Series;
(c) the related Enhancement Agreement, if any, executed by
each of the parties thereto, other than the Trustee;
(d) written confirmation that the Rating Agency Confirmation
Condition and the CP Rating Agency Condition shall have been satisfied
with respect to such issuance;
(e) an Officer's Certificate of AFC-II dated as of the
applicable Series Closing Date to the effect that (i) no Amortization
Event, Aggregate Asset Amount Deficiency, Enhancement Agreement Event
of Default, if applicable, Enhancement Deficiency, Loan Event of
Default, AESOP I Operating Lease Vehicle Deficiency, Manufacturer
Event of Default, Lease Event of Default, Potential Amortization
Event, Potential Enhancement Agreement Event of
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Default, Potential Loan Event of Default, Potential Lease Event of
Default, or Potential Manufacturer Event of Default is continuing or
will occur as a result of the issuance of the new Series of Notes,
(ii) the issuance of the new Series of Notes will not result in any
breach of any of the terms, conditions or provisions of or constitute
a default under any indenture, mortgage, deed of trust or other
agreement or instrument to which AFC-II is a party or by which it or
its property is bound or any order of any court or administrative
agency entered in any suit, action or other judicial or administrative
proceeding to which AFC-II is a party or by which it or its property
may be bound or to which it or its property may be subject, (iii) all
conditions precedent provided in this Base Indenture and the related
Supplement with respect to the authentication and delivery of the new
Series of Notes have been complied with and (iv) if such new Series of
Notes is a Segregated Series, the criteria used to select the
Series-Specific Collateral will not have a material adverse effect on
the quality of the Collateral securing any other outstanding Series of
Notes;
(f) unless otherwise specified in the related Supplement, an
Opinion of Counsel, subject to the assumptions and qualifications
stated therein, and in a form substantially acceptable to the Trustee,
dated the applicable Series Closing Date, substantially to the effect
that:
(i) (x) the new Series of Notes will be treated as
indebtedness of AFC-II for Federal and New York state income
tax purposes and (y) the issuance of such Series will not
adversely affect the Federal or New York state income tax
characterization of the Outstanding Notes of any Series;
(ii) all instruments furnished to the Trustee
conform in all material respects to the requirements of this
Base Indenture and the related Supplement and constitute all
the documents required to be delivered hereunder and
thereunder for the Trustee to authenticate and deliver the
new Series of Notes, and all conditions precedent provided
for in this Base In-
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denture and the related Supplement with respect to the
authentication and delivery of the new Series of Notes have
been complied with in all material respects;
(iii) (w) AFC-II is duly organized under the
jurisdiction of its formation and has the power and authority
to execute and deliver the related Supplement, this Base
Indenture and each other Related Document to which it is a
party and to issue the new Series of Notes, (x) AESOP Leasing
is duly organized under the jurisdiction of its formation and
has the power and authority to execute and deliver each of
the Related Documents to which it is a party, (y) each of
Original AESOP, AESOP Leasing II, PVHC and Quartx is duly
incorporated under the jurisdiction of its incorporation and
has the corporate power and authority to execute and deliver
each of the Related Documents to which it is a party and (z)
each of ARC, ARAC and each Lessee is duly incorporated in the
jurisdiction of its incorporation and, as of the date of this
Indenture, has the corporate power and authority to execute
and deliver each of the Related Documents to which it is a
party;
(iv) the related Supplement, this Base Indenture,
the Loan Agreements, the Leases and each of the other Related
Documents to which AFC-II, AESOP Leasing, AESOP Leasing II,
Original AESOP, PVHC, Quartx, ARAC, any Lessee or ARC is a
party have been duly authorized, executed and delivered by
AFC-II, AESOP Leasing, AESOP Leasing II, Original AESOP,
PVHC, Quartx, ARAC, any Lessee or ARC, as the case may be;
(v) the new Series of Notes has been duly authorized
and executed and, when authenticated and delivered in
accordance with the provisions of this Base Indenture and the
related Supplement, will constitute valid, binding and
enforceable obligations of AFC-II entitled to the benefits of
this Base Indenture and the related Supplement, subject, in
the case of enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affect-
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ing creditors' rights generally and to general principles of
equity;
(vi) this Base Indenture, the related Supplement and
each of the other Related Documents to which AFC-II, AESOP
Leasing, AESOP Leasing II, Original AESOP, PVHC, Quartx,
ARAC, any Lessee or ARC is a party are legal, valid and
binding agreements of AFC-II, AESOP Leasing, AESOP Leasing
II, Original AESOP, PVHC, Quartx, ARAC, any Lessee or ARC, as
the case may be, enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting
creditors' rights generally and to general principles of
equity;
(vii) each of AFC-II, AESOP Leasing and AESOP
Leasing II is not, and is not controlled by, an "investment
company" within the meaning of, and is not required to
register as an "investment company" under, the Investment
Company Act, and this Base Indenture and the related
Supplement are not required to be registered under the Trust
Indenture Act;
(viii) the offer and sale of the new Series of Notes
is not required to be registered under the Securities Act;
(ix) as to the new Series of Notes and any
Outstanding Series of Notes, the opinions of counsel relating
to (A) the validity, perfection and priority of security
interests, (B) the nature of each of the Operating Leases as
a "true lease" and not as a financing arrangement, (C) the
analysis of substantive consolidation of the assets of (1)
AFC, AFC-II, AESOP Leasing, AESOP Leasing II or Original
AESOP with the assets of ARC or any of its Subsidiaries in
the event of the insolvency of ARC or any of its
Subsidiaries, (2) AFC or AFC-II with the assets of AESOP
Leasing, AESOP Leasing II or Original AESOP in the event of
the insolvency of AESOP Leasing, AESOP Leasing II or Original
AESOP and (3) AFC, AESOP Leasing, AESOP Leasing II or
Original AESOP with the as-
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sets of AFC-II in the event of the insolvency of AFC-II, (D)
the status of each of AFC-II, AESOP Leasing, AESOP Leasing II
and Original AESOP as not being an investment company or
controlled by an investment company under the Investment
Company Act, (E) there being no pending or threatened
litigation which, if adversely determined, would materially
and adversely affect the ability of each of AFC-II, AESOP
Leasing, AESOP Leasing II, Original AE-SOP, PVHC, Quartx,
ARAC, any Lessee or ARC to perform its obligations under any
of the Related Documents, and (F) the absence of any conflict
with or violation of any court decree, injunction, writ or
order applicable to AFC-II or any breach or default of any
indenture, agreement or other instrument as a result of the
issuance of such Series of Notes by AFC-II, as furnished by
counsel retained by AFC-II, AESOP Leasing, AESOP Leasing II,
Original AE-SOP, PVHC and Quartx in connection with the
issuance of the initial Series of Notes, are reaffirmed in
all respects and
(x) such other matters as the Trustee may reasonably
require;
(g) executed counterparts of each Loan Agreement and each
Lease, duly executed by the applicable parties thereto;
(h) evidence that each of parties to the Related Documents
and each party to any Swap Agreement has covenanted and agreed that,
prior to the date which is one year and one day after the payment in
full of the latest maturing Note, it will not institute against, or
join with any other Person in instituting, against AFC-II, AESOP
Leasing, AESOP Leasing II, Original AESOP, PVHC, Quartx or AFC any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings, under any Federal or state
bankruptcy or similar law;
(i) evidence of the grant (i) by AESOP Leasing, PVHC and
Quartx to (1) AFC-II and (2) the Trustee of a first priority security
interest in and
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to the AESOP I Operating Lease Loan Collateral, (ii) by AESOP Leasing
to (1) AFC-II and (2) the Trustee of a first priority security
interest in and to the AESOP I Finance Lease Loan Collateral, (iii) by
AESOP Leasing II and Original AESOP to (1) AFC-II and (2) the Trustee
of a first priority security interest in and to the AESOP II Loan
Collateral and (iv) by AFC-II to the Trustee of a first priority
security interest in and to the Collateral;
(j) evidence (which, in the case of the filing of financing
statements on form UCC-1, may be telephonic, followed by prompt
written confirmation) that AESOP Leasing and AESOP Leasing II have
caused or are causing the Trustee's name to be noted on each Vehicle's
Certificate of Title (other than Certificates of Title for the Initial
PVT Vehicles, the Initial Financed Vehicles, the Franchisee Vehicles
and Vehicles titled in Nebraska, Ohio and Oklahoma) in accordance
with the Loan Agreements and this Indenture and all filings (including
filing of financing statements on form UCC-1) and recordings have been
accomplished as may be required by law to establish, perfect, protect
and preserve the rights, titles, interests, remedies, powers,
privileges, licenses and security interest of the Trustee in such
Vehicles and the Collateral for the benefit of the Secured Parties
(except, as to perfection, with respect to Vehicles titled in
Nebraska, Ohio and Oklahoma); and
(k) such other documents, instruments, certifications,
agreements or other items as the Trustee may reasonably require.
Upon satisfaction of such conditions, the Trustee shall authenticate and
deliver, as provided above, such Series of Notes upon execution thereof by
AFC-II.
Section 2.3. Supplement For Each Series.
(a) In conjunction with the issuance of a new Series, the
parties hereto shall execute a Supplement, which shall specify the
relevant terms with respect to such new Series of Notes, which shall
include, as applicable: (i) its name or designation, (ii) the
aggregate principal amount of Notes of such
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Series, (iii) the Note Rate (or the method for calculating such Note
Rate) with respect to such Series, (iv) the interest payment date or
dates and the date or dates from which interest shall accrue, (v) the
method of allocating Collections with respect to such Series and the
method by which the principal amount of Notes of such Series shall
amortize or accrete, (vi) the names of any accounts to be used by such
Series and the terms governing the operation of any such account,
(vii) the terms of any Enhancement, (viii) the Enhancement Provider,
if any, (ix) whether the Notes may be issued in bearer form and any
limitations imposed thereon, (x) the Series Termination Date, (xi)
whether the Notes will be issued in multiple classes and, if so, the
method of allocating Collections among such classes, (xii) whether
such Series of Notes shall have the benefit of Series-Specific
Collateral and (xiii) any other relevant terms of such Series of Notes
that do not (subject to Section 2.3(b) and Article 12 hereof) change
the terms of any Outstanding Series of Notes or otherwise materially
conflict with the provisions of this Indenture and that do not prevent
the satisfaction of the Rating Agency Confirmation Condition with
respect to the issuance of such new Series (all such terms, the
"Principal Terms" of such Series);
(b) (i) A Supplement may specify that the related Series of
Notes (each, a "Segregated Series") will, in addition to the
Enhancement, have Collateral that is to be solely for the benefit of
the Noteholders of such Segregated Series of Notes (such Collateral
being referred to as "Series-Specific Collateral"); provided,
however, that no such Segregated Series of Notes will be issued unless
(x) the Rating Agency Confirmation Condition and the CP Rating Agency
Condition each is met, (y) AFC-II shall have delivered to the Trustee
an Officers' Certificate to the effect that the issuance of such
Segregated Series of Notes will not have a material adverse effect
upon the Noteholders of any Series of Notes outstanding at the time of
the issuance of the Segregated Series of Notes, and (z) the applicable
Supplement provides, in form satisfactory to the Trustee, for the
changes and modifications to the
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Indenture and the other Related Documents as are described in clause
(ii) below.
(ii) In the event any Segregated Series of Notes is
issued, the related Supplement will provide that (A) the
Administrator will identify to the Trustee the Collateral for
such Segregated Series of Notes such that (x) the
Series-Specific Collateral will secure only the Segregated
Series of Notes to which such Series-Specific Collateral is
applicable and (y) the Noteholders with respect to any other
Series of Notes will not be entitled to the benefit of such
Series-Specific Collateral, (B) the Trustee will adjust the
allocations and distributions to be made under the Indenture
at the written direction of the Administrator so that the
Noteholders with respect to the Segregated Series of Notes
will be entitled to allocations and distributions arising
solely from the Series-Specific Collateral applicable to such
Segregated Series of Notes and the Noteholders with respect
to the non-Segregated Series of Notes will be entitled to
allocations and distributions arising solely from the
non-Series-Specific Collateral, (C) the Trustee will act as
collateral agent under the Indenture (and in such capacity
the Trustee shall (x) establish and maintain a master
collection account, and one or more segregated collection
accounts, into which Collections allocated to all Series of
Notes will be deposited and, after such deposit, further
allocated among one or more Segregated Series of Notes and
the non-Segregated Series of Notes and (y) hold its lien
encumbering the non-Series-Specific Collateral for the
benefit of the non-Segregated Series of Notes and hold its
lien encumbering the Series-Specific Collateral for the
benefit of the Segregated Series of Notes), (D) the
Administrator will designate on its computer system the
source of the funds for the financing of each Vehicle (as
between one or more Segregated Series of Notes and the
non-Segregated Series of Notes, the "Financing Provider" with
respect to such Series of Notes), (E) the Noteholders of any
Segregated
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Series of Notes will, subject to the limitations contained in
this Base Indenture and the applicable Supplement, be
entitled to direct the Trustee in writing to exercise the
remedies under the Indenture solely on behalf of such
Segregated Series of Notes, (F) separate monthly reports and
other information will be furnished under the Indenture for
the Series-Specific Collateral, which monthly reports and
other information will contain substantially the same type of
information as the monthly reports provided under the
Indenture prior to the issuance of such Segregated Series of
Notes, (G) a separate segregated loan agreement and separate
segregated leases pertaining solely to the Series-Specific
Collateral will be executed and delivered by AFC-II, as
lender, AESOP Leasing or AESOP Leasing II, as borrower, and
the Lessees, as lessees, and ARC, as guarantor (H) to the
extent specified in the Supplement for such Segregated Series
of Notes, AFC-II and AESOP Leasing or AESOP Leasing II, as
the case may be, will take such actions as are necessary to
perfect the Trustee's interest on behalf of the Noteholders
of such Series in the Series-Specific Collateral, (I)
amendments will be made to this Indenture and the other
Related Documents, if necessary, to reflect the foregoing,
which amendments will, among other things, provide for
revisions to the terms "Aggregate Asset Amount", "Required
Aggregate Asset Amount", "Collateral", "Collection Account",
"AFC-II Agreements", "AFC-II Obligations", "Loan Agreements",
"Leases", "Related Documents", "Aggregate Invested Amount"
and "Requisite Investors" and such other terms as may be
appropriate to reflect the creation of the Segregated Series,
provided that any such amendment shall not have a material
adverse effect on the Noteholders of any Series unless the
Required Noteholders of such Series shall have given their
prior written consent thereto (and, with respect to each
Series, the Trustee may conclusively rely on an Officer's
Certificate of AESOP Leasing and AESOP Leasing II as
sufficient evidence of such lack of a material adverse
effect) and (J) references herein to
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"all" Series of Notes (other than as specifically stated
herein) shall be modified to refer to all Series of Notes
other than any Segregated Series of Notes which may hereafter
be issued.
Section 2.4. Execution and Authentication.
(a) An Authorized Officer shall sign the Notes for AFC-II by
manual or facsimile signature. If an Authorized Officer whose
signature is on a Note no longer holds that office at the time the
Note is authenticated, the Note shall nevertheless be valid.
(b) At any time and from time to time after the execution and
delivery of this Indenture, AFC-II may deliver Notes of any particular
Series executed by AFC-II to the Trustee for authentication, together
with one or more Company Orders for the authentication and delivery of
such Notes, and the Trustee, in accordance with such Company Order and
this Indenture, shall authenticate and deliver such Notes.
(c) No Note shall be entitled to any benefit under this
Indenture or be valid for any purpose unless there appears on such
Note a certificate of authentication substantially in the form
provided for herein, duly executed by the Trustee by the manual
signature of a Trust Officer (and the Luxembourg agent (the
"Luxembourg Agent"), if such Notes are listed on the Luxembourg Stock
Exchange). Such signatures on such certificate shall be conclusive
evidence, and the only evidence, that the Note has been duly
authenticated under this Indenture. The Trustee may appoint an
authenticating agent acceptable to AFC-II to authenticate Notes.
Unless limited by the term of such appointment, an authenticating
agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same
rights as an Agent to deal with AFC-II or an Affiliate of AFC-II. The
Trustee's certificate of authentication shall be in substantially the
following form:
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This is one of the Notes of a series issued under the within
mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
-------------------------------
Authorized Signatory
(d) Each Note shall be dated and issued as of the date of its
authentication by the Trustee.
(e) Notwithstanding the foregoing, if any Note shall have
been authenticated and delivered hereunder but never issued and sold
by AFC-II, and AFC-II shall deliver such Note to the Trustee for
cancellation as provided in Section 2.14 together with a written
statement (which need not comply with Section 13.3 and need not be
accompanied by an Opinion of Counsel) stating that such Note has never
been issued and sold by AFC-II, for all purposes of this Indenture
such Note shall be deemed never to have been authenticated and
delivered hereunder and shall not be entitled to the benefits of this
Indenture.
Section 2.5. Form of Notes; Book Entry Provisions; Title.
(a) Restricted Global Note. Any Series of Notes (other than
Variable Funding Notes), or any class of such Series to be issued in
the United States will be in registered form and sold initially to
institutional accredited investors within the meaning of Regulation D
under the Securities Act in reliance on an exemption from the
registration requirements of the Securities Act and thereafter (i) to
qualified institutional buyers within the meaning of, and in reliance
on, Rule 144A under the Securities Act ("Rule 144A"), (ii) outside the
United States to a non-U.S. Person (as such term is defined in
Regulation S of the Securities Act) in a transaction in compliance
with Regulation S of the Securities Act, (iii) pursuant to an
effective registration statement under the Securities Act or (iv) in
reliance on another exemption under the Securities Act, in each case
in accordance with any
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applicable securities laws of any state of the United States, and as
provided in the applicable Supplement and prior to any such sale, each
such purchaser shall be deemed to have represented and agreed as
follows:
(1) It is an institutional accredited investor
within the meaning of Regulation D under the Securities Act
or a qualified institutional buyer as defined in Rule 144A
and is acquiring the Notes for its own institutional account
or for the account of an institutional accredited investor or
a qualified institutional buyer;
(2) It understands that the Notes purchased by it
will be offered, and may be transferred, only in a
transaction not involving any public offering within the
meaning of the Securities Act, and that, if in the future it
decides to resell, pledge or otherwise transfer any Notes,
such Notes may be resold, pledged or transferred only (a) to
a person who the seller reasonably believes is a qualified
institutional buyer (as defined in Rule 144A under the
Securities Act) that purchases for its own account or for the
account of a qualified institutional buyer to whom notice is
given that the resale, pledge or transfer is being made in
reliance on Rule 144A, (b) outside the United States to a
non-U.S. Person (as such term is defined in Regulation S of
the Securities Act) in a transaction in compliance with
Regulation S of the Securities Act, (c) pursuant to an
effective registration statement under the Securities Act or
(d) in reliance on another exemption under the Securities
Act, in each case in accordance with any applicable
securities laws of any state of the United States;
(3) It understands that the Notes will
bear a legend substantially as set forth in
Section 2.10; and
(4) It acknowledges that the Trustee, the Issuer,
each Placement Agent for such Series of Notes, and their
affiliates, and others will rely upon the truth and accuracy
of the forego-
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ing acknowledgements, representations and agreements. If it
is acquiring any Notes for the account of one or more
institutional accredited investors or qualified institutional
buyers, it represents that it has sole investment discretion
with respect to each such account and that it has full power
to make the foregoing acknowledgements, representations and
agreements on behalf of each such account.
In addition, such purchaser shall be responsible for
providing additional information or certification, as shall be reasonably
requested by the Trustee, the Issuer or any Placement Agent for such Series of
Notes, to support the truth and accuracy of the foregoing acknowledgements,
representations and agreements, it being understood that such additional
information is not intended to create additional restrictions on the transfer
of the Notes. Such Series of Notes (other than the Variable Funding Note) shall
be issued in the form of and represented by one or more permanent global Notes
in fully registered form without interest coupons (each, a "Restricted Global
Note"), substantially in the form set forth in the applicable Supplement, with
such legends as may be applicable thereto, which shall be deposited on behalf
of the subscribers for the Notes represented thereby with a custodian for DTC,
and registered in the name of DTC or a nominee of DTC, duly executed by AFC-II
and authenticated by the Trustee as provided in Section 2.4 for credit to the
accounts of the subscribers at DTC. The aggregate initial principal amount of a
Restricted Global Note may from time to time be increased or decreased by
adjustments made on the records of the custodian for DTC, DTC or its nominee,
as the case may be, as hereinafter provided.
(b) Temporary Global Note; Permanent Global Note. Any Series
of Notes (other than Variable Funding Notes), or any class of such
Series, offered and sold outside of the United States will be offered
and sold in reliance on Regulation S ("Regulation S") under the
Securities Act and shall initially be issued in the form of one or
more temporary global Notes (each, a "Temporary Global Note") in fully
registered form without interest coupons substantially in the form set
forth in the applicable Supplement with such legends as may be
applicable
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thereto, registered in the name of DTC or a nominee of DTC, duly
executed by AFC-II and authenticated by the Trustee as provided in
Section 2.4, for credit to the subscribers' accounts at Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of
Euroclear or Cedel. Interests in a Temporary Global Note will be
exchangeable, in whole or in part, for interests in a permanent global
note (a "Permanent Global Note") in fully registered form without
interest coupons, representing Notes of the same Series, substantially
in the form set forth in the applicable Supplement, in accordance with
the provisions of the Temporary Global Note and this Indenture. Until
the Exchange Date, interests in a Temporary Global Note may only be
held by the agent members of Euroclear and Cedel. The aggregate
initial principal amount of the Temporary Global Note may from time to
time be increased or decreased by adjustments made on the records of
the custodian for DTC, DTC or its nominee, as the case may be, as
hereinafter provided.
(c) Variable Funding Note. Any Series of Variable Funding
Notes shall initially be sold to investors in reliance on an exemption
from the registration requirements of the Securities Act. Such Series
of Notes shall be issued in the form of one or more Variable Funding
Notes (each, a "Variable Funding Note") in fully registered form
without interest coupons substantially in the form set forth in the
applicable Supplement with such legends as may be applicable thereto,
duly executed by AFC-II and authenticated by the Trustee as provided
in Section 2.4. The aggregate initial principal amount of a Variable
Funding Note may from time to time be increased or decreased in
accordance with the applicable Supplement by adjustments made on the
records of the Note Register.
Section 2.6. Registrar and Paying Agent.
(a) AFC-II shall (i) maintain an office or agency where Notes
may be presented for registration of transfer or for exchange
("Registrar") and (ii) appoint a paying agent (which shall satisfy the
eligibility criteria set forth in Section 10.8(a)) ("Paying Agent") at
whose office or agency Notes may
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be presented for payment. The Registrar shall keep a register of the
Notes and of their transfer and exchange (the "Note Register"). AFC-II
may appoint one or more co-registrars and one or more additional
paying agents. The term "Paying Agent" includes any additional paying
agent and the term "Registrar" includes any co-registrars. AFC-II may
change any Paying Agent or Registrar without prior notice to any
Noteholder. AFC-II shall notify the Trustee in writing of the name and
address of any Agent not a party to this Indenture. The Trustee is
hereby initially appointed as the Registrar, Paying Agent and agent
for service of notices and demands in connection with the Notes.
(b) AFC-II shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. Such agency agreement
shall implement the provisions of this Indenture that relate to such
Agent. AFC-II shall notify the Trustee in writing of the name and
address of any such Agent. If AFC-II fails to maintain a Registrar or
Paying Agent and a Trust Officer has actual knowledge of such failure,
or if AFC-II fails to give the foregoing notice, the Trustee shall act
as such, and shall be entitled to appropriate compensation in
accordance with this Indenture, until AFC-II shall appoint a
replacement Registrar and Paying Agent.
Section 2.7. Paying Agent to Hold Money in Trust.
(a) AFC-II will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee (and if the Trustee
acts as Paying Agent, it hereby so agrees), subject to the provisions
of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of
amounts due with respect to the Notes in trust for the
benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein
provided and pay such sums to such Persons as herein
provided;
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(ii) give the Trustee notice of any default by
AFC-II (or any other obligor under the Notes) of which it
(or, in the case of the Trustee, a Trust Officer) has actual
knowledge in the making of any payment required to be made
with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith
pay to the Trustee all sums so held in trust by such Paying
Agent;
(iv) immediately resign as a Paying Agent and
forthwith pay to the Trustee all sums held by it in trust for
the payment of Notes if at any time it ceases to meet the
standards required to be met by a Trustee hereunder at the
time of its appointment; and
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on
any Notes of any applicable withholding taxes imposed thereon
and with respect to any applicable reporting requirements in
connection therewith.
(b) AFC-II may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose,
by Company Order direct any Paying Agent to pay to the Trustee all
sums held in trust by such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which the sums were held by
such Paying Agent; and upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
(c) Subject to applicable laws with respect to escheat of
funds, any money held by the Trustee or any Paying Agent or a Clearing
Agency in trust for the payment of any amount due with respect to any
Note and remaining unclaimed for two years after such amount has
become due and payable shall be discharged from such trust and be paid
to AFC-II on Company Request; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look
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only to AFC-II for payment thereof (but only to the extent of the
amounts so paid to AFC-II), and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of AFC-II
cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general
circulation in New York City, and London and Luxembourg (if the
related Series of Notes has been listed on the Luxembourg Stock
Exchange), if applicable, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30
days from the date of such publication, any unclaimed balance of such
money then remaining will be repaid to AFC-II. The Trustee may also
adopt and employ, at the expense of AFC-II, any other reasonable means
of notification of such repayment.
Section 2.8. Noteholder List.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Noteholders of each Series of Notes. If the Trustee is not the
Registrar, AFC-II shall furnish to the Trustee at least seven Business Days
before each Distribution Date and at such other time as the Trustee may request
in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Noteholders of each Series of
Notes.
Section 2.9. Transfer and Exchange.
(a) When Notes of any particular Series are presented to the
Registrar or a co-registrar with a request to register a transfer or
to exchange them for an equal principal amount of Notes of other
authorized denominations of the same Series, the Registrar shall
register the transfer or make the exchange if its requirements for
such transaction are met; provided, however, that the Notes
surrendered for transfer or exchange (a) shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory
to AFC-II and the
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Registrar, duly executed by the holder thereof or its attorney, duly
authorized in writing and (b) shall be transferred or exchanged in
compliance with the following provisions:
(i) Transfer of Restricted Global Notes.
(A) if such Note is being acquired for the account
of such Holder, without transfer, a certification from such Holder to
that effect (in substantially the form of Exhibit A-1 hereto); or
(B) if such Note is being transferred to a qualified
institutional buyer (as defined in Rule 144A) in accordance with Rule
144A, (i) a certification to that effect (in substantially the form of
Exhibit A-1 hereto) and (ii) each such transferee of such Note shall
be deemed to have represented and agreed as follows:
(1) It is a qualified institutional buyer as defined
in Rule 144A and is acquiring the Notes for its own
institutional account or for the account of a qualified
institutional buyer;
(2) It understands that the Notes purchased by it
will be offered, and may be transferred, only in a
transaction not involving any public offering within the
meaning of the Securities Act, and that, if in the future it
decides to resell, pledge or otherwise transfer any Notes,
such Notes may be resold, pledged or transferred only (a) to
a person who the seller reasonably believes is a qualified
institutional buyer (as defined in Rule 144A under the
Securities Act) that purchases for it own account or for the
account of a qualified institutional buyer to whom notice is
given that the resale, pledge or transfer is being made in
reliance on Rule 144A, (b) outside the United States to a
non-U.S. Person (as such term is defined in Regulation S of
the Securities Act) in a transaction in compliance with
Regulation S of the Securities Act, (c) pursuant to an
effective registration statement under the Securities Act or
(d) in reliance on another exemption under the Securities
Act, in each
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case in accordance with any applicable securities laws of any
state of the United States;
(3) It understands that the Notes will bear a legend
substantially as set forth in Section 2.10; and
(4) It acknowledges that the Trustee, the Issuer,
each Placement Agent for such Series of Notes, and their
affiliates, and others will rely upon the truth and accuracy
of the foregoing acknowledgements, representations and
agreements. If it is acquiring any Notes for the account of
one or more qualified institutional buyers, it represents
that it has sole investment discretion with respect to each
such account and that it has full power to make the foregoing
acknowledgements, representations and agreements on behalf of
each such account.
In addition, such transferee shall be responsible for
providing additional information or certification, as shall be reasonably
requested by the Trustee, the Issuer or any Placement Agent for such Series of
Notes, to support the truth and accuracy of the foregoing acknowledgements,
representations and agreements, it being understood that such additional
information is not intended to create additional restrictions on the transfer
of the Notes; or
(C) if such Note is being transferred pursuant to an
exemption from registration in accordance with Regulation S, a
certification to that effect (in substantially the form of Exhibit A-1
hereto); or
(D) if such Note is being transferred in reliance on
another exemption from the registration requirements of the Securities
Act, a certification to that effect (in substantially the form of
Exhibit A-1 hereto) and an opinion of counsel in form and substance
acceptable to AFC-II and to the Registrar to the effect that such
transfer is in compliance with the Securities Act.
(ii) Temporary Global Note to Permanent
Global Note. Interests in a Temporary Global
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Note as to which the Trustee has received from Euroclear or
Cedel, as the case may be, a certificate substantially in the
form of Exhibit B to the effect that Euroclear or Cedel, as
applicable, has received a certificate substantially in the
form of Exhibit C from the holder of a beneficial interest in
such Note, will be exchanged, on and after the 40th day after
the completion of the distribution of the relevant Series
(the "Exchange Date"), for interests in a Permanent Global
Note. To effect such exchange AFC-II shall execute and the
Trustee shall authenticate and deliver to Euroclear or Cedel,
as applicable, for credit to the respective accounts of the
holders of Notes, a duly executed and authenticated Permanent
Global Note, representing the principal amount of interests
in the Temporary Global Note initially exchanged for
interests in the Permanent Global Note. The delivery to the
Trustee by Euroclear or Cedel of the certificate or
certificates referred to above may be relied upon by AFC-II
and the Trustee as conclusive evidence that the certificate
or certificates referred to therein has or have been
delivered to Euroclear or Cedel pursuant to the terms of this
Indenture and the Temporary Global Note. Upon any exchange of
interests in a Temporary Global Note for interests in a
Permanent Global Note, the Trustee shall endorse the
Temporary Global Note to reflect the reduction in the
principal amount represented thereby by the amount so
exchanged and shall endorse the Permanent Global Note to
reflect the corresponding increase in the amount represented
thereby. The Temporary Global Note or the Permanent Global
Note shall also be endorsed upon any cancellation of
principal amounts upon surrender of Notes purchased by AFC-II
or any of its respective subsidiaries or affiliates or upon
any repayment of the principal amount represented thereby or
any payment of interest in respect of such Notes.
(iii) Restricted Global Note to Temporary
Global Note During the Restricted Period. If,
prior to the Exchange Date, a holder of a bene-
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ficial interest in the Restricted Global Note registered in
the name of DTC or its nominee wishes at any time to exchange
its interest in such Restricted Global Note for an interest
in the Temporary Global Note, such holder may, subject to the
rules and procedures of DTC, exchange or cause the exchange
or transfer of such interest for an equivalent beneficial
interest in the Temporary Global Note. Upon receipt by the
Trustee as Transfer Agent ("Transfer Agent") of (1)
instructions given in accordance with DTC's procedures from
an agent member directing the Trustee as Transfer Agent to
credit or cause to be credited a beneficial interest in the
Temporary Global Note in an amount equal to the beneficial
interest in the Restricted Global Note to be exchanged or
transferred, (2) a written order given in accordance with
DTC's procedures containing information regarding the
Euroclear or Cedel account to be credited with such increase
and the name of such account, and (3) a certificate in the
form of Exhibit A-3 attached hereto given by the holder of
such beneficial interest stating that the exchange or
transfer of such interest has been made in compliance with
the transfer restrictions applicable to the Notes and
pursuant to and in accordance with Regulation S, the Transfer
Agent shall instruct DTC to reduce the Restricted Global Note
by the aggregate principal amount of the beneficial interest
in the Restricted Global Note to be so exchanged or
transferred and the Transfer Agent shall instruct DTC,
concurrently with such reduction, to increase the principal
amount of the Temporary Global Note by the aggregate
principal amount of the beneficial interest in the Restricted
Global Note to be so exchanged or transferred, and to credit
or cause to be credited to the account of the person
specified in such instructions (who shall be the agent member
of Euroclear or Cedel, or both, as the case may be) a
beneficial interest in the Temporary Global Note equal to the
reduction in the principal amount of the Restricted Global
Note.
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(iv) Restricted Global Note to Permanent Global Note
After the Exchange Date. If, after the Exchange Date, a
holder of a beneficial interest in the Restricted Global Note
registered in the name of DTC or its nominee wishes at any
time to exchange its interest in such Restricted Global Note
for an interest in the Permanent Global Note, or to transfer
its interest in such Restricted Global Note to a Person who
wishes to take delivery thereof in the form of an interest in
the Permanent Global Note, such holder may, subject to the
rules and procedures of DTC, exchange or cause the exchange
or transfer of such interest for an equivalent beneficial
interest in the Permanent Global Note. Upon receipt by the
Transfer Agent of (1) instructions given in accordance with
DTC's procedures from an agent member directing the Trustee
to credit or cause to be credited a beneficial interest in
the Permanent Global Note in an amount equal to the
beneficial interest in the Restricted Global Note to be
exchanged or transferred, (2) a written order given in
accordance with DTC's procedures containing information
regarding the participant account of DTC and, in the case of
a transfer pursuant to and in accordance with Regulation S,
the Euroclear or Cedel account to be credited with such
increase and (3) a certificate in the form of Exhibit A-4
attached hereto given by the holder of such beneficial
interest stating that the exchange or transfer of such
interest has been made in compliance with the transfer
restrictions applicable to the Notes (A) and pursuant to and
in accordance with Regulation S or (B) and that the Note
being exchanged or transferred is not a "restricted security"
as defined in Rule 144, the Trustee shall instruct DTC to
reduce the Restricted Global Note by the aggregate principal
amount of the beneficial interest in the Restricted Global
Note to be so exchanged or transferred and the Transfer Agent
shall instruct DTC, concurrently with such reduction, to
increase the principal amount of the Permanent Global Note by
the aggregate principal amount of the beneficial interest in
the Re-
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stricted Global Note to be so exchanged or transferred, and
to credit or cause to be credited to the account of the
person specified in such instructions a beneficial interest
in the Permanent Global Note equal to the reduction in the
principal amount of the Restricted Global Note.
(v) Temporary Global Note to Restricted Global Note.
If a holder of a beneficial interest in the Temporary Global
Note registered in the name of DTC or its nominee wishes at
any time to exchange its interest in such Temporary Global
Note for an interest in the Restricted Global Note, or to
transfer its interest in such Temporary Global Note to a
Person who wishes to take delivery thereof in the form of an
interest in the Restricted Global Note, such holder may,
subject to the rules and procedures of Euroclear or Cedel and
DTC, as the case may be, exchange or cause the exchange or
transfer of such interest for an equivalent beneficial
interest in the Restricted Global Note. Upon receipt by the
Transfer Agent of (1) instructions from Euroclear or Cedel or
DTC, as the case may be, directing the Trustee to credit or
cause to be credited a beneficial interest in the Restricted
Global Note equal to the beneficial interest in the Temporary
Global Note to be exchanged or transferred, such instructions
to contain information regarding the agent member's account
with DTC to be credited with such increase, and, with respect
to an exchange or transfer of an interest in the Temporary
Global Note after the Exchange Date, information regarding
the agent member's account with DTC to be debited with such
decrease, and (2) with respect to an exchange or transfer of
an interest in the Temporary Global Note for an interest in
the Restricted Global Note prior to the Exchange Date, a
certificate in the form of Exhibit A-5 attached hereto given
by the holder of such beneficial interest and stating that
the Person transferring such interest in the Temporary Global
Note reasonably believes that the Person acquiring such
interest in the Restricted Global Note is a qualified
institu-
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tional buyer (as defined in Rule 144A) and is obtaining such
beneficial interest in a transaction meeting the requirements
of Rule 144A, Euroclear or Cedel or the Trustee, as the case
may be, shall instruct DTC to reduce the Temporary Global
Note by the aggregate principal amount of the beneficial
interest in the Temporary Global Note to be exchanged or
transferred, and the Transfer Agent shall instruct DTC,
concurrently with such reduction, to increase the principal
amount of the Restricted Global Note by the aggregate
principal amount of the beneficial interest in the Temporary
Global Note to be so exchanged or transferred, and to credit
or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the
Restricted Global Note equal to the reduction in the
principal amount of the Temporary Global Note.
(vi) Permanent Global Note to Restricted Global
Note. Interests in the Permanent Global Note may not be
transferred for interests in the Restricted Global Note.
(vii) Transfers of Variable Funding Notes. The
Variable Funding Notes shall not be transferable except in
the limited circumstances, if any, described in the
applicable Supplement; provided, however, that the Variable
Funding Note may be pledged as security (and transferred) in
accordance with the terms of the Collateral Agreement and the
CP Program Documents (each as defined in the applicable
Supplement).
(viii) Other Transfers or Exchanges. In the event
that a Global Note is exchanged for Notes in definitive
registered form without interest coupons, pursuant to Section
2.18 hereof, such Notes may be exchanged or transferred for
one another only in accordance with such procedures as are
substantially consistent with the provisions of clauses (i)
through (vi) above (including the certification requirements
intended to insure that such exchanges or
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transfers comply with Rule 144A or Regulation S, as the case
may be) and as may be from time to time adopted by AFC-II and
the Trustee.
(b) The Trustee shall not register the exchange of interests
in a Note for a Definitive Note or the transfer of or exchange of a
Note during the period beginning on any Record Date and ending on the
next following Distribution Date.
(c) AFC-II or the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection with any exchange or registration of transfer of
Notes. No service charge shall be made for any such transaction.
(d) If the Notes are listed on the Luxembourg Stock Exchange,
the Trustee or the Luxembourg Agent, as the case may be, shall send to
AFC-II upon any transfer or exchange of any Note information reflected
in the copy of the register for the Notes maintained by the Registrar
or the Luxembourg Agent, as the case may be.
(e) To permit registrations of transfers and exchanges,
AFC-II shall execute and the Trustee shall authenticate Notes, subject
to such rules as the Trustee may reasonably require. No service charge
to the Noteholder shall be made for any registration of transfer or
exchange (except as otherwise expressly permitted herein), but the
Registrar may require payment of a sum sufficient to cover any
transfer tax or similar government charge payable in connection
therewith (other than any such transfer tax or similar governmental
charge payable upon exchanges pursuant to Section 2.13 hereof in which
event the Registrar will be responsible for the payment of any such
taxes).
(f) All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of AFC-II, evidencing
the same debt, and entitled to the same benefits under this Indenture,
as the Notes surrendered upon such registration of transfer or
exchange.
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(g) Prior to due presentment for registration of transfer of
any Note, the Trustee, any Agent and AFC-II may deem and treat the
Person in whose name any Note is registered (as of the day of
determination) as the absolute owner of such Note for the purpose of
receiving payment of principal of and interest on such Note and for
all other purposes whatsoever, whether or not such Note is overdue,
and neither the Trustee, any Agent nor AFC-II shall be affected by
notice to the contrary.
(h) Notwithstanding any other provision of this Section 2.9,
the typewritten Note or Notes representing Book-Entry Notes for any
Series may be transferred, in whole but not in part, only to another
nominee of the Clearing Agency for such Series, or to a successor
Clearing Agency for such Series selected or approved by AFC-II or to a
nominee of such successor Clearing Agency, only if in accordance with
this Section 2.9 and Section 2.18.
Section 2.10. Legending of Notes.
(a) Unless otherwise provided for in a Supplement and except
as permitted by the following sentence, each Note (other than any
Variable Funding Note) shall bear a legend in substantially the
following form:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE SECURITIES OR "BLUE SKY" LAWS. THE HOLDER HEREOF,
BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF AESOP
FUNDING II L.L.C. (THE "COMPANY") THAT THIS NOTE IS BEING
ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO
DISTRIBUTION AND MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (1) TO THE COMPANY (UPON REDEMPTION THEREOF
OR OTHERWISE), (2) TO A PERSON WHO THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (3) OUTSIDE THE UNITED STATES
TO A NON-U.S. PERSON (AS SUCH TERM IS DEFINED IN REGULATION S
OF THE SECURITIES ACT) IN A TRANSACTION IN COMPLIANCE WITH
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REGULATION S OF THE SECURITIES ACT OR (4) IN A TRANSACTION
COMPLYING WITH OR EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (SUBJECT IN THE CASE OF THIS CLAUSE (4)
TO RECEIPT OF SUCH CERTIFICATES AND OTHER DOCUMENTS AS THE
TRUSTEE MAY REQUIRE UNDER THE INDENTURE), IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER JURISDICTION. THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE RESALE RESTRICTIONS SET FORTH ABOVE.
Upon any transfer, exchange or replacement of Notes bearing such
legend, or if a request is made to remove such legend on a Note, the
Notes so issued shall bear such legend, or such legend shall not be
removed, as the case may be, unless there is delivered to AFC-II and
the Trustee or the Luxembourg Agent, if the Notes are listed on the
Luxembourg Exchange, such satisfactory evidence, which may include an
opinion of counsel, as may be reasonably required by AFC-II that
neither such legend nor the restrictions on transfer set forth therein
are required to ensure that transfers thereof comply with the
provisions of Rule 144A, Rule 144 or Regulation S. Upon provision of
such satisfactory evidence, the Trustee, at the direction of AFC-II,
shall authenticate and deliver a Note that does not bear such legend.
(b) Unless otherwise provided for in a Supplement, each
Variable Funding Note shall bear a legend in substantially the
following form:
THIS VARIABLE FUNDING NOTE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS. THE HOLDER
HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF
AESOP FUNDING II L.L.C. (THE "COMPANY") THAT THIS NOTE IS
BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO
DISTRIBUTION. THIS VARIABLE FUNDING NOTE IS NOT PERMITTED TO
BE TRANSFERRED, ASSIGNED OR OTHERWISE PLEDGED OR CONVEYED
EXCEPT IN COMPLIANCE WITH THE TERMS OF THE INDENTURE REFERRED
TO HEREIN.
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Section 2.11. Replacement Notes.
(a) If (i) any mutilated Note is surrendered to the Trustee,
or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, and (ii) there is delivered to
the Trustee such security or indemnity as may be required by it to
hold AFC-II, each Enhancement Provider and the Trustee harmless then,
in the absence of notice to AFC-II, the Registrar or the Trustee that
such Note has been acquired by a bona fide purchaser, and provided
that the requirements of Section 8-405 of the UCC (which generally
permit AFC-II to impose reasonable requirements) are met, AFC-II shall
execute and upon its request the Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed,
lost or stolen Note, a replacement Note; provided, however, that if
any such destroyed, lost or stolen Note, but not a mutilated Note,
shall have become or within seven days shall be due and payable,
instead of issuing a replacement Note, AFC-II may pay such destroyed,
lost or stolen Note when so due or payable without surrender thereof.
If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in lieu
of which such replacement Note was issued presents for payment such
original Note, AFC-II and the Trustee shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was
delivered or any Person taking such replacement Note from such Person
to whom such replacement Note was delivered or any assignee of such
Person, except a bona fide purchaser, and shall be entitled to recover
upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by AFC-II or the Trustee in
connection therewith.
(b) Upon the issuance of any replacement Note under this
Section 2.11, AFC-II may require the payment by the Holder of such
Note of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other reasonable
expenses (including the fees and expenses of the Trustee) connected
therewith.
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(c) Every replacement Note issued pursuant to this Section
2.11 in replacement of any mutilated, destroyed, lost or stolen Note
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
(d) The provisions of this Section 2.11 are exclusive and
shall preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Notes.
Section 2.12. Treasury Notes.
In determining whether the Noteholders of the required
principal amount of Notes have concurred in any direction, waiver or consent,
Notes owned by AFC-II or any Affiliate of AFC-II (other than the Series 1997-2
Notes (as defined in the related Supplement) owned by AFC) shall be considered
as though they are not Outstanding, except that for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes of which the Trustee has received written notice of such
ownership shall be so disregarded. Absent written notice to the Trustee of such
ownership, the Trustee shall not be deemed to have knowledge of the identity of
the individual beneficial owners of the Notes.
Section 2.13. Temporary Notes.
(a) Pending the preparation of Definitive Notes issued under
Section 2.18 hereof, AFC-II may prepare and the Trustee, upon receipt
of a Company Order, shall authenticate and deliver temporary Notes of
such Series. Temporary Notes shall be substantially in the form of
Definitive Notes of like Series but may have variations that are not
inconsistent with the terms of this Indenture as the officers
executing such Notes may determine, as evidenced by their execution of
such Notes.
(b) If temporary Notes are issued pursuant to
Section 2.13(a) above, AFC-II will cause Definitive
Notes to be prepared without unreasonable delay.
After the preparation of Definitive Notes, the
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temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of AFC-II to
be maintained as provided in Section 8.2, without charge to the
Noteholder. Upon surrender for cancellation of any one or more
temporary Notes, AFC-II shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount
of Definitive Notes of authorized denominations. Until so exchanged,
the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as Definitive Notes.
Section 2.14. Cancellation.
AFC-II may at any time deliver to the Trustee for
cancellation any Notes previously authenticated and delivered hereunder which
AFC-II may have acquired in any manner whatsoever, and all Notes so delivered
shall be promptly cancelled by the Trustee. The Registrar and Paying Agent
shall forward to the Trustee any Notes surrendered to them for registration of
transfer, exchange or payment. The Trustee shall cancel all Notes surrendered
for registration of transfer, exchange, payment, replacement or cancellation.
AFC-II may not issue new Notes to replace Notes that it has redeemed or paid or
that have been delivered to the Trustee for cancellation. All cancelled Notes
held by the Trustee shall be disposed of in accordance with the Trustee's
standard disposition procedures unless by a written order, signed by two
Authorized Officers and received by the Trustee in a timely fashion, AFC-II
shall direct that cancelled Notes be returned to it.
Section 2.15. Principal and Interest.
(a) The principal of each Series of Notes shall be payable at
the times and in the amount set forth in the related Supplement and in
accordance with Section 6.1.
(b) Each Series of Notes shall accrue interest as provided in
the related Supplement and such interest shall be payable on each
Distribution Date for such Series in accordance with Section 6.1 and
the related Supplement.
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(c) Except as provided in the following sentence, the Person
in whose name any Note is registered at the close of business on any
Record Date with respect to a Distribution Date for such Note shall be
entitled to receive the principal and interest payable on such
Distribution Date notwithstanding the cancellation of such Note upon
any registration of transfer, exchange or substitution of such Note
subsequent to such Record Date. Any interest payable at maturity shall
be paid to the Person to whom the principal of such Note is payable.
(d) If AFC-II defaults in the payment of interest on the
Notes of any Series, such interest, to the extent paid on any date
that is more than five (5) Business Days after the applicable due
date, shall, at the option of AFC-II, cease to be payable to the
Persons who were Noteholders of such Series at the applicable Record
Date and AFC-II shall pay the defaulted interest in any lawful manner,
plus, to the extent lawful, interest payable on the defaulted
interest, to the Persons who are Noteholders of such Series on a
subsequent special record date which date shall be at least five (5)
Business Days prior to the payment date, at the rate provided in this
Indenture and in the Notes of such Series. AFC-II shall fix or cause
to be fixed each such special record date and payment date, and at
least 15 days before the special record date, AFC-II (or the Trustee,
in the name of and at the expense of AFC-II) shall mail to Noteholders
of such Series a notice that states the special record date, the
related payment date and the amount of such interest to be paid.
Section 2.16. Book-Entry Notes.
(a) For each Series of Notes to be issued in registered form
(other than the Variable Funding Note), AFC-II shall duly execute the
Notes, and the Trustee shall, in accordance with Section 2.4 hereof,
authenticate and deliver initially one or more Global Notes that (a)
shall be registered on the Note Register in the name of DTC or DTC's
nominee, and (b) shall bear legends substantially to the following
effect:
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UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
AFC-II OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. ("CEDE")
OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE, HAS AN INTEREST
HEREIN.
So long as DTC or its nominee is the registered owner or
holder of a Global Note, DTC or its nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global
Note for purposes of this Indenture and such Notes. Members of, or participants
in, DTC shall have no rights under this Indenture with respect to any Global
Note held on their behalf by DTC, and DTC may be treated by AFC-II, the
Trustee, any Agent and any agent of such entities as the absolute owner of such
Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent AFC-II, the Trustee, any Agent and any agent of such
entities from giving effect to any written certification, proxy or other
authorization furnished by DTC or impair, as between DTC and its agent members,
the operation of customary practices governing the exercise of the rights of a
holder of any Note.
(b) Subject to Section 2.9(g), the provisions of the
"Operating Procedures of the Euroclear System" and the "Terms and
Conditions Governing Use of Euroclear" and the "Management
Regulations" and "Instructions to Participants" of Cedel,
respectively, shall be applicable to the Global Note insofar as
interests in a Global Note are held by the agent members of Euroclear
or Cedel (which shall only occur in the case of the Temporary Global
Note and the Permanent Global Note). Account holders or participants
in Euroclear and Cedel shall have no rights under this Indenture with
respect to such Global Note, and the registered holder may be treated
by AFC-II, the Trustee and any agent of AFC-II or
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the Trustee as the owner of such Global Note for all
purposes whatsoever.
(c) Title to the Notes shall pass only by registration in the
Note Register maintained by the Registrar pursuant to Section 2.6.
(d) Any typewritten Note or Notes representing Book Entry
Notes shall provide that they represent the aggregate or a specified
amount of Outstanding Notes from time to time endorsed thereon and may
also provide that the aggregate amount of Outstanding Notes
represented thereby may from time to time be reduced to reflect
exchanges. Any endorsement of a typewritten Note or Notes representing
Book-Entry Notes to reflect the amount, or any increase or decrease in
the amount, or changes in the rights of Note Owners represented
thereby, shall be made in such manner and by such Person or Persons as
shall be specified therein or in the Company Order to be delivered to
the Trustee pursuant to Section 2.4. Subject to the provisions of
Section 2.5, the Trustee shall deliver and redeliver any typewritten
Note or Notes representing Book-Entry Notes in the manner and upon
instructions given by the Person or Persons specified therein or in
the applicable Company Order. Any instructions by AFC-II with respect
to endorsement or delivery or redelivery of a typewritten Note or
Notes representing the Book-Entry Notes shall be in writing but need
not comply with Section 13.3 hereof and need not be accompanied by an
Opinion of Counsel.
(e) Unless and until definitive, fully registered Notes
("Definitive Notes") have been issued to Note Owners pursuant to
Section 2.18:
(i) the provisions of this Section 2.16
shall be in full force and effect;
(ii) the Paying Agent, the Registrar and the Trustee
may deal with the Clearing Agency and the Clearing Agency
Participants for all purposes of this Indenture (including
the making of payments on the Notes and the giving of
instructions or directions hereunder) as the authorized
representatives of the Note Owners;
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(iii) to the extent that the provisions of this
Section 2.16 conflict with any other provisions of this
Indenture, the provisions of this Section 2.16 shall control;
(iv) whenever this Indenture requires or permits
actions to be taken based upon instructions or directions of
Holders of Notes evidencing a specified percentage of the
Outstanding principal amount of the Notes, the applicable
Clearing Agency shall be deemed to represent such percentage
only to the extent that it has received instructions to such
effect from Note Owners and/or their related Clearing Agency
Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes
and has delivered such instructions to the Trustee; and
(v) the rights of Note Owners shall be exercised
only through the applicable Clearing Agency and their related
Clearing Agency Participants and shall be limited to those
established by law and agreements between such Note Owners
and their related Clearing Agency and/or the Clearing Agency
Participants. Unless and until Definitive Notes are issued
pursuant to Section 2.18, the applicable Clearing Agencies
will make book-entry transfers among their related Clearing
Agency Participants and receive and transmit payments of
principal and interest on the Notes to such Clearing Agency
Participants.
Section 2.17. Notices to Clearing Agency.
Whenever notice or other communication to the Noteholders is
required under this Indenture, unless and until Definitive Notes shall have
been issued to Note Owners pursuant to Section 2.18, the Trustee and AFC-II
shall give all such notices and communications specified herein to be given to
Noteholders to the applicable Clearing Agency for distribution to the Note
Owners.
Section 2.18. Definitive Notes.
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(a) Conditions for Issuance. Interests in a Restricted Global
Note or Permanent Global Note deposited with DTC pursuant to Section
2.5 shall be transferred to the beneficial owners thereof in the form
of definitive registered Notes only if such transfer complies with
Section 2.9 and (x) DTC notifies AFC-II that it is unwilling or unable
to continue as depositary for such Restricted Global Note or Permanent
Global Note or at any time ceases to be a "clearing agency" registered
under the Exchange Act, and a successor depositary so registered is
not appointed by AFC-II within 90 days of such notice or (y) AFC-II
determines that the Restricted Global Note or Permanent Global Note
with respect to the relevant Series of Notes shall be exchangeable for
definitive registered Notes, in which case Definitive Notes shall be
issuable or exchangeable only in respect of such Global Notes or the
category of Definitions Notes represented thereby or (z) any
Noteholder, purchaser or transferee of a Restricted Global Note or a
Permanent Global Note requests the same in the form of a Definitive
Note and AFC-II, in its sole discretion, consents to such request (in
which case a Definitive Note shall be issuable or transferable only to
such Noteholder, purchaser or transferee), AFC-II will deliver Notes
in definitive registered form, without interest coupons, in exchange
for the Restricted Global Notes or the Permanent Global Notes or, in
the case of an exchange or transfer described in clause (z) above, in
exchange for the applicable beneficial interest in one or more Global
Notes. Definitive registered Notes shall be issued without coupons in
amounts of U.S. $200,000 and integral multiples of U.S. $1,000,
subject to compliance with all applicable legal and regulatory
requirements.
(b) Issuance. If interests in any Restricted Global Note or
Permanent Global Note, as the case may be, are to be transferred to
the beneficial owners thereof in the form of definitive registered
Notes pursuant to this Section 2.18, such Restricted Global Note or
Permanent Global Note, as the case may be, shall be surrendered by DTC
to the office or agency of the Transfer Agent located in the Borough
of Manhattan, the City of New York, or if the Notes are listed on the
Luxembourg Stock Exchange, to the
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applicable Luxembourg Agent in Luxembourg, to be so transferred,
without charge. If interests in any Permanent Global Note are to be
transferred to the beneficial owners thereof in the form of definitive
Notes pursuant to this Section 2.18, such Permanent Global Note shall
be surrendered by the custodian for DTC to the Transfer Agent or its
agent located in London to be so transferred, without charge. The
Trustee shall authenticate and deliver, upon such transfer of
interests in such Restricted Global Note or Permanent Global Note, an
equal aggregate principal amount of definitive registered Notes of
authorized denominations; provided, that in the case of an interest in
a Restricted Global Note, no such interest will be transferred except
upon (i) delivery of a Transfer Certificate substantially in the form
of Exhibit A-1 hereto and (ii) compliance with the conditions set
forth in Section 2.9. The definitive Notes transferred pursuant to
this Section 2.18 shall be executed, authenticated and delivered only
in the denominations specified in paragraph (a) above or in the
related Supplement, and definitive registered Notes shall be
registered in such names as DTC shall direct in writing. The Transfer
Agent shall have at least 30 days from the date of its receipt of
definitive Notes and registration information to authenticate and
deliver such definitive Notes. Any definitive registered Note
delivered in exchange for an interest in a Restricted Global Note or
Permanent Global Note shall, except as otherwise provided by Section
2.10, bear, and be subject to, the legend regarding transfer
restrictions set forth in Section 2.10. AFC-II will promptly make
available to the Transfer Agent a reasonable supply of definitive
Notes. AFC-II shall bear the costs and expenses of printing or
preparing any definitive Notes.
(c) Transfer of Definitive Notes. Subject to the terms of
this Indenture, the holder of any definitive registered Note may
transfer the same in whole or in part, in an amount equivalent to an
authorized denomination, by surrendering at the office maintained by
the Transfer Agent for such purpose in the Borough of Manhattan, The
City of New York, such Note with the form of transfer endorsed on it
duly completed and executed by, or accompanied
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by a written instrument of transfer in form satisfactory to AFC-II and
the Transfer Agent by, the holder thereof and accompanied by a
Transfer Certificate substantially in the form of Exhibit A-1 hereto.
In exchange for any definitive registered Note properly presented for
transfer, AFC-II shall execute and the Trustee shall promptly
authenticate and deliver or cause to be authenticated and delivered in
compliance with applicable law, to the transferee at such office, or
send by mail (at the risk of the transferee) to such address as the
transferee may request, definitive registered Notes for the same
aggregate principal amount as was transferred. In the case of the
transfer of any definitive registered Note in part, AFC-II shall
execute and the Trustee shall also promptly authenticate and deliver
or cause to be authenticated and delivered to the transferor at such
office, or send by mail (at the risk of the transferor) to such
address as the transferor may request, definitive registered Notes for
the aggregate principal amount that was not transferred. No transfer
of any definitive registered Note shall be made unless the request for
such transfer is made by the registered holder at such office.
(d) Neither AFC-II nor the Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on,
and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Notes for such Series, the Trustee shall
recognize the Holders of the Definitive Notes as Noteholders of such
Series.
Section 2.19. Tax Treatment.
AFC-II has structured this Indenture and the Notes have been
(or will be) issued with the intention that the Notes will qualify under
applicable tax law as indebtedness of AFC-II and any entity acquiring any
direct or indirect interest in any Note by acceptance of its Notes (or, in the
case of a Note Owner, by virtue of such Note Owner's acquisition of a
beneficial interest therein) agrees to treat the Notes (or beneficial interests
therein) for purposes of Federal, state and local and income or franchise taxes
and any other tax imposed on or measured by income, as indebtedness of AFC-II.
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Each Noteholder agrees that it will cause any Note Owner acquiring an interest
in a Note through it to comply with this Indenture as to treatment as
indebtedness for such tax purposes.
ARTICLE 3.
SECURITY
Section 3.1. Grant of Security Interest.
(a) To secure the AFC-II Obligations, AFC-II hereby pledges,
assigns, conveys, delivers, transfers and sets over to the Trustee,
for the benefit of the Noteholders (the "Secured Parties"), and hereby
grants to the Trustee, for the benefit of the Secured Parties, a
security interest in, all of AFC-II's right, title and interest in and
to all of AFC-II's assets, property and interests in property of any
kind or nature whatsoever (other than as specified below) whether now
or hereafter existing, acquired or created (all of the foregoing being
referred to as the "Collateral"), including without limitation, all of
the following property and interests in property:
(i) the AFC-II Agreements, including, without
limitation, the Loan Notes, all monies due and to become due
to AFC-II from AESOP Leasing and AESOP Leasing II under or in
connection with the AFC-II Agreements, whether payable as
principal, interest, fees, expenses, costs, indemnities,
insurance recoveries, damages for the breach of any of the
AFC-II Agreements or otherwise, and all rights, remedies,
powers, privileges and claims of AFC-II against any other
party under or with respect to the AFC-II Agreements (whether
arising pursuant to the terms of such AFC-II Agreements or
otherwise available to AFC-II at law or in equity), the right
to enforce any of the AFC-II Agreements as provided herein
and to give or withhold any and all consents, requests,
notices, directions, approvals, extensions or waivers under
or with respect to the AFC-II Agreements or the obligations
of any party thereunder, and
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all AESOP I Loan Collateral and AESOP II Loan Collateral;
(ii) all right, title and interest of AFC-II in, to
and under the Leases, any books, records or computer programs
relating thereto, the right to enforce any of the Leases as
provided therein and in the Loan Agreements and to give or
withhold any and all consents, requests, notices, directions,
approvals, extensions or waivers under or with respect to the
Leases or the obligations of any party thereunder;
(iii) all right, title and interest of AFC-II in any
and all Vehicles and all Certificates of Title with respect
thereto, including all payments under insurance policies or
any warranty payable by reason of loss or damage to, or
otherwise with respect to, any of the Vehicles;
(iv) all right, title and interest of AFC-II in, to
and under any Manufacturer Programs as they relate to
Vehicles leased under the Leases and all monies due and to
become due in respect of such Vehicles from the Manufacturers
under or in connection with the Manufacturer Programs whether
payable as Vehicle repurchase prices, auction sales proceeds,
fees, expenses, costs, indemnities, insurance recoveries,
damages for breach of the Manufacturer Programs or otherwise
(but excluding all incentive payments payable in respect of
purchases of vehicles under the Manufacturer Programs) and
all rights to compel performance and otherwise exercise
remedies thereunder;
(v) all payments under insurance policies (whether
or not the Trustee is named as the loss payee thereof) or any
warranty payable by reason of loss or damage to, or otherwise
with respect to, any of the Vehicles;
(vi) all right, title and interest of AFC-II in and
to any proceeds from the sale of Vehicles leased under the
Leases, including all
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monies due in respect of such Vehicles, whether payable as
the purchase price of such Vehicles, or as fees, expenses,
costs, indemnities, insurance recoveries, or otherwise
(including all upfront incentive payments payable by
Manufacturers in respect of purchases of Non-Program
Vehicles);
(vii) (a) the Collection Account, (b) all funds on
deposit therein from time to time, (c) all certificates and
instruments, if any, representing or evidencing any or all of
the Collection Account or the funds on deposit therein from
time to time, and (d) all Permitted Investments made at any
time and from time to time with the moneys in the Collection
Account (including income thereon);
(viii) all right, title and interest of AFC-II in
(a) the Termination Services Reserve Account, (b) all funds
on deposit therein from time to time, (c) all certificates
and instruments, if any, representing or evidencing any or
all of the Termination Services Reserve Account or the funds
on deposit therein from time to time, and (d) all Permitted
Investments made at any time and from time to time with the
moneys in the Termination Services Reserve Account (including
income thereon);
(ix) all additional property that may from time to
time hereafter (pursuant to the terms of any Supplement or
otherwise) be subjected to the grant and pledge hereof by
AFC-II or by anyone on its behalf; and
(x) all proceeds of any and all of the foregoing
including, without limitation, payments under insurance
(whether or not the Trustee is the loss payee thereof) or
Vehicle warranties and cash;
provided, however, the security interest of the Trustee on behalf of the
Secured Parties shall be deemed to be released with respect to amounts that are
released to the Administrator from the Termination Services Reserve Ac-
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count on any Distribution Date in accordance with Section 3.7(d).
(b) The foregoing grant is made in trust to secure AFC-II
Obligations and to secure compliance with the provisions of this
Indenture and any Supplement, all as provided in this Indenture. The
Trustee, as Trustee on behalf of the Secured Parties, acknowledges
such grant, accepts the trusts under this Indenture in accordance with
the provisions of this Indenture and subject to Section 10.1 and 10.2,
agrees to perform its duties required in this Indenture to the best of
its abilities to the end that the interests of the Secured Parties may
be adequately and effectively protected. The Collateral shall secure
the Notes equally and ratably without prejudice, priority (except,
with respect to any Series of Notes, as otherwise stated in the
applicable Supplement) or distinction.
Section 3.2. Certain Rights and Obligations of AFC-II
Unaffected.
(a) Notwithstanding the assignment and security interest so
granted to the Trustee on behalf of the Secured Parties, AFC-II shall
nevertheless be permitted, subject to the Trustee's right to revoke
such permission in the event of an Amortization Event and subject to
the provisions of Section 3.3 hereof, to give all consents, requests,
notices, directions, approvals, extensions or waivers, if any, which
are required to be given in the normal course of business (which does
not include waivers of defaults under any of the AFC-II Agreements or
the Leases or any of the Manufacturer Programs or revocation of powers
of attorney to the Lessees) to AESOP Leasing or AESOP Leasing II by
AFC-II and by AESOP Leasing or AESOP Leasing II to the Manufacturers
by the specific terms of each of the Loan Agreements and each
Manufacturer Program, respectively.
(b) The assignment of the Collateral to the Trustee on behalf
of the Secured Parties shall not (i) relieve AFC-II from the
performance of any term, covenant, condition or agreement on AFC-II's
part to be performed or observed under or in connection with any of
AFC-II Agreements or from any liability to
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AESOP Leasing, AESOP Leasing II or the Manufacturers, as the case may
be, or (ii) impose any obligation on the Trustee or any of the Secured
Parties to perform or observe any such term, covenant, condition or
agreement on AFC-II's part to be so performed or observed or impose
any liability on the Trustee or any of the Secured Parties for any act
or omission on the part of AFC-II or from any breach of any
representation or warranty on the part of AFC-II. AFC-II hereby agrees
to indemnify and hold harmless the Trustee and each Noteholder
(including, in each case, their respective directors, officers,
employees and agents) from and against any and all losses, liabilities
(including liabilities for penalties), claims, demands, actions,
suits, judgments, reasonable out-of-pocket costs and expenses arising
out of or resulting from the assignment granted hereby or by any
Assignment Agreement, whether arising by virtue of any act or omission
on the part of AFC-II or otherwise, including, without limitation, the
reasonable out-of-pocket costs, expenses, and disbursements (including
reasonable attorneys' fees and expenses) incurred by the Trustee and
any of the Noteholders in enforcing this Indenture or preserving any
of their respective rights to, or realizing upon, any of the
Collateral; provided, however, the foregoing indemnification shall not
extend to any action by the Trustee or a Noteholder which constitutes
gross negligence or willful misconduct by the Trustee, such Noteholder
or any other Indemnified Person hereunder. The indemnification
provided for in this Section 3.2 shall survive the removal of, or a
resignation by, such Person as Trustee as well as the termination of
this Indenture, any Supplement or any Assignment Agreement.
Section 3.3. Performance of Agreement.
Upon the occurrence of a Limited Liquidation Event of Default
or Liquidation Event of Default, promptly following a request from the Trustee
to do so and at AFC-II's expense, AFC-II agrees to take all such lawful action
as permitted under this Indenture as the Trustee may request to compel or
secure the performance and observance by: (i) AESOP Leasing, AESOP Leasing II
or any other party to any of the AFC-II Agreements or any other
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Related Document of its obligations to AFC-II, (ii) the Administrator, ARC, any
Lessee or any other party to any Related Document of its obligations to AESOP
Leasing and AESOP Leasing II and (iii) a Manufacturer under a Manufacturer
Program of its obligations to AESOP Leasing, AESOP Leasing II and AFC-II, as
assignee, in each case in accordance with the applicable terms thereof, and to
exercise any and all rights, remedies, powers and privileges lawfully available
to AFC-II to the extent and in the manner directed by the Trustee, including,
without limitation, the transmission of notices of default and the institution
of legal or administrative actions or proceedings to compel or secure
performance by AESOP Leasing and AESOP Leasing II (or such other party to any
AFC-II Agreement or any other Related Document), by the Administrator, ARC or
any Lessee (or such other party to any other Related Document) or by a
Manufacturer under a Manufacturer Program, of their respective obligations
thereunder. If (i) AFC-II, AESOP Leasing, AESOP Leasing II, the Administrator,
ARC or any Lessee shall have failed, within 30 days of receiving the direction
of the Trustee, to take commercially reasonable action to accomplish such
directions of the Trustee, (ii) AFC-II, AESOP Leasing, AESOP Leasing II, the
Administrator, ARC or any Lessee, as applicable, refuses to take any such
action, or (iii) the Trustee reasonably determines that such action must be
taken immediately, the Trustee may take such previously directed action and any
related action permitted under this Indenture which the Trustee thereafter
determines is appropriate (without the need under this provision or any other
provision under the Indenture to direct AFC-II to take such action), on behalf
of AFC-II and the Secured Parties.
Section 3.4. Release of Lien on Vehicles.
The Lien of the Trustee on the Vehicles shall automatically
be deemed to be released concurrently with any release thereof as provided in
Section 7.3 of each of the Loan Agreements.
Section 3.5. Stamp, Other Similar Taxes and Filing Fees.
AFC-II shall indemnify and hold harmless the Trustee and each
Noteholder from any present or future claim for liability for any stamp or
other similar tax
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and any penalties or interest with respect thereto, that may be assessed,
levied or collected by any jurisdiction in connection with this Indenture or
any Collateral. AFC-II shall pay, or reimburse the Trustee for, any and all
amounts in respect of, all search, filing, recording and registration fees,
taxes, excise taxes and other similar imposts that may be payable or determined
to be payable in respect of the execution, delivery, performance and/or
enforcement of this Indenture.
Section 3.6. Vehicle Title Check.
The Trustee shall, on an annual basis, request that the
Borrowers cause a title check to be performed by an independent nationally
recognized firm of certified public accountants acceptable to the Trustee and
each Enhancement Provider on a statistical sample of all Vehicles leased under
the Leases designed to provide a ninety-five percent (95%) confidence level
that no more than five percent (5%) of the Certificates of Title for such
Vehicles did not correctly reference the Trustee or its Permitted Nominee, as
first lienholder, and the Lessor of such Vehicle or its Permitted Nominee or,
in the case of Financed Vehicles, ARAC or its Permitted Nominee, as owner, and
cause such party to deliver a report stating that, within the confidence level
set forth above, no more than five percent (5%) of the Certificates of Title
did not correctly reference the lienholder or owner of the Vehicles described
in the immediately preceding clause.
Section 3.7. Termination Services Reserve Account.
(a) Pursuant to Section 3 of the Administration Agreement,
there has been established and there shall be maintained the Termination
Services Reserve Account in the name of the Trustee for the benefit of the
Secured Parties. The Trustee shall possess all right, title and interest in all
moneys, instruments, securities and other property on deposit from time to time
in the Termination Services Reserve Account and the proceeds thereof for the
benefit of the Secured Parties. The Termination Services Reserve Account shall
be under the sole dominion and control of the Trustee for the benefit of the
Secured Parties. The Termination Services Reserve Account shall be maintained
(i) with a Qualified Institu-
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tion, or (ii) as a segregated trust account with the corporate trust department
of a depository institution or trust company having corporate trust powers and
acting as trustee for funds deposited in the Termination Services Reserve
Account; provided that, if at any time such Qualified Institution is no longer
a Qualified Institution or the credit rating of any securities issued by such
depository institution or trust company shall be reduced to below BBB- by S&P
or Baa3 by Moody's, then the Trustee shall, within 30 days of such reduction,
establish a new Termination Services Reserve Account with a new Qualified
Institution. If the Termination Services Reserve Account is not maintained in
accordance with the previous sentence, then within 10 Business Days after
obtaining knowledge of such fact, the Trustee shall establish a new Termination
Services Reserve Account which complies with such sentence and transfer into
the new Termination Services Reserve Account all cash and investments from the
non-qualifying Termination Services Reserve Account. The Termination Services
Reserve Account has been initially established at Harris Trust and Savings
Bank. The Trustee shall cause Harris Trust and Savings Bank to execute an
agreement pursuant to which it agrees to comply with orders issued by the
Trustee directing the transfer or redemption of any security or other financial
asset credited to the Termination Services Reserve Account without consent of
AFC-II.
(b) Investment of Funds in the Termination Services Reserve
Account. AFC-II shall instruct the institution maintaining the Termination
Services Reserve Account to invest funds on deposit in the Termination Services
Reserve Account at all times in Permitted Investments selected by AFC-II;
provided, however, that any such investment shall mature not later than the
Business Day prior to the Distribution Date following the date on which such
funds were so invested. All such Permitted Investments shall be credited to the
Termination Services Account. Neither AFC-II nor the Trustee shall dispose of
(or permit the disposal of) any Permitted Investments prior to the maturity
thereof to the extent such disposal would result in a loss of principal of such
Permitted Investment.
(c) Earnings from Termination Services Reserve Account.
Subject to the restrictions set forth above, AFC-II shall have the authority
to instruct the Trustee
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(which instructions shall be in writing) with respect to (i) the investment of
funds on deposit in the Termination Services Reserve Account and (ii)
liquidation of such investments. On each Distribution Date, the Trustee shall
withdraw all interest and earnings (net of losses and investment expenses) paid
on funds on deposit in the Termination Services Reserve Account during the
related Interest Period and distribute such amounts to the Administrator in
payment of a portion of the Monthly Administration Fee.
(d) Termination Services Reserve Draws and Reimbursements. On
or prior to the date which is five (5) days prior to the date on which any
payment is due from ARAC to WizCom pursuant to Section 2 of the Termination
Services Agreement, the Administrator shall deliver written evidence to the
Trustee that an amount at least equal to the amount of such payment has been
deposited by ARAC in a segregated account for the benefit of WizCom. In the
event that ARAC fails to make such deposit, the Administrator shall deliver to
the Trustee on the following day a written statement of an Authorized Officer
of ARAC describing such failure and the action that ARAC proposes to take with
respect thereto. If such failure has not been cured within four (4) days
following the date on which such payment is due from ARAC to WizCom pursuant to
the Termination Services Agreement, the Trustee shall, upon the written
direction (on which it may conclusively rely) of AFC-II delivered by 11:00 a.m.
(New York City time) on the fifth day following the date on which such payment
was due, withdraw an amount equal to the Termination Services Reserve Draw
Amount from the Termination Services Reserve Account and shall pay such amount
to WizCom on behalf of ARAC in payment of amounts then due under the
Termination Services Agreement. Pursuant to the Administration Agreement, the
Administrator will be obligated to reimburse any such withdrawal within two
Business Days thereof by deposit to the Termination Services Reserve Account of
an amount equal to such Termination Services Reserve Draw Amount plus interest
thereon at the applicable Lender's Carrying Cost Interest Rate from and
including the date of such withdrawal to but excluding the date of such
deposit.
(e) Termination of Termination Services Reserve Account.
After the termination of this Indenture and the payment in full of the AFC-II
Obligations, the
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Trustee shall distribute any amounts remaining in the Termination Services
Reserve Account to the Administrator.
ARTICLE 4.
REPORTS
Section 4.1. Agreement of AFC-II to Provide Reports and
Instructions.
(a) Daily Reports. On each Business Day commencing on the
Initial Closing Date, AFC-II shall prepare and maintain, or cause to be
prepared and maintained, at the office of AFC-II a record (each, a "Daily
Report") setting forth the aggregate of the amounts deposited in the Collection
Account on the immediately preceding Business Day, which shall consist of: (A)
the aggregate amount of payments received from Manufacturers and/or auction
dealers under Manufacturer Programs related to Program Vehicles leased under
the AESOP I Operating Lease, the AESOP II Operating Lease and the Finance Lease
(separately stated) and in each case deposited in the Collection Account, plus
(B) the aggregate amount of proceeds received from third parties (other than
Manufacturers and auction dealers) with respect to the sale of Vehicles leased
under the AESOP I Operating Lease, the AESOP II Operating Lease and the Finance
Lease (separately stated) and in each case deposited in the Collection Account,
plus (C) the aggregate amount of other Collections deposited in the Collection
Account. AFC-II shall deliver a copy of the Daily Report for each Business Day
to the Trustee;
(b) Monthly Certificate. On each Determination Date, AFC-II
shall forward to the Trustee, the Paying Agent, the Administrative Agent, the
Rating Agencies and any Enhancement Provider, an Officer's Certificate of
AFC-II substantially in the form of Exhibit D (each, a "Monthly Certificate")
setting forth, inter alia, the following information (which, in the cases of
clauses (iii), (iv) and (v) below, will be expressed as a dollar amount per
$1,000 of the original principal amount of each Series of Notes and as a
percentage of the outstanding principal balance of the Notes as of such date):
(i) the aggregate amount of payments received from the
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Manufacturers and/or auction dealers under Manufacturer Programs related to
Program Vehicles leased under the AESOP I Operating Lease, the AESOP II
Operating Lease and the Finance Lease (separately stated) and the aggregate
amount of payments received from third parties (other than Manufacturers and
auction dealers) with respect to the sale of Vehicles leased under the AESOP I
Operating Lease, the AESOP II Operating Lease and the Finance Lease (separately
stated) and in each case deposited in the Collection Account and the aggregate
amount of other Collections deposited in the Collection Account for the Related
Month with respect to such Determination Date; (ii) the Invested Percentage on
the last day of the Related Month of each Series of Notes and each class of
each Series; (iii) for each Series and each class of each Series, the total
amount to be distributed to Noteholders on the next succeeding Distribution
Date; (iv) for each Series and each class of each Series, the amount of such
distribution allocable to principal on the Notes; (v) for each Series and each
class of each Series, the amount of such distribution allocable to interest on
the Notes; (vi) the portion of the Monthly Administration Fee payable by the
Issuer and allocable to each Series and each class of each Series; (vii) for
each Series and each class of each Series, to the extent applicable, the amount
of Enhancement used or drawn in connection with the distribution to Noteholders
of such Series or class on the next succeeding Distribution Date, together with
the aggregate amount of remaining Enhancement not theretofore used or drawn;
(viii) for each applicable Series and each class of each Series, the existing
Carryover Controlled Amortization Amount, if any; (ix) the Pool Factor with
respect to such Related Month for each applicable Series and each class of each
Series; (x) a list of all Vehicles leased under the AESOP I Operating Lease,
the AESOP II Operating Lease and the Finance Lease (separately stated) at the
close of business on the last day of the Related Month; (xi) the aggregate Net
Book Value at the time of the respective sale of all Non-Program Vehicles
leased under the AESOP I Operating Lease and the Finance Lease (separately
stated) that were disposed of during the related Measurement Month; (xii) the
aggregate Disposition Proceeds with respect to all Non-Program Vehicles leased
under the AESOP I Operating Lease and the Finance Lease (separately stated)
that were disposed of during the related Measurement Month; (xiii) the
Aggregate Asset Amount and the amount of the Aggregate Asset
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Amount Deficiency, if any, at the close of business on the last day of the
Related Month; (xiv) the aggregate Net Book Value of all Non-Program Vehicles
leased under the AESOP I Operating Lease and the Finance Lease (separately
stated) as of the last day of the Related Month; (xv) the Non-Program Fleet
Market Value of all Non-Program Vehicles leased under the AESOP I Operating
Lease and the Finance Lease as of the related Determination Date; (xvi) the
amount of Monthly Base Rent and any Supplemental Rent due under each Lease on
the next succeeding Payment Date (separately stated); (xvii) the amount of Loan
Interest, Monthly Loan Principal Amount and any other amounts due under each
Loan Agreement on the next succeeding Payment Date (separately stated); (xviii)
the amount on deposit in the Termination Services Reserve Account; (xix) the
amount of any withdrawals in respect of Termination Services Reserve Draw
Amounts from the Termination Services Reserve Account during the Related Month;
(xx) the amount, if any, of investment earnings on funds on deposit in the
Termination Services Reserve Account that will be distributed to the
Administrator on the next succeeding Distribution Date; (xxi) for each Series,
the Required Enhancement Amount with respect to such Series and whether an
Enhancement Deficiency exists with respect to such Series and the amount
thereof; (xxii) whether an AESOP I Operating Lease Vehicle Deficiency exists
and the amount thereof; and (xxiii) whether, to the knowledge of AFC-II, (A)
any Lien exists on any of the Collateral (other than Liens granted pursuant to
the Indenture and the other Related Documents or permitted thereunder) and (B)
any Lease Event of Default or Loan Event of Default has occurred; provided,
however, that the information set forth in clause (i) above shall be provided
only to the Trustee;
(c) Monthly Noteholders' Statement. On or before each
Distribution Date, AFC-II shall furnish to the Trustee a Monthly Noteholders'
Statement with respect to each Series of Notes substantially in the form of
Exhibit E;
(d) Instructions as to Withdrawals and Payments. AFC-II will
furnish, or cause to be furnished, to the Trustee or the Paying Agent, as
applicable, written instructions to make withdrawals and payments from the
Collection Account, the Termination Services Reserve Account and any other
accounts specified in a Supplement
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and to make drawings under any Enhancement, as contemplated herein and in any
Supplement. The Trustee and the Paying Agent shall promptly follow any such
written instructions.
Section 4.2. Administrator. Pursuant to the Administration
Agreement, the Administrator has agreed to provide certain reports,
instructions and other services on behalf of AESOP Leasing, AESOP Leasing II
and AFC-II. The Noteholders by their acceptance of the Notes consent to the
provision of such reports by the Administrator in lieu of the Trustee or
AFC-II.
ARTICLE 5.
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 5.1. Collection Account.
(a) Establishment of Collection Account. The Trustee shall
establish and maintain in the name of the Trustee for the benefit of
the Secured Parties, or cause to be established and maintained, an
account (the "Collection Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit
of the Secured Parties. The Trustee shall possess all right, title and
interest in all moneys, instruments, securities and other property on
deposit from time to time in the Collection Account and the proceeds
thereof for the benefit of the Secured Parties. The Collection Account
shall be under the sole dominion and control of the Trustee for the
benefit of the Secured Parties. The Collection Account shall be
maintained (i) with a Qualified Institution, or (ii) as a segregated
trust account with the corporate trust department of a depository
institution or trust company having corporate trust powers and acting
as trustee for funds deposited in the Collection Account; provided
that, if at any time such Qualified Institution is no longer a
Qualified Institution or the credit rating of any securities issued by
such depository institution or trust company shall be reduced to below
BBB- by S&P or Baa3 by Moody's, then the Trustee shall, within 30 days
of such reduction, establish a new Collection Account with a
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new Qualified Institution. If the Collection Account is not maintained
in accordance with the previous sentence, then within 10 Business Days
after obtaining knowledge of such fact, the Trustee shall establish a
new Collection Account which complies with such sentence and transfer
into the new Collection Account all cash and investments from the
non-qualifying Collection Account. Initially, the Collection Account
will be established with Harris Trust and Savings Bank. The Trustee
shall cause Harris Trust and Savings Bank to execute an agreement
pursuant to which it agrees to comply with orders issued by the
Trustee directing the transfer or redemption of any security or other
financial asset credited to the Collection Account without consent of
AFC-II.
(b) Establishment of Additional Accounts. To the extent
specified in the Supplement with respect to any Series of Notes, the
Trustee may establish and maintain one or more additional accounts
and/or administrative sub-accounts to facilitate the proper allocation
of Collections in accordance with the terms of such Supplement.
(c) Administration of the Collection Account. AFC-II shall
instruct the institution maintaining the Collection Account to invest
funds on deposit in the Collection Account at all times in Permitted
Investments selected by AFC-II; provided, however, that any such
investment shall mature not later than the Business Day prior to the
Distribution Date following the date on which such funds were so
invested, except for any Permitted Investment held in the Collection
Account which is in an investment made by the Paying Agent
institution, in which event such investment may mature on such
Distribution Date and such funds shall be available for withdrawal on
or prior to such Distribution Date. All such Permitted Investments
will be credited to the Collection Account. Neither AFC-II nor the
Trustee shall dispose of (or permit the disposal of) any Permitted
Investments prior to the maturity thereof to the extent such disposal
would result in a loss of principal of such Permitted Investment.
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(d) Earnings from Collection Account. Subject to the
restrictions set forth above, AFC-II shall have the authority to
instruct the Trustee (which instructions shall be in writing) with
respect to (i) the investment of funds on deposit in the Collection
Account and (ii) liquidation of such investments. All interest and
earnings (net of losses and investment expenses) paid on funds on
deposit in the Collection Account shall be deemed to be available and
on deposit for distribution.
Section 5.2. Collections and Allocations.
(a) Collections in General. Until this Indenture is
terminated pursuant to Section 11.1, AFC-II shall, and the Trustee is
authorized to, cause all Collections due and to become due to AFC-II
or the Trustee, as the case may be, (i) under or in connection with
the Collateral (including, without limitation, amounts due from
Manufacturers and related auction houses under their Manufacturer
Programs but excluding amounts representing the proceeds from sales of
Vehicles by AESOP Leasing, AESOP Leasing II or any Lessee to third
parties other than the Manufacturers, warranty payments and insurance
proceeds) to be paid directly to the Trustee or its agent for deposit
into the Collection Account; (ii) with respect to amounts representing
the proceeds from sales of Vehicles by AESOP Leasing, AESOP Leasing II
or any Lessee to third parties other than the Manufacturers to be
deposited by AESOP Leasing, AESOP Leasing II or any Lessee, as the
case may be, within two Business Days of its receipt thereof into the
Collection Account; (iii) under the Loan Agreements to be paid
directly to the Trustee for deposit into the Collection Account; and
(iv) from any other source to be paid either (a) directly into the
Collection Account at such times as such amounts are due or (b) by
AESOP Leasing, AESOP Leasing II or any Lessee into the Collection
Account within two Business Days of its receipt thereof (and, in each
case, AFC-II represents to the Secured Parties that it has instructed
AESOP Leasing, AESOP Leasing II, each Lessee, the Manufacturers, and
any other source of Collections, as applicable, to so remit such
amounts). Upon the occurrence and during the continuance of an
Amortization Event or Potential
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Amortization Event, insurance proceeds and warranty payments will be
deposited in the Collection Account within two Business Days of their
receipt by AESOP Leasing, AESOP Leasing II or any Lessee; provided,
however, upon the delivery of an Officer's Certificate of AESOP
Leasing or AESOP Leasing II, as the case may be, to the Trustee (upon
which it may conclusively rely) certifying (i) that a Vehicle for
which insurance proceeds or warranty payments, as the case may be,
have been received in the Collection Account has been repaired and
(ii) as to the dollar amount of such repairs, the Trustee shall
release to AESOP Leasing or AESOP Leasing II, as applicable, insurance
proceeds or warranty payments, as the case may be, in such dollar
amount (to the extent not previously applied hereunder). AFC-II agrees
that if any such monies, instruments, cash or other proceeds shall be
received by AFC-II in an account other than the Collection Account or
in any other manner, such monies, instruments, cash and other proceeds
will not be commingled by AFC-II with any of its other funds or
property, if any, but will be held separate and apart therefrom and
shall be held in trust by AFC-II for, and immediately paid over to,
but in any event within two Business Days from receipt, the Trustee,
with any necessary endorsement. All monies, instruments, cash and
other proceeds received by the Trustee pursuant to this Indenture
shall be immediately deposited in the Collection Account and shall be
applied as provided in this Article 5. Notwithstanding the foregoing,
provided that all amounts due and payable under the Loan Agreements as
of any Payment Date have been paid in full and so long as an
Amortization Event shall not have occurred and be continuing and no
Potential Loan Event of Default under Section 12.1.1 of any of the
Loan Agreements shall result therefrom, to the extent that (i) the
aggregate amount of proceeds received in the Collection Account with
respect to Vehicles during the Related Month exceeds the aggregate of
the Termination Values of such Vehicles payable under the Loan
Agreements on the related Distribution Date, (ii) any amounts in
respect of payments to AESOP Leasing pursuant to Section 16.2 of the
AESOP I Operating Lease or the Finance Lease remain on deposit in the
Collection Account or (iii) any amounts in respect of payments
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to AESOP Leasing II pursuant to Section 16.2 of the AESOP II Operating
Lease remain on deposit in the Collection Account, the Trustee shall,
upon the written direction (on which it may conclusively rely) of
AFC-II delivered by 12:00 noon (New York City time) on the second
Business Day prior to such Distribution Date (which direction AFC-II
agrees to give), release (x) in the case of clause (i) above, the
portion of such excess (to the extent not previously applied
hereunder) allocable to Vehicles financed under the AESOP II Loan
Agreement to AESOP Leasing II and the remaining portion of such excess
to AESOP Leasing (in each case, in accordance with such written
direction of AFC-II), (y) in the case of clause (ii) above, such
unreimbursed amounts to AESOP Leasing and (z) in the case of clause
(iii) above, such unreimbursed amounts to AESOP Leasing II. The
Trustee shall release such excess or amounts to AESOP Leasing or AESOP
Leasing II, as the case may be, by deposit to, (i) in the case of
AESOP Leasing, the AESOP I Segregated Account and, (ii) in the case of
AESOP Leasing II, the AESOP II Segregated Account, in each case on
such Distribution Date, or, if such written direction is received by
the Trustee after 12:00 noon (New York City time) on such Distribution
Date, on the next succeeding Business Day.
(b) Disqualification of Institution Maintaining Collection
Account. In the event the Qualified Institution maintaining the
Collection Account ceases to be such, then, upon the occurrence of
such event and the establishment of a new Collection Account with a
Qualified Institution or qualified corporate trust department pursuant
to Section 5.1(a) and thereafter, AFC-II shall deposit or cause to be
deposited all Collections as set forth in Section 5.2(a) into the new
Collection Account, and in no such event shall deposit or cause to be
deposited any Collections thereafter into any account established,
held or maintained with the institution formerly maintaining the
Collection Account (unless it later becomes a Qualified Institution or
qualified corporate trust department). AFC-II will instruct AESOP
Leasing and AESOP Leasing II as to the foregoing requirements of this
subsection (b).
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(c) Sharing Collections. In the manner described in the
related Supplement, to the extent that Principal Collections that are
allocated to any Series on a Distribution Date are not needed to make
payments to Noteholders of such Series or required to be deposited in
a reserve account or a Distribution Account for such Series on such
Distribution Date, such Principal Collections may, at the direction of
AFC-II, be applied to cover principal payments due to or for the
benefit of Noteholders of another Series. Any such reallocation will
not result in a reduction in the Invested Amount of the Series to
which such Principal Collections were initially allocated.
(d) Unallocated Principal Collections. If, after giving
effect to Section 5.2(c), Principal Collections allocated to any
Series on any Distribution Date are in excess of the amount required
to be paid in respect of such Series on such Distribution Date, then
any such excess Principal Collections shall be allocated to AFC-II or
such other party as may be entitled thereto as set forth in any
Supplement.
Section 5.3. Determination of Monthly Interest.
Monthly interest with respect to each Series of Notes shall be
determined, allocated and distributed in accordance with the procedures set
forth in the applicable Supplement.
Section 5.4. Determination of Monthly Principal.
Monthly principal with respect to each Series of Notes shall be
determined, allocated and distributed in accordance with the procedures set
forth in the applicable Supplement. However, all principal or interest with
respect to any Series of Notes shall be due and payable no later than the
Series Termination Date with respect to such Series.
Section 5.5. Paired Series.
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To the extent provided in a Supplement, any Series of Notes
may be paired with one or more other Series (each, a "Paired Series"). Each
Paired Series may be prefunded with an initial deposit to a pre-funding account
in an amount up to the initial principal balance of such Paired Series,
primarily from the proceeds of the sale of such Paired Series, or will have a
variable principal amount. Any such pre-funding account will be held for the
benefit of such Paired Series and not for the benefit of the Noteholders of the
Series paired therewith. As funds are accumulated in a principal funding
account or paid to Noteholders either (i) in the case of a pre-funded Paired
Series, an equal amount of funds on deposit in any pre-funding account for such
prefunded Paired Series will be released and paid to AFC-II or (ii) in the
case of a Paired Series having a variable principal amount, an interest in such
variable Paired Series in an equal or lesser amount may be sold by AFC-II and,
in either case, the invested amount of such Paired Series will increase by up
to a corresponding amount. Upon payment in full of the Series paired to the
Paired Series, the aggregate invested amount of such related Paired Series will
have been increased by an amount up to an aggregate amount equal to the
Invested Amount of such Series paid to the Noteholders thereof. The issuance of
a Paired Series may be subject to certain conditions described in the related
Supplement.
[THE REMAINDER OF ARTICLE 5 IS RESERVED AND MAY BE SPECIFIED IN ANY
SUPPLEMENT WITH RESPECT TO ANY SERIES.]
ARTICLE 6.
DISTRIBUTIONS AND REPORTS TO NOTEHOLDERS
Section 6.1. Distributions in General.
(a) Notwithstanding any provision hereof or of any
Supplement, prior to depositing any amounts on deposit in the
Collection Account into any Distribution Account, all amounts due and
payable to the Trustee pursuant to Section 10.5 and Section 10.11 and
under the Vehicle Title and Lienholder Nominee Agreements (including
all costs and expenses incurred by the Trustee related to the
disposition of any Collateral), to the extent not already paid by
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AFC-II, shall be withdrawn from the Collection Account and paid to the
Trustee. Unless otherwise specified in the applicable Supplement, on
each Distribution Date with respect to each Outstanding Series, after
payment of the amounts described in the preceding sentence, (i) the
Paying Agent shall deposit (in accordance with the Monthly Certificate
delivered to the Trustee) in the Distribution Account for each such
Series the amounts on deposit in the Collection Account allocable to
Noteholders of such Series as interest and, if during an Amortization
Period, principal, and (ii) to the extent provided for in the
applicable Supplement, the Trustee shall deposit in the Distribution
Account for each such Series the amount of Enhancement for such Series
drawn in connection with such Distribution Date.
(b) Unless otherwise specified in the applicable Supplement,
on each Distribution Date, the Paying Agent shall distribute to the
Noteholders of each Series, to the extent amounts are on deposit in
the Distribution Account for such Series, an amount sufficient to pay
all principal and interest due on such Series on such Distribution
Date in accordance with the Monthly Certificate delivered to the
Trustee. Such distribution shall be to each Noteholder of record of
such Series on the preceding Record Date based on such Noteholder's
pro rata share of the aggregate principal amount of the Notes of such
Series held by such Noteholder; provided, however, that, the final
principal payment due on a Note shall only be paid to the holder of a
Note on due presentment of such Note for cancellation in accordance
with the provisions of the Note.
(c) Unless otherwise specified in the applicable Supplement,
amounts distributable to a Noteholder pursuant to this Section 6.1
shall be payable by wire transfer of immediately available funds
released by the Paying Agent from the Distribution Account no later
than 12:00 noon (New York City time) for credit to the account
designated by such Noteholder.
(d) Unless otherwise specified in the applica-
ble Supplement (i) all distributions to Noteholders
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of all classes within a Series of Notes will have the same priority
and (ii) in the event that on any date of determination the amount
available to make payments to the Noteholders of a Series is not
sufficient to pay all sums required to be paid to such Noteholders on
such date, then each class of Noteholders will receive its ratable
share (based upon the aggregate amount due to such class of
Noteholders) of the aggregate amount available to be distributed in
respect of the Notes of such Series.
(e) All distributions in respect of Notes represented by a
Temporary Global Note will be made only with respect to that portion
of the Temporary Global Note in respect of which Euroclear or Cedel
shall have delivered to the Trustee a certificate or certificates
substantially in the form of Exhibit B. The delivery to the Trustee by
Euroclear or Cedel of the certificate or certificates referred to
above may be relied upon by AFC-II and the Trustee as conclusive
evidence that the certificate or certificates referred to therein or
have been delivered to Euroclear or Cedel pursuant to the terms of
this Indenture and the Temporary Global Note. No payments of interest
will be made on a Temporary Global Note after the Exchange Date
therefor.
Section 6.2. Reserved.
Section 6.3. Optional Repurchase of Notes.
On any Distribution Date occurring on or after the date on
which the Invested Amount of any Series or class of such Series is equal to or
less than the Repurchase Amount (if any) for such Series or class set forth in
the Supplement related to such Series, or at such other time otherwise provided
for in the Supplement relating to such Series, AFC-II shall have the option to
purchase all Outstanding Notes of such Series, or class of such Series, at a
purchase price (determined after giving effect to any payment of principal and
interest on such Distribution Date) equal to (unless otherwise specified in the
related Supplement) the Invested Amount of such Series on such Distribution
Date, plus accrued and unpaid interest on the unpaid principal balance of the
Notes of such Series (calculated at the Note Rate of such Series) through the
day immediately prior to the date of
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such purchase plus, if provided for in the related Supplement, any premium
payable at such time. AFC-II shall give the Trustee at least 30 days' prior
written notice of the date on which AFC-II intends to exercise such option to
purchase. Not later than 12:00 noon, New York City time, on such Distribution
Date, an amount of the purchase price equal to the Invested Amount of all Notes
of such Series on such Distribution Date and the amount of accrued and unpaid
interest with respect to such Notes and any applicable premium will be
deposited into the Distribution Account for such Series in immediately
available funds. The funds deposited into such Distribution Account or
distributed to the Paying Agent will be passed through in full to the
Noteholders on such Distribution Date.
Section 6.4. Monthly Noteholders' Statement.
(a) On each Distribution Date, the Paying Agent shall forward
to each Noteholder of record of each Outstanding Series the Monthly
Noteholders' Statement with respect to such Series, with a copy to the
Rating Agencies, the Trustee (if other than the Paying Agent) and any
Enhancement Provider with respect to such Series.
(b) Annual Noteholders' Tax Statement. On or before January
31 of each calendar year, beginning with calendar year 1998, the
Paying Agent shall furnish to each Person who at any time during the
preceding calendar year was a Noteholder a statement prepared by
AFC-II containing the information which is required to be contained in
the Monthly Noteholders' Statements with respect to each Series of
Notes aggregated for such calendar year or the applicable portion
thereof during which such Person was a Noteholder, together with such
other customary information (consistent with the treatment of the
Notes as debt) as AFC-II deems necessary or desirable to enable the
Noteholders to prepare their tax returns (each such statement, an
"Annual Noteholders' Tax Statement"). Such obligations of AFC-II to
prepare and the Paying Agent to distribute the Annual Noteholders' Tax
Statement shall be deemed to have been satisfied to the extent that
substantially comparable information shall be pro-
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vided by the Paying Agent pursuant to any requirements of the Code as
from time to time in effect.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES
AFC-II hereby represents and warrants, for the benefit of the
Trustee and the Secured Parties, as follows as of each Series Closing Date:
Section 7.1. Existence and Power.
AFC-II (a) is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Delaware,
(b) is duly qualified to do business as a foreign limited liability company and
in good standing under the laws of each jurisdiction where the character of its
property, the nature of its business or the performance of its obligations make
such qualification necessary, and (c) has all limited liability company powers
and all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted and for purposes of the
transactions contemplated by this Indenture and the other Related Documents.
Section 7.2. Limited Liability Company and
Governmental Authorization.
The execution, delivery and performance by AFC-II of this
Indenture, the related Supplement and the other Related Documents to which it
is a party (a) is within AFC-II's limited liability company powers, has been
duly authorized by all necessary limited liability company action, (b) requires
no action by or in respect of, or filing with, any governmental body, agency or
official which has not been obtained and (c) does not contravene, or constitute
a default under, any provision of applicable law or regulation or of the
certificate of formation or limited liability company agreement of AFC-II or of
any law or governmental regulation, rule, contract, agreement, judgment,
injunction, order, decree or other instrument binding upon AFC-II or any of its
Assets or result in the creation or imposition of any Lien on any Asset of
AFC-II, except for Liens created by
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this Indenture or the other Related Documents. This Indenture and each of the
other Related Documents to which AFC-II is a party has been executed and
delivered by a duly authorized officer of AFC-II.
Section 7.3. Binding Effect.
This Indenture and each other Related Document is a legal,
valid and binding obligation of AFC-II enforceable against AFC-II in accordance
with its terms (except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally or by general equitable
principles, whether considered in a proceeding at law or in equity and by an
implied covenant of good faith and fair dealing).
Section 7.4. Financial Information; Financial Condition.
All balance sheets, all statements of operations, of
shareholders' equity and of cash flow, and other financial data (other than
projections) which have been or shall hereafter be furnished by AFC-II to the
Trustee and the Rating Agencies pursuant to Section 8.3 have been and will be
prepared in accordance with GAAP (to the extent applicable) and do and will
present fairly the financial condition of the entities involved as of the dates
thereof and the results of their operations for the periods covered thereby,
subject, in the case of all unaudited statements, to normal year-end
adjustments and lack of footnotes and presentation items.
Section 7.5. Litigation.
There is no action, suit or proceeding pending against or, to
the knowledge of AFC-II, threatened against or affecting AFC-II before any
court or arbitrator or any Governmental Authority with respect to which there
is a reasonable possibility of an adverse decision that could materially
adversely affect the financial position, results of operations, business,
properties, performance, prospects or condition (financial or otherwise) of
AFC-II or which in any manner draws into question the validity or
enforceability of this Indenture, any Supplement or any other Related Document
or the
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ability of AFC-II to perform its obligations hereunder or thereunder.
Section 7.6. No ERISA Plan.
AFC-II has not established and does not maintain or
contribute to any Pension Plan that is covered by Title IV of ERISA and will
not do so, as long as any Notes are Outstanding.
Section 7.7. Tax Filings and Expenses.
AFC-II has filed all federal, state and local tax returns and
all other tax returns which, to the knowledge of AFC-II, are required to be
filed (whether informational returns or not), and has paid all taxes due, if
any, pursuant to said returns or pursuant to any assessment received by AFC-II,
except such taxes, if any, as are being contested in good faith and for which
adequate reserves have been set aside on its books. AFC-II has paid all fees
and expenses required to be paid by it in connection with the conduct of its
business, the maintenance of its existence and its qualification as a foreign
limited liability company authorized to do business in each State in which it
is required to so qualify, except where the failure to pay any such fees and
expenses is not reasonably likely to have a Material Adverse Effect.
Section 7.8. Disclosure.
All certificates, reports, statements, documents and other
information furnished to the Trustee by or on behalf of AFC-II pursuant to any
provision of this Indenture or any Related Document, or in connection with or
pursuant to any amendment or modification of, or waiver under, this Indenture
or any Related Document, shall, at the time the same are so furnished, be
complete and correct to the extent necessary to give the Trustee true and
accurate knowledge of the subject matter thereof in all material respects, and
the furnishing of the same to the Trustee shall constitute a representation and
warranty by AFC-II made on the date the same are furnished to the Trustee to
the effect specified herein.
Section 7.9. Investment Company Act; Securities Act.
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AFC-II is not, and is not controlled by, an "investment
company" within the meaning of, and is not required to register as an
"investment company" under, the Investment Company Act of 1940. It is not
necessary in connection with the issuance and sale of the Notes under the
circumstances contemplated in the related Supplement to register any security
under the Securities Act or to qualify any indenture under the Trust Indenture
Act.
Section 7.10. Regulations G, T, U and X.
The proceeds of the Notes will not be used to purchase or
carry any "margin stock" (as defined or used in the regulations of the Board of
Governors of the Federal Reserve System, including Regulations G, T, U and X
thereof). AFC-II is not engaged in the business of extending credit for the
purpose of purchasing or carrying any margin stock.
Section 7.11. No Consent.
No consent, action by or in respect of, approval or other
authorization of, or registration, declaration or filing with, any Governmental
Authority or other Person is required for the valid execution and delivery of
this Indenture or any Supplement or for the performance of any of AFC-II's
obligations hereunder or thereunder or under any other Related Document other
than such consents, approvals, authorizations, registrations, declarations or
filings as shall have been obtained by AFC-II prior to the Initial Closing Date
or as contemplated in Section 7.14.
Section 7.12. Solvency.
Both before and after giving effect to the transactions
contemplated by this Indenture and the other Related Documents, AFC-II is
solvent within the meaning of the Bankruptcy Code and AFC-II is not the subject
of any voluntary or involuntary case or proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy or insolvency law and no Event of Bankruptcy has occurred with
respect to AFC-II.
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Section 7.13. Ownership of Limited Liability Company
Interests; Subsidiary.
As of each Series Closing Date, all of the issued and
outstanding limited liability company interests of AFC-II are owned by AESOP
Leasing and Original AESOP, all of which limited liability company interests
have been validly issued, are fully paid and non-assessable and are owned of
record by such entities. AFC-II has no subsidiaries and owns no capital stock
of, or other interest in, any other Person.
Section 7.14. Security Interests.
(a) All action necessary (including the filing of UCC-1
financing statements, the assignment of rights under the Manufacturer
Programs to the Trustee and the notation on the Certificates of Title
for all Vehicles (other than the Initial PVT Vehicles, the Initial
Financed Vehicles, the Franchisee Vehicles and Vehicles titled in the
states of Nebraska, Ohio and Oklahoma) of the Trustee's Lien for the
benefit of the Secured Parties) to protect and perfect the Trustee's
security interest in the Collateral (except, as to perfection, with
respect to Vehicles titled in Nebraska, Ohio and Oklahoma) now in
existence and hereafter acquired or created has been duly and
effectively taken.
(b) No security agreement, financing statement, equivalent
security or lien instrument or continuation statement listing AFC-II
as debtor covering all or any part of the Collateral is on file or of
record in any jurisdiction, except such as may have been filed,
recorded or made by AFC-II in favor of the Trustee on behalf of the
Secured Parties in connection with this Indenture.
(c) This Indenture constitutes a valid and continuing Lien on
the Collateral in favor of the Trustee on behalf of the Secured
Parties, which Lien will be prior to all other Liens (other than
Permitted Liens), will be enforceable as such as against creditors of
and purchasers from AFC-II in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
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similar laws affecting creditors' rights generally or by general
equitable principles, whether considered in a proceeding at law or in
equity and by an implied covenant of good faith and fair dealing. All
action necessary to perfect such prior security interest has been duly
taken (except with respect to Vehicles titled in Nebraska, Ohio and
Oklahoma).
(d) AFC-II's principal place of business and chief executive
office shall be at: Two Wall Street, New York, New York 10005, and the
place where its records concerning the Collateral are kept is at: Two
Wall Street, New York, New York 10005. AFC-II does not transact, and
has not transacted, business under any other name.
(e) All authorizations in this Indenture for the Trustee to
endorse checks, instruments and securities and to execute financing
statements, continuation statements, security agreements, Certificates
of Title, and other instruments with respect to the Collateral are
powers coupled with an interest and are irrevocable.
Section 7.15. Binding Effect of Loan Agreements.
Each of the Loan Agreements is in full force and effect and
there are no outstanding Loan Events of Default thereunder or Manufacturer
Events of Default under the Leases nor have events occurred which, with the
giving of notice, the passage of time or both, would constitute a Loan Event of
Default or a Manufacturer Event of Default.
Section 7.16. Non-Existence of Other Agreements.
As of the date of the issuance of the first Series of Notes,
other than as permitted by Section 8.24 and Section 8.26 hereof (i) AFC-II is
not a party to any contract or agreement of any kind or nature and (ii) AFC-II
is not subject to any obligations or liabilities of any kind or nature in favor
of any third party, including, without limitation, Contingent Obligations.
Section 7.17. Manufacturer Programs.
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On the date of each Loan, each Manufacturer Program in
respect of which any portion of the Aggregate Asset Amount is calculated
(including any portion of the Aggregate Asset Amount comprising the value of
any Loans used to purchase Vehicles covered by such Manufacturer Program) shall
be an Eligible Manufacturer Program.
Section 7.18. Other Representations.
All representations and warranties of AFC-II made in each
Related Document to which it is a party are true and correct and are repeated
herein as though fully set forth herein.
ARTICLE 8.
COVENANTS
Section 8.1. Payment of Notes.
AFC-II shall pay the principal of (and premium, if any) and
interest on the Notes pursuant to the provisions of this Indenture and any
applicable Supplement. Principal and interest shall be considered paid on the
date due if the Paying Agent holds on that date money designated for and
sufficient to pay all principal and interest then due.
Section 8.2. Maintenance of Office or Agency.
AFC-II will maintain an office or agency (which may be an
office of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or exchange, where notices and demands
to or upon AFC-II in respect of the Notes and this Indenture may be served, and
where, at any time when AFC-II is obligated to make a payment of principal and
premium upon the Notes, the Notes may be surrendered for payment. AFC-II will
give prompt written notice to the Trustee of the location, and any change in
the location, of such office or agency. If at any time AFC-II shall fail to
maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.
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AFC-II may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations. AFC-II
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
AFC-II hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of AFC-II.
Section 8.3. Information.
AFC-II will deliver or cause to be delivered to the Trustee
and each Rating Agency:
(a) promptly upon the delivery by each Borrower to AFC-II, a
copy of the financial information and other materials required to be
delivered by such Borrower to AFC-II pursuant to Section 9.5(i) of the
related Loan Agreements;
(b) from time to time such additional information regarding
the financial position, results of operations or business of each
Borrower as the Trustee may reasonably request to the extent that such
Borrower delivers such information to AFC-II pursuant to Section
9.5(iv) and (v) of the related Loan Agreements;
(c) at the time of delivery of the items described in clause
(a) above, a certificate of an officer of AFC-II that, except as
provided in any certificate delivered in accordance with Section 8.10,
no Amortization Event, Loan Event of Default or (to the best of such
officer's knowledge) Potential Amortization Event, Potential Loan
Event of Default, Lease Event of Default or Potential Lease Event of
Default has occurred or is continuing during such fiscal quarter;
(d) on or prior to June 30 of each year, a certificate of the
chief financial officer of AFC-II certifying that (i) the ratings
assigned by the Rating Agencies in respect of any outstanding Series
of Notes have not been withdrawn or downgraded since
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the date of the related Supplement, (ii) no Rating Agency has
determined that the amount of Enhancement for any outstanding Series
of Notes must be increased in order to maintain the then current
rating of such Series or, if any Rating Agency has made such a
determination, the amount of additional Enhancement that would be
required in order to maintain such current rating, (iii) no change in
the Manufacturer Program of any Manufacturer in respect of any new
model year shall have given rise to any request on the part of the
Rating Agencies that any modification be made to any Loan Agreement or
any other Related Document, and (iv) AFC-II has apprised the Rating
Agencies of all material changes in the Manufacturer Programs
occurring since the date of this Indenture; and
(e) promptly following the introduction of any prospective
change in any Manufacturer Program or the introduction of any new
Manufacturer Program by an existing Manufacturer, or, if later, the
date AFC-II or any Lessee obtains notice thereof, notice of the same
and notice thereof to the Rating Agencies describing the principal
terms thereof, and at least annually a copy of each Manufacturer
Program to the Rating Agencies.
Section 8.4. Payment of Obligations.
AFC-II will pay and discharge, at or before maturity, all of
its respective material obligations and liabilities, including, without
limitation, tax liabilities and other governmental claims, except where the
same may be contested in good faith by appropriate proceedings, and will
maintain, in accordance with GAAP, reserves as appropriate for the accrual of
any of the same.
Section 8.5. Maintenance of Property.
AFC-II will keep, or will cause to be kept, all property
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted; provided, however, that nothing in this
Section 8.5 shall require AFC-II to maintain, or to make renewals,
replacements, additions, betterments or improvements of or to, any tangible
property, if such property, in the reasonable opinion of AFC-II, is obsolete or
surplus or
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unfit for use and cannot be used advantageously in the
conduct of the business of AFC-II.
Section 8.6. Conduct of Business and Maintenance of
Existence.
AFC-II will maintain its existence as a limited liability
company validly existing, and in good standing under the laws of the State of
Delaware and duly qualified as a foreign limited liability company licensed
under the laws of each state in which the failure to so qualify would have a
material adverse effect on the business and operations of AFC-II.
Section 8.7. Compliance with Laws.
AFC-II will comply in all respects with all Requirements of
Law and all applicable laws, ordinances, rules, regulations, and requirements
of Governmental Authorities (including, without limitation, ERISA and the rules
and regulations thereunder) except where the necessity of compliance therewith
is contested in good faith by appropriate proceedings and where such
noncompliance would not materially and adversely affect the condition,
financial or otherwise, operations, performance, properties or prospects of
AFC-II or its ability to carry out the transactions contemplated in this
Indenture and each other Related Document; provided, however, such
noncompliance will not result in a Lien (other than a Permitted Lien) on any
Assets of AFC-II.
Section 8.8. Inspection of Property, Books and Records.
AFC-II will keep proper books of record and account in which
full, true and correct entries shall be made of all dealings and transactions
in relation to its Assets, business and activities in accordance with GAAP; and
will permit the Trustee to visit and inspect any of its properties, to examine
and make abstracts from any of its books and records and to discuss its
affairs, finances and accounts with its officers, directors, employees and
independent public accountants, all at such reasonable times upon reasonable
notice and as often as may reasonably be requested.
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Section 8.9. Compliance with Related Documents.
AFC-II will perform and comply with each and every
obligation, covenant and agreement required to be performed or observed by it
in or pursuant to this Indenture and each other Related Document to which it is
a party and will not take any action which would permit AESOP Leasing, AESOP
Leasing II or any Lessee to have the right to refuse to perform any of its
respective obligations under any Related Document. AFC-II will not amend any of
the Loan Agreements, except in accordance with Article 12 hereof.
Section 8.10. Notice of Defaults.
(a) Promptly upon becoming aware of any Potential
Amortization Event, Amortization Event, Potential Loan Event of
Default, Loan Event of Default, Potential Lease Event of Default or
Lease Event of Default, AFC-II shall give the Trustee, each
Enhancement Provider and the Rating Agencies notice thereof, together
with a certificate of the President, Vice President or principal
financial officer of AFC-II setting forth the details thereof and any
action with respect thereto taken or contemplated to be taken by
AFC-II, and
(b) Promptly upon becoming aware of any default under any
Related Document or under any Manufacturer Program, AFC-II shall give
the Trustee, each Enhancement Provider and the Rating Agencies notice
thereof.
Section 8.11. Notice of Material Proceedings.
Promptly upon becoming aware thereof, AFC-II shall give the
Trustee and the Rating Agencies written notice of the commencement or existence
of any proceeding by or before any Governmental Authority against or affecting
AFC-II which is reasonably likely to have a material adverse effect on the
business, condition (financial or otherwise), results of operations, properties
or performance of AFC-II or the ability of AFC-II to perform its obligations
under this Indenture or under any other Related Document to which it is a
party.
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Section 8.12. Further Requests.
AFC-II will promptly furnish to the Trustee, each Enhancement
Provider and the Rating Agencies such other information as, and in such form
as, the Trustee or such Enhancement Provider or the Rating Agencies may
reasonably request in connection with the transactions contemplated hereby.
Section 8.13. Further Assurances.
(a) AFC-II shall do such further acts and things, and execute
and deliver to the Trustee such additional assignments, agreements,
powers and instruments, as the Trustee or the Required Noteholders
reasonably determines to be necessary to carry into effect the
purposes of this Indenture or the other Related Documents or to better
assure and confirm unto the Trustee or the Noteholders their rights,
powers and remedies hereunder including, without limitation, the
filing of any financing or continuation statements under the Uniform
Commercial Code in effect in any jurisdiction with respect to the
liens and security interests granted hereby. AFC-II also hereby
acknowledges that the Trustee has the right but not the obligation to
file any such financing statement or continuation statement without
the signature of AFC-II to the extent permitted by applicable law. If
any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any promissory note, chattel paper or
other instrument, such note, chattel paper or instrument shall be
deemed to be held in trust and immediately pledged and physically
delivered to the Trustee hereunder, and shall, subject to the rights
of any Person in whose favor a prior Lien has been perfected, be duly
endorsed in a manner satisfactory to the Trustee and delivered to the
Trustee promptly. Without limiting the generality of the foregoing
provisions of this Section 8.13(a), AFC-II shall take all actions that
are required to maintain the security interest of the Trustee on
behalf of the Secured Parties in the Collateral as a perfected
security interest subject to no prior Liens, including, without
limitation (i) filing all Uniform Commercial Code financing
statements, continuation statements and amendments thereto necessary
to
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achieve the foregoing, (ii) causing the Lien of the Trustee to be
noted on all Certificates of Title (other than on Certificates of
Title with respect to the (1) Initial PVT Vehicles and the Initial
Financed Vehicles, which Certificates of Title shall reflect the lien
of BONY, (2) Franchisee Vehicles, which Certificates of Title shall
reflect the lien of the nominee lienholder under the applicable
Franchisee Nominee Agreement, and (3) Vehicles located in Ohio,
Oklahoma and Nebraska) and (iii) causing the Administrator, as agent
for the Trustee, to maintain possession of the Certificates of Title
for the benefit of the Trustee pursuant to Section 10 of each of the
Leases. AFC-II further agrees that it will not, without the prior
written consent of the Trustee and without prior written notice to the
Enhancement Providers, exercise any right, remedy, power or privilege
available to it with respect to any obligor under the Collateral, take
any action to compel or secure performance or observance by any
obligor of its obligations to AFC-II, or give any consent, request,
notice, direction, approval, extension or waiver with respect to any
obligor.
(b) AFC-II will warrant and defend the Trustee's right, title
and interest in and to the Collateral and the income, distributions
and proceeds thereof, for the benefit of the Trustee on behalf of the
Secured Parties, against the claims and demands of all Persons
whomsoever.
(c) If so requested by the Trustee or by Noteholders holding
10% or in excess of 10% of the aggregate Invested Amount of any Series
of Notes (excluding for the purposes of making the foregoing
calculation, any Notes held by ARC or any Affiliate of ARC), AFC-II
will provide, no more frequently than annually, an Opinion of Counsel
to the effect that no UCC financing or continuation statements are
required to be filed with respect to any of the Collateral in which a
security interest may be perfected by the filing of UCC financing
statements.
Section 8.14. Manufacturer Programs.
(a) Prior to making any Loans with respect to any Program
Vehicles for any model year or years
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after the 1997 model year, AFC-II will have received (i) an executed
Assignment Agreement with respect to such Manufacturer Program for
such model year or years, (ii) if any Series of Notes or Commercial
Paper Notes is then being rated by a Rating Agency, a written
confirmation from each such Rating Agency that the acquisition of
Vehicles pursuant to such Manufacturer Program satisfies the Rating
Agency Consent Condition and the CP Rating Agency Condition in respect
of any outstanding Series of Notes or Commercial Paper Notes, as
applicable, and (iii) if there is a material change to a Manufacturer
Program during a model year, written confirmation from each Rating
Agency that the acquisition of Vehicles pursuant to such Manufacturer
Program satisfies the Rating Agency Consent Condition and the CP
Rating Agency Condition in respect of any outstanding Series of Notes
or Commercial Paper Notes, as applicable. A copy of the rating
confirmations set forth in clauses (ii) and (iii) will promptly be
delivered to the Trustee for delivery to the Noteholders of any
outstanding Series of Notes.
(b) AFC-II will (a) provide the Trustee with at least 30
days' prior written notice of its intention to make Loans to AESOP
Leasing or AESOP Leasing II, as the case may be, for the financing of
Program Vehicles from any new Manufacturer, (b) provide the Trustee
with a copy of the draft Manufacturer Program of such Manufacturer as
it exists at the time of such notice and a copy of the final
Manufacturer Program promptly upon its being available and (c) certify
to the Trustee and the Noteholders that such Manufacturer Program is
an Eligible Manufacturer Program at such time. In no event shall
AFC-II agree, to the extent any consent of AFC-II is solicited or
required by the Manufacturer or any assignor of such Manufacturer
Program, to any change in any Manufacturer Program that is reasonably
likely to materially adversely affect its rights or the rights of the
Noteholders with respect to any Program Vehicle previously purchased
or financed under such Manufacturer Program.
Section 8.15. Liens.
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AFC-II will not create, incur, assume or permit to exist any
Lien upon any of its Assets (including the Collateral), other than (i) Liens in
favor of the Trustee for the benefit of the Secured Parties, and (ii) Permitted
Liens.
Section 8.16. Other Indebtedness.
AFC-II will not create, assume, incur, suffer to exist or
otherwise become or remain liable in respect of any Indebtedness other than (i)
Indebtedness hereunder and (ii) Indebtedness permitted under any other Related
Document.
Section 8.17. Mergers.
AFC-II will not merge or consolidate with or into any other
Person.
Section 8.18. Sales of Assets.
AFC-II will not sell, lease, transfer, liquidate or otherwise
dispose of any Assets, except as contemplated by the Related Documents and
provided that the proceeds received by AFC-II are paid directly to the
Collection Account or deposited by AFC-II into the Collection Account within
two Business Days after receipt thereof by AFC-II.
Section 8.19. Acquisition of Assets.
AFC-II will not acquire, by long-term or operating lease or
otherwise, any Assets except in accordance with the terms of the Related
Documents.
Section 8.20. Dividends, Officers' Compensation, etc.
AFC-II will not (i) declare or pay any distributions on any
of its limited liability company interests or make any purchase, redemption or
other acquisition of, any of its limited liability company interests; provided,
however, that so long as no Amortization Event or Potential Amortization Event
has occurred and is continuing or would result therefrom, AFC-II may declare
and pay distributions out of earnings computed in accordance with GAAP or (ii)
pay any wages or salaries or other compensa-
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tion to officers, directors, employees or others except out of earnings
computed in accordance with GAAP.
Section 8.21. Name; Principal Office.
AFC-II will neither (a) change the location of its chief
executive office or principal place of business (within the meaning of the
applicable UCC) without sixty (60) days' prior written notice to the Trustee
nor (b) change its name without prior written notice to the Trustee sufficient
to allow the Trustee to make all filings (including filings of financing
statements on form UCC-1) and recordings necessary to maintain the perfection
of the interest of the Trustee on behalf of the Secured Parties in the
Collateral pursuant to this Indenture. In the event that AFC-II desires to so
change its office or change its name, AFC-II will make any required filings and
prior to actually changing its office or its name AFC-II will deliver to the
Trustee (i) an Officers' Certificate and (except with respect to a change of
the location of AFC-II's chief executive office or principal place of business
to a new location in the same county) an Opinion of Counsel confirming that all
required filings have been made to continue the perfected interest of the
Trustee on behalf of the Secured Parties in the Collateral in respect of the
new office or new name of AFC-II and (ii) copies of all such required filings
with the filing information duly noted thereon by the office in which such
filings were made.
Section 8.22. Organizational Documents.
AFC-II will not amend any of its organizational documents,
including its certificate of formation or limited liability company agreement
unless, prior to such amendment, each Rating Agency confirms that after such
amendment the Rating Agency Consent Condition will be met.
Section 8.23. Investments.
AFC-II will not make, incur, or suffer to exist any loan,
advance, extension of credit or other investment in any Person other than
pursuant to the Loan Agreements and with respect to Permitted Investments and,
in addition, without limiting the generality of the foregoing, AFC-II will not
cause the Trustee to make any Per-
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mitted Investments on AFC-II's behalf that would have the effect of causing
AFC-II to be an "investment company" within the meaning of the Investment
Company Act.
Section 8.24. No Other Agreements.
AFC-II will not (a) enter into or be a party to any agreement
or instrument other than any Related Document or any documents related to any
Enhancement or documents and agreements incidental thereto or entered into as
contemplated in Section 8.26 or (b) except as provided for in Sections 12.1 or
12.2, amend, modify or waive any provision of any Related Document to which it
is a party, or (c) give any approval or consent or permission provided for in
any Related Document, except as permitted in Section 3.2(a).
Section 8.25. Other Business.
AFC-II will not engage in any business or enterprise or enter
into any transaction other than the making of Loans to AESOP Leasing and AESOP
Leasing II pursuant to the Loan Agreements, the related exercise of its rights
as lender thereunder, the incurrence and payment of ordinary course operating
expenses, the issuing and selling of the Notes and other activities related to
or incidental to either of the foregoing (including transactions contemplated
in Sections 8.24 and 8.26).
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Section 8.26. Maintenance of Separate Existence.
AFC-II will do all things necessary to continue to be readily
distinguishable from ARC, each Lessee, AESOP Leasing, Original AESOP, AESOP
Leasing II, AFC and the Affiliates of the foregoing and maintain its limited
liability company existence separate and apart from that of AESOP Leasing,
Original AESOP, AESOP Leasing II, AFC, each Lessee and ARC and Affiliates of
the foregoing including, without limitation, (i) practicing and adhering to
organizational formalities, such as maintaining appropriate books and records;
(ii) observing all organizational formalities in connection with all dealings
between itself and ARC, each Lessee, AESOP Leasing, Original AESOP, AESOP
Leasing II, AFC, the Affiliates of the foregoing or any other unaffiliated
entity; (iii) observing all procedures required by its certificate of
formation, its limited liability company agreement and the laws of the State of
Delaware; (iv) acting solely in its name and through its duly authorized
officers or agents in the conduct of its businesses; (v) managing its business
and affairs by or under the direction of its Managers; (vi) ensuring that its
Chairman of the Managers (or its Managers, when necessary) duly authorizes all
of its actions; (vii) ensuring the receipt of proper authorization, when
necessary, from its Members for its actions; (viii) maintaining at least one
Manager who is an Independent Manager; (ix) owning or leasing (including
through shared arrangements with Affiliates) all office furniture and equipment
necessary to operate its business; (x) not (A) having or incurring any
indebtedness to AESOP Leasing or AESOP Leasing II ; (B) guaranteeing or
otherwise becoming liable for any obligations of AESOP Leasing, Original AESOP,
AESOP Leasing II, AFC, any Lessee or ARC or any Affiliates of the foregoing;
(C) other than as provided in the Related Documents, having obligations
guaranteed by AESOP Leasing, Original AESOP, AESOP Leasing II, AFC, any Lessee,
ARC or any Affiliates of the foregoing; (D) holding itself out as responsible
for debts of AESOP Leasing, AESOP Leasing II, AFC, any Lessee or ARC or any
Affiliates of the foregoing or for decisions or actions with respect to the
affairs of AESOP Leasing, AESOP Leasing II, AFC, any Lessee or ARC or any
Affiliates of the foregoing; (E) failing to correct any known misrepresentation
with respect to the statement in subsection (C); (F) operating or purporting to
operate as
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an integrated, single economic unit with respect to AESOP Leasing, Original
AESOP, AESOP Leasing II, AFC, any Lessee, ARC, the Affiliates of the foregoing
or any other unaffiliated entity; (G) seeking to obtain credit or incur any
obligation to any third party based upon the assets of AESOP Leasing, Original
AESOP, AESOP Leasing II, AFC, any Lessee, ARC, the Affiliates of the foregoing
or any other unaffiliated entity; (H) induce any such third party to reasonably
rely on the creditworthiness of AESOP Leasing, Original AESOP, AESOP Leasing
II, AFC, any Lessee, ARC, the Affiliates of the foregoing or any other
unaffiliated entity; and (I) being directly or indirectly named as a direct or
contingent beneficiary or loss payee on any insurance policy of AESOP Leasing,
Original AESOP, AESOP Leasing II, AFC, any Lessee, ARC or any Affiliates of the
foregoing other than as required by the Related Documents with respect to
insurance on the Vehicles; (xi) other than as provided in the Related
Documents, maintaining its deposit and other bank accounts and all of its
assets separate from those of any other Person; (xii) maintaining its financial
records separate and apart from those of any other Person; (xiii) disclosing in
its annual financial statements the effects of the transactions contemplated by
the Related Documents in accordance with generally accepted accounting
principles; (xiv) setting forth clearly in its financial statements its
separate assets and liabilities and the fact that the Vehicles subject to the
AESOP I Operating Lease are owned by AESOP Leasing and that the Vehicles
subject to the AESOP II Operating Lease are owned by AESOP Leasing II; (xv) not
suggesting in any way, within its financial statements, that its assets are
available to pay the claims of creditors or AESOP Leasing, Original AESOP,
AESOP Leasing II, AFC, any Lessee, ARC, the Affiliates of the foregoing or any
other affiliated or unaffiliated entity; (xvi) compensating all its employees,
officers, consultants and agents for services provided to it by such Persons
out of its own funds; (xvii) maintaining office space separate and apart from
that of AESOP Leasing, Original AESOP, AESOP Leasing II, AFC, any Lessee or ARC
or any Affiliates of the foregoing (even if such office space is subleased from
or is on or near premises occupied by AESOP Leasing, Original AESOP, AESOP
Leasing II, AFC, any Lessee or ARC or any Affiliates of the foregoing) and a
telephone number separate and apart from that of AESOP Leasing, Original AESOP,
AESOP Leasing II, AFC, any Lessee or ARC or any Affiliates of the forego-
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ing; (xviii) conducting all oral and written communications, including, without
limitation, letters, invoices, purchase orders, contracts, statements, and
applications solely in its own name; (xix) having separate stationary from
AESOP Leasing, Original AESOP, AESOP Leasing II, AFC, each Lessee, ARC, the
Affiliates of the foregoing or any other unaffiliated entity; (xx) having no
debt or obligations to any of AESOP Leasing, Original AESOP, AESOP Leasing II,
AFC, any Lessee, ARC, the Affiliates of the foregoing or any other unaffiliated
entity, except for the obligations under the Variable Funding Note to be
acquired by AFC; (xxi) accounting for and managing all of its liabilities
separately from those of AESOP Leasing, Original AESOP, AESOP Leasing II, AFC,
each Lessee or ARC or any Affiliates of the foregoing; (xxii) allocating, on an
arm's length basis, all shared corporate operating services, leases and
expenses, including, without limitation, those associated with the services of
shared consultants and agents and shared computer and other office equipment
and software; and otherwise maintaining an arm's-length relationship with each
of AESOP Leasing, Original AESOP, AESOP Leasing II, AFC, each Lessee, ARC, the
Affiliates of the foregoing or any other unaffiliated entity; (xxiii)
refraining from filing or otherwise initiating or supporting the filing of a
motion in any bankruptcy or other insolvency proceeding involving AESOP
Leasing, Original AESOP, AESOP Leasing II, AFC, each Lessee, ARC or any
Affiliate of ARC, to substantively consolidate AESOP Leasing, Original AESOP,
AESOP Leasing II, AFC, AFC-II with any Lessee, ARC or any Affiliate of ARC;
(xxiv) remaining solvent and assuring adequate capitalization for the business
in which it is engaged and (xxvi) conducting all of its business (whether
written or oral) solely in its own name so as not to mislead others as to the
identity of each of AESOP Leasing, Original AESOP, AESOP Leasing II, AFC, each
Lessee, ARC and the Affiliates of the foregoing. AFC-II acknowledges its
receipt of a copy of those certain opinion letters issued by Skadden, Arps,
Slate, Meagher & Flom LLP dated July 30, 1997 addressing the issue of
substantive consolidation as they may relate to any of each Lessee, ARC and
each affiliate of ARC on the one hand and any of AESOP Leasing II, Original
AESOP, AFC, AFC-II and AESOP Leasing on the other hand and as among AESOP
Leasing II, AESOP Leasing, Original AESOP, AFC-II and AFC. AFC-II hereby agrees
to maintain in place all policies and procedures, and take and continue to take
all action, described in
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the factual assumptions set forth in such opinion letter and relating to it. On
an annual basis, AFC-II will provide to the Rating Agencies and the Trustee an
Officer's Certificate certifying that it is in compliance with its obligations
under this Section 8.26.
Section 8.27. Rule 144A Information Requirement.
For so long as any of the Notes remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, AFC-II covenants and agrees that it shall, during any period in
which it is not subject to Section 13 or 15(d) under the Exchange Act, make
available to any Noteholder in connection with any sale thereof and any
prospective purchaser of Notes from such Noteholder in each case upon request,
the information specified in, and meeting the requirements of, Rule 144A(d)(4)
under the Securities Act.
Section 8.28. Use of Proceeds of Notes.
AFC-II shall use the proceeds of Notes solely for one or more
of the following purposes: (a) to pay amortizing Notes when due, in accordance
with this Indenture; and (b) to fund Loans pursuant to the Loan Agreements.
Section 8.29. Vehicles.
AFC-II shall use commercially reasonable efforts to cause
AESOP Leasing and AESOP Leasing II (and ARAC, to the extent applicable) to
maintain good, legal and marketable title to the Vehicles purchased with
proceeds of Loans (and, in the case of ARAC, leased to ARAC under the Finance
Lease), free and clear of all Liens except for Permitted Liens.
ARTICLE 9.
AMORTIZATION EVENTS AND REMEDIES
Section 9.1. Amortization Events.
If any one of the following events shall occur during the
Revolving Period, the Accumulation Period or
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the Controlled Amortization Period with respect to any Series of Notes (each,
an "Amortization Event"):
(a) AFC-II defaults in the payment of any interest on any
Note of such Series when the same becomes due and payable and such
default continues for a period of five (5) Business Days;
(b) AFC-II defaults in the payment of any principal or
premium on any Note of such Series when the same becomes due and
payable and such default continues for a period of one (1) Business
Day;
(c) AFC-II fails to comply with any of its other agreements
or covenants in, or provisions of, the Notes of a Series or this
Indenture and the failure to so comply materially and adversely
affects the interests of the Noteholders of any Series and continues
to materially and adversely affect the interests of the Noteholders of
such Series for a period of thirty (30) days after the earlier of (i)
the date on which AFC-II obtains knowledge thereof or (ii) the date on
which written notice of such failure, requiring the same to be
remedied, shall have been given to AFC-II by the Trustee or to AFC-II
and the Trustee by the Required Noteholders of such Series;
(d) the occurrence of an Event of Bankruptcy with respect to
AFC-II, AESOP Leasing, AESOP Leasing II, Original AESOP, PVHC, Quartx,
ARAC, any other Lessee or ARC;
(e) (i) any Loan Event of Default described in Section
12.1.1, 12.1.2 or 12.1.3 of any of the Loan Agreements shall occur,
whether or not subsequently waived by AFC-II or (ii) any other Loan
Event of Default shall occur, whether or not subsequently waived by
AFC-II;
(f) any Aggregate Asset Amount Deficiency exists and
continues for a period of 10 days;
(g) AFC-II shall have become an "investment company" or shall
have become under the "control" of an "investment company" under the
Investment Company Act of 1940, as amended;
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(h) any of the Loan Agreements is terminated for any reason;
(i) any representation made by AFC-II in this Base Indenture
or any Related Document is false and such false representation
materially and adversely affects the interests of the Noteholders of
any Series of Notes and such false representation is not cured for a
period of thirty (30) days after the earlier of (i) the date on which
AFC-II obtains knowledge thereof or (ii) the date that written notice
thereof is given to AFC-II by the Trustee or to AFC-II and the Trustee
by the Required Noteholders of such Series;
(j) any of the Related Documents or any portion thereof shall
not be in full force and effect, enforceable in accordance with its
terms or AFC-II, ARC, any Lessee, AESOP Leasing, AESOP Leasing II,
Original AESOP, PVHC, Quartx, any Manufacturer or the Administrator
shall so assert in writing;
(k) ARAC receives notice of termination of the Computer
Services Agreement from WizCom pursuant to Section 14.1(b) or 14.2(b)
thereof, and, in the case of any such notice pursuant to Section
14.2(b) thereof, a qualified successor provider of vehicle processing
services substantially similar to those provided by WizCom pursuant to
the Computer Services Agreement is not appointed by ARAC on or before
the date which is 180 days prior to the effective date of such
termination;
(l) the occurrence of any event of default described in (i)
Section 17.2 or 17.3 of the Licensing Agreement and ARAC receives
notice of termination of the Licensing Agreement from HFS Car
Rental, Inc. or Wizard Co., Inc. or (ii) Section 17.1 of the Licensing
Agreement;
(m) the occurrence of any Administrator Default;
(n) any other event shall occur which may be specified in any
Supplement as an "Amortization Event";
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then (i) in the case of any event described in clause (a), (b), (c), (i) or (n)
above (with respect to clause (n) above, only to the extent such Amortization
Event is subject to waiver as set forth in the applicable Supplement), either
the Trustee, by written notice to AFC-II, or the Required Noteholders of the
applicable Series of Notes, by written notice to AFC-II and the Trustee, may
declare that an Amortization Event has occurred with respect to such Series as
of the date of the notice, or (ii) in the case of any event described in clause
(e)(ii), either the Trustee, by written notice to AFC-II, or the Required
Noteholders of any Series of Notes, by written notice to AFC-II and the
Trustee, may declare that an Amortization Event has occurred with respect to
such Series as of the date of the notice, or (iii) in the case of any event
described in clause (d), (e)(i), (f), (g), (h), (j), (k), (l) or (m) above, an
Amortization Event with respect to all Series of Notes then outstanding shall
immediately occur without any notice or other action on the part of the Trustee
or any Noteholders or (iv) in the case of any event described in clause (n)
above (only to the extent such Amortization Event is not subject to waiver as
set forth in the applicable Supplement), an Amortization Event with respect to
the related Series of Notes shall immediately occur without any notice or other
action on the part of the Trustee or any Noteholders; provided, however, that
the Trustee shall have no liability in connection with any action or inaction
taken, or not taken by it upon the occurrence of an Amortization Event unless a
Trust Officer has actual knowledge of such Amortization Event; and provided
further the provisions of this sentence shall not insulate the Trustee from
liability arising out of its gross negligence or willful misconduct.
Section 9.2. Rights of the Trustee upon Amortization Event or
Certain Other Events of Default.
(a) General. If and whenever an Amortization Event shall have
occurred and be continuing, the Trustee may and, at the written
direction of the Requisite Investors shall, exercise from time to time
any rights and remedies available to it under applicable law or any
Related Document; provided, however, that if such Amortization Event
is based solely on an event described in clause (a), (b), (c), (i) or
(n) of Section 9.1, then the Trustee's
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rights and remedies pursuant to the provisions of this Section 9.2
shall, to the extent not detrimental to the rights of the holders of
the applicable Series of Notes, be limited to rights and remedies
pertaining only to those Series of Notes with respect to which such
Amortization Event has occurred. Any amounts obtained by the Trustee
on account of or as a result of the exercise by the Trustee of any
right shall be held by the Trustee as additional collateral for the
repayment of AFC-II Obligations and shall be applied as provided in
Article 5 hereof. If so specified in the applicable Supplement, the
Trustee may agree not to exercise any rights or remedies available to
it as a result of the occurrence of an Amortization Event with respect
to a Series of Notes only after giving prior written notice thereof to
the Enhancement Provider, if any, with respect to such Series and
obtaining the direction of the Required Noteholders of such Series.
(b) Loan Agreements. If a Liquidation Event of Default or a
Limited Liquidation Event of Default shall have occurred and be
continuing and a Trust Officer shall have notice thereof, the Trustee,
at the written direction of the Requisite Investors (in the case of a
Liquidation Event of Default) or the Required Noteholders (in the case
of a Limited Liquidation Event of Default), shall direct AFC-II to
exercise (and AFC-II agrees to exercise), to the extent necessary, all
rights, remedies, powers, privileges and claims of AFC-II against
AESOP Leasing and AESOP Leasing II under or in connection with the
Loan Agreements and any of the Related Documents and against any party
to any Related Document, including the right or power to take any
action to compel performance or observance by AESOP Leasing, AESOP
Leasing II or any such party of its obligations to AFC-II, the right
to take possession of any of the Vehicles, and to give any consent,
request, notice, direction, approval, extension or waiver in respect
of any of the Loan Agreements, and any right of AFC-II to take such
action independent of such direction shall be suspended; provided,
however, nothing in this Section 9.2(b) shall in any way limit,
condition or delay the duties of the Trustee set forth in Section
9.2(c)(i) or (iii) hereof.
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(c) Manufacturer Programs and Vehicles. (i) Upon the
occurrence of a Liquidation Event of Default of which a Trust Officer
has knowledge (and so long as a Manufacturer Event of Default has not
occurred with respect to the related Manufacturer), the Trustee shall
promptly return or instruct AFC-II to return or cause AESOP Leasing,
AESOP Leasing II or the Lessees to return, the Program Vehicles to the
related Manufacturers (after the minimum holding period specified in
the Manufacturer's Manufacturer Program) and then, to the extent any
Manufacturer fails to accept any such Program Vehicles under the terms
of the applicable Manufacturer Program (or if a Manufacturer Event of
Default has occurred with respect to any Manufacturer), to liquidate
or direct AFC-II to liquidate, or cause AESOP Leasing, AESOP Leasing
II or the Lessees to liquidate the Program Vehicles in accordance with
the rights of AFC-II under the Loan Agreements and to otherwise sell
or cause to be sold to third parties all Non-Program Vehicles. Upon
the occurrence of a Limited Liquidation Event of Default with respect
to any Series of Notes of which the Trust Officer has knowledge, the
Trustee shall promptly return or instruct AFC-II to return or cause
AESOP Leasing, AESOP Leasing II or the Lessees to return Program
Vehicles to the related Manufacturers and to sell Non-Program Vehicles
or cause Non-Program Vehicles to be sold to third parties in an amount
sufficient to pay all interest and principal on such Series of Notes,
and to the extent that any Manufacturer fails to accept any such
Program Vehicles under the terms of the applicable Manufacturer
Program, to return or direct AFC-II to return or cause AESOP Leasing,
AESOP Leasing II or the Lessees to liquidate such Program Vehicles in
accordance with the rights of AFC-II under the Loan Agreements;
provided, however, that the Trustee and AFC-II shall select the
Program Vehicles to be returned to the related Manufacturers and the
Non-Program Vehicles to be sold to third parties in a manner that
does not adversely affect in any material respect the interests of
the Noteholders of any Series of Notes or any Enhancement Provider.
(ii) In addition to, and not in limitation of, the remedies
and duties of the Trustee set forth in
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subsection (i) above or (iii) below, if a Liquidation Event of Default
or a Limited Liquidation Event of Default shall have occurred and be
continuing, the Trustee may, and at the written direction of the
Requisite Investors (in the case of a Liquidation Event of Default) or
at the direction of the Required Noteholders (in the case of a Limited
Liquidation Event of Default) shall exercise, or cause AFC-II or AESOP
Leasing, AESOP Leasing II or the Lessees to exercise, to the extent
necessary, all rights, remedies, powers, privileges and claims of
AFC-II, AESOP Leasing, AESOP Leasing II or the Lessees, as the case
may be, or the Trustee against the Manufacturers under or in
connection with the Manufacturer Programs.
(iii) In the event that either (i) an Event of Bankruptcy
with respect to any Manufacturer of Program Vehicles shall have
occurred and such Manufacturer shall fail to repurchase any Eligible
Vehicles in accordance with the terms of the related Manufacturer
Program or (ii) if there has occurred a Manufacturer Event of Default
of which the Trust Officer has knowledge, the Trustee shall cause
AESOP Leasing, AESOP Leasing II or the Lessees to sell any and all
Program Vehicles covered by the related Manufacturer Program of such
Manufacturer for the highest purchase price offered and, promptly upon
receipt, to deposit the proceeds of such sale into the Collection
Account for allocation hereunder.
(d) Failure of AFC-II, AESOP Leasing, AESOP Leasing II or any
Lessee to Take Action. If (i) AFC-II, AESOP Leasing, AESOP Leasing II
or any Lessee shall have failed, within 15 Business Days of receiving
the direction of the Trustee, to take commercially reasonable action
to accomplish directions of the Trustee given pursuant to clauses (b)
or (c) above, (ii) AFC-II, AESOP Leasing, AESOP Leasing II or such
Lessee refuses to take such action, or (iii) the Trustee reasonably
determines that such action must be taken immediately, the Trustee may
(and at the written direction of the Required Noteholders of the
affected Series of Notes (with respect to any Limited Liquidation
Event of Default) or the Requisite Investors (with respect to any
Amortization Event or any Liquidation Event of Default) shall),
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take such previously directed action (and any related action as
permitted under this Indenture thereafter determined by the Trustee to
be appropriate without the need under this provision or any other
provision under this Indenture to direct AFC-II, AESOP Leasing, AESOP
Leasing II or such Lessee to take such action) on behalf of AFC-II and
the Secured Parties. The Trustee may institute legal proceedings for
the appointment of a receiver or receivers (to which the Trustee shall
be entitled as a matter of right) to take possession of the Vehicles
pending the sale thereof pursuant either to the powers of sale granted
by this Indenture or to a judgment, order or decree made in any
judicial proceeding for the foreclosure or involving the enforcement
of this indenture.
(e) Sale of Collateral. Upon any sale of any of the
Collateral directly by the Trustee, whether made under the power of
sale given under this Section 9.2 or under judgment, order or decree
in any judicial proceeding for the foreclosure or involving the
enforcement of this Indenture:
(i) the Trustee, any Noteholder and/or any
Enhancement Provider may bid for and purchase the property
being sold, and upon compliance with the terms of sale may
hold, retain and possess and dispose of such property in its
own absolute right without further accountability;
(ii) the Trustee may make and deliver to the
purchaser or purchasers a good and sufficient deed, bill of
sale and instrument of assignment and transfer of the
property sold;
(iii) all right, title, interest, claim and demand
whatsoever, either at law or in equity or otherwise, of
AFC-II of, in and to the property so sold shall be divested;
and such sale shall be a perpetual bar both at law and in
equity against AFC-II, its successors and assigns, and
against any and all Persons claiming or who may claim the
property sold or any part thereof from, through or under
AFC-II its successors or assigns;
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(iv) the receipt of the Trustee or of the officer
thereof making such sale shall be a sufficient discharge to
the purchaser or purchasers at such sale for his or their
purchase money, and such purchaser or purchasers, and his or
their assigns or personal representatives, shall not, after
paying such purchase money and receiving such receipt of the
Trustee or of such officer therefor, be obliged to see to the
application of such purchase money or be in any way
answerable for any loss, misapplication or nonapplication
thereof; and
(v) to the extent that it may lawfully do so, AFC-II
agrees that it will not at any time insist upon, or plead, or
in any manner whatsoever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension or
redemption laws, or any law permitting it to direct the order
in which the Vehicles shall be sold, now or at any time
hereafter in force, which may delay, prevent or otherwise
affect the performance or enforcement of this Indenture.
(f) Additional Remedies. In addition to any rights and
remedies now or hereafter granted hereunder or under applicable law
with respect to the Collateral, the Trustee on behalf of the Secured
Parties shall (subject to the foregoing provisions in respect of the
Vehicles) have all of the rights and remedies of a secured party under
the UCC as enacted in any applicable jurisdiction.
(g) Non-Segregated Series. Upon the occurrence of an
Amortization Event relating to one or more, but not all, Outstanding
Series of Notes (not including any Segregated Series of Notes), the
Trustee shall exercise all remedies hereunder to the extent necessary
to pay all interest and principal on the related Series of Notes up to
the Invested Amount of each Series.
(h) Certain Other Non-Segregated Series. Certain Series of
Notes (not including any Segregated Series of Notes) may provide for
allocations of Collections to such Series of Notes only in respect
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of specified items of Collateral upon the occurrence of certain
Amortization Events. Upon the occurrence of such an Amortization Event
relating to such a Series of Notes, the Trustee shall, to the extent
specified in the applicable Supplement, limit any recourse hereunder
to the related specified items of Collateral to satisfy the payment of
all interest and principal on such Series of Notes up to the Invested
Amount of such Series.
(i) Segregated Series. Upon the occurrence of an Amortization
Event relating to any Outstanding Segregated Series of Notes, the
Trustee shall limit any recourse hereunder to the related
Series-Specific Collateral in satisfying the payment of interest and
principal due on such Segregated Series of Notes.
Section 9.3. [RESERVED].
Section 9.4. Other Remedies.
Subject to the terms and conditions of this Indenture, if an
Amortization Event occurs and is continuing, the Trustee may pursue any remedy
available under applicable law or in equity to collect the payment of principal
or interest on the Notes (or the applicable Series of Notes, in the case of an
Amortization Event that affects only one Series of Notes) or to enforce the
performance of any provision of the Notes, this Indenture or any Supplement. If
an Amortization Event has occurred in accordance with Section 9.1, the Trustee
shall instruct AFC-II to cease issuing Notes and the right of AFC-II to issue
Notes shall automatically terminate. Upon the occurrence of a Loan Event of
Default, the Trustee shall have the right to (and upon direction of the
Requisite Investors, shall) direct AFC-II to declare that the relevant Loan
Commitment is terminated and the relevant Loan Note immediately due and
payable. In addition, the Trustee may, or shall at the direction of the
Requisite Investors (or the Required Noteholders, in the case of an
Amortization Event that affects only one Series of Notes), direct AFC-II to
exercise any rights or remedies available under any Related Document or under
applicable law or in equity.
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The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding, and
any such proceeding instituted by the Trustee shall be in its own name as
trustee. All remedies are cumulative to the extent permitted by law.
Section 9.5. Waiver of Past Events.
Subject to Section 12.2 hereof, the Noteholders of any Series
owning an aggregate principal amount of Notes in excess of 66-2/3% of the
aggregate principal amount of the Outstanding Notes of such Series, by notice
to the Trustee, may waive any existing Potential Amortization Event or
Amortization Event related to clause (a), (b), (c), (i) or (n) of Section 9.1
(with respect to clause (n), only to the extent subject to waiver as provided
in the applicable Supplement) which relate to such Series and its consequences
except a continuing Potential Amortization Event or Amortization Event in the
payment of the principal of or interest on any Note. Upon any such waiver, such
Potential Amortization Event shall cease to exist with respect to such Series,
and any Amortization Event with respect to such Series arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Potential Amortization Event or
impair any right consequent thereon. A Potential Amortization Event or an
Amortization Event related to clause (d), (e), (f), (g), (h), (j), (k), (l),
(m) or (n) of Section 9.1 (with respect to clause (n), only to the extent not
subject to waiver as set forth in the applicable Supplement) shall not be
subject to waiver.
Section 9.6. Control by Requisite Investors.
The Requisite Investors may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. However, subject to
Section 10.1, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of other Noteholders, or that may involve the Trustee
in personal liability.
Section 9.7. Limitation on Suits.
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Any other provision of this Indenture to the contrary
notwithstanding, a Noteholder may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) The Noteholder gives to the Trustee written notice of a
continuing Amortization Event;
(b) The Noteholders of at least 25% in principal amount of
all then Outstanding Notes of such Series make a written request to
the Trustee to pursue the remedy;
(c) Such Noteholder or Noteholders offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) The Trustee does not comply with the request within 45
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) During such 45-day period the Required Noteholders do not
give the Trustee a direction inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over another Noteholder.
Section 9.8. Unconditional Rights of Holders to
Receive Payment; Withholding Taxes.
(a) Notwithstanding any other provision of this Indenture,
except for clause (b) below, the right of any Noteholder of a Note to
receive payment of principal and interest on the Note, on or after the
respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, is
absolute and unconditional and shall not be impaired or affected
without the consent of the Noteholder.
(b) The Paying Agent agrees, to the extent required by
applicable law, to withhold from each payment due hereunder or under
any Note, United States withholding taxes at the appropriate rate,
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and, on a timely basis, to deposit such amounts with an authorized
depository and make such reports, filings and other reports in
connection therewith, and in the manner, required under applicable
law. The Paying Agent shall promptly furnish each Noteholder (but in
no event later than the date 30 days after the due date thereof) a
U.S. Treasury Form 1042S and Form 8109-B (or similar forms as at any
relevant time in effect), if applicable, indicating payment in full of
any taxes withheld from any payments by the Paying Agent to such
Persons together with all such other information and documents
reasonably requested by such Noteholder and necessary or appropriate
to enable such Noteholder to substantiate a claim for credit or
deduction with respect thereto for income tax purposes of any
jurisdiction with respect to which such Noteholder is required to file
a tax return. In the event that a Noteholder which is not a United
States Person (as defined in Code Section 7701(a)(30)) has furnished
to the Agent a properly completed and currently effective U.S.
Treasury Form 1001 (or such successor Form or Forms as may be required
by the United States Treasury Department) during the calendar year in
which the payment is made, or in either of the two preceding calendar
years, and has not notified the Agent of the withdrawal or inaccuracy
of such Form prior to the date of each interest payment, only the
amount, if any, required by applicable law shall be withheld from
payments under the Notes held by such Noteholder in respect of United
States federal income tax. In the event that a Noteholder (x) which is
not a United States Person has furnished to the Paying Agent a
properly completed and currently effective U.S. Treasury Form 4224 in
duplicate (or such successor certificate or Form or Forms as may be
required by the United States Treasury Department as necessary in
order to avoid withholding of United States federal income tax),
during the tax year of the Noteholder in which payment is made and has
not notified the Paying Agent of the withdrawal or inaccuracy of such
certificate or Form prior to the date of each interest payment or (y)
which is not a United States Person has furnished to the Agent a
properly completed and currently effective U.S. Treasury Form W-8
during the calendar year in which the payment is made, or in either of
the two preceding calendar years, no amount
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shall be withheld from payments under the Notes held by such
Noteholder in respect of United States federal income tax.
Notwithstanding the foregoing, if any Noteholder has notified the
Paying Agent that any of the foregoing Forms or certificates is
withdrawn or inaccurate, or if the Code or the regulations there-
under or the administrative interpretation thereof are at any time
after the date hereof amended to require such withholding of United
States federal income taxes from payments under the Notes held by such
Noteholder, or if such withholding is otherwise required under
applicable law, the Paying Agent agrees to withhold from each payment
due to the relevant Noteholder withholding taxes at the appropriate
rate under applicable law, and will, as more fully provided above, on
a timely basis, deposit such amounts with an authorized depository and
make such reports, filings and other reports in connection therewith,
and in the manner required under applicable law. The Trustee hereby
agrees to use its best efforts (without incurring liability for a
failure to do so) to inform the Paying Agent and the affected
Noteholder or Noteholders if the Trustee has failed to receive any of
Form 1001, 4224 or W-8 from a Noteholder prior to the date of an
interest payment to such Noteholder.
Section 9.9. Collection Suit by the Trustee.
If any Amortization Event specified in clauses (a) or (b) of
Section 9.1 occurs and is continuing, the Trustee is authorized to recover
judgment in its own name and as trustee of an express trust against AFC-II for
the whole amount of principal and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
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Section 9.10. The Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Noteholders allowed in any judicial proceedings relative to AFC-II (or
any other obligor upon the Notes), its creditors or its property, and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claim and any custodian in any such
judicial proceeding is hereby authorized by each Noteholder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Noteholders, to pay the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 10.5 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 10.5 hereof
out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of,
any and all distributions, dividends, money, Notes and other properties which
the Noteholders of the Notes may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes
or the rights of any Noteholder thereof, or to authorize the Trustee to vote in
respect of the claim of any Noteholder in any such proceeding.
Section 9.11. Priorities.
If the Trustee collects any money pursuant to this Article,
the Trustee shall pay out the money in accordance with the provisions of
Article 5 of this Indenture.
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Section 9.12. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of any undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Noteholder pursuant to Section 9.7, or a suit by Noteholders of more than 10%
in principal amount of all then outstanding Notes.
Section 9.13. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the
Trustee or to the holders of Notes is intended to be exclusive of any other
right or remedy, and every right or remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given under
this Indenture or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy under this Indenture, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
Section 9.14. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any holder of any
Note to exercise any right or remedy accruing upon any Amortization Event shall
impair any such right or remedy or constitute a waiver of any such Amortization
Event or an acquiescence therein. Every right and remedy given by this Article
9 or by law to the Trustee or to the holders of Notes may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by the
holders of Notes, as the case may be.
Section 9.15. Reassignment of Surplus.
After termination of this Indenture and the payment in full
of the AFC-II Obligations, any proceeds of all the Collateral received or held
by the Trustee shall
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be turned over to AFC-II and the Collateral shall be reassigned to AFC-II by
the Trustee without recourse to the Trustee and without any representations,
warranties or agreements of any kind.
ARTICLE 10.
THE TRUSTEE
Section 10.1. Duties of the Trustee.
(a) If an Amortization Event has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs; provided, however,
that the Trustee shall have no liability in connection with any action
or inaction taken, or not taken, by it upon the deemed occurrence of
an Amortization Event of which a Trust Officer has not received
written notice; and provided, further that the preceding sentence
shall not have the effect of insulating the Trustee from liability
arising out of the Trustee's negligence or willful misconduct.
(b) Except during the occurrence and continuance of an
Amortization Event:
(i) The Trustee undertakes to perform only those
duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture.
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(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) This clause does not limit the effect of clause
(b) of this Section 10.1.
(ii) The Trustee shall not be liable for any error
of judgment made in good faith by a Trust Officer, unless it
is proved that the Trustee was negligent in ascertaining the
pertinent facts.
(iii) The Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 9.4.
(iv) The Trustee shall not be charged with knowledge
of any default by any Lessee in the performance of its
obligations under any Related Document, unless a Trust
Officer of the Trustee receives written notice of such
failure from such Lessee or any Holders of Notes evidencing
not less than 10% of the aggregate principal amount of the
Notes of any Series adversely affected thereby.
(d) Notwithstanding anything to the contrary contained in
this Indenture or any of the Related Documents, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or
incur any liability if there is reasonable ground (as determined by
the Trustee in its sole discretion) for believing that the repayment
of such funds is not reasonably assured to it by the security afforded
to it by the terms of this Indenture. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives
indemnity satisfactory to it against any loss, liability or expense.
(e) In the event that the Paying Agent or the Transfer Agent
and Registrar shall fail to perform any obligation, duty or agreement
in the manner or on the day required to be performed by the Paying
Agent or the Transfer Agent and Registrar, as the case may
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be, under this Indenture, the Trustee shall be obligated as soon as
practicable upon actual knowledge of a Trust Officer thereof and
receipt of appropriate records and information, if any, to perform
such obligation, duty or agreement in the manner so required.
(f) Subject to Section 10.3, all moneys received by the
Trustee shall, until used or applied as herein provided, be held in
trust for the purposes for which they were received, but need not be
segregated from other funds except to the extent required by law or
the Related Documents. The Trustee may allow and credit to AFC-II
interest agreed upon by AFC-II and the Trustee from time to time as
may be permitted by law.
Section 10.2. Rights of the Trustee.
Except as otherwise provided by Section 10.1:
(a) The Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting based upon any document
believed by it to be genuine and to have been signed by or presented
by the proper person.
(b) The Trustee may consult with counsel of its selection and
the written advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon.
(c) The Trustee may act through agents, custodians and
nominees and shall not be liable for any misconduct or negligence on
the part of, or for the supervision of, any such agent, custodian or
nominee so long as such agent, custodian or nominee is appointed with
due care. The Trustee shall provide written notice to Moody's of any
such appointment and, if practicable, shall provide prior written
notice to Moody's of any such appointment.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which
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it believes to be authorized or within its rights or powers conferred
upon it by the Indenture.
(e) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture or any
Supplement, or to institute, conduct or defend any litigation
hereunder or in relation hereto, at the request, order or direction of
any of the Noteholders, pursuant to the provisions of this Indenture
or any Supplement, unless such Noteholders shall have offered to the
Trustee reasonable security or indemnity satisfactory to the Trustee
against the costs, expenses and liabilities which may be incurred
therein or thereby; nothing contained herein shall, however, relieve
the Trustee of the obligations, upon the occurrence of a default by
any Lessee, AESOP Leasing, AESOP Leasing II, Original AESOP, PVHC,
Quartx or AFC-II (which has not been cured), to exercise such of the
rights and powers vested in it by this Indenture or any Supplement,
and to use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(f) The Trustee shall not be bound to make any investigation
into the facts of matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless requested in
writing so to do by the Required Noteholders of any Series which could
be adversely affected if the Trustee does not perform such acts.
(g) The Trustee shall not be liable for any losses or
liquidation penalties in connection with Permitted Investments, unless
such losses or liquidation penalties were incurred through the
Trustee's own willful misconduct, negligence or bad faith.
(h) The Trustee shall not be liable for the acts or omissions
of any successor to the Trustee so long as such acts or omissions were
not the result of the negligence, bad faith or willful misconduct of
Harris Trust and Savings Bank.
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Section 10.3. Individual Rights of the Trustee.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Notes and may otherwise deal with AFC-II or an
Affiliate of AFC-II with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. However, the Trustee is subject to
Section 10.8.
Section 10.4. Notice of Amortization Events
and Potential Amortization Events.
If an Amortization Event or a Potential Amortization Event
occurs and is continuing and if a Trust Officer of the Trustee receives written
notice thereof, the Trustee shall promptly provide the Noteholders and each
Rating Agency with notice of such Amortization Event or the Potential
Amortization Event, if such Notes are represented by a Global Note, by
telephone and facsimile, and, if such Notes are represented by Definitive
Notes, by first class mail.
Section 10.5. Compensation.
(a) AFC-II shall promptly pay to the Trustee from time to
time compensation for its acceptance of this Indenture and services
hereunder as set forth in the letter agreement dated July , 1997
between AFC-II and the Trustee, as may be amended from time to time.
The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. AFC-II shall reimburse
the Trustee promptly upon request for all reasonable disbursements,
advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include (i) the
reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel and (ii) the reasonable expenses of the Trustee's
agents in administering the Collateral.
(b) AFC-II shall not be required to reimburse any expense or
indemnify the Trustee against any loss, liability, or expense incurred
by the Trustee through the Trustee's own willful misconduct, gross
negligence or bad faith.
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(c) When the Trustee incurs expenses or renders services
after an Amortization Event occurs, the expenses and the compensation
for the services are intended to constitute expenses of administration
under the Bankruptcy Code.
(d) The provisions of this Section 10.5 shall survive the
termination of this Indenture and the resignation and removal of the
Trustee.
Section 10.6. Replacement of the Trustee.
(a) A resignation or removal of the Trustee and appointment
of a successor Trustee shall become effective only upon the successor
Trustee's acceptance of appointment as provided in this Section 10.6
and the satisfaction of the Rating Agency Consent Condition and the CP
Rating Agency Condition.
(b) The Trustee may, after giving sixty (60) days prior
written notice to AFC-II, each Noteholder and each Rating Agency,
resign at any time and be discharged from the trust hereby created by
so notifying AFC-II and ARAC; provided, however, that no such
resignation of the Trustee shall be effective until a successor
trustee has assumed the obligations of the Trustee hereunder. The
Requisite Investors may remove the Trustee by so notifying the
Trustee, ARAC, AFC-II and each Rating Agency. AFC-II may remove the
Trustee upon notice to each Rating Agency if:
(i) the Trustee fails to comply with Section 10.8;
(ii) the Trustee is adjudged a bankrupt or an
insolvent or an order for relief is entered with respect to
the Trustee under the Bankruptcy Code;
(iii) a custodian or public officer takes charge of
the Trustee or its property; or
(iv) the Trustee becomes incapable of acting.
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If the Trustee resigns or is removed or if a vacancy exists
in the office of the Trustee for any reason, AFC-II shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Requisite Investors may appoint a successor Trustee to replace the
successor Trustee appointed by AFC-II.
(c) If a successor Trustee does not take office within 30
days after the retiring Trustee resigns or is removed, the retiring
Trustee, AFC-II or any Secured Party may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(d) If the Trustee after written request by any Noteholder
who has been a Noteholder for at least six months fails to comply with
Section 10.8, such Noteholder may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) A successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee, ARAC and to AFC-II. Thereupon
the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers
and duties of the Trustee under this Indenture and any Supplement. The
successor Trustee shall mail a notice of its succession to
Noteholders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee; provided, however,
that all sums owing to the retiring Trustee hereunder have been paid.
Notwithstanding replacement of the Trustee pursuant to this Section
10.6, AFC-II's obligations under Section 10.5 hereof shall continue
for the benefit of the retiring Trustee.
Section 10.7. Successor Trustee by Merger, etc.
Subject to Section 10.8, if the Trustee consolidates, merges
or converts into, or transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation without any further
act shall be the successor Trustee.
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Section 10.8. Eligibility Disqualification.
(a) There shall at all times be a Trustee hereunder which
shall (i) be a corporation organized and doing business under the laws
of the United States of America or of any state thereof authorized
under such laws to exercise corporate trustee power, (ii) be subject
to supervision or examination by Federal or state authority and shall
have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and
(iii) so long as any Commercial Paper Notes are outstanding, have a
rating of not less than Baa3 from Moody's and (iv) if such Trustee is
other than Harris Trust and Savings Bank as the original Trustee
hereunder, acceptable to the Requisite Investors.
(b) At any time the Trustee shall cease to satisfy the
eligibility requirements of clauses (a)(i) or (a)(ii) above, the
Trustee shall resign immediately in the manner and with the effect
specified in Section 10.6.
Section 10.9. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Indenture or
any Supplement, at any time, for the purpose of meeting any legal
requirements of any jurisdiction in which any part of the Collateral
may at the time be located, the Trustee shall have the power and may
execute and deliver all instruments to appoint one or more persons to
act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the Collateral, and to vest in such
Person or Persons, in such capacity and for the benefit of the Secured
Parties, such title to the Collateral, or any part thereof, and,
subject to the other provisions of this Section 10.9, such powers,
duties, obligations, rights and trusts as the Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor
trustee under Section 10.8 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required
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under Section 10.6. No co-trustee shall be appointed without the
consent of ARAC unless such appointment is required as a matter of
state law or to enable the Trustee to perform its functions hereunder.
(b) Every separate trustee and co-trustee shall, to the
extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) The Notes of each Series shall be authenticated
and delivered solely by the Trustee or an authenticating
agent appointed by the Trustee;
(ii) All rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or
imposed upon and exercised or performed by the Trustee and
such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in
such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be
performed, the Trustee shall be incompetent or unqualified to
perform, such act or acts, in which event such rights,
powers, duties and obligations (including the holding of
title to the Assets or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction
of the Trustee;
(iii) No trustee hereunder shall be personally
liable by reason of any act or omission of any other trustee
hereunder;
(iv) The Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee;
and
(v) The Trustee shall remain primarily liable for
the actions of any co-trustee.
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(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate
trustees and co-trustees, as effectively as if given to each of them.
Every instrument appointing any separate trustee or co-trustee shall
refer to this Indenture and the conditions of this Article 10. Each
separate trustee and co-trustee, upon its acceptance of the trusts
conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all the provisions
of this Indenture and any Supplement, specifically including every
provision of this Indenture or any Supplement relating to the conduct
of, affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be filed with the Trustee and a
copy thereof given to ARAC.
(d) Any separate trustee or co-trustee may at any time
constitute the Trustee, its agent or attorney-in-fact with full
power and authority, to the extent not prohibited by law, to do any
lawful act under or in respect to this Indenture or any Supplement on
its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and
be exercised by the Trustee, to the extent permitted by law, without
the appointment of a new or successor trustee.
(e) In connection with the appointment of a co-trustee, the
Trustee may, at any time, at the Trustee's sole cost and expense,
without notice to the Noteholders, delegate its duties under this Base
Indenture and any Supplement to any Person who agrees to conduct such
duties in accordance with the terms hereof; provided, however, that no
such delegation shall relieve the Trustee of its obligations and
responsibilities hereunder with respect to any such delegated duties.
Section 10.10. Representations and Warranties of Trustee.
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The Trustee represents and warrants to AFC-II and the Secured
Parties that:
(i) The Trustee is a banking corporation organized,
existing and in good standing under the laws of the State of
Illinois;
(ii) The Trustee has full power, authority and right
to execute, deliver and perform this Indenture and any
Supplement issued concurrently with this Indenture and to
authenticate the Notes, and has taken all necessary action to
authorize the execution, delivery and performance by it of
this Indenture and any Supplement issued concurrently with
this Indenture and to authenticate the Notes;
(iii) This Indenture has been duly executed and
delivered by the Trustee; and
(iv) The Trustee meets the requirements of
eligibility as a trustee hereunder set forth in Section 10.8
hereof.
Section 10.11. AFC-II Indemnification of the
Trustee.
AFC-II shall indemnify and hold harmless the Trustee and its
directors, officers, agents and employees from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any acts,
omissions or alleged acts or omissions arising out of the activities of the
Trustee pursuant to this Indenture or any Supplement, including but not limited
to any judgment, award, settlement, reasonable attorneys' fees and other costs
or expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim; provided, however, that AFC-II shall not indemnify
the Trustee or its directors, officers, employees or agents if such acts,
omissions or alleged acts or omissions constitute bad faith, negligence or
willful misconduct by the Trustee. The indemnity provided herein shall survive
the termination of this Indenture and the resignation and removal of the
Trustee.
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ARTICLE 11.
DISCHARGE OF INDENTURE
Section 11.1. Termination of AFC-II's Obligations.
(a) This Indenture shall cease to be of further effect
(except that AFC-II's obligations under Section 10.5 and Section 10.11
and the Trustee's and Paying Agent's obligations under Section 11.3
shall survive) when all Outstanding Notes theretofore authenticated
and issued have been delivered (other than destroyed, lost or stolen
Notes which have been replaced or paid) to the Trustee for
cancellation and AFC-II has paid all sums payable hereunder.
(b) In addition, except as may be provided to the contrary in
any Supplement, AFC-II may terminate all of its obligations under this
Indenture if:
(i) AFC-II irrevocably deposits in trust with the
Trustee or at the option of the Trustee, with a trustee
reasonably satisfactory to the Trustee and AFC-II under the
terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, money or U.S. Government
Obligations in an amount sufficient, in the opinion of a
nationally recognized firm of independent certified public
accountants expressed in a written certification thereof
delivered to the Trustee, to pay, when due, principal and
interest on the Notes to maturity or redemption, as the case
may be, and to pay all other sums payable by it hereunder;
provided, however, that (1) the trustee of the irrevocable
trust shall have been irrevocably instructed to pay such
money or the proceeds of such U.S. Government Obligations to
the Trustee and (2) the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S.
Government Obligations to the payment of said principal and
interest with respect to the Notes;
(ii) AFC-II delivers to the Trustee an Officers'
Certificate stating that all condi-
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tions precedent to satisfaction and discharge of this
Indenture have been complied with, and an Opinion of Counsel
to the same effect;
(iii) AFC-II delivers to the Trustee an Officer's
Certificate stating that no Potential Amortization Event or
Amortization Event, in either case, described in Section
9.1(d) shall have occurred and be continuing on the date of
such deposit; and
(iv) each of the Rating Agency Consent Condition and
the CP Rating Agency Condition is satisfied.
Then, this Indenture shall cease to be of further effect (except as provided in
this Section 11.1), and the Trustee, on demand of AFC-II, shall execute proper
instruments acknowledging confirmation of and discharge under this Indenture.
(c) After such irrevocable deposit made pursuant to Section
11.1(b) and satisfaction of the other conditions set forth herein, the
Trustee upon request shall acknowledge in writing the discharge of
AFC-II's obligations under this Indenture except for those surviving
obligations specified above.
In order to have money available on a payment date to pay
principal or interest on the Notes, the U.S. Government Obligations shall be
payable as to principal or interest at least one Business Day before such
payment date in such amounts as will provide the necessary money. U.S.
Government Obligations shall not be callable at the issuer's option.
Section 11.2. Application of Trust Money.
The Trustee or a trustee satisfactory to the Trustee and
AFC-II shall hold in trust money or U.S. Government Obligations deposited with
it pursuant to Section 11.1. The Trustee shall apply the deposited money and
the money from U.S. Government Obligations through the Paying Agent in
accordance with this Indenture to the payment of principal and interest on the
Notes.
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The provisions of this Section 11.2 shall survive the
expiration or earlier termination of this Indenture.
Section 11.3. Repayment to AFC-II.
The Trustee and the Paying Agent shall promptly pay to AFC-II
upon written request any excess money or, pursuant to Sections 2.11 and 2.14,
return any Notes held by them at any time.
Subject to Section 2.7(c), the Trustee and the Paying Agent
shall pay to AFC-II upon written request any money held by them for the payment
of principal or interest that remains unclaimed for two years after the date
upon which such payment shall have become due.
The provisions of this Section 11.3 shall survive the
expiration or earlier termination of this Indenture.
ARTICLE 12.
AMENDMENTS
Section 12.1. Without Consent of the Noteholders.
Without the consent of any Noteholder, AFC-II, the Trustee,
and any applicable Enhancement Provider, at any time and from time to time, may
enter into one or more Supplements hereto, in form satisfactory to the Trustee,
for any of the following purposes, provided that (i) with respect to clause (a)
below, the Rating Agency Confirmation Condition is met and (ii) with respect to
clauses (b) to (h) below, the Rating Agency Consent Condition is met:
(a) to create a new Series of Notes (including, without
limitation, making such modifications to the Indenture and the other
Related Documents as may be required to issue a Segregated Series of
Notes; provided, however, that the creation of any Segregated Series
of Notes shall not result in a material adverse effect on the
Noteholders of any Series unless the Required Noteholders of such
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Series shall have given their prior written consent to the creation
thereof);
(b) to add to the covenants of AFC-II for the benefit of any
Secured Parties (and if such covenants are to be for the benefit of
less than all Series of Notes, stating that such covenants are
expressly being included solely for the benefit of such Series) or to
surrender any right or power herein conferred upon AFC-II (provided,
however, that AFC-II will not pursuant to this subsection 12.1(b)
surrender any right or power it has against any Lessee, AESOP Leasing,
AESOP Leasing II, Original AESOP, PVHC, Quartx or any Manufacturer);
(c) to mortgage, pledge, convey, assign and transfer to the
Trustee any property or assets as security for the Notes and to
specify the terms and conditions upon which such property or assets
are to be held and dealt with by the Trustee and to set forth such
other provisions in respect thereof as may be required by the
Indenture or as may, consistent with the provisions of the Indenture,
be deemed appropriate by AFC-II and the Trustee, or to correct or
amplify the description of any such property or assets at any time so
mortgaged, pledged, conveyed and transferred to the Trustee on behalf
of the Secured Parties;
(d) to cure any ambiguity, defect, or inconsistency or to
correct or supplement any provision contained herein or in any
Supplement or in any Notes issued hereunder;
(e) to provide for uncertificated Notes in addition to
certificated Notes;
(f) to add to or change any of the provisions of the
Indenture to such extent as shall be necessary to permit or facilitate
the issuance of Notes in bearer form, registrable or not registrable
as to principal, and with or without interest coupons;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes of one or
more Series and to add to or change any of the provisions of the
Inden-
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ture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee; or
(h) to correct or supplement any provision herein which may
be inconsistent with any other provision herein or to make any other
provisions with respect to matters or questions arising under this
Indenture;
provided, however, that, as evidenced by an Opinion of Counsel, such action
shall not adversely affect in any material respect the interests of any
Noteholders. Upon the request of AFC-II, accompanied by a resolution of the
Board of Directors authorizing the execution of any Supplement to effect such
amendment, and upon receipt by the Trustee and ARAC of the documents described
in Section 2.2 hereof, the Trustee shall join with AFC-II in the execution of
any Supplement authorized or permitted by the terms of this Indenture and shall
make any further appropriate agreements and stipulations which may be therein
contained, but the Trustee shall not be obligated to enter into such Supplement
which affects its own rights, duties or immunities under this Indenture or
otherwise.
Section 12.2. With Consent of the Noteholders.
Except as provided in Section 12.1, the provisions of this
Indenture and any Supplement (unless otherwise provided in such Supplement) and
each other Related Document to which AFC-II is a party may from time to time be
amended, modified or waived, if such amendment, modification or waiver is in
writing and consented to in writing by AFC-II, the Trustee, any applicable
Enhancement Provider, and the Requisite Investors (or the Required Noteholders
of a Series of Notes, in respect of any amendment to this Indenture, the
Supplement with respect to such Series of Notes or any Related Document which
affects only the Noteholders of such Series of Notes and does not affect the
Noteholders of any other Series of Notes, as substantiated by an Opinion of
Counsel to such effect, which Opinion of Counsel may, to the extent same is
based on any factual matter, rely upon an Officer's Certificate as to the truth
of such factual matter) and provided that each of the Rating Agency
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Consent Condition and the CP Rating Agency Condition is satisfied.
Notwithstanding the foregoing:
(i) any modification of this Section 12.2, any
requirement hereunder that any particular action be taken by
Noteholders holding the relevant percentage in principal
amount of the Notes or any change in the definition of the
terms "Aggregate Asset Amount" or "Aggregate Asset Amount
Deficiency" (other than in connection with the issuance of a
Segregated Series of Notes), "Eligible Program Manufacturer",
"Eligible Non-Program Manufacturer" or "Eligible Manufacturer
Program" (other than in connection with a waiver of such
eligibility requirement by the Noteholders of any Series of
Notes, but only to the extent so provided in the related
Supplement in respect of such Series of Notes), "Invested
Amount", "Invested Percentage", or the applicable amount of
Enhancement or any defined term used for the purpose of any
such definitions shall require the consent of each affected
Noteholder; and
(ii) any amendment, waiver or other modification
that would (a) extend the due date for, or reduce the amount
of any scheduled repayment or prepayment of principal of or
interest on any Note (or reduce the principal amount of or
rate of interest on any Note) shall require the consent of
each affected Noteholder; (b) approve the assignment or
transfer by AFC-II of any of its rights or obligations
hereunder or under any other Related Document to which it is
a party except pursuant to the express terms hereof or
thereof shall require the consent of each Noteholder; (c)
release any obligor under any Related Document to which it is
a party except pursuant to the express terms of such Related
Document shall require the consent of each Noteholder;
provided, however, that the Liens on Vehicles may be released
as provided in Section 3.5; (d) affect adversely the
interests, rights or obligations of any Noteholder
individually in comparison to any other Noteholder shall
require the consent of such Noteholder; or (e) amend or
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otherwise modify any Amortization Event shall require the
consent of each affected Noteholder.
No failure or delay on the part of any Noteholder or the Trustee in exercising
any power or right under this Indenture or any other Related Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise thereof or the
exercise of any other power or right.
Section 12.3. Supplements.
Each amendment or other modification to this Indenture or the
Notes shall be set forth in a Supplement. The initial effectiveness of each
Supplement shall be subject to the satisfaction of the Rating Agency Consent
Condition and (so long as any Commercial Paper Notes are Outstanding) the CP
Rating Agency Condition. In addition to the manner provided in Sections 12.1
and 12.2, each Supplement may be amended as provided for in such Supplement.
Section 12.4. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to
it by a Noteholder of a Note is a continuing consent by the Noteholder and
every subsequent Noteholder of a Note or portion of a Note that evidences the
same debt as the consenting Noteholder's Note, even if notation of the consent
is not made on any Note. However, any such Noteholder or subsequent Noteholder
may revoke the consent as to his Note or portion of a Note if the Trustee
receives written notice of revocation before the date the amendment or waiver
becomes effective. An amendment or waiver becomes effective in accordance with
its terms and thereafter binds every Noteholder. AFC-II may fix a record date
for determining which Noteholders must consent to such amendment or waiver.
Section 12.5. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an
amendment or waiver on any Note thereafter
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authenticated. AFC-II in exchange for all Notes may issue and the Trustee shall
authenticate new Notes that reflect the amendment or waiver. Failure to make
the appropriate notation or issue a new Note shall not affect the validity and
effect of such amendment or waiver.
Section 12.6. The Trustee to Sign Amendments, etc.
The Trustee shall sign any Supplement authorized pursuant to
this Article 12 if the Supplement does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may, but need
not, sign it. In signing such Supplement, the Trustee shall be entitled to
receive, if requested, an indemnity reasonably satisfactory to it and to
receive and, subject to Section 10.1, shall be fully protected in relying upon,
an Officers' Certificate and an Opinion of Counsel as conclusive evidence that
such Supplement is authorized or permitted by this Indenture and that it will
be valid and binding upon AFC-II in accordance with its terms. AFC-II may not
sign a Supplement until each of its Managers approves it.
ARTICLE 13.
MISCELLANEOUS
Section 13.1. Notices.
(a) Any notice or communication by AFC-II or the Trustee to
the other shall be in writing and delivered in person or mailed by
first-class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day
delivery, to the other's address:
If to AFC-II:
AESOP Funding II L.L.C.:
c/o Lord Securities Corporation
Two Wall Street
New York, New York 10005
Attn: Frank Bilotta
Phone: (212) 346-9000
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Fax: (212) 346-9012
with a copy to the Administrator:
Avis Rent A Car System, Inc.
900 Old Country Road
Garden City, New York 11530
Attn: Treasurer
cc: General Counsel
Phone: (516) 222-3000
Fax: (516) 222-3741
If to the Trustee:
Harris Trust and Savings Bank
311 Monroe Street, 12th Floor
Chicago, Illinois 60606
Attn: Corporate Trust Officer
Phone: (312) 461-2532
Fax: (312) 461-3525
If to an Enhancement Provider, at the address provided in the
applicable Enhancement Agreement.
AFC-II or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications;
provided, however, AFC-II may not at any time designate more than a total of
three (3) addresses to which notices must be sent in order to be effective.
Any notice (i) given in person shall be deemed delivered on
the date of delivery of such notice, (ii) given by first class mail shall be
deemed given five (5) days after the date that such notice is mailed, (iii)
delivered by telex or telecopier shall be deemed given on the date of delivery
of such notice, and (iv) delivered by overnight air courier shall be deemed
delivered one Business Day after the date that such notice is delivered to such
overnight courier.
Notwithstanding any provisions of this Indenture to the
contrary, the Trustee shall have no liability based upon or arising from the
failure to receive any
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notice required by or relating to this Indenture or the Notes.
If AFC-II mails a notice or communication to Noteholders, it
shall mail a copy to the Trustee at the same time.
(b) Where the Indenture provides for notice to Noteholders of
any event, such notice shall be sufficiently given (unless otherwise
herein expressly provided) if sent in writing and mailed, first-class
postage prepaid, to each Noteholder affected by such event, at its
address as it appears in the Note Register, not later than the latest
date, and not earlier than the earliest date, prescribed (if any) for
the giving of such notice. In any case where notice to Noteholder is
given by mail, neither the failure to mail such notice, nor any defect
in any notice so mailed, to any particular Noteholder shall affect the
sufficiency of such notice with respect to other Noteholders, and any
notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given. Where this Indenture
provides for notice in any manner, such notice may be waived in
writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In the case by reason of the suspension of regular mail
service or by reason of any other cause it shall be impracticable to give such
notice by mail, then such notification as shall be made that is satisfactory to
the Trustee shall constitute a sufficient notification for every purpose
hereunder.
Section 13.2. Communication by Noteholders With Other
Noteholders.
Noteholders may communicate with other Noteholders with
respect to their rights under this Indenture or the Notes.
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Section 13.3. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by AFC-II to the Trustee to
take any action under this Indenture, AFC-II shall furnish to the Trustee an
Officers' Certificate in form and substance reasonably satisfactory to the
Trustee (which shall include the statements set forth in Section 13.4) stating
that, in the opinion of the signers, all conditions precedent and covenants, if
any, provided for in this Indenture relating to the proposed action have been
complied with.
Section 13.4. Statements Required in Certificate.
Each certificate with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(a) a statement that the Person giving such certificate has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements contained in
such certificate are based;
(c) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
Section 13.5. Rules by the Trustee.
The Trustee may make reasonable rules for action by or at a
meeting of Noteholders.
Section 13.6. No Recourse Against Others.
A director, Authorized Officer, employee or stockholder of
AFC-II, as such, shall not have any lia-
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bility for any obligations of AFC-II under the Notes or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder by accepting a Note waives and releases all such
liability.
Section 13.7. Duplicate Originals.
The parties may sign any number of copies of this Indenture.
One signed copy is enough to prove this Indenture.
Section 13.8. Benefits of Indenture.
Except as set forth in a Supplement, nothing in this
Indenture or in the Notes, expressed or implied, shall give to any Person,
other than the parties hereto and their successors hereunder and the Holders,
any benefit or any legal or equitable right, remedy or claim under the
Indenture.
Section 13.9. Payment on Business Day.
In any case where any Distribution Date, redemption date or
maturity date of any Note shall not be a Business Day, then (notwithstanding
any other provision of this Indenture) payment of interest or principal (and
premium, if any), as the case may be, need not be made on such date but may be
made on the next succeeding Business Day with the same force and effect as if
made on the Distribution Date, redemption date, or maturity date; provided,
however, that no interest shall accrue for the period from and after such
Distribution Date, redemption date, or maturity date, as the case may be.
Section 13.10. Governing Law.
The laws of the State of New York, including, without
limitation, the UCC, but excluding any conflicts of laws, shall govern and be
used to construe this Indenture and the Notes and the rights and duties of the
Trustee, Registrar, Paying Agent and Noteholders.
Section 13.11. No Adverse Interpretation of Other Agreements.
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This Indenture may not be used to interpret another
indenture, loan or debt agreement of AFC-II or an Affiliate of AFC-II. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 13.12. Successors.
All agreements of AFC-II in this Indenture and the Notes
shall bind its successor; provided, however, AFC-II may not assign its
obligations or rights under this Indenture or any Related Document. All
agreements of the Trustee in this Indenture shall bind its successor.
Section 13.13. Severability.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 13.14. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
Section 13.15. Table of Contents, Headings,
etc.
The Table of Contents, Cross-Reference Table, and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 13.16. Termination; Collateral.
This Indenture, and any grants, pledges and assignments
hereunder, shall become effective concurrently with the issuance of the first
Series of Notes and shall terminate when (a) all AFC-II Obligations shall have
been fully paid and satisfied, (b) the obligations of each Enhancement Provider
under any Enhancement and related documents have terminated, and (c) any
Enhance-
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ment shall have terminated, at which time the Trustee, at the request of AFC-II
and upon receipt of an Officers' Certificate from AFC-II to the effect that the
conditions in clauses (a), (b) and (c) above have been complied with and upon
receipt of a certificate from the Trustee and each Enhancement Provider to the
effect that the conditions in clauses (a), (b) and (c) above relating to AFC-II
Obligations to the Noteholders and each Enhancement Provider have been complied
with, shall reassign (without recourse upon, or any warranty whatsoever by, the
Trustee) and deliver all Collateral and documents then in the custody or
possession of the Trustee promptly to AFC-II.
AFC-II and the Secured Parties hereby agree that, if any
Deposited Funds remain on deposit in the Collection Account after the
termination of this Indenture, such amounts shall be released by the Trustee
and paid to AFC-II.
Section 13.17. No Bankruptcy Petition Against AFC-II.
Each of the Secured Parties and the Trustee hereby covenants
and agrees that, prior to the date which is one year and one day after the
payment in full of the latest maturing Note, it will not institute against, or
join with any other Person in instituting, against AFC-II, AESOP Leasing, AESOP
Leasing II, Original AESOP, PVHC, Quartx or AFC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings, under
any Federal or state bankruptcy or similar law; provided, however, that nothing
in this Section 13.17 shall constitute a waiver of any right to
indemnification, reimbursement or other payment from AFC-II pursuant to this
Indenture. In the event that any such Secured Party or the Trustee takes action
in violation of this Section 13.17, AFC-II, AESOP Leasing, AESOP Leasing II,
Original AEOP, PVHC, Quartx or AFC shall file an answer with the bankruptcy
court or otherwise properly contesting the filing of such a petition by any
such Secured Party or the Trustee against AFC-II, AESOP Leasing, AESOP Leasing
II, Original AESOP, PVHC, Quartx or AFC or the commencement of such action and
raising the defense that such Secured Party or the Trustee has agreed in
writing not to take such action and should be estopped and precluded therefrom
and such other defenses, if any,
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as its counsel advises that it may assert. The provisions of this Section 13.17
shall survive the termination of this Indenture, and the resignation or removal
of the Trustee. Nothing contained herein shall preclude participation by any
Secured Party or the Trustee in the assertion or defense of its claims in any
such proceeding involving AFC-II, AESOP Leasing, AESOP Leasing II, Original
AESOP, PVHC, Quartx or AFC.
Section 13.18. No Recourse.
The obligations of AFC-II under this Indenture are solely the
obligations of AFC-II. No recourse shall be had for the payment of any amount
owing in respect of any fee hereunder or any other obligation or claim arising
out of or based upon this Indenture against any stockholder, employee, officer,
director or incorporator of AFC-II. Fees, expenses or costs payable by AFC-II
hereunder shall be payable by AFC-II to the extent and only to the extent that
AFC-II is reimbursed therefor pursuant to any of the Loan Agreements or the
Related Documents, or funds are then available or thereafter become available
for such purpose pursuant to Article 5. Nothing in this Section 13.18 shall be
construed to limit the Trustee from exercising its rights hereunder with
respect to the Collateral.
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IN WITNESS WHEREOF, the Trustee and AFC-II have caused, this
Amended and Restated Base Indenture to be duly executed by their respective
duly authorized officers as of the day and year first written above.
AESOP FUNDING II L.L.C.,
as Issuer
By: /s/ Peter H. Sorensen
--------------------------------
Name: Peter H. Sorensen
Title: President
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: /s/ Robert D. Foltz
--------------------------------
Name: Robert D. Foltz
Title: Vice President
<PAGE>
Schedule I
Definitions List
I-1
<PAGE>
EXHIBIT A-1
FORM OF TRANSFER CERTIFICATE
CERTIFICATE TO BE DELIVERED UPON [ ] EXCHANGE OF A BENEFICIAL INTEREST IN THE
RESTRICTED GLOBAL NOTE FOR DEFINITIVE SECURITIES OR [ ] EXCHANGE OR
REGISTRATION OF TRANSFER OF DEFINITIVE SECURITIES
To: Harris Trust and Savings Bank, as Trustee
AESOP Funding II L.L.C.
Re: AESOP Funding II L.L.C. Rental Car Asset Backed Notes
This Certificate relates to $__________ principal amount of
Notes held in *[ ] book-entry or [ ] definitive form by _____________________
[insert name of transferor]
(the "Transferor") (CUSIP No. ___) issued pursuant to an Amended and Restated
Base Indenture dated as of July 30, 1997 between AESOP Funding II L.L.C., as
Issuer, and Harris Trust and Savings Bank, as Trustee (the "Base Indenture").
Capitalized terms used herein and not otherwise defined, shall have the
meanings given thereto in the Base Indenture.
The Transferor has requested the Trustee by written order to
exchange or register the transfer of a Note or Notes.
In connection with such request and in respect of each such
Note, the Transferor does hereby certify as follows:*
[ ] Such Note is being acquired for its own account, without
transfer.
[ ] Such Note is being transferred to (i) a qualified
institutional buyer (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")) in reliance on Rule 144A, (ii) pursuant to
an exemption from registration in accordance with Regulation S under the
Securities Act or (iii) pursuant to Rule 144 of the Securities Act.
A-1-1
<PAGE>
[ ] Such Note is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Securities Act, other than Rule 144A, Rule 144 or Regulation S under the
Securities Act and in compliance with other applicable state and federal
securities laws and an opinion of counsel is being furnished simultaneously
with the delivery of this Certificate as required under Section 2.9(a)(i)(D) of
the Base Indenture.
[INSERT NAME OF TRANSFEROR]
By:
--------------------------------
Name:
Title:
Date:
* Check applicable box.
A-1-2
<PAGE>
EXHIBIT A-2
[RESERVED]
A-2-1
<PAGE>
EXHIBIT A-3
FORM OF TRANSFER CERTIFICATE
FOR EXCHANGE OR TRANSFER FROM RESTRICTED GLOBAL
NOTE TO TEMPORARY GLOBAL NOTE]
(exchanges or transfers pursuant to
Section 2.9 of the Base Indenture)
Harris Trust and Savings Bank,
as Trustee
311 West Monroe Street, 12th Floor
Chicago, Illinois
Attn: Indenture Trust Administration
Re: AESOP Funding II L.L.C. ("AFC-II")
Asset Backed Rental Car Notes
Reference is hereby made to the Amended and Restated Base Indenture,
dated as of July 30, 1997 (the "Base Indenture"), between AFC-II and Harris
Trust and Savings Bank, as Trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Base Indenture.
This letter relates to _____________ principal amount of Series ___
Notes represented by a beneficial interest in the Restricted Global Series ___
Note (CUSIP No. ___) held with DTC by or on behalf of [transferor] as
beneficial owner (the "Transferor"). The Transferor has requested an exchange
or transfer of its beneficial interest for an interest in the Temporary Global
Series ___ Note (CUSIP (CINS) No. ___) to be held with [Euroclear] [Cedel]
(ISIN Code ___) (Common Code ___) through DTC.
In connection with such request and in respect of such Series ___
Note, the Transferor does hereby certify that such exchange or transfer has
been effected in accordance with the transfer restrictions set forth in the
Series ___ Notes and pursuant to and in accordance with Regulation S under the
Securities Act, and accordingly the Transferor does hereby certify that:
A-3-1
<PAGE>
(1) the offer of the Series __ Notes was not made to a person
in the United States;
(2) (A) at the time the buy order was originated, the
transferee was outside the United States or the
Transferor and any person acting on its behalf
reasonably believed that the transferee was
outside the United States, or
(B) the transaction was executed in, on or through the
facilities of a designated offshore securities
market and neither the Transferor nor any person
acting on its behalf knows that the transaction
was prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial
interest being transferred as described above was held with DTC
through Euroclear or Cedel or both (Common Code ___ (ISIN Code ___)).
This certificate and the statements contained herein are made for your
benefit and the benefit of AFC-II and the Dealers.
[Insert Name of Transferor]
By:
------------------------------
Name:
Title:
Dated: _________, 199_
A-3-2
<PAGE>
EXHIBIT A-4
FORM OF TRANSFER CERTIFICATE
FOR EXCHANGE OR TRANSFER FROM RESTRICTED GLOBAL
NOTE TO PERMANENT GLOBAL NOTE
(exchanges or transfers pursuant to
Section 2.9 of the Base Indenture)
Harris Trust and Savings Bank,
as Trustee
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attn: Indenture Trust Administration
Re: AESOP Funding II L.L.C. ("AFC-II")
Asset Backed Rental Car Notes
Reference is hereby made to the Amended and Restated Base Indenture,
dated as of July 30, 1997 (the "Base Indenture"), between AFC-II and Harris
Trust and Savings Bank, as Trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Base Indenture.
This letter relates to __________ principal amount of Series ___ Notes
represented by, a beneficial interest in the Restricted Global Series ___ Note
(CUSIP No. ___) held with DTC by or on behalf of [transferor] as beneficial
owner (the "Transferor"). The Transferor has requested an exchange or transfer
of its beneficial interest for an interest in the Permanent Global Series ___
Note (CUSIP (CINS) No. [___]).
In connection with such request and in respect of such Series ___
Notes, the Transferor does hereby certify that such exchange or transfer has
been effected in accordance with the transfer restrictions set forth in the
Series ___ Notes and (i) that, with respect to transfers made in reliance on
Regulation S under the Securities Act:
(1) the offer of the Series ___ Notes was not made to a person in the
United States;
A-4-1
<PAGE>
(2) (A) at the time the buy order was originated, the transferee
was outside the United States or the Transferor and any
person acting on its behalf reasonably believed that the
transferee was outside the United States, or
(B) the transaction was executed in, on or through the
facilities of a designated offshore securities market and
neither the Transferor nor any person acting on its behalf
knows that the transaction was prearranged with a buyer in
the United States;
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or 904(b) of Regulation S, as applicable, and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
or (ii) that, with respect to transfers made in reliance on Rule 144A under the
Securities Act, the Series ___ Notes are being transferred in a transaction
permitted by Rule 144A under the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of AFC-II and the Dealers.
[Insert Name of Transferor]
By:
------------------------------
Name:
Title:
Dated: ____________, 199_
A-4-2
<PAGE>
EXHIBIT A-5
FORM OF TRANSFER CERTIFICATE FOR TRANSFER OR
EXCHANGE FROM TEMPORARY GLOBAL NOTE
TO RESTRICTED GLOBAL NOTE
(exchanges or transfers pursuant to
Section 2.9 of the Base Indenture)
Harris Trust and Savings Bank,
as Trustee
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attn: Indenture Trust Administration
Re: AESOP Funding II L.L.C. ("AFC-II")
Asset Backed Rental Car Notes
Reference is hereby made to the Amended and Restated Base Indenture,
dated as of July 30, 1997 (the "Base Indenture"), between AFC-II and Harris
Trust and Savings Bank, as Trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
This letter relates to _____________ principal amount of Series ___
Notes which are held in the form of the Permanent Global Series ___ Note (CUSIP
(CINS) No. ) with Euroclear/Cedel(1) (ISIN Code [ ]) (Common Code [ ]) through
DTC by or on behalf of [transferor] as beneficial owner (the "Transferor"). The
Transferor has requested an exchange or transfer of its beneficial interest in
the Series ___ Notes for an interest in the Restricted Global Series ___ Note
(CUSIP No. [ ]).
In connection with such request, and in respect of such Series ___
Notes, the Transferor does hereby certify that such Series ___ Notes are being
transferred in accordance with Rule 144A under the United States Securities Act
of 1933, as amended (the "Securities Act") to a transferee that the Transferor
reasonably believes is purchasing the Series ___ Notes for its own account or
an
- ------------
1 Select appropriate depositary.
A-5-1
<PAGE>
account with respect to which the transferee exercises sole investment
discretion and the transferee and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A, in each case in a
transaction meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States or any other
jurisdiction.
This certificate and the statements contained herein are made for your
benefit and the benefit of AFC-II and the Dealers.
[Insert Name of Transferor]
By:
------------------------------
Name:
Title:
Dated: ____________, 199_
A-5-2
<PAGE>
EXHIBIT B
FORM OF CLEARING SYSTEM CERTIFICATE
AESOP Funding II L.L.C.
c/o Lord Securities Corporation
Two Wall Street, 19th Floor
New York, New York 10005
Harris Trust and Savings Bank, as Trustee
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Reference is hereby made to the Amended and Restated Base Indenture
dated as of July 30, 1997 (the "Indenture") among AESOP Funding II L.L.C, as
Issuer, and Harris Trust and Savings Bank, as Trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
This is to certify that, based solely on certificates we have received
in writing, by tested telex or by electronic transmissions from noteholders
appearing in our records as persons being entitled to a portion of the original
principal amount of the Series Notes (the "Notes") equal to, as of the date
hereof, U.S. $________ (our "Noteholders"), certificates with respect to such
portion, substantially to the effect set forth in Exhibits A-3, A-4 and A-5 to
the Indenture.
We further certify (i) that we are not making available herewith for
exchange any portion of the Temporary Global Note excepted in such certificates
and (ii) that as of the date hereof we have not received any notification from
any of our Noteholders to the effect that the statements made by such
Noteholder with respect to any portion of the part submitted herewith for
exchange are no longer true and cannot be relied upon as at the date hereof. We
understand that this certification is required in connection with certain
securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with this certificate is or would be relevant, we irrevocably authorized you to
produce this
B-1
<PAGE>
certification to any interested party in such proceedings.
Dated: ____________, 199_(1)
Yours faithfully,
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, Brussels office, as
operator of the Euroclear System
or
CEDEL, Societe Anonyme
By:
--------------------------------
Name:
Title:
- -------------
(1) To be dated no earlier than the earliest of the Exchange Date or the
relevant Interest Payment Date or the redemption date (as the case may be).
B-2
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF BENEFICIAL OWNERSHIP
Re: AESOP Funding II L.L.C.
Rental Car Asset Backed Notes, Series [__]
If the Securities are of the category contemplated in Section
230.903(c)(3) of Regulation S under the Securities Act of 1933, as amended (the
"Act"), then this is to certify that, except as set forth below, (i) in the
case of debt securities, the Securities are beneficially owned by (a) non-U.S.
persons or (b) U.S. persons who purchased the Securities in transactions which
did not require registration under the Act; or (ii) in the case of equity
securities, the Securities are owned by (x) non-U.S. persons (and such
person(s) are not acquiring the Securities for the account or benefit of U.S.
person(s)) or (y) U.S. person(s) who purchased the Securities in a transaction
which did not require registration under the Act. If this certification is
being delivered in connection with the exercise of warrants pursuant to Section
230.902(m) of Regulation S under the Act, then this is further to certify that,
except as set forth below, the Securities are being exercised by and on behalf
of non-U.S. person(s). As used in this paragraph the terms "U.S. person" has
the meaning given to it by Regulation S under the Act.
As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the
Securities held by you for our account in accordance with your operating
procedures if any applicable statement herein is not correct on such date, and
in the absence of any such notification it may be assumed that this
certification applies as of such date.
C-1
<PAGE>
This certification excepts and does not relate to U.S.$_______ of such
interest in the above Securities in respect of which we are not able to certify
and as to which we understand exchange and delivery of definitive Securities
(or, if relevant, exercise of any rights or collection of any interest) cannot
be made until we do so certify.
We understand that this certification is required in connection with
certain tax laws and, if applicable, certain securities laws of the United
States. In connection therewith, if administrative or legal proceedings are
commenced or threatened in connection with which this certification is or would
be relevant, we irrevocably authorize you to produce this certification to any
interested party in such proceedings.
Date: _____________, 19__(2)
By:
---------------------------------------------
As, or as agent for, the beneficial owner(s)
of the Securities to which this certificate
relates.
- -------------
(2) Not earlier than 15 days prior to the certification event to which the
certification relates.
C-2
<PAGE>
EXHIBIT D
FORM OF MONTHLY CERTIFICATE
AESOP Funding II L.L.C.
RENTAL CAR ASSET BACKED NOTES
The undersigned, duly authorized representatives of AESOP Funding II
L.L.C., a Delaware limited liability company ("AFC-II"), pursuant to the
Amended and Restated Trust Indenture, dated as of July 30, 1997 (hereinafter as
such agreement may have been, or may be from time to time, supplemented,
amended or otherwise modified, the "Base Indenture"), between AFC-II, as
Issuer, and Harris Trust and Savings Bank, as Trustee, do hereby certify to the
best of their knowledge after reasonable investigation that:
1. Capitalized terms used in this certificate have the respective
meanings set forth in the Base Indenture, or in the case of a particular Series
of Notes, the related Supplement. This certificate is delivered pursuant to
Section 4.1(b) of the Base Indenture.
2. The undersigned are Authorized Officers of AESOP Leasing.
3. The date of this certificate is a Determination Date under the Base
Indenture. Attached hereto as Schedule I is a true and correct copy of the
Monthly Noteholders' Statement to be delivered on the Determination Date
pursuant to Section 4.1(b) of the Base Indenture.
D-1
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this certificate this ____ day of _________________, 199_.
AESOP FUNDING II L.L.C.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
D-2
<PAGE>
SCHEDULE I
1. [1(a), (b) and (c) are only to be provided to the Trustee] (a) The
aggregate amount of payments received and deposited in the Collection Account
with respect to Vehicles from the Manufacturers and/or auction dealers under
Manufacturer Programs for the Related Month with respect to the Determination
Date was equal to $ for Vehicles leased under the AESOP I Operating Lease,
$__________ for Vehicles leased under the AESOP II Operating Lease and
$__________ for Vehicles leased under the Finance Lease.
(b) The aggregate amount of payments received and deposited in the
Collection Account from third parties (other than Manufacturers and auction
dealers) with respect to the sale of Vehicles for the Related Month with
respect to the Determination Date was equal to $__________ for Vehicles leased
under the AESOP I Operating Lease, $__________ for Vehicles leased under the
AESOP II Operating Lease and $__________ for Vehicles leased under the Finance
Lease.
(c) The aggregate amount of other Collections for the Related Month
deposited in the Collection Account with respect to the determination date was
equal to $________________.
2. The Invested Percentage on the last day of the Related Month was
equal to (for each Series of Notes and each Class of each Series):
Series %
Class ___ _____%
Class ___ _____%
Series %
Class ___ _____%
Class ___ _____%
etc.
3. The total amount to be distributed to the Noteholders (expressed as
a dollar amount per $1,000) on the next succeeding Distribution Date is equal
to (for each Series of Notes and each Class of each Series):
Series $
Class ___ $_____
D-3
<PAGE>
Class ___ $_____
Series $
Class ___ $_____
Class ___ $_____
etc.
4. (a) The aggregate amount to be distributed to the Noteholders
(expressed as a dollar amount per $1,000) on the next succeeding Distribution
Date in respect of principal is equal to (for each Series of Notes and each
Class of each Series):
Series $
Class ___ $_____
Class ___ $_____
Series $
Class ___ $_____
Class ___ $_____
etc.
(b) The aggregate amount to be distributed to the Noteholders
(expressed as a dollar amount per $1,000) on the next succeeding Distribution
Date in respect of interest is equal to (for each Series of Notes and each
Class of each Series):
Series $
Class ___ $_____
Class ___ $_____
Series $
Class ___ $_____
Class ___ $_____
etc.
5. (a) The amount of Enhancement used or drawn in connection with the
distribution to Noteholders on the next succeeding Distribution Date (for each
Series of Notes and each Class of each Series):
Series $
Class ___ $_____
Class ___ $_____
Series $
Class ___ $_____
Class ___ $_____
etc.
D-4
<PAGE>
(b) The amount available to be drawn under the Enhancement in
connection with the distribution to Noteholders on the next succeeding
Distribution Date, after giving effect to any drawing on the Enhancement and
payments to the Enhancement Provider on the next succeeding Distribution Date
(for each Series of Notes and each Class of each Series):
Series $
Class ___ $_____
Class ___ $_____
Series $
Class ___ $_____
Class ___ $_____
etc.
6. The existing Carryover Controlled Amortization Amount (if any) is
(for each Series of Notes and each Class of each Series):
Series $
Class ___ $_____
Class ___ $_____
Series $
Class ___ $_____
Class ___ $_____
etc.
7. The Pool Factor (if any) for the Related Month is equal to (for
each Series of Notes and each Class of each Series):
Series %
Class ___ _____%
Class ___ _____%
Series %
Class ___ _____%
Class ___ _____%
etc.
8. The Vehicle Identification Numbers of all Vehicles leased under the
Leases at the close of business on the last day of the Related Month are listed
on Annex A.
D-5
<PAGE>
9. (a) The aggregate Net Book Value of all Non-Program Vehicles
disposed of during the related Measurement Month is as follows:
A. Vehicles under the AESOP I Operating
Lease:
$_______________
B. Vehicles under the Finance Lease:
$_______________
(b) The aggregate Disposition Proceeds with respect to all Non-Program
Vehicles disposed of during the related Measurement Month is as follows:
A. Vehicles under the AESOP I Operating
Lease:
$_______________
B. Vehicles under the Finance Lease:
$_______________
10. The Aggregate Asset Amount and the Aggregate Asset Amount
Deficiency at the close of business on the last day of the Related Month are $
and $ , respectively.
11. The aggregate Net Book Value of all Non-Program Vehicles as of
the last day of the Related Month is as follows:
A. Vehicles under the AESOP I Operating
Lease:
$_______________
B. Vehicles under the Finance Lease:
$_______________
12. The amount of Monthly Base Rent and any Supplemental Rent due
under each Lease on the next succeeding Payment Date is as follows:
A. AESOP I Operating Lease Base Rent due: $___; and AESOP I Operating
Lease Supplemental Rent due: $___.
B. Finance Lease Base Rent due: $___; and Finance Lease Supplemental Rent
due: $___.
D-6
<PAGE>
C. AESOP II Operating Lease Base Rent due: $___; and AESOP II Operating
Lease Supplemental Rent due: $__.
13. The amount of Loan Interest, Monthly Loan Principal Amount and any
other amounts due under each Loan Agreement on the next succeeding Payment Date
is as follows:
A. AESOP I Operating Lease Loan Agreement Loan Interest due: $___;
AESOP I Operating Lease Loan Agreement Monthly Loan Principal Amount
due: $___; and
AESOP I Operating Lease Loan Agreement (other amounts due): $___.
B. AESOP I Finance Lease Loan Agreement Loan Interest due: $___;
AESOP I Finance Lease Loan Agreement Monthly Loan Principal Amount
due: $___; and
AESOP I Finance Lease Loan Agreement (other amounts due): $___.
C. AESOP II Loan Agreement Loan Interest due: $___;
AESOP II Loan Agreement Monthly Loan Principal Amount due: $___; and
AESOP II Loan Agreement (other amounts due): $___.
14. The amount on deposit in the Termination Services Reserve Account
is $________.
15. The amount, if any, of withdrawals in respect of Termination
Services Reserve Draw Amounts from the Termination Services Reserve Account
during the related month was $_________.
16. The amount, if any, of investment earnings on funds on deposit in
the Termination Services Reserve Account that will be distributed to the
Administrator on the next succeeding payment date is $__________.
17. (a) The Required Enhancement Amount with respect to each Series is
as follows:
Series ___ $_____
Series ___ $_____
etc.
D-7
<PAGE>
(b) The amount of Enhancement Deficiency existing with respect to each
Series is as follows:
Series ___ $_____
Series ___ $_____
etc.
18. The following Liens exist on the Loan Collateral (excluding Liens
granted pursuant to the Indenture and the other Related Documents or permitted
thereunder):
[List as applicable]
19. Check if applicable:
[ ] Lease Event of Default has occurred.
[ ] Loan Event of Default has occurred.
D-8
<PAGE>
ANNEX A
1. Vehicles leased under the AESOP I Operating Lease:
[List]
2. Vehicles leased under the AESOP II Operating Lease:
[List]
3. Vehicles leased under the Finance Lease:
[List]
D-9
<PAGE>
EXHIBIT E
FORM OF MONTHLY NOTEHOLDERS' STATEMENT
AESOP FUNDING II L.L.C.
RENTAL CAR ASSET BACKED NOTES
Series
Under Section 4.1(c) of the Amended and Restated Base
Indenture, dated as of July 30, 1997 (hereinafter as such agreement may have
been, or may be from time to time, supplemented, amended or otherwise modified,
the "Base Indenture"), between AESOP Funding II L.L.C., a Delaware limited
liability company ("AFC-II"), and Harris Trust and Savings Bank, as Trustee
(the "Trustee"), AFC-II is required to prepare certain information each month
for the Trustee regarding current distributions to Noteholders. The information
which is required to be prepared with respect to the Distribution Date of
_________________ , 199_ is set forth below. Capitalized terms used herein have
their respective meanings set forth in the Definitions List attached as
Schedule I to the Base Indenture, or in the case of a particular Series of
Notes, the related Supplement.
NOTE: Information contained herein with respect to each Series will
only be distributed to holders of Notes with respect to such
Series.
I. INVESTED PERCENTAGE
As of ____________, the Invested Percentage is computed as the result of the
following (the percentage equivalent, never to exceed 100%):
A. With respect to Principal Collections on Series 1997-1 Notes:
(1) Series 1997-1 Invested Amount: $___________, plus
(2) Series 1997-1 Overcollateralization Amount:
$___________, divided by
(3) the greater of:
(a) the Aggregate Asset Amount: $__________, or
(b) the sum of ((1) + (2)) above for all Series
outstanding.
Series 1997-1 Invested Percentage (with respect to Principal
Collections ((1+2)/(greater of (a) or (b)): ____%
E-1
<PAGE>
B. With respect to Principal Collections on Series 1997-2 Notes:
(1) Series 1997-2 Invested Amount: $_________, divided
by
(2) the greater of:
(a) the Aggregate Asset Amount: $________, or
(b) the Sum of (A(1) + A(2) above for all Series
Outstanding.
Series 1997-2 Invested Percentage (with respect to Principal
Collections (1)/(greater of (a) or (b)): ____%
C. With respect to Interest Collections on Series 1997-1 Notes:
(1) Accrued Amounts on Series 1997-1 Notes: $________,
divided by
(2) The aggregate Accrued Amounts with respect to all
Series of Notes: $_________.
Series 1997-1 Invested Percentage (with respect to Interest
Collections (1/2): ____%
D. With respect to Interest Collections as Series 1997-2 Notes:
(1) Accrued Amounts on Series 1997-2 Notes: $_______,
divided by
(2) The aggregate Accrued Amounts with respect to all
Series of Notes: $__________.
Series 1997-2 Invested Percentage (with respect to Interest
Collections ((1)/(2)): _____%
II. AGGREGATE ASSET AMOUNT
As of __________, the Aggregate Asset Amount is computed as the result of the
following:
A. Aggregate Loan Principal Amount of all Loans outstanding:
$___________, plus
B. Outstanding amount of cash and Permitted Investments held in
the Collection Account: $__________, minus
C. All Monthly Loan Principal Amount payments then or previously
due but not paid with respect to the Loans: $____________.
Total Aggregate Asset Amount (A + B - C): $___________.
E-2
<PAGE>
III. REQUIRED AGGREGATE ASSET AMOUNT
As of _____________________, the Required Aggregate Asset Amount is computed as
the result of the following:
A. Series 1997-1 Invested Amount ($________________), plus
B. Series 1997-2 Invested Amount $_____________), plus
C. Invested Amounts for other Series of Notes ($_____________).
Required Aggregate Asset Amount (A + B + C): $__________.
IV. AGGREGATE ASSET AMOUNT DEFICIENCY
As of __________, the Aggregate Asset Amount Deficiency equals: (III - II):
$_________.
V. DISTRIBUTIONS TO NOTEHOLDERS
As of ________________, the distributions with respect to principal and
interest are computed as the result of the following:
A. With respect to Interest Payments on Series 1997-1 Notes:
(1) One-twelfth of ___% (the Class A-1 Note Rate): ___%,
times
(2) Class A-1 Invested Amount (less principal payments):
$______.
Series 1997-1 Class A-1 Monthly Interest ((1) * (2)): $_______:
(3) One-twelfth of ___% (the Class A-2 Note Rate):
____%, times
(4) Class A-2 Invested Amount (less principal payments):
$_______.
Series 1997-1 Class A-2 Monthly Interest ((3) * (4)): $________.
(5) Any unpaid Deficiency Amounts on Class A-1 Notes
(plus interest accrued thereon): $_______, plus
(6) Any unpaid Deficiency Amounts on Class A-2 Notes
(plus interest accrued thereon): $_______.
Series 1997-1 distribution with respect to interest ((1) * (2)) + ((3)
* (4)) + (5) + (6) = $_________.
E-3
<PAGE>
B. With respect to Interest Payments on Series 1997-2 Notes:
(1) The Series 1997-2 Note Rate: ___%, times
(2) The average Series 1997-2 Invested Amount, times
(3) The actual number of days in such Series 1997-2
Interest Period divided by 360: _______, plus
(4) Any unpaid Deficiency Amounts (plus interest accrued
thereon): $__________.
Series 1997-2 interest ((1) * (2) * (3)) + (4) = $_________.
C. With respect to Principal Payments on Series 1997-1 Notes:
(1) During Series 1997-1 Controlled Amortization Period:
(a) Class A-1 Controlled Amortization Amount:
$_______, plus
(b) Class A-2 Carryover Controlled Amortization
Amount: $_______.
Series 1997-1 Class A-1 principal payment ((a) + (b)): $_________.
(c) Class A-2 Controlled Amortization Amount:
$_______, plus
(d) Class A-2 Carryover Controlled Amortization
Amount: $_______.
Series 1997-1 Class A-2 principal payment ((c) + (d)): $________.
Series 1997-1 distribution with respect to principal (a) + (b) + (c) +
(d) = $_________.
(2) During Series 1997-1 Rapid Amortization Period:
(a) The total for each day during the Related
Month of the Series 1997-1 Invested
Percentage (as of each day) of the
aggregate amount of Principal Collection on
each day: $_______.
D. With respect to Principal Payments on Series 1997-2 Notes:
(1) During Series 1997-2 Controlled Amortization Period:
(a) The total for each day during the Related
Month of the Series 1997-2 Invested
Percentage (as of each day) of the
aggregate amount of Principal Collections
of each day: $_______, plus
(b) any Increase: $________.
Series 1997-2 principal payment (a) + (b): $_______.
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<PAGE>
(2) During Series 1997-2 Rapid Amortization Period:
(a) The total for each day during the Related
Month of the Series 1997-2 Invested
Percentage (as of each day) of the
aggregate amount of Principal Collections
on each day: $_______.
E. The total amount distributed to the Series 1997-1
Noteholders: (A + C): $_________.
F. The total amount distributed to the Series 1997-2
Noteholders: (B + D): $_________.
VI. MONTHLY BASE RENT
As of the __________ Payment Date, the Monthly Base Rent is computed as a
result of the following:
A. With respect to the AESOP I Operating Lease:
(1) The Loan Interest and Supplemental Interest with
respect to the Loans under such Lease: $________;
plus
(2) Accrued Depreciation Charges (plus, without double
counting, Ineligible Vehicles, Casualty Vehicles and
Vehicles sold to third parties under the AESOP I
Operating Lease): $_______; plus
(3) Upfront incentive payments from Manufacturers with
respect to Non-Program Vehicles: $_______; plus
(4) Lease's share of Monthly Administration Fee:
$______; plus
(5) AESOP I Operating Lease Loan Agreement's share of
Carrying Charges: $_______; plus
(6) Portion of AESOP I Operating Lease Management Fee:
$________; plus
(7) One percent of the Net Book Value of Non-Program
Vehicles: $________.
The Monthly Base Rent with respect to the AESOP I Operating Lease is:
(1 + 2 + 3 + 4 + 5 + 6 + 7) = $__________.
B. With respect to the Finance Lease:
(1) The Loan Interest and Supplemental Interest with
respect to the Loans under such Lease: $________;
plus
(2) Accrued Depreciation Charges (plus, without double
counting, Ineligible Vehicles, Casualty Vehicles and
Vehicles sold to third parties under the Finance
Lease): $_______; plus
E-5
<PAGE>
(3) Upfront incentive payments from Manufacturers with
respect to Non-Program Vehicles: $_______; plus
(4) Lease's share of Monthly Administration Fee:
$______; plus
(5) Finance Lease Loan Agreement's share of Carrying
Charges: $_______; plus
(6) Portion of AESOP I Operating Lease Management Fee:
$________; plus
(7) One percent of the Net Book Value of Non-Program
Vehicles: $________.
The Monthly Base Rent with respect to the AESOP I Finance Lease is:
(1 + 2 + 3 + 4 + 5 + 6 + 7) = $__________.
C. With respect to the AESOP II Operating Lease:
(1) The Loan Interest and Supplemental Interest with
respect to the Loans under such Lease: $________;
plus
(2) Accrued Depreciation Charges (plus, without double
counting, Ineligible Vehicles, Casualty Vehicles and
Vehicles sold to third parties under the AESOP II
Operating Lease): $_______; plus
(3) Lease's share of Monthly Administration Fee:
$______; plus
(4) AESOP II Operating Lease Loan Agreement's share of
Carrying Charges: $_______; plus
(5) Dividends accrued on the outstanding Preferred
Stock: $_______;
(6) Portion of AESOP II Management Fee: $________.
The Monthly Base Rent with respect to the AESOP II Operating Lease is:
(1 + 2 + 3 + 4 + 5 + 6) = $__________.
VII. SUPPLEMENTAL BASE RENT
As of the __________ Payment Date, the Supplemental Base Rent is computed as a
result of the following:
A. With respect to the AESOP I Operating Lease:
(1) Supplemental Base Rent: $______.
B. With respect to the AESOP I Finance Lease:
(1) Supplemental Base Rent: $______.
C. With respect to the AESOP II Operating Lease:
(1) Supplemental Base Rent: $______.
E-6
<PAGE>
VIII. MONTHLY ADMINISTRATION FEE
The amount of the Administration Fee payable by the Issuer is computed as a
result of the following:
A. The Series 1997-1 Percentage of the Monthly Administration
Fee: $_______, and
B. The Series 1997-2 Percentage of the Monthly Administration
Fee: $_______, and
C. Any other Series Percentage of the Monthly Administration Fee:
$_______.
Total Administration Fee payable by the Issuer (A + B + C) =
$_________.
IX. CP BORROWING BASE WITH RESPECT TO SERIES 1997-2
As of ________________, the CP Borrowing Base is computed as the result of the
following:
A. The Series 1997-2 Invested Amount: $__________, plus
B. For all principal amounts of Series 1997-2 Notes funded by
Commercial Paper Notes, interest that will accrue on such
Series 1997-2 Notes through the maturity date of the
Commercial Paper Notes issued to fund such Series 1997-2
Notes: $___________, plus
C. For all other Series 1997-2 Notes, interest accrued on such
Series 1997-2 Notes: $ , plus
D. The outstanding principal amount of cash and Eligible
Investments held by the Collateral Agent in the Collateral
Account (other than amounts set aside for repayment of the
principal of, or interest on, Liquidity Advances, LOC
Liquidity Disbursements or Commercial Paper Notes):
$________, minus
E. The current Series 1997-2 Lease Payment Deficit: $_________,
minus
F. Prior, unreimbursed Series 1997-2 Lease Credit Payment
Deficits: $_______.
Total CP Borrowing Base (A + B + C + D - E - F): $__________.
X. LOAN PAYMENTS DUE
E-7
<PAGE>
A. Loan Principal Due with respect to the AESOP I Operating
Lease Loan Agreement (without duplication):
(1) Accrued Depreciation Charges for all Vehicles leased
under the AESOP I Operating Lease: $___________;
plus
(2) Incentive payments from Manufacturers with respect
to purchases of Non-Program Vehicles leased under
the AESOP I Operating Lease: $_________, plus
(3) The aggregate Termination Values of Vehicles leased
under the AESOP I Operating Lease: $__________,
minus
(4) Amounts received by the Lender or Trustee, or
deposited in the Collection Account (representing
Repurchase Prices and sales proceeds for Vehicles
leased under the AESOP I Operating Lease):
$_________, minus
(5) Payments applied to the Loan Principal Amount:
$_________, times
(6) The applicable Loan Payment Allocation Percentage:
____%.
Total Principal Due ((1 + 2 + 3 - 4 - 5) * (6)):
$_________.
Additional amounts due: $__________.
B. Loan Interest Due with respect to the AESOP I Operating Lease
Loan Agreement:
(1) The greater of the Lender's Carrying Cost Interest
Rate (as a percentage equivalent):
(a) The amount of interest accrued with respect
to all Series of Notes: $________, plus
(b) Any Swap Payments payable by the Issuer:
$_________, minus
(c) Any accrued earnings on Permitted
Investments in the Collection Account:
$__________, divided by
(d) The Average Daily Loan Balance under the
Loan Agreements: $_________.
Lender's Carrying Cost Interest Rate: ((a + b - c) / (d)):
___%, or
(2) The rate of Loan Interest specified in the AESOP I
Operating Lease Loan Agreement Loan Request
Response: _____%
Loan Interest = (greater of ((1) or (2)) = ___%
(3) Unpaid principal amount of Loans: $_________
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<PAGE>
Total Loan Interest ((3) * (greater of ((1) or
(2))): $
C. Loan Principal Due with respect to the AESOP II Loan
Agreement (without duplication):
(1) Accrued Depreciation Charges for all Vehicles leased
under the AESOP II Operating Lease: $___________,
plus
(2) The aggregate Termination Values of Vehicles leased
under the AESOP II Operating Lease: $__________,
minus
(3) Amounts received by the Lender or Trustee, or
deposited in the Collection Account (representing
Repurchase Prices and sales proceeds for Vehicles
leased under the AESOP II Operating Lease):
$_________, minus
(4) Payments applied to the Loan Principal Amount:
$_________, times
(5) The applicable Loan Payment Allocation Percentage:
____%.
Total Principal Due ((1 + 2 - 3 - 4) * (5)):
$____________.
Additional amounts due: $__________.
D. Loan Interest Due with respect to the AESOP II Loan Agreement:
(1) The greater of the percentage from B(1) above: ___%,
or
(2) The rate of Loan Interest specified in the AESOP II
Loan Agreement Loan Request Response: _____%
Loan Interest = (greater of ((1) or (2)) = ___%
(3) Unpaid principal amount of Loans: $_________
Total Loan Interest (3 * (greater of ((1) or (2)):
$_________.
E. Loan Principal Due with respect to the AESOP I Operating
Lease Loan Agreement without duplication:
(1) Accrued Depreciation Charges for all Vehicles leased
under the Finance Lease: $___________, plus
(2) Incentive payments from Manufacturers with respect
to purchases of Non-Program Vehicles leased under
the Finance Lease: $_________, plus
(3) The aggregate Termination Values of Vehicles leased
under the Finance Lease: $__________, minus
(4) Amounts received by the Lender or Trustee, or
deposited in the Collection Account (representing
Repurchase Prices and sales proceeds for Vehicles
leased under the Finance Lease): $_________, minus
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<PAGE>
(5) Payments applied to the Loan Principal Amount:
$_________, times
(6) The applicable Loan Payment Allocation Percentage:
________%.
Total Principal Due ((1 + 2 + 3 - 4 - 5) * (6):
$____________.
Additional amounts due: $__________.
F. Loan Interest Due with respect to the AESOP I Operating Lease
Loan Agreement:
(1) The greater of the percentage from B(1) above:
____%, or
(2) The rate of Loan Interest specified in the AESOP I
Operating Lease Loan Agreement Loan Request
Response: _____%
Loan Interest = (greater of ((1) or (2)): ___%
(3) Unpaid principal amount of Loans: $_________
Total Loan Interest ((3) * (greater of ((1) or (2)):
$________.
XI. ENHANCEMENT
A. With respect to Series 1997-1:
(1) Draws on Series 1997-1 Available Reserve Account
Amount: $________.
(2) Current Series 1997-1 Available Reserve Account
Amount: $________.
(3) Current Series 1997-1 Overcollateralization Amount:
$________.
Available Series 1997-1 Enhancement Amount: (2 + 3):
$________.
B. With respect to Series 1997-2:
(1) Draws on the Series 1997-2 Letter of Credit:
$________.
(2) Draws on the Series 1997-2 Cash Collateral Account:
$_______.
(3) Current amount available on Series 1997-2 Letter of
Credit: $________
(4) Current amount available from Series 1997-2 Cash
Collateral Account: $________.
Available Series 1997-2 Enhancement Amount: (3): $________.
C. Series 1997-1 Required Enhancement Amount:
E-10
<PAGE>
(1) The Series 1997-1 Percentage of the excess (if any)
of the Non-Program Vehicle Amount over the Series
1997-1 Maximum Non-Program Vehicle Amount:
$________, plus
(2) The Series 1997-1 Percentage of the excess (if any)
of the Non-Eligible Manufacturer Amount over the
Series 1997-1 Maximum Non-Eligible Manufacturer
Amount: $________, plus
(3) The Series 1997-1 Percentage of the excess (if any)
of the Mitsubishi Vehicle Amount over the Series
1997-1 Maximum Manufacturer Amount with respect to
Mitsubishi: $________, plus
(4) The Series 1997-1 Percentage of the excess (if any)
of the Subaru/Hyundai/Suzuki Vehicle Amount over the
Series 1997-1 Maximum Manufacturer Amount with
respect to Subaru, Hyundai and Suzuki (in the
aggregate): $________, plus
(5) The Series 1997-1 Percentage of the excess (if any)
of the Specified States Amount over the Series
1997-1 Specified States Amount: $________, plus
(6) The product of: (a) The Series 1997-1 Required
Enhancement Percentage: ___%, times (b) The Series
1997-1 Invested Amount.
The Series 1997-1 Required Enhancement Amount:
(1 + 2 + 3 + 4 + 5 + (6(a) * 6(b))): $________.
D. Series 1997-1 Enhancement Deficiency:
(1) The amount by which:
(a) The Series 1997-1 Enhancement Amount:
$________, is less then
(b) The Series 1997-1 Required Enhancement
Amount: $________.
The Series 1997-1 Enhancement Deficiency, if any, is:
$________.
E. Series 1997-2 Required Enhancement Amount:
(1) The Series 1997-2 Percentage of the excess (if any)
of the Non-Program Vehicle Amount over the Series
1997-2 Maximum Non-Program Vehicle Amount:
$________, plus
(2) The Series 1997-2 Percentage of the excess (if any)
of the Non-Eligible Manufacturer Amount over the
Series 1997-2 Maximum Non-Eligible Manufacturer
Amount: $________, plus
E-11
<PAGE>
(3) The Series 1997-2 Percentage of the excess (if any)
of the Mitsubishi Vehicle Amount over the Series
1997-2 Maximum Manufacturer Amount with respect to
Mitsubishi: $________, plus
(4) The Series 1997-2 Percentage of the excess (if any)
of the Subaru/Hyundai/Suzuki Vehicle Amount over the
Series 1997-2 Maximum Manufacturer Amount with
respect to Subaru, Hyundai and Suzuki (in the
aggregate): $________, plus
(5) The excess (if any) of the Financed Vehicle Amount
over the Series 1997-2 Maximum Financed Vehicle
Amount: $________, plus
(6) The product of:
(a) The Series 1997-2 Required Enhancement
Percentage: ___%, times
(b) The Series 1997-2 Invested Amount.
The Series 1997-1 Required Enhancement Amount:
(1 + 2 + 3 + 4 + 5 + (6(a) * 6(b))): $________.
F. Series 1997-1 Enhancement Deficiency:
(1) The amount by which:
(a) The Series 1997-2 Enhancement Amount: $_______,
is less then
(b) The Series 1997-2 Required Enhancement Amount:
$________.
The Series 1997-2 Enhancement Deficiency, if any, is: $______.
XII. LIENS AND DEFAULTS
A. The following Liens exist on the Loan Collateral (excluding
Liens granted pursuant to the Indenture and the other
Related Documents or permitted thereunder):
[List as applicable]
B. Check if applicable:
[ ] Lease Event of Default has occurred.
[ ] Loan Event of Default has occurred.
E-12
<PAGE>
XIII. SALE OF NON-PROGRAM VEHICLES
A. The aggregate Net Book value of all Non-Program Vehicles
disposed of during the related Measurement Month is as
follows:
(1) Vehicles under the AESOP I Operating Lease:
$_________.
(2) Vehicles under the Finance Lease: $________.
B. The aggregate Disposition Proceeds with respect to all
Non-Program Vehicles disposed of during the related
Measurement Month is as follows:
(1) Vehicles under the AESOP I Operating Lease:
$_________.
(2) Vehicles under the Finance Lease: $_________.
XIV. VALUE OF NON-PROGRAM VEHICLES
A. The aggregate Net Book Value of all Non-Program Vehicles is
as follows:
(1) Vehicles under the AESOP I Operating Lease:
$_________.
(2) Vehicles under the Finance Lease: $_________.
B. The aggregate Market Value of all Non-Program Vehicles is as
follows:
(1) Vehicles under the AESOP I Operating Lease:
$_________.
(2) Vehicles under the Finance Lease: $_________.
XV. TERMINATION SERVICES RESERVE ACCOUNT
A. The amount on deposit in the Termination Services Reserve
Account: $_________.
B. The amount of withdrawals from the Termination Services
Reserve Account: $_________.
C. The amount, if any, of investment earnings on funds on
deposit in the Termination Services Reserve Account that will
be distributed to the Administrator (as a portion of the
Monthly Administration Fee): $_________.
E-13
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
certificate this day of , 199 .
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
E-14
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE 1. DEFINITIONS AND INCORPORATION BY
REFERENCE........................................ 2
Section 1.1. Definitions................................. 2
Section 1.2. Cross-References............................ 2
Section 1.3. Accounting and Financial
Determinations; No Duplication............ 2
Section 1.4. Rules of Construction....................... 2
ARTICLE 2. THE NOTES.......................................... 3
Section 2.1. Designation and Terms of Notes.............. 3
Section 2.2. Notes Issuable in Series.................... 4
Section 2.3. Supplement For Each Series.................. 9
Section 2.4. Execution and Authentication................ 12
Section 2.5. Form of Notes; Book Entry Provisions;
Title..................................... 14
Section 2.6. Registrar and Paying Agent.................. 17
Section 2.7. Paying Agent to Hold Money in Trust......... 18
Section 2.8. Noteholder List............................. 20
Section 2.9. Transfer and Exchange....................... 20
Section 2.10. Legending of Notes.......................... 29
Section 2.11. Replacement Notes........................... 30
Section 2.12. Treasury Notes.............................. 32
Section 2.13. Temporary Notes............................. 32
Section 2.14. Cancellation................................ 33
Section 2.15. Principal and Interest...................... 33
Section 2.16. Book-Entry Notes............................ 34
Section 2.17. Notices to Clearing Agency.................. 37
Section 2.18. Definitive Notes............................ 37
Section 2.19. Tax Treatment............................... 40
ARTICLE 3. SECURITY.......................................... 41
Section 3.1. Grant of Security Interest.................. 41
Section 3.2. Certain Rights and Obligations of
AFC-II Unaffected......................... 44
Section 3.3. Performance of Agreement.................... 45
Section 3.4. Release of Lien on Vehicles................. 46
Section 3.5. Stamp, Other Similar Taxes and Filing
Fees...................................... 46
Section 3.6. Vehicle Title Check......................... 47
Section 3.7. Termination Services Reserve Account........ 47
i
<PAGE>
Section Page
- ------- ----
ARTICLE 4. REPORTS........................................... 50
Section 4.1. Agreement of AFC-II to Provide Reports
and Instructions.......................... 50
Section 4.2. Administrator............................... 52
ARTICLE 5. ALLOCATION AND APPLICATION OF COLLECTIONS.......... 53
Section 5.1. Collection Account.......................... 53
Section 5.2. Collections and Allocations................. 55
Section 5.3. Determination of Monthly Interest........... 58
Section 5.4. Determination of Monthly Principal.......... 58
Section 5.5. Paired Series............................... 58
ARTICLE 6. DISTRIBUTIONS AND REPORTS TO NOTEHOLDERS........... 59
Section 6.1. Distributions in General.................... 59
Section 6.2. Reserved.................................... 61
Section 6.3. Optional Repurchase of Notes................ 61
Section 6.4. Monthly Noteholders' Statement.............. 62
ARTICLE 7. REPRESENTATIONS AND WARRANTIES..................... 62
Section 7.1. Existence and Power......................... 62
Section 7.2. Limited Liability Company and
Governmental Authorization................ 63
Section 7.3. Binding Effect.............................. 63
Section 7.4. Financial Information; Financial
Condition................................. 64
Section 7.5. Litigation.................................. 64
Section 7.6. No ERISA Plan............................... 64
Section 7.7. Tax Filings and Expenses.................... 64
Section 7.8. Disclosure.................................. 65
Section 7.9. Investment Company Act; Securities Act...... 65
Section 7.10. Regulations G, T, U and X................... 65
Section 7.11. No Consent.................................. 66
Section 7.12. Solvency.................................... 66
Section 7.13. Ownership of Limited Liability Company
Interests; Subsidiary................... 66
Section 7.14. Security Interests.......................... 66
Section 7.15. Binding Effect of Loan Agreements........... 68
Section 7.16. Non-Existence of Other Agreements........... 68
Section 7.17. Manufacturer Programs....................... 68
Section 7.18. Other Representations....................... 68
ARTICLE 8. COVENANTS.......................................... 69
Section 8.1. Payment of Notes............................ 69
Section 8.2. Maintenance of Office or Agency............. 69
Section 8.3. Information................................. 70
ii
<PAGE>
Section Page
- ------- ----
Section 8.4. Payment of Obligations...................... 71
Section 8.5. Maintenance of Property..................... 71
Section 8.6. Conduct of Business and Maintenance of
Existence................................. 71
Section 8.7. Compliance with Laws........................ 72
Section 8.8. Inspection of Property, Books and
Records................................... 72
Section 8.9. Compliance with Related Documents........... 72
Section 8.10. Notice of Defaults.......................... 73
Section 8.11. Notice of Material Proceedings.............. 73
Section 8.12. Further Requests............................ 73
Section 8.13. Further Assurances.......................... 74
Section 8.14. Manufacturer Programs....................... 75
Section 8.15. Liens....................................... 76
Section 8.16. Other Indebtedness.......................... 76
Section 8.17. Mergers..................................... 77
Section 8.18. Sales of Assets............................. 77
Section 8.19. Acquisition of Assets....................... 77
Section 8.20. Dividends, Officers' Compensation,
etc..................................... 77
Section 8.21. Name; Principal Office...................... 77
Section 8.22. Organizational Documents.................... 78
Section 8.23. Investments................................. 78
Section 8.24. No Other Agreements......................... 78
Section 8.25. Other Business.............................. 79
Section 8.26. Maintenance of Separate Existence........... 79
Section 8.27. Rule 144A Information Requirement........... 82
Section 8.28. Use of Proceeds of Notes.................... 82
Section 8.29. Vehicles.................................... 82
ARTICLE 9. AMORTIZATION EVENTS AND REMEDIES................... 83
Section 9.1. Amortization Events......................... 83
Section 9.2. Rights of the Trustee upon Amortization
Event or Certain Other Events of
Default................................... 86
Section 9.3. [RESERVED].................................. 91
Section 9.4. Other Remedies.............................. 91
Section 9.5. Waiver of Past Events....................... 92
Section 9.6. Control by Requisite Investors.............. 93
Section 9.7. Limitation on Suits......................... 93
Section 9.8. Unconditional Rights of Holders to
Receive Payment; Withholding Taxes........ 94
Section 9.9. Collection Suit by the Trustee.............. 96
Section 9.10. The Trustee May File Proofs of Claim........ 96
Section 9.11. Priorities.................................. 97
iii
<PAGE>
Section Page
- ------- ----
Section 9.12. Undertaking for Costs....................... 97
Section 9.13. Rights and Remedies Cumulative.............. 97
Section 9.14. Delay or Omission Not Waiver................ 98
Section 9.15. Reassignment of Surplus..................... 98
ARTICLE 10. THE TRUSTEE............................................... 98
Section 10.1. Duties of the Trustee....................... 98
Section 10.2. Rights of the Trustee.......................100
Section 10.3. Individual Rights of the Trustee............102
Section 10.4. Notice of Amortization Events and
Potential Amortization Events...........102
Section 10.5. Compensation................................102
Section 10.6. Replacement of the Trustee..................103
Section 10.7. Successor Trustee by Merger, etc............105
Section 10.8. Eligibility Disqualification................105
Section 10.9. Appointment of Co-Trustee or Separate
Trustee.................................105
Section 10.10. Representations and Warranties of
Trustee.................................108
Section 10.11. AFC-II Indemnification of the
Trustee.................................108
ARTICLE 11. DISCHARGE OF INDENTURE....................................109
Section 11.1. Termination of AFC-II's Obligations.........109
Section 11.2. Application of Trust Money..................111
Section 11.3. Repayment to AFC-II.........................111
ARTICLE 12. AMENDMENTS................................................111
Section 12.1. Without Consent of the Noteholders..........111
Section 12.2. With Consent of the Noteholders.............113
Section 12.3. Supplements.................................115
Section 12.4. Revocation and Effect of Consents...........115
Section 12.5. Notation on or Exchange of Notes............116
Section 12.6. The Trustee to Sign Amendments, etc.........116
ARTICLE 13. MISCELLANEOUS.............................................116
Section 13.1. Notices.....................................116
Section 13.2. Communication by Noteholders With
Other Noteholders.......................119
Section 13.3. Certificate and Opinion as to
Conditions Precedent....................119
Section 13.4. Statements Required in Certificate..........119
Section 13.5. Rules by the Trustee........................120
Section 13.6. No Recourse Against Others..................120
Section 13.7. Duplicate Originals.........................120
iv
<PAGE>
Section Page
- ------- ----
Section 13.8. Benefits of Indenture.......................120
Section 13.9. Payment on Business Day.....................120
Section 13.10. Governing Law...............................121
Section 13.11. No Adverse Interpretation of Other
Agreements..............................121
Section 13.12. Successors..................................121
Section 13.13. Severability................................121
Section 13.14. Counterpart Originals.......................121
Section 13.15. Table of Contents, Headings, etc............121
Section 13.16. Termination; Collateral.....................122
Section 13.17. No Bankruptcy Petition Against
AFC-II..................................122
Section 13.18. No Recourse.................................123
v
<PAGE>
SCHEDULES AND EXHIBITS
SCHEDULE 1 DEFINITIONS LIST
EXHIBIT A-1 FORM OF TRANSFER CERTIFICATE
EXHIBIT A-2 [RESERVED]
EXHIBIT A-3 FORM OF TRANSFER CERTIFICATE FOR EXCHANGE
OR TRANSFER FROM RESTRICTED GLOBAL NOTE TO
TEMPORARY GLOBAL NOTE
EXHIBIT A-4 FORM OF TRANSFER CERTIFICATE FOR EXCHANGE
OR TRANSFER FROM RESTRICTED GLOBAL NOTE TO
PERMANENT GLOBAL NOTE
EXHIBIT A-5 FORM OF TRANSFER CERTIFICATE FOR TRANSFER
OR EXCHANGE FROM TEMPORARY GLOBAL NOTE TO
RESTRICTED GLOBAL NOTE
EXHIBIT B FORM OF CLEARING SYSTEM CERTIFICATE
EXHIBIT C FORM OF CERTIFICATE OF BENEFICIAL OWNER-
SHIP
EXHIBIT D FORM OF MONTHLY CERTIFICATE
EXHIBIT E FORM OF MONTHLY NOTEHOLDERS' STATEMENT
vi
<PAGE>
AESOP FUNDING II L.L.C.,
as Issuer
and
HARRIS TRUST AND SAVINGS BANK,
as Trustee and Series 1997-1 Agent
-------------------------
SERIES 1997-1 SUPPLEMENT
dated as of July 30, 1997
to
AMENDED AND RESTATED BASE INDENTURE
dated as of July 30, 1997
-------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PRELIMINARY STATEMENT................................................................................. 1
DESIGNATION........................................................................................... 1
ARTICLE I
DEFINITIONS............................................ 2
ARTICLE II
SERIES 1997-1 ALLOCATIONS..................................... 15
Section 2.1 Establishment of Series 1997-1
Collection Account, Series
1997-1 Excess Collection
Account and Series 1997-1
Accrued Interest Account.......................................................... 15
Section 2.2 Allocations with Respect to
the Series 1997-1 Notes........................................................... 16
Section 2.3 Payments To Noteholders................................................................... 19
Section 2.4 Payment of Note Interest.................................................................. 21
Section 2.5 Payment of Note Principal................................................................. 22
Section 2.6 Administrator's Failure to
Instruct the Trustee to Make
a Deposit or Payment...............................................................23
Section 2.7 Series 1997-1 Reserve Account............................................................. 24
Section 2.8 Series 1997-1 Distribution Account........................................................ 26
ARTICLE III
AMORTIZATION EVENTS........................................ 28
ARTICLE IV
RIGHT TO WAIVE PURCHASE RESTRICTIONS................................ 29
ARTICLE V
FORM OF SERIES 1997-1 NOTES.................................... 33
Section 5.1 Restricted Global Series 1997-1 Notes..................................................... 33
Section 5.2 Temporary Global Series 1997-1
Notes; Permanent Global Series
i
<PAGE>
Page
1997-1 Notes...................................................................... 33
ARTICLE VI
GENERAL.............................................. 34
Section 6.1 Optional Repurchase....................................................................... 34
Section 6.2 Information............................................................................... 34
Section 6.3 Exhibits.................................................................................. 35
Section 6.4 Ratification of Base Indenture............................................................ 35
Section 6.5 Counterparts.............................................................................. 35
Section 6.6 Governing Law............................................................................. 35
Section 6.7 Amendments................................................................................ 35
Section 6.8 Discharge of Indenture.................................................................... 36
Section 6.9 Notice to Surety Provider and
Rating Agencies................................................................... 36
Section 6.10 Certain Rights of Surety Provider......................................................... 36
Section 6.11 Surety Provider Deemed Noteholder
and Secured Party................................................................. 36
Section 6.12 Capitalization of AFC-II.................................................................. 37
Section 6.13 Series 1997-1 Required Non-Program
Enhancement Percentage............................................................ 37
</TABLE>
Exhibit A-1-1: Form of Restricted Global Class A-1 Note
Exhibit A-1-2: Form of Temporary Global Class A-1 Note
Exhibit A-1-3: Form of Permanent Global Class A-1 Note
Exhibit A-2-1: Form of Restricted Global Class A-2 Note
Exhibit A-2-2: Form of Temporary Global Class A-2 Note
Exhibit A-2-3: Form of Permanent Global Class A-2 Note
Exhibit B: Form of Consent
ii
<PAGE>
SERIES 1997-1 SUPPLEMENT, dated as of July 30, 1997 (this
"Supplement") between AESOP FUNDING II L.L.C., a special purpose limited
liability company established under the laws of Delaware ("AFC-II"), HARRIS
TRUST AND SAVINGS BANK, an Illinois banking corporation, as trustee (together
with its successors in trust thereunder as provided in the Base Indenture
referred to below, the "Trustee"), and HARRIS TRUST AND SAVINGS BANK, an
Illinois banking corporation, as agent for the benefit of the Series 1997-1
Noteholders and the Surety Provider (the "Series 1997-1 Agent"), to the Amended
and Restated Base Indenture, dated as of July 30, 1997, between AFC-II and the
Trustee (as amended, modified or supplemented from time to time, exclusive of
Supplements creating a new Series of Notes, the "Base Indenture").
PRELIMINARY STATEMENT
WHEREAS, Sections 2.2 and 12.1 of the Base Indenture provide,
among other things, that AFC-II and the Trustee may at any time and from time
to time enter into a supplement to the Base Indenture for the purpose of
authorizing the issuance of one or more Series of Notes.
NOW, THEREFORE, the parties hereto agree as follows:
DESIGNATION
There is hereby created a Series of Notes to be issued
pursuant to the Base Indenture and this Supplement and such Series of Notes
shall be designated generally as Fixed Rate Rental Car Asset Backed Notes,
Series 1997-1. The Series 1997-1 Notes shall be issued in two classes: (i) the
Class A-1 Rental Car Asset Backed Notes, which shall be designated generally as
the Class A-1 Notes and (ii) the Class A-2 Rental Car Asset Backed Notes, which
shall be designated generally as the Class A-2 Notes. The Class A-1 Notes and
the Class A-2 Notes are referred to collectively as the "Series 1997-1 Notes."
The proceeds from the sale of the Series 1997-1 Notes shall
be deposited in the Collection Account and shall be paid to AFC-II and used to
make Loans under the Loan Agreements to the extent that the Borrowers have
requested Loans thereunder and Eligible Vehicles are available to acquire or
refinance thereunder on the date
<PAGE>
hereof. Any such portion of proceeds not so used to make Loans shall be
deemed to be Principal Collections.
The Series 1997-1 Notes are a non-Segregated Series of Notes
(as more fully described in the Base Indenture). Accordingly, all references in
this Supplement to "all" Series of Notes (and all references in this Supplement
to terms defined in the Base Indenture that contain references to "all" Series
of Notes) shall refer to all Series of Notes other than Segregated Series of
Notes.
ARTICLE I
DEFINITIONS
(a) All capitalized terms not otherwise defined herein are
defined in the Definitions List attached to the Base Indenture as Schedule I
thereto. All Article, Section or Subsection references herein shall refer to
Articles, Sections or Subsections of the Base Indenture, except as otherwise
provided herein. Unless otherwise stated herein, as the context otherwise
requires or if such term is otherwise defined in the Base Indenture, each
capitalized term used or defined herein shall relate only to the Series 1997-1
Notes and not to any other Series of Notes issued by AFC-II.
(b) The following words and phrases shall have the following
meanings with respect to the Series 1997-1 Notes and the definitions of such
terms are applicable to the singular as well as the plural form of such terms
and to the masculine as well as the feminine and neuter genders of such terms:
"Class" means a class of the Series 1997-1 Notes, which may
be the Class A-1 Notes or the Class A-2 Notes.
"Class A-1 Carryover Controlled Amortization Amount" means,
with respect to the Class A-1 Notes for any Related Month during the Class A-1
Controlled Amortization Period, the amount, if any, by which the Monthly Total
Principal Allocation for the previous Related Month was less than the Class A-1
Controlled Distribution Amount for the previous Related Month; provided,
however, that for the first Related Month in the Class A-1 Con-
2
<PAGE>
trolled Amortization Period, the Class A-1 Carryover Controlled Amortization
Amount shall be zero.
"Class A-1 Controlled Amortization Amount" means (i) with
respect to any Related Month other than the last Related Month during the Class
A-1 Controlled Amortization Period, $133,333,333.33 and (ii) with respect to
the last Related Month during the Class A-1 Controlled Amortization Period,
$133,333,333.35.
"Class A-1 Controlled Amortization Period" means the period
commencing at the close of business on April 1, 2000 (or, if such day is not a
Business Day, the Business Day immediately preceding such day) and continuing
to the earliest of (i) the commencement of the Series 1997-1 Rapid Amortization
Period, (ii) the date on which the Class A-1 Notes are fully paid, (iii) the
Series 1997-1 Termination Date, and (iv) the termination of the Indenture.
"Class A-1 Controlled Distribution Amount" means, with
respect to any Related Month during the Class A-1 Controlled Amortization
Period, an amount equal to the sum of the Class A-1 Controlled Amortization
Amount and any Class A-1 Carryover Controlled Amortization Amount for such
Related Month.
"Class A-1 Shortfall" has the meaning specified in Section
2.3(a) of this Supplement.
"Class A-1 Expected Final Distribution Date" means the
October 2000 Distribution Date.
"Class A-1 Final Distribution Date" means the October 2001
Distribution Date.
"Class A-1 Initial Invested Amount" means the aggregate
initial principal amount of the Class A-1 Notes, which is $800,000,000.
"Class A-1 Invested Amount" means, when used with respect to
any date, an amount equal to (a) the Class A-1 Initial Invested Amount minus
(b) the amount of principal payments made to Class A-1 Noteholders on or prior
to such date.
3
<PAGE>
"Class A-1 Monthly Interest" means, with respect to (i) the
initial Series 1997-1 Interest Period, an amount equal to the product of (A)
the Class A-1 Note Rate, (B) the Class A-1 Initial Invested Amount and (C)
20/360 and (ii) any other Series 1997-1 Interest Period, an amount equal to the
product of (A) one-twelfth of the Class A-1 Note Rate and (B) the Class A-1
Invested Amount on the first day of such Series 1997-1 Interest Period, after
giving effect to any principal payments made on such date.
"Class A-1 Noteholder" means the Person in whose name a Class
A-1 Note is registered in the Note Register.
"Class A-1 Note Rate" means 6.22% per annum.
"Class A-1 Notes" means any one of the Class A-1 Fixed Rate
Rental Car Asset Backed Notes, Series 1997-1, executed by AFC-II and
authenticated by or on behalf of the Trustee, substantially in the form of
Exhibit A-1-1, Exhibit A-1-2 or Exhibit A-1-3. Definitive Class A-1 Notes
shall have such insertions and deletions as are necessary to give effect to the
provisions of Section 2.18 of the Base Indenture.
"Class A-2 Carryover Controlled Amortization Amount" means,
with respect to the Class A-2 Notes for any Related Month during the Class A-2
Controlled Amortization Period, the amount, if any, by which the Monthly Total
Principal Allocation for the previous Related Month was less than the Class A-2
Controlled Distribution Amount for the previous Related Month; provided,
however, that for the first Related Month in the Class A-2 Controlled
Amortization Period, the Class A-2 Carryover Controlled Amortization Amount
shall be zero.
"Class A-2 Controlled Amortization Amount" means (i) with
respect to any Related Month other than the last Related Month during the Class
A-2 Controlled Amortization Period, $141,666,666.67 and (ii) with respect to
the last Related Month during the Class A-2 Controlled Amortization Period,
$141,666,666.65.
"Class A-2 Controlled Amortization Period" means the period
commencing at the close of business on April 1, 2002 (or, if such day is not a
Business Day, the
4
<PAGE>
Business Day immediately preceding such day) and continuing to the earliest of
(i) the commencement of the Series 1997-1 Rapid Amortization Period, (ii) the
date on which the Class A-2 Notes are fully paid and the Surety Provider has
been paid all Surety Provider Fees and all other Surety Provider Reimbursement
Amounts then due, (iii) the Series 1997-1 Termination Date, and (iv) the
termination of the Indenture.
"Class A-2 Controlled Distribution Amount" means, with
respect to any Related Month during the Class A-2 Controlled Amortization
Period, an amount equal to the sum of the Class A-2 Controlled Amortization
Amount and any Class A-2 Carryover Controlled Amortization Amount for such
Related Month.
"Class A-2 Shortfall" has the meaning specified in Section
2.3(a) of this Supplement.
"Class A-2 Expected Final Distribution Date" means the
October 2002 Distribution Date.
"Class A-2 Final Distribution Date" means the October 2003
Distribution Date.
"Class A-2 Initial Invested Amount" means the aggregate
initial principal amount of the Class A-2 Notes, which is $850,000,000.
"Class A-2 Invested Amount" means, when used with respect to
any date, an amount equal to (a) the Class A-2 Initial Invested Amount minus
(b) the amount of principal payments made to Class A-2 Noteholders on or prior
to such date.
"Class A-2 Monthly Interest" means, with respect to (i) the
initial Series 1997-1 Interest Period, an amount equal to the product of (A)
the Class A-2 Note Rate, (B) the Class A-2 Initial Invested Amount and (C)
20/360 and (ii) any other Series 1997-1 Interest Period, an amount equal to the
product of (A) one-twelfth of the Class A-2 Note Rate and (B) the Class A-2
Invested Amount on the first day of such Series 1997-1 Interest Period, after
giving effect to any principal payments made on such date.
5
<PAGE>
"Class A-2 Noteholder" means the Person in whose name a Class
A-2 Note is registered in the Note Register.
"Class A-2 Note Rate" means 6.40% per annum.
"Class A-2 Notes" means any one of the Class A-2 Fixed Rate
Rental Car Asset Backed Notes, Series 1997-1, executed by AFC-II and
authenticated by or on behalf of the Trustee, substantially in the form of
Exhibit A-2-1, Exhibit A-2-2 or Exhibit A-2-3. Definitive Class A-2 Notes
shall have such insertions and deletions as are necessary to give effect to the
provisions of Section 2.18 of the Base Indenture.
"Consent" has the meaning set forth in Article IV of this
Supplement.
"Consent Period Expiration Date" has the meaning set forth in
Article IV of this Supplement.
"Designated Amounts" has the meaning set forth in Article IV
of this Supplement.
"Excess Collections" has the meaning specified in Section
2.3(b) of this Supplement.
"Final Distribution Date" means the Class A-1 Final
Distribution Date or the Class A-2 Final Distribution Date.
"Insurance Agreement" means the Insurance Agreement, dated as
July 30, 1997, among the Surety Provider, the Trustee and AFC-II, which shall
constitute an "Enhancement Agreement" with respect the Series 1997-1 Notes for
all purposes under the Indenture.
"Monthly Total Principal Allocation" means for any Related
Month the sum of all Series 1997-1 Principal Allocations with respect to such
Related Month.
"Permanent Global Class A-1 Note" has the meaning specified
in Section 5.2 of this Supplement.
"Permanent Global Class A-2 Note" has the meaning specified
in Section 5.2 of this Supplement.
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"Principal Deficit Amount" means, with respect to any
Distribution Date, the excess, if any, of (a) the Series 1997-1 Invested Amount
on such Distribution Date (after giving effect to the distribution of the
Monthly Total Principal Allocation for the Related Month) over (b) the sum of
the Series 1997-1 Available Reserve Account Amount on such Distribution Date
and the Series 1997-1 AESOP I Operating Lease Loan Agreement Borrowing Base on
such Distribution Date.
"Requisite Noteholders" means Series 1997-1 Noteholders
holding 50% or more of the Series 1997-1 Invested Amount.
"Restricted Global Class A-1 Note" has the meaning specified
in Section 5.1 of this Supplement.
"Restricted Global Class A-2 Note" has the meaning specified
in Section 5.1 of this Supplement.
"Series 1997-1 Accrued Interest Account" has the meaning
specified in Section 2.1(b) of this Supplement.
"Series 1997-1 AESOP I Operating Lease Loan Agreement
Borrowing Base" means, as of any date of determination, the product of (a) the
Series 1997-1 AESOP I Operating Lease Vehicle Percentage as of such date and
(b) the AESOP I Operating Lease Loan Agreement Borrowing Base as of such date.
"Series 1997-1 AESOP I Operating Lease Vehicle Percentage"
means, as of any date of determination, a fraction, expressed as a percentage,
the numerator of which is the Series 1997-1 Required AESOP I Operating Lease
Vehicle Amount as of such date and the denominator of which is the sum of the
Required AESOP I Operating Lease Vehicle Amounts for all Series of Notes as of
such date.
"Series 1997-1 Available Reserve Account Amount" means, as of
any date of determination, the amount on deposit in the Series 1997-1 Reserve
Account (after giving effect to any deposits thereto and withdrawals and
releases therefrom on such date).
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"Series 1997-1 Closing Date" means July 31, 1997.
"Series 1997-1 Collateral" means the Collateral, the Series
1997-1 Distribution Account Collateral and the Series 1997-1 Reserve Account
Collateral.
"Series 1997-1 Collection Account" has the meaning specified
in Section 2.1(b) of this Supplement.
"Series 1997-1 Controlled Amortization Period" means the
Class A-1 Controlled Amortization Period or the Class A-2 Controlled
Amortization Period.
"Series 1997-1 Deposit Date" has the meaning specified in
Section 2.2 of this Supplement.
"Series 1997-1 Distribution Account" has the meaning
specified in Section 2.8(a) of this Supplement.
"Series 1997-1 Distribution Account Collateral" has the
meaning specified in Section 2.8(d) of this Supplement.
"Series 1997-1 Enhancement" means the Series 1997-1
Overcollateralization Amount and the Series 1997-1 Reserve Account Amount.
"Series 1997-1 Enhancement Amount" means, as of any date of
determination, the sum of the Series 1997-1 Overcollateralization Amount and
the Series 1997-1 Available Reserve Account Amount as of such date.
"Series 1997-1 Enhancement Deficiency" means, on any date of
determination, the amount by which the Series 1997-1 Enhancement Amount is less
than the Series 1997-1 Required Enhancement Amount as of such date.
"Series 1997-1 Excess Collection Account" has the meaning
specified in Section 2.1(b) of this Supplement.
"Series 1997-1 Initial Invested Amount" means the sum of the
Class A-1 Initial Invested Amount and the Class A-2 Initial Invested Amount.
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"Series 1997-1 Interest Period" means a period commencing on
and including a Distribution Date and ending on and including the day preceding
the next succeeding Distribution Date; provided, however, that the initial
Series 1997-1 Interest Period shall commence on and include the Series 1997-1
Closing Date and end on and include August 19, 1997.
"Series 1997-1 Invested Amount" means, as of any date of
determination, the sum of the Class A-1 Invested Amount and the Class A-2
Invested Amount as of such date.
"Series 1997-1 Invested Percentage" means as of any date of
determination:
(a) when used with respect to Principal Collections, the
percentage equivalent (which percentage shall never exceed 100%) of a
fraction the numerator of which shall be equal to the sum of the
Series 1997-1 Invested Amount and the Series 1997-1
Overcollateralization Amount, determined during the Series 1997-1
Revolving Period as of the end of the Related Month (or, until the end
of the initial Related Month, on the Series 1997-1 Closing Date), or,
during the Series 1997-1 Controlled Amortization Period and the Series
1997-1 Rapid Amortization Period, as of the end of the Series 1997-1
Revolving Period, and the denominator of which shall be the greater of
(I) the Aggregate Asset Amount as of the end of the Related Month or,
until the end of the initial Related Month, as of the Series 1997-1
Closing Date, and (II) as of the same date as in clause (I), the sum
of the numerators used to determine (i) invested percentages for
allocations with respect to Principal Collections (for all Series of
Notes and all classes of such Series of Notes) and (ii)
overcollateralization percentages for allocations with respect to
Principal Collections (for all Series of Notes that provide for credit
enhancement in the form of overcollateralization); and
(b) when used with respect to Interest Collections, the
percentage equivalent (which percentage shall never exceed 100%) of a
fraction the numerator of which shall be the Accrued Amounts with
respect to the Series 1997-1 Notes on such date of
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determination, and the denominator of which shall be the aggregate
Accrued Amounts with respect to all Series of Notes on such date of
determination.
"Series 1997-1 Limited Liquidation Event of Default" means,
so long as such event or condition continues, any event or condition of the
type specified in clauses (a) through (g) of Article III of this Supplement;
provided, however, that any event or condition of the type specified in clauses
(a) through (e) of Article III of this Supplement shall not constitute a Series
1997-1 Limited Liquidation Event of Default if (i) within such thirty (30) day
period, such Amortization Event shall have been cured and, after such cure of
such Amortization Event is provided for, the Trustee shall have received the
written consent of the Surety Provider waiving the occurrence of such Series
1997-1 Limited Liquidation Event of Default or (ii) the Trustee shall have
received the written consent of the Surety Provider waiving the occurrence of
such Series 1997-1 Limited Liquidation Event of Default.
"Series 1997-1 Maximum Aggregate Subaru/Hyundai/Suzuki
Amount" means, as of any day, with respect to Subaru, Hyundai and Suzuki, in
the aggregate, an amount equal to 10% of the aggregate Net Book Value of all
Vehicles leased under the Leases on such day.
"Series 1997-1 Maximum Amount" means any of the Series 1997-1
Maximum Manufacturer Amounts, the Series 1997-1 Maximum Non-Eligible
Manufacturer Amount, the Series 1997-1 Maximum Non-Program Vehicle Amount or
the Series 1997-1 Maximum Specified States Amount.
"Series 1997-1 Maximum Individual Subaru/Hyundai/Suzuki
Amount" means, as of any day, with respect to Subaru, Hyundai or Suzuki,
individually, an amount equal to 5% of the aggregate Net Book Value of all
Vehicles leased under the Leases on such day.
"Series 1997-1 Maximum Manufacturer Amount" means, as of any
day, any of the Series 1997-1 Maximum Mitsubishi Amount, the Series 1997-1
Maximum Individual Subaru/Hyundai/Suzuki Amount, the Series 1997-1 Maximum
Aggregate Subaru/Hyundai/Suzuki Amount, the Series 1997-1 Maximum Mazda Amount
or the Series 1997-1 Maximum Mazda Program Vehicle Amount.
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"Series 1997-1 Maximum Mazda Amount" means, as of any day, an
amount equal to 20% of the aggregate Net Book Value of all Vehicles leased
under the Leases on such day.
"Series 1997-1 Maximum Mazda Program Vehicle Amount" means,
as of any day, an amount equal to the Series 1997-1 Maximum Mazda Program
Vehicle Percentage of the aggregate Net Book Value of all Vehicles leased under
the Leases on such day.
"Series 1997-1 Maximum Mazda Program Vehicle Percentage"
means 20% or such lesser percentage as may be agreed to in writing by AFC-II
and the Surety Provider (initially 5%) on or after the Series 1997-1 Closing
Date, with prompt written notice thereof delivered by AFC-II to the Trustee.
"Series 1997-1 Maximum Mitsubishi Amount" means, as of any
day, an amount equal to 10% of the aggregate Net Book Value of all Vehicles
leased under the Leases on such day.
"Series 1997-1 Maximum Non-Eligible Manufacturer Amount"
means, as of any day, an amount equal to 3% of the aggregate Net Book Value of
all Vehicles leased under the Leases on such day.
"Series 1997-1 Maximum Non-Program Vehicle Amount" means, as
of any day, an amount equal to the Series 1997-1 Maximum Non-Program Vehicle
Percentage of the aggregate Net Book Value of all Vehicles leased under
the Leases on such day.
"Series 1997-1 Maximum Non-Program Vehicle Percentage" means
25% or such lesser percentage as may be agreed to in writing by AFC-II and the
Surety Provider (initially 15%) on or after the Series 1997-1 Closing Date,
with prompt written notice thereof delivered by AFC-II to the Trustee.
"Series 1997-1 Maximum Specified States Amount" means, as of
any day, an amount equal to 7.5% of the aggregate Net Book Value of all
Vehicles leased under the Leases on such day.
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<PAGE>
"Series 1997-1 Monthly Interest" means, with respect to any
Series 1997-1 Interest Period, the sum of the Class A-1 Monthly Interest and
the Class A-2 Monthly Interest for such Series 1997-1 Interest Period.
"Series 1997-1 Non-Program Vehicle Percentage" means, as of
any date of determination, a fraction, expressed as a percentage, the numerator
of which is the aggregate Net Book Value of all Non-Program Vehicles leased
under the AESOP I Operating Lease as of such date and the denominator of which
is the aggregate Net Book Value of all Vehicles leased under the AESOP I
Operating Lease as of such date.
"Series 1997-1 Noteholders" means the Class A-1 Noteholders
and the Class A-2 Noteholders.
"Series 1997-1 Note Rate" means the Class A-1 Note Rate or
the Class A-2 Note Rate, as the context may require.
"Series 1997-1 Notes" means, collectively, the Class A-1
Notes and the Class A-2 Notes.
"Series 1997-1 Overcollateralization Amount" means (i) as of
any date on which no AESOP I Operating Lease Vehicle Deficiency exists, the
Series 1997-1 Required Overcollateralization Amount as of such date and (ii) as
of any date on which an AESOP I Operating Lease Vehicle Deficiency exists, the
excess, if any, of (x) the Series 1997-1 AESOP I Operating Lease Loan Agreement
Borrowing Base as of such date over (y) the Series 1997-1 Invested Amount as of
such date.
"Series 1997-1 Percentage" means, as of any date of
determination, a fraction, expressed as a percentage, the numerator of which is
the Series 1997-1 Invested Amount as of such date and the denominator of which
is the aggregate Invested Amount of each Series of Notes outstanding as of such
date.
"Series 1997-1 Principal Allocation" has the meaning
specified in Section 2.2(a)(ii) of this Supplement.
"Series 1997-1 Program Vehicle Percentage" means, as of any
date of determination, a fraction,
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expressed as a percentage, the numerator of which is the aggregate Net Book
Value of all Program Vehicles leased under the AESOP I Operating Lease as of
such date and the denominator of which is the aggregate Net Book Value of all
Vehicles leased under the AESOP I Operating Lease as of such date.
"Series 1997-1 Rapid Amortization Period" means the period
beginning at the close of business on the Business Day immediately preceding
the day on which an Amortization Event is deemed to have occurred with respect
to the Series 1997-1 Notes and ending upon the earliest to occur of (i) the
date on which the Series 1997-1 Notes are fully paid and the Surety Provider
has been paid all Surety Provider Fees and all other Surety Provider
Reimbursement Amounts then due, (ii) the Series 1997-1 Termination Date and
(iii) the termination of the Indenture.
"Series 1997-1 Repurchase Amount" has the meaning specified
in Section 6.1 of this Supplement.
"Series 1997-1 Required AESOP I Operating Lease Vehicle
Amount" means, as of any date of determination, the sum of the Series 1997-1
Invested Amount and the Series 1997-1 Required Overcollateralization Amount as
of such date.
"Series 1997-1 Required Enhancement Amount" means, as of any
date of determination, the sum of (i) the product of the Series 1997-1 Required
Enhancement Percentage as of such date and the Series 1997-1 Invested Amount as
of such date, (ii) the Series 1997-1 Percentage of the excess, if any, of the
Non-Program Vehicle Amount as of such date over the Series 1997-1 Maximum
Non-Program Vehicle Amount as of such date, (iii) the Series 1997-1 Percentage
of the excess, if any, of the aggregate Net Book Value of all Vehicles
manufactured by Mitsubishi and leased under the Leases as of such date over the
Series 1997-1 Maximum Mitsubishi Amount as of such date, (iv) the Series 1997-1
Percentage of the excess, if any, of the aggregate Net Book Value of all
Vehicles manufactured by Subaru, Hyundai or Suzuki, individually, and leased
under the Leases as of such date over the Series 1997-1 Maximum Individual
Subaru/Hyundai/Suzuki Amount as of such date, (v) the Series 1997-1 Percentage
of the excess, if any, of the aggregate Net Book Value of all
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Vehicles manufactured by Subaru, Hyundai or Suzuki, in the aggregate, and
leased under the Leases as of such date over the Series 1997-1 Maximum
Aggregate Subaru/Hyundai/Suzuki Amount as of such date, (vi) the Series 1997-1
Percentage of the excess, if any, of the aggregate Net Book Value of all
Vehicles manufactured by Mazda and leased under the Leases as of such date over
the Series 1997-1 Maximum Mazda Amount as of such date, (vii) the Series 1997-1
Percentage of the excess, if any, of the aggregate Net Book Value of all
Program Vehicles manufactured by Mazda and leased under the Leases as of such
date over the Series 1997-1 Maximum Mazda Program Vehicle Amount as of such
date, (viii) the Series 1997-1 Percentage of the excess, if any, of the
Specified States Amount as of such date over the Series 1997-1 Maximum
Specified States Amount as of such date and (ix) the Series 1997-1 Percentage
of the excess, if any, of the Non-Eligible Manufacturer Amount as of such date
over the Series 1997-1 Maximum Non-Eligible Manufacturer Amount as of such
date.
"Series 1997-1 Required Enhancement Percentage" means, as of
any date of determination, a fraction, expressed as a percentage, the numerator
of which is the sum of (i) the product of (A) 11% times (B) the Series 1997-1
Program Vehicle Percentage as of such date times (C) the Series 1997-1 Invested
Amount as of such date and (ii) the product of (A) the Series 1997-1 Required
NonProgram Enhancement Percentage as of such date times (B) the Series 1997-1
Non-Program Vehicle Percentage as of such date times (C) the Series 1997-1
Invested Amount as of such date and the denominator of which is the Series
1997-1 Invested Amount as of such date.
"Series 1997-1 Required Non-Program Enhancement Percentage"
means, as of any date of determination, the greater of (a) 15% and (b) the sum
of (i) 15% and (ii) the sum, for each calendar month within the preceding
twelve calendar months (or such fewer number of calendar months as have elapsed
since the Series 1997-1 Closing Date), of the greater of (x) an amount (not
less than zero) equal to 100% minus the Measurement Month Average for the
immediately preceding Measurement Month and (y) an amount (not less than zero)
equal to 100% minus the Market Value Average as of the Determination Date
within such calendar month (excluding the Market Value Average for any
Determination Date which has not yet occurred).
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"Series 1997-1 Required Overcollateralization Amount" means,
as of any date of determination, the excess, if any, of the Series 1997-1
Required Enhancement Amount over the sum of (i) the Series 1997-1 Available
Reserve Account Amount as of such date and (ii) the amount of cash and
Permitted Investment on deposit in the Series 1997-1 Collection Account and the
Series 1997-1 Excess Collection Account on such date.
"Series 1997-1 Required Reserve Account Amount" means, with
respect to any Distribution Date, an amount equal to 4.0% of the Series 1997-1
Invested Amount on such Distribution Date (after giving effect to any payments
of principal to be made on the Series 1997-1 Notes on such Distribution Date).
"Series 1997-1 Reserve Account" has the meaning specified in
Section 2.7(a) of this Supplement.
"Series 1997-1 Reserve Account Collateral" has the meaning
specified in Section 2.7(d) of this Supplement.
"Series 1997-1 Reserve Account Initial Deposit" means
$66,000,000.
"Series 1997-1 Reserve Account Surplus" means, with respect
to any Distribution Date, the excess, if any, of the Series 1997-1 Available
Reserve Account Amount over the Series 1997-1 Required Reserve Account
Amount on such Distribution Date.
"Series 1997-1 Revolving Period" means the period from and
including the Series 1997-1 Closing Date to the earlier of (i) the commencement
of the Series 1997-1 Controlled Amortization Period and (ii) the commencement
of any Series 1997-1 Rapid Amortization Period.
"Series 1997-1 Termination Date" means the October 2003
Distribution Date.
"Series 1997-2 Supplement" means the supplement to the Base
Indenture authorizing the issuance of the Series of Notes designated as the
Series 1997-2 Notes.
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"Shortfall" means, as of any date, the sum of the Class A-1
Shortfall and the Class A-2 Shortfall as of such date.
"Supplement" has the meaning set forth in the preamble.
"Surety Bond" means the Note Guaranty Insurance Policy No.
24464, dated July 30, 1997, issued by the Surety Provider.
"Surety Default" means (i) the occurrence and continuance of
any failure by the Surety Provider to pay upon a demand for payment in
accordance with the requirements of the Surety Bond or (ii) the occurrence of
an Event of Bankruptcy with respect to the Surety Provider.
"Surety Provider" means MBIA Insurance Corporation, a New
York stock insurance company. The Surety Provider shall constitute an
"Enhancement Provider" with respect to the Series 1997-1 Notes for all purposes
under the Indenture and the other Related Documents.
"Surety Provider Fee" has the meaning set forth in the
Insurance Agreement.
"Surety Provider Reimbursement Amounts" means, as of any date
of determination, (i) an amount equal to the aggregate of any amounts due as of
such date to the Surety Provider pursuant to the Insurance Agreement in respect
of unreimbursed draws under the Surety Bond, including interest thereon
determined in accordance with the Insurance Agreement, and (ii) an amount equal
to the aggregate of any other amounts due as of such date to the Surety
Provider pursuant to the Insurance Agreement.
"Temporary Global Class A-1 Note" has the meaning specified
in Section 5.2 of this Supplement.
"Temporary Global Class A-2 Note" has the meaning specified
in Section 5.2 of this Supplement.
"Waiver Event" means the occurrence of the delivery of a
Waiver Request and the subsequent waiver of any Series 1997-1 Maximum Amount.
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"Waiver Request" has the meaning set forth in Article IV of
this Supplement.
ARTICLE II
SERIES 1997-1 ALLOCATIONS
With respect to the Series 1997-1 Notes only, the following
shall apply:
Section 2.1 Establishment of Series 1997-1 Collection
Account, Series 1997-1 Excess Collection Account and Series 1997-1 Accrued
Interest Account.
(a) All Collections allocable to the Series 1997-1 Notes
shall be allocated to the Collection Account.
(b) The Trustee will create three administrative subaccounts
within the Collection Account for the benefit of the Series 1997-1 Noteholders
and the Surety Provider: the Series 1997-1 Collection Account (such
sub-account, the "Series 1997-1 Collection Account"), the Series 1997-1 Excess
Collection Account (such sub-account, the "Series 1997-1 Excess Collection
Account") and the Series 1997-1 Accrued Interest Account (such sub-account, the
"Series 1997-1 Accrued Interest Account").
Section 2.2 Allocations with Respect to the Series 1997-1
Notes. The proceeds from the initial sale of the Series 1997-1 Notes will be
deposited into the Collection Account. On each Business Day on which
Collections are deposited into the Collection Account (each such date, a
"Series 1997-1 Deposit Date"), the Administrator will direct the Trustee in
writing pursuant to the Administration Agreement to allocate all amounts
deposited into the Collection Account in accordance with the provisions of this
Section 2.2:
(a) Allocations of Collections During the Series 1997-1
Revolving Period. During the Series 1997-1 Revolving Period, the Administrator
will direct the Trustee in writing pursuant to the Administration Agreement
to allocate on each day, prior to 11:00 a.m. (New York City time) on each
Series 1997-1 Deposit Date, all
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amounts deposited into the Collection Account as set forth below:
(i) allocate to the Series 1997-1 Collection Account an
amount equal to the Series 1997-1 Invested Percentage (as of such day)
of the aggregate amount of Interest Collections on such day. All such
amounts allocated to the Series 1997-1 Collection Account shall be
further allocated to the Series 1997-1 Accrued Interest Account; and
(ii) allocate to the Series 1997-1 Excess Collection Account
an amount equal to the Series 1997-1 Invested Percentage (as of such
day) of the aggregate amount of Principal Collections on such day (for
any such day, the "Series 1997-1 Principal Allocation"); provided
however, if a Waiver Event shall have occurred, then such allocation
shall be modified as provided in Article IV of this Supplement.
(b) Allocations of Collections During any Series 1997-1
Controlled Amortization Period. With respect to any Series 1997-1 Controlled
Amortization Period, the Administrator will direct the Trustee in writing
pursuant to the Administration Agreement to allocate, prior to 11:00 a.m. (New
York City time) on any Series 1997-1 Deposit Date, all amounts deposited into
the Collection Account as set forth below:
(i) allocate to the Series 1997-1 Collection Account an
amount determined as set forth in Section 2.2(a)(i) above for such
day, which amount shall be further allocated to the Series 1997-1
Accrued Interest Account; and
(ii) (A) with respect to the Class A-1 Controlled
Amortization Period, allocate to the Series 1997-1 Collection Account
an amount equal to the Series 1997-1 Principal Allocation for such
day, which amount shall be used to make principal payments in respect
of the Class A-1 Notes; provided, however, that if the Monthly Total
Principal Allocation exceeds the Class A-1 Controlled Distribution
Amount, then the amount of such excess shall be allocated to the
Series 1997-1 Excess Collection Account; and provided further that if
a Waiver Event
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shall have occurred, then such allocation shall be modified as
provided in Article IV of this Supplement; and (B) with respect to the
Class A-2 Controlled Amortization Period, allocate to the Series
1997-1 Collection Account an amount equal to the Series 1997-1
Principal Allocation for such day, which amount shall be used to make
principal payments in respect of the Class A-2 Notes; provided,
however, that if the Monthly Total Principal Allocation exceeds the
Class A-2 Controlled Distribution Amount, then the amount of such
excess shall be allocated to the Series 1997-1 Excess Collection
Account; and provided further that if a Waiver Event shall have
occurred, then such allocation shall be modified as provided in
Article IV of this Supplement.
(c) Allocations of Collections During the Series 1997-1 Rapid
Amortization Period. With respect to the Series 1997-1 Rapid Amortization
Period, other than after the occurrence of an Event of Bankruptcy with respect
to ARAC, any other Lessee or ARC, the Administrator will direct the Trustee in
writing pursuant to the Administration Agreement to allocate, prior to 11:00
a.m. (New York City time) on any Series 1997-1 Deposit Date, all amounts
deposited into the Collection Account as set forth below:
(i) allocate to the Series 1997-1 Collection Account an
amount determined as set forth in Section 2.2(a)(i) above for such
day, which amount shall be further allocated to the Series 1997-1
Accrued Interest Account; and
(ii) allocate to the Series 1997-1 Collection Account an
amount equal to the Series 1997-1 Principal Allocation for such day,
which amount shall be used to make principal payments in respect of
the Class A-1 Notes and the Class A-2 Notes, ratably, without
preference or priority of any kind, until the Series 1997-1 Invested
Amount is paid in full.
(d) Allocations of Collections after the Occurrence of an
Event of Bankruptcy. After the occurrence of an Event of Bankruptcy with
respect to ARAC, any other Lessee or ARC, the Administrator will direct the
Trustee in writing pursuant to the Administration Agree-
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ment to allocate, prior to 11:00 a.m. (New York City time) on any Series 1997-1
Deposit Date, all amounts attributable to the AESOP I Operating Lease Loan
Agreement deposited into the Collection Account as set forth below:
(i) allocate to the Series 1997-1 Collection Account
an amount equal to the Series 1997-1 AESOP I Operating Lease Vehicle
Percentage as of the date of the occurrence of such Event of
Bankruptcy of the aggregate amount of Interest Collections made under
the AESOP I Operating Lease Loan Agreement. All such amounts allocated
to the Series 1997-1 Collection Account shall be further allocated to
the Series 1997-1 Accrued Interest Account;
(ii) allocate to the Series 1997-1 Collection
Account an amount equal to the Series 1997-1 AESOP I Operating Lease
Vehicle Percentage as of the date of the occurrence of such Event of
Bankruptcy of the aggregate amount of Principal Collections made under
the AESOP I Operating Lease Loan Agreement, which amount shall be used
to make principal payments in respect of the Class A-1 Notes and the
Class A-2 Notes, ratably, without preference or priority of any kind,
until the Series 1997-1 Invested Amount is paid in full.
After the occurrence of an Event of Bankruptcy with respect to ARAC, any other
Lessee or ARC, the Administrator will direct the Trustee in writing pursuant to
the Administration Agreement to allocate all amounts attributable to the AESOP
I Finance Lease Loan Agreement and the AESOP II Loan Agreement in accordance
with the provisions of the Series 1997-2 Supplement.
(e) Series 1997-1 Excess Collection Account. Amounts
allocated to the Series 1997-1 Excess Collection Account on any Series 1997-1
Deposit Date will be (w) first, deposited in the Series 1997-1 Reserve Account
in an amount up to the excess, if any, of the Series 1997-1 Required Reserve
Account Amount for such date over the Series 1997-1 Available Reserve Account
Amount for such date, (x) second, used to pay the principal amount of other
Series of Notes that are then in amortization, (y) third, released to AESOP
Leasing in an amount equal to the product of (A) the Loan Agreement's Share
with re-
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spect to the AESOP I Operating Lease Loan Agreement as of such date times (B)
100% minus the Loan Payment Allocation Percentage with respect to the AESOP I
Operating Lease Loan Agreement as of such date times (C) the amount of any
remaining funds and (z) fourth, paid to AFC-II and used to make Loans under the
Loan Agreements to the extent the Borrowers have requested Loans thereunder,
Eligible Vehicles are available for financing thereunder and no Series 1997-1
Enhancement Deficiency or AESOP I Operating Lease Vehicle Deficiency would
result therefrom. Upon the occurrence of an Amortization Event, funds on
deposit on the Series 1997-1 Excess Collection Account will be withdrawn by the
Trustee, deposited in the Series 1997-1 Collection Account and allocated as
Principal Collections to reduce the Series 1997-1 Invested Amount on the
immediately succeeding Distribution Date.
Section 2.3 Payments To Noteholders.
On each Determination Date, as provided below, the
Administrator shall instruct the Paying Agent in writing pursuant to the
Administration Agreement to withdraw, and on the following Distribution Date
the Paying Agent, acting in accordance with such instructions, shall withdraw
the amounts required to be withdrawn from the Collection Account pursuant to
Sections 2.3(a) and (b) below in respect of all funds available from Interest
Collections processed since the preceding Distribution Date and allocated to
the holders of the Series 1997-1 Notes.
(a) Note Interest with respect to the Series 1997-1 Notes. On
each Determination Date, the Administrator shall instruct the Trustee and the
Paying Agent in writing pursuant to Administration Agreement as to the amount
to be withdrawn and paid pursuant to Section 2.4 of this Supplement from the
Series 1997-1 Accrued Interest Account to the extent funds are anticipated to
be available from Interest Collections allocable to the Series 1997-1 Notes
processed from but not including the preceding Distribution Date through the
succeeding Distribution Date in respect of (x) first, an amount equal to Series
1997-1 Monthly Interest for the Series 1997-1 Interest Period ending on the day
preceding the related Distribution Date, (y) second, an amount equal to the
amount of any unpaid Shortfalls as of the preceding
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Distribution Date (together with any accrued interest on such Shortfalls) and
(z) third, an amount equal to the Surety Provider Fee for such Series 1997-1
Interest Period plus any Surety Provider Reimbursement Amounts then due and
owing. If the amounts anticipated to be available from the Series 1997-1
Accrued Interest Account will be insufficient to pay the sum of the amounts
described in clauses (x), (y) and (z) above on any Distribution Date, the
Administrator shall instruct the Trustee in writing to withdraw from the Series
1997-1 Reserve Account and deposit in the Series 1997-1 Distribution Account on
the following Distribution Date an amount equal to the lesser of the Series
1997-1 Available Reserve Account Amount and such insufficiency; provided,
however, that after the occurrence of a Surety Default, no amounts in respect
of the Surety Provider Fee shall be withdrawn from the Series 1997-1 Reserve
Account. If the amounts described in the preceding two sentences are
insufficient to pay the sum of the amounts described in clauses (x) and (y)
above on any Distribution Date, the Trustee shall make a demand on the Surety
Bond in accordance with the terms thereof in an amount equal to such
insufficiency and deposit the proceeds thereof in the Series 1997-1
Distribution Account. If the amounts described in this Section 2.3(a) are
insufficient to pay Series 1997-1 Monthly Interest on any Distribution Date,
payments of interest to the Series 1997-1 Noteholders will be reduced on a pro
rata basis by the amount of such deficiency. The aggregate amount, if any, of
such deficiency on any Distribution Date shall be referred to as the
"Shortfall" and the portion thereof allocable to each Class of Series 1997-1
Notes shall be referred to as the "Class A-1 Shortfall" and the "Class A-2
Shortfall", respectively. Interest shall accrue on the Shortfall for each Class
of Series 1997-1 Notes at the applicable Series 1997-1 Note Rate. On the
following Distribution Date, the Trustee shall withdraw the amounts described
in this Section 2.3(a) from the Series 1997-1 Accrued Interest Account and
deposit such amounts in the Series 1997-1 Distribution Account.
(b) Balance. On or prior to the second Business Day preceding
each Distribution Date, the Administrator shall instruct the Trustee and the
Paying Agent in writing pursuant to the Administration Agreement to pay the
balance (after making the payments required in Section 2.3(a) of this
Supplement), if any, of the Interest
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Collections allocated to holders of the Series 1997-1 Notes since the preceding
Distribution Date as follows:
(i) on each Distribution Date during the Series 1997-1
Revolving Period or any Series 1997-1 Controlled Amortization Period,
(1) first, to the Surety Provider, in an amount equal to (x) the
Surety Provider Fee for the related Series 1997-1 Interest Period and,
without duplication, (y) any Surety Provider Reimbursement Amounts
then due and owing, (2) second, to the Administrator, an amount equal
to the Series 1997-1 Percentage as of the beginning of such Series
1997-1 Interest Period of the portion of the Monthly Administration
Fee payable by AFC-II (as specified in clause (iii) of the definition
thereof) for such Series 1997-1 Interest Period, (3) third, to the
Trustee, an amount equal to the Series 1997-1 Percentage as of the
beginning of such Series 1997-1 Interest Period of the Trustee's fees
for such Series 1997-1 Interest Period, (4) fourth, to pay any
Carrying Charges (other than Carrying Charges provided for above) to
the Persons to whom such amounts are owed, an amount equal to the
Series 1997-1 Percentage as of the beginning of such Series 1997-1
Interest Period of such Carrying Charges (other than Carrying Charges
provided for above) for such Series 1997-1 Interest Period and (5)
fifth, the balance, if any ("Excess Collections"), shall be withdrawn
by the Paying Agent from the Series 1997-1 Collection Account and
deposited in the Series 1997-1 Excess Collection Account; and
(ii) on each Distribution Date during the Series 1997-1 Rapid
Amortization Period, (1) first, to the Surety Provider, in an amount
equal to (x) the Surety Provider Fee for the related Series 1997-1
Interest Period and, without duplication, (y) any Surety Provider
Reimbursement Amounts then due and owing, (2) second, to the Trustee,
an amount equal to the Series 1997-1 Percentage as of the beginning of
such Series 1997-1 Interest Period of the Trustee's fees for such
Series 1997-1 Interest Period, (3) third, to the Administrator, an
amount equal to the Series 1997-1 Percentage as of the beginning of
such Series 1997-1 Interest Period of the portion of the Monthly
Administration Fee (as specified in
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clause (iii) of the definition thereof) payable by AFC-II for such
Series 1997-1 Interest Period, (4) fourth, to pay any Carrying Charges
(other than Carrying Charges provided for above) to the Persons to
whom such amounts are owed, an amount equal to the Series 1997-1
Percentage as of the beginning of such Series 1997-1 Interest Period
of such Carrying Charges (other than Carrying Charges provided for
above) for such Series 1997-1 Interest Period and (5) fifth, the
balance, if any, shall constitute Excess Collections and shall be
withdrawn by the Paying Agent from the Series 1997-1 Collection
Account and deposited in the Series 1997-1 Excess Collection Account.
Section 2.4 Payment of Note Interest.
On each Distribution Date, subject to Section 9.8 of the Base
Indenture, the Paying Agent shall, in accordance with Section 6.1 of the Base
Indenture, pay to the Series 1997-1 Noteholders from the Series 1997-1
Distribution Account the amount deposited in the Series 1997-1 Distribution
Account for the payment of interest pursuant to Section 2.3(a) of this
Supplement and, to the extent necessary to pay interest on the Series 1997-1
Notes, first, amounts on deposit in the Series 1997-1 Collection Account,
second, amounts on deposit in the Series 1997-1 Reserve Account and third,
proceeds of a demand on the Surety Bond made in accordance with the terms
thereof.
Section 2.5 Payment of Note Principal.
(a) Monthly Payments During Controlled Amortization Period or
Rapid Amortization Period. Commencing on the second Determination Date during
the Class A-1 Controlled Amortization Period or the Class A-2 Controlled
Amortization Period, as the case may be, or the first Determination Date after
the commencement of the Series 1997-1 Rapid Amortization Period, the
Administrator shall instruct the Trustee and the Paying Agent in writing
pursuant to the Administration Agreement as to the amount allocated to the
Series 1997-1 Notes during the Related Month pursuant to Section 2.2(b)(ii),
(c)(ii) or (d)(ii), as the case may be, of this Supplement, as to any amounts
to be withdrawn from the Series 1997-1 Reserve Account and deposited into the
Series 1997-1 Dis-
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tribution Account, and as to the amount of any demand on the Surety Bond in
accordance with the terms thereof. On the Distribution Date following each such
Determination Date, the Trustee shall withdraw the amount allocated to the
Series 1997-1 Notes during the Related Month pursuant to Section 2.2(b)(ii),
(c)(ii) or (d)(ii), as the case may be, of this Supplement from the Series
1997-1 Collection Account and deposit such amount in the Series 1997-1
Distribution Account, to be paid to the holders of the Series 1997-1 Notes. If
the amount so deposited in the Series 1997-1 Collection Account with respect to
the Final Distribution Date with respect to any Class of Series 1997-1 Notes is
less than the Class A-1 Invested Amount or the Class A-2 Invested Amount, as
the case may be, the Trustee shall withdraw from the Series 1997-1 Reserve
Account, an amount equal to the lesser of the Series 1997-1 Available Reserve
Account Amount and such insufficiency. If the Series 1997-1 Available Reserve
Account Amount is less than such insufficiency, the Trustee shall make a demand
on the Surety Bond in accordance with the terms thereof in an amount equal to
such insufficiency and deposit the proceeds thereof in the Series 1997-1
Distribution Account. The entire principal amount of all Outstanding Class A-1
Notes shall be due and payable on the Class A-1 Final Distribution Date. The
entire principal amount of all Outstanding Class A-2 Notes shall be due and
payable on the Class A-2 Final Distribution Date.
(b) If on any Determination Date the Administrator determines that the
Principal Deficit Amount with respect to the next succeeding Distribution Date
will be greater than zero, the Administrator shall instruct the Trustee in
writing to make a demand on the Surety Bond on such Determination Date in
accordance with the terms thereof in an amount equal to such Principal Deficit
Amount and deposit the proceeds thereof into the Series 1997-1 Distribution
Account.
(c) On each Distribution Date occurring on or after the date a
withdrawal is made from the Series 1997-1 Collection Account or the Series
1997-1 Reserve Account pursuant to Section 2.5(a) of this Supplement or a
demand is made pursuant to Section 2.5(b) of this Supplement, the Paying Agent
shall, in accordance with Section 6.1 of the Base Indenture, pay pro rata to
each Class A-1 Noteholder or Class A-2 Noteholder, as applicable, from
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the Series 1997-1 Distribution Account the amount deposited therein pursuant to
Section 2.5(a) or (b) of this Supplement, to the extent necessary to pay the
Class A-1 Controlled Amortization Amount or the Class A-2 Controlled
Amortization Amount during the Class A-1 Controlled Amortization Period or the
Class A-2 Controlled Amortization Period, respectively, or to the extent
necessary to pay the Class A-1 Invested Amount and the Class A-2 Invested
Amount during the Series 1997-1 Rapid Amortization Period.
Section 2.6 Administrator's Failure to Instruct the Trustee
to Make a Deposit or Payment.
If the Administrator fails to give notice or instructions to
make any payment from or deposit into the Collection Account required to be
given by the Administrator, at the time specified in the Administration
Agreement or any other Related Document (including applicable grace periods),
the Trustee shall make such payment or deposit into or from the Collection
Account without such notice or instruction from the Administrator, provided
that the Administrator, upon request of the Trustee, promptly provides the
Trustee with all information necessary to allow the Trustee to make such a
payment or deposit. When any payment or deposit hereunder or under any other
Related Document is required to be made by the Trustee or the Paying Agent at
or prior to a specified time, the Administrator shall deliver any applicable
written instructions with respect thereto reasonably in advance of such
specified time.
Section 2.7 Series 1997-1 Reserve Account.
(a) Establishment of Series 1997-1 Reserve Account. AFC-II
shall establish and maintain in the name of the Series 1997-1 Agent for the
benefit of the Series 1997-1 Noteholders and the Surety Provider, or cause to
be established and maintained, an account (the "Series 1997-1 Reserve
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Series 1997-1 Noteholders and the
Surety Provider. The Series 1997-1 Reserve Account shall be maintained (i) with
a Qualified Institution, or (ii) as a segregated trust account with the
corporate trust department of a depository institution or trust company having
corporate trust powers and acting as trustee for
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funds deposited in the Series 1997-1 Reserve Account; provided that, if at any
time such Qualified Institution is no longer a Qualified Institution or the
credit rating of any securities issued by such depositary institution or trust
company shall be reduced to below BBB- by S&P or Baa3 by Moody's, then AFC-II
shall, within 30 days of such reduction, establish a new Series 1997-1 Reserve
Account with a new Qualified Institution. If the Series 1997-1 Reserve Account
is not maintained in accordance with the previous sentence, AFC-II shall
establish a new Series 1997-1 Reserve Account, within ten (10) Business Days
after obtaining knowledge of such fact, which complies with such sentence, and
shall instruct the Series 1997-1 Agent in writing to transfer all cash and
investments from the non-qualifying Series 1997-1 Reserve Account into the new
Series 1997-1 Reserve Account. Initially, the Series 1997-1 Reserve Account
will be established with Harris Trust and Savings Bank. On the Series 1997-1
Closing Date, AFC-II shall deposit an amount equal to the Series 1997-1 Reserve
Account Initial Deposit into the Series 1997-1 Reserve Account.
(b) Administration of the Series 1997-1 Reserve Account. The
Administrator may instruct the institution maintaining the Series 1997-1
Reserve Account to invest funds on deposit in the Series 1997-1 Reserve Account
from time to time in Permitted Investments; provided, however, that any such
investment shall mature not later than the Business Day prior to the
Distribution Date following the date on which such funds were received, unless
any Permitted Investment held in the Series 1997-1 Reserve Account is held with
the Paying Agent, then such investment may mature on such Distribution Date and
such funds shall be available for withdrawal on or prior to such Distribution
Date. All such Permitted Investments will be credited to the Series 1997-1
Reserve Account.
(c) Earnings from Series 1997-1 Reserve Account. All interest
and earnings (net of losses and investment expenses) paid on funds on deposit
in the Series 1997-1 Reserve Account shall be deemed to be on deposit therein
and available for distribution.
(d) Series 1997-1 Reserve Account Constitutes Additional
Collateral for Series 1997-1 Notes. In order to secure and provide for the
repayment and payment of
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the AFC-II Obligations with respect to the Series 1997-1 Notes, AFC-II hereby
grants a security interest in and assigns, pledges, grants, transfers and sets
over to the Series 1997-1 Agent, for the benefit of the Series 1997-1
Noteholders and the Surety Provider, all of AFC-II's right, title and interest
in and to the following (whether now or hereafter existing or acquired): (i)
the Series 1997-1 Reserve Account, including any security entitlement thereto;
(ii) all funds on deposit therein from time to time; (iii) all certificates and
instruments, if any, representing or evidencing any or all of the Series 1997-1
Reserve Account or the funds on deposit therein from time to time; (iv) all
investments made at any time and from time to time with monies in the Series
1997-1 Reserve Account, whether constituting securities, instruments, general
intangibles, investment property, financial assets or other property; (v) all
interest, dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
the Series 1997-1 Reserve Account, the funds on deposit therein from time to
time or the investments made with such funds; and (vi) all proceeds of any and
all of the foregoing, including, without limitation, cash (the items in the
foregoing clauses (i) through (vi) are referred to, collectively, as the
"Series 1997-1 Reserve Account Collateral"). The Series 1997-1 Agent shall
possess all right, title and interest in all funds on deposit from time to time
in the Series 1997-1 Reserve Account and in all proceeds thereof, and shall be
the only person authorized to originate entitlement orders in respect of the
Series 1997-1 Reserve Account. The Series 1997-1 Reserve Account Collateral
shall be under the sole dominion and control of the Series 1997-1 Agent for the
benefit of the Series 1997-1 Noteholders and the Surety Provider.
(e) Series 1997-1 Reserve Account Surplus. In the event that
the Series 1997-1 Reserve Account Surplus on any Distribution Date, after
giving effect to all withdrawals from the Series 1997-1 Reserve Account, is
greater than zero, the Trustee, acting in accordance with the written
instructions of the Administrator pursuant to the Administration Agreement,
shall withdraw from the Series 1997-1 Reserve Account an amount equal to the
Series 1997-1 Reserve Account Surplus and shall pay such amount to AFC-II.
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(f) Termination of Series 1997-1 Reserve Account. Upon the
termination of the Indenture pursuant to Section 11.1 of the Base Indenture,
the Trustee, acting in accordance with the written instructions of the
Administrator, after the prior payment of all amounts owing to the Series
1997-1 Noteholders and to the Surety Provider and payable from the Series
1997-1 Reserve Account as provided herein, shall withdraw from the Series
1997-1 Reserve Account all amounts on deposit therein for payment to AFC-II.
Section 2.8 Series 1997-1 Distribution Account.
(a) Establishment of Series 1997-1 Distribution Account. The
Trustee shall establish and maintain in the name of the Series 1997-1 Agent for
the benefit of the Series 1997-1 Noteholders and the Surety Provider, or cause
to be established and maintained, an account (the "Series 1997-1 Distribution
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Series 1997-1 Noteholders and the
Surety Provider. The Series 1997-1 Distribution Account shall be maintained (i)
with a Qualified Institution, or (ii) as a segregated trust account with the
corporate trust department of a depository institution or trust company having
corporate trust powers and acting as trustee for funds deposited in the Series
1997-1 Distribution Account; provided that, if at any time such Qualified
Institution is no longer a Qualified Institution or the credit rating of any
securities issued by such depositary institution or trust company shall be
reduced to below BBB- by S&P or Baa3 by Moody's, then AFC-II shall, within 30
days of such reduction, establish a new Series 1997-1 Distribution Account with
a new Qualified Institution. If the Series 1997-1 Distribution Account is not
maintained in accordance with the previous sentence, AFCII shall establish a
new Distribution Account, within ten (10) Business Days after obtaining
knowledge of such fact, which complies with such sentence, and shall instruct
the Series 1997-1 Agent in writing to transfer all cash and investments from
the non-qualifying Series 1997-1 Distribution Account into the new Series
1997-1 Distribution Account. Initially, the Series 1997-1 Distribution Account
will be established with Harris Trust and Savings Bank.
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(b) Administration of the Series 1997-1 Distribution Account.
The Administrator may instruct the institution maintaining the Series 1997-1
Distribution Account to invest funds on deposit in the Series 1997-1
Distribution Account from time to time in Permitted Investments; provided,
however, that any such investment shall mature not later than the Business Day
prior to the Distribution Date following the date on which such funds were
received, unless any Permitted Investment held in the Series 1997-1
Distribution Account is held with the Paying Agent, then such investment may
mature on such Distribution Date and such funds shall be available for
withdrawal on or prior to such Distribution Date. All such Permitted
Investments will be credited to the Series 1997-1 Distribution Account.
(c) Earnings from Series 1997-1 Distribution Account. All
interest and earnings (net of losses and investment expenses) paid on funds on
deposit in the Series 1997-1 Distribution Account shall be deemed to be on
deposit and available for distribution.
(d) Series 1997-1 Distribution Account Constitutes Additional
Collateral for Series 1997-1 Notes. In order to secure and provide for the
repayment and payment of the AFC-II Obligations with respect to the Series
1997-1 Notes, AFC-II hereby grants a security interest in and assigns, pledges,
grants, transfers and sets over to the Series 1997-1 Agent, for the benefit of
the Series 1997-1 Noteholders and the Surety Provider, all of AFC-II's right,
title and interest in and to the following (whether now or hereafter existing
or acquired): (i) the Series 1997-1 Distribution Account, including any
security entitlement thereto; (ii) all funds on deposit therein from time to
time; (iii) all certificates and instruments, if any, representing or
evidencing any or all of the Series 1997-1 Distribution Account or the funds on
deposit therein from time to time; (iv) all investments made at any time and
from time to time with monies in the Series 1997-1 Distribution Account,
whether constituting securities, instruments, general intangibles, investment
property, financial assets or other property; (v) all interest, dividends,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for the Series 1997-1
Distribution Account, the funds on deposit therein from time to time or the
investments made
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with such funds; and (vi) all proceeds of any and all of the foregoing,
including, without limitation, cash (the items in the foregoing clauses (i)
through (vi) are referred to, collectively, as the "Series 1997-1 Distribution
Account Collateral"). The Series 1997-1 Agent shall possess all right, title
and interest in all funds on deposit from time to time in the Series 1997-1
Distribution Account and in all proceeds thereof, and shall be the only person
authorized to originate entitlement orders in respect of the Series 1997-1
Distribution Account. The Series 1997-1 Distribution Account Collateral shall
be under the sole dominion and control of the Series 1997-1 Agent for the
benefit of the Series 1997-1 Noteholders and the Surety Provider.
ARTICLE III
AMORTIZATION EVENTS
In addition to the Amortization Events set forth in Section
9.1 of the Base Indenture, the following shall be Amortization Events with
respect to the Series 1997-1 Notes and shall constitute the Amortization Events
set forth in Section 9.1(n) of the Base Indenture with respect to the Series
1997-1 Notes (without notice or other action on the part of the Trustee or any
holders of the Series 1997-1 Notes) and shall not be subject to waiver:
(a) a Series 1997-1 Enhancement Deficiency shall occur and
continue for at least two (2) Business Days; provided, however, that such event
or condition shall not be an Amortization Event if (i) during such two (2)
Business Day period such Series 1997-1 Enhancement Deficiency shall have been
cured in accordance with the terms and conditions of the Indenture and the
Related Documents;
(b) the Series 1997-1 Available Reserve Account Amount shall
be less than the Series 1997-1 Required Reserve Account Amount for at least two
(2) Business Days; provided, however, that such event or condition shall not be
an Amortization Event if (i) during such two (2) Business Day period such
insufficiency shall have been cured in accordance with the terms and conditions
of the Indenture and the Related Documents;
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(c) the Series 1997-1 Reserve Account shall be subject to an
injunction, estoppel or other stay or a Lien (other than Liens permitted under
the Related Documents);
(d) all principal and interest of the Class A-1 Notes is not
paid in full on or before the Class A-1 Expected Final Distribution Date or all
principal and interest of the Class A-2 Notes is not paid in full on or before
the Class A-2 Expected Final Distribution Date;
(e) the Trustee shall make a demand for payment under the
Surety Bond;
(f) the occurrence of an Event of Bankruptcy with respect to
the Surety Provider; and
(g) the Surety Provider fails to pay a demand for payment in
accordance with the requirements of the Surety Bond.
ARTICLE IV
RIGHT TO WAIVE PURCHASE RESTRICTIONS
Notwithstanding any provision to the contrary in the
Indenture or the Related Documents, upon the Trustee's receipt of notice from
any Lessee, any Borrower or AFC-II (i) to the effect that a Manufacturer
Program is no longer an Eligible Manufacturer Program and that, as a result,
the Series 1997-1 Maximum Non-Program Vehicle Amount is or will be exceeded or
(ii) that the Lessees, the Borrowers and AFC-II have determined to increase any
Series 1997-1 Maximum Amount, (such notice, a "Waiver Request"), each Series
1997-1 Noteholder may, at its option, waive the Series 1997-1 Maximum
Non-Program Vehicle Amount or any other Series 1997-1 Maximum Amount if (i) no
Amortization Event exists, (ii) the Requisite Noteholders and the Surety
Provider consent to such waiver and (iii) 60 days' prior, written notice of
such proposed waiver is provided to the Rating Agencies by the Trustee.
Upon receipt by the Trustee of a Waiver Request (a copy of
which the Trustee shall promptly provide to the Rating Agencies), all amounts
which would otherwise
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be allocated to the Series 1997-1 Excess Collection Account (collectively, the
"Designated Amounts") from the date the Trustee receives a Waiver Request
through the Consent Period Expiration Date will be held by the Trustee in the
Series 1997-1 Collection Account for ratable distribution as described below.
Within ten (10) Business Days after the Trustee receives a
Waiver Request, the Trustee shall furnish notice thereof to the Series 1997-1
Noteholders and the Surety Provider, which notice shall be accompanied by a
form of consent (each a "Consent") in the form of Exhibit B by which the Series
1997-1 Noteholders may, on or before the Consent Period Expiration Date,
consent to waiver of the applicable Series 1997-1 Maximum Amount. If the
Trustee receives the consent of the Surety Provider and Consents from the
Requisite Noteholders agreeing to waiver of the applicable Series 1997-1
Maximum Amount within forty-five (45) days after the Trustee notifies the
Series 1997-1 Noteholders of a Waiver Request (the day on which such forty-five
(45) day period expires, the "Consent Period Expiration Date"), (i) the
applicable Series 1997-1 Maximum Amount shall be deemed waived by the
consenting Series 1997-1 Noteholders, (ii) the Trustee will distribute the
Designated Amounts as set forth below and (iii) the Trustee shall promptly (but
in any event within two days) provide the Rating Agency with notice of such
waiver. Any Series 1997-1 Noteholder from whom the Trustee has not received a
Consent on or before the Consent Period Expiration Date will be deemed not to
have consented to such waiver.
If the Trustee receives Consents from the Requisite
Noteholders on or before the Consent Period Expiration Date, then on the
immediately following Distribution Date, the Trustee will pay the Designated
Amounts as follows:
(i) to the non-consenting Series 1997-1 Noteholders,
if any, pro rata up to the amount required to pay all Series 1997-1
Notes held by such non-consenting Series 1997-1 Noteholders in full;
and
(ii) any remaining Designated Amounts to the Series
1997-1 Excess Collection Account.
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If the amount paid pursuant to clause (i) of the preceding
paragraph is not paid in full on the date specified therein, then on each day
following such Distribution Date, the Administrator will allocate to the Series
1997-1 Collection Account on a daily basis all Designated Amounts collected on
such day. On each following Distribution Date, the Trustee will withdraw a
portion of such Designated Amounts from the Series 1997-1 Collection Account
and deposit same in the Series 1997-1 Distribution Account for distribution as
follows:
(a) to the non-consenting Series 1997-1 Noteholders,
if any, pro rata an amount equal to the Designated Amounts in the
Series 1997-1 Collection Account as of the applicable Determination
Date up to the aggregate outstanding principal balance of the Series
1997-1 Notes held by the non-consenting Series 1997-1 Noteholders; and
(b) any remaining Designated Amounts to the Series
1997-1 Excess Collection Account.
If the Requisite Noteholders or the Surety Provider do not
timely consent to such waiver, the Designated Amounts will be re-allocated to
the Series 1997-1 Excess Collection Account for allocation and distribution in
accordance with the terms of the Indenture and the Related Documents.
In the event that the Series 1997-1 Rapid Amortization Period
shall commence after receipt by the Trustee of a Waiver Request, all such
Designated Amounts will thereafter be considered Principal Collections
allocated to the Series 1997-1 Noteholders.
ARTICLE V
FORM OF SERIES 1997-1 NOTES
Section 5.1 Restricted Global Series 1997-1 Notes. The Series
1997-1 Notes to be issued in the United States will be issued in book-entry
form of and represented by one or more permanent global Notes in fully
registered form without interest coupons (each, a "Restricted Global Class A-1
Note" or a "Restricted Global Class A-2 Note", as the case may be), substan-
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tially in the forms set forth in Exhibits A-1-1 and A-2-1 hereto, with such
legends as may be applicable thereto as set forth in the Base Indenture, and
will be sold only in the United States (1) initially to institutional
accredited investors within the meaning of Regulation D under the Securities
Act in reliance on an exemption from the registration requirements of the
Securities Act and (2) thereafter to qualified institutional buyers within the
meaning of, and in reliance on, Rule 144A under the Securities Act and shall be
deposited on behalf of the purchasers of the Series 1997-1 Notes represented
thereby, with a custodian for DTC, and registered in the name of Cede as DTC's
nominee, duly executed by AFC-II and authenticated by the Trustee in the manner
set forth in Section 2.4 of the Base Indenture.
Section 5.2 Temporary Global Series 1997-1 Notes; Permanent
Global Series 1997-1 Notes. The Series 1997-1 Notes to be issued outside the
United States will be issued and sold in transactions outside the United States
in reliance on Regulation S under the Securities Act, as provided in the
applicable note purchase agreement, and shall initially be issued in the form
of one or more temporary notes in registered form without interest coupons
(each, a "Temporary Global Class A-1 Note" or a "Temporary Global Class A-2
Note", as the case may be), substantially in the forms set forth in Exhibits
A-1-2 and A-2-2 hereto, which shall be deposited on behalf of the purchasers of
the Series 1997-1 Notes represented thereby with a custodian for, and
registered in the name of a nominee of DTC, for the accounts of Morgan Guaranty
Trust Company of New York, Brussels office, as operator of Euroclear and for
Cedel, duly executed by AFC-II and authenticated by the Trustee in the manner
set forth in Section 2.4 of the Base Indenture. Interests in a Temporary Global
Class A-1 Note or a Temporary Global Class A-2 Note will be exchangeable, in
whole or in part, for interests in one or more permanent global notes in
registered form without interest coupons (each, a "Permanent Global Class A-1
Note" or a "Permanent Global Class A-2 Note", as the case may be),
substantially in the form of Exhibits A-1-3 and A-2-3 hereto, in accordance
with the provisions of such Temporary Global Class A Note and the Base
Indenture (as modified by this Supplement). Interests in a Permanent Global
Class A-1 Note or a Permanent Global Class A-2 Note will be exchangeable for
definitive Class A-1 Notes or definitive Class A-2 Notes, as the
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case may be, in accordance with the provisions of such Permanent Global Class
A-1 Note or Permanent Global Class A-2 Note and the Base Indenture (as modified
by this Supplement).
ARTICLE VI
GENERAL
Section 6.1 Optional Repurchase. Each Class of the Series
1997-1 Notes shall be subject to repurchase by AFC-II at its option in
accordance with Section 6.3 of the Base Indenture on any Distribution Date
after the Class A-1 Invested Amount or the Class A-2 Invested Amount, as the
case may be, is reduced to an amount less than or equal to 10% of the Class A-1
Initial Invested Amount or the Class A-2 Initial Invested Amount, as the case
may be (the "Series 1997-1 Repurchase Amount"); provided, however, that as a
condition precedent to any such optional repurchase, on or prior to the
Distribution Date on which any Series 1997-1 Note is repurchased by AFC-II
pursuant to this Section 6.1, AFC-II shall have paid the Surety Bond Provider
all Surety Provider Fees and all other Surety Provider Reimbursement Amounts
due and unpaid as of such Distribution Date. The repurchase price for any
Series 1997-1 Note shall equal the aggregate outstanding principal balance of
such Series 1997-1 Note (determined after giving effect to any payments of
principal and interest on such Distribution Date), plus accrued and unpaid
interest on such outstanding principal balance.
Section 6.2 Information. The Trustee shall provide to the
Series 1997-1 Noteholders, or their designated agent, and the Surety Provider
copies of all information furnished to the Trustee or AFC-II pursuant to the
Related Documents, as such information relates to the Series 1997-1 Notes or
the Series 1997-1 Collateral.
Section 6.3 Exhibits. The following exhibits attached hereto
supplement the exhibits included in the Indenture.
Exhibit A-1-1: Form of Restricted Global Class A-1 Note
Exhibit A-1-2: Form of Temporary Global Class A-1 Note
Exhibit A-1-3: Form of Permanent Global Class A-1 Note
36
<PAGE>
Exhibit A-2-1: Form of Restricted Global Class A-2 Note
Exhibit A-2-2: Form of Temporary Global Class A-2 Note
Exhibit A-2-3: Form of Permanent Global Class A-2 Note
Exhibit B: Form of Consent
Section 6.4 Ratification of Base Indenture. As supplemented
by this Supplement, the Base Indenture is in all respects ratified and
confirmed and the Base Indenture as so supplemented by this Supplement shall be
read, taken, and construed as one and the same instrument.
Section 6.5 Counterparts. This Supplement may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all of such counterparts shall together constitute but one and
the same instrument.
Section 6.6 Governing Law. This Supplement shall be construed
in accordance with the law of the State of New York (without giving effect to
the provisions thereof regarding conflicts of laws), and the obligations,
rights and remedies of the parties hereto shall be determined in accordance
with such law.
Section 6.7 Amendments. This Supplement may be modified or
amended from time to time in accordance with the terms of the Base Indenture;
provided, however, that if, pursuant to the terms of the Base Indenture or this
Supplement, the consent of the Required Noteholders is required for an
amendment or modification of this Supplement, such requirement shall be
satisfied if such amendment or modification is consented to by Noteholders
representing more than 50% of the aggregate outstanding principal amount of the
Series 1997-1 Notes affected thereby; provided, further, that if the consent of
the Required Noteholders is required for a proposed amendment or modification
of this Supplement that (i) affects only the Class A-1 Notes (and does not
affect in any material respect the Class A-2 Notes, as evidenced by an opinion
of counsel to such effect), then such requirement shall be satisfied if such
amendment or modification is consented to by Class A-1 Noteholders representing
more than 50% of the aggregate outstanding principal amount of the Class A-1
Notes (without the necessity of obtaining the consent of the Required
Noteholders in respect of the Class A-2 Notes) or (ii) affects only the Class
A-2 Notes
37
<PAGE>
(and does not affect in any material respect the Class A-1 Notes, as evidenced
by an opinion of counsel to such effect), then such requirement shall be
satisfied if such amendment or modification is consented to by Class A-2
Noteholders representing more than 50% of the aggregate outstanding principal
amount of the Class A-2 Notes (without the necessity of obtaining the consent
of the Required Noteholders in respect of the Class A-1 Notes).
Section 6.8 Discharge of Indenture. Notwithstanding anything
to the contrary contained in the Base Indenture, no discharge of the Indenture
pursuant to Section 11.1(b) of the Base Indenture will be effective as to the
Series 1997-1 Notes without the consent of the Required Noteholders.
Section 6.9 Notice to Surety Provider and Rating Agencies.
The Trustee shall provide to the Surety Provider and each Rating Agency a copy
of each notice, opinion of counsel, certificate or other item delivered to, or
required to be provided by, the Trustee pursuant to this Supplement or any
other Related Document. Each such opinion of counsel shall be addressed to the
Surety Provider, shall be from counsel reasonably acceptable to the Surety
Provider and shall be in form and substance reasonably acceptable to the Surety
Provider. All such notices, opinions, certificates or other items delivered to
the Surety Provider shall be forwarded to MBIA Insurance Corporation, 113 King
Street Street, Armonk, New York 10504, Attention: Insured Portfolio Management
- - SF, telecopy: (914) 765-3810; confirmation: (914) 765-3781.
Section 6.10 Certain Rights of Surety Provider. The Surety
Provider shall be deemed to be an Enhancement Provider entitled to receive
confirmation of the rating on the Series 1997-1 Notes (without regard to the
Surety Bond) pursuant to the definition of "Rating Agency Confirmation
Condition." In addition, the Surety Provider shall be deemed to be an
Enhancement Provider entitled to exercise the consent rights described in
clause (ii) of the definition of "Rating Agency Consent Condition."
Section 6.11 Surety Provider Deemed Noteholder and Secured
Party. Except for any period during which a Surety Default is continuing, the
Surety Provider shall be deemed to be the holder of 100% of the Series 1997-1
38
<PAGE>
Notes for the purposes of giving any consents, waivers, approvals,
instructions, directions, requests, declarations and/or notices pursuant to the
Base Indenture and this Supplement. Any reference in the Base Indenture or the
Related Documents (including, without limitation, in Sections 2.3, 8.14, 9.1,
9.2 or 12.1 of the Base Indenture) to materially, adversely, or detrimentally
affecting the rights or interests of the Noteholders, or words of similar
meaning, shall be deemed, for purposes of the Series 1997-1 Notes, to refer to
the rights or interests of the Surety Provider. Furthermore, the Surety
Provider shall be deemed to be a "Secured Party" under the Base Indenture and
the Related Documents to the extent of amounts payable to the Surety Provider
pursuant to this Supplement. Moreover, wherever in the Related Documents money
or other property is assigned, conveyed, granted or held for, a filing is made
for, action is taken for or agreed to be taken for, or a representation or
warranty is made for the benefit of the Noteholders, the Surety Provider shall
be deemed to be the Noteholder with respect to 100% of the Series 1997-1 Notes
for such purposes.
Section 6.12 Capitalization of AFC-II. AFC-II agrees that on
the Series 1997-1 Closing Date it will have capitalization in an amount equal
to or greater than 3% of the Series 1997-1 Initial Invested Amount.
Section 6.13 Series 1997-1 Required Non-Program Enhancement
Percentage. AFC-II agrees that it will not make any Loan under any Loan
Agreement to finance the acquisition of any Vehicle by AESOP Leasing, AESOP
Leasing II or ARAC, as the case may be, if, after giving effect to the making
of such Loan, the acquisition of such Vehicle and the inclusion of such Vehicle
under the relevant Lease, the Series 1997-1 Required Non-Program Enhancement
Percentage would exceed 25.0%.
Section 6.14 Third Party Beneficiary. The Surety Provider is
an express third party beneficiary of (i) the Base Indenture to the extent of
provisions relating to any Enhancement Provider and (ii) this Supplement.
Section 6.15 Prior Notice by Trustee to Surety Provider.
Subject to Section 10.1 of the Base Indenture, the Trustee agrees that, so long
as no Amortization Event shall have occurred and be continuing with respect to
any
39
<PAGE>
Series of Notes other than the Series 1997-1 Notes, it shall not exercise any
rights or remedies available to it as a result of the occurrence of an
Amortization Event with respect to the Series 1997-1 Notes (except those set
forth in clauses (f) and (g) of Article III of this Supplement) until after the
Trustee has given prior written notice thereof to the Surety Provider and
obtained the direction of the Required Noteholders with respect to the Series
1997-1 Notes. The Trustee agrees to notify the Surety Provider promptly
following any exercise of rights or remedies available to it as a result of the
occurrence of any Amortization Event or a Series 1997-1 Limited Liquidation
Event of Default.
40
<PAGE>
IN WITNESS WHEREOF, AFC-II and the Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
AESOP FUNDING II L.L.C.
By: /s/ Frank B. Bilotta
------------------------------------
Name: Frank B. Bilotta
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
as Trustee
By: /s/ Robert D. Foltz
------------------------------------
Name: Robert D. Foltz
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
as Series 1997-1 Agent
By: /s/ Robert D. Foltz
------------------------------------
Name: Robert D. Foltz
Title: Vice President
<PAGE>
EXHIBIT A-1-1
TO
SERIES 1997-1 SUPPLEMENT
FORM OF RESTRICTED GLOBAL CLASS A-1 NOTE
REGISTERED $_________*
No. R-
SEE REVERSE FOR CERTAIN CONDITIONS
CUSIP (CINS) NO. __________
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE
SKY" LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CLASS A-1 NOTE, AGREES FOR THE
BENEFIT OF AESOP FUNDING II L.L.C. (THE "COMPANY") THAT THIS CLASS A-1 NOTE IS
BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO THE COMPANY (UPON
REDEMPTION THEREOF OR OTHERWISE), (2) TO A PERSON THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3)
OUTSIDE THE UNITED STATES TO A NON U.S. PERSON (AS SUCH TERM IS DEFINED IN
REGULATION S OF THE SECURITIES ACT) IN A TRANSACTION IN COMPLIANCE WITH
REGULATION S OF THE SECURITIES ACT, OR (4) IN A TRANSACTION COMPLYING WITH OR
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION. EACH SUCH TRANSFER SHALL BE IN ACCORDANCE
WITH THE BASE INDENTURE, ANY APPLICABLE SUPPLEMENT AND ALL APPLICABLE
SECURITIES LAWS. THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE RESALE RESTRICTIONS SET FORTH ABOVE.
- -------------
* Denominations of $1,000,000 and integral multiples
of $200,000.
A-1-1-1
<PAGE>
EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.9 OF THE BASE
INDENTURE, THIS CLASS A-1 NOTE MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART,
ONLY TO ANOTHER NOMINEE OF THE CLEARING AGENCY OR TO A SUCCESSOR CLEARING
AGENCY OR TO A NOMINEE OF SUCH SUCCESSOR CLEARING AGENCY. UNLESS THIS CLASS A-1
NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO AESOP FUNDING II L.L.C. OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CLASS A-1 NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE PRINCIPAL OF THIS CLASS A-1 NOTE IS PAYABLE IN
INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT
OF THIS CLASS A-1 NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE
FACE HEREOF.
AESOP FUNDING II L.L.C.
[ %] RENTAL CAR ASSET BACKED NOTES, CLASS A-1
AESOP FUNDING II L.L.C., a Delaware limited liability company
(herein referred to as the "Company"), for value received, hereby promises to
pay to Cede & Co., or registered assigns, the principal sum of [ ] MILLION
DOLLARS, which amount shall be payable in the amounts and at the times set
forth in the Indenture, provided, however, that the entire unpaid principal
amount of this Class A-1 Note shall be due on the Class A-1 Final Distribution
Date, which is the October 2001 Distribution Date. However, principal with
respect to the Class A-1 Notes may be paid earlier or later under certain
limited circumstances described in the Indenture. The Company will pay interest
on this Class A-1 Note at the Class A-1 Note Rate. Such interest shall be
payable on each Distribution Date until the principal of this Class A-1 Note is
paid or made available for payment. Interest on this Class A-1 Note will accrue
for each Distribution Date from the most recent Distribution Date
A-1-1-2
<PAGE>
on which interest has been paid to but excluding such Distribution Date or, if
no interest has yet been paid, from July 31, 1997. Interest with respect to the
Class A-1 Notes will be calculated on the basis of a 360-day year of twelve 30
day months. Such principal of and interest on this Class A-1 Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Class A-1 Note are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. All
payments made by the Company with respect to this Class A-1 Note shall be
applied first to interest due and payable on this Class A-1 Note as provided
above and then to the unpaid principal of this Class A-1 Note. This Class A-1
Note does not represent an interest in, or an obligation of Original AESOP,
AESOP Leasing, AESOP Leasing II, AFC, ARC, ARAC or any affiliate of Original
AESOP, AESOP Leasing, AESOP Leasing II, AFC, ARC, ARAC other than the Company.
Interests in this Note are exchangeable or transferable in
whole or in part for interests in a Restricted Global Note if this Note is a
Temporary Global Note, or for interests in a Temporary Global Note or a
Permanent Global Note if this Note is a Restricted Global Note (each as defined
in the Base Indenture), in each case of the same Series and class, provided
that such transfer or exchange complies with Article 2 of the Base Indenture.
Interests in this Note may be exchangeable in whole or in part for duly
executed and issued definitive registered Notes if so provided in Article 2 of
the Base Indenture, with the applicable legends as marked therein, subject to
the provisions of the Base Indenture.
Reference is made to the further provisions of this Class A-1
Note set forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Class A-1 Note. Although a summary
of certain provisions of the Indenture are set forth below and on the reverse
hereof and made a part hereof, this Class A-1 Note does not purport to
summarize the Indenture and reference is made to the Indenture for information
with respect to the interests, rights, benefits, obligations, proceeds and
duties evidenced hereby and the rights, duties and obligations of AESOP
Leasing,
A-1-1-3
<PAGE>
AESOP Leasing II, ARAC and the Trustee. A copy of the Indenture may be
requested from the Trustee by writing to the Trustee at: Harris Trust and
Savings Bank, 311 Monroe Street, 12th Floor, Chicago, Illinois 60606,
Attention: Corporate Trust Officer. To the extent not defined herein, the
capitalized terms used herein have the meanings ascribed to them in the
Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee whose name appears below by manual signature, this
Class A-1 Note shall not be entitled to any benefit under the Indenture
referred to on the reverse hereof, or be valid or obligatory for any purpose.
A-1-1-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Date:____________ AESOP FUNDING II L.L.C.
By:
-------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-1 Notes of a series issued under
the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
------------------------------
Authorized Signatory
A-1-1-5
<PAGE>
[REVERSE OF CLASS A-1 NOTE]
This Class A-1 Note is one of a duly authorized issue of
Class A-1 Notes of the Company, designated as its Fixed Rate Rental Car Asset
Backed Notes, Class A-1 (herein called the "Class A-1 Notes"), all issued under
(i) an Amended and Restated Base Indenture dated as of July 30, 1997 (such Base
Indenture, as amended or modified, is herein called the "Base Indenture"),
between the Company and Harris Trust and Savings Bank, as trustee (the
"Trustee", which term includes any successor Trustee under the Base Indenture),
and (ii) a Series 1997-1 Supplement dated as of July 30, 1997 (the "Series
1997-1 Supplement") between the Company and the Trustee. The Base Indenture and
the Series 1997-1 Supplement are referred to herein as the "Indenture". The
Class A-1 Notes are subject to all terms of the Indenture. All terms used in
this Class A-1 Note that are defined in the Indenture, as supplemented or
amended, shall have the meanings assigned to them in or pursuant to the
Indenture, as so supplemented or amended.
The Class A-1 Notes are and will be equally and ratably
secured by the Series 1997-1 Collateral pledged as security therefor as
provided in the Indenture and the Series 1997-1 Supplement.
Principal of the Class A-1 Notes will be payable on each
Distribution Date specified in and in the amounts described in the Indenture.
"Distribution Date" means the 20th day of each month, or, if any such date is
not a Business Day, the next succeeding Business Day, commencing August 20,
1997.
Commencing on the Distribution Date following the second
Determination Date during the Class A-1 Controlled Amortization Period or the
first Determination Date after the commencement of the Series 1997-1 Rapid
Amortization Period, payments with respect to principal will be made on the
Class A-1 Notes. As described above, the entire unpaid principal amount of this
Class A-1 Note shall be due and payable on the Series Class A-1 Final
Distribution Date. Notwithstanding the foregoing, if an Amortization Event,
Liquidation Event of Default, Waiver Event or Series 1997-1 Limited Liquidation
Event of Default shall have occurred and be continuing then, in
A-1-1-6
<PAGE>
certain circumstances, principal on the Class A-1 Notes may be paid earlier, as
described in the Indenture. All principal payments on the Class A-1 Notes shall
be made pro rata to the Noteholders entitled thereto.
Payments of interest on this Class A-1 Note due and payable
on each Distribution Date, together with the installment of principal then due,
if any, to the extent not in full payment of this Class A-1 Note, shall be made
by wire transfer for credit to the account designated by the Holder of record
of this Class A-1 Note (or one or more predecessor Class A-1 Notes) on the Note
Register as of the close of business on each Record Date, except that with
respect to Class A-1 Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Any reduction in the principal amount of
this Class A-1 Note (or any one or more predecessor Class A-1 Notes) effected
by any payments made on any Distribution Date shall be binding upon all future
Holders of this Class A-1 Note and of any Class A-1 Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not noted thereon.
The Company shall pay interest on overdue installments of
interest at the Class A-1 Note Rate to the extent lawful.
As provided in the Indenture, the Class A-1 Notes may be
redeemed, in whole, but not in part, at the option of the Company on any
Distribution Date if on such Distribution Date the Class A-1 Invested Amount is
less than or equal to 10% of the Class A-1 Initial Invested Amount. The
purchase price for such repurchase of the Class A-1 Notes shall equal the
aggregate outstanding principal balance of such Class A-1 Notes (determined
after giving effect to any payment of principal and interest on such
Distribution Date), plus accrued and unpaid interest on such outstanding Class
A-1 Invested Amount.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Class A-1 Note may be
registered on the Note Register upon surrender of this Class A-1 Note for
registra-
A-1-1-7
<PAGE>
tion of transfer at the office or agency designated by the Company pursuant to
the Indenture, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Holder
hereof or his attorney duly authorized in writing, with such signature
guaranteed by an "Eligible Guarantor Institution" (as defined in Rule 17Ad-15
under the Exchange Act), and such other documents as the Trustee may reasonably
require, and thereupon one or more new Class A-1 Notes of authorized
denominations in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Class A-1 Note, but the transferor
may be required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of transfer
or exchange.
Each Noteholder or Note Owner by acceptance of a Class A-1
Note or, in the case of a Note Owner, a beneficial interest in a Class A-1
Note, covenants and agrees that no recourse may be taken, directly or
indirectly, with respect to the obligations of the Company, AESOP Leasing,
AESOP Leasing II, ARAC or the Trustee on the Class A-1 Notes or under the
Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Trustee, AESOP Leasing, AESOP Leasing II or ARAC in
its individual capacity, (ii) any owner of a beneficial interest in the Company
or (iii) any partner, owner, beneficiary, agent, officer, director or employee
of the Trustee, AESOP Leasing, AESOP Leasing II or ARAC in its individual
capacity, any holder of a beneficial interest in the Company, AESOP Leasing,
AESOP Leasing II, ARAC or the Trustee or of any successor or assign of the
Trustee, AESOP Leasing, AESOP Leasing II or ARAC in its individual capacity,
except (a) as any such Person may have expressly agreed and (b) any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Company for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Class A-1 Note, subject to Section 13.18 of the Base Indenture.
A-1-1-8
<PAGE>
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not
for a period of one year and one day following payment in full of all Notes
institute against the Company, or join in any institution against the Company
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Related Documents.
Prior to the due presentment for registration of transfer of
this Class A-1 Note, the Company, the Trustee and any agent of the Company or
the Trustee may treat the Person in whose name this Class A-1 Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Class A-1 Note be overdue, and neither the Company, the Trustee nor any
such agent shall be affected by notice to the contrary.
It is the intent of the Company, each Noteholder and each
Note Owner that, for Federal, state and local income and franchise tax purposes
only, the Class A-1 Notes will evidence indebtedness of the Company secured by
the Series 1997-1 Collateral. Each Noteholder and each Note Owner, by the
acceptance of this Class A-1 Note, agrees to treat this Class A-1 Note for
Federal, state and local income and franchise tax purposes as indebtedness of
the Company.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Series 1997-1
Notes under the Indenture at any time by the Company with the consent of the
Holders of Series 1997-1 Notes representing more than 50% in principal amount
of the aggregate outstanding amount of the Series 1997-1 Notes which are
affected by such amendment or modification. The Indenture also contains
provisions permitting the Holders of Series 1997-1 Notes representing specified
percentages of the aggregate outstanding amount of the Series 1997-1 Notes, on
behalf of the Holders of all the Series 1997-1
A-1-1-9
<PAGE>
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Class A-1 Note (or any one of
more predecessor Class A-1 Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Class A-1 Note and of any Class A-1
Note issued upon the registration of transfer hereof or in exchange hereof or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Class A-1 Note. The Indenture also permits the Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
Holders of the Series 1997-1 Notes issued thereunder.
The term "Company" as used in this Class A-1 Note includes
any successor to the Company under the Indenture.
The Class A-1 Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations set
forth therein.
This Class A-1 Note and the Indenture shall be construed in
accordance with the law of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
law.
No reference herein to the Indenture and no provision of this
Class A-1 Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Class A-1 Note at the times, place, and rate, and in the coin
or currency herein prescribed.
Interests in this Restricted Global Note may be exchanged for
Definitive Notes, subject to the provisions of the Indenture.
A-1-1-10
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying
number of assignee
________________________________
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto __________________________________________
_____________________________________________________________________________
(name and address of assignee)
the within Class A-1 Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ________________________, attorney, to transfer said
Class A-1 Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:___________________ By:_________________________*
Signature Guaranteed:
_________________________
_________________________
- -------------
* NOTE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note,
without alteration, enlargement or any change whatsoever.
A-1-1-11
<PAGE>
EXHIBIT A-1-2
TO
SERIES 1997-1 SUPPLEMENT
FORM OF TEMPORARY GLOBAL CLASS A-1 NOTE
REGISTERED $_____________**
No. R-
SEE REVERSE FOR CERTAIN CONDITIONS
CUSIP (CINS) NO.____________
ISIN NO. ____________
THIS NOTE IS A TEMPORARY GLOBAL NOTE, WITHOUT COUPONS,
EXCHANGEABLE FOR A PERMANENT GLOBAL NOTE WHICH IS, UNDER CERTAIN CIRCUMSTANCES,
IN TURN, EXCHANGEABLE FOR DEFINITIVE NOTES WITHOUT COUPONS. THE RIGHTS
ATTACHING TO THIS TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES
GOVERNING ITS EXCHANGE, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE
SKY" LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CLASS A-1 NOTE, AGREES FOR THE
BENEFIT OF AESOP FUNDING II L.L.C. (THE "COMPANY") THAT THIS CLASS A-1 NOTE IS
BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO THE COMPANY (UPON
REDEMPTION THEREOF OR OTHERWISE), (2) TO A PERSON THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3)
OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON (AS SUCH TERM IS DEFINED IN
REGULATION S OF THE SECURITIES ACT) IN A TRANSACTION IN COMPLIANCE WITH
REGULATION S OF THE SECURITIES ACT, OR (4) IN A TRANSACTION COMPLYING WITH OR
EXEMPT FROM THE REGISTRATION
- -------------
** Denominations of $1,000,000 and integral multiples
of $200,000.
A-1-2-1
<PAGE>
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
EACH SUCH TRANSFER SHALL BE IN ACCORDANCE WITH THE BASE INDENTURE, ANY
APPLICABLE SUPPLEMENT AND ALL APPLICABLE SECURITIES LAWS. THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
RESALE RESTRICTIONS SET FORTH ABOVE.
EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.9 OF THE BASE
INDENTURE, THIS CLASS A-1 NOTE MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART,
ONLY TO ANOTHER NOMINEE OF THE CLEARING AGENCY OR TO A SUCCESSOR CLEARING
AGENCY OR TO A NOMINEE OF SUCH SUCCESSOR CLEARING AGENCY. UNLESS THIS CLASS A-1
NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO AESOP FUNDING II L.L.C. OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CLASS A-1 NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE PRINCIPAL OF THIS CLASS A-1 NOTE IS PAYABLE IN
INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT
OF THIS CLASS A-1 NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE
FACE HEREOF.
INTERESTS IN THIS TEMPORARY GLOBAL NOTE MAY ONLY BE HELD BY
NON U.S. PERSONS AS SUCH TERM IS DEFINED IN REGULATION S OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY ONLY BE HELD IN BOOK-ENTRY FORM THROUGH EUROCLEAR
OR CEDEL.
AESOP FUNDING II L.L.C.
[ %] RENTAL CAR ASSET BACKED NOTES, CLASS A-1
AESOP FUNDING II L.L.C., a Delaware limited liability company
(herein referred to as the "Company"), for value received, hereby promises to
pay to Cede & Co.,
A-1-2-2
<PAGE>
or registered assigns, the principal sum of [ ] MILLION DOLLARS (or such
lesser amount as shall be the outstanding principal amount of this Temporary
Global Note shown in Schedule A hereto), which amount shall be payable in the
amounts and at the times set forth in the Indenture, provided, however, that
the entire unpaid principal amount of this Class A-1 Note shall be due on the
Class A-1 Final Distribution Date, which is the October 2001 Distribution Date.
However, principal with respect to the Class A-1 Notes may be paid earlier or
later under certain limited circumstances described in the Indenture. The
Company will pay interest on this Class A-1 Note at the Class A-1 Note Rate.
Such interest shall be payable on each Distribution Date until the principal of
this Class A-1 Note is paid or made available for payment. Interest on this
Class A-1 Note will accrue for each Distribution Date from the most recent
Distribution Date on which interest has been paid to but excluding such
Distribution Date or, if no interest has yet been paid, from August 20, 1997.
Interest with respect to the Class A-1 Notes will be calculated on the basis of
a 360-day year of twelve 30 day months. Such principal of and interest on this
Class A-1 Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Class A-1 Note are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. All
payments made by the Company with respect to this Class A-1 Note shall be
applied first to interest due and payable on this Class A-1 Note as provided
above and then to the unpaid principal of this Class A-1 Note. This Class A-1
Note does not represent an interest in, or an obligation of Original AESOP,
AESOP Leasing, AESOP Leasing II, AFC, ARC, ARAC or any affiliate of Original
AESOP, AESOP Leasing, AESOP Leasing II, AFC, ARC, ARAC other than the Company.
Interests in this Note are exchangeable or transferable in
whole or in part for interests in a Restricted Global Note if this Note is a
Temporary Global Note, or for interests in a Temporary Global Note or a
Permanent Global Note if this Note is a Restricted Global Note (each as defined
in the Base Indenture), in each case of the same Series and class, provided
that such transfer or exchange complies with Article 2 of the Base
A-1-2-3
<PAGE>
Indenture. Interests in this Note may be exchangeable in whole or in part for
duly executed and issued definitive registered Notes if so provided in Article
2 of the Base Indenture, with the applicable legends as marked therein, subject
to the provisions of the Base Indenture.
Reference is made to the further provisions of this Class A-1
Note set forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Class A-1 Note. Although a summary
of certain provisions of the Indenture are set forth below and on the reverse
hereof and made a part hereof, this Class A-1 Note does not purport to
summarize the Indenture and reference is made to the Indenture for information
with respect to the interests, rights, benefits, obligations, proceeds and
duties evidenced hereby and the rights, duties and obligations of AESOP
Leasing, AESOP Leasing II, ARAC and the Trustee. A copy of the Indenture may be
requested from the Trustee by writing to the Trustee at: Harris Trust and
Savings Bank, 311 Monroe Street, 12th Floor, Chicago, Illinois 60606,
Attention: Corporate Trust Officer. To the extent not defined herein, the
capitalized terms used herein have the meanings ascribed to them in the
Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee whose name appears below by manual signature, this
Class A-1 Note shall not be entitled to any benefit under the Indenture
referred to on the reverse hereof, or be valid or obligatory for any purpose.
A-1-2-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Date:____________ AESOP FUNDING II L.L.C.
By:
--------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-1 Notes of a series issued under
the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
--------------------------------
Authorized Signatory
A-1-2-5
<PAGE>
[REVERSE OF CLASS A-1 NOTE]
This Class A-1 Note is one of a duly authorized issue of
Class A-1 Notes of the Company, designated as its Fixed Rate Rental Car Asset
Backed Notes, Class A-1 (herein called the "Class A-1 Notes"), all issued under
(i) an Amended and Restated Base Indenture dated as of July 30, 1997 (such Base
Indenture, as amended or modified, is herein called the "Base Indenture"),
between the Company and Harris Trust and Savings Bank, as trustee (the
"Trustee", which term includes any successor Trustee under the Base Indenture),
and (ii) a Series 1997-1 Supplement dated as of July 30, 1997 (the "Series
1997-1 Supplement") between the Company and the Trustee. The Base Indenture and
the Series 1997-1 Supplement are referred to herein as the "Indenture". The
Class A-1 Notes are subject to all terms of the Indenture. All terms used in
this Class A-1 Note that are defined in the Indenture, as supplemented or
amended, shall have the meanings assigned to them in or pursuant to the
Indenture, as so supplemented or amended.
The Class A-1 Notes are and will be equally and ratably
secured by the Series 1997-1 Collateral pledged as security therefor as
provided in the Indenture and the Series 1997-1 Supplement.
Principal of the Class A-1 Notes will be payable on each
Distribution Date specified in and in the amounts described in the Indenture.
"Distribution Date" means the 20th day of each month, or, if any such date is
not a Business Day, the next succeeding Business Day, commencing August 20,
1997.
Commencing on the Distribution Date following the second
Determination Date during the Class A-1 Controlled Amortization Period or the
first Determination Date after the commencement of the Series 1997-1 Rapid
Amortization Period, payments with respect to principal will be made on the
Class A-1 Notes. As described above, the entire unpaid principal amount of this
Class A-1 Note shall be due and payable on the Series Class A-1 Final
Distribution Date. Notwithstanding the foregoing, if an Amortization Event,
Liquidation Event of Default, Waiver Event or Series 1997-1 Limited Liquidation
Event of Default shall have occurred and be continuing then, in
A-1-2-6
<PAGE>
certain circumstances, principal on the Class A-1 Notes may be paid earlier, as
described in the Indenture. All principal payments on the Class A-1 Notes shall
be made pro rata to the Noteholders entitled thereto.
Payments of interest on this Class A-1 Note due and payable
on each Distribution Date, together with the installment of principal then due,
if any, to the extent not in full payment of this Class A-1 Note, shall be made
by wire transfer for credit to the account designated by the Holder of record
of this Class A-1 Note (or one or more predecessor Class A-1 Notes) on the Note
Register as of the close of business on each Record Date, except that with
respect to Class A-1 Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Any reduction in the principal amount of
this Class A-1 Note (or any one or more predecessor Class A-1 Notes) effected
by any payments made on any Distribution Date shall be binding upon all future
Holders of this Class A-1 Note and of any Class A-1 Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not noted thereon.
The Company shall pay interest on overdue installments of
interest at the Class A-1 Note Rate to the extent lawful.
As provided in the Indenture, the Class A-1 Notes may be
redeemed, in whole, but not in part, at the option of the Company on any
Distribution Date if on such Distribution Date the Class A-1 Invested Amount is
less than or equal to 10% of the Class A-1 Initial Invested Amount. The
purchase price for such repurchase of the Class A-1 Notes shall equal the
aggregate outstanding principal balance of such Class A-1 Notes (determined
after giving effect to any payment of principal and interest on such
Distribution Date), plus accrued and unpaid interest on such outstanding Class
A-1 Invested Amount.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Class A-1 Note may be
registered on the Note Register upon surrender of this Class A-1 Note for
registra-
A-1-2-7
<PAGE>
tion of transfer at the office or agency designated by the Company pursuant to
the Indenture, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Holder
hereof or his attorney duly authorized in writing, with such signature
guaranteed by an "Eligible Guarantor Institution" (as defined in Rule 17Ad-15
under the Exchange Act), and such other documents as the Trustee may reasonably
require, and thereupon one or more new Class A-1 Notes of authorized
denominations in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Class A-1 Note, but the transferor
may be required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of transfer
or exchange.
Each Noteholder or Note Owner by acceptance of a Class A-1
Note or, in the case of a Note Owner, a beneficial interest in a Class A-1
Note, covenants and agrees that no recourse may be taken, directly or
indirectly, with respect to the obligations of the Company, AESOP Leasing,
AESOP Leasing II, ARAC or the Trustee on the Class A-1 Notes or under the
Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Trustee, AESOP Leasing, AESOP Leasing II or ARAC in
its individual capacity, (ii) any owner of a beneficial interest in the Company
or (iii) any partner, owner, beneficiary, agent, officer, director or employee
of the Trustee, AESOP Leasing, AESOP Leasing II or ARAC in its individual
capacity, any holder of a beneficial interest in the Company, AESOP Leasing,
AESOP Leasing II, ARAC or the Trustee or of any successor or assign of the
Trustee, AESOP Leasing, AESOP Leasing II or ARAC in its individual capacity,
except (a) as any such Person may have expressly agreed and (b) any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Company for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Class A-1 Note, subject to Section 13.18 of the Base Indenture.
A-1-2-8
<PAGE>
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not
for a period of one year and one day following payment in full of all Notes
institute against the Company, or join in any institution against the Company
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Related Documents.
Prior to the due presentment for registration of transfer of
this Class A-1 Note, the Company, the Trustee and any agent of the Company or
the Trustee may treat the Person in whose name this Class A-1 Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Class A-1 Note be overdue, and neither the Company, the Trustee nor any
such agent shall be affected by notice to the contrary.
It is the intent of the Company, each Noteholder and each
Note Owner that, for Federal, state and local income and franchise tax purposes
only, the Class A-1 Notes will evidence indebtedness of the Company secured by
the Series 1997-1 Collateral. Each Noteholder and each Note Owner, by the
acceptance of this Class A-1 Note, agrees to treat this Class A-1 Note for
Federal, state and local income and franchise tax purposes as indebtedness of
the Company.
Each Holder of this Note shall provide to the Trustee at
least annually an appropriate statement (on Internal Revenue Service Form W-8
or suitable substitute) with respect to United States federal income tax and
withholding tax, signed under penalties of perjury, certifying that the
beneficial owner of this Note is a non U.S. person and providing the
Noteholder's name and address. If the information provided in the statement
changes, the Noteholder shall so inform the Trustee within 30 days of such
change.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modi-
A-1-2-9
<PAGE>
fication of the rights and obligations of the Company and the rights of the
Holders of the Series 1997-1 Notes under the Indenture at any time by the
Company with the consent of the Holders of Series 1997-1 Notes representing
more than 50% in principal amount of the aggregate outstanding amount of the
Series 1997-1 Notes which are affected by such amendment or modification. The
Indenture also contains provisions permitting the Holders of Series 1997-1
Notes representing specified percentages of the aggregate outstanding amount of
the Series 1997-1 Notes, on behalf of the Holders of all the Series 1997-1
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Class A-1 Note (or any one of
more predecessor Class A-1 Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Class A-1 Note and of any Class A-1
Note issued upon the registration of transfer hereof or in exchange hereof or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Class A-1 Note. The Indenture also permits the Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
Holders of the Series 1997-1 Notes issued thereunder.
The term "Company" as used in this Class A-1 Note includes
any successor to the Company under the Indenture.
The Class A-1 Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations set
forth therein.
This Class A-1 Note and the Indenture shall be construed in
accordance with the law of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
law.
No reference herein to the Indenture and no provision of this
Class A-1 Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Class A-1 Note at the times,
A-1-2-10
<PAGE>
place, and rate, and in the coin or currency herein prescribed.
Prior to the Exchange Date (as defined below), payments (if
any) on this Temporary Global Note will only be paid to the extent that there
is presented by Cedel Bank, societe anonyme ("Cedel") or Morgan Guaranty Trust
Company of New York, Brussels office, as operator of the Euroclear System
("Euroclear") to the Trustee at its office in London a certificate,
substantially in the form set out in Exhibit B to the Base Indenture, to the
effect that it has received from or in respect of a person entitled to a Note
(as shown by its records) a certificate from such person in or substantially in
the form of Exhibit C to the Base Indenture. After the Exchange Date the holder
of this Temporary Global Note will not be entitled to receive any payment
hereon, until this Temporary Global Note is exchanged in full for a Permanent
Global Note. This Temporary Global Note shall in all other respects be entitled
to the same benefits as the Permanent Global Notes under the Indenture.
On or after the date (the "Exchange Date") which is the date
that is the 40th day after the completion of the distribution of the relevant
Series, interests in this Temporary Global Note may be exchanged (free of
charge) for interests in a Permanent Global Note in the form of Exhibit A-1-3
to the Series 1997-1 Supplement upon presentation of this Temporary Global Note
at the office in London of the Trustee (or at such other place outside the
United States of America, its territories and possessions as the Trustee may
agree). The Permanent Global Note shall be so issued and delivered in exchange
for only that portion of this Temporary Global Note in respect of which there
shall have been presented to the Trustee by Euroclear or Cedel a certificate,
substantially in the form set out in Exhibit B to the Base Indenture, to the
effect that it has received from or in respect of a person entitled to a Note
(as shown by its records) a certificate from such person in or substantially in
the form of Exhibit C to the Base Indenture.
On an exchange of the whole of this Temporary Global Note,
this Temporary Global Note shall be surrendered to the Trustee at its office in
London. On an exchange of part only of this Temporary Global Note, details of
such exchange shall be entered by or on behalf of the Company in Schedule A
hereto and the relevant
A-1-2-11
<PAGE>
space in Schedule A hereto recording such exchange shall be signed by or on
behalf of the Company. If, following the issue of a Permanent Global Note in
exchange for some of the Notes represented by this Temporary Global Note,
further Notes of this Series are to be exchanged pursuant to this paragraph,
such exchange may be effected, without the issue of a new Permanent Global
Note, by the Company or its agent endorsing Part I of Schedule A of the
Permanent Global Note previously issued to reflect an increase in the aggregate
principal amount of such Permanent Global Note by an amount equal to the
aggregate principal amount of the additional Notes of this Series to be
exchanged.
Interests in this Temporary Global Note will be transferable
in accordance with the rules and procedures for the time being of Euroclear or
Cedel. Each person who is shown in the records of Euroclear and Cedel as
entitled to a particular number of Notes by way of an interest in this
Temporary Global Note will be treated by the Company, the Trustee and any
paying agent as the holder of such number of Notes. For purposes of this
Temporary Global Note, the securities account records of Euroclear or Cedel
shall, in the absence of manifest error, be conclusive evidence of the identity
of the holders of Notes and of the principal amount of Notes represented by
this Temporary Global Note credited to the securities accounts of such holders
of Notes. Any statement issued by Euroclear or Cedel to any holder relating to
a specified Note or Notes credited to the securities account of such holder and
stating the principal amount of such Note or Notes and certified by Euroclear
or Cedel to be a true record of such securities account shall, in the absence
of manifest error, be conclusive evidence of the records of Euroclear or Cedel
for the purposes of the next preceding sentence (but without prejudice to any
other means of producing such records in evidence). Notwithstanding any
provision to the contrary contained in this Temporary Global Note, the Company
irrevocably agrees, for the benefit of such holder and its successors and
assigns, that, subject to the provisions of the Indenture, each holder or its
successors or assigns may file any claim, take any action or institute any
proceeding to enforce, directly against the Company, the obligation of the
Company hereunder to pay any amount due in respect of each Note represented by
this Temporary Global Note which is credited to such holder's securities ac-
A-1-2-12
<PAGE>
count with Euroclear or Cedel without the production of this Temporary Global
Note.
A-1-2-13
<PAGE>
SCHEDULE A
SCHEDULE OF EXCHANGES FOR NOTES
REPRESENTED BY A PERMANENT GLOBAL NOTE
The following exchanges of a part of this Temporary Global Note for Notes
represented by a Permanent Global Note have been made:
==============================================================================
Part of principal Remaining
amount of this Principal
Temporary Global amount of this
Note exchanged for Temporary Notation made
Date Notes represented Global Note by or on
exchange by a Permanent following such behalf of the
made Global Note exchange Issuer
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==============================================================================
A-1-2-14
<PAGE>
EXHIBIT A-1-3
TO
SERIES 1997-1 SUPPLEMENT
FORM OF PERMANENT GLOBAL CLASS A-1 NOTE
REGISTERED $____________***
No. R-
SEE REVERSE FOR CERTAIN CONDITIONS
CUSIP (CINS) NO.__________
ISIN NO. __________
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE
SKY" LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CLASS A-1 NOTE, AGREES FOR THE
BENEFIT OF AESOP FUNDING II L.L.C. (THE "COMPANY") THAT THIS CLASS A-1 NOTE IS
BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO THE COMPANY (UPON
REDEMPTION THEREOF OR OTHERWISE), (2) TO A PERSON THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(3) OUTSIDE THE UNITED STATES TO A NON U.S. PERSON (AS SUCH TERM IS DEFINED IN
REGULATION S OF THE SECURITIES ACT) IN A TRANSACTION IN COMPLIANCE WITH
REGULATION S OF THE SECURITIES ACT, OR (4) IN A TRANSACTION COMPLYING WITH OR
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION. EACH SUCH TRANSFER SHALL BE IN ACCORDANCE
WITH THE BASE INDENTURE, ANY APPLICABLE SUPPLEMENT AND ALL APPLICABLE
SECURITIES LAWS. THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE RESALE RESTRICTIONS SET FORTH ABOVE.
________
*** Denominations of $1,000,000 and integral multiples of $200,000.
A-1-3-1
<PAGE>
EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.9 OF THE BASE
INDENTURE, THIS CLASS A-1 NOTE MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART,
ONLY TO ANOTHER NOMINEE OF THE CLEARING AGENCY OR TO A SUCCESSOR CLEARING
AGENCY OR TO A NOMINEE OF SUCH SUCCESSOR CLEARING AGENCY. UNLESS THIS CLASS A-1
NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO AESOP FUNDING II L.L.C. OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CLASS A-1 NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE PRINCIPAL OF THIS CLASS A-1 NOTE IS PAYABLE IN
INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT
OF THIS CLASS A-1 NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE
FACE HEREOF.
AESOP FUNDING II L.L.C.
[ %] RENTAL CAR ASSET BACKED NOTES, CLASS A-1
AESOP FUNDING II L.L.C., a Delaware limited liability company
(herein referred to as the "Company"), for value received, hereby promises to
pay to Cede & Co., or registered assigns, the principal sum of [ ] MILLION
DOLLARS, which amount shall be payable in the amounts and at the times set
forth in the Indenture, provided, however, that the entire unpaid principal
amount of this Class A-1 Note shall be due on the Class A-1 Final Distribution
Date, which is the October 2001 Distribution Date. However, principal with
respect to the Class A-1 Notes may be paid earlier or later under certain
limited circumstances described in the Indenture. The Company will pay interest
on this Class A-1 Note at the Class A-1 Note Rate. Such interest shall be
payable on each Distribution Date until the principal of this Class A-1 Note is
paid or made available for payment. Interest on this Class A-1 Note will accrue
for each Distribution Date from the most recent Distribution Date
A-1-3-2
<PAGE>
on which interest has been paid to but excluding such Distribution Date or, if
no interest has yet been paid, from July 31, 1997. Interest with respect to the
Class A-1 Notes will be calculated on the basis of a 360-day year of twelve 30
day months. Such principal of and interest on this Class A-1 Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Class A-1 Note are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. All
payments made by the Company with respect to this Class A-1 Note shall be
applied first to interest due and payable on this Class A-1 Note as provided
above and then to the unpaid principal of this Class A-1 Note. This Class A-1
Note does not represent an interest in, or an obligation of Original AESOP,
AESOP Leasing, AESOP Leasing II, AFC, ARC, ARAC or any affiliate of Original
AESOP, AESOP Leasing, AESOP Leasing II, AFC, ARC, ARAC other than the Company.
Reference is made to the further provisions of this Class A-1
Note set forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Class A-1 Note. Although a summary
of certain provisions of the Indenture are set forth below and on the reverse
hereof and made a part hereof, this Class A-1 Note does not purport to
summarize the Indenture and reference is made to the Indenture for information
with respect to the interests, rights, benefits, obligations, proceeds and
duties evidenced hereby and the rights, duties and obligations of AESOP
Leasing, AESOP Leasing II, ARAC and the Trustee. A copy of the Indenture may be
requested from the Trustee by writing to the Trustee at: Harris Trust and
Savings Bank, 311 Monroe Street, 12th Floor, Chicago, Illinois 60606,
Attention: Corporate Trust Officer. To the extent not defined herein, the
capitalized terms used herein have the meanings ascribed to them in the
Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee whose name appears below by manual signature, this
Class A-1 Note shall not be entitled to any benefit under the Indenture
referred to on the reverse hereof, or be valid or obligatory for any purpose.
A-1-3-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Date:____________ AESOP FUNDING II L.L.C.
By:
--------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-1 Notes of a series issued under
the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
--------------------------------
Authorized Signatory
A-1-3-4
<PAGE>
[REVERSE OF CLASS A-1 NOTE]
This Class A-1 Note is one of a duly authorized issue of
Class A-1 Notes of the Company, designated as its Fixed Rate Rental Car Asset
Backed Notes, Class A-1 (herein called the "Class A-1 Notes"), all issued under
(i) an Amended and Restated Base Indenture dated as of July 30, 1997 (such Base
Indenture, as amended or modified, is herein called the "Base Indenture"),
between the Company and Harris Trust and Savings Bank, as trustee (the
"Trustee", which term includes any successor Trustee under the Base Indenture),
and (ii) a Series 1997-1 Supplement dated as of July 30, 1997 (the "Series
1997-1 Supplement") between the Company and the Trustee. The Base Indenture and
the Series 1997-1 Supplement are referred to herein as the "Indenture". The
Class A-1 Notes are subject to all terms of the Indenture. All terms used in
this Class A-1 Note that are defined in the Indenture, as supplemented or
amended, shall have the meanings assigned to them in or pursuant to the
Indenture, as so supplemented or amended.
The Class A-1 Notes are and will be equally and ratably
secured by the Series 1997-1 Collateral pledged as security therefor as
provided in the Indenture and the Series 1997-1 Supplement.
Principal of the Class A-1 Notes will be payable on each
Distribution Date specified in and in the amounts described in the Indenture.
"Distribution Date" means the 20th day of each month, or, if any such date is
not a Business Day, the next succeeding Business Day, commencing August 20,
1997.
Commencing on the Distribution Date following the second
Determination Date during the Class A-1 Controlled Amortization Period or the
first Determination Date after the commencement of the Series 1997-1 Rapid
Amortization Period, payments with respect to principal will be made on the
Class A-1 Notes. As described above, the entire unpaid principal amount of this
Class A-1 Note shall be due and payable on the Series Class A-1 Final
Distribution Date. Notwithstanding the foregoing, if an Amortization Event,
Liquidation Event of Default, Waiver Event or Series 1997-1 Limited Liquidation
Event of Default shall have occurred and be continuing then, in
A-1-3-5
<PAGE>
certain circumstances, principal on the Class A-1 Notes may be paid earlier, as
described in the Indenture. All principal payments on the Class A-1 Notes shall
be made pro rata to the Noteholders entitled thereto.
Payments of interest on this Class A-1 Note due and payable
on each Distribution Date, together with the installment of principal then due,
if any, to the extent not in full payment of this Class A-1 Note, shall be made
by wire transfer for credit to the account designated by the Holder of record
of this Class A-1 Note (or one or more predecessor Class A-1 Notes) on the Note
Register as of the close of business on each Record Date, except that with
respect to Class A-1 Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Any reduction in the principal amount of
this Class A-1 Note (or any one or more predecessor Class A-1 Notes) effected
by any payments made on any Distribution Date shall be binding upon all future
Holders of this Class A-1 Note and of any Class A-1 Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not noted thereon.
The Company shall pay interest on overdue installments of
interest at the Class A-1 Note Rate to the extent lawful.
As provided in the Indenture, the Class A-1 Notes may be
redeemed, in whole, but not in part, at the option of the Company on any
Distribution Date if on such Distribution Date the Class A-1 Invested Amount is
less than or equal to 10% of the Class A-1 Initial Invested Amount. The
purchase price for such repurchase of the Class A-1 Notes shall equal the
aggregate outstanding principal balance of such Class A-1 Notes (determined
after giving effect to any payment of principal and interest on such
Distribution Date), plus accrued and unpaid interest on such outstanding Class
A-1 Invested Amount.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Class A-1 Note may be
registered on the Note Register upon surrender of this Class A-1 Note for
registra-
A-1-3-6
<PAGE>
tion of transfer at the office or agency designated by the Company pursuant to
the Indenture, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Holder
hereof or his attorney duly authorized in writing, with such signature
guaranteed by an "Eligible Guarantor Institution" (as defined in Rule 17Ad-15
under the Exchange Act), and such other documents as the Trustee may reasonably
require, and thereupon one or more new Class A-1 Notes of authorized
denominations in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Class A-1 Note, but the transferor
may be required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of transfer
or exchange.
Each Noteholder or Note Owner by acceptance of a Class A-1
Note or, in the case of a Note Owner, a beneficial interest in a Class A-1
Note, covenants and agrees that no recourse may be taken, directly or
indirectly, with respect to the obligations of the Company, AESOP Leasing,
AESOP Leasing II, ARAC or the Trustee on the Class A-1 Notes or under the
Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Trustee, AESOP Leasing, AESOP Leasing II or ARAC in
its individual capacity, (ii) any owner of a beneficial interest in the Company
or (iii) any partner, owner, beneficiary, agent, officer, director or employee
of the Trustee, AESOP Leasing, AESOP Leasing II or ARAC in its individual
capacity, any holder of a beneficial interest in the Company, AESOP Leasing,
AESOP Leasing II, ARAC or the Trustee or of any successor or assign of the
Trustee, AESOP Leasing, AESOP Leasing II or ARAC in its individual capacity,
except (a) as any such Person may have expressly agreed and (b) any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Company for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Class A-1 Note, subject to Section 13.18 of the Base Indenture.
A-1-3-7
<PAGE>
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not
for a period of one year and one day following payment in full of all Notes
institute against the Company, or join in any institution against the Company
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Related Documents.
Prior to the due presentment for registration of transfer of
this Class A-1 Note, the Company, the Trustee and any agent of the Company or
the Trustee may treat the Person in whose name this Class A-1 Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Class A-1 Note be overdue, and neither the Company, the Trustee nor any
such agent shall be affected by notice to the contrary.
It is the intent of the Company, each Noteholder and each
Note Owner that, for Federal, state and local income and franchise tax purposes
only, the Class A-1 Notes will evidence indebtedness of the Company secured by
the Series 1997-1 Collateral. Each Noteholder and each Note Owner, by the
acceptance of this Class A-1 Note, agrees to treat this Class A-1 Note for
Federal, state and local income and franchise tax purposes as indebtedness of
the Company.
Each Holder of this Note shall provide to the Trustee at
least annually an appropriate statement (on Internal Revenue Service Form W-8
or suitable substitute) with respect to United States federal income tax and
withholding tax, signed under penalties of perjury, certifying that the
beneficial owner of this Note is a non U.S. person and providing the
Noteholder's name and address. If the information provided in the statement
changes, the Noteholder shall so inform the Trustee within 30 days of such
change.
The Indenture permits, with certain exceptions
as therein provided, the amendment thereof and the modi-
A-1-3-8
<PAGE>
fication of the rights and obligations of the Company and the rights of the
Holders of the Series 1997-1 Notes under the Indenture at any time by the
Company with the consent of the Holders of Series 1997-1 Notes representing
more than 50% in principal amount of the aggregate outstanding amount of the
Series 1997-1 Notes which are affected by such amendment or modification. The
Indenture also contains provisions permitting the Holders of Series 1997-1
Notes representing specified percentages of the aggregate outstanding amount of
the Series 1997-1 Notes, on behalf of the Holders of all the Series 1997-1
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Class A-1 Note (or any one of
more predecessor Class A-1 Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Class A-1 Note and of any Class A-1
Note issued upon the registration of transfer hereof or in exchange hereof or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Class A-1 Note. The Indenture also permits the Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
Holders of the Series 1997-1 Notes issued thereunder.
The term "Company" as used in this Class A-1 Note includes
any successor to the Company under the Indenture.
The Class A-1 Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations set
forth therein.
This Class A-1 Note and the Indenture shall be construed in
accordance with the law of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
law.
No reference herein to the Indenture and no provision of this
Class A-1 Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Class A-1 Note at the times,
A-1-3-9
<PAGE>
place, and rate, and in the coin or currency herein prescribed.
Interests in this Permanent Global Note will be transferable in
accordance with the rules and procedures for the time being of Cedel Bank,
societe anonyme ("Cedel") or Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System ("Euroclear"). Each person
who is shown in the records of Euroclear and Cedel as entitled to a particular
number of Notes by way of an interest in this Permanent Global Note will be
treated by the Trustee and any paying agent as the holder of such number of
Notes. For purposes of this Permanent Global Note, the securities account
records of Euroclear or Cedel shall, in the absence of manifest error, be
conclusive evidence of the identity of the holders of Notes and of the
principal amount of Notes represented by this Permanent Global Note credited to
the securities accounts of such holders of Notes. Any statement issued by
Euroclear or Cedel to any holder relating to a specified Note or Notes credited
to the securities account of such holder and stating the principal amount of
such Note or Notes and certified by Euroclear or Cedel to be a true record of
such securities account shall, in the absence of manifest error, be conclusive
evidence of the records of Euroclear or Cedel for the purposes of the next
preceding sentence (but without prejudice to any other means of producing such
records in evidence). Notwithstanding any provision to the contrary contained
in this Permanent Global Note, the Company irrevocably agrees, for the benefit
of such holder and its successors and assigns, that, subject to the provisions
of the Indenture, each holder or its successors or assigns may file any claim,
take any action or institute any proceeding to enforce, directly against the
Company, the obligation of the Company hereunder to pay any amount due in
respect of each Note represented by this Permanent Global Note which is
credited to such holder's securities account with Euroclear or Cedel without
the production of this Permanent Global Note.
Interests in this Permanent Global Note may be exchanged for
Definitive Notes subject to the provisions of the Indenture.
A-1-3-10
<PAGE>
EXHIBIT A-2-1
TO
SERIES 1997-1 SUPPLEMENT
FORM OF RESTRICTED GLOBAL CLASS A-2 NOTE
REGISTERED $_________****
No. R-
SEE REVERSE FOR CERTAIN CONDITIONS
CUSIP (CINS) NO. __________
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE
SKY" LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CLASS A-2 NOTE, AGREES FOR THE
BENEFIT OF AESOP FUNDING II L.L.C. (THE "COMPANY") THAT THIS CLASS A-2 NOTE IS
BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO THE COMPANY (UPON
REDEMPTION THEREOF OR OTHERWISE), (2) TO A PERSON THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3)
OUTSIDE THE UNITED STATES TO A NON U.S. PERSON (AS SUCH TERM IS DEFINED IN
REGULATION S OF THE SECURITIES ACT) IN A TRANSACTION IN COMPLIANCE WITH
REGULATION S OF THE SECURITIES ACT, OR (4) IN A TRANSACTION COMPLYING WITH OR
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION. EACH SUCH TRANSFER SHALL BE IN ACCORDANCE
WITH THE BASE INDENTURE, ANY APPLICABLE SUPPLEMENT AND ALL APPLICABLE
SECURITIES LAWS. THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE RESALE RESTRICTIONS SET FORTH ABOVE.
- -------------
**** Denominations of $1,000,000 and integral multiples
of $200,000.
A-2-1-1
<PAGE>
EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.9 OF THE BASE
INDENTURE, THIS CLASS A-2 NOTE MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART,
ONLY TO ANOTHER NOMINEE OF THE CLEARING AGENCY OR TO A SUCCESSOR CLEARING
AGENCY OR TO A NOMINEE OF SUCH SUCCESSOR CLEARING AGENCY. UNLESS THIS CLASS A-2
NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO AESOP FUNDING II L.L.C. OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CLASS A-2 NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE PRINCIPAL OF THIS CLASS A-2 NOTE IS PAYABLE IN
INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT
OF THIS CLASS A-2 NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE
FACE HEREOF.
AESOP FUNDING II L.L.C.
[ %] RENTAL CAR ASSET BACKED NOTES, CLASS A-2
AESOP FUNDING II L.L.C., a Delaware limited liability company
(herein referred to as the "Company"), for value received, hereby promises to
pay to Cede & Co., or registered assigns, the principal sum of [ ] MILLION
DOLLARS, which amount shall be payable in the amounts and at the times set
forth in the Indenture, provided, however, that the entire unpaid principal
amount of this Class A-2 Note shall be due on the Class A-2 Final Distribution
Date, which is the October 2003 Distribution Date. However, principal with
respect to the Class A-2 Notes may be paid earlier or later under certain
limited circumstances described in the Indenture. The Company will pay interest
on this Class A-2 Note at the Class A-2 Note Rate. Such interest shall be
payable on each Distribution Date until the principal of this Class A-2 Note is
paid or made available for payment. Interest on this Class A-2 Note will accrue
for each Distribution Date from the most recent Distribution Date
A-2-1-2
<PAGE>
on which interest has been paid to but excluding such Distribution Date or, if
no interest has yet been paid, from August 20, 1997. Interest with respect to
the Class A-2 Notes will be calculated on the basis of a 360-day year of twelve
30 day months. Such principal of and interest on this Class A-2 Note shall be
paid in the manner specified on the reverse hereof.
The principal of and interest on this Class A-2 Note are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. All
payments made by the Company with respect to this Class A-2 Note shall be
applied first to interest due and payable on this Class A-2 Note as provided
above and then to the unpaid principal of this Class A-2 Note. This Class A-2
Note does not represent an interest in, or an obligation of Original AESOP,
AESOP Leasing, AESOP Leasing II, AFC, ARC, ARAC or any affiliate of Original
AESOP, AESOP Leasing, AESOP Leasing II, AFC, ARC, ARAC other than the Company.
Interests in this Note are exchangeable or transferable in
whole or in part for interests in a Restricted Global Note if this Note is a
Temporary Global Note, or for interests in a Temporary Global Note or a
Permanent Global Note if this Note is a Restricted Global Note (each as defined
in the Base Indenture), in each case of the same Series and class, provided
that such transfer or exchange complies with Article 2 of the Base Indenture.
Interests in this Note may be exchangeable in whole or in part for duly
executed and issued definitive registered Notes if so provided in Article 2 of
the Base Indenture, with the applicable legends as marked therein, subject to
the provisions of the Base Indenture.
Reference is made to the further provisions of this Class A-2
Note set forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Class A-2 Note. Although a summary
of certain provisions of the Indenture are set forth below and on the reverse
hereof and made a part hereof, this Class A-2 Note does not purport to
summarize the Indenture and reference is made to the Indenture for information
with respect to the interests, rights, benefits, obligations, proceeds and
duties evidenced hereby and the rights, duties and obligations of AESOP
Leasing,
A-2-1-3
<PAGE>
AESOP Leasing II, ARAC and the Trustee. A copy of the Indenture may be
requested from the Trustee by writing to the Trustee at: Harris Trust and
Savings Bank, 311 Monroe Street, 12th Floor, Chicago, Illinois 60606,
Attention: Corporate Trust Officer. To the extent not defined herein, the
capitalized terms used herein have the meanings ascribed to them in the
Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee whose name appears below by manual signature, this
Class A-2 Note shall not be entitled to any benefit under the Indenture
referred to on the reverse hereof, or be valid or obligatory for any purpose.
A-2-1-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Date:____________ AESOP FUNDING II L.L.C.
By:
--------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-2 Notes of a series issued under
the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
--------------------------------
Authorized Signatory
A-2-1-5
<PAGE>
[REVERSE OF CLASS A-2 NOTE]
This Class A-2 Note is one of a duly authorized issue of
Class A-2 Notes of the Company, designated as its Fixed Rate Rental Car Asset
Backed Notes, Class A-2 (herein called the "Class A-2 Notes"), all issued under
(i) an Amended and Restated Base Indenture dated as of July 30, 1997 (such Base
Indenture, as amended or modified, is herein called the "Base Indenture"),
between the Company and Harris Trust and Savings Bank, as trustee (the
"Trustee", which term includes any successor Trustee under the Base Indenture),
and (ii) a Series 1997-1 Supplement dated as of July 30, 1997 (the "Series
1997-1 Supplement") between the Company and the Trustee. The Base Indenture and
the Series 1997-1 Supplement are referred to herein as the "Indenture". The
Class A-2 Notes are subject to all terms of the Indenture. All terms used in
this Class A-2 Note that are defined in the Indenture, as supplemented or
amended, shall have the meanings assigned to them in or pursuant to the
Indenture, as so supplemented or amended.
The Class A-2 Notes are and will be equally and ratably
secured by the Series 1997-1 Collateral pledged as security therefor as
provided in the Indenture and the Series 1997-1 Supplement.
Principal of the Class A-2 Notes will be payable on each
Distribution Date specified in and in the amounts described in the Indenture.
"Distribution Date" means the 20th day of each month, or, if any such date is
not a Business Day, the next succeeding Business Day, commencing August 20,
1997.
Commencing on the Distribution Date following the second
Determination Date during the Class A-2 Controlled Amortization Period or the
first Determination Date after the commencement of the Series 1997-1 Rapid
Amortization Period, payments with respect to principal will be made on the
Class A-2 Notes. As described above, the entire unpaid principal amount of this
Class A-2 Note shall be due and payable on the Series Class A-2 Final
Distribution Date. Notwithstanding the foregoing, if an Amortization Event,
Liquidation Event of Default, Waiver Event or Series 1997-1 Limited Liquidation
Event of Default shall have occurred and be continuing then, in
A-2-1-6
<PAGE>
certain circumstances, principal on the Class A-2 Notes may be paid earlier, as
described in the Indenture. All principal payments on the Class A-2 Notes shall
be made pro rata to the Noteholders entitled thereto.
Payments of interest on this Class A-2 Note due and payable
on each Distribution Date, together with the installment of principal then due,
if any, to the extent not in full payment of this Class A-2 Note, shall be made
by wire transfer for credit to the account designated by the Holder of record
of this Class A-2 Note (or one or more predecessor Class A-2 Notes) on the Note
Register as of the close of business on each Record Date, except that with
respect to Class A-2 Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Any reduction in the principal amount of
this Class A-2 Note (or any one or more predecessor Class A-2 Notes) effected
by any payments made on any Distribution Date shall be binding upon all future
Holders of this Class A-2 Note and of any Class A-2 Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not noted thereon.
The Company shall pay interest on overdue installments of
interest at the Class A-2 Note Rate to the extent lawful.
As provided in the Indenture, the Class A-2 Notes may be
redeemed, in whole, but not in part, at the option of the Company on any
Distribution Date if on such Distribution Date the Class A-2 Invested Amount is
less than or equal to 10% of the Class A-2 Initial Invested Amount. The
purchase price for such repurchase of the Class A-2 Notes shall equal the
aggregate outstanding principal balance of such Class A-2 Notes (determined
after giving effect to any payment of principal and interest on such
Distribution Date), plus accrued and unpaid interest on such outstanding Class
A-2 Invested Amount.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Class A-2 Note may be
registered on the Note Register upon surrender of this Class A-2 Note for
registra-
A-2-1-7
<PAGE>
tion of transfer at the office or agency designated by the Company pursuant to
the Indenture, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Holder
hereof or his attorney duly authorized in writing, with such signature
guaranteed by an "Eligible Guarantor Institution" (as defined in Rule 17Ad-15
under the Exchange Act), and such other documents as the Trustee may reasonably
require, and thereupon one or more new Class A-2 Notes of authorized
denominations in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Class A-2 Note, but the transferor
may be required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of transfer
or exchange.
Each Noteholder or Note Owner by acceptance of a Class A-2
Note or, in the case of a Note Owner, a beneficial interest in a Class A-2
Note, covenants and agrees that no recourse may be taken, directly or
indirectly, with respect to the obligations of the Company, AESOP Leasing,
AESOP Leasing II, ARAC or the Trustee on the Class A-2 Notes or under the
Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Trustee, AESOP Leasing, AESOP Leasing II or ARAC in
its individual capacity, (ii) any owner of a beneficial interest in the Company
or (iii) any partner, owner, beneficiary, agent, officer, director or employee
of the Trustee, AESOP Leasing, AESOP Leasing II or ARAC in its individual
capacity, any holder of a beneficial interest in the Company, AESOP Leasing,
AESOP Leasing II, ARAC or the Trustee or of any successor or assign of the
Trustee, AESOP Leasing, AESOP Leasing II or ARAC in its individual capacity,
except (a) as any such Person may have expressly agreed and (b) any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Company for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Class A-2 Note, subject to Section 13.18 of the Base Indenture.
A-2-1-8
<PAGE>
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not
for a period of one year and one day following payment in full of all Notes
institute against the Company, or join in any institution against the Company
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Related Documents.
Prior to the due presentment for registration of transfer of
this Class A-2 Note, the Company, the Trustee and any agent of the Company or
the Trustee may treat the Person in whose name this Class A-2 Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Class A-2 Note be overdue, and neither the Company, the Trustee nor any
such agent shall be affected by notice to the contrary.
It is the intent of the Company, each Noteholder and each
Note Owner that, for Federal, state and local income and franchise tax purposes
only, the Class A-2 Notes will evidence indebtedness of the Company secured by
the Series 1997-1 Collateral. Each Noteholder and each Note Owner, by the
acceptance of this Class A-2 Note, agrees to treat this Class A-2 Note for
Federal, state and local income and franchise tax purposes as indebtedness of
the Company.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Series 1997-1
Notes under the Indenture at any time by the Company with the consent of the
Holders of Series 1997-1 Notes representing more than 50% in principal amount
of the aggregate outstanding amount of the Series 1997-1 Notes which are
affected by such amendment or modification. The Indenture also contains
provisions permitting the Holders of Series 1997-1 Notes representing specified
percentages of the aggregate outstanding amount of the Series 1997-1 Notes, on
behalf of the Holders of all the Series 1997-1
A-2-1-9
<PAGE>
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Class A-2 Note (or any one of
more predecessor Class A-2 Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Class A-2 Note and of any Class A-2
Note issued upon the registration of transfer hereof or in exchange hereof or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Class A-2 Note. The Indenture also permits the Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
Holders of the Series 1997-1 Notes issued thereunder.
The term "Company" as used in this Class A-2 Note includes
any successor to the Company under the Indenture.
The Class A-2 Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations set
forth therein.
This Class A-2 Note and the Indenture shall be construed in
accordance with the law of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
law.
No reference herein to the Indenture and no provision of this
Class A-2 Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Class A-2 Note at the times, place, and rate, and in the coin
or currency herein prescribed.
Interests in this Restricted Global Note may be exchanged for
Definitive Notes, subject to the provisions of the Indenture.
A-2-1-10
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying
number of assignee
______________________________________
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto ____________________________________________
______________________________________________________________________________
(name and address of assignee)
the within Class A-2 Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ________________________, attorney, to transfer said
Class A-2 Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:___________________ _________________________*
Signature Guaranteed:
_________________________
_________________________
- -------------
* NOTE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note,
without alteration, enlargement or any change whatsoever.
A-2-1-11
<PAGE>
EXHIBIT A-2-2
TO
SERIES 1997-1 SUPPLEMENT
FORM OF TEMPORARY GLOBAL CLASS A-2 NOTE
REGISTERED $_____________**
No. R-
SEE REVERSE FOR CERTAIN CONDITIONS
CUSIP (CINS) NO.____________
ISIN NO. ____________
THIS NOTE IS A TEMPORARY GLOBAL NOTE, WITHOUT COUPONS,
EXCHANGEABLE FOR A PERMANENT GLOBAL NOTE WHICH IS, UNDER CERTAIN CIRCUMSTANCES,
IN TURN, EXCHANGEABLE FOR DEFINITIVE NOTES WITHOUT COUPONS. THE RIGHTS
ATTACHING TO THIS TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES
GOVERNING ITS EXCHANGE, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE
SKY" LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CLASS A-2 NOTE, AGREES FOR THE
BENEFIT OF AESOP FUNDING II L.L.C. (THE "COMPANY") THAT THIS CLASS A-2 NOTE IS
BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO THE COMPANY (UPON
REDEMPTION THEREOF OR OTHERWISE), (2) TO A PERSON THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3)
OUTSIDE THE UNITED STATES TO A NON U.S. PERSON (AS SUCH TERM IS DEFINED IN
REGULATION S OF THE SECURITIES ACT) IN A TRANSACTION IN COMPLIANCE WITH
REGULATION S OF THE SECURITIES ACT, OR (4) IN A TRANSACTION COMPLYING WITH OR
EXEMPT FROM THE REGISTRATION
- -------------
** Denominations of $1,000,000 and integral multiples
of $200,000.
A-2-2-1
<PAGE>
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
EACH SUCH TRANSFER SHALL BE IN ACCORDANCE WITH THE BASE INDENTURE, ANY
APPLICABLE SUPPLEMENT AND ALL APPLICABLE SECURITIES LAWS. THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
RESALE RESTRICTIONS SET FORTH ABOVE.
EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.9 OF THE BASE
INDENTURE, THIS CLASS A-2 NOTE MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART,
ONLY TO ANOTHER NOMINEE OF THE CLEARING AGENCY OR TO A SUCCESSOR CLEARING
AGENCY OR TO A NOMINEE OF SUCH SUCCESSOR CLEARING AGENCY. UNLESS THIS CLASS A-2
NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO AESOP FUNDING II L.L.C. OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CLASS A-2 NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE PRINCIPAL OF THIS CLASS A-2 NOTE IS PAYABLE IN
INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT
OF THIS CLASS A-2 NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE
FACE HEREOF.
INTERESTS IN THIS TEMPORARY GLOBAL NOTE MAY ONLY BE HELD BY
NON-U.S. PERSONS AS SUCH TERM IS DEFINED IN REGULATION S OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY ONLY BE HELD IN BOOK-ENTRY FORM THROUGH EUROCLEAR
OR CEDEL.
AESOP FUNDING II L.L.C.
[ %] RENTAL CAR ASSET BACKED NOTES, CLASS A-2
AESOP FUNDING II L.L.C., a Delaware limited liability company
(herein referred to as the "Company"), for value received, hereby promises to
pay to Cede & Co.,
A-2-2-2
<PAGE>
or registered assigns, the principal sum of [ ] MILLION DOLLARS (or such lesser
amount as shall be the outstanding principal amount of this Temporary Global
Note shown in Schedule A hereto), which amount shall be payable in the amounts
and at the times set forth in the Indenture, provided, however, that the entire
unpaid principal amount of this Class A-2 Note shall be due on the Class A-2
Final Distribution Date, which is the October 2003 Distribution Date. However,
principal with respect to the Class A-2 Notes may be paid earlier or later
under certain limited circumstances described in the Indenture. The Company
will pay interest on this Class A-2 Note at the Class A-2 Note Rate. Such
interest shall be payable on each Distribution Date until the principal of this
Class A-2 Note is paid or made available for payment. Interest on this Class
A-2 Note will accrue for each Distribution Date from the most recent
Distribution Date on which interest has been paid to but excluding such
Distribution Date or, if no interest has yet been paid, from July 31, 1997.
Interest with respect to the Class A-2 Notes will be calculated on the basis of
a 360-day year of twelve 30 day months. Such principal of and interest on this
Class A-2 Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Class A-2 Note are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. All
payments made by the Company with respect to this Class A-2 Note shall be
applied first to interest due and payable on this Class A-2 Note as provided
above and then to the unpaid principal of this Class A-2 Note. This Class A-2
Note does not represent an interest in, or an obligation of Original AESOP,
AESOP Leasing, AESOP Leasing II, AFC, ARC, ARAC or any affiliate of Original
AESOP, AESOP Leasing, AESOP Leasing II, AFC, ARC, ARAC other than the Company.
Interests in this Note are exchangeable or transferable in
whole or in part for interests in a Restricted Global Note if this Note is a
Temporary Global Note, or for interests in a Temporary Global Note or a
Permanent Global Note if this Note is a Restricted Global Note (each as defined
in the Base Indenture), in each case of the same Series and class, provided
that such transfer or exchange complies with Article 2 of the Base
A-2-2-3
<PAGE>
Indenture. Interests in this Note may be exchangeable in whole or in part for
duly executed and issued definitive registered Notes if so provided in Article
2 of the Base Indenture, with the applicable legends as marked therein, subject
to the provisions of the Base Indenture.
Reference is made to the further provisions of this Class A-2
Note set forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Class A-2 Note. Although a summary
of certain provisions of the Indenture are set forth below and on the reverse
hereof and made a part hereof, this Class A-2 Note does not purport to
summarize the Indenture and reference is made to the Indenture for information
with respect to the interests, rights, benefits, obligations, proceeds and
duties evidenced hereby and the rights, duties and obligations of AESOP
Leasing, AESOP Leasing II, ARAC and the Trustee. A copy of the Indenture may be
requested from the Trustee by writing to the Trustee at: Harris Trust and
Savings Bank, 311 Monroe Street, 12th Floor, Chicago, Illinois 60606,
Attention: Corporate Trust Officer. To the extent not defined herein, the
capitalized terms used herein have the meanings ascribed to them in the
Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee whose name appears below by manual signature, this
Class A-2 Note shall not be entitled to any benefit under the Indenture
referred to on the reverse hereof, or be valid or obligatory for any purpose.
A-2-2-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Date:____________ AESOP FUNDING II L.L.C.
By:
--------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-2 Notes of a series issued under
the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
--------------------------------
Authorized Signatory
A-2-2-5
<PAGE>
[REVERSE OF CLASS A-2 NOTE]
This Class A-2 Note is one of a duly authorized issue of
Class A-2 Notes of the Company, designated as its Fixed Rate Rental Car Asset
Backed Notes, Class A-2 (herein called the "Class A-2 Notes"), all issued under
(i) an Amended and Restated Base Indenture dated as of July 30, 1997 (such Base
Indenture, as amended or modified, is herein called the "Base Indenture"),
between the Company and Harris Trust and Savings Bank, as trustee (the
"Trustee", which term includes any successor Trustee under the Base Indenture),
and (ii) a Series 1997-1 Supplement dated as of July 30, 1997 (the "Series
1997-1 Supplement") between the Company and the Trustee. The Base Indenture and
the Series 1997-1 Supplement are referred to herein as the "Indenture". The
Class A-2 Notes are subject to all terms of the Indenture. All terms used in
this Class A-2 Note that are defined in the Indenture, as supplemented or
amended, shall have the meanings assigned to them in or pursuant to the
Indenture, as so supplemented or amended.
The Class A-2 Notes are and will be equally and ratably
secured by the Series 1997-1 Collateral pledged as security therefor as
provided in the Indenture and the Series 1997-1 Supplement.
Principal of the Class A-2 Notes will be payable on each
Distribution Date specified in and in the amounts described in the Indenture.
"Distribution Date" means the 20th day of each month, or, if any such date is
not a Business Day, the next succeeding Business Day, commencing August 20,
1997.
Commencing on the Distribution Date following the second
Determination Date during the Class A-2 Controlled Amortization Period or the
first Determination Date after the commencement of the Series 1997-1 Rapid
Amortization Period, payments with respect to principal will be made on the
Class A-2 Notes. As described above, the entire unpaid principal amount of this
Class A-2 Note shall be due and payable on the Series Class A-2 Final
Distribution Date. Notwithstanding the foregoing, if an Amortization Event,
Liquidation Event of Default, Waiver Event or Series 1997-1 Limited Liquidation
Event of Default shall have occurred and be continuing then, in
A-2-2-6
<PAGE>
certain circumstances, principal on the Class A-2 Notes may be paid earlier, as
described in the Indenture. All principal payments on the Class A-2 Notes shall
be made pro rata to the Noteholders entitled thereto.
Payments of interest on this Class A-2 Note due and payable
on each Distribution Date, together with the installment of principal then due,
if any, to the extent not in full payment of this Class A-2 Note, shall be made
by wire transfer for credit to the account designated by the Holder of record
of this Class A-2 Note (or one or more predecessor Class A-2 Notes) on the Note
Register as of the close of business on each Record Date, except that with
respect to Class A-2 Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Any reduction in the principal amount of
this Class A-2 Note (or any one or more predecessor Class A-2 Notes) effected
by any payments made on any Distribution Date shall be binding upon all future
Holders of this Class A-2 Note and of any Class A-2 Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not noted thereon.
The Company shall pay interest on overdue installments of
interest at the Class A-2 Note Rate to the extent lawful.
As provided in the Indenture, the Class A-2 Notes may be
redeemed, in whole, but not in part, at the option of the Company on any
Distribution Date if on such Distribution Date the Class A-2 Invested Amount is
less than or equal to 10% of the Class A-2 Initial Invested Amount. The
purchase price for such repurchase of the Class A-2 Notes shall equal the
aggregate outstanding principal balance of such Class A-2 Notes (determined
after giving effect to any payment of principal and interest on such
Distribution Date), plus accrued and unpaid interest on such outstanding Class
A-2 Invested Amount.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Class A-2 Note may be
registered on the Note Register upon surrender of this Class A-2 Note for
registra-
A-2-2-7
<PAGE>
tion of transfer at the office or agency designated by the Company pursuant to
the Indenture, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Holder
hereof or his attorney duly authorized in writing, with such signature
guaranteed by an "Eligible Guarantor Institution" (as defined in Rule 17Ad-15
under the Exchange Act), and such other documents as the Trustee may reasonably
require, and thereupon one or more new Class A-2 Notes of authorized
denominations in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Class A-2 Note, but the transferor
may be required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of transfer
or exchange.
Each Noteholder or Note Owner by acceptance of a Class A-2
Note or, in the case of a Note Owner, a beneficial interest in a Class A-2
Note, covenants and agrees that no recourse may be taken, directly or
indirectly, with respect to the obligations of the Company, AESOP Leasing,
AESOP Leasing II, ARAC or the Trustee on the Class A-2 Notes or under the
Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Trustee, AESOP Leasing, AESOP Leasing II or ARAC in
its individual capacity, (ii) any owner of a beneficial interest in the Company
or (iii) any partner, owner, beneficiary, agent, officer, director or employee
of the Trustee, AESOP Leasing, AESOP Leasing II or ARAC in its individual
capacity, any holder of a beneficial interest in the Company, AESOP Leasing,
AESOP Leasing II, ARAC or the Trustee or of any successor or assign of the
Trustee, AESOP Leasing, AESOP Leasing II or ARAC in its individual capacity,
except (a) as any such Person may have expressly agreed and (b) any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Company for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Class A-2 Note, subject to Section 13.18 of the Base Indenture.
A-2-2-8
<PAGE>
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not
for a period of one year and one day following payment in full of all Notes
institute against the Company, or join in any institution against the Company
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Related Documents.
Prior to the due presentment for registration of transfer of
this Class A-2 Note, the Company, the Trustee and any agent of the Company or
the Trustee may treat the Person in whose name this Class A-2 Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Class A-2 Note be overdue, and neither the Company, the Trustee nor any
such agent shall be affected by notice to the contrary.
It is the intent of the Company, each Noteholder and each
Note Owner that, for Federal, state and local income and franchise tax purposes
only, the Class A-2 Notes will evidence indebtedness of the Company secured by
the Series 1997-1 Collateral. Each Noteholder and each Note Owner, by the
acceptance of this Class A-2 Note, agrees to treat this Class A-2 Note for
Federal, state and local income and franchise tax purposes as indebtedness of
the Company.
Each Holder of this Note shall provide to the Trustee at
least annually an appropriate statement (on Internal Revenue Service Form W-8
or suitable substitute) with respect to United States federal income tax and
withholding tax, signed under penalties of perjury, certifying that the
beneficial owner of this Note is a non U.S. person and providing the
Noteholder's name and address. If the information provided in the statement
changes, the Noteholder shall so inform the Trustee within 30 days of such
change.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modi-
A-2-2-9
<PAGE>
fication of the rights and obligations of the Company and the rights of the
Holders of the Series 1997-1 Notes under the Indenture at any time by the
Company with the consent of the Holders of Series 1997-1 Notes representing
more than 50% in principal amount of the aggregate outstanding amount of the
Series 1997-1 Notes which are affected by such amendment or modification. The
Indenture also contains provisions permitting the Holders of Series 1997-1
Notes representing specified percentages of the aggregate outstanding amount of
the Series 1997-1 Notes, on behalf of the Holders of all the Series 1997-1
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Class A-2 Note (or any one of
more predecessor Class A-2 Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Class A-2 Note and of any Class A-2
Note issued upon the registration of transfer hereof or in exchange hereof or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Class A-2 Note. The Indenture also permits the Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
Holders of the Series 1997-1 Notes issued thereunder.
The term "Company" as used in this Class A-2 Note includes
any successor to the Company under the Indenture.
The Class A-2 Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations set
forth therein.
This Class A-2 Note and the Indenture shall be construed in
accordance with the law of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
law.
No reference herein to the Indenture and no provision of this
Class A-2 Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Class A-2 Note at the times,
A-2-2-10
<PAGE>
place, and rate, and in the coin or currency herein prescribed.
Prior to the Exchange Date (as defined below), payments (if
any) on this Temporary Global Note will only be paid to the extent that there
is presented by Cedel Bank, societe anonyme ("Cedel") or Morgan Guaranty Trust
Company of New York, Brussels office, as operator of the Euroclear System
("Euroclear") to the Trustee at its office in London a certificate,
substantially in the form set out in Exhibit B to the Base Indenture, to the
effect that it has received from or in respect of a person entitled to a Note
(as shown by its records) a certificate from such person in or substantially in
the form of Exhibit C to the Base Indenture. After the Exchange Date the holder
of this Temporary Global Note will not be entitled to receive any payment
hereon, until this Temporary Global Note is exchanged in full for a Permanent
Global Note. This Temporary Global Note shall in all other respects be entitled
to the same benefits as the Permanent Global Notes under the Indenture.
On or after the date (the "Exchange Date") which is the date
that is the 40th day after the completion of the distribution of the relevant
Series, interests in this Temporary Global Note may be exchanged (free of
charge) for interests in a Permanent Global Note in the form of Exhibit A-2-3
to the Series 1997-1 Supplement upon presentation of this Temporary Global Note
at the office in London of the Trustee (or at such other place outside the
United States of America, its territories and possessions as the Trustee may
agree). The Permanent Global Note shall be so issued and delivered in exchange
for only that portion of this Temporary Global Note in respect of which there
shall have been presented to the Trustee by Euroclear or Cedel a certificate,
substantially in the form set out in Exhibit B to the Base Indenture, to the
effect that it has received from or in respect of a person entitled to a Note
(as shown by its records) a certificate from such person in or substantially in
the form of Exhibit C to the Base Indenture.
On an exchange of the whole of this Temporary Global Note,
this Temporary Global Note shall be surrendered to the Trustee at its office in
London. On an exchange of part only of this Temporary Global Note, details of
such exchange shall be entered by or on behalf of the Company in Schedule A
hereto and the relevant
A-2-2-11
<PAGE>
space in Schedule A hereto recording such exchange shall be signed by or on
behalf of the Company. If, following the issue of a Permanent Global Note in
exchange for some of the Notes represented by this Temporary Global Note,
further Notes of this Series are to be exchanged pursuant to this paragraph,
such exchange may be effected, without the issue of a new Permanent Global
Note, by the Company or its agent endorsing Part I of Schedule A of the
Permanent Global Note previously issued to reflect an increase in the aggregate
principal amount of such Permanent Global Note by an amount equal to the
aggregate principal amount of the additional Notes of this Series to be
exchanged.
Interests in this Temporary Global Note will be transferable
in accordance with the rules and procedures for the time being of Euroclear or
Cedel. Each person who is shown in the records of Euroclear and Cedel as
entitled to a particular number of Notes by way of an interest in this
Temporary Global Note will be treated by the Company, the Trustee and any
paying agent as the holder of such number of Notes. For purposes of this
Temporary Global Note, the securities account records of Euroclear or Cedel
shall, in the absence of manifest error, be conclusive evidence of the identity
of the holders of Notes and of the principal amount of Notes represented by
this Temporary Global Note credited to the securities accounts of such holders
of Notes. Any statement issued by Euroclear or Cedel to any holder relating to
a specified Note or Notes credited to the securities account of such holder and
stating the principal amount of such Note or Notes and certified by Euroclear
or Cedel to be a true record of such securities account shall, in the absence
of manifest error, be conclusive evidence of the records of Euroclear or Cedel
for the purposes of the next preceding sentence (but without prejudice to any
other means of producing such records in evidence). Notwithstanding any
provision to the contrary contained in this Temporary Global Note, the Company
irrevocably agrees, for the benefit of such holder and its successors and
assigns, that, subject to the provisions of the Indenture, each holder or its
successors or assigns may file any claim, take any action or institute any
proceeding to enforce, directly against the Company, the obligation of the
Company hereunder to pay any amount due in respect of each Note represented by
this Temporary Global Note which is credited to such holder's securities ac-
A-2-2-12
<PAGE>
count with Euroclear or Cedel without the production of this Temporary Global
Note.
A-2-2-13
<PAGE>
SCHEDULE A
SCHEDULE OF EXCHANGES FOR NOTES
REPRESENTED BY A PERMANENT GLOBAL NOTE
The following exchanges of a part of this Temporary Global Note for Notes
represented by a Permanent Global Note have been made:
===============================================================================
Part of principal Remaining
amount of this Principal
Temporary Global amount of this
Note exchanged for Temporary Notation made
Date Notes represented Global Note by or on
exchange by a Permanent following such behalf of the
made Global Note exchange Issuer
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A-2-2-14
<PAGE>
EXHIBIT A-2-3
TO
SERIES 1997-1 SUPPLEMENT
FORM OF PERMANENT GLOBAL CLASS A-2 NOTE
REGISTERED $____________***
No. R-
SEE REVERSE FOR CERTAIN CONDITIONS
CUSIP (CINS) NO.__________
ISIN NO. __________
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE
SKY" LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CLASS A-2 NOTE, AGREES FOR THE
BENEFIT OF AESOP FUNDING II L.L.C. (THE "COMPANY") THAT THIS CLASS A-2 NOTE IS
BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO THE COMPANY (UPON
REDEMPTION THEREOF OR OTHERWISE), (2) TO A PERSON THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(3) OUTSIDE THE UNITED STATES TO A NON U.S. PERSON (AS SUCH TERM IS DEFINED IN
REGULATION S OF THE SECURITIES ACT) IN A TRANSACTION IN COMPLIANCE WITH
REGULATION S OF THE SECURITIES ACT, OR (4) IN A TRANSACTION COMPLYING WITH OR
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION. EACH SUCH TRANSFER SHALL BE IN ACCORDANCE
WITH THE BASE INDENTURE, ANY APPLICABLE SUPPLEMENT AND ALL APPLICABLE
SECURITIES LAWS. THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE RESALE RESTRICTIONS SET FORTH ABOVE.
______________
*** Denominations of $1,000,000 and integral multiples of $200,000.
A-2-3-1
<PAGE>
EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.9 OF THE BASE
INDENTURE, THIS CLASS A-2 NOTE MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART,
ONLY TO ANOTHER NOMINEE OF THE CLEARING AGENCY OR TO A SUCCESSOR CLEARING
AGENCY OR TO A NOMINEE OF SUCH SUCCESSOR CLEARING AGENCY. UNLESS THIS CLASS A-2
NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO AESOP FUNDING II L.L.C. OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CLASS A-2 NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE PRINCIPAL OF THIS CLASS A-2 NOTE IS PAYABLE IN
INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT
OF THIS CLASS A-2 NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE
FACE HEREOF.
AESOP FUNDING II L.L.C.
[ %] RENTAL CAR ASSET BACKED NOTES, CLASS A-2
AESOP FUNDING II L.L.C., a Delaware limited liability company
(herein referred to as the "Company"), for value received, hereby promises to
pay to Cede & Co., or registered assigns, the principal sum of [ ] MILLION
DOLLARS, which amount shall be payable in the amounts and at the times set
forth in the Indenture, provided, however, that the entire unpaid principal
amount of this Class A-2 Note shall be due on the Class A-2 Final Distribution
Date, which is the October 2003 Distribution Date. However, principal with
respect to the Class A-2 Notes may be paid earlier or later under certain
limited circumstances described in the Indenture. The Company will pay interest
on this Class A-2 Note at the Class A-2 Note Rate. Such interest shall be
payable on each Distribution Date until the principal of this Class A-2 Note is
paid or made available for payment. Interest on this Class A-2 Note will accrue
for each Distribution Date from the most recent Distribution Date
A-2-3-2
<PAGE>
on which interest has been paid to but excluding such Distribution Date or, if
no interest has yet been paid, from July 31, 1997. Interest with respect to the
Class A-2 Notes will be calculated on the basis of a 360-day year of twelve 30
day months. Such principal of and interest on this Class A-2 Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Class A-2 Note are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. All
payments made by the Company with respect to this Class A-2 Note shall be
applied first to interest due and payable on this Class A-2 Note as provided
above and then to the unpaid principal of this Class A-2 Note. This Class A-2
Note does not represent an interest in, or an obligation of Original AESOP,
AESOP Leasing, AESOP Leasing II, AFC, ARC, ARAC or any affiliate of Original
AESOP, AESOP Leasing, AESOP Leasing II, AFC, ARC, ARAC other than the Company.
Reference is made to the further provisions of this Class A-2
Note set forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Class A-2 Note. Although a summary
of certain provisions of the Indenture are set forth below and on the reverse
hereof and made a part hereof, this Class A-2 Note does not purport to
summarize the Indenture and reference is made to the Indenture for information
with respect to the interests, rights, benefits, obligations, proceeds and
duties evidenced hereby and the rights, duties and obligations of AESOP
Leasing, AESOP Leasing II, ARAC and the Trustee. A copy of the Indenture may be
requested from the Trustee by writing to the Trustee at: Harris Trust and
Savings Bank, 311 Monroe Street, 12th Floor, Chicago, Illinois 60606,
Attention: Corporate Trust Officer. To the extent not defined herein, the
capitalized terms used herein have the meanings ascribed to them in the
Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee whose name appears below by manual signature, this
Class A-2 Note shall not be entitled to any benefit under the Indenture
referred to on the reverse hereof, or be valid or obligatory for any purpose.
A-2-3-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Date:____________ AESOP FUNDING II L.L.C.
By:
--------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A-2 Notes of a series issued under
the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
--------------------------------
Authorized Signatory
A-2-3-4
<PAGE>
[REVERSE OF CLASS A-2 NOTE]
This Class A-2 Note is one of a duly authorized issue of
Class A-2 Notes of the Company, designated as its Fixed Rate Rental Car Asset
Backed Notes, Class A-2 (herein called the "Class A-2 Notes"), all issued under
(i) an Amended and Restated Base Indenture dated as of July 30, 1997 (such Base
Indenture, as amended or modified, is herein called the "Base Indenture"),
between the Company and Harris Trust and Savings Bank, as trustee (the
"Trustee", which term includes any successor Trustee under the Base Indenture),
and (ii) a Series 1997-1 Supplement dated as of July __, 1997 (the "Series
1997-1 Supplement") between the Company and the Trustee. The Base Indenture and
the Series 1997-1 Supplement are referred to herein as the "Indenture". The
Class A-2 Notes are subject to all terms of the Indenture. All terms used in
this Class A-2 Note that are defined in the Indenture, as supplemented or
amended, shall have the meanings assigned to them in or pursuant to the
Indenture, as so supplemented or amended.
The Class A-2 Notes are and will be equally and ratably
secured by the Series 1997-1 Collateral pledged as security therefor as
provided in the Indenture and the Series 1997-1 Supplement.
Principal of the Class A-2 Notes will be payable on each
Distribution Date specified in and in the amounts described in the Indenture.
"Distribution Date" means the 20th day of each month, or, if any such date is
not a Business Day, the next succeeding Business Day, commencing August 20,
1997.
Commencing on the Distribution Date following the second
Determination Date during the Class A-2 Controlled Amortization Period or the
first Determination Date after the commencement of the Series 1997-1 Rapid
Amortization Period, payments with respect to principal will be made on the
Class A-2 Notes. As described above, the entire unpaid principal amount of this
Class A-2 Note shall be due and payable on the Series Class A-2 Final
Distribution Date. Notwithstanding the foregoing, if an Amortization Event,
Liquidation Event of Default, Waiver Event or Series 1997-1 Limited Liquidation
Event of Default shall have occurred and be continuing then, in
A-2-3-5
<PAGE>
certain circumstances, principal on the Class A-2 Notes may be paid earlier, as
described in the Indenture. All principal payments on the Class A-2 Notes shall
be made pro rata to the Noteholders entitled thereto.
Payments of interest on this Class A-2 Note due and payable
on each Distribution Date, together with the installment of principal then due,
if any, to the extent not in full payment of this Class A-2 Note, shall be made
by wire transfer for credit to the account designated by the Holder of record
of this Class A-2 Note (or one or more predecessor Class A-2 Notes) on the Note
Register as of the close of business on each Record Date, except that with
respect to Class A-2 Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Any reduction in the principal amount of
this Class A-2 Note (or any one or more predecessor Class A-2 Notes) effected
by any payments made on any Distribution Date shall be binding upon all future
Holders of this Class A-2 Note and of any Class A-2 Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not noted thereon.
The Company shall pay interest on overdue installments of
interest at the Class A-2 Note Rate to the extent lawful.
As provided in the Indenture, the Class A-2 Notes may be
redeemed, in whole, but not in part, at the option of the Company on any
Distribution Date if on such Distribution Date the Class A-2 Invested Amount is
less than or equal to 10% of the Class A-2 Initial Invested Amount. The
purchase price for such repurchase of the Class A-2 Notes shall equal the
aggregate outstanding principal balance of such Class A-2 Notes (determined
after giving effect to any payment of principal and interest on such
Distribution Date), plus accrued and unpaid interest on such outstanding Class
A-2 Invested Amount.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Class A-2 Note may be
registered on the Note Register upon surrender of this Class A-2 Note for
registra-
A-2-3-6
<PAGE>
tion of transfer at the office or agency designated by the Company pursuant to
the Indenture, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Holder
hereof or his attorney duly authorized in writing, with such signature
guaranteed by an "Eligible Guarantor Institution" (as defined in Rule 17Ad-15
under the Exchange Act), and such other documents as the Trustee may reasonably
require, and thereupon one or more new Class A-2 Notes of authorized
denominations in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Class A-2 Note, but the transferor
may be required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of transfer
or exchange.
Each Noteholder or Note Owner by acceptance of a Class A-2
Note or, in the case of a Note Owner, a beneficial interest in a Class A-2
Note, covenants and agrees that no recourse may be taken, directly or
indirectly, with respect to the obligations of the Company, AESOP Leasing,
AESOP Leasing II, ARAC or the Trustee on the Class A-2 Notes or under the
Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Trustee, AESOP Leasing, AESOP Leasing II or ARAC in
its individual capacity, (ii) any owner of a beneficial interest in the Company
or (iii) any partner, owner, beneficiary, agent, officer, director or employee
of the Trustee, AESOP Leasing, AESOP Leasing II or ARAC in its individual
capacity, any holder of a beneficial interest in the Company, AESOP Leasing,
AESOP Leasing II, ARAC or the Trustee or of any successor or assign of the
Trustee, AESOP Leasing, AESOP Leasing II or ARAC in its individual capacity,
except (a) as any such Person may have expressly agreed and (b) any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Company for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Class A-2 Note, subject to Section 13.18 of the Base Indenture.
A-2-3-7
<PAGE>
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not
for a period of one year and one day following payment in full of all Notes
institute against the Company, or join in any institution against the Company
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Related Documents.
Prior to the due presentment for registration of transfer of
this Class A-2 Note, the Company, the Trustee and any agent of the Company or
the Trustee may treat the Person in whose name this Class A-2 Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Class A-2 Note be overdue, and neither the Company, the Trustee nor any
such agent shall be affected by notice to the contrary.
It is the intent of the Company, each Noteholder and each
Note Owner that, for Federal, state and local income and franchise tax purposes
only, the Class A-2 Notes will evidence indebtedness of the Company secured by
the Series 1997-1 Collateral. Each Noteholder and each Note Owner, by the
acceptance of this Class A-2 Note, agrees to treat this Class A-2 Note for
Federal, state and local income and franchise tax purposes as indebtedness of
the Company.
Each Holder of this Note shall provide to the Trustee at
least annually an appropriate statement (on Internal Revenue Service Form W-8
or suitable substitute) with respect to United States federal income tax and
withholding tax, signed under penalties of perjury, certifying that the
beneficial owner of this Note is a non U.S. person and providing the
Noteholder's name and address. If the information provided in the statement
changes, the Noteholder shall so inform the Trustee within 30 days of such
change.
The Indenture permits, with certain exceptions
as therein provided, the amendment thereof and the modi-
A-2-3-8
<PAGE>
fication of the rights and obligations of the Company and the rights of the
Holders of the Series 1997-1 Notes under the Indenture at any time by the
Company with the consent of the Holders of Series 1997-1 Notes representing
more than 50% in principal amount of the aggregate outstanding amount of the
Series 1997-1 Notes which are affected by such amendment or modification. The
Indenture also contains provisions permitting the Holders of Series 1997-1
Notes representing specified percentages of the aggregate outstanding amount of
the Series 1997-1 Notes, on behalf of the Holders of all the Series 1997-1
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Class A-2 Note (or any one of
more predecessor Class A-2 Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Class A-2 Note and of any Class A-2
Note issued upon the registration of transfer hereof or in exchange hereof or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Class A-2 Note. The Indenture also permits the Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
Holders of the Series 1997-1 Notes issued thereunder.
The term "Company" as used in this Class A-2 Note includes
any successor to the Company under the Indenture.
The Class A-2 Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations set
forth therein.
This Class A-2 Note and the Indenture shall be construed in
accordance with the law of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
law.
No reference herein to the Indenture and no provision of this
Class A-2 Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Class A-2 Note at the times,
A-2-3-9
<PAGE>
place, and rate, and in the coin or currency herein prescribed.
Interests in this Permanent Global Note will be transferable in
accordance with the rules and procedures for the time being of Cedel Bank,
societe anonyme ("Cedel") or Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System ("Euroclear"). Each person
who is shown in the records of Euroclear and Cedel as entitled to a particular
number of Notes by way of an interest in this Permanent Global Note will be
treated by the Trustee and any paying agent as the holder of such number of
Notes. For purposes of this Permanent Global Note, the securities account
records of Euroclear or Cedel shall, in the absence of manifest error, be
conclusive evidence of the identity of the holders of Notes and of the
principal amount of Notes represented by this Permanent Global Note credited to
the securities accounts of such holders of Notes. Any statement issued by
Euroclear or Cedel to any holder relating to a specified Note or Notes credited
to the securities account of such holder and stating the principal amount of
such Note or Notes and certified by Euroclear or Cedel to be a true record of
such securities account shall, in the absence of manifest error, be conclusive
evidence of the records of Euroclear or Cedel for the purposes of the next
preceding sentence (but without prejudice to any other means of producing such
records in evidence). Notwithstanding any provision to the contrary contained
in this Permanent Global Note, the Company irrevocably agrees, for the benefit
of such holder and its successors and assigns, that, subject to the provisions
of the Indenture, each holder or its successors or assigns may file any claim,
take any action or institute any proceeding to enforce, directly against the
Company, the obligation of the Company hereunder to pay any amount due in
respect of each Note represented by this Permanent Global Note which is
credited to such holder's securities account with Euroclear or Cedel without
the production of this Permanent Global Note.
Interests in this Permanent Global Note may be exchanged for
Definitive Notes subject to the provisions of the Indenture.
A-2-3-10
<PAGE>
EXHIBIT B
TO
SERIES 1997-1 SUPPLEMENT
FORM OF CONSENT
Harris Trust and Savings Bank,
as Trustee
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attn: Indenture Trust Administration
AESOP Funding II L.L.C.
c/o Lord Securities Corporation
Two Wall Street
New York, New York 10005
Attn: Andrew L. Stidd
This Consent is delivered pursuant to the Waiver Request
dated ____________, 19__ (the "Notice") and the Series 1997-1 Supplement, dated
as of July 30, 1997 (as amended, modified or supplemented from time to time,
the "Series 1997-1 Supplement") between AESOP Funding II L.L.C., a Delaware
limited liability company ("AFC-II"), and Harris Trust and Savings Bank, an
Illinois banking corporation, as Trustee ("Trustee"). Terms used herein have
the meaning provided in the Series 1997-1 Supplement.
Pursuant to Article 4 of the Series 1997-1 Supplement, the
Trustee has delivered a Notice indicating that [choose which applies] [(i) the
Manufacturer Program[s] of [name of Manufacturer] [is/are] no longer [an]
Eligible Manufacturer Program[s] and that, as a result, the Series 1997-1
Maximum Non-Program Vehicle Amount [and/or] the Series 1997-1 Maximum
Non-Eligible Manufacturer Amount is or will be exceeded [or (ii) that the
Lessees, the Borrower and AFC-II have determined to increase [the Series 1997-1
Maximum Non-Program Vehicle Amount] [the Series 1997-1 Maximum Manufacturer
Amount] [any Series 1997-1 Maximum Specified States Amount] [the Series 1997-1
Maximum Non-Eligible Manufacturer Amount]]. The undersigned hereby waives all
requirements that the [Series 1997-1 Maximum Non-Program Vehicle Amount] [Se-
B-1
<PAGE>
ries 1997-1 Maximum Manufacturer Amount] [any Series 1997-1 Maximum Specified
States Amount] [Series 1997-1 Maximum Non-Eligible Manufacturer Amount] not be
exceeded for all purposes of the Indenture and the Series 1997-1 Supplement.
The undersigned understands that this Consent will only be effective if the
Trustee receives Consents from Noteholders representing not less than 25% of
the aggregate unpaid principal amount of the Series 1997-1 Notes on or before
______________ 19__.
The undersigned hereby represents and warrants that it is the
beneficial owner of $__________ in principal amount of Series 1997-1 Notes.
[Name]
By:
--------------------------------
Name:
Title:
B-2
<PAGE>
AESOP FUNDING II L.L.C.,
as Issuer
and
HARRIS TRUST AND SAVINGS BANK,
as Trustee
-------------------------
SERIES 1997-2 SUPPLEMENT
dated as of July 30, 1997
to
AMENDED AND RESTATED BASE INDENTURE
dated as of July 30, 1997
-------------------------
Rental Car Asset Backed Variable Funding Notes
<PAGE>
TABLE OF CONTENTS
Page
----
PRELIMINARY STATEMENT..................................................... 1
DESIGNATION........................... 1
ARTICLE I
DEFINITIONS........................... 2
ARTICLE II
INITIAL ISSUANCE AND INCREASES AND DECREASES OF
PRINCIPAL AMOUNT SERIES 1997-2 NOTES............. 37
Section 2.1 Procedure for Increasing the Series
1997-2 Invested Amount......................................37
Section 2.2 Procedure for Decreasing the Series
1997-2 Invested Amount......................................41
ARTICLE III
SERIES 1997-2 ALLOCATIONS................... 42
Section 3.1 Establishment of Series 1997-2
Collection Account and Series
1997-2 Accrued Interest Account........................... 42
Section 3.2 Allocations with Respect to
the Series 1997-2 Notes................................... 42
Section 3.3 Payments To Noteholders................................... 45
Section 3.4 Payment of Note Interest.................................. 47
Section 3.5 Payment of Note Principal................................. 47
Section 3.6 The Administrator's Failure to Instruct
the Trustee to Make a Deposit or
Payment................................................... 49
Section 3.7 Credit Demand on Series 1997-2
Letter of Credit.......................................... 49
Section 3.8 Series 1997-2 Cash Collateral
Account; Exit Loan Funding Account........................ 50
Section 3.9 [RESERVED]
Section 3.10 Series 1997-2 Distribution Account..........................52
Section 3.11 [RESERVED]
Section 3.12 Subrogation of Series 1997-2 Enhancement
Provider....................................................55
i
<PAGE>
Page
----
ARTICLE IV
AMORTIZATION EVENTS...................... 55
ARTICLE V
RIGHT TO WAIVE PURCHASE RESTRICTIONS............. 56
ARTICLE VI
FORM OF SERIES 1997-2 NOTES.................. 59
ARTICLE VII
GENERAL............................ 59
Section 7.1 [RESERVED]
Section 7.2 Information.................................................59
Section 7.3 [RESERVED]..................................................59
Section 7.4 Exhibits....................................................60
Section 7.5 Ratification of Base Indenture..............................60
Section 7.6 Counterparts................................................60
Section 7.7 Governing Law...............................................60
Section 7.8 Amendments..................................................60
Section 7.9 Discharge of Indenture......................................60
Section 7.10 Notice to Rating Agencies...................................61
Section 7.11 Series 1997-2 Letter of Credit..............................61
Section 7.12 Series 1997-2 Required Non-Program
Enhancement Percentage......................................60
Exhibit A: Form of Variable Funding Note
Exhibit B: Form of Consent
ii
<PAGE>
SERIES 1997-2 SUPPLEMENT, dated as of July 30, 1997 (this
"Supplement") between AESOP FUNDING II L.L.C., a special purpose limited
liability company established under the laws of Delaware ("AFC-II") and HARRIS
TRUST AND SAVINGS BANK, an Illinois banking corporation, as trustee (together
with its successors in trust thereunder as provided in the Base Indenture
referred to below, the "Trustee"), to the Amended and Restated Base Indenture,
dated as of July 30, 1997, between AFC-II and the Trustee (as amended, modified
or supplemented from time to time, exclusive of Supplements creating a new
Series of Notes, the "Base Indenture").
PRELIMINARY STATEMENT
WHEREAS, Sections 2.2 and 12.1 of the Base Indenture provide,
among other things, that AFC-II and the Trustee may at any time and from time
to time enter into a supplement to the Base Indenture for the purpose of
authorizing the issuance of one or more Series of Notes.
NOW, THEREFORE, the parties hereto agree as follows:
DESIGNATION
There is hereby created a Series of Notes to be issued
pursuant to the Base Indenture and this Supplement and such Series of Notes
shall be designated generally as Floating Rate Rental Car Asset Backed Variable
Funding Notes, Series 1997-2.
The proceeds from the sale of the Series 1997-2 Notes (as
defined herein) and the proceeds from any Increase (as defined herein) shall be
deposited in the Collection Account and shall be paid to AFC-II and used to
make Loans under the Loan Agreements to the extent that the Borrowers have
requested Loans thereunder and Eligible Vehicles are available to acquire or
refinance thereunder on the date hereof. Any proceeds not so used to make Loans
shall be deemed to be Principal Collections.
The Series 1997-2 Notes are a non-Segregated Series of Notes
(as more fully described in the Base Indenture). Accordingly, all references in
this Supplement to "all" Series of Notes (and all references in this
<PAGE>
Supplement to terms defined in the Base Indenture that contain references to
"all" Series of Notes) shall refer to all Series of Notes other than Segregated
Series of Notes.
ARTICLE I
DEFINITIONS
(a) All capitalized terms not otherwise defined herein are
defined in the Definitions List attached to the Base Indenture as Schedule 1
thereto. All Article, Section or Subsection references herein shall refer to
Articles, Sections or Subsections of the Base Indenture, except as otherwise
provided herein. Unless otherwise stated herein, as the context otherwise
requires or if such term is otherwise defined in the Base Indenture, each
capitalized term used or defined herein shall relate only to the Series 1997-2
Notes and not to any other Series of Notes issued by AFC-II. All references
herein and in any CP Program Document to the "Series 1997-2 Supplement" shall
mean the Base Indenture, as supplemented hereby.
(b) The following words and phrases shall have the following
meanings with respect to the Series 1997-2 Notes and the definitions of such
terms are applicable to the singular as well as the plural form of such terms
and to the masculine as well as the feminine and neuter genders of such terms:
"1996 Liquidity Agreement" means the Liquidity Agreement,
dated as of May 1, 1996, among AFC, certain financial institutions, as the
liquidity lenders thereunder, and Bank of America National Trust and Savings
Association, as the liquidity agent for the liquidity lenders thereunder.
"Accounts" is defined in Section 5.1 of the Collateral
Agreement.
"Administrative Agent" means The Chase Manhattan Bank, as
agent for the Liquidity Lenders, or such other Person as shall have
subsequently been appointed as the successor Administrative Agent pursuant to
Section 10.4 of the Liquidity Agreement.
2
<PAGE>
"AFC Agreements" means the Collateral Agreement, the
Liquidity Agreement and any other CP Program Document to which AFC is a party.
"AFC Management Agreement" means the Amended and Restated
Management Agreement, dated as of July 30, 1997, between the Manager and AFC.
"AFC Management Fee" is defined in Section 2 of the AFC
Management Agreement.
"AFC Obligations" is defined in Section 2.1 of the Collateral
Agreement.
"AFC Reimbursement Share" is defined in Section 5.7(d) of the
Collateral Agreement.
"Affected Liquidity Lender" is defined in clause (a) of
Section 5.9 of the Liquidity Agreement.
"Affiliate" means, with respect to a 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.
"Aggregate Face Amount" means, on any date, with respect to
Commercial Paper Notes issued at a discount, the aggregate face amount of all
such Commercial Paper Notes Outstanding on such date and, with respect to
interest bearing Commercial Paper Notes, the aggregate face amount of all such
Commercial Paper Notes Outstanding on such date plus the accrued and unpaid
interest thereon and interest that will accrue prior to maturity.
"Aggregate Liquidity Commitment" means, as of any date of
determination, the sum of the Liquidity Lenders' Liquidity Commitments on such
date.
"Aggregate Outstandings" means, as of any date, the sum of
(i) the aggregate principal amount of and accrued interest on all Liquidity
Advances Outstanding on such date, (ii) the aggregate principal amount of and
accrued interest on LOC Liquidity Disbursements Outstanding on such date and
(iii) the Aggregate Face Amount of Commercial Paper Notes Outstanding on such
date, net of
3
<PAGE>
any amounts on deposit on such date in the Collateral Account and/or the
Commercial Paper Account, set aside for the repayment of the principal of
Liquidity Advances, LOC Liquidity Disbursements or Commercial Paper Notes.
"Applicable Law" means all applicable provisions of all (a)
constitutions, statutes, treaties, rules, regulations and orders of
governmental bodies, (b) governmental approvals and (c) orders, decisions,
judgments and decrees of all courts and arbitrators.
"Assigned Collateral" is defined in Section 4.1 of the
Collateral Agreement.
"Assignee Lender" is defined in Section 11.11.1 of the
Liquidity Agreement.
"Authorized Officer" means as to AFC, those officers,
employees and agents of AFC whose signatures and incumbency shall have been
certified to the Administrative Agent and the Liquidity Lenders pursuant to
Section 6.1.1 of the Liquidity Agreement or in such other certificates as may
be delivered by AFC to the Administrative Agent from time to time as duly
authorized to execute and deliver the Liquidity Agreement, and any other
Liquidity Document and any instruments or documents in connection therewith on
behalf of AFC and to take, from time to time, all other actions on behalf of
AFC in connection therewith.
"Authorized Representatives" is defined in Section 2 of the
Depositary Agreement.
"Authorized Signatories" is defined in Section 2 of the
Depositary Agreement.
"Base Rate" means, for any day, a rate per annum equal to the
higher of
(a) the Prime Rate in effect on such day; and
(b) the Federal Funds Effective Rate in effect on such day
plus 1/2 of 1% per annum.
Changes in the rate of interest on that portion of any Liquidity Advance
maintained as Base Rate Advances will take effect simultaneously with each
change in the Base
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Rate. The Administrative Agent will give notice promptly to AFC and the
Liquidity Lenders of changes in the Base Rate.
"Base Rate Advance" means a Liquidity Advance under the
Liquidity Agreement bearing interest at a fluctuating rate determined by
reference to the Base Rate.
"Book Entry CP Holder" is defined in Section 6(e) of the
Depositary Agreement.
"Book Entry CP Notes" is defined in Section 6(a) of the
Depositary Agreement.
"Book Entry Procedures" is defined in Section 6(a) of the
Depositary Agreement.
"Borrowing" means the Liquidity Advances of the same type
and, in the case of LIBOR Advances, having the same Liquidity Advance Interest
Period, and either (i) made by all Liquidity Lenders on the same Business Day
pursuant to the same Borrowing Request in accordance with Sections 3.1.1 or
3.1.2 of the Liquidity Agreement or (ii) made by the Swing Line Lender pursuant
to a Borrowing Request in accordance with Section 3.1.3 of the Liquidity
Agreement.
"Borrowing Request" means a request and certificate for
Liquidity Advances, substantially in the form of Exhibit C to the Liquidity
Agreement.
"Business Day" means, with respect to the CP Program
Documents,
(a) any day other than a Saturday, Sunday or other day on
which banks are authorized or required by law to be closed in New York
City, New York or Chicago, Illinois; and
(b) relative to the making, continuing prepaying or repaying
of LIBOR Advances, any day on which dealings in Dollars are carried on
in the London interbank market.
"Certificate of Credit Demand" means a certificate in the
form of Annex A to the Series 1997-2 Letter of Credit.
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<PAGE>
"Certificate of Liquidity Demand" means a certificate in the
form of Annex B to the Series 1997-2 Letter of Credit.
"Certificate of Termination Demand" means a certificate in
the form of Annex C to the Series 1997-2 Letter of Credit.
"Closing Date Certificate" means a certificate, substantially
in the form of Exhibit G to the Liquidity Agreement, duly completed and
executed by an Authorized Officer of AFC, addressed to the Liquidity Lenders,
the Administrative Agent and the Series 1997-2 Enhancement
Provider.
"Collateral Account" is defined in Section 5.1 of the
Collateral Agreement.
"Collateral Agent" means The Chase Manhattan Bank, in its
capacity as collateral agent under the Collateral Agreement, and any successor
thereto.
"Collateral Agreement" means the Collateral Agreement, dated
as of July 30, 1997, among AFC, the Collateral Agent, the LOC Agent, the
Administrative Agent and the Depositary, substantially in the form of Exhibit H
to the Liquidity Agreement, as such agreement may be amended, supplemented,
restated or otherwise modified from time to time in accordance with the terms
thereof and of the Liquidity Agreement.
"Commercial Paper Account" is defined in clause (a) of
Section 2.4 of the Liquidity Agreement.
"Commercial Paper Deficit" is defined in Section 3.6.2 of
the Liquidity Agreement.
"Commercial Paper Notes" means the promissory notes of AFC
issued by AFC in the commercial paper market pursuant to the Depositary
Agreement.
"Commitment Fee" is defined in Section 4.5 of the Liquidity
Agreement.
"Consent" has the meaning specified in Article 5 of this
Supplement.
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"Consent Period Expiration Date" has the meaning specified in
Article 5 of this Supplement.
"Continuation/Conversion Notice" means a notice of
continuation or conversion and certificate, duly executed by an Authorized
Officer of AFC, substantially in the form of Exhibit D to the Liquidity
Agreement.
"Conversion" shall have the meaning set forth in Section 5.8
of the Collateral Agreement.
"CP Amortization Commencement Date" means the earlier to
occur of (a) the occurrence of an Amortization Event described in Section 9.1.7
or 9.1.12 of the Liquidity Agreement with respect to AFC, (b) an Event of
Bankruptcy with respect to ARC or ARAC or (c) the date of declaration of the
commencement of the CP Amortization Period by written notice to AFC pursuant to
Section 9.2 of the Liquidity Agreement.
"CP Amortization Event" is defined in Section 9.1 of the
Liquidity Agreement.
"CP Amortization Period" means the period commencing on the
CP Amortization Commencement Date and ending on the date Liquidity Commitments
have been terminated and all amounts due and payable to the Administrative
Agent, the Liquidity Lenders, the Series 1997-2 Enhancement Provider (with
respect to Disbursements and other amounts payable by AFC under the Collateral
Agreement) and the CP Holders with respect to the Commercial Paper Notes have
been paid in full.
"CP Borrowing Base" means, as of any date, an amount equal to
(a) the sum of (i) the Series 1997-2 Invested Amount as of such date, (ii) in
the case of all principal amounts of Series 1997-2 Notes funded by Commercial
Paper Notes, interest accrued on such Series 1997-2 Notes as of such date and
interest that will accrue on such Series 1997-2 Notes through the maturity date
of the Commercial Paper Notes issued to fund such Series 1997-2 Notes, (iii) in
the case of all such other Series 1997-2 Notes, interest accrued on such Series
1997-2 Notes as of such date and (iv) the outstanding principal amount of
Eligible Investments and cash (other than amounts on deposit on such date in
the Collateral Account set aside for repayment of the principal of, or
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interest on, Liquidity Advances, LOC Liquidity Disbursements or Commercial
Paper Notes) then held by the Collateral Agent in the Collateral Account, minus
(b) any CP Borrowing Base Decline with respect to such date.
"CP Borrowing Base Decline" means, as of any date, the
aggregate amount of the Series 1997-2 Lease Payment Deficit for such date (if
such date is a Distribution Date) and all prior Series 1997-2 Lease Payment
Deficits, which have not been reimbursed by (x) a draw under the Series 1997-2
Letter of Credit, the Exit Loan Funding Account, the Series 1997-2 Cash
Collateral Account or the Collection Account or (y) a payment by a Lessee under
the applicable Lease and a corresponding payment by AESOP Leasing or AESOP
Leasing II under the applicable Loan Agreement.
"CP Borrowing Base Deficiency" means, with respect to any
date of determination, the amount by which the Aggregate Outstandings on such
date exceeds the CP Borrowing Base on such date.
"CP Deposited Funds" is defined in Section 5.1 of the
Collateral Agreement.
"CP Holder" means the holder from time to time of any
Commercial Paper Note.
"CP Issuer" means AFC, in its capacity as the issuer under
the Depositary Agreement.
"CP Program Documents" means, collectively, the Liquidity
Documents, the Series 1997-2 Letter of Credit, the Series 1997-2 Credit
Agreement, the Collateral Agreement, the Depositary Agreement, the Dealer
Agreement, the AFC Management Agreement, the Fee Letter and any agreements
relating to the issuance or purchase of the Series 1997-2 Notes.
"CP Rating Agency Condition" means, with respect any action,
that each Rating Agency shall have notified AFC, ARAC, the Administrative Agent
and the Trustee in writing that such action will not result in a reduction or
withdrawal of the rating (in effect immediately before the taking of such
action) of the Commercial Paper Notes with respect to which it is a Rating
Agency.
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"CP Secured Parties" is defined in Section 4.1 of the
Collateral Agreement.
"Dealer Agreement" means the Placement Agency Agreement,
dated as of July 30, 1997, among Chase Securities Inc., Lehman Brothers Inc.,
NationsBanc Capital Markets, Inc., ARAC, ARC and AFC, substantially in the form
of Exhibit J to the Liquidity Agreement, as amended, supplemented, restated or
otherwise modified from time to time in accordance with its terms, and any
other placement agency agreement in form and substance substantially similar
thereto with any other dealer of Commercial Paper Notes engaged by AFC.
"Dealers" means Chase Securities Inc., a Delaware
corporation, Lehman Brothers Inc., a Delaware corporation, and NationsBanc
Capital Markets, Inc., a Delaware corporation, or any other dealer of
Commercial Paper Notes engaged by AFC from time to time, for so long as such
Person is so engaged by AFC.
"Decreases" has the meaning specified in Section 2.2 of
this Supplement.
"Deficiency Amount" has the meaning specified in Section
3.3(a) of this Supplement.
"Depositary" means The Chase Manhattan Bank, or such other
banking institution as AFC shall appoint, with the prior written consent of the
Required Secured Parties (which consent shall not be unreasonably withheld or
delayed), as issuing and paying agent for Commercial Paper Notes under the
Depositary Agreement and as agent for the holders of the Commercial Paper
Notes.
"Depositary Agreement" means the Amended and Restated
Depositary Agreement, dated as of July 30, 1997, between AFC and the
Depositary, as amended, supplemented, restated or otherwise modified from time
to time in accordance with its terms.
"Deposited Funds" means all funds on deposit in the
Collection Account.
"Designated Amounts" has the meaning specified in Article 5
of this Supplement.
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"Disbursement" shall mean any LOC Liquidity Disbursement, any
LOC Credit Disbursement or any LOC Termination Disbursement, or other
disbursement by the Series 1997-2 Enhancement Providers under the Series 1997-2
Letter of Credit, or any combination thereof, as
the context may require.
"Eligible Investments" means investments payable in Dollars
issued by an entity located in the United States which are:
(a) Government Obligations;
(b) Participation certificates (excluding strip mortgage
securities which are purchased at prices exceeding their principal
amounts) and senior debt obligations, in each case rated Aaa by
Moody's and AAA by S&P, of the Federal Home Loan Mortgage Corporation,
consolidated system wide bonds and notes of the Farm Credit System,
senior debt obligations and mortgage-backed securities (excluding
stripped mortgage securities which are purchased at prices exceeding
their principal amounts) of the Federal National Mortgage Association,
senior debt obligations (excluding securities that have no fixed value
and/or whose terms do not promise a fixed dollar amount at maturity or
call date) of the Student Loan Marketing Association and debt
obligations of the Resolution Funding Corp. (collectively, "Agency
Obligations");
(c) [RESERVED]
(d) Commercial paper maturing in not more that three hundred
sixty-five (365) days and having ratings from S&P and Moody's of A-1
and P-1, respectively;
(e) Deposits, federal funds or bankers acceptances (maturing
in not more that three hundred sixty-five (365) days) of any domestic
bank (including a branch office of a foreign bank which branch office
is located in the United States, provided that the Collateral Agent
shall have received a legal opinion or opinions to the effect that
full timely payment of such deposit or similar obligation
10
<PAGE>
is enforceable against the principal office or any branch of such
bank), which:
(i) has an unsecured, uninsured and unguaranteed
obligation which has ratings from S&P and Moody's of A-1 and
P-1, respectively, or
(ii) is the lead bank, meeting the rating
requirements in (i) above, of a parent bank holding company
with an uninsured, unsecured and unguaranteed obligation;
(f) Deposits of any bank or savings and loan association
having a guaranteed short-term debt rating of P-1 by Moody's and A-1
by S&P which has combined capital, surplus and undivided profits of
not less than $10 million, provided such deposits are fully insured by
the Federal Deposit Insurance Corporation, the Banking Insurance Fund
or the Savings Association Insurance Fund;
(g) Investments in a money-market fund which may be a 12b-1
fund as registered under the Investment Company Act and is rated at
least AAm or AAm-G by S&P and Aaa by Moody's;
(h) Repurchase agreements with a term of six (6) months or
less with a counterparty having short-term, unsecured debt rated at
least A-1 by S&P and P-1 by Moody's;
(i) Repurchase agreements collateralized by Government
Obligations or Agency Obligations (the "Collateral Securities")
entered into with any registered broker-dealer which is under the
jurisdiction of the Securities Investors Protection Corp. or any
commercial bank, if such broker-dealer or bank has uninsured,
unsecured and unguaranteed debt rated at least A-1 by S&P and P-1 by
Moody's, provided that:
(A) a master repurchase agreement or
other specific written repurchase
agreement governs the transaction;
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<PAGE>
(B) the Collateral Securities are held free and
clear of any other lien by the Collateral
Agent or an independent third party
acting solely as agent for the Collateral
Agent, provided that any such third party
(A) is (1) a Federal Reserve bank, (2) a
bank which is a member of the Federal
Deposit Insurance Corporation and which has
combined capital, surplus and undivided
profits of not less that $25 million, or
(3) a bank approved in writing for such
purpose by the Required Secured Parties,
and (B) certifies in writing to the
Collateral Agent (or delivers to the
Collateral Agent a written opinion of
counsel to such third party) that such
third party holds the Collateral Securities
free and clear of any lien, as agent for
the Collateral Agent;
(C) a perfected first security interest under
the Uniform Commercial Code is created in,
or book entry procedures prescribed at 31
C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et
seq. are followed with respect to, the
Collateral Securities for the benefit of
the Collateral Agent;
(D) such repurchase agreement has a term of
thirty (30) days or less, or the Collateral
Agent will value the Collateral
Securities no less frequently than monthly
and will liquidate the Collateral
Securities if any deficiency in the
required collateral percentage is not
restored within two (2) business days of
such valuation;
(E) such repurchase agreement matures (or
permits the Collateral Agent to withdraw
all or any portion of the invested funds)
at least ten (10) days
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(or other appropriate liquidation period)
prior to each Payment Date;
(F) the fair market value of the Collateral
Securities in relation to the amount of the
repurchase obligation, including principal
and interest, is equal to at least one
hundred and three percent (103%); and
(G) the Collateral Agent obtains an opin-
ion of counsel to such broker-dealer
or bank to the effect that such re-
purchase agreement is a legal, valid,
binding and enforceable agreement of
such broker-dealer or bank (and, in
the case of a bank which is a branch
of a foreign bank, of such foreign
bank) in accordance with its terms;
and
(j) Other investment instruments approved in writing by the
Required Secured Parties, offered by financial institutions that have
a combined capital and surplus and undivided profits of not less than
$250,000,000 and the inclusion of which satisfy the Rating Agency
Condition and the CP Rating Agency Condition.
"Eligible Liquidity Lender" means (a) a commercial bank
having total assets in excess of $500,000,000, (b) a finance company, insurance
company or other financial institution that in the ordinary course of business
enters into transactions of a type similar to that entered into by the
Liquidity Lenders under the Liquidity Agreement and has total assets in excess
of $200,000,000, and whose becoming an assignee would not constitute a
prohibited transaction under Section 4975 of ERISA and (c) any other financial
institution satisfactory to AFC and the Administrative Agent, in each case
having a short-term rating or an equivalent long-term debt rating from S&P and
Moody's at least equal to the then current rating of the Commercial Paper
Notes, but in any event not less than a rating of A-1 by S&P and P-1 by
Moody's; provided, however, that any Person who does not have either a
short-term rating from S&P or Moody's shall be deemed to have the required
rating set forth above if
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<PAGE>
such Rating Agency confirms in writing that such Person, if its short-term debt
obligations were rated, would be assigned such required rating.
"Excess Collections" has the meaning specified in Section
3.3(b) of this Supplement.
"Exit Loan" has the meaning specified in the Series 1997-2
Credit Agreement.
"Exit Loan Funding Account" has the meaning specified in
Section 5.11 of the Collateral Agreement.
"Expiry Date" shall mean, with respect to any Liquidity
Lender, the later of (i) the Business Day immediately preceding the first
anniversary of the Series 1997-2 Closing Date, and (ii) such later date which
is agreed by such Liquidity Lender and AFC to be the Expiry Date for such
Liquidity Lender.
"Expiry Date Liquidity Advance" means a Liquidity Advance
made by a Liquidity Lender on the Expiry Date with respect to such Liquidity
Lender pursuant to Section 3.6.4 of the Liquidity Agreement.
"Extension Request" means an Extension Request substantially
in the form of Exhibit E to the Liquidity Agreement.
"Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"Fee Letter" means the fee letter, dated as of July 30, 1997,
from AFC, addressed to, and acknowledged and agreed to by, the Collateral
Agent.
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<PAGE>
"Financial Officer" means, with respect to any corporation,
the chief financial officer, vice-presidentfinance, principal accounting
officer, controller or treasurer of such corporation.
"F.R.S. Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Government Obligations" means direct obligations of, or
obligations the timely payment of principal of and interest on which is fully
and unconditionally guaranteed by, the United States of America and U.S.
Treasury REFCORPS.
"Increases" has the meaning specified in Section 2.1(a) of
this Supplement.
"Initial Aggregate Liquidity Commitment" means the amount of
the Aggregate Liquidity Commitment as of the Series 1997-2 Closing Date.
"LIBOR" means, with respect to any LIBOR Advance for any
Liquidity Advance Interest Period, the rate appearing on Telerate Page 3750 at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Liquidity Advance Interest Period, as the rate for dollar
deposits with a maturity comparable to such Liquidity Advance Interest Period.
In the event that such rate is not available at such time for any reason, then
"LIBOR" with respect to such LIBOR Advance for such Liquidity Advance Interest
Period shall be the rate at which dollar deposits of $5,000,000 and for a
maturity comparable to such Liquidity Advance Interest Period are offered by
the principal London office of the Administrative Agent in immediately
available funds in the London interbank market at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Liquidity
Advance Interest Period.
"LIBOR Advance" means a Liquidity Advance under the Liquidity
Agreement bearing interest, at all times during the Liquidity Advance Interest
Period applicable thereto at a fixed rate of interest determined by refer-
ence to LIBOR.
"Limited CP Amortization Event" is defined in Section 9.3 of
the Liquidity Agreement.
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<PAGE>
"Liquidity Advance" means any Revolving Advance, any
Refunding Advance, any Expiry Date Liquidity Advance or any Swing Line Advance,
or any combination thereof, as the context may require.
"Liquidity Advance Interest Period" means with respect to any
LIBOR Advance, a one-week (only in the case of Swing Line Advances), or a
one-,two-, three- or six-month period commencing on the date of such LIBOR
Advance, as selected by AFC in its Borrowing Request; provided, however, that
if any such period would otherwise end on a day which is not a Business Day,
the Liquidity Advance Interest Period shall instead end on the next succeeding
Business Day; and provided, further, that if such extension would cause the
last day of such Liquidity Advance Interest Period to occur in the next
following calendar month, the last day of such Liquidity Advance Interest
Period shall occur on the next preceding Business Day.
"Liquidity Advance Notes" means, with respect to any
Liquidity Lender, the Revolving Note and the Refunding Note issued to such
Liquidity Lender by AFC.
"Liquidity Agreement" means the Liquidity Agreement, dated as
of July 30, 1997, among AFC, the Liquidity Lenders and the Administrative
Agent, as such agreement may be further amended, supplemented, restated or
otherwise modified from time to time in accordance with the terms thereof.
"Liquidity Commitment" means, as to any Liquidity Lender, the
amount set forth on Schedule I of the Liquidity Agreement for such Liquidity
Lender as its Liquidity Commitment or set forth in its Liquidity Lender
Assignment, as such amount may be increased or decreased from time to time
pursuant to Section 3.3, 3.4, 5.9 or 11.11.1 of the Liquidity Agreement.
"Liquidity Commitment Agreement" means a Liquidity Commitment
Agreement substantially in the form of Exhibit K to the Liquidity Agreement.
"Liquidity Commitment Termination Date" means the earlier to
occur of
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(a) the date on which the Aggregate Liquidity Commitment has
been terminated in full or reduced to zero pursuant to Section 3.3 or
9.2 of the Liquidity Agreement; and
(b) the Scheduled Liquidity Commitment Termination Date.
"Liquidity Deficiency" is defined in the Certificate of
Liquidity Demand.
"Liquidity Demand" means a demand for an LOC Liquidity
Disbursement under the Series 1997-2 Letter of Credit pursuant to a Certificate
of Liquidity Demand.
"Liquidity Documents" means the Liquidity Agreement, the
Liquidity Advance Notes, any Borrowing Request, any Continuation/Conversion
Notice, any Liquidity Commitment Agreement, any Liquidity Lender Assignment,
the Closing Date Certificate, and each other agreement, instrument, certificate
or other document delivered in connection therewith.
"Liquidity Lender Assignment" means a Liquidity Lender
Assignment substantially in the form of Exhibit F to the Liquidity Agreement.
"Liquidity Lenders" is defined in the preamble of the
Liquidity Agreement, and, unless otherwise indicated, shall include any
Liquidity Lender acting in the capacity of Swing Line Lender.
"Liquidity Participant" is defined in Section 11.11.2 of the
Liquidity Agreement.
"LOC Agent" means The Chase Manhattan Bank, as agent for the
LOC Lenders party to the Series 1997-2 Credit Agreement, or such other Person
as shall have subsequently been appointed as the successor LOC Agent pursuant
to Article X of the Series 1997-2 Credit Agreement.
"LOC Credit Disbursement" means an amount drawn under the
Series 1997-2 Letter of Credit pursuant to a Certificate of Credit Demand.
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<PAGE>
"LOC Lender" means a lender under the Series 1997-2 Credit
Agreement.
"LOC Liquidity Disbursement" means an amount drawn under the
Series 1997-2 Letter of Credit pursuant to a Certificate of Liquidity Demand.
"LOC Termination Disbursement" means an amount drawn under
the Series 1997-2 Letter of Credit pursuant to a Certificate of Termination
Demand.
"Majority Banks" means, at any time, Liquidity Lenders
holding, in the aggregate, Liquidity Commitments equaling or exceeding 66-2/3
of the Aggregate Liquidity Commitment; provided, however, that any Liquidity
Lender that has defaulted in making a Liquidity Advance, shall (if such default
is then continuing) be considered to have a Liquidity Commitment equal to its
unreimbursed Liquidity Advances; provided, further, that the Liquidity
Commitment of any Liquidity Lender whose Liquidity Commitment has been drawn,
terminated and not repaid shall equal the unpaid or unreimbursed balance of its
Liquidity Advances.
"Management Agreements" mean the AESOP I Management
Agreement, the AESOP II Management Agreement, the Original AESOP Management
Agreement, the AFC Management Agreement and the AFC-II Management Agreement.
"Master Note" means the form of Commercial Paper Note
attached to the Depositary Agreement as Exhibit E thereto.
"Non-Extending Liquidity Lender" is defined in clause (c) of
Section 3.5 of the Liquidity Agreement.
"Obligations" means all obligations monetary or otherwise,
including fixed and contingent obligations, of AFC arising under or in
connection with the Liquidity Agreement, the Liquidity Advance Notes, each
other Liquidity Document and each CP Program Document, including without
limitation, all costs and expenses payable by AFC pursuant to Sections 5.3,
5.4, 5.5, 5.6, 8.1.7 and 11.3 of the Liquidity Agreement; all costs and
expenses payable pursuant to Section 9.5 of the Collateral Agreement; all fees
of the Collateral Agent, the Dealers, and the Depositary and fees payable to
the Rating Agencies; all
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<PAGE>
out-of-pocket costs and expenses (including reasonable attorneys' fees and
legal expenses) incurred by AFC in connection with the administration,
enforcement, waiver or amendment of any CP Program Documents; any indemnities
payable by AFC under any of the CP Program Documents, including, without
limitation, those indemnities payable pursuant to Section 11.4 of the Liquidity
Agreement; any document, stamp, filing, recording, mortgage or other taxes
(other than net income taxes of AFC) which may be payable in connection with
the issuance of the Series 1997-2 Notes (including any Increases with respect
thereto) or the execution, delivery, recording or filing of any instruments or
documents provided for in or delivered or to be delivered under or in
connection with the Series 1997-2 Supplement (including the Series 1997-2
Supplement itself).
"Offering Memorandum" means the offering memorandum of AFC
used by AFC or the Dealers from time to time in connection with the offering
and sale of the Commercial Paper Notes, as the same may be amended,
supplemented or modified.
"Organic Document" means, with respect to any Person, its
certificate or articles of incorporation, its by-laws and all shareholder
agreements, voting trusts and similar arrangements applicable to any of its
authorized shares of capital stock.
"Outstanding" means with respect to Commercial Paper Notes,
all Commercial Paper Notes issued at any time under the Depositary Agreement,
except (a) Commercial Paper Notes which have been paid through the Depositary,
(b) matured Commercial Paper Notes which have not been presented for payment
but funds for the payment of which are on deposit in the Commercial Paper
Account established with respect thereto and are available for payment of such
Commercial Paper Notes or (c) matured Commercial Paper Notes with respect to
which a Borrowing Request has been honored but funds for the payment of which
have not yet been deposited in the Commercial Paper Account, and (iii) with
respect to Liquidity Advances and Disbursements, all Liquidity Advances or
Disbursements made or deemed made by the Collateral Agent or the Liquidity
Lenders or the Series 1997-2 Enhancement Provider, as the case may be, pursuant
to the Liquidity Agreement or the Series 1997-2 Letter of Credit, respectively,
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and not repaid by AFC, except Liquidity Advances or Disbursements to be repaid
from the proceeds of Commercial Paper Notes being issued on the date of such
repayment.
"Overall Percentage" means, relative to any Liquidity Lender,
a fraction (expressed as a percentage), the numerator of which is the Liquidity
Commitment of such Person, and the denominator of which is the sum of the
Aggregate Liquidity Commitment and the Series 1997-2 Aggregate Enhancement
Commitment.
"Percentage" means, relative to any Liquidity Lender, a
fraction (expressed as a percentage) obtained by dividing (i) the Liquidity
Commitment of such Liquidity Lender by (ii) the Aggregate Liquidity Commitment.
"Plan" means any Single Employer Plan or any Multiple
Employer Plan, or either of them, as the context may require.
"Potential CP Amortization Event" means any occurrence or
event which, after notice or lapse of time or both, would constitute a CP
Amortization Event.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank as its prime rate in
effect at its principal office in New York City; each change in the Prime Rate
shall be effective from and including the date such change is publicly
announced as being effective.
"Rating Agencies" means, with respect to the Series 1997-2
Notes, Standard & Poor's, Moody's and any other nationally recognized rating
agency approved by the Administrative Agent, ARAC and the Required Secured
Parties.
"Rating Downgrade" means, with respect to any Person, that
the rating assigned to such Person's short-term unsecured debt securities or
short-term deposits by any Rating Agency shall be lower than the rating then
assigned by such Rating Agency to the Commercial Paper Notes, or in any event,
a rating lower than A-1 by S&P or P-1 by Moody's.
"Refunding Advance" is defined in Section 3.1.2
of the Liquidity Agreement.
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"Refunding Note" means, with respect to any Liquidity Lender,
a promissory note issued to such Liquidity Lender by AFC, substantially in the
form of Exhibit B to the Liquidity Agreement, evidencing the Refunding Advances
by such Liquidity Lender to AFC, and all other promissory notes accepted from
time to time in substitution therefor or renewal thereof.
"Regulatory Change" means any Applicable Law, interpretation,
directive, request or guideline (whether or not having the force of law), or
any change therein or in the administration or enforcement hereof, that becomes
effective or is implemented or first required or expected to be complied with
after the Series 1997-2 Closing Date, whether the same is (i) the result of an
enactment by a government or any agency or political subdivision thereof, a
determination of a court, regulatory authority or monetary authority, or any
other action or (ii) enacted, adopted, issued or proposed before or after the
Series 1997-2 Closing Date, including any such that imposes, increases or
modifies tax, reserve requirement, insurance charge, special deposit
requirement, assessment or capital adequacy requirement but excluding any such
that imposes, increases or modifies any income or franchise taxes imposed upon
any Liquidity Lender by any jurisdiction (or any political subdivision thereof)
in which such Liquidity Lender or any branch or office thereof which is
providing liquidity support under the Liquidity Agreement.
"Rejected Program Vehicle" means any Program Vehicle rejected
as ineligible for repurchase by the related Manufacturer (or sale by an
authorized auction dealer) under its Manufacturer Program and sold to a third
party (other than to such Manufacturer or an authorized auction dealer).
"Required Liquidity Providers" means, at any time, Liquidity
Lenders holding, in the aggregate, Liquidity Commitments, such that the
aggregate amount of such commitments equals or exceeds 66-2/3% of the Aggregate
Liquidity Commitment; provided, however, that any Liquidity Lender that has
defaulted in making a Liquidity Advance (if at such time such default is
continuing), shall be considered to have a Liquidity Commitment equal to the
unpaid or unreimbursed balance of its Liquidity Advances; and provided,
further, that the Liquidity
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Commitment of any Liquidity Lender whose commitment has been drawn, terminated
and not repaid, shall equal the unpaid or unreimbursed balance of its Liquidity
Advances.
"Required Secured Parties" means, the Required Liquidity
Providers, except during the continuance of a CP Amortization Event or a
Liquidation Event of Default, in which case "Required Secured Parties" means
the Series 1997-2 Majority Enhancement Providers and the Majority Banks.
"Requisite Noteholders" means Noteholders holding 50% or more
of the Series 1997-2 Invested Amount.
"Reserve Account Eligible Investments" means
(a) Commercial paper maturing in not more than three hundred
sixty-five (365) days and having ratings from S&P and Moody's of A-1
and P-1, respectively;
(b) Deposits, federal funds or bankers acceptances (maturing in not
more that three hundred sixty-five (365) days) of any domestic bank
(including a branch office of a foreign bank which branch office is
located in the United States, provided that the Collateral Agent shall
have received a legal opinion or opinions to the effect that full
timely payment of such deposit or similar obligation is enforceable
against the principal office or any branch of such bank), which:
(i) has an unsecured, uninsured and unguaranteed obligation
which has ratings from S&P and Moody's of A-1 and P-1,
respectively, or
(ii) is the lead bank of a parent bank holding company with
an uninsured, unsecured and unguaranteed obligation meeting
the rating requirements in (i) above;
(c) Deposits of any bank or savings and loan association which has
combined capital, surplus and undivided profits of not less than $10
million, provided such deposits are fully insured by the Federal
Deposit Insurance Corporation, the Banking
22
<PAGE>
Insurance Fund or the Savings Association Insurance Fund;
(d) Investments in a money-market fund which may be a 12b-1 fund as
registered under the Investment Company Act and is rated at least the
equivalent of AAm or AAm-G by S&P and P-1 by Moody's;
(e) Repurchase agreements with a term of six (6) months or less with
any institution having long-term, unsecured debt rated at least the
equivalent of A-1 by S&P and P-1 by Moody's; and
(f) A guaranteed investment contract, which shall be an obligation of
an insurance company or other corporation whose short-term, unsecured
debt is rated at least the equivalent of A-1 by S&P and P-1 by
Moody's; and
(g) Other investment instruments approved in writing by the holders of
the outstanding Preferred Stock, S&P and Moody's and offered by
financial institutions that have a combined capital and surplus and
undivided profits of not less than $250,000,000.
"Revolving Advance" is defined in Section 3.1.1 of the
Liquidity Agreement.
"Revolving Advance Commitment Termination Date" means the
earlier to occur of
(a) the Liquidity Commitment Termination Date; and
(b) the CP Amortization Commencement Date.
"Revolving Note" means, with respect to any Liquidity Lender,
a promissory note issued to such Liquidity Lender by AFC, substantially in the
form of Exhibit A to the Liquidity Agreement, evidencing Revolving Advances by
such Liquidity Lender to AFC, and all other promissory notes accepted from time
to time in substitution therefor or renewal thereof.
"Scheduled Liquidity Commitment Termination Date" means, on
any date of determination, the latest
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Expiry Date with respect to any Liquidity Lender then in effect.
"Scheduled Maturity Date" means, with respect to Liquidity
Advances and LOC Liquidity Disbursements, the date six months after the
applicable Expiry Date and the date six months after the Series 1997-2 Letter
of Credit Expiration Date, respectively; provided, however, that after the
occurrence of a CP Amortization Event, the Scheduled Maturity Date shall mean
the date twenty-four (24) months after the CP Amortization Commencement Date.
"SEC" means the Securities and Exchange Commission, and any
successor agency thereto.
"Series 1997-2 Account Surplus" means, as of any date of
determination subsequent to the establishment and funding of the Exit Loan
Funding Account or the Series 1997-2 Cash Collateral Account pursuant to
Section 3.8 of this Supplement, the amount, if any, by which the Series 1997-2
Letter of Credit Amount exceeds the Series 1997-2 Required Enhancement Amount.
"Series 1997-2 Accrued Interest Account" has the meaning
specified in Section 3.1(b) of this Supplement.
"Series 1997-2 AESOP I Operating Lease Vehicle Percentage"
means, as of any date of determination, a fraction, expressed as a percentage,
the numerator of which is the Series 1997-2 Required AESOP I Operating Lease
Vehicle Amount as of such date and the denominator of which is the sum of the
Required AESOP I Operating Lease Vehicle Amounts for all Series of Notes as of
such date.
"Series 1997-2 Aggregate Enhancement Commitment" means, as of
any date, the sum of the Series 1997-2 Enhancement Providers' Series 1997-2
Enhancement Commitments on such date.
"Series 1997-2 Cash Collateral Account" has the meaning
specified in Section 5.7 of the Collateral Agreement.
"Series 1997-2 Claims" means, as of any date, any claims by
AFC-II against AESOP Leasing or AESOP
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Leasing II, as the case may be, for amounts then due and owing under the Loan
Agreements that remain unpaid on such date, to the extent such amounts relate
to Loans funded with the proceeds of the Series 1997-2 Notes.
"Series 1997-2 Closing Date" means July 31, 1997.
"Series 1997-2 Collateral" means the Collateral and the
Series 1997-2 Distribution Account Collateral.
"Series 1997-2 Collection Account" has the meaning specified
in Section 3.1(b) of this Supplement.
"Series 1997-2 Credit Agreement" means the Credit Agreement,
dated as of July 30, 1997, among ARAC, ARC, the lenders parties thereto from
time to time and the LOC Agent, as such agreement may be amended, supplemented,
restated or otherwise modified from time to time in accordance with the terms
thereof.
"Series 1997-2 Deposit Date" has the meaning specified in
Section 3.2 of this Supplement.
"Series 1997-2 Distribution Account Collateral" has the
meaning specified in Section 3.10(d) of this Supplement.
"Series 1997-2 Distribution Account" has the meaning
specified in Section 3.10(a) of this Supplement.
"Series 1997-2 Eligible Enhancement Provider" means (a) a
commercial bank having total assets in excess of $500,000,000, (b) a finance
company, insurance company or other financial institution that in the ordinary
course of business enters into transactions of a type similar to that entered
into by the Series 1997-2 Enhancement Provider under the Series 1997-2 Credit
Agreement and has total assets in excess of $200,000,000, and whose becoming an
assignee would not constitute a prohibited transaction under Section 4975 of
ERISA and (c) any other financial institution satisfactory to ARC and ARAC
having a short-term rating or an equivalent long-term debt rating from S&P and
Moody's at least equal to the then current rating of the Commercial Paper
Notes, but in any event not less than a rating of A-1 by S&P and P-1 by
Moody's; provided, however, that any Person who does not
25
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have either a short-term rating from S&P or Moody's shall be deemed to have the
required rating set forth above if such Rating Agency confirms in writing that
such Person, if its short-term debt obligations were rated, would be assigned
such required rating.
"Series 1997-2 Enhancement" means the Series 1997-2 Letter of
Credit and the Series 1997-2 Cash Collateral Account.
"Series 1997-2 Enhancement Agreement" means the Series 1997-2
Credit Agreement.
"Series 1997-2 Enhancement Agreement Event of Default" means
an Event of Default as defined in Article IX of the Series 1997-2 Credit
Agreement.
"Series 1997-2 Enhancement Amount" means, as of any date, the
Series 1997-2 Letter of Credit Amount.
"Series 1997-2 Enhancement Commitment" means, as to any
Series 1997-2 Enhancement Provider, the amount of such Series 1997-2
Enhancement Provider's commitment to provide credit support for the Lessee's
respective obligations under the Leases and/or liquidity support for the
Commercial Paper Notes pursuant to the Series 1997-2 Letter of Credit.
"Series 1997-2 Enhancement Deficiency" means, on any day, the
amount by which the Series 1997-2 Enhancement Amount is less than the Series
1997-2 Required Enhancement Amount.
"Series 1997-2 Enhancement Percentage" means, as of any date
of determination, the percentage equivalent of a fraction, the numerator of
which is the Series 1997-2 Required Enhancement Amount as of such date and the
denominator of which is the Series 1997-2 Invested Amount as of such date.
"Series 1997-2 Enhancement Provider" means Bayerische
Vereinsbank AG, a German banking corporation, and any successor thereto or
replacement thereof or addition thereto, as the issuer of the letter of credit
pursuant to the Series 1997-2 Credit Agreement; provided, however, that solely
for purposes of the giving of any consent or approval, or directing any action,
in either
26
<PAGE>
case to the extent provided under any of the AFC-II Agreements, the LOC Agent
shall be deemed to be the Series 1997-2 Enhancement Provider entitled to such
rights of consent, approval or direction. The Series 1997-2 Enhancement
Provider is an "Enhancement Provider" for purposes of the Base Indenture.
"Series 1997-2 Enhancement Provider Account" has the meaning
specified in Section 3.11 of this Supplement.
"Series 1997-2 Initial Invested Amount" means the aggregate
initial principal amount of the Series 1997-2 Notes, which is $_______.
"Series 1997-2 Interest Period" means a period commencing on
and including a Distribution Date and ending on and including the day preceding
the next succeeding Distribution Date; provided, however, that the initial
Series 1997-2 Interest Period shall commence on and include the Series 1997-2
Closing Date and end on and include August 19, 1997.
"Series 1997-2 Invested Amount" means, when used with respect
to any date, an amount equal to (a) the Series 1997-2 Initial Invested Amount
minus (b) the amount of principal payments made pursuant to Section 3.5 of this
Supplement to Series 1997-2 Noteholders on or prior to such date plus (c) any
Increases in the Series 1997-2 Invested Amount pursuant to Section 2.1 of this
Supplement minus (d) any Decreases in the Series 1997-2 Invested Amount
pursuant to Section 2.2 of this Supplement.
"Series 1997-2 Invested Percentage" means on
any date of determination:
(a) when used with respect to Principal Collections, the
percentage equivalent (which percentage shall never exceed 100%) of a
fraction the numerator of which shall be equal to the Series 1997-2
Invested Amount, determined during the Series 1997-2 Revolving Period
as of the end of the Related Month (or, until the end of the initial
Related Month, on the Series 1997-2 Closing Date), or, during the
Series 1997-2 Rapid Amortization Period, as of the end of the Series
1997-2 Revolving Period,
27
<PAGE>
and the denominator of which shall be the greater of (I) the Aggregate
Asset Amount as of the end of the Related Month or, until the end of
the initial Related Month, as of the Series 1997-2 Closing Date, and
(II) as of the same date as in clause (I), the sum of the numerators
used to determine (i) invested percentages for allocations with
respect to Principal Collections (for all Series of Notes and all
classes of such Series of Notes) and (ii) overcollateralization
percentages for allocations with respect to Principal Collections (for
all Series of Notes that provide for credit enhancement in the form of
overcollateralization);
(b) when used with respect to Interest Collections, the
percentage equivalent (which percentage shall never exceed 100%) of a
fraction the numerator of which shall be the Accrued Amounts with
respect to the Series 1997-2 Notes on such date of determination, and
the denominator of which shall be the aggregate Accrued Amounts with
respect to all Series of Notes on such date of determination.
"Series 1997-2 Lease Payment Deficit" means on any
Distribution Date an amount equal to the sum of (a) the aggregate amount of
Principal Collections which pursuant to Section 3.2(a), (b) or (c) of this
Supplement would have been allocated to the Series 1997-2 Noteholders if 40% of
all payments required under Section 5.1(B)(iii) of the Loan Agreements in
respect of Rejected Program Vehicles since the preceding Distribution Date were
made in full over the aggregate amount of Principal Collections which pursuant
to Section 3.2(a), (b) or (c) of this Supplement have been allocated to the
Series 1997-2 Noteholders in respect of Rejected Program Vehicles since the
preceding Distribution Date and (b) the excess, if any, of (a) the sum of the
aggregate amount of Interest Collections and Principal Collections which
pursuant to Section 3.2(a), (b) or (c) of this Supplement would have been
allocated to the Series 1997-2 Noteholders if all payments required under the
Leases to have been made since the preceding Distribution Date were made in
full, over (b) the aggregate amount of Interest Collections and Principal
Collections which pursuant to Section 3.2(a), (b) or (c) of this Supplement
have been allocated to the Series 1997-2 Noteholders since the preceding
Distribution Date; provided, however, for
28
<PAGE>
purposes of this definition only, the determination of the portion of payments
with respect to Loan Interest included in Monthly Base Rent required under the
Leases to have been made since the preceding Distribution Date pursuant to
clause (a) above shall be made applying the Lender's Carrying Cost Interest
Rate calculated using the Series 1997-2 Note Rate without giving effect to
clause (iii) of the definition of Series 1997-2 Note Rate. For this purpose,
amounts paid or determined pursuant to Section 3.2(a)(ii), (b)(ii) and (c)(ii)
of this Supplement shall be deemed allocated to the Series 1997-2 Noteholders.
"Series 1997-2 Letter of Credit" means the irrevocable letter
of credit or letters of credit issued by the Series 1997-2 Enhancement
Providers in favor of the Collateral Agent and the Trustee for the benefit of
the Series 1997-2 Noteholders pursuant to the Series 1997-2 Credit Agreement
and any amount on deposit in the Exit Loan Funding Account.
"Series 1997-2 Letter of Credit Amount" means, as of any date
of determination, (a) the sum of (i) the amount available to be drawn on such
date under the Series 1997-2 Letter of Credit, as specified therein and (ii) if
the Exit Loan Funding Account has been established and funded pursuant to
Section 3.8, the amount on deposit in the Exit Loan Funding Account on such
date or (b) if the Series 1997-2 Cash Collateral Account has been established
and funded pursuant to Section 3.8, the amount on deposit in the Series 1997-2
Cash Collateral Account on such date.
"Series 1997-2 Letter of Credit Expiration Date" means the
Business Date immediately preceding the first anniversary of the Series 1997-2
Closing Date, as such date may be extended pursuant to the Series 1997-2 Credit
Agreement.
"Series 1997-2 Limited Liquidation Event of Default" means,
so long as such event or condition continues, any event or condition of the
type specified in Section 4(a) through (g) of this Supplement that continues
for thirty (30) days or more; provided, however, that such event or condition
shall not constitute a Series 1997-2 Limited Liquidation Event of Default if
(i) within such thirty (30) day period, such Amortization Event
29
<PAGE>
shall have been cured and (ii) each Rating Agency shall have notified AFC-II,
each Borrower, each Lessee and the Trustee in writing that after such cure of
such Amortization Event is provided for, the Commercial Paper Notes will
receive the same rating from the Rating Agencies as they received prior to the
occurrence of such Amortization Event.
"Series 1997-2 Majority Enhancement Providers" means, at any
time, Series 1997-2 Enhancement Providers holding, in the aggregate, Series
1997-2 Enhancement Commitments equaling or exceeding 66-2/3% of the aggregate
Series 1997-2 Enhancement Commitments; provided, however, that any Series
1997-2 Enhancement Provider that has defaulted in making a Disbursement, shall
(if such default is then continuing) be considered to have a Series 1997-2
Enhancement Commitment equal to its unreimbursed Disbursements; provided,
further, that the Series 1997-2 Enhancement Commitment of any Series 1997-2
Enhancement Provider whose Series 1997-2 Enhancement Commitment has been drawn,
terminated and not repaid shall equal the unpaid or unreimbursed balance of its
Disbursements.
"Series 1997-2 Maximum Aggregate Subaru/Hyundai/Suzuki
Amount" means, as of any day, an amount equal to 10% of the aggregate Net Book
Value of all Vehicles leased under the Leases on such day.
"Series 1997-2 Maximum Amount" means any of the Series 1997-2
Maximum Manufacturer Amounts, the Series 1997-2 Maximum Financed Vehicle
Amount, the Series 1997-2 Maximum Non-Eligible Manufacturer Amount, the Series
1997-2 Maximum Non-Program Vehicle Amount or the Series
1997-2 Maximum Specified States Amount.
"Series 1997-2 Maximum Financed Vehicle Amount" means, as of
any day, an amount equal to 10% of the aggregate Net Book Value of all Vehicles
leased under the Leases on such day; provided, however, that in the event that
ARAC acquires any Person or substantially all of the assets of any Person that
was at the time of such acquisition a franchisee of HFS Car Rental, Inc. and
Wizard Co., Inc., and the closing date of such acquisition occurs within nine
(9) months after the Initial Closing Date, the Series 1997-2 Maximum Financed
Vehicle Amount as of any day during the period from and including the
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closing date of such acquisition to and including the date that is six (6)
months after such closing date means an amount equal to the greater of (a) 15%
of the aggregate Net Book Value of all Vehicles leased under the Leases on such
day and (b) $350,000,000.
"Series 1997-2 Maximum Individual Subaru/Hyundai/Suzuki
Amount" means, as of any day, an amount equal to 5% of the aggregate Net Book
Value of all Vehicles leased under the Leases on such day.
"Series 1997-2 Maximum Invested Amount" means, as of any
date, the Series 1997-2 Program Size less the aggregate discount on Commercial
Paper Notes Outstanding
on such date.
"Series 1997-2 Maximum Manufacturer Amount" means, as of any
day, any of the Series 1997-2 Maximum Mitsubishi Amount, the Series 1997-2
Maximum Individual Subaru/Hyundai/Suzuki Amount, the Series 1997-2 Maximum
Aggregate Subaru/Hyundai/Suzuki Amount or the Series
1997-2 Maximum Mazda Amount.
"Series 1997-2 Maximum Mazda Amount" means, as of any day, an
amount equal to 20% of the aggregate Net Book Value of all Vehicles leased
under the Leases on such day.
"Series 1997-2 Maximum Mitsubishi Amount" means, as of any
day, an amount equal to 10% of the aggregate Net Book Value of all Vehicles
leased under the Leases on such day.
"Series 1997-2 Maximum Non-Eligible Manufacturer Amount"
means, as of any day, an amount equal to 3% of the aggregate Net Book Value of
all Vehicles leased under the Leases on such day.
"Series 1997-2 Maximum Non-Program Vehicle Amount" means, as
of any day, an amount equal to 25% of the aggregate Net Book Value of all
Vehicles leased under the Leases on such day.
"Series 1997-2 Maximum Specified States Amount" means, as of
any day, an amount equal to 7.5% of the aggregate Net Book Value of all
Vehicles leased under the Leases on such day.
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<PAGE>
"Series 1997-2 Non-Program Vehicle Percentage" means, as of
any date of determination, a fraction, expressed as a percentage, the numerator
of which is the sum of (i) the aggregate Net Book Value of all Non-Program
Vehicles leased under the Finance Lease and (ii) the Series 1997-2 AESOP I
Operating Lease Vehicle Percentage of the aggregate Net Book Value of all
Non-Program Vehicles leased under the AESOP I Operating Lease on such date and
the denominator of which is the sum of (i) the aggregate Net Book Value of all
Vehicles leased under the Finance Lease, (ii) the Series 1997-2 AESOP I
Operating Lease Vehicle Percentage of the aggregate Net Book Value of all
Vehicles leased under the AESOP I Operating Lease and (iii) the aggregate Net
Book Value of all Vehicles leased under the AESOP II Operating Lease on such
date.
"Series 1997-2 Noteholder" means a Person in whose name a
Series 1997-2 Note is registered in the Note Register.
"Series 1997-2 Note Rate" means, for any Series 1997-2
Interest Period, the interest rate equal to the percentage equivalent of a
fraction, the numerator of which is equal to the sum of (i) interest payable by
AFC during the related Series 1997-2 Interest Period on the Outstanding
Commercial Paper Notes (based on the weighted average commercial paper rate),
Liquidity Advances, LOC Liquidity Disbursements and other Obligations
(including, in each case, any post-default interest with respect to such
Obligations), (ii) the monthly portion of the quarterly fees payable by AFC
pursuant to Section 4.5 of the Liquidity Agreement, (iii) all costs and
expenses payable by AFC pursuant to Sections 5.3, 5.4, 5.5, 5.6, 8.1.7 and 11.3
of the Liquidity Agreement; all costs and expenses payable pursuant to Section
9.5 of the Collateral Agreement; all fees of the Collateral Agent, the Dealers,
and the Depositary and fees payable to the Rating Agencies; all out-of-pocket
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by AFC in connection with the administration, enforcement, waiver or
amendment of any CP Program Documents; any indemnities payable by AFC under any
of the CP Program Documents, including, without limitation, those indemnities
payable pursuant to Section 11.4 of the Liquidity Agreement; any document,
stamp, filing, recording, mortgage or other taxes (other than net income taxes
of AFC) which may be payable in connection with the issuance of
32
<PAGE>
the Series 1997-2 Notes (including any Increases with respect thereto) or the
execution, delivery, recording or filing of any instruments or documents
provided for in or delivered or to be delivered under or in connection with the
Series 1997-2 Supplement (including the Series 1997-2 Supplement itself), in
each case due and payable during the related Series 1997-2 Interest Period,
(iv) the monthly portion of the AFC Management Fee and (v) the monthly portion
of all other operating expenses of AFC and the denominator of which is equal to
the average daily Series 1997-2 Invested Amount during such Series 1997-2
Interest Period; provided, however, that the Series 1997-2 Note Rate will in no
event be higher than the maximum rate permitted by applicable law.
"Series 1997-2 Notes" means any one of the Series 1997-2
Floating Rate Rental Car Agent Backed Variable Funding Notes, executed by
AFC-II and authenticated and delivered by or on behalf of the Trustee,
substantially in the form of Exhibit A.
"Series 1997-2 Percentage" means, as of any date of
determination, a fraction, expressed as a percentage, the numerator of which is
the Series 1997-2 Invested Amount as of such date and the denominator of which
is the aggregate Invested Amount of each Series of Notes outstanding as of such
date.
"Series 1997-2 Principal Allocation" has the meaning
specified in Section 3.2(a)(ii) of this Supplement.
"Series 1997-2 Program Size" means $_______; provided,
however, that the Series 1997-2 Program Size may be increased to an amount
greater than $_______, from time to time, if (i) additional Enhancement in an
amount required by the Rating Agencies is obtained and (ii) such increase shall
not, as evidenced by written confirmation from the Rating Agencies, result in
the downgrading or withdrawal of the then current rating on the Commercial
Paper Notes.
"Series 1997-2 Program Vehicle Percentage" means, as of any
date of determination, a fraction, expressed as a percentage, the numerator of
which is the sum of (i) the aggregate Net Book Value of all Program Vehicles
leased under the Finance Lease, (ii) the aggre-
33
<PAGE>
gate Net Book Value of all Vehicles leased under the AESOP II Operating Lease
and (iii) the Series 1997-2 AESOP I Operating Lease Vehicle Percentage of the
aggregate Net Book Value of all Program Vehicles leased under the AESOP I
Operating Lease on such date and the denominator of which is the sum of (i) the
aggregate Net Book Value of all Vehicles leased under the Finance Lease, (ii)
the aggregate Net Book Value of all Vehicles leased under the AESOP II
Operating Lease and (iii) the Series 1997-2 AESOP I Operating Lease Vehicle
Percentage of the aggregate Net Book Value of all Vehicles leased under the
AESOP I Operating Lease on such date.
"Series 1997-2 Rapid Amortization Period" means the period
beginning at the close of business on the Business Day immediately preceding
the day on which an Amortization Event is deemed to have occurred with respect
to the Series 1997-2 Notes and ending upon the date on which the Series 1997-2
Notes are fully paid.
"Series 1997-2 Repurchase Amount" has the meaning specified
in Article 7 of this Supplement.
"Series 1997-2 Required AESOP I Operating Lease Vehicle
Amount" means, as of any date of determination, the excess, if any, of the
Series 1997-2 Invested Amount over the sum of the AESOP I Finance Lease Loan
Agreement Borrowing Base and the AESOP II Loan Agreement Borrowing Base as of
such date.
"Series 1997-2 Required Enhancement Amount" means, (i) as of
any date of determination prior to the occurrence of a CP Amortization Event,
the sum of (a) product of the Series 1997-2 Required Enhancement Percentage as
of such date and the Series 1997-2 Invested Amount as of such date, (b) the
Series 1997-2 Percentage of the excess, if any, of the Non-Program Vehicle
Amount as of such date over the Series 1997-2 Maximum Non-Program Vehicle
Amount as of such date, (c) the Series 1997-2 Percentage of the excess, if
any, of the Non-Eligible Manufacturer Amount as of such date over the Series
1997-2 Maximum Non-Eligible Manufacturer Amount as of such date, (d) the
Series 1997-2 Percentage of the excess, if any, of the aggregate Net Book Value
of all Vehicles manufactured by Mitsubishi and leased under the Leases as of
such date over the Series 1997-2 Maximum Mitsubishi Amount as of such date, (e)
the Series 1997-2 Percentage
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<PAGE>
of the excess, if any, of the aggregate Net Book Value of all Vehicles
manufactured by Subaru, Hyundai or Suzuki, individually, and leased under the
Leases as of such date over the Series 1997-2 Maximum Individual
Subaru/Hyundai/Suzuki Amount as of such date, (f) the Series 1997-2 Percentage
of the excess, if any, of the aggregate Net Book Value of all Vehicles
manufactured by Subaru, Hyundai or Suzuki, in the aggregate, and leased under
the Leases as of such date over the Series 1997-2 Maximum Aggregate
Subaru/Hyundai/Suzuki Amount as of such date, (g) the excess, if any, of the
Financed Vehicle Amount as of such date over the Series 1997-2 Maximum Financed
Vehicle Amount as of such date, (h) the Series 1997-2 Percentage of the excess,
if any, of the aggregate Net Book Value of all Vehicles manufactured by Mazda
and leased under the Leases as of such date over the Series 1997-2 Maximum
Mazda Amount as of such date and (i) the Series 1997-2 Percentage of the
excess, if any, of the Specified States Amount as of such date over the Series
1997-2 Maximum Specified States Amount as of such date, and (ii) as of any date
of determination on and after the occurrence of a CP Amortization Event, the
amount described in clause (i) that shall have been in effect on the day
immediately preceding the occurrence of such CP Amortization Event.
"Series 1997-2 Required Enhancement Percentage" means, as of
any date of determination, a fraction, expressed as a percentage, the numerator
of which is the sum of (i) the product of (A) 9.50% (or such other percentage
as shall be required by the Rating Agencies to maintain the then current rating
(but not less than A-2 by Standard & Poor's and not less than P-2 by Moody's)
on the Commercial Paper Notes) times (B) the Series 1997-2 Program Vehicle
Percentage as of such date and (ii) the product of (A) the Series 1997-2
Required Non-Program Enhancement Percentage as of such date (or such other
percentage as shall be required by the Rating Agencies to maintain the then
current rating (but not less than A-2 by Standard & Poor's and not less than
P-2 by Moody's) on the Commercial Paper Notes) times (B) the Series 1997-2
Non-Program Vehicle Percentage as of such date.
"Series 1997-2 Required Non-Program Enhancement Percentage"
means, as of any date of determination, the greater of (a) 14.5% and (b) the
sum of (i) 14.5% and (ii) the sum, for each calendar month within the preced-
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ing twelve calendar months (or such fewer number of calendar months as have
elapsed since the Series 1997-2 Closing Date), of the greater of (x) an amount
(not less than zero) equal to 100% minus the Measurement Month Average for the
immediately preceding Measurement Month and (y) an amount (not less than zero)
equal to 100% minus the Market Value Average as of the Determination Date
within such calendar month (excluding the Market Value Average for any
Determination Date which has not yet occurred).
"Series 1997-2 Revolving Period" means the period from and
including the Series 1997-2 Closing Date to the commencement of the Series
1997-2 Rapid Amortization Period.
"Series 1997-2 Termination Date" means the Scheduled
Liquidity Commitment Termination Date.
"Shortfall" means (a) if a Borrowing Request is submitted for
Revolving Advances, the aggregate amount of the proposed Borrowing requested
with respect thereto in such Borrowing Request; provided, however, that such
Shortfall shall not exceed the aggregate principal amount of Series 1997-2
Notes to be purchased by AFC on the date such Borrowing is to be made; or (b)
if a Borrowing Request is submitted for Refunding Advances, the aggregate
amount of the proposed Borrowing requested with respect thereto in such
Borrowing Request; provided, however, that such Shortfall shall not exceed the
Commercial Paper Deficit on the date such Borrowing is to be made.
"Statutory Reserve Rate" means, with respect to any Liquidity
Advance Interest Period and any Liquidity Lender, a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentage
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the F.R.S. Board to which such Liquidity Lender is
subject for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the F.R.S. Board). Such reserve percentage
shall include that imposed pursuant to such Regulation D. The Statutory Reserve
Rate shall be adjusted automatically on
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and as of the effective date of any change in any reserve percentage.
"Supplement" has the meaning set forth in the preamble.
"Swing Line Advance" means any Refunding Advance made
pursuant to Section 3.1.3 of the Liquidity Agreement by _______________ in its
capacity as Swing Line Lender (or any successor thereto in such capacity).
"Swing Line Lender" means _______________, in its capacity as
swing line lender, or any successor thereto in such capacity.
"Telerate Page 3750" means the display page currently so
designated on the Dow Jones Telerate Service (or any successor or substitute
page of such Service, or any successor to or substitute for such Service,
providing rate quotations comparable to those currently provided on such page
of such Service, as determined by the Administrative Agent from time to time
for purposes of providing quotations of interest rates applicable to dollar
deposits in the London interbank market).
"Type" means, relative to any Liquidity Advance under the
Liquidity Agreement, the portion thereof, if any, being maintained as a Base
Rate Advance or a LIBOR Advance.
"Variable Funding Note" has the meaning specified in Section
6.1 of this Supplement.
"Waiver Event" means the occurrence of the delivery of a
Waiver Request and the subsequent waiver of any Series 1997-2 Maximum Amount.
"Waiver Request" has the meaning specified in
Article 5 of this Supplement.
ARTICLE II
INITIAL ISSUANCE AND INCREASES AND DECREASES OF
PRINCIPAL AMOUNT OF SERIES 1997-2 NOTES
Section 2.1 Procedure for Increasing the Series 1997-2
Invested Amount. (a) Subject to satisfac-
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tion of the conditions precedent set forth in subsection (b) of this Section
2.1, (i) on the Series 1997-2 Closing Date, AFC-II may issue Series 1997-2
Notes in the initial principal amount equal to (x) the Aggregate Outstandings
on the Series 1997-2 Closing Date, which Series 1997-2 Notes shall be issued to
AFC (and pledged to the Collateral Agent pursuant to the Collateral Agreement)
in consideration for AFC releasing its lien on the Assigned Collateral (as
defined in the 1996 Liquidity Agreement) plus (y) the Series 1997-2 Initial
Invested Amount less the initial principal amount of the Series 1997-2 Notes
referred to in clause (x) above, and (ii) on any Business Day during the Series
1997-2 Revolving Period, AFC-II may, upon request by a Borrower under any Loan
Agreement and upon receipt of confirmation from AFC of its ability to issue
Commercial Paper Notes in an amount equal to such Increase (as defined below),
increase the Series 1997-2 Invested Amount (each such increase referred to as
an "Increase") by issuing, at par, additional principal amounts of the Series
1997-2 Notes. Proceeds from any Increase shall be deposited into the Collection
Account and allocated in accordance with Article III hereof. Upon each
Increase, the Trustee shall, or shall cause the Note Registrar to, indicate in
the Note Register such Increase.
(b) The initial Series 1997-2 Notes may be issued on the
Series 1997-2 Closing Date and the Series 1997-2 Invested Amount may be
increased on any Business Day during the Series 1997-2 Revolving Period, in
each case pursuant to subsection (a) above, only upon satisfaction of each of
the following conditions with respect to such initial issuance and each
proposed Increase:
(i) The amount of such issuance or Increase shall be equal to
or greater than $200,000;
(ii) After giving effect to such issuance or Increase, the
Series 1997-2 Invested Amount shall not exceed the Series 1997-2
Maximum Invested
Amount;
(iii) After giving effect to such issuance or Increase, no
AESOP I Operating Lease Vehicle Deficiency shall exist;
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(iv) Such issuance or Increase shall not result in the
occurrence of (1) an Amortization Event, a Liquidation Event of
Default or a Series 1997-2 Limited Liquidation Event of Default, or
(2) an event or occurrence, which, with the passing of time or the
giving of notice thereof, or both, would become an Amortization Event,
a Liquidation Event of Default or a Series 1997-2 Limited Liquidation
Event of Default;
(v) (1) All conditions precedent to the making of any Loans
under the applicable Loan Agreements have been satisfied, (2) to the
extent any portion of such Increase will be funded by AFC with the
proceeds of the issuance of Commercial Paper Notes, all conditions
precedent to the issuance of Commercial Paper Notes under the
Depositary Agreement and the Liquidity Agreement have been satisfied
and (3) to the extent any portion of such Increase will be funded by
AFC with the proceeds of Liquidity Advances, all conditions precedent
to the making of such Liquidity Advances under the Liquidity Agreement
have been satisfied;
(vi) Each Borrower (or ARAC in the case of Financed Vehicles)
shall have good and marketable title to each Vehicle purchased or
financed by such Borrower with the proceeds of Loans, free and clear
of all Liens and encumbrances, other than any Permitted Liens. Each
Manufacturer Program shall be in full force and effect, and shall be
enforceable against the related Manufacturer;
(vii) Each Borrower shall have granted to AFCII, and AFC-II
shall have granted to the Trustee, a first priority security interest
in all Vehicles now or hereafter leased by such Borrower;
(viii) Each Borrower shall have granted to AFC-II, and AFC-II
shall have granted to the Trustee, a first priority security interest
in its right, title and interest in and to the Leases or Leases to
which it is party;
(ix) AFC-II shall have granted to the Trustee a first
priority security interest in its right, title and interest in and to
the Loan Collateral;
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(x) The Trustee shall have received executed counterparts of
the Assignment Agreements related to the assignment of rights under
each Manufacturer Program under which Program Vehicles will be or have
been purchased and are proposed to be included in the initial
Aggregate Asset Amount, dated as of the Initial Closing Date (or, if
later, the date on which such Manufacturer Program becomes an Eligible
Manufacturer Program), duly executed thereby and by each Lessee, the
Borrowers, AFC-II and each applicable Manufacturer;
(xi) The Trustee shall have received from the Borrowers a
copy of each Manufacturer Program under which Program Vehicles will be
or have been purchased and are proposed to be included in the initial
Aggregate Asset Amount and an Officer's Certificate, dated the Initial
Closing Date (or, if later, the date on which such Manufacturer
Program becomes an Eligible Manufacturer Program), and duly executed
by an Authorized Officer of each of the Borrowers certifying that each
such copy is true, correct and complete as of the Initial Closing Date
(or, if later, the date on which such Manufacturer Program becomes an
Eligible Manufacturer Program);
(xii) The Trustee shall have received evidence (which, in the
case of the filing of financing statements on form UCC-1, may be
telephonic confirmation of such filing, followed by prompt written
confirmation) that AFC-II has caused or is causing the Trustee's name
to be noted on each Vehicle's Certificate of Title (other than
Certificates of Title with respect to Initial PVT Vehicles and
Vehicles titled in the States of Ohio, Oklahoma or Nebraska) in
accordance with the Loan Agreements and all filings (including filings
of financing statements on form UCC-1) and recordings have been
accomplished as may be required by law to establish, perfect, protect
and preserve the rights, titles, interests, remedies, powers,
privileges, licenses and security interest of the Trustee in such
Vehicles and other Collateral for the benefit of the Secured Parties
(except, as to perfection, with respect to Vehicles titled in the
States of Nebraska, Ohio and Oklahoma);
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(xiii) The Administration Agreement and the Termination
Services Agreement shall have been duly executed by the parties
thereto.
(xiv) Notice of such Increase shall have been delivered to
the Collateral Agent and the CP Secured Parties;
(xv) all representations and warranties set forth in Section
8 of the applicable Loan Agreement shall be true and correct; and
(xvi) (1) on the Initial Closing Date, each Borrower shall
have delivered to the Trustee the original of each of its Loan Notes
and original Counterpart No. 1 of each of the Leases to which it is a
party (as set forth on the cover page and signature page of each
Lease) and (2) on the date of any Increase the Trustee shall have in
its possession the original of each of the Loan Notes and original
Counterpart No. 1 of each of the Leases (as set forth on the cover
page and signature page of each Lease).
Section 2.2 Procedure for Decreasing the Series 1997-2
Invested Amount. On any Business Day, AFC-II may, upon request by either
Borrower and upon one (1) Business Day's prior written notice to the Trustee,
decrease the Series 1997-2 Invested Amount (each such decrease referred to as a
"Decrease") by withdrawing from the Series 1997-2 Collection Account and
depositing into the Series 1997-2 Distribution Account, and distributing to the
Series 1997-2 Noteholders in respect of principal on the Series 1997-2 Notes,
an amount equal to the amount of such Decrease in accordance with Section
3.5(b) and 3.5(c). Upon each Decrease, the Trustee shall, or shall cause the
Note Registrar to indicate in the Note Register such Decrease. The amount of
any Decrease shall not exceed the amount on deposit in the Series 1997-2
Collection Account and available for distribution to Series 1997-2 Noteholders
in respect of principal on the Series 1997-2 Notes.
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ARTICLE III
SERIES 1997-2 ALLOCATIONS
With respect to the Series 1997-2 Notes only, the following
shall apply:
Section 3.1 Establishment of Series 1997-2 Collection Account
and Series 1997-2 Accrued Interest Account.
(a) All Collections allocable to the Series 1997-2 Notes
shall be allocated to the Collection Account.
(b) The Trustee will create two administrative subaccounts
within the Collection Account for the benefit of the Series 1997-2 Noteholders:
the Series 1997-2 Collection Account (such sub-account, the "Series 1997-2
Collection Account") and the Series 1997-2 Accrued Interest Account (such
sub-account, the "Series 1997-2 Accrued Interest Account").
Section 3.2 Allocations with Respect to the Series 1997-2
Notes. The proceeds from the initial sale (or the initial Increase, as
applicable) of the Series 1997-2 Notes will be deposited into the Collection
Account. On each Business Day on which proceeds from any Increase or
Collections are deposited into the Collection Account (each such date, a
"Series 1997-2 Deposit Date"), the Administrator will direct the Trustee in
writing pursuant to the Administration Agreement to allocate all amounts
deposited into the Collection Account in accordance with the provisions of this
Section 3.2:
(a) Allocations of Collections During the Series 1997-2
Revolving Period. During the Series 1997-2 Revolving Period, the Administrator
will direct the Trustee in writing pursuant to the Administration Agreement to
allocate on each day, prior to 11:00 a.m. (New York City time) on each Series
1997-2 Deposit Date, all amounts deposited into the Collection Account as set
forth below:
(i) allocate to the Series 1997-2 Collection Account an
amount equal to the Series 1997-2 Invested Percentage (as of such day)
of the aggregate
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amount of Interest Collections on such day. All such amounts allocated
to the Series 1997-2 Collection Account shall be further allocated to
the Series 1997-2 Accrued Interest Account; and
(ii) allocate to the Series 1997-2 Collection Account an
amount equal to the sum of (A) the Series 1997-2 Invested Percentage
(as of such day) of the aggregate amount of Principal Collections on
such day (for any such day, the "Series 1997-2 Principal Allocation")
plus (B) the proceeds from any Increase, which may be used by AFC-II
to make Loans under the Loan Agreements; provided however, if a Waiver
Event shall have occurred, then such allocation shall be modified as
provided in Article 5 of this Supplement.
(b) Allocations of Collections During the Series 1997-2 Rapid
Amortization Period. With respect to the Series 1997-2 Rapid Amortization
Period, other than after the occurrence of an Event of Bankruptcy with respect
to ARAC, any other Lessee or ARC, the Administrator will direct the Trustee in
writing pursuant to the Administration Agreement to allocate, prior to 11:00
a.m. (New York City time) on any Series 1997-2 Deposit Date, all amounts
deposited into the Collection Account as set forth below:
(i) allocate to the Series 1997-2 Collection Account an
amount determined as set forth in Section 3.2(a)(i) above for such
day, which amount shall be further allocated to the Series 1997-2
Accrued Interest Account; and
(ii) allocate to the Series 1997-2 Collection Account an
amount equal to the Series 1997-2 Principal Allocation for such day,
which amount shall be used to make principal payments in respect of
the Series 1997-2 Notes until the Series 1997-2 Notes
have been paid in full.
(c) Allocations of Collections after the occurrence of an
Event of Bankruptcy. After the occurrence of an Event of Bankruptcy with
respect to ARAC, any other Lessee or ARC, the Administrator will direct the
Trustee in writing pursuant to the Administration Agreement to allocate,
prior to 11:00 a.m. (New York City
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time) on any Series 1997-2 Deposit Date, all amounts deposited into the
Collection Account as set forth below:
(i) allocate to the Series 1997-2 Collection Account
an amount equal to the sum of (A) the Series 1997-2 AESOP I
Operating Lease Vehicle Percentage as of the date of the
occurrence of such Event of Bankruptcy of the aggregate
amount of Interest Collections made under the AESOP I
Operating Lease Loan Agreement, (B) the aggregate amount of
Interest Collections made under the AESOP I Finance Lease
Loan Agreement and (C) the aggregate amount of Interest
Collections made under the AESOP II Loan Agreement. All such
amounts allocated to the Series 1997-2 Collection Account
shall be further allocated to the Series 1997-2 Accrued
Interest Account;
(ii) allocate to the Series 1997-2 Collection
Account an amount equal to the sum of (A) the Series 1997-2
AESOP I Operating Lease Vehicle Percentage as of the date of
the occurrence of such Event of Bankruptcy of the aggregate
amount of Principal Collections made under the AESOP I
Operating Lease Loan Agreement, (B) the aggregate amount of
Principal Collections made under the AESOP I Finance Lease
Loan Agreement and (C) the aggregate amount of Principal
Collections made under the AESOP II Loan Agreement, which
amount shall be used to make principal payments in respect of
the Series 1997-2 Notes until the Series 1997-2 Notes have
been paid in full.
(d) Allocation Adjustments. Notwithstanding the foregoing
provisions of this Section 3.2, amounts allocated to the Series 1997-2
Collection Account that are not required to make payments under the Series
1997-2 Notes will be (x) first, used to pay the principal amount of other
Series of Notes that are then in amortization, (y) second, released to AESOP
Leasing in an amount equal to the product of (A) the amount of any remaining
funds times (B) the Loan Agreement's Share with respect to the AESOP I
Operating Lease Loan Agreement as of such date times (C) 100% minus the Loan
Payment Allocation Percentage with respect to the AESOP I Operating Lease Loan
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Agreement as of such date and (z) third, paid to AFC-II and used to make Loans
under the Loan Agreements to the extent the Borrowers have requested Loans
thereunder, Eligible Vehicles are available for financing thereunder and no
Series 1997-2 Enhancement Deficiency or AESOP I Operating Lease Vehicle
Deficiency would result therefrom.
Section 3.3 Payments To Noteholders.
On each Determination Date, as provided below, the
Administrator shall instruct the Paying Agent in writing pursuant to the
Administration Agreement to withdraw, and on the following Distribution Date
the Paying Agent, acting in accordance with such instructions, shall withdraw
the amounts required to be withdrawn from the Collection Account pursuant to
Sections 3.3(a) and (b) below in respect of all funds available from Interest
Collections processed since the preceding Distribution Date and allocated to
the holders of the Series 1997-2 Notes.
(a) Note Interest with respect to the Series 1997-2 Notes. On
each Determination Date, the Administrator shall instruct the Trustee and the
Paying Agent in writing pursuant to the Administration Agreement as to the
amount to be withdrawn and paid pursuant to Section 3.4 of this Supplement from
the Series 1997-2 Accrued Interest Account to the extent funds are anticipated
to be available from Interest Collections allocable to the Series 1997-2 Notes
processed from but not including the preceding Distribution Date through the
succeeding Distribution Date in respect of (x) first, an amount equal to
interest accrued during the Series 1997-2 Interest Period ending on the day
preceding such Distribution Date which will be equal to the product of (i) the
Series 1997-2 Note Rate for such Series 1997-2 Interest Period, (ii) the
average daily Series 1997-2 Invested Amount during such Series 1997-2 Interest
Period, and (iii) the actual number of days elapsed in such Series 1997-2
Interest Period divided by 360, and (y) then, an amount equal to the amount of
any unpaid Deficiency Amounts, as of the preceding Distribution Date (together
with any accrued interest on such Deficiency Amounts). If the amounts described
in this Section 3.3(a) are insufficient, after taking into account any portion
of the Series 1997-2 Letter of Credit Amount, Exit Loan Funding
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Account or Series 1997-2 Cash Collateral Account applied pursuant to Section
3.7 or Section 3.8 of this Supplement, to pay such interest on any Distribution
Date, payments of interest to the Series 1997-2 Noteholders will be reduced by
the amount of such deficiency. The amount, if any, of such deficiency on any
Distribution Date shall be referred to as the "Deficiency Amount." Interest
shall accrue on the Deficiency Amount at the Series 1997-2 Note Rate. On the
following Distribution Date, the Trustee shall withdraw the accrued interest on
the Series 1997-2 Notes (as determined above) and the Deficiency Amount
(together with accrued interest thereon) from the Series 1997-2 Accrued
Interest Account and deposit such amounts in the Series 1997-2 Distribution
Account.
(b) Balance. On each Distribution Date, the Administrator
shall instruct the Trustee and the Paying Agent in writing pursuant to the
Administration Agreement to pay the balance (after making the payments required
in Section 3.3(a) of this Supplement), if any, of the Interest Collections
allocated to holders of the Series 1997-2 Notes since the preceding
Distribution Date as follows:
(i) on each Distribution Date during the Series 1997-2
Revolving Period, (1) first, to the Administrator, in an amount equal
to the Series 1997-2 Percentage as of the beginning of such Series
1997-2 Interest Period of AFC-II's portion of the Monthly
Administration Fee (as specified in clause (iii) of the definition
thereof) for such Series 1997-2 Interest Period, (2) second, to the
Trustee, in an amount equal to the Series 1997-2 Percentage as of the
beginning of such Series 1997-2 Interest Period of the Trustee's fees
for such Series 1997-2 Interest Period, (3) third, to pay any Carrying
Charges (other than Carrying Charges provided for above) to the
Persons to whom such amounts are owed, in an amount equal to the
Series 1997-2 Percentage as of the beginning of such Series 1997-2
Interest Period of such Carrying Charges (other than Carrying Charges
provided for above) for such Series 1997-2 Interest Period and (4)
fourth, the balance, if any ("Excess Collections"), shall be withdrawn
by the Paying Agent from the Series 1997-2 Collection Account and a
portion of such balance equal to the product of (A) the Loan
Agreement's Share with re-
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spect to the AESOP I Operating Lease Loan Agreement as of such date
times (B) 100% minus the Loan Payment Allocation Percentage with
respect to the AESOP I Operating Lease Loan Agreement as of such date
times (C) the amount of such balance, shall be paid to AESOP Leasing,
and the remaining portion of such balance shall be paid to AFC-II and
used to make Loans under the Loan Agreements to the extent the
Borrowers have requested Loans thereunder and Eligible Vehicles are
available for financing thereunder and no Series 1997-2 Enhancement
Deficiency or AESOP I Operating Lease Vehicle Deficiency would result
therefrom; and
(ii) on each Distribution Date during the Series 1997-2 Rapid
Amortization Period, (1) first, to the Trustee, an amount equal to the
Series 1997-2 Percentage as of the beginning of such Series 1997-2
Interest Period of the Trustee's fees for such Series 1997-2 Interest
Period, (2) second, to the Administrator, an amount equal to the
Series 1997-2 Percentage as of the beginning of such Series 1997-2
Interest Period of AFC-II's portion of the Monthly Administration Fee
(as specified in clause (iii) of the definition thereof) for such
Series 1997-2 Interest Period, (3) third, to pay any Carrying Charges
(other than Carrying Charges provided for above) to the Persons to
whom such amounts are owed, an amount equal to the Series 1997-2
Percentage as of the beginning of such Series 1997-2 Interest Period
of such Carrying Charges (other than Carrying Charges provided for
above) for such Series 1997-2 Interest Period and (4) fourth, the
balance, if any, shall constitute Excess Collections and shall be
withdrawn by the Paying Agent from the Series 1997-2 Collection
Account and distributed in accordance with clause (4) of Section
3.3(b)(i) above.
Section 3.4 Payment of Note Interest.
On each Distribution Date, subject to Section 9.8 of the Base
Indenture, the Paying Agent shall, in accordance with Section 6.1 of the Base
Indenture, pay to the Series 1997-2 Noteholders from the Series 1997-2
Distribution Account the amount deposited in the Series 1997-2 Distribution
Account for the payment of interest pursuant to Section 3.3(a) of this
Supplement and, to the
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extent necessary to pay interest on the Series 1997-2 Notes, amounts drawn on
the Series 1997-2 Letter of Credit pursuant to Section 3.7 or 3.8.
Section 3.5 Payment of Note Principal.
(a) Monthly Payments During Rapid Amortization Period. (i)
Subject to subsection (b) below, commencing on the first Determination Date
after the commencement of the Series 1997-2 Rapid Amortization Period, the
Administrator shall instruct the Trustee and the Paying Agent in writing
pursuant to the Administration Agreement as to the amount allocated to the
Series 1997-2 Notes during the Related Month pursuant to Section 3.2(b)(ii) or
(c)(ii) of this Supplement. Commencing on the first Distribution Date after the
commencement of the Series 1997-2 Rapid Amortization Period the Trustee shall
withdraw such amount from the Series 1997-2 Collection Account and deposit such
amount in the Series 1997-2 Distribution Account, to be paid to the holders of
the Series 1997-2 Notes; provided, however, that with respect to the final
Distribution Date, the Trustee shall withdraw from the Series 1997-2 Collection
Account an amount which is no greater than the Series 1997-2 Invested Amount as
of the end of the day on the immediately preceding day. The entire principal
amount of all Outstanding Series 1997-2 Notes shall be due and payable on the
Series 1997-2 Termination Date.
(ii) Subject to subsection (b) below, on each Distribution
Date occurring on or after the date a withdrawal is made pursuant to
Section 3.5(a) of this Supplement, the Paying Agent shall, in
accordance with Section 6.1 of the Base Indenture, pay to the Series
1997-2 Noteholders the amount deposited in the Series 1997-2
Distribution Account for the payment of principal pursuant to Section
3.5(a)(i) of this Supplement and, to the extent necessary to pay the
Series 1997-2 Invested Amount, amounts drawn on the Series 1997-2
Letter of Credit pursuant to Section 3.7 or 3.8.
(b) Decreases. (i) On any Business Day during the Series
1997-2 Revolving Period on which a Decrease pursuant to Section 2.2 shall be
declared, the Trustee shall withdraw from the Series 1997-2 Collection Account
in accordance with the written instructions of the Admin-
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istrator an amount equal to the lesser of (i) the sum of (A) all Series 1997-2
Principal Allocations for the Related Month plus (B) any other funds on deposit
in the Series 1997-2 Collection Account (excluding any Interest Collections but
including proceeds from any Increase) and (ii) the amount of such Decrease, and
deposit such amount in the Series 1997-2 Distribution Account, to be paid to
the Series 1997-2 Noteholders.
(ii) On each Business Day occurring on or after the date a
withdrawal is made pursuant to Section 3.5(b)(i) of this Supplement,
the Paying Agent shall, in accordance with Section 6.1 of the Base
Indenture, pay to the Series 1997-2 Noteholders the amount deposited
in the Series 1997-2 Distribution Account for the payment of principal
pursuant to Section 3.5(b)(i) of this Supplement.
Section 3.6 The Administrator's Failure to Instruct the
Trustee to Make a Deposit or Payment.
If the Administrator fails to give notice or instructions to
make any payment from or deposit into the Collection Account required to be
given by the Administrator, at the time specified in the Administration
Agreement or any other Related Document (including applicable grace periods),
the Trustee shall make such payment or deposit into or from the Collection
Account without such notice or instruction from the Administrator, provided
that the Administrator, upon request of the Trustee, promptly provides the
Trustee with all information necessary to allow the Trustee to make such a
payment or deposit. When any payment or deposit hereunder or under any other
Related Document is required to be made by the Trustee or the Paying Agent at
or prior to a specified time, the Administrator shall deliver any applicable
written instructions with respect thereto reasonably in advance of such
specified time.
Section 3.7 Credit Demand on Series 1997-2 Letter of Credit.
(a) At or before 11:15 a.m. (New York City time) on each
Distribution Date, the Administrator shall notify the Trustee pursuant to the
Administration Agreement (with confirmation thereof by telephone) of the amount
of the Series 1997-2 Lease Payment Deficit with
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respect to such Distribution Date, such notification to be in the form of
Exhibit C to each of the Loan Agreements.
(b) Subject to Section 3.8, on any Business Day that a Series
1997-2 Lease Payment Deficit exists, the Trustee shall, by 11:00 a.m. (New York
City time) on the same Business Day, draw on the Series 1997-2 Letter of Credit
by presenting a draft in the amount of such Series 1997-2 Lease Payment Deficit
accompanied by a Certificate of Credit Demand in the form of Annex A to the
Series 1997-2 Letter of Credit. The proceeds of such draw shall be deposited in
the Series 1997-2 Collection Account. The Trustee shall provide written notice
to each Borrower, each Lessee, ARC, each Rating Agency and the Collateral Agent
of such draw.
Section 3.8 Series 1997-2 Cash Collateral Account; Exit Loan
Funding Account.
(a) When established, the Series 1997-2 Cash Collateral
Account is intended to function in all respects as the replacement for, and the
equivalent of, the Series 1997-2 Letter of Credit. Accordingly, following its
creation, each reference to a draw on the Series 1997-2 Letter of Credit shall
refer to withdrawals from the Series 1997-2 Cash Collateral Account and
references to similar terms shall mean and be a reference to actions taken with
respect to the Series 1997-2 Cash Collateral Account that correspond to actions
that otherwise would have been taken with respect to the Series 1997-2 Letter
of Credit. Without limiting the generality of the foregoing, upon funding of
the Series 1997-2 Cash Collateral Account, the Trustee shall, at all times when
otherwise required to make a draw under the Series 1997-2 Letter of Credit
pursuant to Sections 3.7 of this Supplement, make a draw from the Series 1997-2
Cash Collateral Account in the amount and at such time as a draw would be made
under the Series 1997-2 Letter of Credit pursuant to Sections 3.7 of this
Supplement. The Trustee shall provide written notice to each Borrower, each
Lessee, ARC, each Rating Agency and the Collateral Agent of any draw from the
Series 1997-2 Cash Collateral Account pursuant to Sections 3.7 of this
Supplement.
(b) When established, the Exit Loan Funding Account is
intended to function in all respects as the
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replacement for, and the equivalent of, the portion of the Series 1997-2 Letter
of Credit that was reduced in connection with the funding of the Exit Loan
Funding Account. Accordingly, following its creation, each reference herein to
a draw under the Series 1997-2 Letter of Credit shall mean and be a reference
to actions taken with respect to both the Series 1997-2 Letter of Credit and
the Exit Loan Funding Account that correspond to actions that otherwise would
have been taken only with respect to the Series 1997-2 Letter of Credit.
Without limiting the generality of the foregoing, upon funding of the Exit Loan
Funding Account, the Trustee shall, at all times when otherwise required to
make a draw under the Series 1997-2 Letter of Credit pursuant to Section 3.7,
make a draw on the Series 1997-2 Letter of Credit and a withdrawal from the
Exit Loan Funding Account on a pro rata basis in the amount and at such time as
a draw would have been made under the Series 1997-2 Letter of Credit pursuant
to Section 3.7.
(c) In order to secure and provide for the repayment and
payment of the AFC-II Obligations with respect to the Series 1997-2 Notes (but
not the other Notes), AFC-II hereby grants a security interest in and assigns,
pledges, grants, transfers and sets over to the Trustee, for the benefit of the
Series 1997-2 Noteholders, all of AFC-II's right, title and interest in and to
the following (whether now or hereafter existing or acquired): (i) the Series
1997-2 Cash Collateral Account and the Exit Loan Funding Account, including any
security entitlement thereto; (ii) all funds on deposit therein from time to
time; (iii) all certificates and instruments, if any, representing or
evidencing any or all of the Series 1997-2 Cash Collateral Account, the Exit
Loan Funding Account or the funds on deposit therein from time to time; (iv)
all investments made at any time and from time to time with the monies in the
Series 1997-2 Cash Collateral Account and the Exit Loan Funding Account,
whether constituting securities, instruments, general intangibles, investment
property, financial assets or other property; (v) all interest, dividends,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for the Series 1997-2 Cash
Collateral Account, the Exit Loan Funding Account, the funds on deposit therein
from time to time or the investments made with such funds; and (vi) all
proceeds of any and all of
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the foregoing, including, without limitation, cash. Subject to the rights of
the Collateral Agent therein, the Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Series 1997-2 Cash
Collateral Account, the Exit Loan Funding Account and in all proceeds thereof,
and shall be the only person authorized to originate entitlement orders in
respect of the Series 1997-2 Cash Collateral Account and the Exit Loan Funding
Account. The Series 1997-2 Cash Collateral Account and the Exit Loan Funding
Account shall be under the sole dominion and control of the Trustee for the
benefit of the Series 1997-2 Noteholders and the Series 1997-2 Enhancement
Provider, as their interests appear herein and in the Collateral Agreement,
which interest in the case of the Series 1997-2 Enhancement Provider shall be
subject to the interests of the holders of Series 1997-2 Notes as provided
herein.
(d) Series 1997-2 Account Surplus. In the event that the
Series 1997-2 Account Surplus on any Distribution Date, after giving effect to
all withdrawals from the Series 1997-2 Cash Collateral Account or the Exit Loan
Funding Account, as applicable, is greater than zero, the Trustee, acting in
accordance with the written instructions of the Administrator pursuant to the
Administration Agreement, shall withdraw from the Series 1997-2 Cash Collateral
Account or the Exit Loan Funding Account, as applicable, an amount equal to the
Series 1997-2 Account Surplus and shall pay such amount to the LOC Agent to the
extent of unreimbursed draws on the Series 1997-2 Letter of Credit or any Exit
Loans outstanding and, otherwise, to ARAC.
(e) Termination of Series 1997-2 Cash Collateral Account and
Exit Loan Funding Account. Upon the later to occur of (i) the termination of
the Indenture pursuant to Section 11.1 of the Base Indenture and (ii) the
Business Day immediately following the Series 1997-2 Letter of Credit
Expiration Date, the Trustee, acting in accordance with the written
instructions of the Administrator, after the prior payment of all amounts owing
to the Series 1997-2 Noteholders and payable from the Series 1997-2 Cash
Collateral Account or the Exit Loan Funding Account, as provided herein, shall
withdraw from the Series 1997-2 Cash Collateral Account or the Exit Loan
Funding Account, as applicable, all amounts on deposit therein for payment to
the LOC Agent to the extent of
52
<PAGE>
unreimbursed draws on the Series 1997-2 Letter of Credit or any Exit Loans
outstanding and, otherwise, to ARAC.
Section 3.9 [RESERVED]
Section 3.10 Series 1997-2 Distribution Account.
(a) Establishment of Series 1997-2 Distribution Account. The
Trustee shall establish and maintain in the name of the Trustee for the benefit
of the Series 1997-2 Noteholders, or cause to be established and maintained, an
account (the "Series 1997-2 Distribution Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Series 1997-2 Noteholders. The Series 1997-2 Distribution Account shall be
maintained (i) with a Qualified Institution, or (ii) as a segregated trust
account with the corporate trust department of a depository institution or
trust company having corporate trust powers and acting as trustee for funds
deposited in the Series 1997-2 Distribution Account; provided that, if at any
time such Qualified Institution is no longer a Qualifed Institution or the
credit rating of any securities issued by such depositary institution or trust
company shall be reduced to below BBB- by S&P or Baa3 by Moody's, then AFC-II
shall, within 30 days of such reduction, establish a new Series 1997-2
Distribution Account with a new Qualified Institution. If the Series 1997-2
Distribution Account is not maintained in accordance with the previous
sentence, AFC-II shall establish a new Series 1997-2 Distribution Account,
within ten (10) Business Days after obtaining knowledge of such fact, which
complies with such sentence, and shall instruct the Trustee in writing to
transfer all cash and investments from the non-qualifying Series 1997-2
Distribution Account into the new Series 1997-2 Distribution Account.
Initially, the Series 1997-2 Distribution Account will be established with
Harris Trust and Savings Bank.
(b) Administration of the Series 1997-2 Distribution Account.
The Administrator may instruct the institution maintaining the Series 1997-2
Distribution Account in writing to invest funds on deposit in the Series 1997-2
Distribution Account from time to time in Eligible Investments; provided,
however, that any such investment shall mature not later than the Business Day
53
<PAGE>
prior to the Distribution Date following the date on which such funds were
received, unless any Eligible Investment held in the Series 1997-2 Distribution
Account is held with the Paying Agent, then such investment may mature on such
Distribution Date and such funds shall be available for withdrawal on or prior
to such Distribution Date. All such Permitted Investments will be credited to
the Series 1997-2 Distribution Account.
(c) Earnings from Series 1997-2 Distribution Account. All
interest and earnings (net of losses and investment expenses) paid on funds on
deposit in the Series 1997-2 Distribution Account shall be deemed to be on
deposit and available for distribution.
(d) Series 1997-2 Distribution Account Constitutes Additional
Collateral for Series 1997-2 Notes. In order to secure and provide for the
repayment and payment of the AFC-II Obligations with respect to the Series
1997-2 Notes, AFC-II hereby grants a security interest in and assigns, pledges,
grants, transfers and sets over to the Trustee, for the benefit of the Series
1997-2 Noteholders, all of AFC-II's right, title and interest in and to the
following (whether now or hereafter existing or acquired): (i) the Series
1997-2 Distribution Account, including any security entitlement thereto; (ii)
all funds on deposit therein from time to time; (iii) all certificates and
instruments, if any, representing or evidencing any or all of the Series 1997-2
Distribution Account or the funds on deposit therein from time to time; (iv)
all investments made at any time and from time to time with monies in the
Series 1997-2 Distribution Account, whether constituting securities,
instruments, general intangibles, investment property, financial assets or
other property; (v) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for the Series 1997-2 Distribution Account, the funds
on deposit therein from time to time or the investments made with such funds;
and (vi) all proceeds of any and all of the foregoing, including, without
limitation, cash (the items in the foregoing clauses (i) through (vi) are
referred to, collectively, as the "Series 1997-2 Distribution Account
Collateral"). The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Series 1997-2 Distribution Account
and in all proceeds thereof,
54
<PAGE>
and shall be the only person authorized to originate entitlement orders in
respect of the Series 1997-2 Distribution Account. The Series 1997-2
Distribution Account Collateral shall be under the sole dominion and control of
the Trustee for the benefit of the Series 1997-2 Noteholders.
Section 3.11 [RESERVED].
Section 3.12 Subrogation of Series 1997-2 Enhancement
Provider. Solely to the extent that any amounts are due and owing to the Series
1997-2 Enhancement Provider pursuant to the Series 1997-2 Enhancement Agreement
(solely with respect to amounts due thereunder from ARAC or any other Lessee),
the Series 1997-2 Enhancement Provider will be subrogated (on a subordinated
basis as described in the following sentence and in the Series 1997-2
Enhancement Agreement) to the rights of AFC-II with respect to the Loan
Collateral. Such subrogation rights will be subject and subordinate to the
rights of the Trustee hereunder on behalf of the Series 1997-2 Noteholders with
respect to the Loan Collateral. The Series 1997-2 Enhancement Provider shall
not exercise any rights which it may acquire by way of subrogation under this
Section 3.12 or pursuant to the Series 1997-2 Enhancement Agreement until the
prior payment, in full and in cash, of all AFC-II Obligations. Upon such
payment, AFC-II and the Trustee will, at the request of the LOC Agent, to the
extent any amount due from ARAC or any other Lessee to the Series 1997-2
Enhancement Provider remains unpaid under the Series 1997-2 Enhancement
Agreement, execute and deliver to the Series 1997-2 Enhancement Provider such
documents and instruments as the Series 1997-2 Enhancement Provider may request
to evidence the transfer by subrogation or otherwise of the Loan Collateral.
ARTICLE IV
AMORTIZATION EVENTS
In addition to the Amortization Events set forth in Section
9.1 of the Base Indenture, the following shall be Amortization Events with
respect to the Series 1997-2 Notes and shall constitute the Amortization Events
set forth in Section 9.1(n) of the Base Indenture with
55
<PAGE>
respect to the Series 1997-2 Notes (without notice or other action on the part
of the Trustee or any holders of the Series 1997-2 Notes) and shall not be
subject to waiver:
(a) a Series 1997-2 Enhancement Deficiency shall occur and
continue for at least two (2) Business Days; provided, however, that such event
or condition shall not be an Amortization Event if (i) during such two (2)
Business Day period ARAC shall have increased the Series 1997-2 Letter of
Credit Amount so that such Series 1997-2 Enhancement Deficiency no longer
exists;
(b) an AESOP I Operating Lease Vehicle Deficiency shall
occur and continue for at least two (2) Business Days;
(c) at any time prior to the funding of the Series 1997-2
Cash Collateral Account pursuant to Section 5.07 of the Collateral Agreement,
the Series 1997-2 Letter of Credit shall not be in full force and effect;
(d) from and after the funding of the Series 1997-2 Cash
Collateral Account pursuant to Section 5.07 of the Collateral Agreement, the
Series 1997-2 Cash Collateral Account shall be subject to an injunction,
estoppel or other stay or a Lien (other than Liens permitted under the Related
Documents);
(e) unless the Series 1997-2 Cash Collateral Account shall
theretofore have been funded to the full extent required hereunder and under
the Series 1997-2 Credit Agreement, an Event of Bankruptcy shall have occurred
with respect to the Series 1997-2 Enhancement Provider or the Series 1997-2
Enhancement Provider repudiates the Series 1997-2 Letter of Credit or refuses
to honor a proper draw thereon;
(f) a Series 1997-2 Enhancement Agreement Event of Default
shall have occurred and be continuing and the LOC Lenders either (i) shall have
declared the principal amount of any outstanding loans under the Series 1997-2
Enhancement Agreement to be due and payable as a result thereof or (ii) shall
not have waived such Series 1997-2 Enhancement Agreement Event of Default; and
(g) a CP Amortization Event shall occur.
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<PAGE>
ARTICLE V
RIGHT TO WAIVE PURCHASE RESTRICTIONS
Notwithstanding any provision to the contrary in the
Indenture or the Related Documents, upon the Trustee's receipt of notice from
any Lessee, any Borrower or AFC-II (i) to the effect that a Manufacturer
Program is no longer an Eligible Manufacturer Program and that, as a result,
the Series 1997-2 Maximum Non-Program Vehicle Amount is or will be exceeded or
(ii) that the Lessees, any Borrower and AFC-II have determined to increase any
Series 1997-2 Maximum Amount (such notice, a "Waiver Request"), each Series
1997-2 Noteholder may, at its option, waive the Series 1997-2 Maximum
Non-Program Vehicle Amount or such other Series 1997-2 Maximum Amount, as
applicable, if (i) no Amortization Event exists, (ii) the Requisite Noteholders
consent to such waiver and (iii) 60 days' prior, written notice of such
proposed waiver is provided to the Rating Agencies by the Trustee.
Upon receipt by the Trustee of a Waiver Request (a copy of
which the Trustee shall promptly provide to the Rating Agencies), all Series
1997-2 Principal Allocations and any proceeds from any Increase allocated
pursuant to Section 3.2(a)(ii), other than amounts to be deposited into the
Series 1997-2 Distribution Account pursuant to Section 2.2 hereof
(collectively, the "Designated Amounts") from the date the Trustee receives a
Waiver Request through the Consent Period Expiration Date will be held by the
Trustee in the Series 1997-2 Collection Account for ratable distribution as
described below.
Within ten (10) Business Days after the Trustee receives a
Waiver Request, the Trustee shall furnish notice thereof to the Series 1997-2
Noteholders, which notice shall be accompanied by a form of consent (each a
"Consent") in the form of Exhibit B by which the Series 1997-2 Noteholders may,
on or before the Consent Period Expiration Date, consent to waiver of the
applicable Series 1997-2 Maximum Amount. If the Trustee receives Consents from
the Requisite Noteholders agreeing to waiver of the applicable Series 1997-2
Maximum Amount within forty-five (45) days after the Trustee notifies the
Series 1997-2 Noteholders of a Waiver Request (the day on which such forty-five
(45) day period expires, the "Consent Period Expiration Date"), (i) the
applicable
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Series 1997-2 Maximum Amount shall be deemed waived by the consenting Series
1997-2 Noteholders, (ii) the Trustee will distribute the Designated Amounts as
set forth below and (iii) the Trustee shall promptly (but in any event within
two days) provide the Rating Agency with notice of such waiver. Any Series
1997-2 Noteholder from whom the Trustee has not received a Consent on or before
the Consent Period Expiration Date will be deemed not to have consented to such
waiver of the requirements of the applicable Series 1997-2 Maximum Amount.
If the Trustee receives Consents from the Requisite
Noteholders on or before the Consent Period Expiration Date, then on the
immediately following Distribution Date, the Trustee will pay the Designated
Amounts as follows:
(i) to the non-consenting Series 1997-2 Noteholders,
if any, pro rata up to the amount required to pay all Series 1997-2
Notes held by such non-consenting Series 1997-2 Noteholders in full;
and
(ii) any remaining Designated Amounts to the Series
1997-2 Collection Account for distribution in accordance with clause
(4) of Section 3.3(b)(i).
If the amounts paid pursuant to clause (i) of the preceding
paragraph are insufficient to pay in full all non-consenting Series 1997-2
Noteholders, then on each day following such Distribution Date, the
Administrator will allocate to the Series 1997-2 Collection Account on a daily
basis all Designated Amounts collected on such day. On each following
Distribution Date, the Trustee will withdraw a portion of such Designated
Amounts from the Series 1997-2 Collection Account and deposit same in the
Series 1997-2 Distribution Account for distribution as follows:
(a) to the non-consenting Series 1997-2 Noteholders,
if any, pro rata an amount equal to the Designated Amounts in the
Series 1997-2 Collection Account as of the applicable Determination
Date up to the aggregate outstanding principal balance of the Series
1997-2 Notes held by the non-consenting Series 1997-2 Noteholders; and
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(b) any remaining Designated Amounts after
distribution of the amounts set forth in clause (a) above, to the
Series 1997-2 Collection Account for distribution in accordance with
clause (4) of Section 3.3(b)(i).
If the Requisite Noteholders do not timely consent to such
waiver, the Designated Amounts will be re-allocated to the Series 1997-2
Collection Account for allocation and distribution in accordance with the terms
of the Indenture and the Related Documents.
In the event that the Series 1997-2 Rapid Amortization Period
shall commence after receipt by the Trustee of a Waiver Request, all such
Designated Amount will thereafter be considered Principal Collections allocated
to the Series 1997-2 Noteholders.
ARTICLE VI
FORM OF SERIES 1997-2 NOTES
Section 6.1 Series 1997-2 Notes will be issued in fully
registered form without interest coupons (the "Variable Funding Note"),
substantially in the form set forth in Exhibit A hereto, with such legends as
may be applicable thereto as set forth in the Base Indenture, and will be sold
initially to AFC and shall be duly executed by AFC-II and authenticated by the
Trustee in the manner set forth in Section 2.4 of the Base Indenture. The
Variable Funding Note is not permitted to be transferred, assigned, exchanged
or otherwise pledged or conveyed except in compliance with the terms of the
Base Indenture. The Variable Funding Note shall bear a face amount equal to the
Series 1997-2 Maximum Invested Amount, and shall be initially issued in a
principal amount equal to the Series 1997-2 Initial Invested Amount. The
Trustee shall, or shall cause the Note Registrar to record any Increases or
Decreases with respect to the Series 1997-2 Invested Amount such that the
principal amount of the Series 1997-2 Notes Outstanding accurately reflects all
such Increases and Decreases.
ARTICLE VII
GENERAL
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Section 7.1 [RESERVED].
Section 7.2 Information. The Trustee shall provide to the
Series 1997-2 Noteholders, or their designated agent, copies of all information
furnished to the Trustee or AFC-II pursuant to the Related Documents, as such
information relates to the Series 1997-2 Notes or the Series 1997-2 Collateral.
Section 7.3 [RESERVED].
Section 7.4 Exhibits. The following exhibits attached hereto
supplement the exhibits included in the Indenture.
Exhibit A: Form of Variable Funding Note
Exhibit B: Form of Consent
Section 7.5 Ratification of Base Indenture. As supplemented
by this Supplement, the Base Indenture is in all respects ratified and
confirmed and the Base Indenture as so supplemented by this Series Supplement
shall be read, taken, and construed as one and the same instrument.
Section 7.6 Counterparts. This Supplement may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all of such counterparts shall together constitute but one and
the same instrument.
Section 7.7 Governing Law. This Supplement shall be construed
in accordance with the law of the State of New York without giving effect to
the provisions thereof regarding conflicts of laws), and the obligations,
rights and remedies of the parties hereto shall be determined in accordance
with such law.
Section 7.8 Amendments. This Supplement may be modified or
amended from time to time in accordance with the terms of the Base Indenture,
provided that if, pursuant to the terms of the Base Indenture or this
Supplement, the consent of the Required Noteholders is required for an
amendment or modification of this Supplement, such requirement shall be
satisfied if such amendment or modification is consented to by Noteholders
representing more than 50% of the aggregate outstanding
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principal amount of the Series 1997-2 Notes affected thereby.
Section 7.9 Discharge of Indenture. Notwithstanding anything
to the contrary contained in the Base Indenture, no discharge of the Indenture
pursuant to Section 11.1(b) of the Base Indenture will be effective as to the
Series 1997-2 Notes without the consent of the Required Noteholders.
Section 7.10 Notice to Rating Agencies. The Trustee shall
provide to each Rating Agency a copy of each notice delivered to, or required
to be provided by, the Trustee pursuant to this Supplement, any other Related
Document or any CP Program Document.
Section 7.11 Series 1997-2 Letter of Credit. The Trustee
hereby appoints the Collateral Agent to act as custodian with respect to the
Series 1997-2 Letter of Credit for the benefit of the Trustee. Notwithstanding
the foregoing, the Trustee shall retain all of the rights thereof under the
Series 1997-2 Letter of Credit as set forth therein.
Section 7.12 Series 1997-2 Required Non-Program Enhancement
Percentage. AFC-II agrees that it will not make any Loan under any Loan
Agreement to finance the acquisition of any Vehicle by AESOP Leasing, AESOP
Leasing II or ARAC, as the case may be, if, after giving effect to the making
of such Loan, the acquisition of such Vehicle and the inclusion of such Vehicle
under the relevant Lease, the Series 1997-2 Required Non-Program Enhancement
Percentage would exceed 25.0%.
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<PAGE>
IN WITNESS WHEREOF, AFC-II and the Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
AESOP FUNDING II L.L.C.
By: /s/ Frank B. Bilotta
--------------------------------
Name: Frank B. Bilotta
Title: Vice President
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: /s/ Robert D. Foltz
--------------------------------
Name: Robert D. Foltz
Title: Vice President
<PAGE>
EXHIBIT A
TO
SERIES 1997-2 SUPPLEMENT
AESOP FUNDING II L.L.C.
FORM OF VARIABLE FUNDING NOTE
FLOATING RATE RENTAL CAR ASSET
BACKED VARIABLE FUNDING NOTES
AESOP FUNDING II, a Delaware limited liability company
(herein referred to as the "Company"), for value received, hereby promises to
pay to AESOP Funding Corp., a Delaware corporation, or registered assigns, the
principal sum of [ ] MILLION DOLLARS, which amount shall be payable in the
amounts and at the times set forth in the Indenture, provided, however, that
the entire unpaid principal amount of this Variable Funding Note shall be due
on the Series 1997-2 Termination Date. The Company will pay interest on this
Variable Funding Note at the Series 1997-2 Note Rate. Such interest shall be
payable on each Distribution Date until the principal of this Variable Funding
Note is paid or made available for payment, to the extent funds will be
available from Interest Collections allocable to the Series 1997-2 Notes
processed from but not including the preceding Distribution Date through each
such Distribution Date in respect of (x) first, an amount equal to interest
accrued for the related Series 1997-2 Interest Period ending on the day
preceding such Distribution Date which will be equal to the product of (i) the
Series 1997-2 Note Rate for the related Series 1997-2 Interest Period ending on
the day preceding such Distribution Date, (ii) the average daily Series 1997-2
Invested Amount during such Series 1997-2 Interest Period, and (iii) the actual
number of days elapsed in the Series 1997-2 Interest Period divided by 360, and
(y) then, an amount equal to the amount of any unpaid Deficiency Amounts, as
defined in the Indenture, as of the preceding Distribution Date (together with
any accrued interest on such Deficiency Amounts). The principal amount of this
Variable Funding Note shall be subject to Increases and Decreases on any
Business Day, and accordingly, such principal amount is subject to prepayment
at any time. Notwithstanding the foregoing, prior to the Series 1997-2
Termination Date and unless an Amortization Event shall have occurred, only
interest payments on the outstanding principal amount of the Variable Funding
Note are required to be made to the holder hereof. Beginning on the first
Distribution Date following the occurrence of an Amortization Event, sub-
A-1
<PAGE>
ject to Decreases on any Business Day, the principal of this Variable Funding
Note shall be paid in installments on each subsequent Distribution Date to the
extent of funds available for payment therefor pursuant to the Indenture. Such
principal of and interest on this Variable Funding Note shall be paid in the
manner specified on the reverse hereof.
The principal of and interest on this Variable Funding Note
are payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts. All
payments made by the Company with respect to this Variable Funding Note shall
be applied first to interest due and payable on this Variable Funding Note as
provided above and then to the unpaid principal of this Variable Funding Note.
This Variable Funding Note does not represent an interest in, or an obligation
of, AESOP Leasing Corp., AESOP Leasing, AESOP Leasing II, ARC, ARAC, or any
affiliate of AESOP Leasing Corp., AESOP Leasing, AESOP Leasing II, ARC or ARAC
other than the Company.
Reference is made to the further provisions of this Variable
Funding Note set forth on the reverse hereof, which shall have the same effect
as though fully set forth on the face of this Variable Funding Note. Although a
summary of certain provisions of the Indenture are set forth below and on the
reverse hereof and made a part hereof, this Variable Funding Note does not
purport to summarize the Indenture and reference is made to the Indenture for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
AESOP Leasing, AESOP Leasing II and the Trustee. A copy of the Indenture may be
requested from the Trustee by writing to the Trustee at: Harris Trust and
Savings Bank, 311 Monroe Street, 12th Floor, Chicago, Illinois 60606,
Attention: Corporate Trust Officer. To the extent not defined herein, the
capitalized terms used herein have the meanings ascribed to them in the
Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee whose name appears below by manual signature, this
Variable Funding Note shall not be entitled to any benefit under the Indenture
referred to on the reverse hereof, or be valid or obligatory for any purpose.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: ______________ AESOP FUNDING II L.L.C.
By:
--------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series 1997-2 Notes of a series issued
under the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
--------------------------------
Authorized Signature
A-3
<PAGE>
REVERSE OF VARIABLE FUNDING NOTE
This Variable Funding Note is one of a duly authorized issue
of Series 1997-2 Notes of the Company, designated as its Floating Rate Rental
Car Asset Backed Variable Funding Notes (herein called the "Series 1997-2
Notes"), all issued under (i) an Amended and Restated Base Indenture dated as
of July 30, 1997 (such Base Indenture, as amended or modified, is herein called
the "Base Indenture"), between the Company and Harris Trust and Savings Bank,
as trustee (the "Trustee", which term includes any successor Trustee under the
Base Indenture), and (ii) a Series 1997-2 Supplement dated as of July 30, 1997
(the "Series 1997-2 Supplement") between the Company and the Trustee. The Base
Indenture and the Series 1997-2 Supplement are referred to herein as the
"Indenture". The Series 1997-2 Notes are subject to all terms of the Indenture.
All terms used in this Variable Funding Note that are defined in the Indenture,
as supplemented or amended, shall have the meanings assigned to them in or
pursuant to the Indenture, as so supplemented or amended.
The Series 1997-2 Notes are and will be equally and ratably
secured by the Collateral pledged as security therefor as provided in the
Indenture and the Series 1997-2 Supplement.
"Distribution Date" means the 20th day of each month, or, if
any such date is not a Business Day, the next succeeding Business Day,
commencing August 20, 1997.
As described above, principal of this Series 1997-2 Note
shall be payable in the amounts and at the times set forth in the Indenture,
provided, however, the entire unpaid principal amount of this Variable Funding
Note shall be due and payable on the Series 1997-2 Termination Date.
Notwithstanding the foregoing, if an Amortization Event, Liquidation Event of
Default, Waiver Event or Series 1997-2 Limited Liquidation Event of Default
shall have occurred and be continuing then, in certain circumstances, principal
on the Series 1997-2 Notes may be paid earlier, as described in the Indenture.
All principal payments on the Series 1997-2 Notes shall be made pro rata to the
Noteholders entitled thereto.
A-4
<PAGE>
Payments of interest on this Variable Funding Note due and
payable on each Distribution Date, together with the installment of principal
then due, if any, and any payments of principal made on any Business Day in
respect of any Decreases, to the extent not in full payment of this Variable
Funding Note, shall be made by wire transfer to the Holder of record of this
Variable Funding Note (or one or more predecessor Series 1997-2 Notes) on the
Note Register as of the close of business on each Record Date. Any reduction in
the principal amount of this Variable Funding Note (or any one or more
predecessor Series 1997-2 Notes) effected by any payments made in accordance
with the terms hereof and of the Indenture shall be binding upon all future
Holders of this Variable Funding Note and of any Variable Funding Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted thereon.
The Company shall pay interest on overdue installments of
interest at the Series 1997-2 Note Rate to the extent lawful.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Variable Funding Note may
be registered on the Note Register upon surrender of this Variable Funding Note
for registration of transfer at the office or agency designated by the Company
pursuant to the Indenture, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by,
the Holder hereof or his attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located, or having a
correspondent located, in the City of New York or the city in which the
Corporate Trust Office is located, or a member firm of a national securities
exchange, and such other documents as the Trustee may reasonably require, and
thereupon one or more new Series 1997-2 Notes of authorized denominations and
in the same aggregate principal amount will be issued to the designated
transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Variable Funding Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such
registration of transfer or exchange.
A-5
<PAGE>
Each Noteholder, by acceptance of a Variable Funding Note,
covenants and agrees that no recourse may be taken, directly or indirectly,
with respect to the obligations of the Company, Original AESOP, AESOP Leasing,
AESOP Leasing II, ARC, ARAC, or the Trustee on the Series 1997-2 Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Trustee, Original AESOP, AESOP Leasing, AESOP
Leasing II, ARC or ARAC in its individual capacity, (ii) any owner of a
beneficial interest in the Company or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Trustee, Original AESOP, AESOP
Leasing, AESOP Leasing II, ARC or ARAC in its individual capacity, any holder
of a beneficial interest in the Company, Original AESOP, AESOP Leasing, AESOP
Leasing II or the Trustee or of any successor or assign of Original AESOP,
AESOP Leasing, AESOP Leasing II or the Trustee in its individual capacity,
except (a) as any such Person may have expressly agreed and (b) any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Company for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Variable Funding Note, subject to Section 13.18 of the Base Indenture.
Each Noteholder, by acceptance of a Note, covenants and
agrees that by accepting the benefits of the Indenture that such Noteholder
will not, for a period of one year and one day following payment in full of all
Notes institute against the Company, or join in any institution against the
Company of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Related Documents.
Prior to the due presentment for registration of transfer of
this Variable Funding Note, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this Variable Funding
Note (as of the day of determination or as of such other
A-6
<PAGE>
date as may be specified in the Indenture) is registered as the owner hereof
for all purposes, whether or not this Variable Funding Note be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by notice
to the contrary.
It is the intent of the Company and each Noteholder that, for
Federal, state and local income and franchise tax purposes only, the Series
1997-2 Notes will evidence indebtedness of the Company secured by the Series
1997-2 Collateral. Each Noteholder, by the acceptance of this Variable Funding
Note, agrees to treat this Variable Funding Note for Federal, state and local
income and franchise tax purposes as indebtedness of the Company.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Series 1997-2
Notes under the Indenture at any time by the Company with the consent of the
Holders of Series 1997-2 Notes representing more than 50% in principal amount
of the aggregate outstanding amount of the Series 1997-2 Notes which are
affected by such amendment or modification. The Indenture also contains
provisions permitting the Holders of Series 1997-2 Notes representing specified
percentages of the aggregate outstanding amount of the Series 1997-2 Notes, on
behalf of the Holders of all the Series 1997-2 Notes, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Variable Funding Note (or any one or more predecessor Series
1997-2 Notes) shall be conclusive and binding upon such Holder and upon all
future Holders of this Variable Funding Note and of any Variable Funding Note
issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent or waiver is made upon this
Variable Funding Note. The Indenture also permits the Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
Holders of the Series 1997-2 Notes issued thereunder.
The term "Company" as used in this Variable Funding Note
includes any successor to the Company under the Indenture.
A-7
<PAGE>
The Series 1997-2 Notes are issuable only in registered form
in denominations as provided in the Indenture, subject to certain limitations
set forth therein.
This Variable Funding Note and the Indenture shall be
construed in accordance with the law of the State of New York, without
reference to its conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder and thereunder shall be determined in
accordance with such law.
No reference herein to the Indenture and no provision of this
Variable Funding Note or of the Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of
and interest on this Variable Funding Note at the times, place, and rate, and
in the coin or currency herein prescribed, subject to any duty of the Company
to deduct or withhold any amounts as required by law, including any applicable
U.S. withholding taxes.
A-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying
number of assignee
______________________________
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto ____________________________________________
______________________________________________________________________________
(name and address of assignee)
the within Variable Funding Note and all rights thereunder, and hereby
irrevocably constitutes and appoints _________________, attorney, to transfer
said Variable Funding Note on the books kent for registration thereof, with
full power of substitution in the premises.
Dated: ______________ __________________________*
Signature Guaranteed:
_____________________ ___________________________
- -------------
* NOTE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note
in every particular, without alteration, enlargement or any change
whatsoever.
A-9
<PAGE>
EXHIBIT B
TO
SERIES 1997-2 SUPPLEMENT
FORM OF CONSENT
Harris Trust and Savings Bank,
as Trustee
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attn: Indenture Trust Administration
AESOP Funding II L.L.C.
c/o Lord Securities Corporation
Two Wall Street
New York, New York 10005
Attn: Andrew L. Stidd
This Consent is delivered pursuant to the Waiver Request
dated ____________, 19__ (the "Notice") and the Series 1997-2 Supplement, dated
as of July 30, 1997 (as amended, modified or supplemented from time to time,
the "Series 1997-2 Supplement") between AESOP Funding II L.L.C., a Delaware
limited liability company ("AFC-II"), and Harris Trust and Savings Bank, an
Illinois banking corporation, as Trustee ("Trustee"). Terms used herein have
the meaning provided in the Series 1997-2 Supplement.
Pursuant to Article 5 of the Series 1997-2 Supplement, the
Trustee has delivered a Notice indicating that [choose which applies] [(i) the
Manufacturer Program[s] of [name of Manufacturer] [is/are] no longer [an]
Eligible Manufacturer Program[s] and that, as a result, the Series 1997-2
Maximum Non-Program Vehicle Amount is or will be exceeded [or (ii) that the
Lessees, the Borrower and AFC-II have determined to increase [the Series 1997-2
Maximum Non-Program Vehicle Amount] [the Series 1997-2 Maximum Financed Vehicle
Amount] [the Series 1997-2 Maximum Mazda Amount] [the Series 1997-2 Maximum
Mitsubishi Amount][the Series 1997-2 Maximum Subaru/Hyundai/Suzuki Amount][the
Series 1997-2 Maximum Non-Eligible Manufacturer Amount]]. The undersigned
hereby waives all requirements that the [Series 1997-2
B-1
<PAGE>
Maximum Non-Program Vehicle Amount] [Series 1997-2 Maximum Financed Vehicle
Amount] [the Series 1997-2 Maximum Mazda Amount][the Series 1997-2 Maximum
Mitsubishi Amount][the Series 1997-2 Maximum Subaru/Hyundai/Suzuki Amount]
[Series 1997-2 Maximum Non-Eligible Manufacturer Amount] not be exceeded for
all purposes of the Indenture and the Series 1997-2 Supplement. The undersigned
understands that this Consent will only be effective if the Trustee receives
Consents from Noteholders representing not less than 25% of the aggregate
unpaid principal amount of the Series 1997-2 Notes on or before ______________
19__.
The undersigned hereby represents and warrants that it is the
beneficial owner of $__________ in principal amount of Series 1997-2 Notes.
[Name]
By:
--------------------------------
Name:
Title:
B-2
<PAGE>
[AESOP I Finance
Lease Loan Agreement]
- --------------------------------------------------------------------------------
LOAN AGREEMENT
dated as of July 30, 1997
between
AESOP LEASING L.P.,
as Borrower,
and
AESOP FUNDING II L.L.C.,
as Lender
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. CERTAIN DEFINITIONS................................................................... 3
SECTION 1.1. Certain Definitions........................................... 3
SECTION 1.2. Accounting and Financial Determinations....................... 3
SECTION 1.3. Cross References; Headings.................................... 3
SECTION 1.4. Interpretation................................................ 4
SECTION 2. LOAN COMMITMENT OF THE LENDER............................................... 4
SECTION 2.1. Loan Commitment............................................... 4
SECTION 2.2. Certain Waivers............................................... 5
SECTION 2.3. Conditions.................................................... 5
SECTION 2.4. Use of Proceeds............................................... 5
SECTION 3. LOAN NOTE; LOAN PROCEDURE;
RECORDKEEPING............................................................... 6
SECTION 3.1. Loan Note..................................................... 6
SECTION 3.2. Loan Procedure................................................ 6
SECTION 3.3. Recordkeeping................................................. 7
SECTION 4. INTEREST.................................................................... 7
SECTION 4.1. Interest Rate on Loans........................................ 7
SECTION 4.2. Supplemental Interest......................................... 8
SECTION 4.3. Loan Interest Payment Dates................................... 8
SECTION 4.4. Setting of Rates.............................................. 8
SECTION 4.5. Carrying Charges.............................................. 9
SECTION 5. REPAYMENT OF LOAN PRINCIPAL AMOUNT.......................................... 9
SECTION 5.1. Mandatory Repayment of Monthly
Loan Principal Amount of Loans................................ 9
SECTION 5.2. Voluntary Prepayments of Loan
Principal Amount.............................................. 10
SECTION 6. MAKING OF PAYMENTS.......................................................... 11
SECTION 6.1. Making of Payments............................................ 11
SECTION 6.2. Due Date Extension............................................ 11
SECTION 6.3. Application of Sale Proceeds.................................. 11
SECTION 6.4. Payment Deficits.............................................. 12
SECTION 7. LOAN COLLATERAL SECURITY.................................................... 12
SECTION 7.1. Grant of Security Interest.................................... 12
SECTION 7.2. Certificates of Title......................................... 14
i
<PAGE>
SECTION 7.3. Release of AESOP I Finance Lease
Loan Collateral............................................... 14
SECTION 7.4. Change of Location or Name.................................... 16
SECTION 7.5. Deliveries; Further Assurances................................ 16
SECTION 7.6. [RESERVED].................................................... 17
SECTION 7.7. [RESERVED].................................................... 17
SECTION 7.8. AESOP I Segregated Account.................................... 17
SECTION 8. REPRESENTATIONS AND WARRANTIES.............................................. 17
SECTION 8.1. Organization; Ownership; Power;
Qualification................................................. 18
SECTION 8.2. Authorization; Enforceability................................. 18
SECTION 8.3. Compliance.................................................... 18
SECTION 8.4. [RESERVED].................................................... 18
SECTION 8.5. Litigation.................................................... 19
SECTION 8.6. Liens......................................................... 19
SECTION 8.7. Employee Benefit Plans........................................ 19
SECTION 8.8. Investment Company Act........................................ 19
SECTION 8.9. Regulations G, T, U and X..................................... 19
SECTION 8.10. Proceeds...................................................... 20
SECTION 8.11. Business Locations; Trade Names............................... 20
SECTION 8.12. Taxes......................................................... 20
SECTION 8.13. Governmental Authorizations................................... 20
SECTION 8.14. Compliance with Laws.......................................... 21
SECTION 8.15. Eligible Vehicles............................................. 21
SECTION 8.16. Manufacturer Programs......................................... 21
SECTION 8.17. Absence of Default............................................ 21
SECTION 8.18. No Security Interest; Title to
Assets........................................................ 22
SECTION 8.19. Accuracy of Information....................................... 22
SECTION 9. AFFIRMATIVE COVENANTS....................................................... 23
SECTION 9.1. Existence; Foreign Qualifica-
tion.......................................................... 23
SECTION 9.2. Books, Records and Inspections................................ 23
SECTION 9.3. Insurance..................................................... 24
SECTION 9.4. Manufacturer Programs......................................... 24
SECTION 9.5. Reporting Requirements........................................ 25
SECTION 9.6. Payment of Taxes; Removal of
Liens......................................................... 26
SECTION 9.7. Business...................................................... 26
SECTION 9.8. Maintenance of the Vehicles................................... 26
SECTION 9.9. Maintenance of Separate Existence............................. 26
SECTION 9.10. Manufacturer Payments; Sales
Proceeds...................................................... 29
SECTION 9.11. Maintenance of Properties..................................... 30
ii
<PAGE>
SECTION 9.12. Verification of Title......................................... 30
SECTION 9.13. [RESERVED].................................................... 30
SECTION 9.14. Delivery of Information....................................... 31
SECTION 9.15. [RESERVED].................................................... 31
SECTION 9.16. Vehicles...................................................... 31
SECTION 9.17. Assignments................................................... 31
SECTION 9.18. Notation of Liens............................................. 31
SECTION 9.19. [RESERVED].................................................... 31
SECTION 9.20. [RESERVED].................................................... 31
SECTION 9.21. [RESERVED].................................................... 32
SECTION 9.22. [RESERVED].................................................... 32
SECTION 9.23. Sale of Non-Program Vehicles
Returned to AESOP Leasing.................................... 32
SECTION 10. NEGATIVE COVENANTS.......................................................... 32
SECTION 10.1. Liens......................................................... 32
SECTION 10.2. Other Indebtedness............................................ 32
SECTION 10.3. Mergers, Consolidations....................................... 32
SECTION 10.4. Sales of Assets............................................... 32
SECTION 10.5. Acquisition of Assets......................................... 32
SECTION 10.6. Dividends, Officers' Compensation, etc........................ 32
SECTION 10.7 Organizational Documents...................................... 33
SECTION 10.8 Investments................................................... 33
SECTION 10.9. Regulations G, T, U and X..................................... 33
SECTION 10.10. Other Agreements.............................................. 33
SECTION 10.11. Use of Vehicles............................................... 33
SECTION 10.12. Use of Proceeds............................................... 33
SECTION 10.13. Limitations on the Acquisition
or Redesignation of Certain
Vehicles...................................................... 34
SECTION 10.14. Maximum Vehicle Age........................................... 34
SECTION 11. CONDITIONS.................................................................. 34
SECTION 11.1. Initial Loans................................................. 34
SECTION 11.2. All Loans..................................................... 37
SECTION 12. LOAN EVENTS OF DEFAULT AND THEIR EFFECT..................................... 38
SECTION 12.1. AESOP I Finance Lease Loan
Events of Default............................................. 38
SECTION 12.2. Effect of AESOP I Finance Lease
Loan Event of Default or Liquidation Event of Default......... 39
SECTION 12.3. Rights of Trustee Upon Liquidation Event of Default and Non-
Performance of Certain Covenants.............................. 40
iii
<PAGE>
SECTION 12.4. Application of Proceeds....................................... 41
SECTION 13. GENERAL..................................................................... 42
SECTION 13.1. Waiver; Amendments............................................ 42
SECTION 13.2. Confirmations................................................. 42
SECTION 13.3. Notices....................................................... 42
SECTION 13.4. Taxes......................................................... 42
SECTION 13.5. Indemnification............................................... 43
SECTION 13.6. Bankruptcy Petition........................................... 44
SECTION 13.7. Submission to Jurisdiction.................................... 45
SECTION 13.8. Governing Law................................................. 46
SECTION 13.9. JURY TRIAL.................................................... 46
SECTION 13.10. Successors and Assigns........................................ 46
SECTION 13.11. Tax Treatment of Loans........................................ 47
SECTION 13.12. No Recourse................................................... 47
</TABLE>
EXHIBITS AND SCHEDULES
EXHIBIT A FORM OF LOAN NOTE
EXHIBIT B-1 FORM OF LOAN REQUEST
EXHIBIT B-2 FORM OF LOAN REQUEST RESPONSE
EXHIBIT C FORM OF PAYMENT DEFICIT NOTICE
SCHEDULE 8.11 BUSINESS LOCATIONS, TRADE NAMES
iv
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of July 30, 1997 (the
"Agreement"), is entered into between AESOP LEASING L.P., a Delaware limited
partnership ("AESOP Leasing" or the "Borrower"), and AESOP FUNDING II L.L.C.,
a Delaware limited liability company ("AFC-II" or the "Lender").
BACKGROUND
AESOP Leasing intends to finance the purchase of Program
Vehicles (such capitalized term, together with all other capitalized terms
used herein, shall have the meaning assigned thereto in Section 1.1) and
Non-Program Vehicles that it will lease to ARAC for use in its daily vehicle
rental business pursuant to the Finance Lease, and AESOP Leasing desires to
obtain financing for such Vehicles from the Lender.
The Lender is willing to make Loans to AESOP Leasing on the
terms and conditions set forth herein.
The Lender will utilize the proceeds of one or more Series
of Notes issued from time to time pursuant to the Indenture to make Loans to
(i) AESOP Leasing hereunder, (ii) to AESOP Leasing under the AESOP I Operating
Lease Loan Agreement and (iii) to AESOP Leasing II under the AESOP II Loan
Agreement, in each case to the extent Vehicles eligible to be financed
hereunder and thereunder are available for financing and, in certain other
circumstances, to pay amortizing Notes. In addition, the Lender will utilize
the proceeds of certain capital contributions from time to time to make Loans
to AESOP Leasing hereunder to the extent Vehicles eligible to be financed
hereunder are available for financing and, in certain other circumstances, to
pay amortizing Notes. In connection with the foregoing, the Lender will assign
its rights hereunder and under the AESOP I Operating Lease Loan Agreement and
the AESOP II Loan Agreement to the Trustee to secure the Lender's obligations
to the Secured Parties.
The Loans made to AESOP Leasing hereunder will be secured by
all of AESOP Leasing's right, title and interest in and to (a) the Vehicles
leased under the
2
<PAGE>
Finance Lease, (b) the Manufacturer Programs as they relate to such Vehicles
that are Program Vehicles, (c) all monies due arising from the sale of such
Vehicles that are Non-Program Vehicles, (c) all payments under insurance
policies or warranties relating to such Vehicles, (d) all payments due from
the Lessee and ARC under the Finance Lease and (e) all proceeds of the
foregoing.
Accordingly, in consideration of the mutual agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the terms and
conditions hereof, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
SECTION 1.1. Certain Definitions. As used in this Agreement
and unless the context requires a different meaning, capitalized terms not
otherwise defined herein shall have the meanings assigned to such terms in (i)
the Definitions List attached as Schedule I to the Base Indenture, dated as of
July 30, 1997 (as such agreement may be amended, supplemented, restated or
otherwise modified from time to time in accordance with its terms, the "Base
Indenture"), between AFC-II and Harris Trust and Savings Bank, as trustee (the
"Trustee"), as in effect on the date hereof and as such Schedule I may be
amended or modified from time to time in accordance with the terms of the Base
Indenture (the "Definitions List").
SECTION 1.2. Accounting and Financial Determinations. Where
the character or amount of any asset or liability or item of income or expense
is required to be determined, or any accounting computation is required to be
made, for the purpose of this Agreement, such determination or calculation
shall be made, to the extent applicable and except as otherwise specified in
this Agreement, in accordance with GAAP. When used herein, the term "financial
statement" shall include the notes and schedules thereto.
SECTION 1.3. Cross References; Headings. The words "hereof",
"herein" and "hereunder" and words of a similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. Section, Schedule and Exhibit references
contained in this Agreement are refer-
3
<PAGE>
ences to Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified. Any reference in any Section or definition to any clause
is, unless otherwise specified, to such clause of such Section or definition.
The various headings in this Agreement are inserted for convenience only and
shall not affect the meaning or interpretation of this Agreement or any
provision hereof.
SECTION 1.4. Interpretation. In this Agree-
ment, unless the context otherwise requires:
(i) the singular includes the plural and
vice versa;
(ii) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors
and assigns are permitted by this Agreement, and reference to any
Person in a particular capacity only refers to such Person in such
capacity;
(iii) reference to any gender includes
the other gender;
(iv) reference to any Requirement of Law means such
Requirement of Law as amended, modified, codified or reenacted, in
whole or in part, and in effect from time to time;
(v) "including" (and with correlative meaning
"include") means including without limiting the generality of any
description preceding such term; and
(vi) with respect to the determination of any
period of time, "from" means "from and including" and "to" and
"until" means "to but excluding".
SECTION 2. LOAN COMMITMENT OF THE LENDER.
SECTION 2.1. Loan Commitment. Subject to the terms and
conditions of this Agreement, including Section 12.2, and further subject to
the availability of funds to the Lender pursuant to the Indenture, the Lender
agrees to make loans hereunder (the "Loans") to AESOP Leasing from time to
time on or after the Initial Closing Date
4
<PAGE>
and prior to the Loan Commitment Termination Date; provided, that on any one
date the Loan Principal Amount of all Loans made hereunder to AESOP Leasing
shall not exceed the AESOP I Finance Lease Loan Agreement Borrowing Base. The
foregoing commitment of the Lender is called the "Loan Commitment".
SECTION 2.2. Certain Waivers. AESOP Leasing waives
presentment, demand for payment, notice of dishonor and protest, notice of the
creation of any of its Liabilities and all other notices whatsoever to AESOP
Leasing with respect to such Liabilities except notices required under Section
12.1. The obligations of AESOP Leasing under this Agreement and the Loan Note
shall not be affected by (i) the failure of the Trustee or the Lender or the
holder of the Loan Note or any of AESOP Leasing's Liabilities to assert any
claim or demand or to exercise or enforce any right, power or remedy against
AESOP Leasing or the AESOP I Finance Lease Loan Collateral or otherwise, (ii)
any extension or renewal for any period (whether or not longer than the
original period) or exchange of any of AESOP Leasing's Liabilities or the
release or compromise of any obligation of any nature of any Person with
respect thereto, (iii) the surrender, release or exchange of all or any part
of any property (including the AESOP I Finance Lease Loan Collateral) securing
payment and performance of any of AESOP Leasing's Liabilities or the
compromise or extension or renewal for any period (whether or not longer than
the original period) of any obligations of any nature of any Person with
respect to any such property, and (iv) any other act, matter or thing which
would or might, in the absence of this provision, operate to release,
discharge or otherwise prejudicially affect the obligations of AESOP Leasing.
SECTION 2.3. Conditions. The making of each Loan hereunder is
subject to the satisfaction of the applicable conditions set forth in Section
11.
SECTION 2.4. Use of Proceeds. AESOP Leasing shall apply the
funds received by it pursuant to Section 2.1 hereof solely to finance the
purchase of Eligible Vehicles that it will lease to ARAC pursuant to the
Finance Lease for use in ARAC's daily vehicle rental business.
5
<PAGE>
SECTION 3. LOAN NOTE; LOAN PROCEDURE; RECORDKEEPING.
SECTION 3.1. Loan Note. The Loans made hereunder shall be
evidenced by a promissory note issued by AESOP Leasing (herein, as from time
to time supplemented, extended or replaced, the "Loan Note"), substantially in
the form set forth in Exhibit A, with appropriate insertions, dated as of the
Initial Closing Date, payable to the order of the Lender and assigned to the
Trustee pursuant to the Indenture.
SECTION 3.2. Loan Procedure. AESOP Leasing shall deliver a
Loan Request to the Lender no later than 4:00 p.m., New York City time, on a
day that is not less than one, nor more than five, Business Days prior to the
proposed Borrowing Date (which shall be a Business Day). Each Loan Request
shall be irrevocable, and shall specify (i) the principal amount of the
proposed Loan, (ii) the Borrowing Date of the proposed Loan, (iii) a summary
of the Vehicles being financed (including for Program Vehicles subject to the
GM Repurchase Program, the Designated Period for each such Program Vehicle),
(iv) whether each Vehicle is a Program Vehicle or a Non-Program Vehicle, (v)
the VIN for each Vehicle to be financed, (vi) in the case of new Vehicles, the
total Capitalized Cost thereof as of the Borrowing Date, and (vii) in the case
of Franchisee Vehicles, the Net Book Value of such Vehicles as of the first
day of the Related Month. The aggregate requested borrowings hereunder on any
Business Day shall be for an initial aggregate principal amount that, together
with the Loan Principal Amount of Loans outstanding hereunder and under the
AESOP I Operating Lease Loan Agreement and the AESOP II Loan Agreement on such
date, shall not exceed the principal amount of Notes outstanding on such date.
On the terms and subject to the conditions of this Agreement, on or before
2:00 p.m., New York City time, on the Borrowing Date specified in the Loan
Request, the Lender shall transfer same day or immediately available funds to
AESOP Leasing's account specified in such Loan Request in the amount specified
in such Loan Request. Each Loan Request made pursuant to this Section 3.2
shall constitute AESOP Leasing's representation and warranty that all of the
applicable conditions contained in Section 11 will, after giving effect to
such Loan, be satisfied.
6
<PAGE>
SECTION 3.3. Recordkeeping. The Lender shall record in its
records, or at its option on the schedule attached to the Loan Note, the date
and principal amount of each Loan made hereunder, each repayment thereof, and
the other information provided for thereon. The aggregate unpaid Loan
Principal Amount so recorded shall be rebuttable presumptive evidence of the
Loan Principal Amount owing and unpaid on the Loan Note. The failure to so
record any such information or any error in so recording any such information
shall not, however, limit or otherwise affect the actual obligations of AESOP
Leasing hereunder or under the Loan Note to repay the Loan Principal Amount,
together with all Loan Interest accruing thereon.
SECTION 4. INTEREST.
SECTION 4.1. Interest Rate on Loans. AESOP Leasing hereby
promises to pay interest on the unpaid principal amount of each Loan made to
it hereunder (the "Loan Interest"), for each Loan Interest Period commencing
on the date such Loan is made to AESOP Leasing until such Loan is paid in full
at a rate not less than the Lender's Carrying Cost Interest Rate for the
applicable Loan Interest Period. The applicable rate of Loan Interest on each
Loan shall be specified in a Loan Request Response provided by the Lender to
AESOP Leasing on the date a Loan Request is delivered; provided that if the
Lender's Carrying Cost Interest Rate for the applicable Loan Interest Period
is higher than the rate of Loan Interest specified in the Loan Request
Response, Loan Interest payable shall be determined using the higher rate.
SECTION 4.2. Supplemental Interest. AESOP Leasing agrees to
pay to the Lender, as an additional interest payment, an amount equal to the
product of (A) the applicable Loan Agreement's Share as of the beginning of
each Loan Interest Period times (B) the sum of (i) the Supplemental Carrying
Charges for such Loan Interest Period, minus (ii) any accrued earnings on
Permitted Investments in the Collection Account which earnings are available
for distribution on the last Business Day of such Loan Interest Period (the
product of the amounts described in clauses (A) and (B) above, "Supplemental
Interest").
7
<PAGE>
SECTION 4.3. Loan Interest Payment Dates. Accrued Loan
Interest on each Loan made hereunder shall be payable on each Payment Date
(with respect to the related Loan Interest Period), upon any prepayment and at
maturity, commencing with the first of such dates to occur after the date such
Loan is made. After maturity (whether by acceleration or otherwise), all
accrued Loan Interest and Supplemental Interest on all Loans made hereunder
shall be payable on demand. Supplemental Interest in respect of each Loan
Interest Period shall be payable on each Payment Date and upon any prepayment
and at maturity. All calculations of Loan Interest and Supplemental Interest
shall be based on a 360-day year and the actual number of days elapsed in the
related Loan Interest Period.
SECTION 4.4. Setting of Rates. The Lender's Carrying Cost
Interest Rate and Supplemental Carrying Charges used hereunder to compute Loan
Interest due on each Loan made hereunder on each Payment Date and the
Supplemental Interest due on each Payment Date shall be calculated from time
to time by the Lender in accordance with this Agreement (and written notice
thereof shall be provided to AESOP Leasing not later than ten days prior to
the applicable Payment Date). Such calculation shall be conclusive, absent
demonstrable error.
SECTION 4.5. Carrying Charges. AESOP Leasing agrees to pay
to the Lender on each Payment Date an amount equal to the product of (A) the
applicable Loan Agreement's Share as of such Payment Date times (B) all
accrued and unpaid Carrying Charges that are accrued and unpaid as of each
such Payment Date.
SECTION 5. REPAYMENT OF LOAN PRINCIPAL AMOUNT.
SECTION 5.1. Mandatory Repayment of Monthly Loan Principal
Amount of Loans. On each Payment Date, AESOP Leasing shall pay to the Lender,
as a repayment of the Loan Principal Amount, an amount equal to the product of
(A) the applicable Loan Payment Allocation Percentage as of the beginning of
the Related Month times (B) the sum, without duplication, of (i) the accrued
Depreciation Charges for the Related Month for all Vehicles (a) leased under
the Finance Lease as of the end of the Related Month or (b) described in
clauses (iii) or (iv) of this Section 5.1, plus (ii) all upfront incentive
payments
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paid by Manufacturers during the Related Month in respect of purchases of
Non-Program Vehicles leased under the Finance Lease, plus (iii) the aggregate
Termination Values (each as of the date on which such Vehicle becomes an
Ineligible Vehicle, a Casualty or is sold, as applicable) of all the Vehicles
leased under the Finance Lease at any time during such Related Month that,
without double counting, while so leased either became Ineligible Vehicles,
suffered a Casualty or were sold by or on behalf of AESOP Leasing (it being
understood that AESOP Leasing has agreed to sell, or cause to be sold,
Vehicles only in a manner consistent with the provisions hereof and of the
Related Documents) to any Person other than to a Manufacturer pursuant to a
Manufacturer Program or to a third party pursuant to an auction conducted
through a Guaranteed Depreciation Program, in each case, during the Related
Month, plus (iv) the aggregate Termination Values (each as of the applicable
Turnback Date) of all Program Vehicles leased under the Finance Lease that
while so leased were returned to a Manufacturer pursuant to a Manufacturer
Program with respect to which either (x) the Repurchase Price has been paid by
such Manufacturer and/or the related auction dealers during the Related Month
or (y) a Manufacturer Event of Default has occurred, minus (v) an amount equal
to the sum of (1) any amounts received by the Lender or the Trustee, or
deposited into the Collection Account, during the Related Month representing
(a) Repurchase Prices for repurchases of Program Vehicles leased under the
Finance Lease at the applicable Turnback Date or (b) the sales proceeds
(including amounts paid by a Manufacturer as a result of the sale of a Program
Vehicle during the Related Month outside such Manufacturer's Manufacturer
Program but excluding amounts released to AESOP Leasing pursuant to the last
sentence of Section 5.2(a) of the Base Indenture) for sales of Vehicles leased
under the Finance Lease at the time of such sale to a third party other than
(x) to a Manufacturer pursuant to a Repurchase Program or (y) through an
auction dealer pursuant to a Guaranteed Depreciation Program and (2) any
amounts received in the Related Month and applied to the Loan Principal Amount
pursuant to Section 6.3 (the product of the amounts described in clauses (A)
and (B) above, the "Monthly Loan Principal Amount"). Unless otherwise required
to be paid sooner pursuant to the terms of this Agreement, the entire unpaid
Loan Principal Amount of the Loans made hereunder shall be payable on the last
occurring Series
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Termination Date with respect to the Notes. All Loans made hereunder shall be
due on the maturity date therefor, whether by acceleration or otherwise.
Solely for determining the amounts payable under this Section 5.1, with
respect to a Program Vehicle that became a Casualty during the Related Month
as a result of such Program Vehicle being held beyond the stated expiration
date of the applicable Repurchase Period and not being redesignated as a
Non-Program Vehicle, such Vehicle will be deemed to have become a Casualty
upon such expiration date.
SECTION 5.2. Voluntary Prepayments of Loan Principal Amount.
AESOP Leasing may from time to time prepay the principal amount with respect
to any Loans made hereunder, in whole or in part, on any date; provided that,
except for any prepayment made pursuant to Section 6.3 hereof or any payment
made to comply with Section 10.13 hereof, AESOP Leasing shall give the Lender
and the Trustee not less than one (1) Business Day's prior notice of any such
prepayment, specifying the date and amount of such prepayment, and, if AESOP
Leasing is requesting a release of Vehicles from the Lien hereof pursuant to
Section 7.3, the Vehicles to which such prepayment relates.
SECTION 6. MAKING OF PAYMENTS.
SECTION 6.1. Making of Payments. All payments of the Monthly
Loan Principal Amount or Loan Interest hereunder, all prepayments of the Loan
Principal Amount hereunder, and all payments of Supplemental Interest,
Carrying Charges and of all other Liabilities shall be made by AESOP Leasing
to, or for the account of, the Lender in immediately available Dollars,
without setoff, counterclaim or deduction of any kind. All such payments shall
be made to the Collection Account (or such other account as the Lender may
from time to time specify with the consent of the Trustee), not later than
11:00 a.m., New York City time, on the date due, and funds received after that
hour shall be deemed to have been received by the Lender on the next following
Business Day. The Lender hereby specifies that all (i) payments with respect
to Program Vehicles leased under the Finance Lease made by the Manufacturers
and related auction dealers under the Manufacturer Programs, (ii) amounts
representing the proceeds from sales of Vehicles leased under the
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Finance Lease (including amounts paid by a Manufacturer as a result of the
sale of such Vehicle outside such Manufacturer's Manufacturer Program) to
third parties (other than under any related Manufacturer Program) and (iii)
payments with respect to any other AESOP I Finance Lease Loan Collateral shall
be deposited in the Collection Account; provided, however, that, subject to
Section 5.2 of the Base Indenture, insurance proceeds and warranty payments
with respect to Vehicles leased under the Finance Lease will be deposited in
the Collection Account only if an Amortization Event or a Potential
Amortization Event shall have occurred and be continuing.
SECTION 6.2. Due Date Extension. If any (i) payment of the
Monthly Loan Principal Amount or Loan Interest hereunder or (ii) prepayments
of the Loan Principal Amount or Supplemental Interest with respect to any
Loans made hereunder falls due on a day which is not a Business Day, then such
due date shall be extended to the next following Business Day and Loan
Interest or Supplemental Interest, as applicable, shall accrue through such
Business Day.
SECTION 6.3. Application of Sale Proceeds. AESOP Leasing
agrees that an amount equal to the product of (A) the applicable Loan Payment
Allocation Percentage as of the beginning of the Related Month times (B) the
sum of (i) all payments made by the Manufacturers and related auction dealers
under the Manufacturer Programs with respect to Vehicles leased under the
Finance Lease, plus (ii) proceeds from the sale of Vehicles leased under the
Finance Lease to third parties (other than to the Manufacturer or pursuant to
a Guaranteed Depreciation Program), in each case deposited in the Collection
Account on any date, shall be applied, upon receipt thereof in the Collection
Account, to prepay the Loan Principal Amount.
SECTION 6.4. Payment Deficits. At or before 11:30 a.m., New
York City time, on each Payment Date, AESOP Leasing shall notify the Trustee
and the related Enhancement Provider of the amount of the Lease Payment
Deficit, if any, with respect to each Series of Notes issued pursuant to the
Indenture, such notification to be in the form of Exhibit C.
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SECTION 7. LOAN COLLATERAL SECURITY.
SECTION 7.1. Grant of Security Interest. (a) As security for
the prompt and complete payment and performance of its Liabilities, AESOP
Leasing hereby pledges, hypothecates, assigns, transfers and delivers to the
Lender, and hereby grants to the Lender, a continuing, security interest in,
all of the following, whether now owned or hereafter acquired:
(i) all Vehicles leased under the Finance
Lease, and all Certificates of Title with respect
thereto;
(ii) all right, title and interest of AESOP Leasing
in and to each Manufacturer Program, including any amendments
thereof, and all monies due and to become due under or in connection
with each such Manufacturer Program, in each case in respect of
Vehicles leased under the Finance Lease, whether payable as Vehicle
Repurchase Prices, auction sales proceeds, fees, expenses, costs,
indemnities, insurance recoveries, damages for breach of the
Manufacturer Programs or otherwise (but excluding all incentive
payments payable in respect of purchases of vehicles under the
Manufacturer Programs) and all rights to compel performance and
otherwise exercise remedies thereunder;
(iii) all right, title and interest of AESOP
Leasing in, to and under the Finance Lease, any agreement to sublease
Vehicles leased under the Finance Lease in accordance with Section 7
thereof, and the related Lessee Agreements (other than any right,
title and interest of AESOP Leasing with respect to any Excluded
Payments) including, without limitation, all monies due and to become
due to AESOP Leasing from any of the Lessees, any sublessee or the
Guarantor or any of their assigns under or in connection with the
Finance Lease, any such agreement to sublease and the related Lessee
Agreements, whether payable as principal, interest, rent, guaranty
payments (other than guaranty payments with respect to any Excluded
Payments provided to AESOP Leasing under the Finance Lease), fees,
expenses, costs, indemnities, insurance recoveries, damages for the
breach of any of the Finance Lease, any such
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agreement to sublease and the related Lessee Agreements or otherwise,
and all rights, remedies, powers, privileges and claims of AESOP
Leasing against any other party under or with respect to the Finance
Lease, any such agreement to sublease and the related Lessee
Agreements (whether arising pursuant to the terms of the Finance
Lease, any such agreement to sublease or the related Lessee
Agreements or otherwise available to AESOP Leasing at law or in
equity), the right to enforce the Finance Lease, any such agreement
to sublease and the related Lessee Agreements as provided herein and
to give or withhold any and all consents, requests, notices,
directions, approvals, extensions or waivers under or with respect to
the Finance Lease, any such agreement to sublease and the related
Lessee Agreements or the obligations of any party thereunder, and all
collateral pledged by ARAC under the Finance Lease;
(iv) all right, title and interest of each of AESOP
Leasing in, to and under the Vehicle Title and Lienholder Nominee
Agreements, the HFS Indemnity and the Administration Agreement,
including any amendments thereof, and all monies due and to become
due thereunder, in each case in respect of Vehicles leased under the
AESOP I Finance Lease, whether payable as fees, expenses, costs,
indemnities, insurance recoveries, damages for the breach of any of
the Vehicle Title and Lienholder Nominee Agreements, the HFS
Indemnity and the Administration Agreement or otherwise and all
rights to compel performance and otherwise exercise remedies
thereunder;
(v) all payments under insurance policies (whether
or not the Lessor, the Lender or the Trustee is named as the loss
payee thereof) or any warranty payable by reason of loss or damage
to, or otherwise with respect to, any of the Vehicles leased under
the Finance Lease;
(vi) all right, title and interest of AESOP Leasing
in and to any proceeds from the sale of Vehicles leased under the
Finance Lease, including all monies due in respect of such Vehicles
under the Finance Lease, whether payable as the purchase price of
such Vehicles, auction sales proceeds, or as fees, expenses, costs,
indemnities, insurance
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recoveries, or otherwise (including all upfront incentive payments
payable by Manufacturers in respect of purchases of Non-Program
Vehicles);
(vii) any assignment of a security interest in any
Vehicle leased under the Finance Lease granted to AESOP Leasing
pursuant to the Finance Lease or otherwise, and all Certificates of
Title with respect to each such Vehicle; and
(viii) all products and proceeds of all of
the foregoing;
provided, however, that the AESOP I Segregated Account shall not be subject to
the grant of a security interest by AESOP Leasing pursuant to this Section
7.1(a) and shall not constitute part of the AESOP I Loan Collateral.
(b) To secure the AFC-II Obligations, AESOP Leasing hereby
pledges, hypothecates, assigns, transfers and delivers to the Trustee, on
behalf of the Secured Parties, and hereby grants to the Trustee, on behalf of
the Secured Parties, a continuing, first priority security interest in, all of
the AESOP I Finance Lease Loan Collateral, whether now owned or hereafter
acquired. Upon the occurrence of a Liquidation Event of Default or a Limited
Liquidation Event of Default and subject to the provisions of the Related
Documents, the Trustee shall have all of the rights and remedies of a secured
party, including, without limitation, the rights and remedies granted under
the Uniform Commercial Code.
SECTION 7.2. Certificates of Title. AESOP Leasing shall
take, or shall cause to be taken, such action as shall be necessary to submit
all of the Certificates of Title for Vehicles leased under the Finance Lease
(other than Certificates of Title with respect to the (i) Initial Financed
Vehicles for which BONY is noted as the first lienholder and (ii) Franchisee
Vehicles for which the nominee lienholder under the applicable Franchisee
Nominee Agreement is noted as the first lienholder) to the appropriate state
authority for notation of the Trustee's lien thereon. The original
Certificates of Title shall be held by the Administrator, as agent for AESOP
Leasing, in trust for the benefit of the Lender and the Trustee.
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SECTION 7.3. Release of AESOP I Finance Lease Loan
Collateral. The Lender shall request the Trustee in writing to release its
Lien on a Vehicle leased under the Finance Lease and the Certificate of Title
therefor upon the earliest of (i) in the case of a Program Vehicle or a
Non-Program Vehicle subject to a Guaranteed Depreciation Program, the date of
the sale of such Vehicle by an auction dealer to a third party, and in the
case of a Program Vehicle or a Non-Program Vehicle subject to a Repurchase
Program, the Turnback Date for such Vehicle, (ii) voluntary prepayment in full
of the principal amount of the Loan to which such Vehicle relates in
accordance with Section 5.2, as noted in records maintained by the Trustee,
(iii) receipt of proceeds from an ordinary course sale of such Vehicle in an
amount at least equal to the Termination Value of such Vehicle, provided,
however, that if such an ordinary course sale occurs during the Repurchase
Period with respect to a Program Vehicle, AESOP Leasing shall only sell or
permit a sale of such Program Vehicle for a purchase price, together with any
amounts payable by a Manufacturer as a result of or in connection with such
sale, equal to or greater than the Repurchase Price that it would have
received if it had turned back such Program Vehicle to the Manufacturer and
(iv) receipt of proceeds from an ordinary course sale of a Vehicle subject to
a Casualty in an amount at least equal to the Termination Value of such
Vehicle. With respect to Vehicles leased under the Finance Lease, from and
after the earliest of (a) in the case of a Program Vehicle or a Non-Program
Vehicle subject to a Guaranteed Depreciation Program, the date of the sale of
such Vehicle by an auction dealer to a third party, and in the case of a
Program Vehicle or a Non-Program Vehicle subject to a Repurchase Program, the
Turnback Date for such Vehicle, (b) a prepayment of the principal amount of
the Loan to which such Vehicle relates and (c) receipt of the purchase price
for a Vehicle by AESOP Leasing, or by the Trustee on the Lender's behalf, in
the case of (b) and (c), in an amount at least equal to the Termination Value
of such Vehicle, such Vehicle and such Certificate of Title shall be deemed to
be released from the Lien of this Agreement, and the Lender and the Trustee
shall execute such documents and instruments as AESOP Leasing may reasonably
request (including a power of attorney of the Trustee appointing the
Administrator to act as the agent of the Trustee in releasing the Lien of the
Trustee on Vehicles turned back or sold pursuant to the provi-
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sions of this Section 7.3; which power of attorney shall be revocable by the
Lender or the Trustee at any time following the occurrence of a Liquidation
Event of Default), at AESOP Leasing's expense, to evidence and/or accomplish
such release.
SECTION 7.4. Change of Location or Name. So long as any of
its Liabilities shall remain outstanding or the Lender shall continue to have
any Loan Commitment, AESOP Leasing will not change (i) the location of its
principal place of business, chief executive office, major executive office,
chief place of business or its records concerning its business and financial
affairs, or (ii) its legal name or the name under or by which it conducts its
business, in each case without first giving the Trustee and the Lender at
least 30 days' advance written notice thereof and having taken any and all
action required to maintain and preserve the first priority perfected Lien
of the Lender or the Trustee on the AESOP I Finance Lease Loan Collateral
(except that the lien of the Trustee shall not be noted on the Certificates
of Title with respect to the Initial Financed Vehicles or the Franchisee
Vehicles), free and clear of any Lien whatsoever except for Permitted Liens;
provided, however, that notwithstanding the foregoing, AESOP Leasing shall
not change the location of its principal place of business, chief executive
office, major executive office, chief place of business or its records
concerning its business and financial affairs to any place outside the United
States of America.
SECTION 7.5. Deliveries; Further Assurances. AESOP Leasing
agrees that it will, at its sole expense, (i) immediately deliver or cause to
be delivered to the Lender (or the Trustee on behalf of the Secured Parties),
in due form for transfer (i.e., endorsed in blank), all securities, chattel
paper, instruments and documents, if any, at any time representing all or any
of the AESOP I Finance Lease Loan Collateral, other than the Certificates of
Title which shall be delivered to the Lender or the Trustee, as applicable,
after the occurrence of a Liquidation Event of Default, if such delivery is
reasonably necessary or appropriate to perfect or protect the Lender's (or the
Trustee's on behalf of the Secured Parties) security interest in such AESOP I
Finance Lease Loan Collateral, and (ii) execute and deliver, or cause to be
executed and delivered, to the Lender or the Trust-
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ee in due form for filing or recording (and pay the cost of filing or
recording the same in all public offices reasonably deemed necessary or
advisable by the Lender or the Trustee), such assignments, security
agreements, mortgages, consents, waivers, financing statements and other
documents, and do such other acts and things, all as may from time to time be
reasonably necessary or desirable to establish and maintain to the
satisfaction of the Lender (or the Trustee) a valid perfected Lien on and
security interest in all of the AESOP I Finance Lease Loan Collateral now or
hereafter existing or acquired (free of all other Liens whatsoever other than
Permitted Liens) to secure payment and performance of its Liabilities.
SECTION 7.6. [RESERVED].
SECTION 7.7. [RESERVED].
SECTION 7.8. AESOP I Segregated Account. AESOP Leasing shall
establish and maintain in its name an account entitled "AESOP Leasing L.P.
Account" (the "AESOP I Segregated Account"). The AESOP I Segregated Account
shall be maintained (i) with a Qualified Institution, or (ii) as a segregated
trust account with the corporate trust department of a depository institution
or trust company having corporate trust powers and acting as trustee for funds
deposited in the AESOP I Segregated Account. If the AESOP I Segregated Account
is not maintained in accordance with the previous sentence, then within 10
Business Days after obtaining knowledge of such fact, AESOP Leasing shall
establish a new AESOP I Segregated Account which complies with such sentence
and transfer into the new AESOP I Segregated Account all amounts then on
deposit in the non-qualifying AESOP I Segregated Account. The parties hereto
acknowledge and agree that the monies held in the AESOP I Segregated Account
from time to time (i) are property of AESOP Leasing, (ii) are not being
pledged to secure any obligation to, or otherwise held in trust for, the
Lender or any of the persons specified in this Section 7.8 and (iii) are
available to satisfy the claims of creditors of AESOP Leasing generally;
provided, however, that if funds are deposited into the AESOP I Segregated
Account in accordance with Section 9.13 for the purpose of paying legal fees
and disbursements of counsel to AESOP Leasing or its Permitted Nominees, AESOP
Leasing shall use such funds
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solely for such purpose; and provided further that nothing contained herein
shall affect the rights of the Lender to pursue all legal remedies available
to it with respect to any amounts payable by AESOP Leasing hereunder.
SECTION 8. REPRESENTATIONS AND WARRANTIES. To induce the
Lender to enter into this Agreement and to make Loans hereunder, AESOP Leasing
represents and warrants to the Lender as of the Initial Closing Date, as of
the date of each Loan made hereunder and as of each Series Closing Date that:
SECTION 8.1. Organization; Ownership; Power; Qualification.
AESOP Leasing is (i) a limited partnership duly organized, validly existing
and in good standing under the laws of the jurisdiction of its formation, (ii)
has the power and authority to own its properties and to carry on its business
as now being and hereafter proposed to be conducted and (iii) is duly
qualified, in good standing and authorized to do business in each jurisdiction
in which the character of its properties or the nature of its businesses
requires such qualification or authorization.
SECTION 8.2. Authorization; Enforceability. AESOP Leasing
has the power and has taken all necessary action to authorize it to execute,
deliver and perform this Agreement and each of the other Related Documents to
which it is a party in accordance with their respective terms, and to
consummate the transactions contemplated hereby and thereby. This Agreement
has been duly executed and delivered by AESOP Leasing and is, and each of the
other Related Documents to which AESOP Leasing is a party is, a legal, valid
and binding obligation of AESOP Leasing, enforceable in accordance with its
terms.
SECTION 8.3. Compliance. The execution, delivery and
performance by AESOP Leasing of this Agreement and each other Related Document
to which it is a party, and the consummation of the transactions contemplated
hereby and thereby, do not and will not (i) require any consent, approval,
authorization or registration not already obtained or effected, (ii) violate
any applicable law with respect to AESOP Leasing which violation could result
in a Material Adverse Effect, (iii) conflict with, result in a breach of, or
constitute a
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default under the certificate of limited partnership or limited partnership
agreement of AESOP Leasing, or under any indenture, agreement, or other
instrument to which AESOP Leasing is a party or by which its properties may be
bound, or (iv) result in or require the creation or imposition of any Lien
upon or with respect to any property now owned or hereafter acquired by AESOP
Leasing except Permitted Liens.
SECTION 8.4. [RESERVED].
SECTION 8.5. Litigation. There is no action, suit or
proceeding pending against or, to the knowledge of AESOP Leasing, threatened
against or affecting AESOP Leasing before any court or arbitrator or any
Governmental Authority in which there is a reasonable possibility of an
adverse decision that could materially adversely affect the consolidated
financial position, consolidated results of operations, business, properties,
performance or condition (financial or otherwise) of AESOP Leasing or which in
any manner draws into question the validity or enforceability of this
Agreement or any other Related Document or the ability of AESOP Leasing to
comply with any of the respective terms hereunder or thereunder.
SECTION 8.6. Liens. The AESOP I Finance Lease Loan
Collateral is free and clear of all Liens other than (i) Permitted Liens and
(ii) Liens in favor of the Lender or the Trustee. The Lender (or the Trustee
on behalf of the Secured Parties) has obtained, as security for the
Liabilities, a first priority perfected Lien on all AESOP I Finance Lease Loan
Collateral. All Vehicle Perfection and Documentation Requirements with respect
to all Vehicles leased under the Finance Lease on or after the date hereof
have and will continue to be satisfied in accordance with the terms of this
Agreement.
SECTION 8.7. Employee Benefit Plans. AESOP Leasing has not
established and does not maintain or contribute to any employee benefit plan
that is covered by Title IV of ERISA, and will not do so, so long as the Loan
Commitment has not expired, or any amount is owing to the Lender hereunder.
SECTION 8.8. Investment Company Act. AESOP Leasing is not
and is not controlled by an "investment company," within the meaning of the
Investment Company
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Act, and AESOP Leasing is not subject to any other statute which would impair
or restrict its ability to perform its obligations under this Agreement or the
other Related Documents, and neither the entering into or performance by AESOP
Leasing of this Agreement nor the issuance of the Loan Note violates any
provision of such Act.
SECTION 8.9. Regulations G, T, U and X. AESOP Leasing is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation G, T, U and X of the Board of Governors of
the Federal Reserve System). None of AESOP Leasing, any Affiliate of AESOP
Leasing or any Person acting on its behalf has taken or will take action to
cause the execution, delivery or performance of this Agreement or the Loan
Note, the making or existence of the Loans or the use of proceeds of the Loans
made hereunder to violate Regulation G, T, U or X of the Board of Governors
of the Federal Reserve System.
SECTION 8.10. Proceeds. The proceeds of the Loans made
hereunder will be used solely to finance the purchase of Eligible Vehicles
that will be leased under the Finance Lease.
SECTION 8.11. Business Locations; Trade Names. Schedule 8.11
lists each of the locations where AESOP Leasing maintains a chief executive
office, principal place of business, or any records, and Schedule 8.11 also
lists AESOP Leasing's legal name and each name under or by which AESOP Leasing
conducts its business.
SECTION 8.12. Taxes. AESOP Leasing has filed all tax returns
which have been required to be filed by it (except where the requirement to
file such return is subject to a valid extension), and has paid or provided
adequate reserves for the payment of all taxes shown due on such returns or
required to be paid as a condition to such extension, as well as all payroll
taxes and federal and state withholding taxes, and all assessments payable by
it that have become due, other than those that are payable without penalty or
are being contested in good faith by appropriate proceedings and with respect
to which adequate reserves have been established, and are being maintained, in
accordance with GAAP. As of the Initial Closing Date, to the best of AESOP
Leasing's
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knowledge, there is no unresolved claim by a taxing authority concerning AESOP
Leasing's tax liability for any period for which returns have been filed or
were due other than those contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been established, and are
being maintained, in accordance with GAAP.
SECTION 8.13. Governmental Authorizations. AESOP Leasing has
all licenses, franchises, permits and other governmental authorizations
necessary for all businesses presently carried on by it (including owning and
leasing the real and personal property owned and leased by it), except where
failure to obtain such licenses, franchises, permits and other governmental
authorizations would not have a material adverse effect on its business and
properties or a Material Adverse Effect (as set forth in clauses (ii) and
(iii) of the definition thereof).
SECTION 8.14. Compliance with Laws. AESOP Leasing: (i) is
not in violation of any law, ordinance, rule, regulation or order of any
Governmental Authority applicable to it or its property, which violation would
have a material adverse effect on its business and properties or a Material
Adverse Effect (as set forth in clauses (ii) and (iii) of the definition
thereof), and no such violation has been alleged, (ii) has filed in a timely
manner all reports, documents and other materials required to be filed by it
with any governmental bureau, agency or instrumentality (and the information
contained in each of such filings is true correct and complete in all material
respects), except where failure to make such filings would not have a material
adverse effect on its business and properties or a Material Adverse Effect (as
set forth in clauses (ii) and (iii) of the definition thereof) and (iii) has
retained all records and documents required to be retained by it pursuant to
any Requirement of Law, except where failure to retain such records would not
have a material adverse effect on its business and properties or a Material
Adverse Effect (as set forth in clauses (ii) and (iii) of the definition
thereof).
SECTION 8.15. Eligible Vehicles. Each Vehicle leased under
the Finance Lease was, on the date of financing thereof by AESOP Leasing, an
Eligible Vehicle.
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SECTION 8.16. Manufacturer Programs. No Manufacturer Event
of Default has occurred and is continuing with respect to any Eligible Program
Manufacturer.
SECTION 8.17. Absence of Default. AESOP Leasing is in
compliance with all of the provisions of its certificate of limited
partnership and limited partnership agreement and no event has occurred or
failed to occur which has not been remedied or waived, the occurrence or
non-occurrence of which constitutes, or with the passage of time or giving of
notice or both would constitute, (i) an AESOP I Loan Event of Default or a
Potential AESOP I Loan Event of Default or (ii) a default or event of default
by AESOP Leasing under any indenture, agreement or other instrument, or any
judgment, decree or final order to which AESOP Leasing is a party or by which
AESOP Leasing or any of its properties may be bound or affected.
SECTION 8.18. No Security Interest; Title to Assets. (a) All
action necessary (including the filing of UCC-1 financing statements, the
assignment of rights under the Manufacturer Programs to the Trustee, the
notation on Certificates of Title for all Vehicles leased under the Finance
Lease (other than Certificates of Title with respect to the (i) Initial
Financed Vehicles for which BONY is noted as the first lienholder and (ii)
Franchisee Vehicles for which the nominee lienholder under the applicable
Franchisee Nominee Agreement is noted as the first lienholder) of the
Trustee's lien for the benefit of the Secured Parties) to protect and perfect
AFC-II's security interest in the AESOP I Finance Lease Loan Collateral and
the Trustee's security interest on behalf of the Noteholders in the Collateral
now in existence and hereafter acquired or created has been duly and
effectively taken.
(b) AESOP Leasing has good, legal and marketable title to,
or a valid leasehold interest in, all of its assets. None of such properties
or assets is subject to any Liens, except for Permitted Liens. Except for
financing statements or other filings with respect to or evidencing Permitted
Liens, no financing statement under the UCC of any state, application for a
Certificate of Title or certificate of ownership, or other filing which names
AESOP Leasing as debtor or which covers or purports to cover any of the assets
of AESOP Leasing is on file in
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any state or other jurisdiction, and AESOP Leasing has not signed any such
financing statement, application or instrument authorizing any secured party
or creditor of such Person thereunder to file any such financing statement,
application or filing other than with respect to Permitted Liens.
SECTION 8.19. Accuracy of Information. All data,
certificates, reports, statements, opinions of counsel, documents and other
information furnished to the Lender or the Trustee by or on behalf of AESOP
Leasing pursuant to any provision of any Related Document, or in connection
with or pursuant to any amendment or modification of, or waiver under, any
Related Document, shall, at the time the same are so furnished, (i) be
complete and correct in all material respects to the extent necessary to give
the Lender or the Trustee, as the case may be, true and accurate knowledge of
the subject matter thereof, (ii) not contain any untrue statement of a
material fact and (iii) not omit to state a material fact necessary in order
to make the statements contained therein (in light of the circumstances in
which they were made) not misleading, and the furnishing of the same to the
Lender or the Trustee, as the case may be, shall constitute a representation
and warranty by AESOP Leasing made on the date the same are furnished to the
Lender or the Trustee, as the case may be, to the effect specified in clauses
(i), (ii) and (iii) above.
SECTION 9. AFFIRMATIVE COVENANTS. Until the expiration or
termination of the Loan Commitment and thereafter until the Loan Note and all
other Liabilities are paid in full, AESOP Leasing agrees that, unless at any
time the Lender shall otherwise expressly consent in writing:
SECTION 9.1. Existence; Foreign Qualification. AESOP Leasing
will do and cause to be done at all times all things necessary to (i) maintain
and preserve its existence as a limited partnership, (ii) be, and ensure that
it is, duly qualified to do business and in good standing as a foreign limited
partnership in each jurisdiction where the nature of its business makes such
qualification necessary and the failure to so qualify would have a material
adverse effect on its business and properties or a Material Adverse Effect (as
set forth in clauses (ii) and (iii) of the definition thereof) and
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(iii) comply with all Contractual Obligations and Requirements of Law binding
upon it, except to the extent that the failure to comply therewith would not,
in the aggregate, have a material adverse effect on its business and
properties or a Material Adverse Effect (as set forth in clauses (ii) and
(iii) of the definition thereof).
SECTION 9.2. Books, Records and Inspections. AESOP Leasing
will (i) maintain complete and accurate books and records with respect to the
AESOP I Finance Lease Loan Collateral and (ii) permit any Person designated by
the Lender or the Trustee in writing to visit and inspect any of its
properties, corporate books and financial records and to discuss its affairs,
finances and accounts with its officers, its agents and its independent public
accountants, all at such reasonable times and as often as the Lender or the
Trustee may reasonably request.
SECTION 9.3. Insurance. AESOP Leasing will obtain and
maintain, or cause to be obtained and maintained, with respect to all Vehicles
leased under the Finance Lease (i) vehicle liability insurance to the full
extent required by law and in any event not less than $500,000 per Person and
$1,000,000 per occurrence, (ii) property damage insurance with a limit of
$1,000,000 per occurrence and (iii) excess coverage public liability insurance
with a limit of not less than $50,000,000 or the limit maintained from time to
time by the relevant Lessee at any time hereafter, whichever is greater, with
respect to all passenger cars and vans comprising such Lessee's rental fleet.
The Lender acknowledges and agrees that AESOP Leasing may, to the extent
permitted by applicable law, allow the relevant Lessees to self-insure with
respect to the Vehicles leased under the Finance Lease for the first
$1,000,000 per occurrence, or a greater amount up to a maximum of $3,000,000,
with the consent of each Enhancement Provider, per occurrence, of vehicle
liability and property damage insurance which is otherwise required to be
insured hereunder. All such policies shall be from financially sound and
reputable insurers, shall name the Lender, Original AESOP, PVHC, Quartx and
the Trustee as additional insured parties and, in the case of catastrophic
physical damage insurance on such Vehicles, shall name the Trustee as loss
payee as its interest may appear and will provide that the Lender and the
Trustee shall receive at least 10 days' prior
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written notice of cancellation of such policies. AESOP Leasing will notify
promptly the Lender and the Trustee of any curtailment or cancellation of any
such Lessee's right to self-insure in any jurisdiction.
SECTION 9.4. Manufacturer Programs. AESOP Leasing will turn
in, or cause to be turned in, the Vehicles leased under the Finance Lease
which are Program Vehicles (subject to the redesignation provisions of Section
2.7 of the Finance Lease) to the relevant Manufacturer within the Repurchase
Period therefor (unless AESOP Leasing pays in full the Loan with respect to a
Program Vehicle pursuant to Section 5.2 or sells a Program Vehicle and, prior
to the end of the Repurchase Period therefor, receives sales proceeds thereof
in cash in an amount equal to or greater than the repurchase price under such
Manufacturer Program); and will comply with all of its obligations under each
Manufacturer Program.
SECTION 9.5. Reporting Requirements. AESOP Leasing will
furnish, or cause to be furnished, to the Lender and the Trustee and, in the
case of item (iii) below, each Rating Agency:
(i) Reports. All reports of ARC and the Lessee
required to be delivered to AESOP Leasing pursuant to Section 31.5
of the Finance Lease;
(ii) AESOP I Loan Events of Default; Amortization
Events. As soon as possible but in any event within two Business Days
after the occurrence of (A) any Potential AESOP I Loan Event of
Default or AESOP I Loan Event of Default, a written statement of an
Authorized Officer describing such event and the action that AESOP
Leasing proposes to take with respect thereto and (B) any Potential
Amortization Event or Amortization Event, notice thereof to the
Lender, each Enhancement Provider and the Rating Agencies;
(iii) Manufacturers. Promptly after obtaining
actual knowledge thereof, notice of any Manufacturer Event of Default
or termination or replacement of a Manufacturer Program;
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(iv) Notice of Liens and Vicarious Liability
Claims. On each Determination Date, AESOP Leasing shall forward to
AFC-II, the Trustee and the Paying Agent, the Administrative Agent,
the Rating Agencies and each Enhancement Provider, (A) an Officer's
Certificate of AESOP Leasing certifying as to whether, to the
knowledge of AESOP Leasing, (x) any Lien exists on any of the AESOP I
Finance Lease Loan Collateral or (y) any vicarious liability claims
shall have been made against AESOP Leasing as a result of its
ownership of the Vehicles leased under the Finance Lease and (B) a
written statement of an Authorized Officer summarizing each such Lien
or claim and the action that AESOP Leasing proposes to take with
respect thereto; and
(v) Other. Promptly, from time to time, such other
information, documents, or reports respecting the AESOP I Loan
Collateral or the condition or operations, financial or otherwise, of
AESOP Leasing as the Lender or the Trustee may from time to time
reasonably request in order to protect the interests of the Lender or
the Trustee under or as contemplated by this Agreement or any other
Related Document.
SECTION 9.6. Payment of Taxes; Removal of Liens. AESOP
Leasing will pay when due all taxes, assessments, fees and governmental
charges of any kind whatsoever that may be at any time lawfully assessed or
levied against or with respect to AESOP Leasing or its property and assets or
any interest thereon. Notwithstanding the previous sentence, but subject in
any case to the other requirements hereof and of the Related Documents, AESOP
Leasing shall not be required to pay any tax, charge, assessment or imposition
nor to comply with any law, ordinance, rule, order, regulation or requirement
so long as AESOP Leasing shall contest, in good faith, the amount or validity
thereof, in an appropriate manner or by appropriate proceedings. Each such
contest shall be promptly prosecuted to final conclusion (subject to the right
of AESOP Leasing to settle any such contest).
SECTION 9.7. Business. AESOP Leasing will engage only in
businesses conducted on the date hereof.
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SECTION 9.8. Maintenance of the Vehicles. AESOP Leasing will
maintain or cause to be maintained in good repair, working order, and
condition all of the Vehicles leased under the Finance Lease, except to the
extent that any such failure to comply with such requirements does not, in the
aggregate, materially adversely affect the interests of the Lender under this
Agreement or the interests of the Secured Parties under the Indenture or the
likelihood of repayment of the Loans made hereunder. From time to time AESOP
Leasing will make or cause to be made all appropriate repairs, renewals, and
replacements with respect to the Vehicles leased under the Finance Lease.
SECTION 9.9. Maintenance of Separate Existence. AESOP
Leasing will do all things necessary to continue to be readily distinguishable
from ARC, ARAC, Original AESOP, AESOP Leasing II, AFC, AFC-II, the Affiliates
of the foregoing or any other affiliated or unaffiliated entity and to
maintain its existence as a limited partnership separate and apart from that
of Original AESOP, AESOP Leasing II, AFC, AFC-II, ARAC and ARC and Affiliates
of ARC including, without limitation, (i) practicing and adhering to
organizational formalities, such as maintaining appropriate books and records;
(ii) observing all organizational formalities in connection with all dealings
between itself and ARC, ARAC, AESOP Leasing II, Original AESOP, AFC, AFC-II,
the Affiliates of the foregoing or any other affiliated or unaffiliated
entity; (iii) observing all procedures required by its certificate of limited
partnership, its limited partnership agreement and the laws of the State of
Delaware; (iv) acting solely in its name and through its duly authorized
officers or agents in the conduct of its businesses; (v) managing its business
and affairs by or under the direction of its general partner; (vi) ensuring
that its general partner duly authorizes all of its actions; (vii) ensuring
the receipt of proper authorization, when necessary, from its limited
partner(s) for its actions; (viii) requiring its general partner to maintain
at least two corporate directors who are Independent Directors; (ix) owning or
leasing (including through shared arrangements with Affiliates) all office
furniture and equipment necessary to operate its business; (x) not (A) having
or incurring any debt or obligations to any of AESOP Leasing II, Original
AESOP, AFC, AFC-II, ARC, ARAC, the Affiliates of the foregoing or any other
affiliated
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or unaffiliated entity, except for, the obligations to AFC-II under the AESOP
I Loan Agreements; (B) other than as provided in the Related Documents,
guaranteeing or otherwise becoming liable for any obligations of AESOP Leasing
II, Original AESOP, AFC, AFC-II, ARAC or ARC or any Affiliates of the
foregoing; (C) having obligations guaranteed by AESOP Leasing II, Original
AESOP, AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing; (D)
holding itself out as responsible for debts of AESOP Leasing II, Original
AESOP, AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing or for
decisions or actions with respect to the affairs of AESOP Leasing II, Original
AESOP, AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing; (E)
failing to correct any known misrepresentation with respect to the statement
in subsection (C); (F) operating or purporting to operate as an integrated,
single economic unit with respect to AESOP Leasing II, Original AESOP, AFC,
AFC-II, ARAC, ARC, the Affiliates of the foregoing or any other affiliated or
unaffiliated entity or any other affiliated or unaffiliated entity; (G)
seeking to obtain credit or incur any obligation to any third party based upon
the assets of AESOP Leasing II, Original AESOP, AFC, AFC-II, ARAC, ARC, the
Affiliates of the foregoing or any other affiliated or unaffiliated entity;
(H) induce any such third party to reasonably rely on the creditworthiness of
AESOP Leasing II, Original AESOP, AFC, AFC-II, ARAC, ARC, the Affiliates of
the foregoing or any other affiliated or unaffiliated entity; and (I) being
directly or indirectly named as a direct or contingent beneficiary or loss
payee on any insurance policy of AESOP Leasing II, Original AESOP, AFC,
AFC-II, ARAC or ARC or any Affiliates of the foregoing other than as required
by the Related Documents with respect to insurance on the Vehicles; (xi) other
than as provided in the Related Documents, maintaining its deposit and other
bank accounts and all of its assets separate from those of any other Person;
(xii) maintaining its financial records separate and apart from those of any
other Person; (xiii) disclosing in its annual financial statements the effects
of the transactions contemplated by the Related Documents in accordance with
generally accepted accounting principles; (xiv) setting forth clearly in its
financial statements its separate assets and liabilities and the fact that the
Vehicles leased under the AESOP I Operating Lease are owned by AESOP Leasing;
(xv) not suggesting in any way, within its financial statements, that its
assets are available to
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pay the claims of creditors of AESOP Leasing II, Original AESOP, AFC, AFC-II,
ARAC, ARC, the Affiliates of the foregoing or any other affiliated or
unaffiliated entity; (xvi) compensating all its employees, officers,
consultants and agents for services provided to it by such Persons out of its
own funds; (xvii) maintaining office space separate and apart from that of
AESOP Leasing II, Original AESOP, AFC, AFC-II, ARAC or ARC or any Affiliates
of the foregoing (even if such office space is subleased from or is on or near
premises occupied by AESOP Leasing II, Original AESOP, AFC, AFC-II, ARAC or
ARC or any Affiliates of the foregoing) and a telephone number separate and
apart from that of AESOP Leasing II, Original AESOP, AFC, AFC-II, ARAC or ARC
or any Affiliates of the foregoing; (xviii) conducting all oral and written
communications, including, without limitation, letters, invoices, purchase
orders, contracts, statements, and applications solely in its own name; (xix)
having separate stationary from AESOP Leasing II, Original AESOP, AFC, AFC-II,
ARAC, ARC, the Affiliates of the foregoing or any other affiliated or
unaffiliated entity; (xx) accounting for and managing all of its liabilities
separately from those of AESOP Leasing II, Original AESOP, AFC, AFC-II, ARAC
or ARC or any Affiliates of the foregoing; (xxi) allocating, on an
arm's-length basis, all shared operating services, leases and expenses,
including, without limitation, those associated with the services of shared
consultants and agents and shared computer and other office equipment and
software; and otherwise maintaining an arm's-length relationship with each of
AESOP Leasing II, Original AESOP, AFC, AFC-II, ARAC, ARC, the Affiliates of
the foregoing or any other affiliated or unaffiliated entity; (xxii)
refraining from filing or otherwise initiating or supporting the filing of a
motion in any bankruptcy or other insolvency proceeding involving AESOP
Leasing II, Original AESOP, AFC, AFC-II, AESOP Leasing, ARAC, ARC or any
Affiliate of ARC, to substantively consolidate AESOP Leasing II, Original
AESOP, AFC, AFC-II or AESOP Leasing with ARAC, ARC or any Affiliate of ARC;
(xxiii) remaining solvent and assuring adequate capitalization for the
business in which it is engaged and (xxiv) conducting all of its business
(whether written or oral) solely in its own name so as not to mislead others
as to the identity of each of AESOP Leasing II, Original AESOP, AESOP Leasing,
AFC, AFC-II, ARAC, ARC and the Affiliates of the foregoing or any other
affiliated or unaffiliated entity. AESOP Leasing ac-
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knowledges its receipt of a copy of those certain opinion letters issued by
Skadden, Arps, Slate, Meagher & Flom LLP dated July 30, 1997 addressing the
issue of substantive consolidation as they may relate to any of ARAC, ARC and
each affiliate of ARC on the one hand and any of AESOP Leasing II, Original
AESOP, AFC, AFC-II and AESOP Leasing on the other hand and as among AESOP
Leasing II, Original AESOP, AESOP Leasing, AFC-II and AFC. AESOP Leasing
hereby agrees to maintain in place all policies and procedures, and take and
continue to take all action, described in the factual assumptions set forth in
such opinion letter and relating to it.
SECTION 9.10. Manufacturer Payments; Sales Proceeds. AESOP
Leasing will cause each Manufacturer and auction dealer to make all payments
under the Manufacturer Programs with respect to Program Vehicles directly to
the Collection Account. Any such payments from Manufacturers or related
auction dealers received directly by AESOP Leasing, will be, within three
Business Days of receipt, deposited into the Collection Account. AESOP Leasing
shall, within two Business Days of receipt thereof, deposit into the
Collection Account all amounts representing the proceeds from sales of Program
Vehicles by auction dealers under a Guaranteed Depreciation Program and sales
of Vehicles (including amounts paid by a Manufacturer as a result of the sale
of such Vehicle outside such Manufacturer's Manufacturer Program) to third
parties (other than under any related Manufacturer Program) and all payments
with respect to other AESOP I Loan Collateral (other than the AESOP I Loan
Collateral described in the last sentence of this paragraph). Insurance
proceeds and warranty payments with respect to Vehicles will only be deposited
into the Collection Account if an Amortization Event or Potential Amortization
Event shall have occurred and be continuing.
SECTION 9.11. Maintenance of Properties. AESOP Leasing will
maintain or cause to be maintained in the ordinary course of business in good
repair, working order and condition (reasonable wear and tear excepted) all
properties, including, without limitation, vehicles necessary for the
operation of its businesses (whether owned or held under lease), and from time
to time make or cause to be made all needed and appropriate repairs, renewals,
replacements, additions, betterments and improvements thereto, except to the
extent no material
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adverse effect on its business and properties or a Material Adverse Effect (as
set forth in clauses (ii) and (iii) of the definition thereof) could result,
and maintain good, legal and marketable title to, or a valid leasehold
interest in, all of its assets, free and clear of all Liens except for
Permitted Liens, and except to the extent sold or otherwise disposed of in
accordance with this Agreement or any other Related Document.
SECTION 9.12. Verification of Title. AESOP Leasing will, on
an annual basis, cause a title check to be performed by an independent
nationally recognized firm of certified public accountants acceptable to the
Trustee and each Enhancement Provider on a statistical sample of all Vehicles
leased under the Leases designed to provide a ninety-five percent (95%)
confidence level that no more than five percent (5%) of the Certificates of
Title for such Vehicles did not correctly reference the Trustee or its
Permitted Nominee, as first lienholder, and the Lessor of such Vehicle or its
Permitted Nominee or, in the case of Financed Vehicles, ARAC or its Permitted
Nominee, as owner, and cause such party to deliver a report stating that,
within the confidence level set forth above, no more than five percent (5%) of
the Certificates of Title did not correctly reference the lienholder or
owner of the Vehicles described in the immediately preceding clause.
SECTION 9.13. Legal Reserve Fund. On and after the Legal
Reserve Funding Date and for so long as the Legal Reserve Release Condition is
not met, AESOP Leasing shall maintain a balance of $500,000 in the AESOP I
Segregated Account for the purpose of paying legal fees and disbursements of
counsel to AESOP Leasing or its Permitted Nominees for the defense of
vicarious liability claims.
SECTION 9.14. Delivery of Information. AESOP Leasing will
provide to the Lender any information or materials necessary for the Lender to
comply with its obligations under the Indenture.
SECTION 9.15. [RESERVED].
SECTION 9.16. Vehicles. AESOP Leasing will cause ARAC to
maintain good and marketable title to each Vehicle financed by AESOP Leasing
with the proceeds of
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Loans made hereunder and leased under the Finance Lease, free and clear of all
Liens and encumbrances, other than any Permitted Liens.
SECTION 9.17. Assignments. AESOP Leasing will deliver to the
Trustee on or prior to the Initial Closing Date, or such later date and
thereafter, as necessary to comply with the terms of the Related Documents,
executed counterparts of the Assignment Agreements related to the assignment
of rights under each Manufacturer Program, dated as of the Initial Closing
Date, or such later date, if delivered after the Initial Closing Date in
accordance herewith, duly executed by ARAC, each other Lessee, AESOP Leasing,
AESOP Leasing II, AFC-II, the Trustee and each applicable Manufacturer.
SECTION 9.18. Notation of Liens. AESOP Leasing will deliver
to the Lender and the Trustee on or prior to the Initial Closing Date and on
an ongoing basis, as applicable, evidence (which, in the case of the filing of
financing statements on form UCC-1, may be telephonic confirmation of such
filing, followed by prompt written confirmation) that it has caused or is
causing the Trustee's name to be noted on the Certificate of Title for each
Vehicle leased under the Finance Lease (other than Certificates of Title with
respect to the (i) Initial Financed Vehicles for which BONY is noted as the
first lienholder and (ii) Franchisee Vehicles for which the nominee lienholder
under the applicable Franchisee Nominee Agreement is noted as the first
lienholder) in accordance herewith and all filings (including filings of
financing statements on form UCC-1) and recordings have been accomplished as
may be required by law to establish, perfect, protect and preserve the rights,
titles, interests, remedies, powers, privileges, licenses and security
interest of the Trustee in such Vehicles and other AESOP I Finance Lease Loan
Collateral for the benefit of the Secured Parties.
SECTION 9.19. [RESERVED].
SECTION 9.20. [RESERVED].
SECTION 9.21. [RESERVED].
SECTION 9.22. Non-Program Vehicle Report. On or before the
second Determination Date immediately
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following June 30 and December 31 of each calendar year, beginning with
December 31, 1997, AESOP Leasing shall cause a firm of nationally recognized
independent public accountants (who may also render other services to AESOP
Leasing, ARC or ARAC and who is acceptable to the Rating Agencies and each
Enhancement Provider) to furnish a report to the Lender, the Trustee, each
Enhancement Provider and the Rating Agencies to the effect that they have
performed certain agreed upon procedures (which shall be acceptable to each
Enhancement Provider) with respect to the calculation of the (i) Disposition
Proceeds obtained from the sale or other disposition of all Non-Program
Vehicles (other than Casualties) sold or otherwise disposed of during each
Related Month in such period (ii) Non-Program Fleet Market Value and compared
such calculations with the corresponding amounts set forth in the Monthly
Certificate prepared pursuant to Section 4.1(b) of the Indenture and that on
the basis of such comparison such accountants are of the opinion that such
amounts are in agreement, except for such exceptions as they believe to be
material and such other exceptions as shall be set forth in such report. On or
before the second Determination Date immediately following March 31 and
September 30 of each calendar year, beginning with September 30, 1997, AESOP
Leasing shall furnish an Officer's Certificate of AESOP Leasing to the Lender,
the Trustee, each Enhancement Provider and the Rating Agencies to the effect
that the officer making such certification has compared or caused to be
compared the calculations described in clauses (i) and (ii) above with the
corresponding amounts set forth in the Monthly Certificate prepared pursuant
to Section 4.1(b) of the Indenture and that on the basis of such comparison
such officer is of the opinion that such amounts are in agreement, except for
such exceptions as shall be set forth in such Officer's Certificate.
SECTION 9.23. Sale of Non-Program Vehicles Returned to AESOP
Leasing. In the event that any Non-Program Vehicle leased under the Finance
Lease is returned to AESOP Leasing in accordance with Section 2.6(c) of the
Finance Lease, AESOP Leasing shall use commercially reasonable efforts to
arrange for the sale of such Vehicle and to maximize the sale price thereof.
AESOP Leasing shall not return a Non-Program Vehicle to a Manufacturer under a
Manufacturer Program unless the conditions set forth in Section 2.6(b) of the
Finance
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Lease would have been satisfied with respect to such disposition.
SECTION 10. NEGATIVE COVENANTS. Until the expiration or
termination of the Loan Commitment and thereafter until the Loan Note and all
other Liabilities are paid in full, AESOP Leasing agrees that, unless at any
time the Lender shall otherwise expressly consent in writing, it will not:
SECTION 10.1. Liens. Create, incur, assume or permit to
exist any Lien upon any of its Assets (including the AESOP I Collateral),
other than Permitted Liens.
SECTION 10.2. Other Indebtedness. Create, assume, incur,
suffer to exist or otherwise become or remain liable in respect of any
Indebtedness other than (i) Indebtedness hereunder and (ii) Indebtedness
permitted under any other Related Document.
SECTION 10.3. Mergers, Consolidations. Except as may be
permitted by the express written approval of the Trustee and the Lender, merge
with or into, enter into any joint venture or other association with, or
consolidate with, any other Person.
SECTION 10.4. Sales of Assets. Sell, lease, transfer,
liquidate or otherwise dispose of any Assets, except as contemplated by the
Related Documents.
SECTION 10.5. Acquisition of Assets. Acquire, by long-term
or operating lease or otherwise, any Assets except pursuant to the terms of
the Related Documents.
SECTION 10.6. Dividends, Officers' Compensation, etc. (i)
Declare or pay any distributions on any of its partnership interests or make
any other distribution on, or any purchase, redemption or other acquisition
of, any of its partnership interests except out of funds in the AESOP I
Segregated Account, or (ii) pay any wages or salaries or other compensation to
officers, employees or others except out of earnings computed in accordance
with GAAP and, in any case, only from funds in the AESOP I Segregated Account.
SECTION 10.7. Organizational Documents. Amend any of its
organizational documents, including its cer-
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tificate of limited partnership or limited partnership agreement, unless prior
to such amendment, each Rating Agency confirms that after such amendment the
Rating Agency Consent Condition and the CP Rating Agency Condition will be
met.
SECTION 10.8. Investments. Make, incur, or suffer to exist
any loan, advance, extension of credit or other investment in any Person other
than pursuant to the Related Documents.
SECTION 10.9. Regulations G, T, U and X. Use or permit any
proceeds of the Loans made hereunder to be used, either directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
"purchasing or carrying margin stock" within the meaning of Regulations G, T,
U and X of the Board of Governors of the Federal Reserve System, as amended
from time to time.
SECTION 10.10. Other Agreements. Enter into any agreement
containing any provision which would be violated or breached by the
performance of its obligations hereunder or under any instrument or document
delivered or to be delivered by it hereunder or in connection herewith.
SECTION 10.11. Use of Vehicles. Use or allow the Vehicles
leased under the Finance Lease to be used in any manner (i) that would make
Program Vehicles ineligible for repurchase under an Eligible Manufacturer
Program, (ii) for any illegal purposes or (iii) that could subject the
Vehicles to confiscation.
SECTION 10.12. Use of Proceeds. Use the proceeds of the
Loans made hereunder for any purpose other than to finance the purchase of
Eligible Vehicles that will be leased under the Finance Lease.
SECTION 10.13. Limitations on the Acquisition or
Redesignation of Certain Vehicles. Unless otherwise specified in the related
Supplement or unless waived by the Required Noteholders as specified in the
related Supplement, permit (a) the Non-Eligible Manufacturer Amount as of any
Payment Date to exceed any applicable Maximum Non-Eligible Manufacturer
Amount, (b) the Financed Vehicle Amount as of any Payment Date to exceed any
applicable Maximum Financed Vehicle Amount, (c) the
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Non-Program Vehicle Amount as of any Payment Date to exceed any applicable
Maximum Non-Program Vehicle Amount and (d) the aggregate Net Book Value of all
Vehicles leased under the Leases and manufactured by a particular Manufacturer
or group of Manufacturers as of any Payment Date to exceed any applicable
Maximum Manufacturer Amount.
SECTION 10.14. Maximum Vehicle Age. Permit at any time the
age of any Non-Program Vehicle leased under the Finance Lease, calculated from
the date of the original manufacturer invoice for such Vehicle, to exceed 18
months.
SECTION 11. CONDITIONS.
SECTION 11.1. Initial Loans. The effectiveness of this
Agreement and the obligation of the Lender to make the initial Loans hereunder
to AESOP Leasing shall be subject to the prior or concurrent (i) delivery of
each of the following documents to the Lender and, if not otherwise required
to be delivered to the Trustee by any other Related Document, to the Trustee
and any Enhancement Provider, as applicable (in form and substance
satisfactory to the Lender and, if applicable, the Trustee and any Enhancement
Provider) and (ii) satisfaction of the following conditions, as applicable:
(a) Loan Note. A Loan Note duly executed by AESOP Leasing;
(b) Certificate of Limited Partnership; Certificate of
Incorporation. The certificate of limited partnership of AESOP Leasing, duly
certified by the Secretary of State of the State of Delaware, together with a
copy of the limited partnership agreement of AESOP Leasing, duly certified by
the Secretary or an Assistant Secretary of Original AESOP. The certificate of
incorporation of Original AESOP, duly certified by the Secretary of State of
the State of Delaware, together with a copy of the by-laws of Original AESOP,
duly certified by the Secretary or an Assistant Secretary of Original AESOP;
(c) Resolutions. Copies of resolutions of the Board of
Directors of Original AESOP, the general partner of AESOP Leasing, authorizing
or ratifying the execution, delivery and performance of those documents and
matters
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required of it with respect to this Agreement, duly certified by the Secretary
or an Assistant Secretary of Original AESOP;
(d) Consents, etc. Certified copies of all documents
evidencing any necessary limited partnership action, consents and governmental
approvals (if any) with respect to this Agreement;
(e) Incumbency and Signatures. A certificate of the
Secretary or an Assistant Secretary of Original AESOP certifying the names of
the individual or individuals authorized to sign this Agreement and the other
Related Documents to be executed by it, together with a sample of the true
signature of each such individual (the Lender may conclusively rely on each
such certificate until formally advised by a like certificate of any changes
therein);
(f) Opinions of Counsel. The opinions of Skadden, Arps,
Slate, Meagher & Flom LLP, special counsel to AESOP Leasing, AESOP Leasing II,
AFC and AFC-II, addressed to the Lender, the Trustee, the Placement Agents,
the Rating Agencies and the Administrative Agent, on behalf of the Liquidity
Lenders, the opinions of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for
ARC and ARAC addressed to the Lender, the Trustee, the Placement Agents, the
Rating Agencies and the Administrative Agent, on behalf of the Liquidity
Lenders, and the opinions of counsel to each applicable Manufacturer for the
Manufacturer Programs under which Program Vehicles will be financed hereunder
addressed to the Lender, the Trustee, the Rating Agencies and the
Administrative Agent, on behalf of the Liquidity Lenders;
(g) Good Standing Certificates. Certificates of good
standing for AESOP Leasing in the jurisdiction of its formation and the
jurisdiction of its principal place of business;
(h) Search Reports. A written search report from a Person
satisfactory to the Lender and the Trustee listing all effective financing
statements that name AESOP Leasing, as debtor or assignor, and that are filed
and the jurisdictions in which filings were made pursuant to subsection (i)
below, together with copies of such financing statements, and tax and judgment
lien search
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reports from a Person satisfactory to the Lender and the Trustee showing no
evidence of such liens filed against AESOP Leasing;
(i) Evidence. Evidence (which may be telephonic, followed by
prompt written confirmation) of the filing of proper financing statements on
Form UCC-1, naming AESOP Leasing as debtor, the Lender as secured party and
the Trustee as assignee or other, similar instruments or documents, as may be
necessary or, in the reasonable opinion of the Lender and the Trustee,
desirable under the UCC of all applicable jurisdictions to perfect the
Lender's and the Trustee's interest in the AESOP I Loan Collateral;
(j) Enhancement Agreement. An executed copy of the
Enhancement Agreement pursuant to the Supplement with respect to any Series of
Notes for which the Series Closing Date occurs on the Initial Closing Date;
(k) Enhancement. The Enhancement Amount with respect to any
Series of Notes for which the Series Closing Date occurs on the Initial
Closing Date is equal to or exceeds the Required Enhancement Amount for such
Series;
(l) Leases. An executed copy of each of the Leases and all
documents required to be delivered by any relevant Lessee and ARC to the
Lessors pursuant to the Leases, and all conditions to the effectiveness of the
Leases shall have been satisfied;
(m) Assignment Agreement. An executed copy of the Assignment
Agreement of each Manufacturer;
(n) Certified Copy of Manufacturer Program. A copy of each
Manufacturer Program under which Program Vehicles will be financed hereunder
and an Officer's Certificate, dated the Initial Closing Date, and duly
executed by an Authorized Officer of Original AESOP, certifying that each such
copy is true, correct and complete as of the Initial Closing Date and that
each such Manufacturer Program shall be in full force and effect and
enforceable against the related Manufacturer;
(o) Indenture. The Indenture, dated the Initial Closing
Date, duly executed by the Lender and the
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Trustee, and all conditions to the effectiveness thereof and the issuance of
the Notes thereunder shall have been satisfied in all respects;
(p) Vehicle Title and Lienholder Nominee Agreements and HFS
Indemnity. The Vehicle Title and Lienholder Nominee Agreements and the HFS
Indemnity, each dated the Initial Closing Date, duly executed by the parties
thereto;
(q) Conditions Precedent to Note Issuance. All conditions
precedent to the issuance of any Series of Notes for which the Series Closing
Date occurs on the Initial Closing Date shall have been satisfied in accor-
dance with the related Supplement; and
(r) Other. Such other documents as the Trustee or the
Lender may reasonably request.
SECTION 11.2. All Loans. All Loans hereunder (including the
initial Loan) shall be subject to the further conditions precedent that (a) if
the amount of Enhancement with respect to any Series of Notes is increased or
if the current Enhancement with respect to any Series of Notes is replaced, to
the extent such additional or replacement Enhancement is in the form of an un-
funded commitment (including, without limitation, a letter of credit), AESOP
Leasing shall cause the delivery to the Lender, the Trustee, the Enhancement
Providers, if any, for any Series of Notes issued and outstanding on the date
of such opinion(s), Placement Agents, if any, the Rating Agencies and the
Administrative Agent (on behalf of the Liquidity Lenders) on or prior to the
effectiveness of such additional or replacement Enhancement of opinion(s) of
counsel as to the enforceability of such additional or replacement Enhancement
substantially similar to the original opinions delivered with respect to such
Enhancement, (b) the Lender shall have received a completed Loan Request
therefor and a copy of the related Vehicle Order, (c) all conditions precedent
to the issuance of any Series of Notes after the Initial Closing Date shall
have been satisfied in accordance with the related Supplement and (d) on the
date of such Loan the following statements shall be true (and AESOP Leasing,
by accepting the amount of such Loan, shall be deemed to have represented and
warranted that): (i) the representations and warranties contained in Section 8
are true and
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correct on and as of such date with the same effect as though made on and as
of such date and shall be deemed to have made on such date and (ii) no
Potential AESOP I Finance Lease Loan Event of Default or AESOP I Finance Lease
Loan Event of Default has occurred and is continuing or would result from the
making of such Loan or from the application of the proceeds of such Loan.
SECTION 12. LOAN EVENTS OF DEFAULT AND THEIR EFFECT.
SECTION 12.1. AESOP I Finance Lease Loan Events of Default.
Each of the following shall constitute an AESOP I Finance Lease Loan Event of
Default under this Agreement:
12.1.1. Non-Payment of Loans. Default in
the payment when due of the principal amount of any Loan made hereunder or the
Monthly Loan Principal Amount hereunder, and the continuance thereof for one
(1) Business Day after the occurrence thereof, or the default in the payment
of any Loan Interest on any Loan made hereunder, and the continuance thereof
for five (5) Business Days after the occurrence thereof.
12.1.2. Non-Payment of Other Amounts.
Default, and continuance thereof for five (5) Business Days after notice
thereof by the Lender to AESOP Leasing, in the payment when due of any amount
payable hereunder (other than any amount described in Section 12.1.1).
12.1.3. Bankruptcy, Insolvency, etc. The
occurrence of an Event of Bankruptcy with respect to ARC, ARAC, AESOP Leasing,
Original AESOP or any Permitted Nominee under any Franchisee Nominee
Agreement.
12.1.4. Non-Compliance With Provisions.
Failure by AESOP Leasing to comply with or to perform any provision of this
Agreement (and not constituting an AESOP I Finance Lease Loan Event of Default
under any of the other provisions of this Section 12.1) and, other than the
failure to comply with the provisions of Sections 10.1 and 10.2 hereof, the
continuance of such failure for 30 days after the earlier of the date of the
receipt of written notice thereof from the Lender or the Trustee to AESOP
Leasing and the date AESOP Leasing learns of such failure.
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12.1.5. Warranties and Representations.
Any warranty or representation made by or on behalf of AESOP Leasing or
otherwise in connection herewith is inaccurate or incorrect or is breached or
false or misleading in any material respect as of the date such warranty or
representation is made; or any schedule, certificate, financial statement,
report, notice, or other writing furnished by or on behalf of AESOP Leasing to
the Lender is false or misleading in any material respect on the date as of
which the facts therein set forth are stated or certified.
12.1.6. Lease Events of Default. The occurrence of a Lease
Event of Default.
12.1.7. Loan Events of Default Under Other Loan Agreements.
The occurrence of an AESOP I Loan Event of Default.
12.1.8. Judgments. Any final and unappealable (or, if
capable of appeal, such appeal is not being diligently pursued or enforcement
thereof has not been stayed) judgment or order for the payment of money in
excess of $100,000 which is not fully covered by insurance shall be rendered
against AESOP Leasing and such judgment or order shall continue unsatisfied
and unstayed for a period of 30 days.
SECTION 12.2. Effect of AESOP I Finance Lease Loan Event of
Default or Liquidation Event of Default. If any AESOP I Finance Lease Loan
Event of Default described in Section 12.1.1 or 12.1.3 or any Liquidation
Event of Default shall occur, the Loan Commitment (if not theretofore
terminated) shall immediately terminate and in the case of any other AESOP I
Finance Lease Loan Event of Default, the Lender may declare its Loan
Commitment (if not theretofore terminated) to be terminated and whereupon it
shall immediately terminate and may declare the Loan Note and all other
Liabilities to be due and payable, whereupon the Loan Note shall become
immediately due and payable.
SECTION 12.3. Rights of Trustee Upon Liquidation Event of
Default and Non-Performance of Certain Covenants. (a) If a Liquidation Event
of Default shall have occurred and be continuing the Lender and the Trustee,
to the extent provided in the Indenture, shall have
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all the rights against AESOP Leasing and the Loan Collateral provided in the
Indenture upon a Liquidation Event of Default, including the right to take
(under the specified circumstances) possession of all Vehicles immediately.
(b) If (i) AESOP Leasing shall default in the due
performance and observance of any of its obligations under Section 9.3, 9.4,
9.5(iii), 9.8, 10.1 or 10.11 hereof, or (ii) any Lessee shall default in the
due performance and observance of its obligations under Section 31.10 of the
Finance Lease, and such default shall continue unremedied for a period of 30
days after notice thereof shall have been given to AESOP Leasing by the
Lender, the Lender shall have the ability to exercise all rights, remedies,
powers, privileges and claims of AESOP Leasing against the Manufacturers under
or in connection with the Manufacturer Programs with respect to (A) Program
Vehicles leased under the Finance Lease that AESOP Leasing has determined to
turn back to the Manufacturers under such Manufacturer Programs and (B)
whether or not AESOP Leasing shall then have determined to turn back such
Program Vehicles, any Program Vehicles leased under the Finance Lease for
which the applicable Repurchase Period will end within one week or less.
(c) Upon a default in the performance (after giving effect
to any grace periods provided herein) by AESOP Leasing of its obligations
under Section 7.5 or 8.6 hereof with respect to certain Vehicles, the Lender
or the Trustee shall have the right to take actions reasonably necessary to
correct such default with respect to the subject Vehicles including the
execution of UCC financing statements with respect to Manufacturer Programs
and other general intangibles and the completion of Vehicle Perfection and
Documentation Requirements on behalf of AESOP Leasing or the Lender, as
applicable.
(d) Upon the occurrence of a Liquidation Event of Default,
AESOP Leasing will return all Program Vehicles leased under the Finance Lease
to the related Manufacturer and shall sell all Non-Program Vehicles leased
under the Finance Lease in accordance with the instructions of the Lender.
Upon the occurrence of a Limited Liquidation Event of Default with respect to
any Series of Notes, AESOP Leasing will return Program Vehicles leased under
the Finance Lease to the related Manufac-
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turer, and shall sell Non-Program Vehicles leased under the Finance Lease in
accordance with the instructions of the Lender, to generate proceeds in an
amount which, together with the proceeds of Vehicles returned pursuant to the
AESOP I Operating Lease Loan Agreement and the AESOP II Loan Agreement, will
be sufficient to pay all interest on and principal of such Series of Notes. To
the extent any Manufacturer fails to accept any such Vehicles under the terms
of the applicable Manufacturer Program, the Lender shall have the right to
otherwise dispose of such Vehicles and to direct AESOP Leasing to dispose of
such Vehicles in accordance with its instructions. In addition, the Lender
shall have all of the rights, remedies, powers, privileges and claims
vis-a-vis AESOP Leasing, necessary or desirable to allow the Trustee to
exercise the rights, remedies, powers, privileges and claims given to the
Trustee pursuant to Sections 9.2 and 9.3 of the Base Indenture and AESOP
Leasing acknowledges that it has hereby granted the Lender all of the rights,
remedies, powers, privileges and claims granted to the Trustee pursuant to
Article 9 of the Base Indenture and that, under certain circumstances set
forth in the Base Indenture, the Trustee may act in lieu of the Lender in the
exercise of such rights, remedies, powers, privileges and claims.
SECTION 12.4. Application of Proceeds. The proceeds of any
sale or other disposition on any date pursuant to Section 12.3 shall be
applied in the following order: (i) to the reasonable costs and expenses
incurred by the Lender in connection with such sale or disposition, including
any reasonable costs associated with repairing any Vehicles leased under the
Finance Lease, and reasonable attorneys' fees in connection with the
enforcement of this Agreement; (ii) to the payment of accrued Loan Interest
and outstanding Loan Principal Amount, and all other amounts due hereunder in
the Related Month; and (iii) any remaining amounts to AESOP Leasing, or
such Person as may be lawfully entitled thereto.
SECTION 13. GENERAL.
SECTION 13.1. Waiver; Amendments. No delay on the part of
the Lender or the holder of the Loan Note or other Liabilities in the exercise
of any right, power or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise by any of them of any right,
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power or remedy preclude other or further exercise thereof, or the exercise of
any other right, power or remedy. No amendment, modification or waiver of, or
consent with respect to, any provision of this Agreement or the Loan Note
shall in any event be effective unless (i) the same shall be writing and
signed and delivered by the Lender and AESOP Leasing and consented to in
writing by the Trustee, (ii) the Lender shall have received in writing
confirmation from each of the Rating Agencies that its then current rating
with respect to any outstanding Series of Notes or the Commercial Paper Notes
will not be reduced or withdrawn as a result thereof and (iii) the Rating
Agency Consent Condition shall have been satisfied; provided that any
amendment or modification of the Loan Note need only be signed by AESOP
Leasing.
SECTION 13.2. Confirmations. AESOP Leasing and the Lender
(or the holder of the Loan Note) agree from time to time, upon written request
received by it from the other, to confirm to the other in writing the
aggregate unpaid Loan Principal Amount.
SECTION 13.3. Notices. All notices, amendments, waivers,
consents and other communications provided to any party hereto under this
Agreement shall be in writing and addressed, delivered or transmitted to such
party at its address or facsimile number set forth below its signature hereto
or at such other address or facsimile number as may be designated by such
party in a notice to the other parties. Any notice, if mailed and properly
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any notice, if
transmitted by facsimile, shall be deemed given when transmitted upon receipt
of electronic confirmation of transmission.
SECTION 13.4. Taxes. AESOP Leasing agrees to pay, and to
save the Trustee and the Lender harmless from all liability for, any document,
stamp, filing, recording, mortgage or other taxes (other than net income taxes
of the Lender) which may be payable in connection with the borrowings
hereunder or the execution, delivery, recording or filing of this Agreement or
of any other instruments or documents provided for herein or delivered or to
be delivered hereunder or in connection herewith. All obligations provided for
in this Section 13.4 shall survive any termination of this Agreement.
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SECTION 13.5. Indemnification. In consideration of the
Lender's execution and delivery of this Agreement and the Lender's extension
of the Loan Commitment, AESOP Leasing hereby agrees to:
(a) indemnify, exonerate and hold the Lender and its
officers, directors, stockholders, employees, and agents (herein collectively
called "Lender Parties" and individually called a "Lender Party") free and
harmless from and against any and all claims, demands, actions, causes of
action, suits, losses, costs, charges, liabilities, damages, and expenses in
connection therewith (irrespective of whether such Lender Party is a party to
the action for which indemnification hereunder is sought), and including,
without limitation, reasonable attorneys' fees and disbursements (called in
this paragraph the "Indemnified Liabilities"), incurred by Lender Parties or
any of them as a result of, or arising out of, or relating to (i) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of any Loan made hereunder or involving any Loan
made hereunder, or (ii) the execution, delivery, performance or enforcement of
this Agreement and any instrument, document or agreement executed pursuant
hereto by any of the Lender Parties, or (iii) the ownership, operation,
maintenance, leasing, or titling of the Vehicles, except in each case, for any
such Indemnified Liabilities arising on account of the relevant Lender Party's
gross negligence or willful misconduct and, to the extent that the foregoing
undertaking may be unenforceable for any reason, AESOP Leasing agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law; and
(b) indemnify and hold harmless the Trustee (and its
officers, directors, employees and agents) from and against any loss,
liability, expense, damage or injury suffered or sustained by reason of, or
arising out of or in connection with: (i) any acts or omissions of AESOP
Leasing pursuant to this Agreement and (ii) the Trustee's appointment under
the Indenture and the Trustee's performance of its obligations thereunder, or
any document pertaining to any of the foregoing to which the Trustee is a
signatory, including, but not limited to any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
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with the defense of any actual or threatened action, proceeding or claim;
provided, however, AESOP Leasing shall have no duty to indemnify the Trustee
to the extent such loss, liability, expense, damage or injury suffered or
sustained is due to the Trustee's negligence or willful misconduct.
AESOP Leasing agrees that the indemnification provided for in this Section
13.5 shall run directly to and be enforceable by an indemnified party subject
to the limitations hereof. The indemnification provided for in this Section
13.5 shall survive the termination of this Agreement, the Indenture and the
resignation or removal of the Trustee.
SECTION 13.6. Bankruptcy Petition. (a) AESOP Leasing hereby
covenants and agrees that, prior to the date which is one year and one day
after the payment in full of (i) all Commercial Paper Notes Outstanding and
(ii) all Notes Outstanding, it will not institute against, or join any other
Person in instituting against, AFC-II any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States. In the
event that AESOP Leasing takes action in violation of this Section 13.6,
AFC-II agrees, for the benefit of the Noteholders and the Commercial Paper
Note holders, respectively, that it shall file an answer with the bankruptcy
court or otherwise properly contest the filing of such a petition by AESOP
Leasing against AFC-II or commencement of such action and raise the defense
that AESOP Leasing has agreed in writing not to take such action and should be
estopped and precluded therefrom and such other defenses, if any, as its
counsel advises that it may assert. The provisions of this Section 13.6 shall
survive the termination of this Agreement.
(b) AFC-II hereby covenants and agrees that, prior to the
date which is one year and one day after the payment in full of (i) all
Commercial Paper Notes Outstanding, (ii) all Notes Outstanding and (iii) all
Loans outstanding under the AESOP I Loan Agreements, it will not institute
against, or join any other Person in instituting against, AESOP Leasing,
Original AESOP, AESOP Leasing II, AFC, PVHC or Quartx any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceed-
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ings or other similar proceeding under the laws of the United States or any
state of the United States. In the event that AFC-II takes action with respect
to AESOP Leasing in violation of this Section 13.6, AESOP Leasing agrees, for
the benefit of the Noteholders and the Commercial Paper Note Holders,
respectively, that it shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such a petition by AFC-II against
AESOP Leasing or commencement of such action and raise the defense that AFC-II
has agreed in writing not to take such action and should be estopped and
precluded therefrom and such other defenses, if any, as its counsel advises
that it may assert. The provisions of this Section 13.6 shall survive the
termination of this Agreement.
SECTION 13.7. Submission to Jurisdiction. The Lender may
enforce any claim arising out of this Agreement or the Loan Note in any
state or federal court having subject matter jurisdiction and located in New
York, New York. For the purpose of any action or proceeding instituted with
respect to any such claim, AESOP Leasing hereby irrevocably submits to the
jurisdiction of such courts. AESOP Leasing irrevocably consents to the service
of process out of said courts by mailing a copy thereof, by registered mail,
postage prepaid, to AESOP Leasing and agrees that such service, to the fullest
extent permitted by law, (i) shall be deemed in every respect effective
service of process upon it in any such suit, action or proceeding and (ii)
shall be taken and held to be valid personal service upon and personal
delivery to it. Nothing herein contained shall affect the right of the Trustee
and the Lender to serve process in any other manner permitted by law or
preclude the Lender from bringing an action or proceeding in respect hereof in
any other country, state or place having jurisdiction over such action.
AESOP Leasing hereby irrevocably waives, to the fullest extent permitted by
law, any objection which it may have or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in any such court
located in New York, New York and any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient
forum.
SECTION 13.8. Governing Law. THIS AGREEMENT AND THE LOAN
NOTE SHALL BE A CONTRACT MADE UNDER AND
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GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW). Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement. All obligations of
AESOP Leasing and rights of the Lender and the holder of the Loan Note or
Liability expressed herein shall be in addition to and not in limitation of
those provided by applicable law or in any other written instrument or
agreement relating to any of the Liabilities.
SECTION 13.9. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT TO WHICH
IT IS A PARTY, OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR
ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR
ANY RELATED TRANSACTION, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 13.10. Successors and Assigns. This Agreement shall
be binding upon AESOP Leasing, the Lender and their respective successors and
assigns, and shall inure to the benefit of AESOP Leasing, the Lender, the
Trustee as a third party beneficiary and their respective successors and
assigns; provided, however, that AESOP Leasing shall not have the right to
assign its rights or delegate its duties under this Agreement without (i) the
Lender's and the Trustee's prior written consent and (ii) receipt of written
confirmation from each of the Rating Agencies that its then current rating
will not be reduced or withdrawn with respect to the Commercial Paper Notes or
any outstanding Series of Notes as a result thereof. AESOP Leasing
acknowledges that this Agreement and the Loan Note will be assigned by the
Lender to the Trustee pursuant to the Indenture, and hereby agrees that, sub-
ject to the terms of the Indenture, the Trustee may exercise all of the
Lender's rights hereunder. This
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Agreement and the other Related Documents contain the entire agreement of the
parties hereto with respect to the matters covered hereby.
SECTION 13.11. Tax Treatment of Loans. It is the intention
of the parties hereto that for U.S. federal income tax purposes each Loan made
hereunder will constitute indebtedness of AESOP Leasing to the Lender and
that AESOP Leasing shall be only a lender, and not the owner of the Vehicles
subject to the Finance Lease, in which case the Lessee thereunder shall be the
owner of the Vehicles for tax purposes. The parties agree to take no position
in any tax return, filing or proceeding inconsistent with this provision.
SECTION 13.12. No Recourse. The obligations of AFC-II and
AESOP Leasing under this Agreement are solely the corporate obligations of
AFC-II and AESOP Leasing, respectively. No recourse shall be had for the
payment of any obligation or claim arising out of or based upon this Agreement
against any shareholder, employee, officer, director or incorporator of AFC-II
or AESOP Leasing.
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Delivered at New York, New York as of the day and year first
above written.
AESOP LEASING L.P.
By: AESOP LEASING CORP.,
its general partner
By: /s/ Peter H. Sorensen
-------------------------------
Name: Peter H. Sorensen
Title: President
Address: c/o Lord Securities
Corporation
Two Wall Street
New York, NY 10055
Facsimile: (212) 346-9012
Telephone: (212) 346-9000
AESOP FUNDING II L.L.C.
By: /s/ Frank B. Bilotta
-------------------------------
Name: Frank B. Bilotta
Title: Vice President
Address: c/o Lord Securities
Corporation
Two Wall Street
New York, NY 10055
Facsimile: (212) 346-9012
Telephone: (212) 346-9000
<PAGE>
EXHIBIT A
TO THE LOAN
AGREEMENT
FORM OF LOAN NOTE
_______, 1997
FOR VALUE RECEIVED, AESOP Leasing L.P., a Delaware limited
partnership (the "Borrower"), promises to pay to the order of AESOP Funding II
L.L.C., a Delaware limited liability company (the "Lender"), the aggregate
unpaid Loan Principal Amount of all Loans shown on the schedule attached
hereto (and any continuation thereof) provided, that the failure to so record
any such information or any error in so recording any such information shall
not limit or otherwise affect the actual obligations of the Borrower hereunder
to repay the Loan Principal Amount of all Loans made to it, together with all
Loan Interest accruing thereon, made by the Lender pursuant to that certain
AESOP I Finance Lease Loan Agreement, dated as of July 30, 1997 (together with
all amendments, supplements, restatements and other modifications, if any,
from time to time thereafter made thereto, the "Loan Agreement"), between the
Borrower and the Lender. Unless otherwise defined herein or the context
otherwise requires, terms used herein have the meanings provided in the Loan
Agreement.
The Borrower also promises to pay interest on the unpaid Loan
Principal Amount of all Loans hereof from time to time outstanding from the
date hereof until maturity (whether by acceleration or otherwise) and, after
maturity, until paid, at the rates per annum and on the dates specified in the
Loan Agreement.
Payments of both principal and interest are to be made in lawful
money of the United States in same day or immediately available funds to the
account designated by the Lender pursuant to the Loan Agreement.
This Loan Note is the Loan Note referred to in the Loan Agreement and
is entitled to the benefits of the Loan Agreement, and reference is hereby
made to the Loan Agreement for a statement of the terms and conditions on
which the Borrower is permitted and required to make prepayments and
repayments of the Loan Principal Amount of the indebtedness evidenced by this
Loan Note and on which such indebtedness may be declared to be immediately due
and payable.
A-1
<PAGE>
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of
dishonor.
THIS LOAN NOTE HAS BEEN DELIVERED IN NEW YORK AND SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER AND GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
AESOP Leasing L.P.
By:_________________________
Name:
Title:
A-2
<PAGE>
TRANSACTIONS ON LOAN NOTE
<TABLE>
<CAPTION>
==================================================================================================================
Amount of
Loan Outstanding
Principal Loan
Amount of Amount Principal
Loan Made Paid Amount Notation
Date This Date This Date This Date Made By
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
</TABLE>
A-3
<PAGE>
EXHIBIT B-1
TO THE LOAN
AGREEMENT
FORM OF LOAN REQUEST
AESOP Funding II L.L.C.
c/o Lord Securities Corporation
Two Wall Street, 19th Floor
New York, New York 10005
Attention: Andrew L. Stidd
Ladies and Gentlemen:
This Loan Request is delivered to you pursuant to Section 3.2 of that
certain AESOP I Finance Lease Loan Agreement, dated as of July 30, 1997 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Loan Agreement"), between AESOP Leasing L.P., a Delaware limited
partnership ("AESOP Leasing"), and AESOP Funding II L.L.C., a Delaware limited
liability company (the "Lender"). Unless otherwise defined herein or the
context otherwise requires, terms used herein have the meanings provided in
the Loan Agreement.
AESOP Leasing hereby requests that a Loan be made in the Amount of
$______________ on _______________ , 19 __.
AESOP Leasing hereby acknowledges that the delivery of this Loan
Request and the acceptance by AESOP Leasing of the proceeds of the Loan
requested hereby constitute a representation and warranty by AESOP Leasing
that, on the date of such Loan, and before and after giving effect thereto and
to the application of the proceeds therefrom, all conditions set forth in
Section 11.2 of the Loan Agreement have been satisfied and all statements set
forth in Section 11.2 of the Loan Agreement are true and correct.
Attached hereto as Annex I is a true and correct copy of the schedule
required to be delivered in connection herewith pursuant to Section 3.2 of the
Loan Agreement.
AESOP Leasing agrees that if prior to the time of the Loan requested
hereby any matter certified to herein by it will not be true and correct at
such time as if then made, it will immediately so notify the Lender. Except to
the
B-1-1
<PAGE>
extent, if any, that prior to the time of the Loan requested hereby the Lender
shall receive written notice to the contrary from AESOP Leasing, each matter
certified to herein shall be deemed once again to be certified as true and
correct at the date of such Loan as if then made.
Please wire transfer the proceeds of the Loan to the account of AESOP
Leasing at the financial institution set forth below:
Person to be Paid Name, Address, etc.
Amount to be ----------------- -------------------
Transferred Name Account No.
- ----------- ---- -----------
$_________ ______ ___________ ___________________
___________________
Attention: ___________________
AESOP Leasing has caused this Loan Request to be executed and
delivered, and the certification and warranties contained herein to be made,
by its duly Authorized Officer this _____ day of _____________, 19___.
AESOP LEASING L.P.
By:
-------------------------------
Name
Title:
B-1-2
<PAGE>
ANNEX I
Vehicle Acquisition Schedule and Related Information
1. Principal amount of proposed Loan
2. Borrowing Date of proposed Loan
3. Vehicle Identification Number (VIN)
4. Summary of Vehicles being financed (including, for
Program Vehicles subject to the GM Repurchase Pro-
gram, the Designated Period for such Program Vehi-
cles)
5. Program or Non-Program Vehicles
6. Capitalized Cost (New Vehicles)
7. Net Book Value (Franchisee Vehicles)
B-1-3
<PAGE>
EXHIBIT B-2
TO THE LOAN
AGREEMENT
FORM OF LOAN REQUEST RESPONSE
AESOP Leasing L.P.
c/o Lord Securities Corporation
Two Wall Street, 19th Floor
New York, New York 10005
Attention: Andrew L. Stidd
_______________________, 199__
Re: Loan Request Dated ____________________, 199__
Ladies and Gentlemen:
This Loan Request Response is delivered to you pursuant to Section
4.1 of that certain AESOP I Finance Lease Loan Agreement, dated as of July 30,
1997 (as amended, supplemented, restated or otherwise modified from time to
time, the "Loan Agreement"), between AESOP Leasing L.P., a Delaware limited
partnership ("AESOP Leasing"), and AESOP Funding II L.L.C., a Delaware limited
liability company (the "Lender"). Unless otherwise defined herein or the
context otherwise requires, terms used herein have the meanings assigned to
such terms in the Loan Agreement.
Reference is hereby made to the Loan Request delivered to us today by
AESOP Leasing (the "Loan Request"). The applicable rate of Loan Interest on
each Loan requested in the Loan Request is _%; provided, however, if the
Lender's Carrying Cost Interest Rate for the Related Month is higher than the
rate of Loan Interest specified herein, the Loan Interest payable on such
Loans shall be determined using the higher rate.
Very truly yours,
AESOP FUNDING II L.L.C.
By:
-------------------------------
Name:
Title:
B-2-1
<PAGE>
EXHIBIT C
TO THE LOAN
AGREEMENT
FORM OF PAYMENT
DEFICIT NOTICE
Harris Trust and Savings Bank, as Trustee
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attn: Indenture Trust Administration
[Related Enhancement Provider]
[Address]
[ ], 19 _
Ladies and Gentlemen:
This Payment Deficit Notice is delivered to you pursuant to
Section 6.4 of the AESOP I Finance Lease Loan Agreement, dated as of July 30,
1997 (as amended or modified from time to time, the "Loan Agreement") between
AESOP Funding II L.L.C., a Delaware limited liability company, as Lender, and
AESOP Leasing L.P. ("AESOP Leasing"), a Delaware limited partnership, as
Borrower. Terms used herein have the meanings provided in the Loan Agreement.
AESOP Leasing hereby notifies the Trustee and [Related
Enhancement Provider] that on _________, 199_ [a Lease Payment Deficit did not
exist] [there was a Lease Payment Deficit on _________, 199_ as follows:
Series _____: $_______________________
Series _____: $_______________________
AESOP LEASING L.P.
By:
----------------------------
Name:
Title:
C-1
<PAGE>
SCHEDULE 8.11
Business Locations, Trade Names
<TABLE>
<CAPTION>
State of
Principal
Place of States in which
Business Location Business Conducts Business
----------------- -------- -----------------
<S> <C> <C> <C>
AESOP Leasing c/o Lord Securities New York New York
L.P. Corporation
Two Wall Street,
19th Floor
New York, NY 10005
</TABLE>
<PAGE>
[AESOP I Operating
Lease Loan Agreement]
- --------------------------------------------------------------------------------
LOAN AGREEMENT
dated as of July 30, 1997
among
AESOP LEASING L.P.,
as Borrower,
PV HOLDING CORP.,
as a Permitted Nominee of the Borrower,
QUARTX FLEET MANAGEMENT, INC.
as a Permitted Nominee of the Borrower,
and
AESOP FUNDING II L.L.C.,
as Lender
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. CERTAIN DEFINITIONS......................................... 3
SECTION 1.1. Certain Definitions.............................. 3
SECTION 1.2. Accounting and Financial
Determinations.................................. 3
SECTION 1.3. Cross References; Headings....................... 4
SECTION 1.4. Interpretation................................... 4
SECTION 2. LOAN COMMITMENT OF THE LENDER............................... 5
SECTION 2.1. Loan Commitment.................................. 5
SECTION 2.2. Certain Waivers.................................. 5
SECTION 2.3. Conditions....................................... 6
SECTION 2.4. Use of Proceeds.................................. 6
SECTION 3. LOAN NOTE; LOAN PROCEDURE;RECORDKEEPING..................... 6
SECTION 3.1. Loan Note........................................ 6
SECTION 3.2. Loan Procedure................................... 6
SECTION 3.3. Recordkeeping.................................... 7
SECTION 4. INTEREST.................................................... 8
SECTION 4.1. Interest Rate on Loans........................... 8
SECTION 4.2. Supplemental Interest............................ 8
SECTION 4.3. Loan Interest Payment Dates...................... 8
SECTION 4.4. Setting of Rates................................. 9
SECTION 4.5. Carrying Charges................................. 9
SECTION 5. REPAYMENT OF LOAN PRINCIPAL AMOUNT.......................... 9
SECTION 5.1. Mandatory Repayment of Monthly
Loan Principal Amount of Loans.................. 9
SECTION 5.2. Voluntary Prepayments of Loan
Principal Amount.................................. 10
SECTION 6. MAKING OF PAYMENTS.......................................... 11
SECTION 6.1. Making of Payments............................... 11
SECTION 6.2. Due Date Extension............................... 11
SECTION 6.3. Application of Sale Proceeds..................... 12
i
<PAGE>
SECTION 6.4. Payment Deficits................................. 12
SECTION 7. LOAN COLLATERAL SECURITY.................................... 12
SECTION 7.1. Grant of Security Interest....................... 12
SECTION 7.2. Certificates of Title............................ 15
SECTION 7.3. Release of AESOP I Operating
Lease Loan Collateral............................. 15
SECTION 7.4. Change of Location or Name....................... 16
SECTION 7.5. Deliveries; Further Assurances................... 17
SECTION 7.6. [RESERVED]....................................... 17
SECTION 7.7. [RESERVED]....................................... 18
SECTION 7.8. AESOP I Segregated Account....................... 18
SECTION 8. REPRESENTATIONS AND WARRANTIES.............................. 18
SECTION 8.1. Organization; Ownership; Power;
Qualification................................... 18
SECTION 8.2. Authorization; Enforceability.................... 19
SECTION 8.3. Compliance....................................... 19
SECTION 8.4. [RESERVED]....................................... 20
SECTION 8.5. Litigation....................................... 20
SECTION 8.6. Liens............................................ 20
SECTION 8.7. Employee Benefit Plans........................... 20
SECTION 8.8. Investment Company Act........................... 20
SECTION 8.9. Regulations G, T, U and X........................ 21
SECTION 8.10. Proceeds........................................ 21
SECTION 8.11. Business Locations; Trade Names................. 21
SECTION 8.12. Taxes........................................... 21
SECTION 8.13. Governmental Authorizations..................... 22
SECTION 8.14. Compliance with Laws............................ 22
SECTION 8.15. Eligible Vehicles............................... 22
SECTION 8.16. Manufacturer Programs........................... 23
SECTION 8.17. Absence of Default.............................. 23
SECTION 8.18. No Security Interest; Title to
Assets......................................... 23
SECTION 8.19. Accuracy of Information......................... 24
SECTION 9. AFFIRMATIVE COVENANTS....................................... 24
SECTION 9.1. Existence; Foreign Qualification................. 24
SECTION 9.2. Books, Records and Inspections................... 25
SECTION 9.3. Insurance........................................ 25
SECTION 9.4. Manufacturer Programs............................ 26
SECTION 9.5. Reporting Requirements........................... 26
SECTION 9.6. Payment of Taxes; Removal of
Liens............................................. 27
ii
<PAGE>
SECTION 9.7. Business......................................... 28
SECTION 9.8. Maintenance of the Vehicles...................... 28
SECTION 9.9. Maintenance of Separate
Existence....................................... 28
SECTION 9.10. Manufacturer Payments; Sales
Proceeds.......................................... 31
SECTION 9.11. Maintenance of Properties....................... 31
SECTION 9.12. Verification of Title........................... 32
SECTION 9.13. Legal Reserve Fund.............................. 32
SECTION 9.14. Delivery of Information......................... 32
SECTION 9.15. [RESERVED]...................................... 32
SECTION 9.16. Vehicles........................................ 32
SECTION 9.17. Assignments..................................... 32
SECTION 9.18. Notation of Liens............................... 33
SECTION 9.19. [RESERVED]...................................... 33
SECTION 9.20. [RESERVED]...................................... 33
SECTION 9.21. [RESERVED]...................................... 33
SECTION 9.22. [RESERVED]...................................... 33
SECTION 9.23. Sale of Non-Program Vehicles
Returned to AESOP Leasing. ...................... 33
SECTION 10. NEGATIVE COVENANTS......................................... 34
SECTION 10.1. Liens........................................... 34
SECTION 10.2. Other Indebtedness.............................. 34
SECTION 10.3. Mergers, Consolidations......................... 34
SECTION 10.4. Sales of Assets................................. 34
SECTION 10.5. Acquisition of Assets........................... 34
SECTION 10.6. Dividends, Officers'
Compensation, etc............................... 34
SECTION 10.7. Organizational Documents........................ 35
SECTION 10.8. Investments..................................... 35
SECTION 10.9. Regulations G, T, U and X....................... 35
SECTION 10.10. Other Agreements............................... 35
SECTION 10.11. Use of Vehicles................................ 35
SECTION 10.12. Use of Proceeds................................ 35
SECTION 10.13. [RESERVED]..................................... 35
SECTION 10.14. Maximum Vehicle Age............................ 36
SECTION 11. CONDITIONS................................................. 36
SECTION 11.1. Initial Loans................................... 36
SECTION 11.2. All Loans....................................... 39
iii
<PAGE>
SECTION 12. LOAN EVENTS OF DEFAULT AND
THEIR EFFECT...................................... 40
SECTION 12.1. AESOP I Operating Lease Loan Events
of Default........................................ 40
12.1.1. Non-Payment of Loans..................... 40
12.1.2. Non-Payment of Other Amounts............. 40
12.1.3. Bankruptcy, Insolvency, etc.............. 40
12.1.4. Non-Compliance With Provisions........... 41
12.1.5. Warranties and Representations........... 41
12.1.6. Lease Events of Default.................. 41
12.1.7. Loan Events of Default Under
Other Loan Agreements..................... 41
12.1.8. Judgments................................ 41
SECTION 12.2. Effect of AESOP I Operating Lease
Loan Event of Default or Liquidation
Event of Default.......................... 41
SECTION 12.3. Rights of Trustee Upon Liquidation
Event of Default and Non-Performance
of Certain Covenants...................... 42
SECTION 12.4. Application of Proceeds......................... 43
SECTION 13. GENERAL.................................................... 44
SECTION 13.1. Waiver; Amendments.............................. 44
SECTION 13.2. Confirmations................................... 44
SECTION 13.3. Notices......................................... 44
SECTION 13.4. Taxes........................................... 45
SECTION 13.5. Indemnification................................. 45
SECTION 13.6. Bankruptcy Petition............................. 46
SECTION 13.7. Submission to Jurisdiction...................... 47
SECTION 13.8. Governing Law................................... 48
SECTION 13.9. JURY TRIAL...................................... 48
SECTION 13.10. Successors and Assigns......................... 49
SECTION 13.11. Tax Treatment of Loans......................... 49
SECTION 13.12. No Recourse.................................... 49
EXHIBITS AND SCHEDULES
EXHIBIT A FORM OF LOAN NOTE
EXHIBIT B-1 FORM OF LOAN REQUEST
EXHIBIT B-2 FORM OF LOAN REQUEST RESPONSE
EXHIBIT C NOTIFICATION OF LEASE PAYMENT DEFICIT
iv
<PAGE>
SCHEDULE 8.11 BUSINESS LOCATIONS, TRADE NAMES
v
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of July 30, 1997 (the
"Agreement"), is entered into among AESOP LEASING L.P., a Delaware limited
partnership ("AESOP Leasing" or the "Borrower"), PV HOLDING CORP., a Delaware
corporation ("PVHC"), as a Permitted Nominee of the Borrower, QUARTX FLEET
MANAGEMENT, INC., a Delaware corporation ("Quartx"), as a Permitted Nominee of
the Borrower, and AESOP FUNDING II L.L.C., a Delaware limited liability company
("AFC-II" or the "Lender").
BACKGROUND
AESOP Leasing intends to purchase and finance Program
Vehicles (such capitalized term, together with all other capitalized terms used
herein, shall have the meaning assigned thereto in Section 1.1) and Non-Program
Vehicles that it will then lease to ARAC and certain other Eligible Rental Car
Companies for use in their respective daily vehicle rental businesses pursuant
to the AESOP I Operating Lease, and AESOP Leasing desires to obtain financing
for such Vehicles from the Lender.
AESOP Leasing has appointed PVHC pursuant to the PVHC/BONY
Nominee Agreement and Quartx pursuant to the Quartx Nominee Agreement to act as
nominee titleholders for the sole purpose of holding registered title to
certain Vehicles acquired by AESOP Leasing.
The Lender is willing to make Loans to AESOP Leasing on the
terms and conditions set forth herein.
The Lender will utilize the proceeds of one or more Series of
Notes issued from time to time pursuant to the Indenture to make Loans to (i)
AESOP Leasing hereunder, (ii) to AESOP Leasing under the AESOP I Finance Lease
Loan Agreement and (iii) to AESOP Leasing II under the AESOP II Loan Agreement,
in each case to the extent Vehicles eligible to be financed hereunder and
thereunder are available for financing and, in certain other circumstances, to
pay amortizing Notes. In addition, the Lender will utilize the proceeds of
certain capital contributions from time to time to make Loans to AESOP Leasing
hereunder to the extent Vehicles eligible to be
2
<PAGE>
financed hereunder are available for financing and, in certain other
circumstances, to pay amortizing Notes. In connection with the foregoing, the
Lender will assign its rights hereunder and under the AESOP I Finance Lease
Loan Agreement and the AESOP II Loan Agreement to the Trustee to secure the
Lender's obligations to the Secured Parties.
The Loans made to AESOP Leasing hereunder will be secured by
all of the right, title and interest of AESOP Leasing, PVHC and Quartx in and
to (a) the Vehicles leased under the AESOP I Operating Lease, (b) the
Manufacturer Programs as they relate to such Vehicles that are Program
Vehicles, (c) all monies due arising from the sale of such Vehicles that are
Non-Program Vehicles, (c) all payments under insurance policies or warranties
relating to such Vehicles, (d) all payments due from the Lessees and ARC under
the AESOP I Operating Lease and (e) all proceeds of the foregoing.
Accordingly, in consideration of the mutual agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the terms and
conditions hereof, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
SECTION 1.1. Certain Definitions. As used in this Agreement
and unless the context requires a different meaning, capitalized terms not
otherwise defined herein shall have the meanings assigned to such terms in (i)
the Definitions List attached as Schedule I to the Base Indenture, dated as of
July 30, 1997 (as such agreement may be amended, supplemented, restated or
otherwise modified from time to time in accordance with its terms, the "Base
Indenture"), between AFC-II and Harris Trust and Savings Bank, as trustee (the
"Trustee"), as in effect on the date hereof and as such Schedule I may be
amended or modified from time to time in accordance with the terms of the Base
Indenture (the "Definitions List").
SECTION 1.2. Accounting and Financial Determinations. Where
the character or amount of any asset or liability or item of income or expense
is required to be determined, or any accounting computation is required to be
made, for the purpose of this Agreement, such determi-
3
<PAGE>
nation or calculation shall be made, to the extent applicable and except as
otherwise specified in this Agreement, in accordance with GAAP. When used
herein, the term "financial statement" shall include the notes and schedules
thereto.
SECTION 1.3. Cross References; Headings. The words "hereof",
"herein" and "hereunder" and words of a similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. Section, Schedule and Exhibit references contained
in this Agreement are references to Sections, Schedules and Exhibits in or to
this Agreement unless otherwise specified. Any reference in any Section or
definition to any clause is, unless otherwise specified, to such clause of
such Section or definition. The various headings in this Agreement are
inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision hereof.
SECTION 1.4. Interpretation. In this Agreement, unless the
context otherwise requires:
(i) the singular includes the plural and
vice versa;
(ii) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and
assigns are permitted by this Agreement, and reference to any Person
in a particular capacity only refers to such Person in such capacity;
(iii) reference to any gender includes
the other gender;
(iv) reference to any Requirement of Law means such
Requirement of Law as amended, modified, codified or reenacted, in
whole or in part, and in effect from time to time;
(v) "including" (and with correlative meaning
"include") means including without limiting the generality of any
description preceding such term; and
4
<PAGE>
(vi) with respect to the determination of any period
of time, "from" means "from and including" and "to" and "until" means
"to but excluding".
SECTION 2. LOAN COMMITMENT OF THE LENDER.
SECTION 2.1. Loan Commitment. Subject to the terms and
conditions of this Agreement, including Section 12.2, and further subject to
the availability of funds to the Lender pursuant to the Indenture, the Lender
agrees to make loans hereunder (the "Loans") to AESOP Leasing from time to time
on or after the Initial Closing Date and prior to the Loan Commitment
Termination Date; provided, that on any one date the Loan Principal Amount of
all Loans made hereunder to AESOP Leasing shall not exceed the AESOP I
Operating Lease Loan Agreement Borrowing Base. The foregoing commitment of the
Lender is called the "Loan Commitment".
SECTION 2.2. Certain Waivers. AESOP Leasing waives
presentment, demand for payment, notice of dishonor and protest, notice of the
creation of any of its Liabilities and all other notices whatsoever to AESOP
Leasing with respect to such Liabilities except notices required under Section
12.1. The obligations of AESOP Leasing under this Agreement and the Loan Note
shall not be affected by (i) the failure of the Trustee or the Lender or the
holder of the Loan Note or any of AESOP Leasing's Liabilities to assert any
claim or demand or to exercise or enforce any right, power or remedy against
AESOP Leasing or the AESOP I Operating Lease Loan Collateral or otherwise, (ii)
any extension or renewal for any period (whether or not longer than the
original period) or exchange of any of AESOP Leasing's Liabilities or the
release or compromise of any obligation of any nature of any Person with
respect thereto, (iii) the surrender, release or exchange of all or any part of
any property (including the AESOP I Operating Lease Loan Collateral) securing
payment and performance of any of AESOP Leasing's Liabilities or the compromise
or extension or renewal for any period (whether or not longer than the original
period) of any obligations of any nature of any Person with respect to any such
property, and (iv) any other act, matter or thing which would or might, in the
absence of this provision, operate to release, discharge or otherwise
prejudicially affect the obligations of AESOP Leasing.
5
<PAGE>
SECTION 2.3. Conditions. The making of each Loan hereunder is
subject to the satisfaction of the applicable conditions set forth in Section
11.
SECTION 2.4. Use of Proceeds. AESOP Leasing shall apply the
funds received by it pursuant to Section 2.1 hereof solely to purchase Eligible
Vehicles that it will lease to ARAC and certain other Eligible Rental Car
Companies pursuant to the AESOP I Operating Lease for use in their respective
daily vehicle rental businesses.
SECTION 3. LOAN NOTE; LOAN PROCEDURE; RECORDKEEPING.
SECTION 3.1. Loan Note. The Loans made hereunder shall be
evidenced by a promissory note issued by AESOP Leasing (herein, as from time to
time supplemented, extended or replaced, the "Loan Note"), substantially in the
form set forth in Exhibit A, with appropriate insertions, dated as of the
Initial Closing Date, payable to the order of the Lender and assigned to the
Trustee pursuant to the Indenture.
SECTION 3.2. Loan Procedure. AESOP Leasing shall deliver a
Loan Request to the Lender no later than 4:00 p.m., New York City time, on a
day that is not less than one, nor more than five, Business Days prior to the
proposed Borrowing Date (which shall be a Business Day). Each Loan Request
shall be irrevocable, and shall specify (i) the principal amount of the
proposed Loan, (ii) the Borrowing Date of the proposed Loan, (iii) a summary of
the Vehicles being financed (including for Program Vehicles subject to the GM
Repurchase Program, the Designated Period for each such Program Vehicle), (iv)
whether each Vehicle is a Program Vehicle or a Non-Program Vehicle, (v) the VIN
for each Vehicle to be financed, (vi) in the case of new Vehicles, the total
Capitalized Cost thereof as of the Borrowing Date, and (vii) in the case of
Initial Vehicles, the Net Book Value of such Vehicles as of the first day of
the Related Month. The aggregate requested borrowings hereunder on any Business
Day shall be for an initial aggregate principal amount that, together with the
Loan Principal Amount of Loans outstanding hereunder and under the AESOP I
Finance Lease Loan Agreement and the AESOP II Loan Agreement on such date,
shall not exceed the principal amount of Notes outstanding on such date. On the
terms and subject to the conditions of
6
<PAGE>
this Agreement, on or before 2:00 p.m., New York City time, on the Borrowing
Date specified in the Loan Request, the Lender shall transfer same day or
immediately available funds to AESOP Leasing's account specified in such Loan
Request in the amount specified in such Loan Request. Each Loan Request made
pursuant to this Section 3.2 shall constitute AESOP Leasing's representation
and warranty that all of the applicable conditions contained in Section 11
will, after giving effect to such Loan, be satisfied.
SECTION 3.3. Recordkeeping. The Lender shall record in its
records, or at its option on the schedule attached to the Loan Note, the date
and principal amount of each Loan made hereunder, each repayment thereof, and
the other information provided for thereon. The aggregate unpaid Loan Principal
Amount so recorded shall be rebuttable presumptive evidence of the Loan
Principal Amount owing and unpaid on the Loan Note. The failure to so record
any such information or any error in so recording any such information shall
not, however, limit or otherwise affect the actual obligations of AESOP Leasing
hereunder or under the Loan Note to repay the Loan Principal Amount, together
with all Loan Interest accruing thereon.
SECTION 4. INTEREST.
SECTION 4.1. Interest Rate on Loans. AESOP Leasing hereby
promises to pay interest on the unpaid principal amount of each Loan made to it
hereunder (the "Loan Interest"), for each Loan Interest Period commencing on
the date such Loan is made to AESOP Leasing until such Loan is paid in full at
a rate not less than the Lender's Carrying Cost Interest Rate for the
applicable Loan Interest Period. The applicable rate of Loan Interest on each
Loan shall be specified in a Loan Request Response provided by the Lender to
AESOP Leasing on the date a Loan Request is delivered; provided that if the
Lender's Carrying Cost Interest Rate for the applicable Loan Interest Period is
higher than the rate of Loan Interest specified in the Loan Request Response,
Loan Interest payable shall be determined using the higher rate.
SECTION 4.2. Supplemental Interest. AESOP Leasing agrees to
pay to the Lender, as an additional
7
<PAGE>
interest payment, an amount equal to the product of (A) the applicable Loan
Agreement's Share as of the beginning of each Loan Interest Period times (B)
the sum of (i) the Supplemental Carrying Charges for such Loan Interest Period,
minus (ii) any accrued earnings on Permitted Investments in the Collection
Account which earnings are available for distribution on the last Business Day
of such Loan Interest Period (the product of the amounts described in clauses
(A) and (B) above, "Supplemental Interest").
SECTION 4.3. Loan Interest Payment Dates. Accrued Loan
Interest on each Loan made hereunder shall be payable on each Payment Date
(with respect to the related Loan Interest Period), upon any prepayment and at
maturity, commencing with the first of such dates to occur after the date such
Loan is made. After maturity (whether by acceleration or otherwise), all
accrued Loan Interest and Supplemental Interest on all Loans made hereunder
shall be payable on demand. Supplemental Interest in respect of each Loan
Interest Period shall be payable on each Payment Date and upon any prepayment
and at maturity. All calculations of Loan Interest and Supplemental Interest
shall be based on a 360-day year and the actual number of days elapsed in the
related Loan Interest Period.
SECTION 4.4. Setting of Rates. The Lender's Carrying Cost
Interest Rate and Supplemental Carrying Charges used hereunder to compute Loan
Interest due on each Loan made hereunder on each Payment Date and the
Supplemental Interest due on each Payment Date shall be calculated from time to
time by the Lender in accordance with this Agreement (and written notice
thereof shall be provided to AESOP Leasing not later than ten days prior to the
applicable Payment Date). Such calculation shall be conclusive, absent
demonstrable error.
SECTION 4.5. Carrying Charges. AESOP Leasing agrees to pay to
the Lender on each Payment Date an amount equal to the product of (A) the
applicable Loan Agreement's Share as of such Payment Date times (B) all accrued
and unpaid Carrying Charges that are accrued and unpaid as of each such Payment
Date.
SECTION 5. REPAYMENT OF LOAN PRINCIPAL AMOUNT.
8
<PAGE>
SECTION 5.1. Mandatory Repayment of Monthly Loan Principal
Amount of Loans. On each Payment Date, AESOP Leasing shall pay to the Lender,
as a repayment of the Loan Principal Amount, an amount equal to the product of
(A) the applicable Loan Payment Allocation Percentage as of the beginning of
the Related Month times (B) the sum, without duplication, of (i) the accrued
Depreciation Charges for the Related Month for all Vehicles (a) leased under
the AESOP I Operating Lease at any time during the Related Month or (b)
described in clauses (iii) or (iv) of this Section 5.1, plus (ii) all upfront
incentive payments paid by Manufacturers during the Related Month in respect of
purchases of Non-Program Vehicles leased under the AESOP I Operating Lease,
plus (iii) the aggregate Termination Values (each as of the date on which such
Vehicle becomes an Ineligible Vehicle, a Casualty or is sold, as applicable) of
all the Vehicles leased under the AESOP I Operating Lease at any time during
such Related Month that, without double counting, while so leased either became
Ineligible Vehicles, suffered a Casualty or were sold by or on behalf of AESOP
Leasing (it being understood that AESOP Leasing has agreed to sell, or cause to
be sold, Vehicles only in a manner consistent with the provisions hereof and of
the Related Documents) to any Person other than to a Manufacturer pursuant to a
Manufacturer Program or to a third party pursuant to an auction conducted
through a Guaranteed Depreciation Program, in each case, during the Related
Month, plus (iv) the aggregate Termination Values (each as of the applicable
Turnback Date) of all Program Vehicles leased under the AESOP I Operating Lease
that while so leased were returned to a Manufacturer pursuant to a Manufacturer
Program with respect to which either (x) the Repurchase Price has been paid by
such Manufacturer and/or the related auction dealers during the Related Month
or (y) a Manufacturer Event of Default has occurred, minus (v) an amount equal
to the sum of (1) any amounts received by the Lender or the Trustee, or
deposited into the Collection Account, during the Related Month representing
(a) Repurchase Prices for repurchases of Program Vehicles leased under the
AESOP I Operating Lease at the applicable Turnback Date or (b) the sales
proceeds (including amounts paid by a Manufacturer as a result of the sale of a
Program Vehicle during the Related Month outside such Manufacturer's
Manufacturer Program but excluding amounts released to AESOP Leasing pursuant
to the last sentence of Section 5.2(a) of the Base Indenture) for sales of
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Vehicles leased under the AESOP I Operating Lease at the time of such sale to a
third party other than (x) to a Manufacturer pursuant to a Repurchase Program
or (y) through an auction dealer pursuant to a Guaranteed Depreciation Program
and (2) any amounts received in the Related Month and applied to the Loan
Principal Amount pursuant to Section 6.3 (the product of the amounts described
in clauses (A) and (B) above, the "Monthly Loan Principal Amount"). Unless
otherwise required to be paid sooner pursuant to the terms of this Agreement,
the entire unpaid Loan Principal Amount of the Loans made hereunder shall be
payable on the last occurring Series Termination Date with respect to the
Notes. All Loans made hereunder shall be due on the maturity date therefor,
whether by acceleration or otherwise. Solely for determining the amounts
payable under this Section 5.1, with respect to a Program Vehicle that became a
Casualty during the Related Month as a result of such Program Vehicle being
held beyond the stated expiration date of the applicable Repurchase Period and
not being redesignated as a Non-Program Vehicle, such Vehicle will be deemed
to have become a Casualty upon such expiration date.
SECTION 5.2. Voluntary Prepayments of Loan Principal Amount.
AESOP Leasing may from time to time prepay the principal amount with respect to
any Loans made hereunder, in whole or in part, on any date; provided that,
except for any prepayment made pursuant to Section 6.3 hereof or any payment
made to comply with Section 10.13 hereof, AESOP Leasing shall give the Lender
and the Trustee not less than one (1) Business Day's prior notice of any such
prepayment, specifying the date and amount of such prepayment, and, if AESOP
Leasing is requesting a release of Vehicles from the Lien hereof pursuant to
Section 7.3, the Vehicles to which such prepayment relates.
SECTION 6. MAKING OF PAYMENTS.
SECTION 6.1. Making of Payments. All payments of the Monthly
Loan Principal Amount or Loan Interest hereunder, all prepayments of the Loan
Principal Amount hereunder, and all payments of Supplemental Interest, Carrying
Charges and of all other Liabilities shall be made by AESOP Leasing to, or for
the account of, the Lender in immediately available Dollars, without setoff,
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counterclaim or deduction of any kind. All such payments shall be made to the
Collection Account (or such other account as the Lender may from time to time
specify with the consent of the Trustee), not later than 11:00 a.m., New York
City time, on the date due, and funds received after that hour shall be deemed
to have been received by the Lender on the next following Business Day. The
Lender hereby specifies that all (i) payments with respect to Program Vehicles
leased under the AESOP I Operating Lease made by the Manufacturers and related
auction dealers under the Manufacturer Programs, (ii) amounts representing the
proceeds from sales of Vehicles leased under the AESOP I Operating Lease
(including amounts paid by a Manufacturer as a result of the sale of such
Vehicle outside such Manufacturer's Manufacturer Program) to third parties
(other than under any related Manufacturer Program) and (iii) payments with
respect to any other AESOP I Operating Lease Loan Collateral shall be deposited
in the Collection Account; provided, however, that, subject to Section 5.2 of
the Base Indenture, insurance proceeds and warranty payments with respect to
Vehicles leased under the AESOP I Operating Lease will be deposited in the
Collection Account only if an Amortization Event or a Potential Amortization
Event shall have occurred and be continuing.
SECTION 6.2. Due Date Extension. If any (i) payment of the
Monthly Loan Principal Amount or Loan Interest hereunder or (ii) prepayments of
the Loan Principal Amount or Supplemental Interest with respect to any Loans
made hereunder falls due on a day which is not a Business Day, then such due
date shall be extended to the next following Business Day and Loan Interest or
Supplemental Interest, as applicable, shall accrue through such Business Day.
SECTION 6.3. Application of Sale Proceeds. AESOP Leasing
agrees that an amount equal to the product of (A) the applicable Loan Payment
Allocation Percentage as of the beginning of the Related Month times (B) the
sum of (i) all payments made by the Manufacturers and related auction dealers
under the Manufacturer Programs with respect to Vehicles leased under the AESOP
I Operating Lease, plus (ii) proceeds from the sale of Vehicles leased under
the AESOP I Operating Lease to third parties (other than to the Manufacturer or
pursuant to a Guaranteed Depreciation Program), in each case deposited in the
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Collection Account on any date, shall be applied, upon receipt thereof in the
Collection Account, to prepay the Loan Principal Amount.
SECTION 6.4. Payment Deficits. At or before 11:30 a.m., New
York City time, on each Payment Date, AESOP Leasing shall notify the Trustee
and the related Enhancement Provider of the amount of the Lease Payment
Deficit, if any, with respect to each Series of Notes issued pursuant to the
Indenture, such notification to be in the form of Exhibit C.
SECTION 7. LOAN COLLATERAL SECURITY.
SECTION 7.1. Grant of Security Interest. (a) As security for
the prompt and complete payment and performance of its Liabilities, each of
AESOP Leasing, PVHC and Quartx hereby pledges, hypothecates, assigns, transfers
and delivers to the Lender, and hereby grants to the Lender, a continuing,
security interest in, all of the following, whether now owned or hereafter
acquired:
(i) all Vehicles leased under the AESOP I
Operating Lease, and all Certificates of Title with
respect thereto;
(ii) all right, title and interest of each of AESOP
Leasing, PVHC and Quartx in and to each Manufacturer Program,
including any amendments thereof, and all monies due and to become due
under or in connection with each such Manufacturer Program, in each
case in respect of Vehicles leased under the AESOP I Operating Lease,
whether payable as Vehicle Repurchase Prices, auction sales proceeds,
fees, expenses, costs, indemnities, insurance recoveries, damages for
breach of the Manufacturer Programs or otherwise (but excluding all
incentive payments payable in respect of purchases of vehicles under
the Manufacturer Programs) and all rights to compel performance and
otherwise exercise remedies thereunder;
(iii) all right, title and interest of each of AESOP
Leasing, PVHC and Quartx in, to and under the AESOP I Operating Lease
and the related Lessee Agreements (other than any right, title and
interest of any of AESOP Leasing, PVHC and Quartx with re-
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spect to any Excluded Payments) including, without limitation, all
monies due and to become due to any of AESOP Leasing, PVHC and Quartx
from any of the Lessees or the Guarantor or any of their assigns under
or in connection with the AESOP I Operating Lease and the related
Lessee Agreements, whether payable as principal, interest, rent,
guaranty payments (other than guaranty payments with respect to any
Excluded Payments provided to any of AESOP Leasing, PVHC and Quartx
under the AESOP I Operating Lease), fees, expenses, costs,
indemnities, insurance recoveries, damages for the breach of any of
the AESOP I Operating Lease and the related Lessee Agreements or
otherwise, and all rights, remedies, powers, privileges and claims of
each of AESOP Leasing, PVHC and Quartx against any other party under
or with respect to the AESOP I Operating Lease and the related Lessee
Agreements (whether arising pursuant to the terms of the AESOP I
Operating Lease or the related Lessee Agreements or otherwise
available to AESOP Leasing, PVHC or Quartx at law or in equity), the
right to enforce the AESOP I Operating Lease and the related Lessee
Agreements as provided herein and to give or withhold any and all
consents, requests, notices, directions, approvals, extensions or
waivers under or with respect to the AESOP I Operating Lease and the
related Lessee Agreements or the obligations of any party thereunder,
and all collateral pledged under the AESOP I Operating Lease;
(iv) all right, title and interest of each of AESOP
Leasing, PVHC and Quartx in, to and under the Vehicle Title and
Lienholder Nominee Agreements, the HFS Indemnity and the
Administration Agreement, including any amendments thereof, and all
monies due and to become due thereunder, in each case in respect of
Vehicles leased under the AESOP I Operating Lease, whether payable as
fees, expenses, costs, indemnities, insurance recoveries, damages for
the breach of any of the Vehicle Title and Lienholder Nominee
Agreements, the HFS Indemnity and the Administration Agreement or
otherwise and all rights to compel performance and otherwise exercise
remedies thereunder;
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(v) all payments under insurance policies (whether
or not the Lessor, the Lender or the Trustee is named as the loss
payee thereof) or any warranty payable by reason of loss or damage to,
or otherwise with respect to, any of the Vehicles leased under the
AESOP I Operating Lease;
(vi) all right, title and interest of each of AESOP
Leasing, PVHC and Quartx in and to any proceeds from the sale of
Vehicles leased under the AESOP I Operating Lease, including all
monies due in respect of such Vehicles under the AESOP I Operating
Lease, whether payable as the purchase price of such Vehicles, auction
sales proceeds, or as fees, expenses, costs, indemnities, insurance
recoveries, or otherwise (including all upfront incentive payments
payable by Manufacturers in respect of purchases of Non-Program
Vehicles);
(vii) any assignment of a security interest in any
Vehicle leased under the AESOP I Operating Lease granted to any of
AESOP Leasing, PVHC and Quartx pursuant to the AESOP I Operating Lease
or otherwise, and all Certificates of Title with respect to each such
Vehicle; and
(viii) all products and proceeds of all of
the foregoing;
provided, however, that the AESOP I Segregated Account shall not be subject to
the grant of a security interest by each of AESOP Leasing, PVHC and Quartx
pursuant to this Section 7.1(a) and shall not constitute part of the AESOP I
Loan Collateral.
(b) To secure the AFC-II Obligations, each of AESOP Leasing,
PVHC and Quartx hereby pledges, hypothecates, assigns, transfers and delivers
to the Trustee, on behalf of the Secured Parties, and hereby grants to the
Trustee, on behalf of the Secured Parties, a continuing, first priority
security interest in, all of the AESOP I Operating Lease Loan Collateral,
whether now owned or hereafter acquired. Upon the occurrence of a Liquidation
Event of Default or a Limited Liquidation Event of Default and subject to the
provisions of the Related Documents, the Trustee shall have all of the rights
and remedies of a secured party, including, without limitation,
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the rights and remedies granted under the Uniform Commercial Code.
SECTION 7.2. Certificates of Title. AESOP Leasing shall take,
or shall cause to be taken, such action as shall be necessary to submit all of
the Certificates of Title for Vehicles leased under the AESOP I Operating Lease
(other than Certificates of Title with respect to the Initial PVT Vehicles, for
which BONY is noted as the first lienholder, and Certificates of Title with
respect to Vehicles titled in the states of Nebraska, Ohio and Oklahoma) to
the appropriate state authority for notation of the Trustee's lien thereon. The
original Certificates of Title shall be held by the Administrator, as agent for
AESOP Leasing, in trust for the benefit of the Lender and the Trustee.
SECTION 7.3. Release of AESOP I Operating Lease Loan
Collateral. The Lender shall request the Trustee in writing to release its Lien
on a Vehicle leased under the AESOP I Operating Lease and the Certificate of
Title therefor upon the earliest of (i) in the case of a Program Vehicle or a
Non-Program Vehicle subject to a Guaranteed Depreciation Program, the date of
the sale of such Vehicle by an auction dealer to a third party, and in the case
of a Program Vehicle or a Non-Program Vehicle subject to a Repurchase Program,
the Turnback Date for such Program Vehicle, (ii) voluntary prepayment in full
of the principal amount of the Loan to which such Vehicle relates in accordance
with Section 5.2, as noted in records maintained by the Trustee, (iii) receipt
of proceeds from an ordinary course sale of such Vehicle in an amount at least
equal to the Termination Value of such Vehicle, provided, however, that if such
an ordinary course sale occurs during the Repurchase Period with respect to a
Program Vehicle, AESOP Leasing shall only sell or permit a sale of such Program
Vehicle for a purchase price, together with any amounts payable by a
Manufacturer as a result of or in connection with such sale, equal to or
greater than the Repurchase Price that it would have received if it had turned
back such Program Vehicle to the Manufacturer and (iv) receipt of proceeds from
an ordinary course sale of a Vehicle subject to a Casualty in an amount at
least equal to the Termination Value of such Vehicle. With respect to Vehicles
leased under the AESOP I Operating Lease, from and after the earliest of (a) in
the case of a Program Vehicle or a
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Non-Program Vehicle subject to a Guaranteed Depreciation Program, the date of
the sale of such Vehicle by an auction dealer to a third party, and in the case
of a Program Vehicle or a Non-Program Vehicle subject to a Repurchase Program,
the Turnback Date for such Program Vehicle, (b) a prepayment of the principal
amount of the Loan to which such Vehicle relates and (c) receipt of the
purchase price for a Vehicle by AESOP Leasing, or by the Trustee on the
Lender's behalf, in the case of (b) and (c), in an amount at least equal to the
Termination Value of such Vehicle, such Vehicle and such Certificate of Title
shall be deemed to be released from the Lien of this Agreement, and the Lender
and the Trustee shall execute such documents and instruments as AESOP Leasing
may reasonably request (including a power of attorney of the Trustee appointing
the Administrator to act as the agent of the Trustee in releasing the Lien of
the Trustee on Vehicles turned back or sold pursuant to the provisions of this
Section 7.3; which power of attorney shall be revocable by the Lender or the
Trustee at any time following the occurrence of a Liquidation Event of
Default), at AESOP Leasing's expense, to evidence and/or accomplish such
release.
SECTION 7.4. Change of Location or Name. So long as any of
its Liabilities shall remain outstanding or the Lender shall continue to have
any Loan Commitment, none of AESOP Leasing, PVHC or Quartx will change (i) the
location of its principal place of business, chief executive office, major
executive office, chief place of business or its records concerning its
business and financial affairs, or (ii) its legal name or the name under or by
which it conducts its business, in each case without first giving the Trustee
and the Lender at least 30 days' advance written notice thereof and having
taken any and all action required to maintain and preserve the first priority
perfected Lien of the Lender or the Trustee on the AESOP I Operating Lease
Loan Collateral (except, (a) as to perfection and priority, with respect to
Vehicles titled in the states of Nebraska, Ohio and Oklahoma and (b) that the
lien of the Trustee shall not be noted on the Certificates of Title with
respect to the Initial PVT Vehicles), free and clear of any Lien whatsoever
except for Permitted Liens; provided, however, that notwithstanding the
foregoing, none of AESOP Leasing, PVHC or Quartx shall change the location of
its principal place of business, chief executive office, major execu-
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tive office, chief place of business or its records concerning its business and
financial affairs to any place outside the United States of America.
SECTION 7.5. Deliveries; Further Assurances. Each of AESOP
Leasing, PVHC and Quartx agrees that it will, at its sole expense, (i)
immediately deliver or cause to be delivered to the Lender (or the Trustee on
behalf of the Secured Parties), in due form for transfer (i.e., endorsed in
blank), all securities, chattel paper, instruments and documents, if any, at
any time representing all or any of the AESOP I Operating Lease Loan
Collateral, other than the Certificates of Title which shall be delivered to
the Lender or the Trustee, as applicable, after the occurrence of a Liquidation
Event of Default, if such delivery is reasonably necessary or appropriate to
perfect or protect the Lender's (or the Trustee's on behalf of the Secured
Parties) security interest in such AESOP I Operating Lease Loan Collateral, and
(ii) execute and deliver, or cause to be executed and delivered, to the Lender
or the Trustee in due form for filing or recording (and pay the cost of filing
or recording the same in all public offices reasonably deemed necessary or
advisable by the Lender or the Trustee), such assignments, security agreements,
mortgages, consents, waivers, financing statements and other documents, and do
such other acts and things, all as may from time to time be reasonably
necessary or desirable to establish and maintain to the satisfaction of the
Lender (or the Trustee) a valid perfected Lien on and security interest in all
of the AESOP I Operating Lease Loan Collateral (except, as to perfection, with
respect to Vehicles titled in the states of Nebraska, Ohio and Oklahoma) now or
hereafter existing or acquired (free of all other Liens whatsoever other than
Permitted Liens) to secure payment and performance of its Liabilities.
SECTION 7.6. [RESERVED].
SECTION 7.7. [RESERVED].
SECTION 7.8. AESOP I Segregated Account. AESOP Leasing shall
establish and maintain in its name an account entitled "AESOP Leasing L.P.
Account" (the "AESOP I Segregated Account"). The AESOP I Segregated Account
shall be maintained (i) with a Qualified Institution, or (ii) as a segregated
trust account with the corporate
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trust department of a depository institution or trust company having corporate
trust powers and acting as trustee for funds deposited in the AESOP I
Segregated Account. If the AESOP I Segregated Account is not maintained in
accordance with the previous sentence, then within 10 Business Days after
obtaining knowledge of such fact, AESOP Leasing shall establish a new AESOP I
Segregated Account which complies with such sentence and transfer into the new
AESOP I Segregated Account all amounts then on deposit in the non-qualifying
AESOP I Segregated Account. The parties hereto acknowledge and agree that the
monies held in the AESOP I Segregated Account from time to time (i) are
property of AESOP Leasing, (ii) are not being pledged to secure any obligation
to, or otherwise held in trust for, the Lender or any of the persons specified
in this Section 7.8 and (iii) are available to satisfy the claims of creditors
of AESOP Leasing generally; provided, however, that if funds are deposited into
the AESOP I Segregated Account in accordance with Section 9.13 for the purpose
of paying legal fees and disbursements of counsel to AESOP Leasing or its
Permitted Nominees, AESOP Leasing shall use such funds solely for such purpose;
and provided further that nothing contained herein shall affect the rights of
the Lender to pursue all legal remedies available to it with respect to any
amounts payable by AESOP Leasing hereunder.
SECTION 8. REPRESENTATIONS AND WARRANTIES. To induce the
Lender to enter into this Agreement and to make Loans hereunder, AESOP Leasing
represents and warrants to the Lender as to itself, and each of PVHC and
Quartx represents and warrants to the Lender as to itself, as of the Initial
Closing Date, as of the date of each Loan made hereunder and as of each Series
Closing Date that:
SECTION 8.1. Organization; Ownership; Power; Qualification.
Each of AESOP Leasing, PVHC and Quartx is (i) a limited partnership or a
corporation, as the case may be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation, (ii) has the
power and authority to own its properties and to carry on its business as now
being and hereafter proposed to be conducted and (iii) is duly qualified, in
good standing and authorized to do business in each jurisdiction in which the
character of its proper-
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ties or the nature of its businesses requires such qualification or
authorization.
SECTION 8.2. Authorization; Enforceability. Each of AESOP
Leasing, PVHC and Quartx has the power and has taken all necessary action to
authorize it to execute, deliver and perform this Agreement and each of the
other Related Documents to which it is a party in accordance with their
respective terms, and to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by each of AESOP
Leasing, PVHC and Quartx and is, and each of the other Related Documents to
which any of AESOP Leasing, PVHC or Quartx is a party is, a legal, valid and
binding obligation of such party, enforceable in accordance with its terms.
SECTION 8.3. Compliance. The execution, delivery and
performance by each of AESOP Leasing, PVHC and Quartx of this Agreement and
each other Related Document to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not (i) require
any consent, approval, authorization or registration not already obtained or
effected, (ii) violate any applicable law with respect to AESOP Leasing, PVHC
or Quartx, as the case may be, which violation could result in a Material
Adverse Effect, (iii) conflict with, result in a breach of, or constitute a
default under the certificate of limited partnership or limited partnership
agreement of AESOP Leasing or under the certificate of incorporation, as
amended, or by-laws of each of PVHC and Quartx, or under any indenture,
agreement, or other instrument to which any of AESOP Leasing, PVHC or Quartx is
a party or by which its properties may be bound, or (iv) result in or require
the creation or imposition of any Lien upon or with respect to any property now
owned or hereafter acquired by any of AESOP Leasing, PVHC or Quartx except
Permitted Liens.
SECTION 8.4. [RESERVED].
SECTION 8.5. Litigation. There is no action, suit or
proceeding pending against or, to the knowledge of any of AESOP Leasing, PVHC
or Quartx, threatened against or affecting any of AESOP Leasing, PVHC or Quartx
before any court or arbitrator or any Governmental Authority in which there is
a reasonable possibility of an
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adverse decision that could materially adversely affect the consolidated
financial position, consolidated results of operations, business, properties,
performance or condition (financial or otherwise) of AESOP Leasing, PVHC or
Quartx, as the case may be, or which in any manner draws into question the
validity or enforceability of this Agreement or any other Related Document or
the ability of any of AESOP Leasing, PVHC or Quartx to comply with any of the
respective terms hereunder or thereunder.
SECTION 8.6. Liens. The AESOP I Operating Lease Loan
Collateral is free and clear of all Liens other than (i) Permitted Liens and
(ii) Liens in favor of the Lender or the Trustee. The Lender (or the Trustee on
behalf of the Secured Parties) has obtained, as security for the Liabilities, a
first priority perfected Lien on all AESOP I Operating Lease Loan Collateral
(except, with respect to perfection and priority, Vehicles titled in the states
of Nebraska, Ohio and Oklahoma). All Vehicle Perfection and Documentation
Requirements with respect to all Vehicles leased under the AESOP I Operating
Lease on or after the date hereof have and will continue to be satisfied in
accordance with the terms of this Agreement.
SECTION 8.7. Employee Benefit Plans. None of AESOP Leasing,
PVHC or Quartx have established and maintain or contribute to any employee
benefit plan that is covered by Title IV of ERISA, and none of AESOP Leasing,
PVHC or Quartx will do so, so long as the Loan Commitment has not expired, or
any amount is owing to the Lender hereunder.
SECTION 8.8. Investment Company Act. None of AESOP Leasing,
PVHC or Quartx is or is controlled by an "investment company," within the
meaning of the Investment Company Act, and none of AESOP Leasing, PVHC or
Quartx is subject to any other statute which would impair or restrict its
ability to perform its obligations under this Agreement or the other Related
Documents, and neither the entering into or performance by any of AESOP
Leasing, PVHC or Quartx of this Agreement nor the issuance of the Loan Note
violates any provision of such Act.
SECTION 8.9. Regulations G, T, U and X. None of AESOP
Leasing, PVHC or Quartx is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carry-
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ing margin stock (within the meaning of Regulation G, T, U and X of the Board
of Governors of the Federal Reserve System). None of AESOP Leasing, PVHC or
Quartx, any Affiliate of any of AESOP Leasing, PVHC or Quartx or any Person
acting on its or their behalf has taken or will take action to cause the
execution, delivery or performance of this Agreement or the Loan Note, the
making or existence of the Loans or the use of proceeds of the Loans made
hereunder to violate Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
SECTION 8.10. Proceeds. The proceeds of the Loans made
hereunder will be used solely to purchase or finance Eligible Vehicles that
will be leased under the AESOP I Operating Lease.
SECTION 8.11. Business Locations; Trade Names. Schedule 8.11
lists each of the locations where AESOP Leasing, PVHC or Quartx maintains a
chief executive office, principal place of business, or any records, and
Schedule 8.11 also lists the legal name of each of AESOP Leasing, PVHC and
Quartx and each name under or by which it conducts its business.
SECTION 8.12. Taxes. Each of AESOP Leasing, PVHC and Quartx
has filed all tax returns which have been required to be filed by it (except
where the requirement to file such return is subject to a valid extension), and
has paid or provided adequate reserves for the payment of all taxes shown due
on such returns or required to be paid as a condition to such extension, as
well as all payroll taxes and federal and state withholding taxes, and all
assessments payable by it that have become due, other than those that are
payable without penalty or are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been established,
and are being maintained, in accordance with GAAP. As of the Closing Date, to
the best of AESOP Leasing's, PVHC's and Quartx's knowledge, there is no
unresolved claim by a taxing authority concerning AESOP Leasing's, PVHC's or
Quartx's tax liability for any period for which returns have been filed or were
due other than those contested in good faith by appropriate proceedings and
with respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP.
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SECTION 8.13. Governmental Authorizations. Each of AESOP
Leasing, PVHC and Quartx has all licenses, franchises, permits and other
governmental authorizations necessary for all businesses presently carried on
by it (including owning and leasing the real and personal property owned and
leased by it), except where failure to obtain such licenses, franchises,
permits and other governmental authorizations would not have a material adverse
effect on its business and properties or a Material Adverse Effect (as set
forth in clauses (ii) and (iii) of the definition thereof).
SECTION 8.14. Compliance with Laws. Each of AESOP Leasing,
PVHC and Quartx: (i) is not in violation of any law, ordinance, rule,
regulation or order of any Governmental Authority applicable to it or its
property, which violation would have a material adverse effect on its business
and properties or a Material Adverse Effect (as set forth in clauses (ii) and
(iii) of the definition thereof), and no such violation has been alleged, (ii)
has filed in a timely manner all reports, documents and other materials
required to be filed by it with any governmental bureau, agency or
instrumentality (and the information contained in each of such filings is true
correct and complete in all material respects), except where failure to make
such filings would not have a material adverse effect on its business and
properties or a Material Adverse Effect (as set forth in clauses (ii) and (iii)
of the definition thereof) and (iii) has retained all records and documents
required to be retained by it pursuant to any Requirement of Law, except where
failure to retain such records would not have a material adverse effect on its
business and properties or a Material Adverse Effect (as set forth in clauses
(ii) and (iii) of the definition thereof).
SECTION 8.15. Eligible Vehicles. Each Vehicle leased under
the AESOP I Operating Lease was, on the date of purchase or financing thereof
by AESOP Leasing, an Eligible Vehicle.
SECTION 8.16. Manufacturer Programs. No Manufacturer Event
of Default has occurred and is continuing with respect to any Eligible Program
Manufacturer.
SECTION 8.17. Absence of Default. AESOP Leasing is in
compliance with all of the provisions of
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its certificate of limited partnership and limited partnership agreement and
each of PVHC and Quartx is in compliance with all provisions of its certificate
of incorporation, as amended, and by-laws and no event has occurred or failed
to occur which has not been remedied or waived, the occurrence or
non-occurrence of which constitutes, or with the passage of time or giving of
notice or both would constitute, (i) an AESOP I Loan Event of Default or a
Potential AESOP I Loan Event of Default or (ii) a default or event of default
by any of AESOP Leasing, PVHC or Quartx under any indenture, agreement or other
instrument, or any judgment, decree or final order to which any of AESOP
Leasing, PVHC or Quartx is a party or by which any of AESOP Leasing, PVHC or
Quartx or any of its properties may be bound or affected.
SECTION 8.18. No Security Interest; Title to Assets. (a) All
action necessary (including the filing of UCC-1 financing statements, the
assignment of rights under the Manufacturer Programs to the Trustee, the
notation on Certificates of Title for all Vehicles leased under the AESOP I
Operating Lease (other than the Initial PVT Vehicles, for which BONY is noted
as the first lienholder, and other than Vehicles titled in the states of
Nebraska, Ohio and Oklahoma) of the Trustee's lien for the benefit of the
Noteholders) to protect and perfect AFC-II's security interest in the AESOP I
Operating Lease Loan Collateral and the Trustee's security interest on behalf
of the Secured Parties in the Collateral now in existence and hereafter
acquired or created has been duly and effectively taken.
(b) Each of AESOP Leasing, PVHC and Quartx has good, legal
and marketable title to, or a valid leasehold interest in, all of its assets.
None of such properties or assets is subject to any Liens, except for Permitted
Liens. Except for financing statements or other filings with respect to or
evidencing Permitted Liens, no financing statement under the UCC of any state,
application for a Certificate of Title or certificate of ownership, or other
filing which names any of AESOP Leasing, PVHC or Quartx as debtor or which
covers or purports to cover any of the assets of any of AESOP Leasing, PVHC or
Quartx is on file in any state or other jurisdiction, and none of AESOP
Leasing, PVHC or Quartx has signed any such financing statement, application or
instrument authorizing any secured party or creditor of such Person thereunder
to
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file any such financing statement, application or filing other than with
respect to Permitted Liens.
SECTION 8.19. Accuracy of Information. All data,
certificates, reports, statements, opinions of counsel, documents and other
information furnished to the Lender or the Trustee by or on behalf of any of
AESOP Leasing, PVHC or Quartx pursuant to any provision of any Related
Document, or in connection with or pursuant to any amendment or modification
of, or waiver under, any Related Document, shall, at the time the same are so
furnished, (i) be complete and correct in all material respects to the extent
necessary to give the Lender or the Trustee, as the case may be, true and
accurate knowledge of the subject matter thereof, (ii) not contain any untrue
statement of a material fact and (iii) not omit to state a material fact
necessary in order to make the statements contained therein (in light of the
circumstances in which they were made) not misleading, and the furnishing of
the same to the Lender or the Trustee, as the case may be, shall constitute a
representation and warranty by AESOP Leasing, PVHC or Quartx, as the case may
be, made on the date the same are furnished to the Lender or the Trustee, as
the case may be, to the effect specified in clauses (i), (ii) and (iii) above.
SECTION 9. AFFIRMATIVE COVENANTS. Until the expiration or
termination of the Loan Commitment and thereafter until the Loan Note and all
other Liabilities are paid in full, each of AESOP Leasing, PVHC and Quartx
agrees that, unless at any time the Lender shall otherwise expressly consent in
writing:
SECTION 9.1. Existence; Foreign Qualification. Each of AESOP
Leasing, PVHC and Quartx will do and cause to be done at all times all things
necessary to (i) maintain and preserve its existence as a limited partnership
or a corporation, as the case may be, (ii) be, and ensure that it is, duly
qualified to do business and in good standing as a foreign limited partnership
or foreign corporation, as the case may be, in each jurisdiction where the
nature of its business makes such qualification necessary and the failure to so
qualify would have a material adverse effect on its business and properties or
a Material Adverse Effect (as set forth in clauses (ii) and (iii) of the
definition thereof) and (iii) comply with all Contractual Obligations and
Requirements of Law
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binding upon it, except to the extent that the failure to comply therewith
would not, in the aggregate, have a material adverse effect on its business and
properties or a Material Adverse Effect (as set forth in clauses (ii) and (iii)
of the definition thereof).
SECTION 9.2. Books, Records and Inspections. AESOP Leasing
will maintain complete and accurate books and records with respect to the AESOP
I Operating Lease Loan Collateral and each of AESOP Leasing, PVHC and Quartx
will permit any Person designated by the Lender or the Trustee in writing to
visit and inspect any of its properties, corporate books and financial records
and to discuss its affairs, finances and accounts with its officers, its agents
and its independent public accountants, all at such reasonable times and as
often as the Lender or the Trustee may reasonably request.
SECTION 9.3. Insurance. AESOP Leasing will obtain and
maintain, or cause to be obtained and maintained, with respect to all Vehicles
leased under the AESOP I Operating Lease (i) vehicle liability insurance to the
full extent required by law and in any event not less than $500,000 per Person
and $1,000,000 per occurrence, (ii) property damage insurance with a limit of
$1,000,000 per occurrence and (iii) excess coverage public liability insurance
with a limit of not less than $50,000,000 or the limit maintained from time to
time by the relevant Lessee at any time hereafter, whichever is higher, with
respect to all passenger cars and vans comprising such Lessee's rental fleet.
The Lender acknowledges and agrees that AESOP Leasing may, to the extent
permitted by applicable law, allow the relevant Lessees to self-insure with
respect to the Vehicles leased under the AESOP I Operating Lease for the first
$1,000,000 per occurrence, or a greater amount up to a maximum of $3,000,000,
with the consent of each Enhancement Provider, per occurrence, of vehicle
liability and property damage insurance which is otherwise required to be
insured hereunder. All such policies shall be from financially sound and
reputable insurers, shall name the Lender, Original AESOP, PVHC, Quartx and the
Trustee as additional insured parties and, in the case of catastrophic physical
damage insurance on such Vehicles, shall name the Trustee as loss payee as its
interest may appear and will provide that the Lender and the Trustee shall
receive at least 10 days' prior written notice of
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cancellation of such policies. AESOP Leasing will notify promptly the Lender
and the Trustee of any curtailment or cancellation of any such Lessee's right
to self-insure in any jurisdiction.
SECTION 9.4. Manufacturer Programs. AESOP Leasing will turn
in, or cause to be turned in, the Vehicles leased under the AESOP I Operating
Lease which are Program Vehicles (subject to the redesignation provisions of
Section 2.7 of the AESOP I Operating Lease) to the relevant Manufacturer within
the Repurchase Period therefor (unless AESOP Leasing pays in full the Loan with
respect to a Program Vehicle pursuant to Section 5.2 or sells a Program Vehicle
and, prior to the end of the Repurchase Period therefor, receives sales
proceeds thereof in cash in an amount equal to or greater than the repurchase
price under such Manufacturer Program); and will comply with all of its
obligations under each Manufacturer Program.
SECTION 9.5. Reporting Requirements. AESOP Leasing will
furnish, or cause to be furnished to the Lender and the Trustee and, in the
case of item (iii) below, each Rating Agency:
(i) Reports. All reports of ARC and the Lessees
required to be delivered to AESOP Leasing pursuant to Section 31.5 of
the AESOP I Operating Lease;
(ii) AESOP I Loan Events of Default; Amortization
Events. As soon as possible but in any event within two Business Days
after the occurrence of (A) any Potential AESOP I Loan Event of
Default or AESOP I Loan Event of Default, a written statement of an
Authorized Officer describing such event and the action that AESOP
Leasing proposes to take with respect thereto and (B) any Potential
Amortization Event or Amortization Event, notice thereof to the
Lender, each Enhancement Provider and the Rating Agencies;
(iii) Manufacturers. Promptly after obtaining
actual knowledge thereof, notice of any Manufacturer Event of Default
or termination or replacement of a Manufacturer Program;
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(iv) Notice of Liens and Vicarious Liability
Claims. On each Determination Date, AESOP Leasing shall forward to
AFC-II, the Trustee and the Paying Agent, the Administrative Agent,
the Rating Agencies and each Enhancement Provider, (A) an Officer's
Certificate of AESOP Leasing certifying as to whether, to the
knowledge of AESOP Leasing, (x) any Lien exists on any of the AESOP I
Operating Lease Loan Collateral or (y) any vicarious liability claims
shall have been made against AESOP Leasing as a result of its
ownership of the Vehicles leased under the AESOP I Operating Lease or
against PVHC or Quartx as a result of its holding legal title to the
Vehicles leased under the AESOP I Operating Lease and (B) a written
statement of an Authorized Officer summarizing each such Lien or claim
and the action that AESOP Leasing proposes to take with respect
thereto; and
(v) Other. Promptly, from time to time, such other
information, documents, or reports respecting the AESOP I Loan
Collateral or the condition or operations, financial or otherwise, of
any of AESOP Leasing, PVHC or Quartx as the Lender or the Trustee may
from time to time reasonably request in order to protect the interests
of the Lender or the Trustee under or as contemplated by this
Agreement or any other Related Document.
SECTION 9.6. Payment of Taxes; Removal of Liens. Each of
AESOP Leasing, PVHC and Quartx will pay when due all taxes, assessments, fees
and governmental charges of any kind whatsoever that may be at any time
lawfully assessed or levied against or with respect to AESOP Leasing, PVHC or
Quartx, as the case may be, or its property and assets or any interest thereon.
Notwithstanding the previous sentence, but subject in any case to the other
requirements hereof and of the Related Documents, none of AESOP Leasing, PVHC
or Quartx shall be required to pay any tax, charge, assessment or imposition
nor to comply with any law, ordinance, rule, order, regulation or requirement
so long as AESOP Leasing, PVHC or Quartx, as the case may be, shall contest, in
good faith, the amount or validity thereof, in an appropriate manner or by
appropriate proceedings. Each such contest shall be promptly prosecuted to
final conclusion (subject
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to the right of AESOP Leasing, PVHC or Quartx, as the case may be, to settle
any such contest).
SECTION 9.7. Business. Each of AESOP Leasing, PVHC and Quartx
will engage only in businesses conducted on the date hereof.
SECTION 9.8. Maintenance of the Vehicles. AESOP Leasing will
maintain or cause to be maintained in good repair, working order, and condition
all of the Vehicles leased under the AESOP I Operating Lease, except to the
extent that any such failure to comply with such requirements does not, in the
aggregate, materially adversely affect the interests of the Lender under this
Agreement or the interests of the Secured Parties under the Indenture or the
likelihood of repayment of the Loans made hereunder. From time to time AESOP
Leasing will make or cause to be made all appropriate repairs, renewals, and
replacements with respect to the Vehicles leased under the AESOP I Operating
Lease.
SECTION 9.9. Maintenance of Separate Existence. AESOP Leasing
will do all things necessary to continue to be readily distinguishable from
ARC, ARAC, Original AESOP, AESOP Leasing II, AFC, AFC-II, the Affiliates of the
foregoing or any other affiliated or unaffiliated entity and to maintain its
existence as a limited partnership separate and apart from that of Original
AESOP, AESOP Leasing II, AFC, AFC-II, ARAC and ARC and Affiliates of ARC
including, without limitation, (i) practicing and adhering to organizational
formalities, such as maintaining appropriate books and records; (ii) observing
all organizational formalities in connection with all dealings between itself
and ARC, ARAC, Original AESOP, AESOP Leasing II, AFC, AFC-II, the Affiliates of
the foregoing or any other affiliated or unaffiliated entity; (iii) observing
all procedures required by its certificate of limited partnership, its limited
partnership agreement and the laws of the State of Delaware; (iv) acting solely
in its name and through its duly authorized officers or agents in the conduct
of its businesses; (v) managing its business and affairs by or under the
direction of its general partner; (vi) ensuring that its general partner duly
authorizes all of its actions; (vii) ensuring the receipt of proper
authorization, when necessary, from its limited partner(s) for its actions;
(viii) requiring its general partner to maintain
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at least two corporate directors who are Independent Directors; (ix) owning or
leasing (including through shared arrangements with Affiliates) all office
furniture and equipment necessary to operate its business; (x) not (A) having
or incurring any debt or obligations to any of Original AESOP, AESOP Leasing
II, AFC, AFC-II, ARC, ARAC, the Affiliates of the foregoing or any other
affiliated or unaffiliated entity, except for, the obligations to AFC-II under
the AESOP I Loan Agreements; (B) other than as provided in the Related
Documents, guaranteeing or otherwise becoming liable for any obligations of
Original AESOP, AESOP Leasing II, AFC, AFC-II, ARAC or ARC or any Affiliates of
the foregoing; (C) having obligations guaranteed by Original AESOP, AESOP
Leasing II, AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing; (D)
holding itself out as responsible for debts of Original AESOP, AESOP Leasing
II, AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing or for
decisions or actions with respect to the affairs of Original AESOP, AESOP
Leasing II, AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing; (E)
failing to correct any known misrepresentation with respect to the statement in
subsection (C); (F) operating or purporting to operate as an integrated, single
economic unit with respect to Original AESOP, AESOP Leasing II, AFC, AFC-II,
ARAC, ARC, the Affiliates of the foregoing or any other affiliated or
unaffiliated entity or any other affiliated or unaffiliated entity; (G) seeking
to obtain credit or incur any obligation to any third party based upon the
assets of Original AESOP, AESOP Leasing II, AFC, AFC-II, ARAC, ARC, the
Affiliates of the foregoing or any other affiliated or unaffiliated entity; (H)
induce any such third party to reasonably rely on the creditworthiness of
Original AESOP, AESOP Leasing II, AFC, AFC-II, ARAC, ARC, the Affiliates of the
foregoing or any other affiliated or unaffiliated entity; and (I) being
directly or indirectly named as a direct or contingent beneficiary or loss
payee on any insurance policy of Original AESOP, AESOP Leasing II, AFC, AFC-II,
ARAC or ARC or any Affiliates of the foregoing other than as required by the
Related Documents with respect to insurance on the Vehicles; (xi) other than as
provided in the Related Documents, maintaining its deposit and other bank
accounts and all of its assets separate from those of any other Person; (xii)
maintaining its financial records separate and apart from those of any other
Person; (xiii) disclosing in its annual financial statements the effects of the
transactions
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contemplated by the Related Documents in accordance with generally accepted
accounting principles; (xiv) setting forth clearly in its financial statements
its separate assets and liabilities and the fact that the Vehicles leased under
the AESOP I Operating Lease are owned by AESOP Leasing; (xv) not suggesting in
any way, within its financial statements, that its assets are available to pay
the claims of creditors of Original AESOP, AESOP Leasing II, AFC, AFC-II, ARAC,
ARC, the Affiliates of the foregoing or any other affiliated or unaffiliated
entity; (xvi) compensating all its employees, officers, consultants and agents
for services provided to it by such Persons out of its own funds; (xvii)
maintaining office space separate and apart from that of Original AESOP, AESOP
Leasing II, AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing (even
if such office space is subleased from or is on or near premises occupied by
Original AESOP, AESOP Leasing II, AFC, AFC-II, ARAC or ARC or any Affiliates of
the foregoing) and a telephone number separate and apart from that of Original
AESOP, AESOP Leasing II, AFC, AFC-II, ARAC or ARC or any Affiliates of the
foregoing; (xviii) conducting all oral and written communications, including,
without limitation, letters, invoices, purchase orders, contracts, statements,
and applications solely in its own name; (xix) having separate stationary from
Original AESOP, AESOP Leasing II, AFC, AFC-II, ARAC, ARC, the Affiliates of the
foregoing or any other affiliated or unaffiliated entity; (xx) accounting for
and managing all of its liabilities separately from those of Original AESOP,
AESOP Leasing II, AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing;
(xxi) allocating, on an arm's-length basis, all shared operating services,
leases and expenses, including, without limitation, those associated with the
services of shared consultants and agents and shared computer and other office
equipment and software; and otherwise maintaining an arm's-length relationship
with each of Original AESOP, AESOP Leasing II, AFC, AFC-II, ARAC, ARC, the
Affiliates of the foregoing or any other affiliated or unaffiliated entity;
(xxii) refraining from filing or otherwise initiating or supporting the filing
of a motion in any bankruptcy or other insolvency proceeding involving Original
AESOP, AESOP Leasing II, AFC, AFC-II, AESOP Leasing, ARAC, ARC or any Affiliate
of ARC, to substantively consolidate Original AESOP, AESOP Leasing II, AFC,
AFC-II or AESOP Leasing with ARAC, ARC or any Affiliate of ARC; (xxiii)
remaining solvent and
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assuring adequate capitalization for the business in which it is engaged and
(xxiv) conducting all of its business (whether written or oral) solely in its
own name so as not to mislead others as to the identity of each of Original
AESOP, AESOP Leasing II, AESOP Leasing, AFC, AFC-II, ARAC, ARC and the
Affiliates of the foregoing or any other affiliated or unaffiliated entity.
AESOP Leasing acknowledges its receipt of a copy of those certain opinion
letters issued by Skadden, Arps, Slate, Meagher & Flom LLP dated July 30, 1997
addressing the issue of substantive consolidation as they may relate to any of
ARAC, ARC and each affiliate of ARC on the one hand and any of Original AESOP,
AESOP Leasing II, AFC, AFC-II and AESOP Leasing on the other hand and as among
Original AESOP, AESOP Leasing II, AESOP Leasing, AFC-II and AFC. AESOP Leasing
hereby agrees to maintain in place all policies and procedures, and take and
continue to take all action, described in the factual assumptions set forth in
such opinion letter and relating to it.
SECTION 9.10. Manufacturer Payments; Sales Proceeds. AESOP
Leasing will cause each Manufacturer and auction dealer to make all payments
under the Manufacturer Programs with respect to Program Vehicles directly to
the Collection Account. Any such payments from Manufacturers or related auction
dealers received directly by AESOP Leasing, will be, within three Business Days
of receipt, deposited into the Collection Account. AESOP Leasing shall, within
two Business Days of receipt thereof, deposit into the Collection Account all
amounts representing the proceeds from sales of Program Vehicles by auction
dealers under a Guaranteed Depreciation Program and sales of Vehicles
(including amounts paid by a Manufacturer as a result of the sale of such
Vehicle outside such Manufacturer's Manufacturer Program) to third parties
(other than under any related Manufacturer Program) and all payments with
respect to other AESOP I Loan Collateral (other than the AESOP I Loan
Collateral described in the last sentence of this paragraph). Insurance
proceeds and warranty payments with respect to Vehicles will only be deposited
into the Collection Account if an Amortization Event or Potential Amortization
Event shall have occurred and be continuing.
SECTION 9.11. Maintenance of Properties. Each of AESOP
Leasing, PVHC and Quartx will maintain or cause to be maintained in the
ordinary course of business in
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good repair, working order and condition (reasonable wear and tear excepted)
all properties, including, without limitation, vehicles necessary for the
operation of its businesses (whether owned or held under lease), and from time
to time make or cause to be made all needed and appropriate repairs, renewals,
replacements, additions, betterments and improvements thereto, except to the
extent no material adverse effect on its business and properties or a Material
Adverse Effect (as set forth in clauses (ii) and (iii) of the definition
thereof) could result, and maintain good, legal and marketable title to, or a
valid leasehold interest in, all of its assets, free and clear of all Liens
except for Permitted Liens, and except to the extent sold or otherwise disposed
of in accordance with this Agreement or any other Related Document.
SECTION 9.12. Verification of Title. AESOP Leasing will, on
an annual basis, cause a title check to be performed by an independent
nationally recognized firm of certified public accountants acceptable to the
Trustee and each Enhancement Provider on a statistical sample of all Vehicles
leased under the Leases designed to provide a ninety-five percent (95%)
confidence level that no more than five percent (5%) of the Certificates of
Title for such Vehicles did not correctly reference the Trustee or its
Permitted Nominee, as first lienholder, and the Lessor of such Vehicle or its
Permitted Nominee or, in the case of Financed Vehicles, ARAC or its Permitted
Nominee, as owner, and cause such party to deliver a report stating that,
within the confidence level set forth above, no more than five percent (5%) of
the Certificates of Title did not correctly reference the lienholder or owner
of the Vehicles described in the immediately preceding clause.
SECTION 9.13. Legal Reserve Fund. On and after the Legal
Reserve Funding Date and for so long as the Legal Reserve Release Condition is
not met, AESOP Leasing shall maintain a balance of $500,000 in the AESOP I
Segregated Account for the purpose of paying legal fees and disbursements of
counsel to AESOP Leasing or its Permitted Nominees for the defense of vicarious
liability claims.
SECTION 9.14. Delivery of Information. Each of AESOP Leasing,
PVHC and Quartx will provide to the
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Lender any information or materials necessary for the Lender to comply with its
obligations under the Indenture.
SECTION 9.15. [RESERVED].
SECTION 9.16. Vehicles. AESOP Leasing will maintain good and
marketable title to each Vehicle purchased by AESOP Leasing with the proceeds
of Loans made hereunder and leased under the AESOP I Operating Lease, free and
clear of all Liens and encumbrances, other than any Permitted Liens.
SECTION 9.17. Assignments. AESOP Leasing will deliver to the
Trustee on or prior to the Initial Closing Date, or such later date and
thereafter, as necessary to comply with the terms of the Related Documents,
executed counterparts of the Assignment Agreements related to the assignment of
rights under each Manufacturer Program, dated as of the Initial Closing Date,
or such later date, if delivered after the Initial Closing Date in accordance
herewith, duly executed by ARAC, each other Lessee, AESOP Leasing, AESOP
Leasing II, AFC-II, the Trustee and each applicable Manufacturer.
SECTION 9.18. Notation of Liens. AESOP Leasing will deliver
to the Lender and the Trustee on or prior to the Initial Closing Date and on an
ongoing basis, as applicable, evidence (which, in the case of the filing of
financing statements on form UCC-1, may be telephonic confirmation of such
filing, followed by prompt written confirmation) that it has caused or is
causing the Trustee's name to be noted on the Certificate of Title for each
Vehicle leased under the AESOP I Operating Lease (other than Certificates of
Title for the Initial PVT Vehicles, which Certificate of Title will show BONY
as the first lienholder, and Vehicles titled in the states of Nebraska, Ohio
and Oklahoma) in accordance herewith and all filings (including filings of
financing statements on form UCC-1) and recordings have been accomplished as
may be required by law to establish, perfect (other than perfection of the
security interest of the Trustee in Vehicles by notation of the lien of the
Trustee on the Certificates of Title for Vehicles titled in the States of
Nebraska, Ohio and Oklahoma), protect and preserve the rights, titles,
interests, remedies, powers, privileges, licenses and security interest of the
Trustee
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in such Vehicles and other AESOP I Operating Lease Loan Collateral for the
benefit of the Secured Parties.
SECTION 9.19. [RESERVED].
SECTION 9.20. [RESERVED].
SECTION 9.21. [RESERVED].
SECTION 9.22. Non-Program Vehicle Report. On or before the
second Determination Date immediately following June 30 and December 31 of each
calendar year, beginning with December 31, 1997, AESOP Leasing shall cause a
firm of nationally recognized independent public accountants (who may also
render other services to AESOP Leasing, ARC or ARAC and who is acceptable to
the Rating Agencies and each Enhancement Provider) to furnish a report to the
Lender, the Trustee, each Enhancement Provider and the Rating Agencies to the
effect that they have performed certain agreed upon procedures (which shall be
acceptable to each Enhancement Provider) with respect to the calculation of the
(i) Disposition Proceeds obtained from the sale or other disposition of all
Non-Program Vehicles (other than Casualties) sold or otherwise disposed of
during each Related Month in such period and (ii) Non-Program Fleet Market
Value and compared such calculations with the corresponding amounts set forth
in the Monthly Certificate prepared pursuant to Section 4.1(b) of the Indenture
and that on the basis of such comparison such accountants are of the opinion
that such amounts are in agreement, except for such exceptions as they believe
to be material and such other exceptions as shall be set forth in such report.
On or before the second Determination Date immediately following March 31 and
September 30 of each calendar year, beginning with September 30, 1997, AESOP
Leasing shall furnish an Officer's Certificate of AESOP Leasing to the Lender,
the Trustee, each Enhancement Provider and the Rating Agencies to the effect
that the officer making such certification has compared or caused to be
compared the calculations described in clauses (i) and (ii) above with the
corresponding amounts set forth in the Monthly Certificate prepared pursuant
to Section 4.1(b) of the Indenture and that on the basis of such comparison
such officer is of the opinion that such amounts are in agreement, except for
such exceptions as shall be set forth in such Officer's Certificate.
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SECTION 9.23. Sale of Non-Program Vehicles Returned to AESOP
Leasing. In the event that any NonProgram Vehicle leased under the AESOP I
Operating Lease is returned to AESOP Leasing in accordance with Section 2.6(c)
of the AESOP I Operating Lease, AESOP Leasing shall use commercially reasonable
efforts to arrange for the sale of such Vehicle and to maximize the sale price
thereof. AESOP Leasing shall not return a Non-Program Vehicle to a Manufacturer
under a Manufacturer Program unless the conditions set forth in Section 2.6(b)
of the AESOP I Operating Lease would have been satisfied with respect to such
disposition.
SECTION 10. NEGATIVE COVENANTS. Until the expiration or
termination of the Loan Commitment and thereafter until the Loan Note and all
other Liabilities are paid in full, each of AESOP Leasing, PVHC and Quartx
agrees that, unless at any time the Lender shall otherwise expressly consent in
writing, it will not:
SECTION 10.1. Liens. Create, incur, assume or permit to exist
any Lien upon any of its Assets (including the AESOP I Collateral), other
than Permitted Liens.
SECTION 10.2. Other Indebtedness. Create, assume, incur,
suffer to exist or otherwise become or remain liable in respect of any
Indebtedness other than (i) Indebtedness hereunder and (ii) Indebtedness
permitted under any other Related Document.
SECTION 10.3. Mergers, Consolidations. Except as may be
permitted by the express written approval of the Trustee and the Lender, merge
with or into, enter into any joint venture or other association with, or
consolidate with, any other Person.
SECTION 10.4. Sales of Assets. Sell, lease, transfer,
liquidate or otherwise dispose of any Assets, except as contemplated by the
Related Documents.
SECTION 10.5. Acquisition of Assets. Acquire, by long-term or
operating lease or otherwise, any Assets except pursuant to the terms of the
Related Documents.
SECTION 10.6. Dividends, Officers' Compensation, etc. (i)
Declare or pay any distributions on any of its partnership interests or capital
stock, as the
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case may be, or make any other distribution on, or any purchase, redemption or
other acquisition of, any of its partnership interests or any shares of its
capital stock, as the case may be, except, in the case of AESOP Leasing, out of
funds in the AESOP I Segregated Account, or (ii) pay any wages or salaries or
other compensation to officers, employees or others except out of earnings
computed in accordance with GAAP and, in the case of AESOP Leasing, only from
funds in the AESOP I Segregated Account.
SECTION 10.7. Organizational Documents. Amend any of its
organizational documents, including its certificate of limited partnership or
limited partnership agreement or certificate of incorporation or by-laws, as
the case may be, unless prior to such amendment, each Rating Agency confirms
that after such amendment the Rating Agency Consent Condition and the CP Rating
Agency Condition will be met.
SECTION 10.8. Investments. Make, incur, or suffer to exist
any loan, advance, extension of credit or other investment in any Person other
than pursuant to the Related Documents.
SECTION 10.9. Regulations G, T, U and X. Use or permit any
proceeds of the Loans made hereunder to be used, either directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of "purchasing or
carrying margin stock" within the meaning of Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System, as amended from time to time.
SECTION 10.10. Other Agreements. Enter into any agreement
containing any provision which would be violated or breached by the performance
of its obligations hereunder or under any instrument or document delivered or
to be delivered by it hereunder or in connection herewith.
SECTION 10.11. Use of Vehicles. Use or allow the Vehicles
leased under the AESOP I Operating Lease to be used in any manner (i) that
would make Program Vehicles ineligible for repurchase under an Eligible
Manufacturer Program, (ii) for any illegal purposes or (iii) that could subject
the Vehicles to confiscation.
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SECTION 10.12. Use of Proceeds. Use or permit the proceeds of
the Loans made hereunder to be used for any purpose other than to purchase or
finance Eligible Vehicles that will be leased under the AESOP I Operating
Lease.
SECTION 10.13. Limitations on the Acquisition or
Redesignation of Certain Vehicles. Unless otherwise specified in the related
Supplement or unless waived by the Required Noteholders as specified in the
related Supplement, permit (a) the Non-Eligible Manufacturer Amount as of any
Payment Date to exceed any applicable Maximum Non-Eligible Manufacturer Amount,
(b) the Financed Vehicle Amount as of any Payment Date to exceed any applicable
Maximum Financed Vehicle Amount, (c) the Non-Program Vehicle Amount as of any
Payment Date to exceed any applicable Maximum Non-Program Vehicle Amount, (d)
the aggregate Net Book Value of all Vehicles leased under the Leases and
manufactured by a particular Manufacturer or group of Manufacturers as of any
Payment Date to exceed any applicable Maximum Manufacturer Amount and (e) the
Specified States Amount as of any Payment Date to exceed any applicable Maximum
Specified States Amount.
SECTION 10.14. Maximum Vehicle Age. Permit at any time the
age of any Non-Program Vehicle leased under the AESOP I Operating Lease,
calculated from the date of the original manufacturer invoice for such Vehicle,
to exceed 18 months.
SECTION 11. CONDITIONS.
SECTION 11.1. Initial Loans. The effectiveness of this
Agreement and the obligation of the Lender to make the initial Loans hereunder
to AESOP Leasing shall be subject to the prior or concurrent (i) delivery of
each of the following documents to the Lender and, if not otherwise required to
be delivered to the Trustee by any other Related Document, to the Trustee and
any Enhancement Provider, as applicable (in form and substance satisfactory to
the Lender and, if applicable, the Trustee and any Enhancement Provider) and
(ii) satisfaction of the following conditions, as applicable:
(a) Loan Note. A Loan Note duly executed by AESOP Leasing;
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(b) Certificate of Limited Partnership; Certificates of
Incorporation. The certificate of limited partnership of AESOP Leasing, duly
certified by the Secretary of State of the State of Delaware, together with a
copy of the limited partnership agreement of AESOP Leasing, duly certified by
the Secretary or an Assistant Secretary of Original AESOP. The certificate of
incorporation of each of Original AESOP, PVHC and Quartx, duly certified by the
Secretary of State of the State of Delaware, together with a copy of the
by-laws of each of Original AESOP, PVHC and Quartx, duly certified by the
Secretary or an Assistant Secretary of Original AESOP, PVHC and Quartx, as the
case may be.
(c) Resolutions. Copies of resolutions of the Board of
Directors of each of Original AESOP, PVHC and Quartx, authorizing or ratifying
the execution, delivery and performance of those documents and matters required
of it with respect to this Agreement, duly certified by the Secretary or an
Assistant Secretary of Original AESOP, PVHC or Quartx, as the case may be;
(d) Consents, etc. Certified copies of all documents
evidencing any necessary limited partnership or corporate action, consents and
governmental approvals (if any) with respect to this Agreement;
(e) Incumbency and Signatures. A certificate of the Secretary
or an Assistant Secretary of each of Original AESOP, PVHC and Quartx certifying
the names of the individual or individuals authorized to sign this Agreement
and the other Related Documents to be executed by it, together with a sample of
the true signature of each such individual (the Lender may conclusively rely on
each such certificate until formally advised by a like certificate of any
changes therein);
(f) Opinions of Counsel. The opinions of Skadden, Arps,
Slate, Meagher & Flom LLP, special counsel to AESOP Leasing, AESOP Leasing II,
AFC and AFC-II, addressed to the Lender, the Trustee, the Placement Agents, the
Rating Agencies and the Administrative Agent, on behalf of the Liquidity
Lenders, the opinions of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for
ARC and ARAC addressed to the Lender, the Trustee, the Rating Agencies, the
Placement Agents and the Administrative Agent, on behalf of the Liquidity
Lenders, and the opin-
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ions of counsel to each applicable Manufacturer for the Manufacturer Programs
under which Program Vehicles will be financed hereunder addressed to the
Lender, the Trustee, the Rating Agencies and the Administrative Agent, on
behalf of the Liquidity Lenders;
(g) Good Standing Certificates. Certificates of good standing
for each of AESOP Leasing, Original AESOP, PVHC and Quartx in the jurisdiction
of its formation and the jurisdiction of its principal place of business;
(h) Search Reports. A written search report from a Person
satisfactory to the Lender and the Trustee listing all effective financing
statements that name any of AESOP Leasing, PVHC or Quartx, as debtor or
assignor, and that are filed and the jurisdictions in which filings were made
pursuant to subsection (i) below, together with copies of such financing
statements, and tax and judgment lien search reports from a Person satisfactory
to the Lender and the Trustee showing no evidence of such liens filed against
AESOP Leasing, PVHC or Quartx;
(i) Evidence. Evidence (which may be telephonic, followed by
prompt written confirmation) of the filing of proper financing statements on
Form UCC-1, naming (1) AESOP Leasing as debtor, (2) PVHC as debtor and (3)
Quartx as debtor, and the Lender as secured party and the Trustee as assignee
or other, similar instruments or documents, as may be necessary or, in the
reasonable opinion of the Lender and the Trustee, desirable under the UCC of
all applicable jurisdictions to perfect the Lender's and the Trustee's interest
in the AESOP I Loan Collateral;
(j) Enhancement Agreement. An executed copy of the
Enhancement Agreement pursuant to the Supplement with respect to any Series of
Notes for which the Series Closing Date occurs on the Initial Closing Date;
(k) Enhancement. The Enhancement Amount with respect to any
Series of Notes for which the Series Closing Date occurs on the Initial Closing
Date is equal to or exceeds the Required Enhancement Amount for such Series;
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(l) Leases. An executed copy of each of the Leases and all
documents required to be delivered by any relevant Lessee and ARC to the
Lessors pursuant to the Leases, and all conditions to the effectiveness of the
Leases shall have been satisfied;
(m) Assignment Agreement. An executed copy of the Assignment
Agreement of each Manufacturer;
(n) Certified Copy of Manufacturer Program. A copy of each
Manufacturer Program under which Program Vehicles will be financed hereunder
and an Officer's Certificate, dated the Initial Closing Date, and duly executed
by an Authorized Officer of Original AESOP, certifying that each such copy is
true, correct and complete as of the Initial Closing Date and that each such
Manufacturer Program shall be in full force and effect and enforceable against
the related Manufacturer;
(o) Indenture. The Indenture, dated the Initial Closing Date,
duly executed by the Lender and the Trustee, and all conditions to the
effectiveness thereof and the issuance of the Notes thereunder shall have been
satisfied in all respects;
(p) Vehicle Title and Lienholder Nominee Agreements and HFS
Indemnity. The Vehicle Title and Lienholder Nominee Agreements and the HFS
Indemnity, each dated the Initial Closing Date, duly executed by the parties
thereto;
(q) Conditions Precedent to Note Issuance. All conditions
precedent to the issuance of any Series of Notes for which the Series Closing
Date occurs on the Initial Closing Date shall have been satisfied in accor-
dance with the related Supplement; and
(r) Other. Such other documents as the Trustee or the
Lender may reasonably request.
SECTION 11.2. All Loans. All Loans hereunder (including the
initial Loan) shall be subject to the further conditions precedent that (a) if
the amount of Enhancement with respect to any Series of Notes is increased or
if the current Enhancement with respect to any Series of Notes is replaced, to
the extent such additional or replacement Enhancement is in the form of an un-
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funded commitment (including, without limitation, a letter of credit), AESOP
Leasing shall cause the delivery to the Lender, the Trustee, the Enhancement
Providers, if any, for any Series of Notes issued and outstanding on the date
of such opinion(s), Placement Agents, if any, the Rating Agencies and the
Administrative Agent (on behalf of the Liquidity Lenders) on or prior to the
effectiveness of such additional or replacement Enhancement of opinion(s) of
counsel as to the enforceability of such additional or replacement Enhancement
substantially similar to the original opinions delivered with respect to such
Enhancement, (b) the Lender shall have received a completed Loan Request
therefor and a copy of the related Vehicle Order, (c) all conditions precedent
to the issuance of any Series of Notes after the Initial Closing Date shall
have been satisfied in accordance with the related Supplement and (d) on the
date of such Loan the following statements shall be true (and AESOP Leasing, by
accepting the amount of such Loan, shall be deemed to have represented and
warranted that): (i) the representations and warranties contained in Section 8
are true and correct on and as of such date with the same effect as though made
on and as of such date and shall be deemed to have made on such date and (ii)
no Potential AESOP I Operating Lease Loan Event of Default or AESOP I Operating
Lease Loan Event of Default has occurred and is continuing or would result from
the making of such Loan or from the application of the proceeds of such Loan.
SECTION 12. LOAN EVENTS OF DEFAULT AND THEIR EFFECT.
SECTION 12.1. AESOP I Operating Lease Loan Events of Default.
Each of the following shall constitute an AESOP I Operating Lease Loan Event of
Default under this Agreement:
12.1.1. Non-Payment of Loans. Default in the payment when due
of the principal amount of any Loan made hereunder or the Monthly Loan
Principal Amount hereunder, and the continuance thereof for one (1) Business
Day after the occurrence thereof, or the default in the payment of any Loan
Interest on any Loan made hereunder, and the continuance thereof for five (5)
Business Days after the occurrence thereof; provided, however, that in the case
of any failure to pay an amount owing pursuant to Section 5.1(B)(iii) or
5.1(B)(iv)(y), an AESOP I Operat-
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ing Lease Loan Event of Default shall occur only to the extent that at the end
of the applicable continuance period referred to above, an Enhancement
Deficiency exists with respect to any Series of Notes or an AESOP I Operating
Lease Vehicle Deficiency exists.
12.1.2. Non-Payment of Other Amounts. Default, and
continuance thereof for five (5) Business Days after notice thereof by the
Lender to AESOP Leasing, in the payment when due of any amount payable
hereunder (other than any amount described in Section 12.1.1).
12.1.3. Bankruptcy, Insolvency, etc. The occurrence of an
Event of Bankruptcy with respect to ARC, ARAC, any other Lessee under the AESOP
I Operating Lease, AESOP Leasing, Original AESOP, PVHC or Quartx.
12.1.4. Non-Compliance With Provisions. Failure by AESOP
Leasing to comply with or to perform any provision of this Agreement (and not
constituting an AESOP I Operating Lease Loan Event of Default under any of the
other provisions of this Section 12.1) and, other than the failure to comply
with the provisions of Sections 10.1 and 10.2 hereof, the continuance of such
failure for 30 days after the earlier of the date of the receipt of written
notice thereof from the Lender or the Trustee to AESOP Leasing and the date
AESOP Leasing learns of such failure.
12.1.5. Warranties and Representations. Any warranty or
representation made by or on behalf of AESOP Leasing in connection herewith is
inaccurate or incorrect or is breached or false or misleading in any material
respect as of the date such warranty or representation is made; or any
schedule, certificate, financial statement, report, notice, or other writing
furnished by or on behalf of AESOP Leasing to the Lender is false or mis-
leading in any material respect on the date as of which the facts therein set
forth are stated or certified.
12.1.6. Lease Events of Default. The occurrence of a Lease
Event of Default.
12.1.7. Loan Events of Default Under Other Loan Agreements.
The occurrence of an AESOP I Finance Lease Loan Event of Default or an AESOP II
Loan Event of Default.
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12.1.8. Judgments. Any final and unappealable (or, if capable
of appeal, such appeal is not being diligently pursued or enforcement thereof
has not been stayed) judgment or order for the payment of money in excess of
$100,000 which is not fully covered by insurance shall be rendered against
AESOP Leasing and such judgment or order shall continue unsatisfied and
unstayed for a period of 30 days.
SECTION 12.2. Effect of AESOP I Operating Lease Loan Event of
Default or Liquidation Event of Default. If any AESOP I Operating Lease Loan
Event of Default described in Section 12.1.1 or 12.1.3 or any Liquidation Event
of Default shall occur, the Loan Commitment (if not theretofore terminated)
shall immediately terminate and in the case of any other AESOP I Operating
Lease Loan Event of Default, the Lender may declare its Loan Commitment (if not
theretofore terminated) to be terminated and whereupon it shall immediately
terminate and may declare the Loan Note and all other Liabilities to be due and
payable, whereupon the Loan Note shall become immediately due and payable.
SECTION 12.3. Rights of Trustee Upon Liquidation Event of
Default and Non-Performance of Certain Covenants. (a) If a Liquidation Event of
Default shall have occurred and be continuing the Lender and the Trustee, to
the extent provided in the Indenture, shall have all the rights against AESOP
Leasing, PVHC and Quartx and the Loan Collateral provided in the Indenture upon
a Liquidation Event of Default, including the right to take (under the
specified circumstances) possession of all Vehicles immediately.
(b) If (i) AESOP Leasing shall default in the due performance
and observance of any of its obligations under Section 9.3, 9.4, 9.5(iii), 9.8,
10.1 or 10.11 hereof, or (ii) any Lessee shall default in the due performance
and observance of its obligations under Section 31.10 of the AESOP I Operating
Lease, and such default shall continue unremedied for a period of 30 days after
notice thereof shall have been given to AESOP Leasing by the Lender, the Lender
shall have the ability to exercise all rights, remedies, powers, privileges and
claims of AESOP Leasing, PVHC or Quartx against the Manufacturers under or in
connection with the Manufacturer Programs with respect to (A) Program Vehicles
leased
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under the AESOP I Operating Lease that AESOP Leasing has determined to turn
back to the Manufacturers under such Manufacturer Programs and (B) whether or
not AESOP Leasing shall then have determined to turn back such Program
Vehicles, any Program Vehicles leased under the AESOP I Operating Lease for
which the applicable Repurchase Period will end within one week or less.
(c) Upon a default in the performance (after giving effect to
any grace periods provided herein) by AESOP Leasing, PVHC or Quartx of its
obligations under Section 7.5 or 8.6 hereof with respect to certain Vehicles,
the Lender or the Trustee shall have the right to take actions reasonably
necessary to correct such default with respect to the subject Vehicles
including the execution of UCC financing statements with respect to
Manufacturer Programs and other general intangibles and the completion of
Vehicle Perfection and Documentation Requirements on behalf of AESOP Leasing,
PVHC, Quartx or the Lender, as applicable.
(d) Upon the occurrence of a Liquidation Event of Default,
AESOP Leasing will return all Program Vehicles leased under the AESOP I
Operating Lease to the related Manufacturer and shall sell all Non-Program
Vehicles leased under the AESOP I Operating Lease in accordance with the
instructions of the Lender. Upon the occurrence of a Limited Liquidation Event
of Default with respect to any Series of Notes, AESOP Leasing will return
Program Vehicles leased under the AESOP I Operating Lease to the related
Manufacturer, and shall sell Non-Program Vehicles leased under the AESOP I
Operating Lease in accordance with the instructions of the Lender, to generate
proceeds in an amount which, together with the proceeds of Vehicles returned
pursuant to the AESOP I Finance Lease Loan Agreement and the AESOP II Loan
Agreement, will be sufficient to pay all interest on and principal of such
Series of Notes. To the extent any Manufacturer fails to accept any such
Vehicles under the terms of the applicable Manufacturer Program, the Lender
shall have the right to otherwise dispose of such Vehicles and to direct AESOP
Leasing to dispose of such Vehicles in accordance with its instructions. In
addition, the Lender shall have all of the rights, remedies, powers, privileges
and claims vis-a-vis AESOP Leasing, PVHC and Quartx necessary or desirable to
allow the Trustee to exercise the rights, remedies, powers, privi-
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leges and claims given to the Trustee pursuant to Sections 9.2 and 9.3 of the
Base Indenture and each of AESOP Leasing, PVHC and Quartx acknowledges that it
has hereby granted the Lender all of the rights, remedies, powers, privileges
and claims granted to the Trustee pursuant to Article 9 of the Base Indenture
and that, under certain circumstances set forth in the Base Indenture, the
Trustee may act in lieu of the Lender in the exercise of such rights, remedies,
powers, privileges and claims.
SECTION 12.4. Application of Proceeds. The proceeds of any
sale or other disposition on any date pursuant to Section 12.3 shall be applied
in the following order: (i) to the reasonable costs and expenses incurred by
the Lender in connection with such sale or disposition, including any
reasonable costs associated with repairing any Vehicles leased under the AESOP
I Operating Lease, and reasonable attorneys' fees in connection with the
enforcement of this Agreement; (ii) to the payment of accrued Loan Interest and
outstanding Loan Principal Amount, and all other amounts due hereunder in the
Related Month; and (iii) any remaining amounts to AESOP Leasing, or such Person
as may be lawfully entitled thereto.
SECTION 13. GENERAL.
SECTION 13.1. Waiver; Amendments. No delay on the part of the
Lender or the holder of the Loan Note or other Liabilities in the exercise of
any right, power or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise by any of them of any right, power or remedy
preclude other or further exercise thereof, or the exercise of any other right,
power or remedy. No amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or the Loan Note shall in any event
be effective unless (i) the same shall be writing and signed and delivered by
the Lender, AESOP Leasing, PVHC and Quartx and consented to in writing by the
Trustee, (ii) the Lender shall have received in writing confirmation from each
of the Rating Agencies that its then current rating with respect to any
outstanding Series of Notes or the Commercial Paper Notes will not be reduced
or withdrawn as a result thereof and (iii) the Rating Agency Consent Condition
shall have been satisfied; provided that any amendment or modification of the
Loan Note need only be signed by AESOP Leasing.
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SECTION 13.2. Confirmations. AESOP Leasing and the Lender (or
the holder of the Loan Note) agree from time to time, upon written request
received by it from the other, to confirm to the other in writing the aggregate
unpaid Loan Principal Amount.
SECTION 13.3. Notices. All notices, amendments, waivers,
consents and other communications provided to any party hereto under this
Agreement shall be in writing and addressed, delivered or transmitted to such
party at its address or facsimile number set forth below its signature hereto
or at such other address or facsimile number as may be designated by such party
in a notice to the other parties. Any notice, if mailed and properly addressed
with postage prepaid or if properly addressed and sent by pre-paid courier
service, shall be deemed given when received; any notice, if transmitted by
facsimile, shall be deemed given when transmitted upon receipt of electronic
confirmation of transmission.
SECTION 13.4. Taxes. AESOP Leasing agrees to pay, and to save
the Trustee and the Lender harmless from all liability for, any document,
stamp, filing, recording, mortgage or other taxes (other than net income taxes
of the Lender) which may be payable in connection with the borrowings hereunder
or the execution, delivery, recording or filing of this Agreement or of any
other instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith. All obligations provided for in
this Section 13.4 shall survive any termination of this Agreement.
SECTION 13.5. Indemnification. In consideration of the
Lender's execution and delivery of this Agreement and the Lender's extension
of the Loan Commitment, AESOP Leasing hereby agrees to:
(a) indemnify, exonerate and hold the Lender and its
officers, directors, stockholders, employees, and agents (herein collectively
called "Lender Parties" and individually called a "Lender Party") free and
harmless from and against any and all claims, demands, actions, causes of
action, suits, losses, costs, charges, liabilities, damages, and expenses in
connection therewith (irrespective of whether such Lender Party is a party to
the action for which indemnification hereunder is sought), and including,
without limitation, reasonable
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attorneys' fees and disbursements (called in this paragraph the "Indemnified
Liabilities"), incurred by Lender Parties or any of them as a result of, or
arising out of, or relating to (i) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of any Loan made
hereunder or involving any Loan made hereunder, or (ii) the execution,
delivery, performance or enforcement of this Agreement and any instrument,
document or agreement executed pursuant hereto by any of the Lender Parties, or
(iii) the ownership, operation, maintenance, leasing, or titling of the
Vehicles, except in each case, for any such Indemnified Liabilities arising on
account of the relevant Lender Party's gross negligence or willful misconduct
and, to the extent that the foregoing undertaking may be unenforceable for any
reason, AESOP Leasing agrees to make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law; and
(b) indemnify and hold harmless the Trustee (and its
officers, directors, employees and agents) from and against any loss,
liability, expense, damage or injury suffered or sustained by reason of, or
arising out of or in connection with: (i) any acts or omissions of AESOP
Leasing pursuant to this Agreement and (ii) the Trustee's appointment under the
Indenture and the Trustee's performance of its obligations thereunder, or any
document pertaining to any of the foregoing to which the Trustee is a
signatory, including, but not limited to any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim;
provided, however, AESOP Leasing shall have no duty to indemnify the Trustee to
the extent such loss, liability, expense, damage or injury suffered or
sustained is due to the Trustee's negligence or willful misconduct.
AESOP Leasing agrees that the indemnification provided for in this Section 13.5
shall run directly to and be enforceable by an indemnified party subject to the
limitations hereof. The indemnification provided for in this Section 13.5 shall
survive the termination of this Agreement, the Indenture and the resignation or
removal of the Trustee.
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SECTION 13.6. Bankruptcy Petition. (a) Each of AESOP Leasing,
PVHC and Quartx hereby covenants and agrees that, prior to the date which is
one year and one day after the payment in full of (i) all Commercial Paper
Notes Outstanding and (ii) all Notes Outstanding, it will not institute
against, or join any other Person in instituting against, AFC-II any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any state of
the United States. In the event that AESOP Leasing, PVHC or Quartx takes action
in violation of this Section 13.6, AFC-II agrees, for the benefit of the
Noteholders and the Commercial Paper Note holders, respectively, that it shall
file an answer with the bankruptcy court or otherwise properly contest the
filing of such a petition by AESOP Leasing, PVHC or Quartx against AFC-II or
commencement of such action and raise the defense that each of AESOP Leasing,
PVHC and Quartx has agreed in writing not to take such action and should be
estopped and precluded therefrom and such other defenses, if any, as its
counsel advises that it may assert. The provisions of this Section 13.6 shall
survive the termination of this Agreement.
(b) AFC-II hereby covenants and agrees that, prior to the
date which is one year and one day after the payment in full of (i) all
Commercial Paper Notes Outstanding, (ii) all Notes Outstanding and (iii) all
Loans outstanding under the AESOP I Loan Agreements, it will not institute
against, or join any other Person in instituting against, AESOP Leasing,
Original AESOP, AESOP Leasing II, AFC, PVHC or Quartx any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States. In the event that AFC-II takes action with respect to AESOP
Leasing, PVHC or Quartx in violation of this Section 13.6, each of AESOP
Leasing, PVHC and Quartx agrees, for the benefit of the Noteholders and the
Commercial Paper Note Holders, respectively, that it shall file an answer with
the bankruptcy court or otherwise properly contest the filing of such a
petition by AFC-II against AESOP Leasing, PVHC or Quartx or commencement of
such action and raise the defense that AFC-II has agreed in writing not to take
such action and should be estopped and precluded therefrom and such other
defenses, if any, as its counsel advises that it may assert. The provisions of
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this Section 13.6 shall survive the termination of this Agreement.
SECTION 13.7. Submission to Jurisdiction. The Lender may
enforce any claim arising out of this Agreement or the Loan Note in any state
or federal court having subject matter jurisdiction and located in New York,
New York. For the purpose of any action or proceeding instituted with respect
to any such claim, AESOP Leasing hereby irrevocably submits to the jurisdiction
of such courts. Each of AESOP Leasing, PVHC and Quartx irrevocably consents to
the service of process out of said courts by mailing a copy thereof, by
registered mail, postage prepaid, to AESOP Leasing, PVHC or Quartx, as the case
may be, and agrees that such service, to the fullest extent permitted by law,
(i) shall be deemed in every respect effective service of process upon it in
any such suit, action or proceeding and (ii) shall be taken and held to be
valid personal service upon and personal delivery to it. Nothing herein
contained shall affect the right of the Trustee and the Lender to serve process
in any other manner permitted by law or preclude the Lender from bringing an
action or proceeding in respect hereof in any other country, state or place
having jurisdiction over such action. Each of AESOP Leasing, PVHC and Quartx
hereby irrevocably waives, to the fullest extent permitted by law, any
objection which it may have or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court located in New York,
New York and any claim that any such suit, action or proceeding brought in such
a court has been brought in an inconvenient forum.
SECTION 13.8. Governing Law. THIS AGREEMENT AND THE LOAN NOTE
SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Whenever possible each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Agreement. All obligations of AESOP Leasing, PVHC and Quartx
and rights of the Lender and the
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holder of the Loan Note or Liability expressed herein shall be in addition to
and not in limitation of those provided by applicable law or in any other
written instrument or agreement relating to any of the Liabilities.
SECTION 13.9. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT TO WHICH
IT IS A PARTY, OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR
ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY
RELATED TRANSACTION, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 13.10. Successors and Assigns. This Agreement shall
be binding upon AESOP Leasing, PVHC, Quartx, the Lender and their respective
successors and assigns, and shall inure to the benefit of AESOP Leasing, PVHC,
Quartx, the Lender, the Trustee as a third party beneficiary and their
respective successors and assigns; provided, however, that none of AESOP
Leasing, PVHC or Quartx shall have the right to assign its rights or delegate
its duties under this Agreement without (i) the Lender's and the Trustee's
prior written consent and (ii) receipt of written confirmation from each of the
Rating Agencies that its then current rating will not be reduced or withdrawn
with respect to the Commercial Paper Notes or any outstanding Series of Notes
as a result thereof. Each of AESOP Leasing, PVHC and Quartx acknowledges that
this Agreement and the Loan Note will be assigned by the Lender to the Trustee
pursuant to the Indenture, and hereby agrees that, subject to the terms of the
Indenture, the Trustee may exercise all of the Lender's rights hereunder.
This Agreement and the other Related Documents contain the entire agreement
of the parties hereto with respect to the matters covered hereby.
SECTION 13.11. Tax Treatment of Loans. It is the intention of
the parties hereto that for U.S. federal income tax purposes each Loan made
hereunder will constitute indebtedness of AESOP Leasing to the Lender and
that AESOP Leasing shall be the owner of the Vehicles that are subject to the
AESOP I Operating Lease. The parties
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agree to take no position in any tax return, filing or proceeding inconsistent
with this provision.
SECTION 13.12. No Recourse. The obligations of AFC-II, AESOP
Leasing, PVHC and Quartx under this Agreement are solely the corporate
obligations of AFC-II, AESOP Leasing, PVHC and Quartx, respectively. No
recourse shall be had for the payment of any obligation or claim arising out of
or based upon this Agreement against any shareholder, employee, officer,
director or incorporator of AFC-II, AESOP Leasing, PVHC and Quartx.
51
<PAGE>
Delivered at New York, New York as of the day and year first
above written.
AESOP LEASING L.P.
By: AESOP LEASING CORP.,
its general partner
By: /s/ Peter H. Sorensen
----------------------------
Name: Peter H. Sorensen
Title: President
Address: c/o Lord Securities
Corporation
Two Wall Street
New York, NY 10055
Facsimile: (212) 346-9012
Telephone: (212) 346-9000
PV HOLDING CORP.
By: /s/ M.A. Ferrucci
----------------------------
Name: M.A. Ferrucci
Title: President
Address: c/o The Corporation
Trust Company
Corporation Trust
Center
1209 Orange Street
Wilmington, DE 19801
Facsimile: (302) 658-2919
Telephone: (302) 777-0200
QUARTX FLEET MANAGEMENT, INC.
By: /s/ M.A. Ferrucci
----------------------------
Name: M.A. Ferrucci
Title: President
<PAGE>
Address: c/o The Corporation
Trust Company
Corporation Trust
Center
1209 Orange Street
Wilmington, DE 19801
Facsimile: (302) 658-2919
Telephone: (302) 777-0200
AESOP FUNDING II L.L.C.
By: /s/ Frank B. Bilotta
----------------------------
Name: Frank B. Bilotta
Title: Vice President
Address: c/o Lord Securities
Corporation
Two Wall Street
New York, NY 10055
Facsimile: (212) 346-9012
Telephone: (212) 346-9000
<PAGE>
EXHIBIT A
TO THE LOAN
AGREEMENT
FORM OF LOAN NOTE _______, 1997
FOR VALUE RECEIVED, AESOP LEASING L.P., a Delaware limited liability
partnership (the "Borrower"), promises to pay to the order of AESOP FUNDING II
L.L.C., a Delaware limited liability company (the "Lender"), the aggregate
unpaid Loan Principal Amount of all Loans shown on the schedule attached hereto
(and any continuation thereof) provided, that the failure to so record any such
information or any error in so recording any such information shall not limit
or otherwise affect the actual obligations of the Borrower hereunder to repay
the Loan Principal Amount of all Loans made to it, together with all Loan
Interest accruing thereon, made by the Lender pursuant to that certain AESOP I
Operating Lease Loan Agreement, dated as of July 30, 1997 (together with all
amendments, supplements, restatements and other modifications, if any, from
time to time thereafter made thereto, the "Loan Agreement"), among the
Borrower, PV Holding Corp. and Quartx Fleet Management, Inc., as Permitted
Nominees of the Borrower, and the Lender. Unless otherwise defined herein or
the context otherwise requires, terms used herein have the meanings provided in
the Loan Agreement.
The Borrower also promises to pay interest on the unpaid Loan
Principal Amount of all Loans hereof from time to time outstanding from the
date hereof until maturity (whether by acceleration or otherwise) and, after
maturity, until paid, at the rates per annum and on the dates specified in the
Loan Agreement.
Payments of both principal and interest are to be made in lawful money
of the United States in same day or immediately available funds to the account
designated by the Lender pursuant to the Loan Agreement.
This Loan Note is the Loan Note referred to in the Loan Agreement and
is entitled to the benefits of the Loan Agreement, and reference is hereby made
to the Loan Agreement for a statement of the terms and conditions on which the
Borrower is permitted and required to make prepayments and repayments of the
Loan Principal Amount of the indebtedness evidenced by this Loan Note and on
which such indebtedness may be declared to be immediately due and payable.
A-1
<PAGE>
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of
dishonor.
THIS LOAN NOTE HAS BEEN DELIVERED IN NEW YORK AND SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER AND GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
AESOP LEASING L.P.
By:________________________
Name:
Title:
A-2
<PAGE>
TRANSACTIONS ON LOAN NOTE
=====================================================================
Amount of
Loan Outstanding
Principal Loan
Amount of Amount Principal
Loan Made Paid Amount Notation
Date This Date This Date This Date Made By
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
=====================================================================
A-3
<PAGE>
EXHIBIT B-1
TO THE LOAN
AGREEMENT
FORM OF LOAN REQUEST
AESOP Funding II L.L.C.
c/o Lord Securities Corporation
Two Wall Street, 19th Floor
New York, New York 10005
Attention: Andrew L. Stidd
Ladies and Gentlemen:
This Loan Request is delivered to you pursuant to Section 3.2 of that
certain AESOP I Operating Lease Loan Agreement, dated as of July 30, 1997 (as
amended, supplemented, restated or otherwise modified from time to time, the
"Loan Agreement"), among AESOP Leasing L.P., a Delaware limited partnership
("AESOP Leasing"), PV Holding Corp. and Quartx Fleet Management, Inc., as
Permitted Nominees of AESOP Leasing, and AESOP Funding II L.L.C., a Delaware
limited liability company (the "Lender"). Unless otherwise defined herein or
the context otherwise requires, terms used herein have the meanings provided in
the Loan Agreement.
AESOP Leasing hereby requests that a Loan be made in the amount of
$______________ on _______________ , 19 __.
AESOP Leasing hereby acknowledges that the delivery of this Loan
Request and the acceptance by AESOP Leasing of the proceeds of the Loan
requested hereby constitute a representation and warranty by AESOP Leasing
that, on the date of such Loan, and before and after giving effect thereto and
to the application of the proceeds therefrom, all conditions set forth in
Section 11.2 of the Loan Agreement have been satisfied and all statements set
forth in Section 11.2 of the Loan Agreement are true and correct.
Attached hereto as Annex I is a true and correct copy of the schedule
required to be delivered in connection herewith pursuant to Section 3.2 of the
Loan Agreement.
B-1-1
<PAGE>
AESOP Leasing agrees that if prior to the time of the Loan requested
hereby any matter certified to herein by it will not be true and correct at
such time as if then made, it will immediately so notify the Lender. Except to
the extent, if any, that prior to the time of the Loan requested hereby the
Lender shall receive written notice to the contrary from AESOP Leasing, each
matter certified to herein shall be deemed once again to be certified as true
and correct at the date of such Loan as if then made.
Please wire transfer the proceeds of the Loan to the account of AESOP
Leasing at the financial institution set forth below:
Amount to be Person to be Paid Name, Address, etc.
Transferred Name Account No.
$___________ _____ ___________ _____________________________
Attention: _____________________________
_____________________________
AESOP Leasing has caused this Loan Request to be executed and
delivered, and the certification and warranties contained herein to be made, by
its duly Authorized Officer this ____ day of ________________, 19____.
AESOP LEASING L.P.
By _______________________________
Name
Title:
B-1-2
<PAGE>
ANNEX I
Vehicle Acquisition Schedule and Related Information
1. Principal amount of proposed Loan
2. Borrowing Date of proposed Loan
3. Vehicle Identification Number (VIN)
4. Summary of Vehicles being financed (including, for
Program Vehicles subject to the GM Repurchase Pro-
gram, the Designated Period for such Program Vehi-
cles)
5. Program or Non-Program Vehicles
6. Capitalized Cost (New Vehicles)
7. Net Book Value (Franchisee Vehicles)
B-1-3
<PAGE>
EXHIBIT B-2
TO THE LOAN
AGREEMENT
FORM OF LOAN REQUEST RESPONSE
AESOP Leasing L.P.
c/o Lord Securities Corporation
Two Wall Street, 19th Floor
New York, New York 10005
Attention: Andrew L. Stidd
__________________, 199__
Re: Loan Request Dated _____________________, 199
Ladies and Gentlemen:
This Loan Request Response is delivered to you pursuant to Section 4.1
of that certain AESOP I Operating Lease Loan Agreement, dated as of July 30,
1997 (as amended, supplemented, restated or otherwise modified from time to
time, the "Loan Agreement"), among AESOP Leasing L.P., a Delaware limited
partnership ("AESOP Leasing"), PV Holding Corp. and Quartx Fleet Management,
Inc., as Permitted Nominees of AESOP Leasing, and AESOP Funding II L.L.C., a
Delaware limited liability company (the "Lender"). Unless otherwise defined
herein or the context otherwise requires, terms used herein have the meanings
assigned to such terms in the Loan Agreement.
Reference is hereby made to the Loan Request delivered to us today by
AESOP Leasing (the "Loan Request"). The applicable rate of Loan Interest on
each Loan requested in the Loan Request is _%; provided, however, if the
Lender's Carrying Cost Interest Rate for the Related Month is higher than the
rate of Loan Interest specified herein, the Loan Interest payable on such Loans
shall be determined using the higher rate.
Very truly yours,
AESOP FUNDING II L.L.C.
By:________________________________
Name:
Title:
B-2-1
<PAGE>
EXHIBIT C
TO THE LOAN
AGREEMENT
FORM OF PAYMENT
DEFICIT NOTICE
Harris Trust and Savings Bank, as Trustee
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attn: Indenture Trust Administration
[Related Enhancement Provider]
[Address]
[ ], 19 _
Ladies and Gentlemen:
This Payment Deficit Notice is delivered to you pursuant to
Section 6.4 of the AESOP I Operating Lease Loan Agreement, dated as of July 30,
1997 (as amended or modified from time to time, the "Loan Agreement") among
AESOP Funding II L.L.C., a Delaware limited liability company, as Lender, PV
Holding Corp. and Quartx Fleet Management, Inc., as Permitted Nominees of the
Borrower, and AESOP Leasing L.P. ("AESOP Leasing"), a Delaware limited
partnership, as Borrower. Terms used herein have the meanings provided in the
Loan Agreement.
AESOP Leasing hereby notifies the Trustee and [Related
Enhancement Provider] that [a Lease Payment Deficit did not exist on ________,
199_] [there was a Lease Payment Deficit on ________, 199_ as follows:
Series______: $_____________________________
Series______: $_____________________________
AESOP LEASING L.P.
By:___________________________
Name:
Title:
C-1
<PAGE>
SCHEDULE 8.11
Business Locations, Trade Names
State of
Principal
Place of States in which
Business Location Business Conducts Business
----------------- --------- -----------------
AESOP Leasing c/o Lord Securities New York New York
L.P. Corporation
Two Wall Street
19th Floor
New York, NY 10005
<PAGE>
[AESOP II Loan Agreement]
- --------------------------------------------------------------------------------
LOAN AGREEMENT
dated as of July 30, 1997
among
AESOP LEASING CORP. II,
as Borrower,
AESOP LEASING CORP.,
as Permitted Nominee of the Borrower,
and
AESOP FUNDING II L.L.C.,
as Lender
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. CERTAIN DEFINITIONS......................................................... 3
SECTION 1.1. Certain Definitions........................................... 3
SECTION 1.2. Accounting and Financial Determinations....................... 3
SECTION 1.3. Cross References; Headings.................................... 3
SECTION 1.4. Interpretation................................................ 4
SECTION 2. LOAN COMMITMENT OF THE LENDER............................................... 4
SECTION 2.1. Loan Commitment............................................... 4
SECTION 2.2. Certain Waivers............................................... 5
SECTION 2.3. Conditions.................................................... 5
SECTION 2.4. Use of Proceeds............................................... 5
SECTION 3. LOAN NOTE; LOAN PROCEDURE;
RECORDKEEPING............................................................... 6
SECTION 3.1. Loan Note..................................................... 6
SECTION 3.2. Loan Procedure................................................ 6
SECTION 3.3. Recordkeeping................................................. 7
SECTION 4. INTEREST.................................................................... 7
SECTION 4.1. Interest Rate on Loans........................................ 7
SECTION 4.2. Supplemental Interest......................................... 7
SECTION 4.3. Loan Interest Payment Dates................................... 8
SECTION 4.4. Setting of Rates.............................................. 8
SECTION 4.5. Carrying Charges.............................................. 8
SECTION 5. REPAYMENT OF LOAN PRINCIPAL AMOUNT.......................................... 9
SECTION 5.1. Mandatory Repayment of Monthly
Loan Principal Amount of Loans................................ 9
SECTION 5.2. Voluntary Prepayments of Loan
Principal Amount.............................................. 10
SECTION 6. MAKING OF PAYMENTS.......................................................... 10
SECTION 6.1. Making of Payments............................................ 10
SECTION 6.2. Due Date Extension............................................ 11
SECTION 6.3. Application of Sale Proceeds.................................. 11
SECTION 6.4. Payment Deficits.............................................. 12
SECTION 7. LOAN COLLATERAL SECURITY.................................................... 12
SECTION 7.1. Grant of Security Interest.................................... 12
SECTION 7.2. Certificates of Title......................................... 14
i
<PAGE>
Page
----
SECTION 7.3. Release of AESOP II Loan Collateral........................... 14
SECTION 7.4. Change of Location or Name.................................... 16
SECTION 7.5. Deliveries; Further Assurances................................ 16
SECTION 7.6. [RESERVED].................................................... 17
SECTION 7.7. [RESERVED].................................................... 17
SECTION 7.8. AESOP II Segregated Account................................... 17
SECTION 8. REPRESENTATIONS AND WARRANTIES.............................................. 17
SECTION 8.1. Organization; Ownership; Power;
Qualification................................................. 18
SECTION 8.2. Authorization; Enforceability................................. 18
SECTION 8.3. Compliance.................................................... 18
SECTION 8.4. [RESERVED].................................................... 19
SECTION 8.5. Litigation.................................................... 19
SECTION 8.6. Liens......................................................... 19
SECTION 8.7. Employee Benefit Plans........................................ 19
SECTION 8.8. Investment Company Act........................................ 19
SECTION 8.9. Regulations G, T, U and X..................................... 20
SECTION 8.10. Proceeds...................................................... 20
SECTION 8.11. Business Locations; Trade Names............................... 20
SECTION 8.12. Taxes......................................................... 20
SECTION 8.13. Governmental Authorizations................................... 21
SECTION 8.14. Compliance with Laws.......................................... 21
SECTION 8.15. Eligible Vehicles............................................. 22
SECTION 8.16. Manufacturer Programs......................................... 22
SECTION 8.17. Absence of Default............................................ 22
SECTION 8.18. No Security Interest; Title to
Assets........................................................ 22
SECTION 8.19. Accuracy of Information....................................... 23
SECTION 9. AFFIRMATIVE COVENANTS....................................................... 23
SECTION 9.1. Corporate Existence; Foreign
Qualification................................................. 23
SECTION 9.2. Books, Records and Inspections................................ 24
SECTION 9.3. Insurance..................................................... 24
SECTION 9.4. Manufacturer Programs......................................... 25
SECTION 9.5. Reporting Requirements........................................ 25
SECTION 9.6. Payment of Taxes; Removal of
Liens......................................................... 26
SECTION 9.7. Business...................................................... 27
SECTION 9.8. Maintenance of the Vehicles................................... 27
SECTION 9.9. Maintenance of Separate Existence............................. 27
ii
<PAGE>
Page
----
SECTION 9.10. Manufacturer Payments; Sales
Proceeds...................................................... 30
SECTION 9.11. Maintenance of Properties..................................... 30
SECTION 9.12. Verification of Title......................................... 31
SECTION 9.13. [RESERVED].................................................... 31
SECTION 9.14. Delivery of Information....................................... 31
SECTION 9.15. Preferred Stock............................................... 31
SECTION 9.16. Vehicles...................................................... 32
SECTION 9.17. Assignments................................................... 32
SECTION 9.18. Notation of Liens............................................. 32
SECTION 10. NEGATIVE COVENANTS.......................................................... 33
SECTION 10.1. Liens......................................................... 33
SECTION 10.2. Other Indebtedness............................................ 33
SECTION 10.3. Mergers, Consolidations....................................... 33
SECTION 10.4. Sales of Assets............................................... 33
SECTION 10.5. Acquisition of Assets......................................... 33
SECTION 10.6. Dividends, Officers' Compensation, etc........................ 33
SECTION 10.7. Organizational Documents...................................... 33
SECTION 10.8. Investments................................................... 34
SECTION 10.9. Regulations G, T, U and X..................................... 34
SECTION 10.10. Other Agreements.............................................. 34
SECTION 10.11. Use of Vehicles............................................... 34
SECTION 10.12. Use of Proceeds............................................... 34
SECTION 10.13. Limitations on the Acquisition of
Certain Vehicles.............................................. 34
SECTION 11. CONDITIONS.................................................................. 35
SECTION 11.1. Initial Loans................................................. 35
SECTION 11.2. All Loans..................................................... 37
SECTION 12. LOAN EVENTS OF DEFAULT AND THEIR EFFECT..................................... 38
SECTION 12.1. AESOP II Loan Events of Default............................... 38
SECTION 12.2. Effect of AESOP II Loan Event of
Default or Liquidation Event of
Default....................................................... 40
SECTION 12.3. Rights of Trustee Upon Liquidation Event of Default and
Non-Performance of Certain Covenants.......................... 40
SECTION 12.4. Application of Proceeds....................................... 42
SECTION 13. GENERAL..................................................................... 42
iii
<PAGE>
Page
----
SECTION 13.1. Waiver; Amendments............................................ 42
SECTION 13.2. Confirmations................................................. 43
SECTION 13.3. Notices....................................................... 43
SECTION 13.4. Taxes......................................................... 43
SECTION 13.5. Indemnification............................................... 43
SECTION 13.6. Bankruptcy Petition........................................... 45
SECTION 13.7. Submission to Jurisdiction.................................... 46
SECTION 13.8. Governing Law................................................. 46
SECTION 13.9. JURY TRIAL.................................................... 47
SECTION 13.10. Successors and Assigns........................................ 47
SECTION 13.11. Tax Treatment of Loans........................................ 47
SECTION 13.12. No Recourse................................................... 47
SECTION 13.13. Consent to Amendment of Indenture
by Preferred Stockholders..................................... 47
EXHIBITS AND SCHEDULES
EXHIBIT A FORM OF LOAN NOTE
EXHIBIT B-1 FORM OF LOAN REQUEST
EXHIBIT B-2 FORM OF LOAN REQUEST RESPONSE
EXHIBIT C FORM OF PAYMENT DEFICIT NOTICE
SCHEDULE 8.11 BUSINESS LOCATIONS, TRADE NAMES
</TABLE>
iv
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of July 30, 1997 (the
"Agreement"), is entered into between AESOP LEASING CORP. II, a Delaware
corporation ("AESOP Leasing II" or the "Borrower"), AESOP LEASING CORP., a
Delaware corporation ("Original AESOP"), as Permitted Nominee of the Borrower,
and AESOP FUNDING II L.L.C., a Delaware limited liability company ("AFC-II" or
the "Lender").
BACKGROUND
AESOP Leasing II intends to purchase and finance Program
Vehicles (such capitalized term, together with all other capitalized terms
used herein, shall have the meaning assigned thereto in Section 1.1) that it
will then lease to ARAC and certain other Eligible Rental Car Companies for
use in their respective daily vehicle rental businesses pursuant to the AESOP
II Operating Lease, and AESOP Leasing II desires to obtain financing for such
Program Vehicles from the Lender.
AESOP Leasing II has appointed Original AESOP pursuant to
the Original AESOP Nominee Agreement to act as nominee titleholder for the
sole purpose of holding registered title to Vehicles acquired by AESOP Leasing
II.
The Lender is willing to make Loans to AESOP Leasing II on
the terms and conditions set forth herein.
The Lender will utilize the proceeds of one or more Series
of Notes issued from time to time pursuant to the Indenture to make Loans to
AESOP Leasing II hereunder and to AESOP Leasing I under the AESOP I Loan
Agreements, in each case to the extent Vehicles eligible to be financed
hereunder and thereunder are available for financing and, in certain other
circumstances, to pay amortizing Notes. In connection therewith, the Lender
will assign its rights hereunder and under the AESOP I Loan Agreements to the
Trustee to secure the Lender's obligations to the Secured Parties.
The Loans made to AESOP Leasing II hereunder will be secured
by all of the right, title and interest
2
<PAGE>
of AESOP Leasing II and Original AESOP in and to (a) the Program Vehicles
leased under the AESOP II Operating Lease, (b) the Manufacturer Programs as
they relate to such Program Vehicles, (c) all payments under insurance
policies or warranties relating to such Program Vehicles, (d) all payments due
from the Lessees and ARC under the AESOP II Operating Lease and (e) all
proceeds of the foregoing.
Accordingly, in consideration of the mutual agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the terms and
conditions hereof, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
SECTION 1.1. Certain Definitions. As used in this Agreement
and unless the context requires a different meaning, capitalized terms not
otherwise defined herein shall have the meanings assigned to such terms in (i)
the Definitions List attached as Schedule I to the Base Indenture, dated as of
July 30, 1997 (as such agreement may be amended, supplemented, restated or
otherwise modified from time to time in accordance with its terms, the "Base
Indenture"), between AFC-II and Harris Trust and Savings Bank, as trustee (the
"Trustee"), as in effect on the date hereof and as such Schedule I may be
amended or modified from time to time in accordance with the terms of the Base
Indenture (the "Definitions List").
SECTION 1.2. Accounting and Financial Determinations. Where
the character or amount of any asset or liability or item of income or expense
is required to be determined, or any accounting computation is required to be
made, for the purpose of this Agreement, such determination or calculation
shall be made, to the extent applicable and except as otherwise specified in
this Agreement, in accordance with GAAP. When used herein, the term "financial
statement" shall include the notes and schedules thereto.
SECTION 1.3. Cross References; Headings. The words "hereof",
"herein" and "hereunder" and words of a similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. Section, Schedule and
3
<PAGE>
Exhibit references contained in this Agreement are references to Sections,
Schedules and Exhibits in or to this Agreement unless otherwise specified. Any
reference in any Section or definition to any clause is, unless otherwise
specified, to such clause of such Section or definition. The various headings
in this Agreement are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or any provision hereof.
SECTION 1.4. Interpretation. In this Agreement, unless the
context otherwise requires:
(i) the singular includes the plural and
vice versa;
(ii) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors
and assigns are permitted by this Agreement, and reference to any
Person in a particular capacity only refers to such Person in such
capacity;
(iii) reference to any gender includes
the other gender;
(iv) reference to any Requirement of Law means such
Requirement of Law as amended, modified, codified or reenacted, in
whole or in part, and in effect from time to time;
(v) "including" (and with correlative meaning
"include") means including without limiting the generality of any
description preceding such term; and
(vi) with respect to the determination of any
period of time, "from" means "from and including" and "to" and
"until" means "to but excluding".
SECTION 2. LOAN COMMITMENT OF THE LENDER.
SECTION 2.1. Loan Commitment. Subject to the terms and
conditions of this Agreement, including Section 12.2 and further subject to
the availability of funds to the Lender pursuant to the Indenture, the Lender
agrees to make loans hereunder (the "Loans") to AESOP Leasing II
4
<PAGE>
from time to time on or after the Initial Closing Date and prior to the Loan
Commitment Termination Date; provided, that on any one date the Loan Principal
Amount of all Loans made hereunder to AESOP Leasing II shall not exceed the
AESOP II Loan Agreement Borrowing Base. The foregoing commitment of the Lender
is called the "Loan Commitment".
SECTION 2.2. Certain Waivers. AESOP Leasing II waives
presentment, demand for payment, notice of dishonor and protest, notice of the
creation of any of its Liabilities and all other notices whatsoever to AESOP
Leasing II with respect to such Liabilities except notices required under
Section 12.1. The obligations of AESOP Leasing II under this Agreement and the
Loan Note shall not be affected by (i) the failure of the Trustee or the
Lender or the holder of the Loan Note or any of AESOP Leasing II's Liabilities
to assert any claim or demand or to exercise or enforce any right, power or
remedy against AESOP Leasing II or the AESOP II Loan Collateral or otherwise,
(ii) any extension or renewal for any period (whether or not longer than the
original period) or exchange of any of AESOP Leasing II's Liabilities or the
release or compromise of any obligation of any nature of any Person with
respect thereto, (iii) the surrender, release or exchange of all or any part
of any property (including the AESOP II Loan Collateral) securing payment and
performance of any of AESOP Leasing II's Liabilities or the compromise or
extension or renewal for any period (whether or not longer than the original
period) of any obligations of any nature of any Person with respect to any
such property, and (iv) any other act, matter or thing which would or might,
in the absence of this provision, operate to release, discharge or otherwise
prejudicially affect the obligations of AESOP Leasing II.
SECTION 2.3. Conditions. The making of each Loan hereunder
is subject to the satisfaction of the applicable conditions set forth in
Section 11.
SECTION 2.4. Use of Proceeds. AESOP Leasing II shall apply
the funds received by it pursuant to Section 2.1 hereof solely to purchase
Eligible Vehicles that are Program Vehicles that it will lease to ARAC and
certain other Eligible Rental Car Companies pursuant to the AESOP II Operating
Lease for use in their respective daily vehicle rental businesses. Only
Eligible Vehicles
5
<PAGE>
that are Program Vehicles shall be eligible to be purchased by AESOP Leasing
II from the proceeds of the Loans made hereunder. All references in this
Agreement to "Vehicle" or "Vehicles" (other than such references in the
recital) shall refer to a Program Vehicle or Program Vehicles, respectively.
SECTION 3. LOAN NOTE; LOAN PROCEDURE;
RECORDKEEPING.
SECTION 3.1. Loan Note. The Loans made hereunder shall be
evidenced by a promissory note issued by AESOP Leasing II (herein, as from
time to time supplemented, extended or replaced, the "Loan Note"),
substantially in the form set forth in Exhibit A, with appropriate insertions,
dated as of the Initial Closing Date, payable to the order of the Lender and
assigned to the Trustee pursuant to the Indenture.
SECTION 3.2. Loan Procedure. AESOP Leasing II shall deliver
a Loan Request to the Lender no later than 4:00 p.m., New York City time, on a
day that is not less than one, nor more than five, Business Days prior to the
proposed Borrowing Date (which shall be a Business Day). Each Loan Request
shall be irrevocable, and shall specify (i) the principal amount of the
proposed Loan, (ii) the Borrowing Date of the proposed Loan, (iii) a summary
of the Vehicles being financed (including for Vehicles subject to the GM
Repurchase Program, the Designated Period for each such Vehicle), (iv) that
each Vehicle is a Program Vehicle, (v) the VIN for each Vehicle to be
financed, (vi) in the case of new Vehicles, the total Capitalized Cost thereof
as of the Borrowing Date, and (vii) in the case of Initial Vehicles, the Net
Book Value of such Vehicles as of the first day of the Related Month. The
aggregate requested borrowings hereunder on any Business Day shall be for an
initial aggregate principal amount that, together with the Loan Principal
Amount of Loans outstanding hereunder and under the AESOP I Loan Agreements on
such date, shall not exceed the principal amount of Notes outstanding on such
date. On the terms and subject to the conditions of this Agreement, on or
before 2:00 p.m., New York City time, on the Borrowing Date specified in the
Loan Request, the Lender shall transfer same day or immediately available
funds to AESOP Leasing II's account specified in such Loan Request in the
amount specified in such Loan Request. Each Loan
6
<PAGE>
Request made pursuant to this Section 3.2 shall constitute AESOP Leasing II's
representation and warranty that all of the applicable conditions contained in
Section 11 will, after giving effect to such Loan, be satisfied.
SECTION 3.3. Recordkeeping. The Lender shall record in its
records, or at its option on the schedule attached to the Loan Note, the date
and principal amount of each Loan made hereunder, each repayment thereof, and
the other information provided for thereon. The aggregate unpaid Loan
Principal Amount so recorded shall be rebuttable presumptive evidence of the
Loan Principal Amount owing and unpaid on the Loan Note. The failure to so
record any such information or any error in so recording any such information
shall not, however, limit or otherwise affect the actual obligations of AESOP
Leasing II hereunder or under the Loan Note to repay the Loan Principal
Amount, together with all Loan Interest accruing thereon.
SECTION 4. INTEREST.
SECTION 4.1. Interest Rate on Loans. AESOP Leasing II hereby
promises to pay interest on the unpaid principal amount of each Loan made to
it hereunder (the "Loan Interest"), for each Loan Interest Period commencing
on the date such Loan is made to AESOP Leasing II until such Loan is paid in
full at a rate not less than the Lender's Carrying Cost Interest Rate for the
applicable Loan Interest Period. The applicable rate of Loan Interest on each
Loan shall be specified in a Loan Request Response provided by the Lender to
AESOP Leasing II on the date a Loan Request is delivered; provided that if the
Lender's Carrying Cost Interest Rate for the applicable Loan Interest Period
is higher than the rate of Loan Interest specified in the Loan Request
Response, Loan Interest payable shall be determined using the higher rate.
SECTION 4.2. Supplemental Interest. AESOP Leasing II agrees
to pay to the Lender, as an additional interest payment, an amount equal to
the product of (A) the applicable Loan Agreement's Share as of the beginning
of each Loan Interest Period times (B) the sum of (i) the Supplemental
Carrying Charges for such Loan Interest Period, minus (ii) any accrued
earnings on Permitted Investments in the Collection Account which earnings are
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available for distribution on the last Business Day of such Loan Interest
Period (the product of the amounts described in clauses (A) and (B) above,
"Supplemental Interest").
SECTION 4.3. Loan Interest Payment Dates. Accrued Loan
Interest on each Loan made hereunder shall be payable on each Payment Date
(with respect to the related Loan Interest Period), upon any prepayment and at
maturity, commencing with the first of such dates to occur after the date such
Loan is made. After maturity (whether by acceleration or otherwise), all
accrued Loan Interest and Supplemental Interest on all Loans made hereunder
shall be payable on demand. Supplemental Interest in respect of each Loan
Interest Period shall be payable on each Payment Date and upon any prepayment
and at maturity. All calculations of Loan Interest and Supplemental Interest
shall be based on a 360-day year and the actual number of days elapsed in the
related Loan Interest Period.
SECTION 4.4. Setting of Rates. The Lender's Carrying Cost
Interest Rate and Supplemental Carrying Charges used hereunder to compute Loan
Interest due on each Loan made hereunder on each Payment Date and the
Supplemental Interest due on each Payment Date shall be calculated from time
to time by the Lender in accordance with this Agreement (and written notice
thereof shall be provided to AESOP Leasing II not later than ten days prior to
the applicable Payment Date). Such calculation shall be conclusive, absent
demonstrable error.
SECTION 4.5. Carrying Charges. AESOP Leasing II agrees to
pay to the Lender on each Payment Date an amount equal to the product of (A)
the applicable Loan Agreement's Share as of such Payment Date times (B) all
accrued and unpaid Carrying Charges that are accrued and unpaid as of each
such Payment Date.
SECTION 5. REPAYMENT OF LOAN PRINCIPAL AMOUNT.
SECTION 5.1. Mandatory Repayment of Monthly Loan Principal
Amount of Loans. On each Payment Date, AESOP Leasing II shall pay to the
Lender, as a repayment of the Loan Principal Amount, an amount equal to the
product of (A) the applicable Loan Payment Allocation Percentage as of the
beginning of the Related Month times
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(B) the sum, without duplication, of (i) the accrued Depreciation Charges for
the Related Month for all Vehicles (a) leased under the AESOP II Operating
Lease as of the end of the Related Month or (b) described in clauses (ii) or
(iii) of this Section 5.1, plus (ii) the aggregate Termination Values (each as
of the date on which such Vehicle becomes an Ineligible Vehicle, a Casualty or
is sold, as applicable) of all the Vehicles leased under the AESOP II
Operating Lease at any time during such Related Month that, without double
counting, while so leased either became Ineligible Vehicles, suffered a
Casualty or were sold by or on behalf of AESOP Leasing II (it being understood
that AESOP Leasing II has agreed to sell, or cause to be sold, Vehicles only
in a manner consistent with the provisions hereof and of the Related
Documents) to any Person other than to a Manufacturer pursuant to a
Manufacturer Program or to a third party pursuant to an auction conducted
through a Guaranteed Depreciation Program, in each case, during the Related
Month, plus (iii) the aggregate Termination Values (each as of the applicable
Turnback Date) of all Vehicles leased under the AESOP II Operating Lease that
while so leased were returned to a Manufacturer pursuant to a Manufacturer
Program with respect to which either (x) the Repurchase Price has been paid by
such Manufacturer and/or the related auction dealers during the Related Month
or (y) a Manufacturer Event of Default has occurred, minus (iv) an amount
equal to the sum of (1) any amounts received by the Lender or the Trustee, or
deposited into the Collection Account, during the Related Month representing
(a) Repurchase Prices for repurchases of Vehicles leased under the AESOP II
Operating Lease at the applicable Turnback Date or (b) the sales proceeds
(including amounts paid by a Manufacturer as a result of the sale of a Vehicle
during the Related Month outside such Manufacturer's Manufacturer Program but
excluding amounts released to AESOP Leasing II pursuant to the last sentence
of Section 5.2(a) of the Base Indenture) for sales of Vehicles leased under
the AESOP II Operating Lease at the time of such sale to a third party other
than (x) to a Manufacturer pursuant to a Repurchase Program or (y) through an
auction dealer pursuant to a Guaranteed Depreciation Program and (2) any
amounts received in the Related Month and applied to the Loan Principal Amount
pursuant to Section 6.3 (the product of the amounts described in clauses (A)
and (B) above, the "Monthly Loan Principal Amount"). Unless otherwise
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required to be paid sooner pursuant to the terms of this Agreement, the entire
unpaid Loan Principal Amount of the Loans made hereunder shall be payable on
the last occurring Series Termination Date with respect to the Notes. All
Loans made hereunder shall be due on the maturity date therefor, whether by
acceleration or otherwise. Solely for determining the amounts payable under
this Section 5.1, with respect to a Vehicle that became a Casualty during the
Related Month as a result of such Vehicle being held beyond the stated
expiration date of the applicable Repurchase Period, such Vehicle will be
deemed to have become a Casualty upon such expiration date.
SECTION 5.2. Voluntary Prepayments of Loan Principal Amount.
AESOP Leasing II may from time to time prepay the principal amount with
respect to any Loans made hereunder, in whole or in part, on any date;
provided that, except for any prepayment made pursuant to Section 6.3 hereof
or any payment made to comply with Section 10.13 hereof, AESOP Leasing II
shall give the Lender and the Trustee not less than one (1) Business Day's
prior notice of any such prepayment, specifying the date and amount of such
prepayment, and, if AESOP Leasing II is requesting a release of Vehicles from
the Lien hereof pursuant to Section 7.3, the Vehicles to which such prepayment
relates.
SECTION 6. MAKING OF PAYMENTS.
SECTION 6.1. Making of Payments. All payments of the Monthly
Loan Principal Amount or Loan Interest hereunder, all prepayments of the Loan
Principal Amount hereunder, and all payments of Supplemental Interest,
Carrying Charges and of all other Liabilities shall be made by AESOP Leasing
II to, or for the account of, the Lender in immediately available Dollars,
without setoff, counterclaim or deduction of any kind. All such payments shall
be made to the Collection Account (or such other account as the Lender may
from time to time specify with the consent of the Trustee), not later than
11:00 a.m., New York City time, on the date due, and funds received after that
hour shall be deemed to have been received by the Lender on the next following
Business Day. The Lender hereby specifies that all (i) payments with respect
to Vehicles leased under the AESOP II Operating Lease made by the
Manufacturers and related auction deal-
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ers under the Manufacturer Programs, (ii) amounts representing the proceeds
from sales of Vehicles leased under the AESOP II Operating Lease (including
amounts paid by a Manufacturer as a result of the sale of such Vehicle outside
such Manufacturer's Manufacturer Program) to third parties (other than under
any related Manufacturer Program) and (iii) payments with respect to any other
AESOP II Loan Collateral shall be deposited in the Collection Account;
provided, however, that, subject to Section 5.2 of the Base Indenture,
insurance proceeds and warranty payments with respect to Vehicles leased under
the AESOP II Operating Lease will be deposited in the Collection Account only
if an Amortization Event or a Potential Amortization Event shall have occurred
and be continuing.
SECTION 6.2. Due Date Extension. If any (i) payment of the
Monthly Loan Principal Amount or Loan Interest hereunder or (ii) prepayments
of the Loan Principal Amount or Supplemental Interest with respect to any
Loans made hereunder falls due on a day which is not a Business Day, then such
due date shall be extended to the next following Business Day and Loan
Interest or Supplemental Interest, as applicable, shall accrue through such
Business Day.
SECTION 6.3. Application of Sale Proceeds. AESOP Leasing II
agrees that an amount equal to the product of (A) the applicable Loan Payment
Allocation Percentage as of the beginning of the Related Month times (B) the
sum of (i) all payments made by the Manufacturers and related auction dealers
under the Manufacturer Programs with respect to Vehicles leased under the
AESOP II Operating Lease, plus (ii) proceeds from the sale of Vehicles leased
under the AESOP II Operating Lease to third parties (other than to the
Manufacturer or pursuant to a Guaranteed Depreciation Program), in each case
deposited in the Collection Account on any date, shall be applied, upon
receipt thereof in the Collection Account, to prepay the Loan Principal
Amount.
SECTION 6.4. Payment Deficits. At or before 11:30 a.m., New
York City time, on each Payment Date, AESOP Leasing II shall notify the
Trustee and the related Enhancement Provider of the amount of the Lease
Payment Deficit, if any, with respect to each Series of Notes
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issued pursuant to the Indenture, such notification to be in the form of
Exhibit C.
SECTION 7. LOAN COLLATERAL SECURITY.
SECTION 7.1. Grant of Security Interest. (a) As security for
the prompt and complete payment and performance of its Liabilities, each of
AESOP Leasing II and Original AESOP hereby pledges, hypothecates, assigns,
transfers and delivers to the Lender, and hereby grants to the Lender, a
continuing, security interest in, all of the following, whether now owned or
hereafter acquired:
(i) all Vehicles leased under the AESOP II
Operating Lease, and all Certificates of Title with respect thereto;
(ii) all right, title and interest of each of AESOP
Leasing II and Original AESOP in and to each Manufacturer Program,
including any amendments thereof, and all monies due and to become
due under or in connection with each such Manufacturer Program
whether payable as Vehicle Repurchase Prices, auction sales proceeds,
fees, expenses, costs, indemnities, insurance recoveries, damages for
breach of the Manufacturer Programs or otherwise (but excluding all
incentive payments payable in respect of purchases of vehicles under
the Manufacturer Programs) and all rights to compel performance and
otherwise exercise remedies thereunder;
(iii) all right, title and interest of AESOP
Leasing II and Original AESOP in, to and under the AESOP II Operating
Lease and the related Lessee Agreements (other than any right, title
and interest of AESOP Leasing II or Original AESOP with respect to
any Excluded Payments) including, without limitation, all monies due
and to become due to AESOP Leasing II or Original AESOP from any of
the Lessees or the Guarantor or any of their assigns under or in
connection with the AESOP II Operating Lease and the related Lessee
Agreements, whether payable as principal, interest, rent, guaranty
payments (other than guaranty payments with respect to any Excluded
Payments provided to AESOP Leasing II or Original AESOP under the
AESOP II Operating Lease), fees, expenses, costs, indemnities,
insurance recoveries,
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damages for the breach of any of the AESOP II Operating Lease and the
related Lessee Agreements or otherwise, and all rights, remedies,
powers, privileges and claims of each of AESOP Leasing II and
Original AESOP against any other party under or with respect to the
AESOP II Operating Lease and the related Lessee Agreements (whether
arising pursuant to the terms of the AESOP II Operating Lease or the
related Lessee Agreements or otherwise available to AESOP Leasing II
or Original AESOP at law or in equity), the right to enforce the
AESOP II Operating Lease and the related Lessee Agreements as
provided herein and to give or withhold any and all consents,
requests, notices, directions, approvals, extensions or waivers under
or with respect to the AESOP II Operating Lease and the related
Lessee Agreements or the obligations of any party thereunder, and all
collateral pledged under the AESOP II Operating Lease;
(iv) all right, title and interest of each of AESOP
Leasing II and Original AESOP in, to and under the Vehicle Title and
Lienholder Nominee Agreements, the HFS Indemnity and the
Administration Agreement, including any amendments thereof, and all
monies due and to become due thereunder, whether payable as fees,
expenses, costs, indemnities, insurance recoveries, damages for the
breach of any of the Vehicle Title and Lienholder Nominee Agreements,
the HFS Indemnity and the Administration Agreement or otherwise and
all rights to compel performance and otherwise exercise remedies
thereunder;
(v) all payments under insurance policies (whether
or not the Lessor, the Lender or the Trustee is named as the loss
payee thereof) or any warranty payable by reason of loss or damage
to, or otherwise with respect to, any of the Vehicles leased under
the AESOP II Operating Lease;
(vi) all right, title and interest of each of AESOP
Leasing II and Original AESOP in and to any proceeds from the sale of
Vehicles leased under the AESOP II Operating Lease, including all
monies due in respect of such Vehicles under the AESOP II Operating
Lease, whether payable as the purchase
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price of such Vehicles, auction sales proceeds, or as fees, expenses,
costs, indemnities, insurance recoveries, or otherwise;
(vii) any assignment of a security interest in any
Vehicle leased under the AESOP II Operating Lease granted to AESOP
Leasing II or Original AESOP pursuant to the AESOP II Operating Lease
or otherwise, and all Certificates of Title with respect to each such
Vehicle; and
(viii) all products and proceeds of all of the
foregoing;
provided, however, that the AESOP II Segregated Account shall not be subject
to the grant of a security interest by each of AESOP Leasing II and Original
AESOP pursuant to this Section 7.1(a) and shall not constitute part of the
AESOP II Loan Collateral.
(b) To secure the AFC-II Obligations, each of AESOP Leasing
II and Original AESOP hereby pledges, hypothecates, assigns, transfers and
delivers to the Trustee, on behalf of the Secured Parties, and hereby grants
to the Trustee, on behalf of the Secured Parties, a continuing, first priority
security interest in, all of the AESOP II Loan Collateral, whether now owned
or hereafter acquired; provided, however, that in no event shall the Trustee's
claim against such collateral exceed the outstanding obligations of AESOP
Leasing II to the Lender hereunder. Upon the occurrence of a Liquidation Event
of Default or a Limited Liquidation Event of Default and subject to the
provisions of the Related Documents and the proviso contained in the
immediately preceding sentence, the Trustee shall have all of the rights and
remedies of a secured party, including, without limitation, the rights and
remedies granted under the Uniform Commercial Code.
SECTION 7.2. Certificates of Title. AESOP Leasing II shall
take, or shall cause to be taken, such action as shall be necessary to submit
all of the Certificates of Title for Vehicles leased under the AESOP II
Operating Lease (other than Certificates of Title with respect to Vehicles
titled in the states of Nebraska, Ohio and Oklahoma) to the appropriate state
authority for notation of the Trustee's lien thereon. The original
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Certificates of Title shall be held by the Administrator, as agent for AESOP
Leasing II, in trust for the benefit of the Lender and the Trustee.
SECTION 7.3. Release of AESOP II Loan Collateral. The Lender
shall request the Trustee in writing to release its Lien on a Vehicle leased
under the AESOP II Operating Lease and the Certificate of Title therefor upon
the earliest of (i) in the case of a Vehicle subject to a Guaranteed
Depreciation Program, the date of the sale of such Vehicle by an auction
dealer to a third party, and in the case of a Vehicle subject to a Repurchase
Program, the Turnback Date for such Vehicle, (ii) voluntary prepayment in full
of the principal amount of the Loan to which such Vehicle relates in
accordance with Section 5.2, as noted in records maintained by the Trustee,
(iii) receipt of proceeds from an ordinary course sale of such Vehicle in an
amount at least equal to the Termination Value of such Vehicle, provided,
however, that if such ordinary course sale occurs during the Repurchase Period
with respect to a Vehicle, AESOP Leasing II shall only sell or permit a sale
of such Vehicle for a purchase price, together with any amounts payable by a
Manufacturer as a result of or in connection with such sale, equal to or
greater than the Repurchase Price that it would have received if it had turned
back such Vehicle to the Manufacturer and (iv) receipt of proceeds from an
ordinary course sale of a Vehicle subject to a Casualty in an amount at least
equal to the Termination Value of such Vehicle. With respect to Vehicles
leased under the AESOP II Operating Lease, from and after the earliest of (a)
in the case of a Vehicle subject to a Guaranteed Depreciation Program, the
date of the sale of such Vehicle by an auction dealer to a third party, and in
the case of a Vehicle subject to a Repurchase Program, the Turnback Date for
such Vehicle, (b) a prepayment of the principal amount of the Loan to which
such Vehicle relates and (c) receipt of the purchase price for a Vehicle by
AESOP Leasing II, or by the Trustee on the Lender's behalf, in either case in
an amount at least equal to the Termination Value of such Vehicle, such
Vehicle and such Certificate of Title shall be deemed to be released from the
Lien of this Agreement, and the Lender and the Trustee shall execute such
documents and instruments as AESOP Leasing II may reasonably request
(including a power of attorney of the Trustee appointing the Administrator to
act as the agent of the Trustee in
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releasing the Lien of the Trustee on Vehicles turned back or sold pursuant to
the provisions of this Section 7.3; which power of attorney shall be revocable
by the Lender or the Trustee at any time following the occurrence of a
Liquidation Event of Default), at AESOP Leasing II's expense, to evidence
and/or accomplish such release.
SECTION 7.4. Change of Location or Name. So long as any of
its Liabilities shall remain outstanding or the Lender shall continue to have
any Loan Commitment, neither AESOP Leasing II nor Original AESOP will change
(i) the location of its principal place of business, chief executive office,
major executive office, chief place of business or its records concerning its
business and financial affairs, or (ii) its legal name or the name under or by
which it conducts its business, in each case without first giving the Trustee
and the Lender at least 30 days' advance written notice thereof and having
taken any and all action required to maintain and preserve the first priority
perfected Lien of the Lender or the Trustee on the AESOP II Loan Collateral
(except, as to perfection and priority, with respect to Vehicles titled in
the states of Nebraska, Ohio and Oklahoma), free and clear of any Lien
whatsoever except for Permitted Liens; provided, however, that notwithstanding
the foregoing, neither AESOP Leasing II nor Original AESOP shall change the
location of its principal place of business, chief executive office, major
executive office, chief place of business or its records concerning its
business and financial affairs to any place outside the United States of
America.
SECTION 7.5. Deliveries; Further Assurances. Each of AESOP
Leasing II and Original AESOP agrees that it will, at its sole expense, (i)
immediately deliver or cause to be delivered to the Lender (or the Trustee on
behalf of the Secured Parties), in due form for transfer (i.e., endorsed in
blank), all securities, chattel paper, instruments and documents, if any, at
any time representing all or any of the AESOP II Loan Collateral, other than
the Certificates of Title which shall be delivered to the Lender or the
Trustee, as applicable, after the occurrence of a Liquidation Event of
Default, if such delivery is reasonably necessary or appropriate to perfect or
protect the Lender's (or the Trustee's on behalf of the Secured Parties)
security interest in such AESOP II Loan Collateral, and (ii) execute and
deliver, or
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cause to be executed and delivered, to the Lender or the Trustee in due form
for filing or recording (and pay the cost of filing or recording the same in
all public offices reasonably deemed necessary or advisable by the Lender or
the Trustee), such assignments, security agreements, mortgages, consents,
waivers, financing statements and other documents, and do such other acts and
things, all as may from time to time be reasonably necessary or desirable to
establish and maintain to the satisfaction of the Lender (or the Trustee) a
valid perfected Lien on and security interest in all of the AESOP II Loan
Collateral (except, as to perfection, with respect to Vehicles titled in the
states of Nebraska, Ohio and Oklahoma) now or hereafter existing or acquired
(free of all other Liens whatsoever other than Permitted Liens) to secure
payment and performance of its Liabilities.
SECTION 7.6. [RESERVED].
SECTION 7.7. [RESERVED].
SECTION 7.8. AESOP II Segregated Account. AESOP Leasing II
shall establish and maintain in its name an account entitled "AESOP Leasing
Corp. II Account" (the "AESOP II Segregated Account"). The AESOP II Segregated
Account shall be maintained (i) with a Qualified Institution, or (ii) as a
segregated trust account with the corporate trust department of a depository
institution or trust company having corporate trust powers and acting as
trustee for funds deposited in the AESOP II Segregated Account. If the AESOP
II Segregated Account is not maintained in accordance with the previous
sentence, then within 10 Business Days after obtaining knowledge of such fact,
AESOP Leasing II shall establish a new AESOP II Segregated Account which
complies with such sentence and transfer into the new AESOP II Segregated
Account all amounts then on deposit in the non-qualifying AESOP II Segregated
Account. The parties hereto acknowledge and agree that the monies held in the
AESOP II Segregated Account from time to time (i) are property of AESOP
Leasing II, (ii) are not being pledged to secure any obligation to, or
otherwise held in trust for, the Lender or any of the persons specified in
this Section 7.8 and (iii) are available to satisfy the claims of creditors of
AESOP Leasing II generally; provided, however, that nothing contained herein
shall affect the rights of the Lender to
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pursue all legal remedies available to it with respect to any amounts payable
by AESOP Leasing II hereunder.
SECTION 8. REPRESENTATIONS AND WARRANTIES. To induce the
Lender to enter into this Agreement and to make Loans hereunder, AESOP Leasing
II represents and warrants to the Lender as to itself, and Original AESOP
represents and warrants to the Lender as to itself, as of the Initial Closing
Date, as of the date of each Loan made hereunder and as of each Series Closing
Date that:
SECTION 8.1. Organization; Ownership; Power; Qualification.
Each of AESOP Leasing II and Original AESOP is (i) a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) has the power and authority to own its
properties and to carry on its business as now being and hereafter proposed to
be conducted and (iii) is duly qualified, in good standing and authorized to
do business in each jurisdiction in which the character of its properties or
the nature of its businesses requires such qualification or authorization.
SECTION 8.2. Authorization; Enforceability. Each of AESOP
Leasing II and Original AESOP has the corporate power and has taken all
necessary corporate action to authorize it to execute, deliver and perform
this Agreement and each of the other Related Documents to which it is a party
in accordance with their respective terms, and to consummate the transactions
contemplated hereby and thereby. This Agreement has been duly executed and
delivered by each of AESOP Leasing II and Original AESOP and is, and each of
the other Related Documents to which AESOP Leasing II or Original AESOP is a
party is, a legal, valid and binding obligation of such party, enforceable in
accordance with its terms.
SECTION 8.3. Compliance. The execution, delivery and
performance by each of AESOP Leasing II and Original AESOP of this Agreement
and each other Related Document to which it is a party, and the consummation
of the transactions contemplated hereby and thereby, do not and will not (i)
require any consent, approval, authorization or registration not already
obtained or effected, (ii) violate any applicable law with respect to AESOP
Leasing II or Original AESOP, as the case may be, which violation could result
in a Material Adverse Effect,
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(iii) conflict with, result in a breach of, or constitute a default under the
certificate or articles of incorporation or by-laws, as amended, of AESOP
Leasing II or Original AESOP, as the case may be, or under any indenture,
agreement, or other instrument to which AESOP Leasing II or Original AESOP is
a party or by which its properties may be bound, or (iv) result in or require
the creation or imposition of any Lien upon or with respect to any property
now owned or hereafter acquired by AESOP Leasing II or Original AESOP except
Permitted Liens.
SECTION 8.4. [RESERVED].
SECTION 8.5. Litigation. There is no action, suit or
proceeding pending against or, to the knowledge of AESOP Leasing II or
Original AESOP, threatened against or affecting AESOP Leasing II or Original
AESOP before any court or arbitrator or any Governmental Authority in which
there is a reasonable possibility of an adverse decision that could materially
adversely affect the consolidated financial position, consolidated results of
operations, business, properties, performance or condition (financial or
otherwise) of AESOP Leasing II or Original AESOP, as the case may be, or which
in any manner draws into question the validity or enforceability of this
Agreement or any other Related Document or the ability of AESOP Leasing II or
Original AESOP to comply with any of the respective terms hereunder or
thereunder.
SECTION 8.6. Liens. The AESOP II Loan Collateral is free and
clear of all Liens other than (i) Permitted Liens and (ii) Liens in favor of
the Lender or the Trustee. The Lender (or the Trustee on behalf of the Secured
Parties) has obtained, as security for the Liabilities, a first priority
perfected Lien on all AESOP II Loan Collateral (except, with respect to
perfection and priority, Vehicles titled in the states of Nebraska, Ohio and
Oklahoma). All Vehicle Perfection and Documentation Requirements with respect
to all Vehicles leased under the AESOP II Operating Lease on or after the date
hereof have and will continue to be satisfied in accordance with the terms of
this Agreement.
SECTION 8.7. Employee Benefit Plans. Neither AESOP Leasing
II nor Original AESOP has established nor does it maintain or contribute to
any employee benefit plan that is covered by Title IV of ERISA, and neither
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AESOP Leasing II nor Original AESOP will do so, so long as the Loan Commitment
has not expired, or any amount is owing to the Lender hereunder.
SECTION 8.8. Investment Company Act. Neither AESOP Leasing
II nor Original AESOP is or is controlled by an "investment company," within
the meaning of the Investment Company Act, and neither AESOP Leasing II nor
Original AESOP is subject to any other statute which would impair or restrict
its ability to perform its obligations under this Agreement or the other
Related Documents, and neither the entering into or performance by AESOP
Leasing II or Original AESOP of this Agreement nor the issuance of the Loan
Note violates any provision of such Act.
SECTION 8.9. Regulations G, T, U and X. Neither AESOP
Leasing II nor Original AESOP is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation G, T, U
and X of the Board of Governors of the Federal Reserve System). None of AESOP
Leasing II, Original AESOP, any Affiliate of AESOP Leasing II or Original
AESOP or any Person acting on its or their behalf has taken or will take
action to cause the execution, delivery or performance of this Agreement or
the Loan Note, the making or existence of the Loans or the use of proceeds of
the Loans made hereunder to violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
SECTION 8.10. Proceeds. The proceeds of the Loans made
hereunder will be used solely to purchase or finance Eligible Vehicles that
will be leased under the AESOP II Operating Lease.
SECTION 8.11. Business Locations; Trade Names. Schedule 8.11
lists each of the locations where AESOP Leasing II or Original AESOP maintains
a chief executive office, principal place of business, or any records, and
Schedule 8.11 also lists the legal name of each of AESOP Leasing II and
Original AESOP of each name under or by which it conducts its business.
SECTION 8.12. Taxes. Each of AESOP Leasing II and Original
AESOP has filed all tax returns which have
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been required to be filed by it (except where the requirement to file such
return is subject to a valid extension), and has paid or provided adequate
reserves for the payment of all taxes shown due on such returns or required to
be paid as a condition to such extension, as well as all payroll taxes and
federal and state withholding taxes, and all assessments payable by it that
have become due, other than those that are payable without penalty or are
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been established, and are being maintained, in
accordance with GAAP. As of the Closing Date, to the best of AESOP Leasing
II's and Original AESOP's knowledge, there is no unresolved claim by a taxing
authority concerning AESOP Leasing II's or Original AESOP's tax liability for
any period for which returns have been filed or were due other than those
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been established, and are being maintained, in
accordance with GAAP.
SECTION 8.13. Governmental Authorizations. Each of AESOP
Leasing II and Original AESOP has all licenses, franchises, permits and other
governmental authorizations necessary for all businesses presently carried on
by it (including owning and leasing the real and personal property owned and
leased by it), except where failure to obtain such licenses, franchises,
permits and other governmental authorizations would not have a material
adverse effect on its business and properties or a Material Adverse Effect (as
set forth in clauses (ii) and (iii) of the definition thereof).
SECTION 8.14. Compliance with Laws. Each of AESOP Leasing II
and Original AESOP: (i) is not in violation of any law, ordinance, rule,
regulation or order of any Governmental Authority applicable to it or its
property, which violation would have a material adverse effect on its business
and properties or a Material Adverse Effect (as set forth in clauses (ii) and
(iii) of the definition thereof), and no such violation has been alleged, (ii)
has filed in a timely manner all reports, documents and other materials
required to be filed by it with any governmental bureau, agency or
instrumentality (and the information contained in each of such filings is true
correct and complete in all material respects), except where failure to make
such filings would not have
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a material adverse effect on its business and properties or a Material Adverse
Effect (as set forth in clauses (ii) and (iii) of the definition thereof) and
(iii) has retained all records and documents required to be retained by it
pursuant to any Requirement of Law, except where failure to retain such
records would not have a material adverse effect on its business and
properties or a Material Adverse Effect (as set forth in clauses (ii) and
(iii) of the definition thereof).
SECTION 8.15. Eligible Vehicles. Each Vehicle leased under
the AESOP II Operating Lease was, on the date of purchase or financing thereof
by AESOP Leasing II, an Eligible Vehicle.
SECTION 8.16. Manufacturer Programs. No Manufacturer Event
of Default has occurred and is continuing with respect to any Eligible Program
Manufacturer.
SECTION 8.17. Absence of Default. Each of AESOP Leasing II
and Original AESOP is in compliance with all of the provisions of its
certificate or articles of incorporation and by-laws and no event has occurred
or failed to occur which has not been remedied or waived, the occurrence or
non-occurrence of which constitutes, or with the passage of time or giving of
notice or both would constitute, (i) an AESOP II Loan Event of Default or a
Potential AESOP II Loan Event of Default or (ii) a default or event of default
by AESOP Leasing II or Original AESOP under any indenture, agreement or other
instrument, or any judgment, decree or final order to which AESOP Leasing II
or Original AESOP is a party or by which AESOP Leasing II or Original AESOP or
any of its properties may be bound or affected.
SECTION 8.18. No Security Interest; Title to Assets. (a) All
action necessary (including the filing of UCC-1 financing statements, the
assignment of rights under the Manufacturer Programs to the Trustee, the
notation on Certificates of Title for all Vehicles leased under the AESOP II
Operating Lease (other than Vehicles titled in the states of Nebraska, Ohio
and Oklahoma) of the Trustee's lien for the benefit of the Noteholders) to
protect and perfect AFC-II's security interest in the AESOP II Loan Collateral
and the Trustee's security interest on behalf of the Secured Parties in the
Collat-
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eral now in existence and hereafter acquired or created has been duly and
effectively taken.
(b) Each of AESOP Leasing II and Original AESOP has good,
legal and marketable title to, or a valid leasehold interest in, all of its
assets. None of such properties or assets is subject to any Liens, except for
Permitted Liens. Except for financing statements or other filings with respect
to or evidencing Permitted Liens, no financing statement under the UCC of any
state, application for a Certificate of Title or certificate of ownership, or
other filing which names AESOP Leasing II or Original AESOP as debtor or which
covers or purports to cover any of the assets of AESOP Leasing II or Original
AESOP is on file in any state or other jurisdiction, and neither AESOP Leasing
II nor Original AESOP has signed any such financing statement, application or
instrument authorizing any secured party or creditor of such Person thereunder
to file any such financing statement, application or filing other than with
respect to Permitted Liens.
SECTION 8.19. Accuracy of Information. All data,
certificates, reports, statements, opinions of counsel, documents and other
information furnished to the Lender or the Trustee by or on behalf of AESOP
Leasing II or Original AESOP pursuant to any provision of any Related
Document, or in connection with or pursuant to any amendment or modification
of, or waiver under, any Related Document, shall, at the time the same are
so furnished, (i) be complete and correct in all material respects to the
extent necessary to give the Lender or the Trustee, as the case may be, true
and accurate knowledge of the subject matter thereof, (ii) not contain any
untrue statement of a material fact and (iii) not omit to state a material
fact necessary in order to make the statements contained therein (in light of
the circumstances in which they were made) not misleading, and the
furnishing of the same to the Lender or the Trustee, as the case may be, shall
constitute a representation and warranty by AESOP Leasing II or Original
AESOP, as the case may be, made on the date the same are furnished to the
Lender or the Trustee, as the case may be, to the effect specified in clauses
(i), (ii) and (iii) above.
SECTION 9. AFFIRMATIVE COVENANTS. Until the expiration or
termination of the Loan Commitment and
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thereafter until the Loan Note and all other Liabilities are paid in full,
each of AESOP Leasing II and Original AESOP agrees that, unless at any time
the Lender shall otherwise expressly consent in writing:
SECTION 9.1. Corporate Existence; Foreign Qualification.
Each of AESOP Leasing II and Original AESOP will do and cause to be done at
all times all things necessary to (i) maintain and preserve its corporate
existence, (ii) be, and ensure that it is, duly qualified to do business and
in good standing as a foreign corporation in each jurisdiction where the
nature of its business makes such qualification necessary and the failure to
so qualify would have a material adverse effect on its business and properties
or a Material Adverse Effect (as set forth in clauses (ii) and (iii) of the
definition thereof) and (iii) comply with all Contractual Obligations and
Requirements of Law binding upon it, except to the extent that the failure to
comply therewith would not, in the aggregate, have a material adverse effect
on its business and properties or a Material Adverse Effect (as set forth in
clauses (ii) and (iii) of the definition thereof).
SECTION 9.2. Books, Records and Inspections. AESOP Leasing
II will maintain complete and accurate books and records with respect to the
AESOP II Loan Collateral and each of AESOP Leasing II and Original AESOP will
permit any Person designated by the Lender or the Trustee in writing to visit
and inspect any of its properties, corporate books and financial records and
to discuss its affairs, finances and accounts with its officers, its agents
and its independent public accountants, all at such reasonable times and as
often as the Lender or the Trustee may reasonably request.
SECTION 9.3. Insurance. AESOP Leasing II will obtain and
maintain, or cause to be obtained and maintained, with respect to all Vehicles
leased under the AESOP II Operating Lease (i) vehicle liability insurance to
the full extent required by law and in any event not less than $500,000 per
Person and $1,000,000 per occurrence, (ii) property damage insurance with a
limit of $1,000,000 per occurrence and (iii) excess coverage public liability
insurance with a limit of not less than $50,000,000 or the limit maintained
from time to time by the relevant Lessee at any time hereafter, whichever is
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greater, with respect to all passenger cars and vans comprising such Lessee's
rental fleet. The Lender acknowledges and agrees that AESOP Leasing II may, to
the extent permitted by applicable law, allow the relevant Lessees to
self-insure with respect to the Vehicles leased under the AESOP II Operating
Lease for the first $1,000,000 per occurrence, or a greater amount up to a
maximum of $3,000,000, with the consent of each Enhancement Provider, per
occurrence, of vehicle liability and property damage insurance which is
otherwise required to be insured hereunder. All such policies shall be from
financially sound and reputable insurers, shall name the Lender, Original
AESOP, PVHC, Quartx and the Trustee as additional insured parties, in the case
of catastrophic physical damage insurance on such Vehicles, shall name the
Trustee as loss payee as its interest may appear and will provide that the
Lender and the Trustee shall receive at least 10 days' prior written notice of
cancellation of such policies. AESOP Leasing II will notify promptly the
Lender and the Trustee of any curtailment or cancellation of any such Lessee's
right to self-insure in any jurisdiction.
SECTION 9.4. Manufacturer Programs. AESOP Leasing II will
turn in, or cause to be turned in, the Vehicles leased under the AESOP II
Operating Lease to the relevant Manufacturer within the Repurchase Period
therefor (unless AESOP Leasing II pays in full the Loan with respect to a
Vehicle pursuant to Section 5.2 or sells a Vehicle and, prior to the end of
the Repurchase Period therefor, receives sales proceeds thereof in cash in an
amount equal to or greater than the repurchase price under such Manufacturer
Program); and will comply with all of its obligations under each Manufacturer
Program.
SECTION 9.5. Reporting Requirements. AESOP Leasing II will
furnish, or cause to be furnished, to the Lender and the Trustee and, in the
case of item (iii) below, each Rating Agency:
(i) Reports. All reports of ARC and the Lessees
required to be delivered to AESOP Leasing II pursuant to Section 31.5
of the AESOP II Operating Lease;
(ii) AESOP II Loan Events of Default; Amortization
Events. As soon as possible but in any
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event within two Business Days after the occurrence of (A) any
Potential AESOP II Loan Event of Default or AESOP II Loan Event of
Default, a written statement of an Authorized Officer describing such
event and the action that AESOP Leasing II proposes to take with
respect thereto and (B) any Potential Amortization Event or
Amortization Event, notice thereof to the Lender, each Enhancement
Provider and the Rating Agencies;
(iii) Manufacturers. Promptly after obtaining actual
knowledge thereof, notice of any Manufacturer Event of Default or
termination or replacement of a Manufacturer Program;
(iv) Notice of Liens and Vicarious Liability
Claims. On each Determination Date, AESOP Leasing II shall forward to
AFC-II, the Trustee and the Paying Agent, the Administrative Agent,
the Rating Agencies and each Enhancement Provider, (A) an Officer's
Certificate of AESOP Leasing II certifying as to whether, to the
knowledge of AESOP Leasing II, (x) any Lien exists on any of the
AESOP II Loan Collateral or (y) any vicarious liability claims shall
have been made against AESOP Leasing II as a result of its ownership
of the Vehicles leased under the AESOP II Operating Lease or against
Original AESOP as a result of its holding legal title to the Vehicles
leased under the AESOP II Operating Lease and (B) a written statement
of an Authorized Officer summarizing each such Lien or claim and the
action that AESOP Leasing II proposes to take with respect thereto;
and
(v) Other. Promptly, from time to time, such other
information, documents, or reports respecting the AESOP II Loan
Collateral or the condition or operations, financial or otherwise, of
AESOP Leasing II or Original AESOP as the Lender or the Trustee may
from time to time reasonably request in order to protect the
interests of the Lender or the Trustee under or as contemplated by
this Agreement or any other Related Document.
SECTION 9.6. Payment of Taxes; Removal of Liens. Each of
AESOP Leasing II and Original AESOP will pay when due all taxes, assessments,
fees and governmen-
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tal charges of any kind whatsoever that may be at any time lawfully assessed
or levied against or with respect to AESOP Leasing II or Original AESOP, as
the case may be, or its property and assets or any interest thereon.
Notwithstanding the previous sentence, but subject in any case to the other
requirements hereof and of the Related Documents, neither AESOP Leasing II nor
Original AESOP shall be required to pay any tax, charge, assessment or
imposition nor to comply with any law, ordinance, rule, order, regulation or
requirement so long as AESOP Leasing II or Original AESOP, as the case may be,
shall contest, in good faith, the amount or validity thereof, in an
appropriate manner or by appropriate proceedings. Each such contest shall be
promptly prosecuted to final conclusion (subject to the right of AESOP Leasing
II or Original AESOP, as the case be, to settle any such contest).
SECTION 9.7. Business. Each of AESOP Leasing II and Original
AESOP will engage only in businesses conducted on the date hereof.
SECTION 9.8. Maintenance of the Vehicles. AESOP Leasing II
will maintain or cause to be maintained in good repair, working order, and
condition all of the Vehicles leased under the AESOP II Operating Lease,
except to the extent that any such failure to comply with such requirements
does not, in the aggregate, materially adversely affect the interests of the
Lender under this Agreement or the interests of the Secured Parties under the
Indenture or the likelihood of repayment of the Loans made hereunder. From
time to time AESOP Leasing II will make or cause to be made all appropriate
repairs, renewals, and replacements with respect to the Vehicles leased under
the AESOP I Operating Lease.
SECTION 9.9. Maintenance of Separate Existence. AESOP
Leasing II will do all things necessary to continue to be readily
distinguishable from ARC, ARAC, AESOP Leasing, Original AESOP, AFC, AFC-II,
the Affiliates of the foregoing or any other affiliated or unaffiliated entity
and to maintain its corporate existence separate and apart from that of AESOP
Leasing, Original AESOP, AFC, AFC-II, ARAC and ARC and Affiliates of ARC
including, without limitation, (i) practicing and adhering to corporate
formalities, such as maintaining appropriate corporate books and records; (ii)
observing all
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corporate formalities in connection with all dealings between itself and ARC,
ARAC, AESOP Leasing, Original AESOP, AFC, AFC-II, the Affiliates of the
foregoing or any other affiliated or unaffiliated entity; (iii) observing all
corporate procedures required by its certificate of incorporation, its bylaws
and the corporation law of the State of Delaware; (iv) acting solely in its
name and through its duly authorized officers or agents in the conduct of its
businesses; (v) managing its business and affairs by or under the direction of
the Board of Directors; (vi) ensuring that its Board of Directors duly
authorizes all of its corporate actions; (vii) ensuring the receipt of proper
authorization, when necessary, from its stockholder(s) for corporate action;
(viii) maintaining at least two corporate directors who are Independent
Directors; (ix) owning or leasing (including through shared arrangements with
Affiliates) all office furniture and equipment necessary to operate its
business; (x) not (A) having or incurring any debt or obligations to any of
AESOP Leasing, Original AESOP, AFC, AFC-II, ARC, ARAC, the Affiliates of the
foregoing or any other affiliated or unaffiliated entity, except for, the
obligations to AFC-II under the AESOP II Loan Agreement; (B) other than as
provided in the Related Documents, guaranteeing or otherwise becoming liable
for any obligations of AESOP Leasing, Original AESOP, AFC, AFC-II, ARAC or ARC
or any Affiliates of the foregoing; (C) having obligations guaranteed by AESOP
Leasing, Original AESOP, AFC, AFC-II, ARAC or ARC or any Affiliates of the
foregoing; (D) holding itself out as responsible for debts of AESOP Leasing,
Original AESOP, AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing or
for decisions or actions with respect to the affairs of AESOP Leasing,
Original AESOP, AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing;
(E) failing to correct any known misrepresentation with respect to the
statement in subsection (C); (F) operating or purporting to operate as an
integrated, single economic unit with respect to AESOP Leasing, Original
AESOP, AFC, AFC-II, ARAC, ARC, the Affiliates of the foregoing or any other
affiliated or unaffiliated entity or any other affiliated or unaffiliated
entity; (G) seeking to obtain credit or incur any obligation to any third
party based upon the assets of AESOP Leasing, Original AESOP, AFC, AFC-II,
ARAC, ARC, the Affiliates of the foregoing or any other affiliated or
unaffiliated entity; (H) induce any such third party to reasonably rely on the
creditworthiness of AESOP Leasing, Original
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AESOP, AFC, AFC-II, ARAC, ARC, the Affiliates of the foregoing or any other
affiliated or unaffiliated entity; and (I) being directly or indirectly named
as a direct or contingent beneficiary or loss payee on any insurance policy of
AESOP Leasing, Original AESOP, AFC, AFC-II, ARAC or ARC or any Affiliates of
the foregoing other than as required by the Related Documents with respect to
insurance on the Vehicles; (xi) other than as provided in the Related
Documents, maintaining its deposit and other bank accounts and all of its
assets separate from those of any other Person; (xii) maintaining its
financial records separate and apart from those of any other Person; (xiii)
disclosing in its annual financial statements the effects of the transactions
contemplated by the Related Documents in accordance with generally accepted
accounting principles; (xiv) setting forth clearly in its financial statements
its separate assets and liabilities and the fact that the Vehicles leased
under the AESOP II Operating Lease are owned by AESOP Leasing II; (xv) not
suggesting in any way, within its financial statements, that its assets are
available to pay the claims of creditors of AESOP Leasing, Original AESOP,
AFC, AFC-II, ARAC, ARC, the Affiliates of the foregoing or any other
affiliated or unaffiliated entity; (xvi) not consolidating its financial
statements with the financial statements of AESOP Leasing, Original AESOP,
AFC, AFC-II, ARAC, ARC, the Affiliates of the foregoing or any other
affiliated or unaffiliated entity and not consolidating its assets or
liabilities into, or otherwise reflecting them on, the financial statements of
AESOP Leasing, Original AESOP, AFC, AFC-II, ARAC, ARC, the Affiliates of the
foregoing or any other affiliated or unaffiliated entity; (xvii) compensating
all its employees, officers, consultants and agents for services provided to
it by such Persons out of its own funds; (xviii) maintaining office space
separate and apart from that of AESOP Leasing, Original AESOP, AFC, AFC-II,
ARAC or ARC or any Affiliates of the foregoing (even if such office space is
subleased from or is on or near premises occupied by AESOP Leasing, Original
AESOP, AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing) and a
telephone number separate and apart from that of AESOP Leasing, Original
AESOP, AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing; (xix)
conducting all oral and written communications, including, without limitation,
letters, invoices, purchase orders, contracts, statements, and applications
solely in its own name; (xx) having separate stationary from AESOP Leasing,
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Original AESOP, AFC, AFC-II, ARAC, ARC, the Affiliates of the foregoing or any
other affiliated or unaffiliated entity; (xxi) accounting for and managing all
of its liabilities separately from those of AESOP Leasing, Original AESOP,
AFC, AFC-II, ARAC or ARC or any Affiliates of the foregoing; (xxii)
allocating, on an arm's-length basis, all shared corporate operating services,
leases and expenses, including, without limitation, those associated with the
services of shared consultants and agents and shared computer and other office
equipment and software; and otherwise maintaining an arm's-length relationship
with each of AESOP Leasing, Original AESOP, AFC, AFC-II, ARAC, ARC, the
Affiliates of the foregoing or any other affiliated or unaffiliated entity;
(xxiii) refraining from filing or otherwise initiating or supporting the
filing of a motion in any bankruptcy or other insolvency proceeding involving
AESOP Leasing, Original AESOP, AFC, AFC-II, AESOP Leasing II, ARAC, ARC or any
Affiliate of ARC, to substantively consolidate AESOP Leasing, AFC, AFC-II or
AESOP Leasing II with ARAC, ARC or any Affiliate of ARC; (xxiv) remaining
solvent and assuring adequate capitalization for the business in which it is
engaged and (xxv) conducting all of its business (whether written or oral)
solely in its own name so as not to mislead others as to the identity of each
of AESOP Leasing II, AESOP Leasing, Original AESOP, AFC, AFC-II, ARAC, ARC and
the Affiliates of the foregoing or any other affiliated or unaffiliated
entity. AESOP Leasing II acknowledges its receipt of a copy of those certain
opinion letters issued by Skadden, Arps, Slate, Meagher & Flom LLP dated July
30, 1997 addressing the issue of substantive consolidation as they may relate
to any of ARAC, ARC and each affiliate of ARC on the one hand and any of AESOP
Leasing, Original AESOP, AFC, AFC-II and AESOP Leasing II on the other hand
and as among AESOP Leasing II, AFC-II, AESOP Leasing Original AESOP, and AFC.
AESOP Leasing II hereby agrees to maintain in place all policies and
procedures, and take and continue to take all action, described in the factual
assumptions set forth in such opinion letter and relating to it.
SECTION 9.10. Manufacturer Payments; Sales Proceeds. AESOP
Leasing II will cause each Manufacturer and auction dealer to make all
payments under the Manufacturer Programs with respect to Vehicles directly to
the Collection Account. Any such payments from Manufacturers or related
auction dealers received directly by
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AESOP Leasing II, will be, within three Business Days of receipt, deposited
into the Collection Account. AESOP Leasing II shall, within two Business Days
of receipt thereof, deposit into the Collection Account all amounts
representing the proceeds from sales of Vehicles by auction dealers under a
Guaranteed Depreciation Program and sales of Vehicles (including amounts paid
by a Manufacturer as a result of the sale of such Vehicle outside such
Manufacturer's Manufacturer Program) to third parties (other than under any
related Manufacturer Program) and all payments with respect to other AESOP II
Loan Collateral (other than the AESOP II Loan Collateral described in the last
sentence of this paragraph). Insurance proceeds and warranty payments with
respect to Vehicles will only be deposited into the Collection Account if an
Amortization Event or Potential Amortization Event shall have occurred and be
continuing.
SECTION 9.11. Maintenance of Properties. Each of AESOP
Leasing II and Original AESOP will maintain or cause to be maintained in the
ordinary course of business in good repair, working order and condition
(reasonable wear and tear excepted) all properties, including, without
limitation, vehicles necessary for the operation of its businesses (whether
owned or held under lease), and from time to time make or cause to be made all
needed and appropriate repairs, renewals, replacements, additions, betterments
and improvements thereto, except to the extent no material adverse effect on
its business and properties or a Material Adverse Effect (as set forth in
clauses (ii) and (iii) of the definition thereof) could result, and maintain
good, legal and marketable title to, or a valid leasehold interest in, all of
its assets, free and clear of all Liens except for Permitted Liens, and except
to the extent sold or otherwise disposed of in accordance with this Agreement
or any other Related Document.
SECTION 9.12. Verification of Title. AESOP Leasing II will
on an annual basis, cause a title check to be performed by an independent
nationally recognized firm of certified public accountants acceptable to the
Trustee and each Enhancement Provider on a statistical sample of all Vehicles
leased under the Leases designed to provide a ninety-five percent (95%)
confidence level that no more than five percent (5%) of the Certificates of
Title for such Vehicles did not correctly reference
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the Trustee or its Permitted Nominee, as first lienholder, and the Lessor of
such Vehicle or its Permitted Nominee or, in the case of Financed Vehicles,
ARAC or its Permitted Nominee, as owner, and cause such party to deliver a
report stating that, within the confidence level set forth above, no more than
five percent (5%) of the Certificates of Title did not correctly reference the
lienholder or owner of the Vehicles described in the immediately preceding
clause.
SECTION 9.13. [RESERVED].
SECTION 9.14. Delivery of Information. Each of AESOP Leasing
II and Original AESOP will provide to the Lender any information or materials
necessary for the Lender to comply with its obligations under the Indenture.
SECTION 9.15. Preferred Stock. AESOP Leasing
II will at all times cause to be outstanding Preferred
Stock in an amount equal to or greater than $15,000,000.
SECTION 9.16. Vehicles. AESOP Leasing II will maintain good
and marketable title to each Vehicle purchased by AESOP Leasing II with the
proceeds of Loans made hereunder, free and clear of all Liens and
encumbrances, other than any Permitted Liens.
SECTION 9.17. Assignments. AESOP Leasing II will deliver to
the Trustee on or prior to the Initial Closing Date, or such later date and
thereafter, as necessary to comply with the terms of the Related Documents,
executed counterparts of the Assignment Agreements related to the assignment
of rights under each Manufacturer Program, dated as of the Initial Closing
Date, or such later date, if delivered after the Initial Closing Date in
accordance herewith, duly executed by ARAC, each other Lessee, AESOP Leasing
II, AFC-II, the Trustee and each applicable Manufacturer.
SECTION 9.18. Notation of Liens. AESOP Leasing II will
deliver to the Lender and the Trustee on or prior to the Initial Closing Date
and on an ongoing basis, as applicable, evidence (which, in the case of the
filing of financing statements on form UCC-1, may be telephonic confirmation
of such filing) that it has caused or is causing the Trustee's name to be
noted on
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the Certificate of Title for each Vehicle leased under the AESOP II Operating
Lease (other than Certificates of Title for Vehicles titled in the states of
Nebraska, Ohio and Oklahoma) in accordance herewith and all filings (including
filings of financing statements on form UCC-1) and recordings have been
accomplished as may be required by law to establish, perfect (other than
perfection of the security interest of the Trustee in Vehicles by notation of
the lien of the Trustee on the Certificates of Title for Vehicles titled in
the States of Nebraska, Ohio and Oklahoma), protect and preserve the rights,
titles, interests, remedies, powers, privileges, licenses and security
interest of the Trustee in such Vehicles and other AESOP II Loan Collateral
for the benefit of the Secured Parties.
SECTION 10. NEGATIVE COVENANTS. Until the expiration or
termination of the Loan Commitment and thereafter until the Loan Note and all
other Liabilities are paid in full, each of AESOP Leasing II and Original
AESOP agrees that, unless at any time the Lender shall otherwise expressly
consent in writing, it will not:
SECTION 10.1. Liens. Create, incur, assume or permit to
exist any Lien upon any of its Assets (including the AESOP II Collateral),
other than Permitted Liens.
SECTION 10.2. Other Indebtedness. Create, assume, incur,
suffer to exist or otherwise become or remain liable in respect of any
Indebtedness other than (i) Indebtedness hereunder and (ii) Indebtedness
permitted under any other Related Document.
SECTION 10.3. Mergers, Consolidations. Except as may be
permitted by the express written approval of the Trustee and the Lender, merge
with or into, enter into any joint venture or other association with, or
consolidate with, any other Person.
SECTION 10.4. Sales of Assets. Sell, lease, transfer,
liquidate or otherwise dispose of any Assets, except as contemplated by the
Related Documents.
SECTION 10.5. Acquisition of Assets. Acquire, by long-term
or operating lease or otherwise, any Assets except pursuant to the terms of
the Related Documents.
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SECTION 10.6. Dividends, Officers' Compensation, etc. (i)
Declare or pay any dividends on any shares of its capital stock or make any
other distribution on, or any purchase, redemption or other acquisition of,
any shares of its capital stock except, in the case of AESOP Leasing II, out
of funds in the AESOP II Segregated Account, or (ii) pay any wages or salaries
or other compensation to officers, directors, employees or others except out
of earnings computed in accordance with GAAP and, in the case of AESOP Leasing
II, only from funds in the AESOP II Segregated Account.
SECTION 10.7. Organizational Documents. Amend any of its
organizational documents, including its certificate of incorporation or
by-laws, unless prior to such amendment, each Rating Agency confirms that
after such amendment the Rating Agency Condition and the CP Rating Agency
Consent Condition will be met.
SECTION 10.8. Investments. Make, incur, or suffer to exist
any loan, advance, extension of credit or other investment in any Person other
than pursuant to the Related Documents.
SECTION 10.9. Regulations G, T, U and X. Use or permit any
proceeds of the Loans made hereunder to be used, either directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
"purchasing or carrying margin stock" within the meaning of Regulations G, T,
U and X of the Board of Governors of the Federal Reserve System, as amended
from time to time.
SECTION 10.10. Other Agreements. Enter into any agreement
containing any provision which would be violated or breached by the
performance of its obligations hereunder or under any instrument or document
delivered or to be delivered by it hereunder or in connection herewith.
SECTION 10.11. Use of Vehicles. Use or allow the Vehicles
leased under the AESOP II Operating Lease to be used in any manner (i) that
would make Vehicles ineligible for repurchase under an Eligible Manufacturer
Program, (ii) for any illegal purposes or (iii) that could subject the
Vehicles to confiscation.
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SECTION 10.12. Use of Proceeds. Use or permit the proceeds
of the Loans made hereunder to be used for any purpose other than to purchase
or finance Eligible Vehicles that will be leased under the AESOP II Operating
Lease.
SECTION 10.13. Limitations on the Acquisition of Certain
Vehicles. Unless otherwise specified in the related Supplement or unless
waived by the Required Noteholders as specified in the related Supplement,
permit (a) the aggregate Net Book Value of all Vehicle leased under the Leases
and manufactured by a particular Manufacturer or group of Manufacturers as of
any Payment Date to exceed any applicable Maximum Manufacturer Amount and (b)
the Specified States Amount as of any Payment Date to exceed any applicable
Maximum Specified States Amount.
SECTION 11. CONDITIONS.
SECTION 11.1. Initial Loans. The effectiveness of this
Agreement and the obligation of the Lender to make the initial Loans hereunder
to AESOP Leasing II shall be subject to the prior or concurrent (i) delivery
of each of the following documents to the Lender and, if not otherwise
required to be delivered to the Trustee by any other Related Document, to the
Trustee and any other Enhancement Provider, as applicable (in form and
substance satisfactory to the Lender and, if applicable, the Trustee and any
Enhancement Provider) and (ii) satisfaction of the following conditions, as
applicable:
(a) Loan Note. A Loan Note duly executed by AESOP Leasing
II;
(b) Certificates of Incorporation. The certificate of
incorporation of each of AESOP Leasing II and Original AESOP, duly certified
by the Secretary of State of the State of Delaware, together with a copy of
the by-laws of each of AESOP Leasing II and Original AESOP, duly certified by
the Secretary or an Assistant Secretary of AESOP Leasing II or Original AESOP,
as the case may be;
(c) Resolutions. Copies of resolutions of the Board of
Directors of each of AESOP Leasing II and Original AESOP authorizing or
ratifying the execution, delivery and performance of those documents and
matters re-
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quired of it with respect to this Agreement, duly certified by the Secretary
or an Assistant Secretary of AESOP Leasing II or Original AESOP, as the case
may be;
(d) Consents, etc. Certified copies of all documents
evidencing any necessary corporate action, consents and governmental approvals
(if any) with respect to this Agreement;
(e) Incumbency and Signatures. A certificate of the
Secretary or an Assistant Secretary of each of AESOP Leasing II and Original
AESOP certifying the names of the individual or individuals authorized to sign
this Agreement and the other Related Documents to be executed by it, together
with a sample of the true signature of each such individual (the Lender may
conclusively rely on each such certificate until formally advised by a like
certificate of any changes therein);
(f) Opinions of Counsel. The opinions of Skadden, Arps,
Slate, Meagher & Flom LLP, special counsel to AESOP Leasing II, AESOP Leasing,
AFC and AFC-II, addressed to the Lender, the Trustee, the Rating Agencies and
the Administrative Agent, the opinions of Skadden, Arps, Slate, Meagher & Flom
LLP, counsel for ARC and ARAC addressed to the Lender, the Trustee, the
Placement Agents, the Rating Agencies and the Administrative Agent, on behalf
of the Liquidity Lenders, and the opinions of counsel to each applicable
Manufacturer for the Manufacturer Programs under which Program Vehicles will
be financed hereunder addressed to the Lender, the Trustee, the Rating
Agencies and the Administrative Agent, on behalf of the Liquidity Lenders;
(g) Good Standing Certificates. Certificates of good
standing for each of AESOP Leasing II and Original AESOP in the jurisdiction
of its incorporation and the jurisdiction of its principal place of business;
(h) Search Reports. A written search report from a Person
satisfactory to the Lender and the Trustee listing all effective financing
statements that name AESOP Leasing II or Original AESOP, as debtor or assign-
or, and that are filed and the jurisdictions in which filings were made
pursuant to subsection (i) below, together with copies of such financing
statements, and tax and judgment lien search reports from a Person satis-
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factory to the Lender and the Trustee showing no evidence of such liens filed
against AESOP Leasing II or Original AESOP;
(i) Evidence. Evidence (which may be telephonic) of the
filing of proper financing statements on Form UCC-1, naming (1) AESOP Leasing
II as debtor and (2) Original AESOP as debtor, and the Lender as secured party
and the Trustee as assignee or other, similar instruments or documents, as may
be necessary or, in the reasonable opinion of the Lender and the Trustee,
desirable under the UCC of all applicable jurisdictions to perfect the
Lender's and the Trustee's interest in the AESOP II Loan Collateral;
(j) Enhancement Agreement. An executed copy of the
Enhancement Agreement pursuant to the Supplement with respect to any Series of
Notes for which the Series Closing Date occurs on the Initial Closing Date;
(k) Enhancement. The Enhancement Amount with respect to any
Series of Notes for which the Series Closing Date occurs on the Initial
Closing Date is equal to or exceeds the Required Enhancement Amount for such
Series;
(l) Leases. An executed copy of the Leases and all documents
required to be delivered by any relevant Lessee and ARC to the Lessors
pursuant to the Leases, and all conditions to the effectiveness of the Lease
shall have been satisfied;
(m) Assignment Agreement. An executed copy of the Assignment
Agreement of each Manufacturer;
(n) Certified Copy of Manufacturer Program. A copy of each
Manufacturer Program under which Vehicles will be financed hereunder and an
Officer's Certificate, dated the Initial Closing Date, and duly executed by an
Authorized Officer of AESOP Leasing II, certifying that each such copy is
true, correct and complete as of the Initial Closing Date and that each such
Manufacturer Program shall be in full force and effect and enforceable against
the related Manufacturer;
(o) Indenture. The Indenture, dated the Initial Closing
Date, duly executed by the Lender and the
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Trustee, and all conditions to the effectiveness thereof and the issuance of
the Notes thereunder shall have been satisfied in all respects;
(p) Vehicle Title and Lienholder Nominee Agreements and HFS
Indemnity. The Vehicle Title and Lienholder Nominee Agreements and HFS
Indemnity, each dated the Initial Closing Date, duly executed by the parties
thereto;
(q) Conditions Precedent to Note Issuance. All conditions
precedent to the issuance of any Series of Notes for which the Series Closing
Date occurs on the Initial Closing Date shall have been satisfied in accor-
dance with the related Supplement; and
(r) Other. Such other documents as the Trust-
ee or the Lender may reasonably request.
SECTION 11.2. All Loans. All Loans hereunder (including the
initial Loan) shall be subject to the further conditions precedent that (a) if
the amount of Enhancement with respect to any Series of Notes is increased
or if the current Enhancement with respect to any Series of Notes is replaced,
to the extent such additional or replacement Enhancement is in the form of
an unfunded commitment (including, without limitation, a letter of credit),
AESOP Leasing II shall cause the delivery to the Lender, the Trustee, the
Enhancement Providers, if any, for any Series of Notes issued and outstanding
on the date of such opinion(s), Placement Agents, if any, the Rating Agencies
and the Administrative Agent (on behalf of the Liquidity Lenders) on or
prior to the effectiveness of such additional or replacement Enhancement of
opinion(s) of counsel as to the enforceability of such additional or
replacement Enhancement substantially similar to the original opinions
delivered with respect to such Enhancement, (b) the Lender shall have received
a completed Loan Request therefor and a copy of the related Vehicle Order, (c)
all conditions precedent to the issuance of any Series of Notes after the
Initial Closing Date shall have been satisfied in accordance with the related
Supplement and (d) on the date of such Loan the following statements shall be
true (and AESOP Leasing II, by accepting the amount of such Loan, shall be
deemed to have represented and warranted that): (i) the representations and
warran-
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ties contained in Section 8 are true and correct on and as of such date with
the same effect as though made on and as of such date and shall be deemed to
have made on such date and (ii) no Potential AESOP II Loan Event of Default or
AESOP II Loan Event of Default has occurred and is continuing or would result
from the making of such Loan or from the application of the proceeds of such
Loan.
SECTION 12. LOAN EVENTS OF DEFAULT AND THEIR
EFFECT.
SECTION 12.1. AESOP II Loan Events of Default. Each of the
following shall constitute an AESOP II Loan Event of Default under this
Agreement:
12.1.1. Non-Payment of Loans. Default in
the payment when due of the principal amount of any Loan made hereunder or the
Monthly Loan Principal Amount hereunder, and the continuance thereof for one
(1) Business Day after the occurrence thereof, or the default in the payment
of any Loan Interest on any Loan made hereunder, and the continuance thereof
for five (5) Business Days after the occurrence thereof.
12.1.2. Non-Payment of Other Amounts. Default, and
continuance thereof for five (5) Business Days after notice thereof by the
Lender to AESOP Leasing II, in the payment when due of any amount payable
hereunder (other than any amount described in Section 12.1.1).
12.1.3. Bankruptcy, Insolvency, etc. The
occurrence of an Event of Bankruptcy with respect to ARC, ARAC, any other
Lessee under the AESOP II Operating Lease, AESOP Leasing II or Original AESOP.
12.1.4. Non-Compliance With Provisions.
Failure by AESOP Leasing II to comply with or to perform any provision of this
Agreement (and not constituting an AESOP II Loan Event of Default under any of
the other provisions of this Section 12.1) and, other than the failure to
comply with the provisions of Sections 10.1 and 10.2 hereof, the continuance
of such failure for 30 days after the earlier of the date of the receipt of
written notice thereof from the Lender or the Trustee to AESOP Leasing II and
the date AESOP Leasing II learns of such failure.
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12.1.5. Warranties and Representations.
Any warranty or representation made by or on behalf of AESOP Leasing II or
otherwise in connection herewith is inaccurate or incorrect or is breached or
false or misleading in any material respect as of the date such warranty or
representation is made; or any schedule, certificate, financial statement,
report, notice, or other writing furnished by or on behalf of AESOP Leasing II
to the Lender is false or misleading in any material respect on the date as of
which the facts therein set forth are stated or certified.
12.1.6. Lease Events of Default. The occurrence of a Lease
Event of Default.
12.1.7. Loan Events of Default Under Other Loan Agreements.
The occurrence of an AESOP I Loan Event of Default.
12.1.8. Judgments. Any final and unappealable (or, if
capable of appeal, such appeal is not being diligently pursued or enforcement
thereof has not been stayed) judgment or order for the payment of money in
excess of $100,000 which is not fully covered by insurance shall be rendered
against AESOP Leasing II and such judgment or order shall continue unsatisfied
and unstayed for a period of 30 days.
SECTION 12.2. Effect of AESOP II Loan Event of Default or
Liquidation Event of Default. If any AESOP II Loan Event of Default described
in Section 12.1.1 or 12.1.3 or any Liquidation Event of Default shall occur,
the Loan Commitment (if not theretofore terminated) shall immediately
terminate and in the case of any other AESOP II Loan Event of Default, the
Lender may declare its Loan Commitment (if not theretofore terminated) to be
terminated and whereupon it shall immediately terminate and may declare the
Loan Note and all other Liabilities to be due and payable, whereupon the Loan
Note shall become immediately due and payable.
SECTION 12.3. Rights of Trustee Upon Liquidation Event of
Default and Non-Performance of Certain Covenants. (a) If a Liquidation Event
of Default shall have occurred and be continuing the Lender and the Trustee,
to the extent provided in the Indenture, shall have all the rights against
AESOP Leasing II, Original AESOP
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and the Loan Collateral provided in the Indenture upon a Liquidation Event of
Default, including the right to take (under the specified circumstances)
possession of all Vehicles immediately.
(b) If (i) AESOP Leasing II shall default in the due
performance and observance of any of its obligations under Section 9.3, 9.4,
9.5(iii), 9.8, 10.1 or 10.11 hereof, or (ii) any Lessee shall default in the
due performance and observance of its obligations under Section 31.10 of the
AESOP II Operating Lease, and such default shall continue unremedied for a
period of 30 days after notice thereof shall have been given to AESOP Leasing
II by the Lender, the Lender shall have the ability to exercise all rights,
remedies, powers, privileges and claims of AESOP Leasing II or Original AESOP
against the Manufacturers under or in connection with the Manufacturer
Programs with respect to (A) Vehicles leased under the AESOP II Operating
Lease that AESOP Leasing II has determined to turn back to the Manufacturers
under such Manufacturer Programs and (B) whether or not AESOP Leasing II shall
then have determined to turn back such Vehicles, any Vehicles leased under the
AESOP II Operating Lease for which the applicable Repurchase Period will end
within one week or less.
(c) Upon a default in the performance (after giving effect
to any grace periods provided herein) by AESOP Leasing II or Original AESOP of
its obligations under Section 7.5 or 8.6 hereof with respect to certain
Vehicles, the Lender or the Trustee shall have the right to take actions
reasonably necessary to correct such default with respect to the subject
Vehicles including the execution of UCC financing statements with respect to
Manufacturer Programs and other general intangibles and the completion of
Vehicle Perfection and Documentation Requirements on behalf of AESOP Leasing
II, Original AESOP or the Lender, as applicable.
(d) Upon the occurrence of a Liquidation Event of Default,
AESOP Leasing II will return all Vehicles leased under the AESOP II Operating
Lease to the related Manufacturer in accordance with the instructions of the
Lender. Upon the occurrence of a Limited Liquidation Event of Default with
respect to any Series of Notes, AESOP Leasing II will return Vehicles leased
under the AESOP II Operating Lease to the related Manufacturer in
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accordance with the instructions of the Lender to generate proceeds in an
amount which, together with the proceeds of Vehicles returned or sold pursuant
to the AESOP I Loan Agreements, will be sufficient to pay all interest on and
principal of such Series of Notes. To the extent any Manufacturer fails to
accept any such Vehicles under the terms of the applicable Manufacturer
Program, the Lender shall have the right to otherwise dispose of such Vehicles
and to direct AESOP Leasing II to dispose of such Vehicles in accordance with
its instructions. In addition, the Lender shall have all of the rights,
remedies, powers, privileges and claims vis-a-vis AESOP Leasing II and
Original AESOP, necessary or desirable to allow the Trustee to exercise the
rights, remedies, powers, privileges and claims given to the Trustee pursuant
to Sections 9.2 and 9.3 of the Base Indenture and each of AESOP Leasing II and
Original AESOP acknowledges that it has hereby granted the Lender all of the
rights, remedies, powers, privileges and claims granted to the Trustee
pursuant to Article 9 of the Base Indenture and that, under certain
circumstances set forth in the Base Indenture, the Trustee may act in lieu of
the Lender in the exercise of such rights, remedies, powers, privileges and
claims.
SECTION 12.4. Application of Proceeds. The proceeds of any
sale or other disposition on any date pursuant to Section 12.3 shall be
applied in the following order: (i) to the reasonable costs and expenses
incurred by the Lender in connection with such sale or disposition, including
any reasonable costs associated with repairing any Vehicles leased under the
AESOP II Operating Lease, and reasonable attorneys' fees in connection with
the enforcement of this Agreement; (ii) to the payment of accrued Loan
Interest and outstanding Loan Principal Amount, and all other amounts due
hereunder in the Related Month; and (iii) any remaining amounts to AESOP
Leasing II, or such Person as may be lawfully entitled thereto.
SECTION 13. GENERAL.
SECTION 13.1. Waiver; Amendments. No delay on the part of
the Lender or the holder of the Loan Note or other Liabilities in the exercise
of any right, power or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise by any of them of any right,
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power or remedy preclude other or further exercise thereof, or the exercise of
any other right, power or remedy. No amendment, modification or waiver of, or
consent with respect to, any provision of this Agreement or the Loan Note
shall in any event be effective unless (i) the same shall be writing and
signed and delivered by the Lender, AESOP Leasing II and Original AESOP and
consented to in writing by the (x) Trustee and (y) if such amendment,
modification, waiver or consent would materially adversely affect the rights
of the holders of the outstanding Preferred Stock, the holders of such
Preferred Stock, (ii) the Lender shall have received in writing confirmation
from each of the Rating Agencies that its then current rating with respect to
any outstanding Series of Notes or the Commercial Paper Notes will not be
reduced or withdrawn as a result thereof and (iii) the Rating Agency Consent
Condition shall have been satisfied; provided that any amendment or
modification of the Loan Note need only be signed by AESOP Leasing II.
SECTION 13.2. Confirmations. AESOP Leasing II and the Lender
(or the holder of the Loan Note) agree from time to time, upon written request
received by it from the other, to confirm to the other in writing the
aggregate unpaid Loan Principal Amount.
SECTION 13.3. Notices. All notices, amendments, waivers,
consents and other communications provided to any party hereto under this
Agreement shall be in writing and addressed, delivered or transmitted to such
party at its address or facsimile number set forth below its signature hereto
or at such other address or facsimile number as may be designated by such
party in a notice to the other parties. Any notice, if mailed and properly
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any notice, if
transmitted by facsimile, shall be deemed given when transmitted upon receipt
of electronic confirmation of transmission.
SECTION 13.4. Taxes. AESOP Leasing II agrees to pay, and to
save the Trustee and the Lender harmless from all liability for, any document,
stamp, filing, recording, mortgage or other taxes (other than net income taxes
of the Lender) which may be payable in connection with the borrowings
hereunder or the execution, delivery, recording or filing of this Agreement or
of any other
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instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided for in this
Section 13.4 shall survive any termination of this Agreement.
SECTION 13.5. Indemnification. In consideration of the
Lender's execution and delivery of this Agreement and the Lender's extension
of the Loan Commitment, AESOP Leasing II hereby agrees to:
(a) indemnify, exonerate and hold the Lender and its
officers, directors, stockholders, employees, and agents (herein collectively
called "Lender Parties" and individually called a "Lender Party") free and
harmless from and against any and all claims, demands, actions, causes of
action, suits, losses, costs, charges, liabilities, damages, and expenses in
connection therewith (irrespective of whether such Lender Party is a party to
the action for which indemnification hereunder is sought), and including,
without limitation, reasonable attorneys' fees and disbursements (called in
this paragraph the "Indemnified Liabilities"), incurred by Lender Parties or
any of them as a result of, or arising out of, or relating to (i) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of any Loan made hereunder or involving any Loan
made hereunder, or (ii) the execution, delivery, performance or enforcement of
this Agreement and any instrument, document or agreement executed pursuant
hereto by any of the Lender Parties, or (iii) the ownership, operation,
maintenance, leasing, or titling of the Vehicles, except in each case, for any
such Indemnified Liabilities arising on account of the relevant Lender Party's
gross negligence or willful misconduct and, to the extent that the foregoing
undertaking may be unenforceable for any reason, AESOP Leasing II agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law; and
(b) indemnify and hold harmless the Trustee (and its
officers, directors, employees and agents) from and against any loss,
liability, expense, damage or injury suffered or sustained by reason of, or
arising out of or in connection with: (i) any acts or omissions of AESOP
Leasing II pursuant to this Agreement and (ii) the Trustee's appointment under
the Indenture and the
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Trustee's performance of its obligations thereunder, or any document
pertaining to any of the foregoing to which the Trustee is a signatory,
including, but not limited to any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim; provided,
however, AESOP Leasing II shall have no duty to indemnify the Trustee to the
extent such loss, liability, expense, damage or injury suffered or sustained
is due to the Trustee's negligence or willful misconduct.
AESOP Leasing II agrees that the indemnification provided for in this Section
13.5 shall run directly to and be enforceable by an indemnified party subject
to the limitations hereof. The indemnification provided for in this Section
13.5 shall survive the termination of this Agreement, the Indenture and the
resignation or removal of the Trustee.
SECTION 13.6. Bankruptcy Petition. (a) Each of AESOP Leasing
II and Original AESOP hereby covenants and agrees that, prior to the date
which is one year and one day after the payment in full of (i) all Commercial
Paper Notes Outstanding and (ii) all Notes Outstanding, it will not institute
against, or join any other Person in instituting against, AFC-II any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceed-
ings or other similar proceeding under the laws of the United States or any
state of the United States. In the event that AESOP Leasing II or Original
AESOP takes action in violation of this Section 13.6, AFC-II agrees, for the
benefit of the Noteholders and the Commercial Paper Note holders,
respectively, that it shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such a petition by AESOP Leasing II
or Original AESOP against AFC-II or commencement of such action and raise the
defense that each of AESOP Leasing II and Original AESOP has agreed in writing
not to take such action and should be estopped and precluded therefrom and
such other defenses, if any, as its counsel advises that it may assert. The
provisions of this Section 13.6 shall survive the termination of this
Agreement.
(b) AFC-II hereby covenants and agrees that, prior to the
date which is one year and one day after the
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payment in full of (i) all Commercial Paper Notes Outstanding, (ii) all Notes
Outstanding and (iii) all Loans outstanding under this Agreement, it will not
institute against, or join any other Person in instituting against, AESOP
Leasing, Original AESOP, AESOP Leasing II, AFC, PVHC or Quartx any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States. In the event that AFC-II takes action with respect to AESOP
Leasing II or Original AESOP in violation of this Section 13.6, each of AESOP
Leasing II and Original AESOP agrees, for the benefit of the Noteholders and
the Commercial Paper Note Holders, respectively, that it shall file an answer
with the bankruptcy court or otherwise properly contest the filing of such a
petition by AFC-II against AESOP Leasing II or Original AESOP or commencement
of such action and raise the defense that AFC-II has agreed in writing not to
take such action and should be estopped and precluded therefrom and such other
defenses, if any, as its counsel advises that it may assert. The provisions of
this Section 13.6 shall survive the termination of this Agreement.
SECTION 13.7. Submission to Jurisdiction. The Lender may
enforce any claim arising out of this Agreement or the Loan Note in any
state or federal court having subject matter jurisdiction and located in New
York, New York. For the purpose of any action or proceeding instituted with
respect to any such claim, AESOP Leasing II hereby irrevocably submits to the
jurisdiction of such courts. Each of AESOP Leasing II and Original AESOP
irrevocably consents to the service of process out of said courts by mailing a
copy thereof, by registered mail, postage prepaid, to AESOP Leasing II or
Original AESOP, as the case may be, and agrees that such service, to the
fullest extent permitted by law, (i) shall be deemed in every respect
effective service of process upon it in any such suit, action or proceeding
and (ii) shall be taken and held to be valid personal service upon and
personal delivery to it. Nothing herein contained shall affect the right of
the Trustee and the Lender to serve process in any other manner permitted by
law or preclude the Lender from bringing an action or proceeding in respect
hereof in any other country, state or place having jurisdiction over such
action. Each of AESOP Leasing II and Original AESOP hereby irrevocably waives,
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to the fullest extent permitted by law, any objection which it may have or
hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court located in New York, New York and any
claim that any such suit, action or proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 13.8. Governing Law. THIS AGREEMENT AND THE LOAN
NOTE SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Whenever possible
each provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. All obligations of AESOP Leasing II
and Original AESOP and rights of the Lender and the holder of the Loan Note or
Liability expressed herein shall be in addition to and not in limitation of
those provided by applicable law or in any other written instrument or
agreement relating to any of the Liabilities.
SECTION 13.9. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT TO WHICH
IT IS A PARTY, OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR
ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR
ANY RELATED TRANSACTION, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 13.10. Successors and Assigns. This Agreement shall
be binding upon AESOP Leasing II, Original AESOP, the Lender and their
respective successors and assigns, and shall inure to the benefit of AESOP
Leasing II, Original AESOP, the Lender, the Trustee as a third party
beneficiary and their respective successors and assigns; provided, however,
that neither AESOP Leasing II nor Original AESOP shall have the right to
assign its
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rights or delegate its duties under this Agreement without (i) the Lender's
and the Trustee's prior written consent and (ii) receipt of written
confirmation from each of the Rating Agencies that its then current rating
will not be reduced or withdrawn with respect to the Commercial Paper Notes or
any outstanding Series of Notes as a result thereof. Each of AESOP Leasing II
and Original AESOP acknowledges that this Agreement and the Loan Note will be
assigned by the Lender to the Trustee pursuant to the Indenture, and hereby
agrees that, subject to the terms of the Indenture, the Trustee may exercise
all of the Lender's rights hereunder. This Agreement and the other Related
Documents contain the entire agreement of the parties hereto with respect to
the matters covered hereby.
SECTION 13.11. Tax Treatment of Loans. It is the intention
of the parties hereto that for U.S. federal income tax purposes each Loan made
hereunder will constitute indebtedness of AESOP Leasing II to the Lender and
that AESOP Leasing II shall be the owner of the Vehicles that are subject to
the AESOP II Operating Lease. The parties agree to take no position in any tax
return, filing or proceeding inconsistent with this provision.
SECTION 13.12. No Recourse. The obligations of AFC-II, AESOP
Leasing II and Original AESOP under this Agreement are solely the corporate
obligations of AFC-II, AESOP Leasing II and Original AESOP, respectively. No
recourse shall be had for the payment of any obligation or claim arising out
of or based upon this Agreement against any shareholder, employee, officer,
director or incorporator of AFC-II, AESOP Leasing II or Original AESOP.
SECTION 13.13. Consent to Amendment of Indenture by
Preferred Stockholders. AFC-II shall not consent to any amendment,
modification or waiver of the Indenture if such amendment, modification or
waiver would materially adversely affect the rights of the holders of the
outstanding Preferred Stock, unless the same shall be consented to in writing
by the holders of such Preferred Stock.
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Delivered at New York, New York as of the day and year first
above written.
AESOP LEASING CORP. II
By: /s/ Frank B. Bilotta
-------------------------------
Name: Frank B. Bilotta
Title: Vice President
Address: c/o Lord Securities
Corporation
Two Wall Street
New York, NY 10055
Facsimile: (212) 346-9000
Telephone: (212) 346-9012
AESOP LEASING CORP.
By: /s/ Peter H. Sorensen
-------------------------------
Name: Peter H. Sorensen
Title: President
Address: c/o Lord Securities
Corporation
Two Wall Street
New York, NY 10055
Facsimile: (212) 346-9000
Telephone: (212) 346-9012
AESOP FUNDING II L.L.C.
By: /s/ Frank B. Bilotta
-------------------------------
Name: Frank B. Bilotta
Title: Vice President
Address: c/o Lord Securities
Corporation
Two Wall Street
New York, NY 10055
<PAGE>
Facsimile: (212) 346-9000
Telephone: (212) 346-9012
<PAGE>
EXHIBIT A
TO THE LOAN
AGREEMENT
FORM OF LOAN NOTE
_______, 1997
FOR VALUE RECEIVED, AESOP Leasing Corp. II, a Delaware corporation
(the "Borrower"), promises to pay to the order of AESOP Funding II L.L.C., a
Delaware limited liability company (the "Lender"), the aggregate unpaid Loan
Principal Amount of all Loans shown on the schedule attached hereto (and any
continuation thereof) provided, that the failure to so record any such
information or any error in so recording any such information shall not limit
or otherwise affect the actual obligations of the Borrower hereunder to repay
the Loan Principal Amount of all Loans made to it, together with all Loan
Interest accruing thereon, made by the Lender pursuant to that certain AESOP
II Loan Agreement, dated as of July 30, 1997 (together with all amendments,
supplements, amendment and restatements and other modifications, if any, from
time to time thereafter made thereto, the "Loan Agreement"), between the
Borrower, AESOP Leasing Corp., as Permitted Nominee of the Borrower, and the
Lender. Unless otherwise defined herein or the context otherwise requires,
terms used herein have the meanings provided in the Loan Agreement.
The Borrower also promises to pay interest on the unpaid Loan
Principal Amount of all Loans hereof from time to time outstanding from the
date hereof until maturity (whether by acceleration or otherwise) and, after
maturity, until paid, at the rates per annum and on the dates specified in the
Loan Agreement.
Payments of both principal and interest are to be made in lawful
money of the United States in same day or immediately available funds to the
account designated by the Lender pursuant to the Loan Agreement.
This Loan Note is the Loan Note referred to in the Loan Agreement and
is entitled to the benefits of the Loan Agreement, and reference is hereby
made to the Loan Agreement for a statement of the terms and conditions on
which the Borrower is permitted and required to make prepayments and
repayments of the Loan Principal Amount of the indebtedness evidenced by this
Loan Note and on which such indebtedness may be declared to be immediately due
and payable.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of
dishonor.
A-1
<PAGE>
THIS LOAN NOTE HAS BEEN DELIVERED IN NEW YORK AND SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER AND GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
AESOP LEASING CORP. II
By____________________
Name:
Title:
A-2
<PAGE>
TRANSACTIONS ON LOAN NOTE
<TABLE>
<CAPTION>
==================================================================================================================
Amount of
Loan Outstanding
Principal Loan
Amount of Amount Principal
Loan Made Paid Amount Notation
Date This Date This Date This Date Made By
---- --------- --------- --------- -------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
</TABLE>
A-3
<PAGE>
EXHIBIT B-1
TO THE LOAN
AGREEMENT
FORM OF LOAN REQUEST
AESOP Funding II L.L.C.
c/o Lord Securities Corporation
Two Wall Street, 19th Floor
New York, New York 10005
Attention: Andrew J. Stidd
Ladies and Gentlemen:
This Loan Request is delivered to you pursuant to Section 3.2 of that
certain AESOP II Loan Agreement, dated as of July 30, 1997 (as amended,
supplemented, amended and restated or otherwise modified from time to time,
the "Loan Agreement"), between AESOP Leasing Corp. II, a Delaware corporation
("AESOP Leasing II"), AESOP Leasing Corp., as Permitted Nominee of the
Borrower, and AESOP Funding II L.L.C., a Delaware limited liability company
(the "Lender"). Unless otherwise defined herein or the context otherwise
requires, terms used herein have the meanings provided in the Loan Agreement.
AESOP Leasing II hereby requests that a Loan be made in the aggregate
Loan Principal Amount of $______________ on _______________ , 19 __.
AESOP Leasing II hereby acknowledges that the delivery of this Loan
Request and the acceptance by AESOP Leasing II of the proceeds of the Loan
requested hereby constitute a representation and warranty by AESOP Leasing II
that, on the date of such Loan, and before and after giving effect thereto and
to the application of the proceeds therefrom, all conditions set forth in
Section 11.2 of the Loan Agreement have been satisfied and all statements set
forth in Section 11.2 of the Loan Agreement are true and correct (in all
material respects to the extent any such statements do not incorporate a
materiality limitation in their terms).
Attached hereto as Annex I is a true and correct copy of the schedule
required to be delivered in connection herewith pursuant to Section 3.2 of the
Loan Agreement.
B-1-1
<PAGE>
AESOP Leasing II agrees that if prior to the time of the Loan
requested hereby any matter certified to herein by it will not be true and
correct at such time as if then made, it will immediately so notify the
Lender. Except to the extent, if any, that prior to the time of the Loan
requested hereby the Lender shall receive written notice to the contrary from
AESOP Leasing II, each matter certified to herein shall be deemed once again
to be certified as true and correct at the date of such Loan as if then made.
Please wire transfer the proceeds of the Loan to the account of AESOP
Leasing II at the financial institution set forth below:
Person to be Paid Name, Address, etc.
Amount to be ----------------- -------------------
Transferred Name Account No.
- ----------- ---- -----------
$_______ ____ ___________ ___________________
___________________
Attention: ___________________
AESOP Leasing II has caused this Loan Request to be executed and
delivered, and the certification and warranties contained herein to be made,
by its duly Authorized Officer this ____ day of ______________, 19__.
AESOP LEASING CORP. II
By__________________________
Name
Title:
B-1-2
<PAGE>
ANNEX I
Vehicle Acquisition Schedule and Related Information
1. Principal amount of proposed Loan
2. Borrowing Date of proposed Loan
3. Vehicle Identification Number (VIN)
4. Summary of Vehicles being financed (including, for
Program Vehicles subject to the GM Repurchase Pro-
gram, the Designated Period for such Vehicles)
5. Each Vehicle is a Program Vehicles
6. Capitalized Cost (New Vehicles)
7. Net Book Value (Initial Vehicles)
B-1-3
<PAGE>
EXHIBIT B-2
TO THE LOAN
AGREEMENT
FORM OF LOAN REQUEST RESPONSE
AESOP Leasing Corp. II
c/o Lord Securities Corporation
Two Wall Street, 19th Floor
New York, New York 10005
Attention: Andrew Stidd
_______________, 199__
Re: Loan Request Dated ___________________, 199__
Ladies and Gentlemen:
This Loan Request Response is delivered to you pursuant to Section
4.1 of that certain Loan Agreement, dated as of July 30, 1997 (as amended,
supplemented, amended and restated or otherwise modified from time to time,
the "Loan Agreement"), between AESOP Leasing Corp. II, a Delaware corporation
("AESOP Leasing II"), AESOP Leasing Corp., as Permitted Nominee of AESOP
Leasing II, and AESOP Funding II L.L.C., a Delaware limited liability company
(the "Lender"). Unless otherwise defined herein or the context otherwise
requires, terms used herein have the meanings assigned to such terms in the
Loan Agreement.
Reference is hereby made to the Loan Request delivered to us today by
AESOP Leasing II (the "Loan Request"). The applicable rate of Loan Interest on
each Loan requested in the Loan Request is _%; provided, however, if the
Lender's Carrying Cost Interest Rate for the Related Month is higher than the
rate of Loan Interest specified herein, the Loan Interest payable on such
Loans shall be determined using the higher rate.
Very truly yours,
AESOP FUNDING II L.L.C.
By:____________________________
Name:
Title:
B-2-1
<PAGE>
EXHIBIT C
TO THE LOAN
AGREEMENT
FORM OF PAYMENT
DEFICIT NOTICE
Harris Trust and Savings Bank, as Trustee
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attn: Indenture Trust Administration
[Related Enhancement Provider]
[Address]
[ ], 19 _
Ladies and Gentlemen:
This Payment Deficit Notice is delivered to you pursuant to
Section 6.4 of the Loan Agreement, dated as of July 30, 1997 (as amended or
modified from time to time, the "Loan Agreement") between AESOP Funding II
L.L.C., a Delaware limited liability company, as Lender, AESOP Leasing Corp.,
as Permitted Nominee of the Borrower, and AESOP Leasing Corp. II ("AESOP
Leasing II"), a Delaware corporation, as Borrower. Terms used herein have the
meanings provided in the Loan Agreement.
AESOP Leasing II hereby notifies the Trustee and [Related
Enhancement Provider] that for the Related Month ended , 199[ ] [a Lease
Payment Deficit did not exist] [there was a Lease Payment Deficit as follows:
Series ___________: $__________________
Series ___________: $__________________
AESOP Leasing Corp. II
By:_______________________
Name:
Title:
C-1
<PAGE>
SCHEDULE 8.11
Business Locations, Trade Names
<TABLE>
<CAPTION>
State of
Principal
Place of States in which
Business Location Business Conducts Business
----------------- -------- -----------------
<S> <C> <C> <C>
AESOP Leasing c/o Lord Securities New York New York
Corp. II Corporation
Two Wall Street
19th Floor
New York, NY 10005
</TABLE>
<PAGE>
MASTER MOTOR VEHICLE FINANCE LEASE AGREEMENT
dated as of July 30, 1997
among
AESOP LEASING L.P.,
as Lessor,
AVIS RENT A CAR SYSTEM, INC.,
as Lessee and as Administrator,
and
AVIS RENT A CAR, INC.,
as Guarantor
AS SET FORTH IN SECTION 27 HEREOF, LESSOR HAS ASSIGNED TO AFC-II (AS DEFINED
HEREIN) AND AFC-II HAS ASSIGNED TO THE TRUSTEE (AS DEFINED HEREIN) CERTAIN OF
ITS RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE. TO THE EXTENT, IF ANY,
THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION) NO
SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE TRANSFER OR
POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART,
WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR
EXECUTED BY THE TRUSTEE ON THE SIGNATURE PAGE THEREOF.
[THIS IS NOT COUNTERPART NO. 1]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <C>
1. DEFINITIONS................................................................................... 1
2. GENERAL AGREEMENT............................................................................. 1
2.1. Lease and Acquisition of Vehicles................................................ 4
2.2. Right of Lessee and Guarantor to Act as
Lessor's Agent................................................................... 5
2.3. Payment of Capitalized Cost or Assignment of
Net Book Value by Lessor......................................................... 5
2.4. Non-Liability of Lessor.......................................................... 6
2.5. Lessee's Rights to Purchase Vehicles............................................. 6
2.6. Lessor's Right to Cause Vehicles to be Sold...................................... 7
2.7. Redesignation of Vehicles........................................................ 9
2.8. Vehicle Purchase Surplus Amount Payments......................................... 9
2.9. Limitations on the Acquisition or Redesignation
of Certain Vehicles............................................................. 10
3. TERM.......................................................................................... 10
3.1. Vehicle Term..................................................................... 10
3.2. Term............................................................................. 11
4. RENT AND CHARGES.............................................................................. 12
4.1. Payment of Rent.................................................................. 12
4.2. [RESERVED]....................................................................... 12
4.3. Net Lease........................................................................ 12
5. INSURANCE..................................................................................... 13
5.1. Personal Injury and Damage....................................................... 13
5.2. Delivery of Certificate of Insurance............................................. 13
5.3. Changes in Insurance Coverage.................................................... 13
6. RISK OF LOSS; CASUALTY AND INELIGIBLE VEHICLE OBLIGA-
TIONS......................................................................................... 14
6.1. Risk of Loss Borne by Lessee..................................................... 14
6.2. Casualty; Ineligible Vehicles.................................................... 14
7. VEHICLE USE................................................................................... 15
8. LIENS......................................................................................... 16
9. NON-DISTURBANCE............................................................................... 16
10. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND
FINES......................................................................................... 16
11. MAINTENANCE AND REPAIRS....................................................................... 17
i
<PAGE>
Page
12. VEHICLE WARRANTIES............................................................................ 17
12.1. No Lessor Warranties............................................................. 18
12.2. Manufacturer's Warranties........................................................ 18
13. VEHICLE USAGE GUIDELINES AND RETURN; SPECIAL DEFAULT
PAYMENTS; EARLY TERMINATION PAYMENTS.......................................................... 18
13.1. Usage............................................................................ 18
13.2. Return........................................................................... 18
13.3. Special Default Payments......................................................... 21
13.4. Early Termination Payments....................................................... 22
14. DISPOSITION PROCEDURE......................................................................... 22
15. ODOMETER DISCLOSURE REQUIREMENT............................................................... 22
16. GENERAL INDEMNITY............................................................................. 22
16.1. Indemnity by the Lessee and the Guarantor........................................ 22
16.2. Reimbursement Obligation by the Lessee and the
Guarantor........................................................................ 24
16.3. Defense of Claims................................................................ 24
17. ASSIGNMENT.................................................................................... 25
17.1. Right of the Lessor to Assign this Agreement..................................... 25
17.2. Limitations on the Right of the Lessee to As-
sign this Agreement.............................................................. 25
18. DEFAULT AND REMEDIES THEREFOR................................................................. 26
18.1. Events of Default................................................................ 26
18.2. Effect of Finance Lease Event of Default or
Liquidation Event of Default..................................................... 27
18.3. Rights of Lessor Upon Finance Lease Event of
Default, Limited Liquidation Event of Default
or Liquidation Event of Default.................................................. 28
18.4. Rights of Lender and Trustee Upon Liquidation
Event of Default, Limited Liquidation Event of
Default and Non-Performance of Certain Cove-
nants............................................................................ 29
18.5. Measure of Damages............................................................... 31
18.6. Vehicle Return Default........................................................... 31
18.7. Application of Proceeds.......................................................... 33
19. MANUFACTURER EVENTS OF DEFAULT................................................................ 33
20. [RESERVED].................................................................................... 34
21. [RESERVED].................................................................................... 34
22. CERTIFICATION OF TRADE OR BUSINESS USE........................................................ 34
23. SURVIVAL...................................................................................... 34
ii
<PAGE>
Page
24. [RESERVED].................................................................................... 34
25. [RESERVED].................................................................................... 34
26. GUARANTY...................................................................................... 34
26.1. Guaranty......................................................................... 35
26.2. Scope of Guarantor's Liability................................................... 35
26.3. Lessor's Right to Amend this Agreement, Etc...................................... 36
26.4. Waiver of Certain Rights by Guarantor............................................ 36
26.5. [RESERVED]....................................................................... 37
26.6. Guarantor to Pay Lessor's Expenses............................................... 37
26.7. Reinstatement.................................................................... 37
26.8. Pari Passu Indebtedness.......................................................... 38
27. RIGHTS OF LESSOR ASSIGNED TO TRUSTEE.......................................................... 38
28. [RESERVED].................................................................................... 39
29. MODIFICATION AND SEVERABILITY................................................................. 39
30. CERTAIN REPRESENTATIONS AND WARRANTIES........................................................ 40
30.1. Organization; Ownership; Power; Qualification.................................... 40
30.2. Authorization; Enforceability.................................................... 40
30.3. Compliance....................................................................... 40
30.4. Financial Information; Financial Condition....................................... 41
30.5. Litigation....................................................................... 42
30.6. Liens............................................................................ 42
30.7. Employee Benefit Plans........................................................... 42
30.8. Investment Company Act........................................................... 42
30.9. Regulations G, T, U and X........................................................ 43
30.10. Business Locations; Trade Names; Principal
Places of Business Locations..................................................... 43
30.11. Taxes............................................................................ 43
30.12. Governmental Authorization....................................................... 43
30.13. Compliance with Laws............................................................. 44
30.14. Eligible Vehicles................................................................ 44
30.15. Supplemental Documents True and Correct.......................................... 44
30.16. Manufacturer Programs............................................................ 44
30.17. Absence of Default............................................................... 44
30.18. Title to Assets.................................................................. 44
30.19. Burdensome Provisions............................................................ 45
30.20. No Adverse Change................................................................ 45
30.21. No Adverse Fact.................................................................. 45
30.22. Accuracy of Information.......................................................... 45
30.23. Solvency......................................................................... 46
31. CERTAIN AFFIRMATIVE COVENANTS................................................................. 46
31.1. Corporate Existence; Foreign Qualification....................................... 46
31.2. Books, Records and Inspections................................................... 46
31.3. Insurance........................................................................ 47
iii
<PAGE>
Page
31.4. Manufacturer Programs............................................................ 47
31.5. Reporting Requirements........................................................... 47
31.6. Payment of Taxes; Removal of Liens............................................... 49
31.7. Business......................................................................... 49
31.8. Maintenance of Separate Existence................................................ 49
31.9. Trustee as Lienholder............................................................ 50
31.10. Maintenance of the Vehicles...................................................... 50
31.11. Enhancement...................................................................... 50
31.12. Manufacturer Payments............................................................ 51
31.13. Accounting Methods; Financial Records............................................ 51
31.14. Disclosure to Auditors........................................................... 51
31.15. Disposal of Non-Program Vehicles................................................. 51
32. CERTAIN NEGATIVE COVENANTS.................................................................... 51
32.1. Mergers, Consolidations.......................................................... 51
32.2. Other Agreements................................................................. 52
32.3. Liens............................................................................ 52
32.4. Use of Vehicles.................................................................. 52
32.5. Termination of Agreement......................................................... 52
33. ADMINISTRATOR ACTING AS AGENT OF THE LESSOR. ................................................. 52
34. NO PETITION................................................................................... 52
35. SUBMISSION TO JURISDICTION.................................................................... 53
36. GOVERNING LAW................................................................................. 53
37. JURY TRIAL.................................................................................... 54
38. NOTICES....................................................................................... 54
39. LIABILITY..................................................................................... 55
40. TITLE TO MANUFACTURER PROGRAMS IN LESSOR...................................................... 55
41. HEADINGS...................................................................................... 55
42. EXECUTION IN COUNTERPARTS..................................................................... 55
43. EFFECTIVENESS................................................................................. 55
44. NO RECOURSE................................................................................... 55
iv
</TABLE>
<PAGE>
Page
SCHEDULES AND ATTACHMENTS
Schedule 30.5 Litigation
Schedule 30.10 Business Locations
Schedule 30.13 Compliance with Law
ATTACHMENT A Information Relating to Initial Leased
Vehicles
ATTACHMENT B Vehicle Acquisition Schedule and Related
Information
ATTACHMENT C Form of Power of Attorney
v
<PAGE>
MASTER MOTOR VEHICLE FINANCE LEASE AGREEMENT
This Master Motor Vehicle Finance Lease Agreement (this
"Agreement"), dated as of July 30, 1997, by and among AESOP LEASING L.P., a
Delaware limited partnership (the "Lessor"), AVIS RENT A CAR SYSTEM, INC., a
Delaware corporation ("ARAC" or the "Lessee"), individually and as the
Administrator and AVIS RENT A CAR, INC., a Delaware corporation, as guarantor
(the "Guarantor").
W I T N E S S E T H:
WHEREAS, the Lessor (such capitalized term, together with
all other capitalized terms used herein, shall have the meaning assigned
thereto in Section 1) has purchased or will purchase Program Vehicles and
Non-Program Vehicles of one or more Manufacturers with proceeds provided to
the Lessor by the Lender pursuant to the AESOP I Finance Lease Loan Agreement
and other available funds;
WHEREAS, the Lessor desires to lease to the Lessee and the
Lessee desires to lease from the Lessor both Program Vehicles and Non-Program
Vehicles financed by the Lessor with the proceeds of Loans and other available
funds for use in the daily rental car business of the Lessee (excluding
vehicles titled in the States of Ohio, Oklahoma and Nebraska); and
WHEREAS, the Guarantor has, pursuant to Section 26 hereof,
guaranteed the obligations of the Lessee under this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises,
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. DEFINITIONS. Unless specified herein, capitalized terms
used herein (including the preamble and recitals hereto) shall have the
meanings ascribed to such terms in the Definitions List attached as Schedule I
to the Base Indenture, dated as of July 30, 1997 (the "Base Indenture"),
between AFC-II, as Issuer, and Harris Trust and Savings Bank, as Trustee.
2. GENERAL AGREEMENT. (a) The Lessee and the Lessor each
intend that this Agreement constitute a lease for accounting purposes and a
financing arrangement for tax and property law purposes and that the
relationship between the Lessor and the Lessee pursuant hereto shall always be
only that of lessor and lessee, and the Lessor hereby declares, acknowledges
and agrees that the tax ownership of the Financed Vehicles rests solely with
<PAGE>
the Lessee subject to the security interest granted hereunder to the Lessor.
The Lessor and the Lessee further agree that the obligations of the Lessee to
the Lessor hereunder shall constitute debt for all federal and state income
tax purposes.
(b) It is the intention of the parties that this
Agreement shall constitute a security agreement under applicable law, and, to
secure all of its obligations under this Agreement, the Lessee hereby grants
to the Lessor a first priority security interest in all of the Lessee's right,
title and interest, if any, in and to all of the following assets, property
and interests in property, whether now owned or hereafter acquired or created:
(i) the rights of the Lessee under this Agreement
and under any agreement to sublease Vehicles leased hereunder to any
Eligible Rental Car Company in accordance with the provisions of
Section 7, as such agreements may be amended, modified or
supplemented from time to time in accordance with its terms, and any
other agreements related to or in connection with this Agreement and
any such agreement to sublease to which the Lessee is a party (the
"Lessee Agreements"), including, without limitation, (a) all monies,
if any, due and to become due to the Lessee from the Guarantor or any
sublessee under or in connection with any of the Lessee Agreements,
whether payable as rent, guaranty payments, fees, expenses, costs,
indemnities, insurance recoveries, damages for the breach of any of
the Lessee Agreements or otherwise, (b) all rights, remedies, powers,
privileges and claims of the Lessee against any other party under or
with respect to the Lessee Agreements (whether arising pursuant to
the terms of such Agreements or otherwise available to the Lessee at
law or in equity), including the right to enforce any of the Lessee
Agreements and to give or withhold any and all consents, requests,
notices, directions, approvals, extensions or waivers under or with
respect to the Lessee Agreements or the obligations and liabilities
of any party thereunder, (c) all liens and property from time to time
purporting to secure payment of the obligations and liabilities of
the Lessee arising under or in connection with the Lessee Agreements,
and any documents or agreements describing any collateral securing
such obligations or liabilities and (d) all guarantees, insurance and
other agreements or arrangements of whatever character from time to
time supporting or securing payment of such obligations and
liabilities of the Lessee pursuant to the Lessee Agreements;
(ii) all Vehicles leased by the Lessee from the
Lessor under this Agreement and all Certificates of Title with respect
to such Vehicles;
2
<PAGE>
(iii) all right, title and interest of the Lessee
in, to and under any Manufacturer Programs, including any amendments
thereof, and all monies due and to become due thereunder, in each
case in respect of Vehicles leased under this Agreement, whether
payable as Vehicle repurchase prices, auction sales proceeds, fees,
expenses, costs, indemnities, insurance recoveries, damages for
breach of the Manufacturer Programs or otherwise (but excluding all
incentive payments payable to the Lessee or the Lessor in respect of
purchases of vehicles under the Manufacturer Programs) and all rights
to compel performance and otherwise exercise remedies thereunder
(provided, that such security interest is nonexclusive and subject to
Lessee's right, title or interest in and to the Manufacturer
Programs);
(iv) all right, title and interest of the Lessee in
and to any proceeds from the sale of Vehicles leased under this
Agreement, including all monies due in respect of such Vehicles,
whether payable as the purchase price of such Vehicles, as auction
sales proceeds, or as fees, expenses, costs, indemnities, insurance
recoveries, or otherwise (including all upfront incentive payments
payable by Manufacturers to the Lessee or the Lessor in respect of
purchases of Non-Program Vehicles);
(v) all payments under insurance policies (whether
or not the Lessor, the Lender or the Trustee is named as the loss
payee thereof) or any warranty payable by reason of loss or damage
to, or otherwise with respect to, any of the Vehicles leased under
this Agreement;
(vi) all additional property that may from time to
time hereafter be subjected to the grant and pledge under this
Agreement, as same may be modified or supplemented from time to time,
by the Lessee or by anyone on its behalf; and
(vii) all proceeds of any and all of the foregoing
including, without limitation, payments under insurance (whether or
not the Lessor is named as the loss payee thereof) and cash.
(c) To secure the AFC-II Obligations, the Lessee
hereby grants to the Trustee, on behalf of the Secured Parties, a first
priority security interest in all of the Lessee's right, title and interest,
if any, in and to all of the collateral described in Section 2(b) above,
whether now owned or hereafter acquired or created. Upon the occurrence of a
Liquidation Event of Default or a Limited Liquidation Event of Default and
subject to the provisions of the Related Documents, the Trustee shall have all
of the rights and remedies of a secured party, including, without limitation,
the rights and remedies granted under the Uniform Commercial Code.
3
<PAGE>
(d) The Lessee agrees to deliver to the Lessor,
the Lender and the Trustee on or before the Initial Closing Date:
(i) a written search report from a Person satisfactory to
the Lessor, the Lender and the Trustee listing all effective
financing statements that name the Lessee as debtor or assignor, and
that are filed in the jurisdictions in which filings were made
pursuant to clause (ii) below, together with copies of such financing
statements, and tax and judgment lien search reports from a Person
satisfactory to the Lessor, the Lender and the Trustee showing no
evidence of liens filed against the Lessee that purport to affect any
Vehicles leased hereunder or any Collateral under the Base Indenture:
(ii) evidence of the filing of proper financing statements
on Form UCC-1 naming the Lessee, as debtor, and the Lessor as secured
party covering the collateral described in Section 2(b) hereof; and
(iii) evidence of the filing in the states in which the
Lessee conducts business of proper financing statements on Form UCC-1
naming the Lessee, as debtor, and the Trustee as secured party
covering the collateral described in Section 2(b) hereof.
2.1. Lease and Acquisition of Vehicles. From time to time,
subject to the terms and provisions hereof, the Lessor agrees to lease to the
Lessee and the Lessee agrees to lease from the Lessor, subject to the terms
hereof, (i) the new Vehicles identified in Vehicle orders (each such vehicle
order, a "Vehicle Order") placed by the Lessee (which Vehicles may not be
titled in the States of Ohio, Oklahoma or Nebraska), pursuant to the terms of
the Manufacturer Programs with respect to Program Vehicles and Non-Program
Vehicles to the extent subject to a Manufacturer Program and as otherwise
agreed by the Lessor, the Lessee and a dealer with respect to other
Non-Program Vehicles, (ii) the Vehicles identified in Attachment A hereto
(which Vehicles may not be titled in the States of Ohio, Oklahoma or Nebraska)
containing information concerning the Initial Financed Vehicles leased under
this Agreement (the "Initial Leased Vehicles") of a scope agreed upon by ARAC
and the Lessor (including, at a minimum, the Net Book Value (as of the first
day of the Related Month in which the Initial Closing Date occurs) of each of
the Initial Leased Vehicles) and (iii) the Franchisee Vehicles identified in
an Officer's Certificate from the Lessee delivered to the Lessor, the Lender
and the Trustee (with a copy to each Rating Agency) at the time the Lessee
desires to lease such Franchisee Vehicles hereunder (which Vehicles may not be
titled in the States of Ohio, Oklahoma or Nebraska), which Officer's
Certificate shall contain information concerning the Franchisee Vehicles to be
leased by the Lessee under this Agreement of a scope agreed upon
4
<PAGE>
by the Lessee and the Lessor (including, at a minimum, the Net Book Value (as
of the first day of the Related Month in which the Vehicle Finance Lease
Commencement Date with respect to each such Vehicle occurs); provided,
however, that no Franchisee Vehicle may be leased by the Lessee hereunder
unless the Franchisee Vehicle Leasing Condition is met with respect to such
Franchisee Vehicle. If requested by the Lessor, the Lessee shall make each
Vehicle Order available to the Lessor, together with a schedule containing the
information with respect to the Vehicles included within such Vehicle Order as
is set forth in Attachment B hereto (each, a "Vehicle Acquisition Schedule"),
or in such form as is otherwise requested by the Lessor. In addition, the
Lessee agrees to provide such other information regarding such Vehicles as the
Lessor may require from time to time, including on the Initial Closing Date,
in the case of the Initial Leased Vehicles, and on the related Vehicle Finance
Lease Commencement Date, in the case of any Franchisee Vehicle leased
hereunder, such information as may be required to determine the monthly
Depreciation Charges applicable to such Vehicle. This Agreement, together with
the Manufacturer Programs and any other related documents attached to this
Agreement or submitted with a Vehicle Order (collectively, the "Supplemental
Documents"), will constitute the entire agreement regarding the leasing of
Vehicles by the Lessor to the Lessee.
2.2. Right of Lessee and Guarantor to Act as Lessor's Agent.
The Lessor agrees that the Lessee or the Guarantor may act as the Lessor's
agent in placing Vehicle Orders on behalf of the Lessor, as well as filing
claims on behalf of the Lessor for damage in transit, and other Manufacturer
delivery claims related to the Vehicles; provided, however, that the Lessor
may hold the Lessee or the Guarantor liable for losses due to the Lessee's or
the Guarantor's actions, or failure to act, in performing as the Lessor's
agent in accordance with the terms hereof. In addition, the Lessor agrees that
the Lessee may make arrangements for delivery of Vehicles to a location
selected by the Lessee at its expense. The Lessee agrees to accept Vehicles as
produced and delivered except the Lessee will have the option to reject any
Vehicle that may be rejected pursuant to the terms of the applicable
Manufacturer Program (with respect to Program Vehicles and Non-Program
Vehicles subject to a Manufacturer Program), or in accordance with its
customary business practices with respect to other Non-Program Vehicles. The
Lessee, acting as agent for the Lessor, shall be responsible for pursuing any
rights of the Lessor with respect to the return of any Vehicle to the
Manufacturer pursuant to the preceding sentence. Each of the Lessee and the
Guarantor agrees that all Program Vehicles ordered as provided herein shall be
ordered utilizing the procedures consistent with an Eligible Manufacturer
Program.
2.3. Payment of Capitalized Cost or Assignment of Net
Book Value by Lessor. On the Finance Lease Commencement Date,
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the Lessor shall apply to each Initial Leased Vehicle the Net Book Value (as
of the first day of the Related Month) for such Vehicle as described on
Attachment A hereto. On the Vehicle Finance Lease Commencement Date with
respect to any Franchisee Vehicle leased hereunder, the Lessor shall apply to
each such Franchisee Vehicle the Net Book Value (as of the first day of the
Related Month) for such Vehicle. Upon delivery of any Vehicle, the Lessor
shall pay to the authorized dealer, if any, that sold such Vehicle to the
Lessor, the Capitalized Cost for such Vehicle and the Lessee shall pay all
applicable costs and expenses of freight, packing, handling, storage, shipment
and delivery of such Vehicle, and sales and use tax (if any), to the extent
that the same have not been included in the Capitalized Cost for such Vehicle.
2.4. Non-Liability of Lessor. The Lessor shall not be liable
to the Lessee for any failure or delay in obtaining Vehicles or making
delivery thereof. AS BETWEEN THE LESSOR AND THE LESSEE, ACCEPTANCE FOR LEASE
OF THE VEHICLES SHALL CONSTITUTE THE LESSEE'S ACKNOWLEDGMENT AND AGREEMENT
THAT THE LESSEE HAS FULLY INSPECTED SUCH VEHICLES, THAT THE VEHICLES ARE IN
GOOD ORDER AND CONDITION AND ARE OF THE MANUFACTURE, DESIGN, SPECIFICATIONS
AND CAPACITY SELECTED BY THE LESSEE, THAT THE LESSEE IS SATISFIED THAT THE
SAME ARE SUITABLE FOR THIS USE AND THAT THE LESSOR IS NOT A MANUFACTURER OR
ENGAGED IN THE SALE OR DISTRIBUTION OF VEHICLES, AND HAS NOT MADE AND DOES NOT
HEREBY MAKE ANY REPRESENTATION, WARRANTY OR COVENANT WITH RESPECT TO
MERCHANTABILITY, CONDITION, QUALITY, DURABILITY OR SUITABILITY OF THE VEHICLE
IN ANY RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES OR USES OF THE
LESSEE, OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR
CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT THERETO. The Lessor shall not be
liable for any failure or delay in delivering any Vehicle ordered for lease
pursuant to this Agreement, or for any failure to perform any provision
hereof, resulting from fire or other casualty, natural disaster, riot, strike
or other labor difficulty, governmental regulation or restriction, or any
cause beyond the Lessor's direct control. IN NO EVENT SHALL THE LESSOR BE
LIABLE FOR ANY INCONVENIENCES, LOSS OF PROFITS OR ANY OTHER CONSEQUENTIAL,
INCIDENTAL OR SPECIAL DAMAGES RESULTING FROM ANY DEFECT IN OR ANY THEFT,
DAMAGE, LOSS OR FAILURE OF ANY VEHICLE, AND THERE SHALL BE NO ABATEMENT OF
MONTHLY BASE RENT, SUPPLEMENTAL RENT OR OTHER AMOUNTS PAYABLE HEREUNDER
BECAUSE OF THE SAME.
2.5. Lessee's Rights to Purchase Vehicles. (a) The Lessee
shall have the option, exercisable with respect to any Vehicle during the
Vehicle Term with respect to such Vehicle, to purchase any Vehicle leased
hereunder at the greater of (i) the Termination Value or (ii) the Market Value
of such Vehicle (the greater of such amounts being referred to as the "Vehicle
Purchase Price"), in which event the Lessee will pay the Vehicle Purchase
Price to the Lessor on or before the Payment Date with
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respect to the Related Month in which the Lessee elects to purchase such
Vehicle and the Lessee will pay on or before such Payment Date all accrued and
unpaid Monthly Base Rent and any Supplemental Rent payable with respect to
such Vehicle through such Payment Date. The Administrator shall request the
Trustee to cause its Lien to be removed from the Certificate of Title for such
Vehicle, concurrently with or promptly after the Vehicle Purchase Price for
such Vehicle (and any such unpaid Monthly Base Rent and Supplemental Rent) is
deposited in the Collection Account.
(b) The Lessee shall have the option on the
Vehicle Finance Lease Expiration Date (excluding the date set forth in
subclause (iv) of the definition of such term) to purchase any Vehicle leased
hereunder for an amount equal to the Termination Value of such Vehicle on such
date. The Lessee shall pay such Termination Value plus all accrued and unpaid
Monthly Base Rent and any Supplemental Rent with respect to such Vehicle to
the Lessor on or before the Payment Date occurring on or immediately following
the applicable Vehicle Finance Lease Expiration Date.
(c) The parties hereto agree and acknowledge
that, although the provisions of Section 2.5(a) and (b) nominally describe the
Lessee's options with respect to each Vehicle leased hereunder as options to
purchase, the Lessee owns each such Vehicle, subject to the security interests
of the Lessor, the Lender and the Trustee in such Vehicle, and such options
are options to extinguish the security interests of the Lessor, the Lender and
the Trustee in such Vehicle.
2.6. Lessor's Right to Cause Vehicles to be Sold. If
the Lessee does not elect to purchase any Vehicle pursuant to
Section 2.5 hereof, then:
(a) with respect to Program Vehicles leased
hereunder, and subject to Sections 13.2 and 2.5 hereof, the Lessor shall have
the right, at any time following the date ninety (90) days prior to the
expiration of the Maximum Term for such Program Vehicle, to require that the
Lessee or another Person designated by the Lessor, which Person's compensation
will be payable solely from the proceeds from the sale of such Vehicle,
exercise commercially reasonable efforts to arrange for the sale of such
Vehicle to a third party for the Vehicle Purchase Price with respect to such
Vehicle, in which event the Lessee or such other designated Person shall,
until not later than the date thirty (30) days prior to the expiration of such
Maximum Term, exercise commercially reasonable efforts to arrange for the sale
of such Vehicle to a third party for a price (as reduced by the amount of
compensation to be paid to any such other designated Person) equal to or
greater than the Termination Value thereof. If a sale of the Vehicle is
arranged by the Lessee or such other
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designated Person prior to such date thirty (30) days prior to the expiration
of such Maximum Term, then (i) the Lessee or such other designated Person
shall deliver such Vehicle to the purchaser thereof, (ii) the Lessee or such
other designated Person shall cause to be delivered to the Lessor the funds
paid for such Vehicle by the purchaser and (iii) the Administrator shall
request the Trustee to cause its Lien to be removed from the Certificate of
Title for such Vehicle. If the Lessee or such other designated Person is
unable to arrange for a sale of such Vehicle prior to such date thirty (30)
days prior to the expiration of such Maximum Term, then the Lessee or such
other designated Person shall cease attempting to arrange for such a sale and
the Lessee shall return such Vehicle in the manner provided in Section
13.2(a)(y). If the Lessee shall fail to satisfy any provision of Section
13.2(a)(y) or 13.2(b), then the Lessee shall pay within 5 days after the
Vehicle Finance Lease Expiration Date the amount of the Termination Value of
such Vehicle immediately prior to such Vehicle Finance Lease Expiration Date
(rather than the Residual Value Payment required by Section 2.6(c)); or
(b) with respect to Non-Program Vehicles leased
hereunder and subject to the exercise of Lessee's rights under Section 2.5,
the Lessee shall use commercially reasonable efforts to arrange for the sale
of each Non-Program Vehicle to a third party for the Vehicle Purchase Price
with respect to such Vehicle on or prior to the applicable Vehicle Finance
Lease Expiration Date. In no event may any Vehicle be sold pursuant to this
Section 2.6(b) unless the funds to be paid to the Lessor with respect to such
Vehicle (net of any disposition expenses but including any Non-Program Vehicle
Special Default Payments) equal or exceed the Termination Value of such
Vehicle. The Lessee may return a Non-Program Vehicle subject to a Manufacturer
Program to the applicable Manufacturer under such Manufacturer Program
provided that (i) the Repurchase Price of such Vehicle, together with any
Special Default Payments payable by the Lessee with respect to such Vehicle,
is at least equal to the Termination Value with respect to such Vehicle, (ii)
no Manufacturer Event of Default shall have occurred with respect to such
Manufacturer and (iii) by the later of the sixtieth (60th) day after the
Initial Closing Date and the date on which such Vehicle is returned to the
Manufacturer, the Trustee and the Lender shall have received an assignment of
the benefits of such Manufacturer Program, acknowledged in writing by such
Manufacturer, in form and substance satisfactory to each Enhancement Provider.
Notwithstanding the disposition of a Non-Program Vehicle by the Lessee prior
to the applicable Vehicle Finance Lease Expiration Date, the Lessee shall pay
to the Lessor all accrued and unpaid Monthly Base Rent and any Supplemental
Rent then due and payable with respect to such Non-Program Vehicle through the
Payment Date with respect to the Related Month during which such disposition
occurred, unless such Non-Program Vehicle is a Standard Casualty or becomes an
Ineligible Vehicle, payment for which will be made
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in accordance with Section 6 hereof. If a sale of such NonProgram Vehicle is
arranged by the Lessee pursuant to this Section 2.6(b), then (i) the Lessee
shall deliver the Vehicle to the purchaser thereof, (ii) the Lessee shall
cause to be delivered to the Lessor the funds paid for such Vehicle by the
purchaser and (iii) the Administrator shall request the Trustee to cause its
Lien to be removed from the Certificate of Title for such Vehicle.
(c) In the event any Vehicle or Vehicles leased
hereunder are not purchased by the Lessee pursuant to Section 2.5 hereof, sold
to a third party pursuant to Section 2.6(a) or sold to a third party or
returned to a Manufacturer pursuant to Section 2.6(b), then, in the case of a
Non-Program Vehicle, the Lessee shall return such Vehicle to the Lessor in
accordance with the procedures set forth in Section 13.2(a) or, in the case of
a Program Vehicle, the Lessee shall dispose of such Vehicle in accordance with
the procedures set forth in Section 13.2(b) or return such Vehicle to the
Lessor in accordance with the procedures set forth in Section 13.2(a), in each
case, on the Payment Date with respect to the Related Month in which the
applicable Vehicle Finance Lease Expiration Date falls, and the Lessee shall
pay an amount equal to the Residual Value Payment plus all accrued but unpaid
Monthly Base Rent and all Supplemental Rent payable with respect to such
Vehicles through such Payment Date.
In no event may any Vehicle be sold pursuant to this Section
2.6 unless the funds to be paid to the Lessor with respect to such Vehicle (as
reduced by the amount of compensation to be paid to any such other designated
Person) equal or exceed the Termination Value of such Vehicle.
2.7. Redesignation of Vehicles. If a Program Vehicle becomes
ineligible for repurchase by its Manufacturer or for sale at auction under the
applicable Manufacturer Program or the return of a Program Vehicle to the
applicable Manufacturer cannot otherwise be effected for any reason (including
by reason of the occurrence of a Manufacturer Event of Default with respect to
the Manufacturer of such Program Vehicle or the failure of a Manufacturer to
accept such Program Vehicle for repurchase and acceptance is not expected upon
a subsequent return), the Lessee may redesignate the related Program Vehicle
as a Non-Program Vehicle, provided that (i) no Amortization Event or Potential
Amortization Event has occurred and is continuing and (ii) no violation of the
requirements of Section 10.13 of the AESOP I Finance Lease Loan Agreement or
Section 2.9 hereof would be caused by such redesignation; provided, in each
case, that (x) the Lessee shall pay to the Lessor on the next succeeding
Payment Date an amount equal to the difference, if any, between the Net Book
Value of such Vehicle as of the date of redesignation and an amount equal to
the Net Book Value of such Vehicle as of the date of redesignation had such
Vehicle been a Non-Program Vehicle at the time of
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delivery thereof pursuant to Section 2.1 and (y) the Required Enhancement
Amount required under each Supplement, after giving effect to such
redesignation, shall be satisfied on the date of redesignation.
2.8. Vehicle Purchase Surplus Amount Payments. On each
Payment Date, the Lessor shall pay to the Lessee, from amounts on deposit in
the AESOP I Segregated Account, the Vehicle Purchase Surplus Amount with
respect to the Vehicles leased hereunder for such Payment Date. The Lessee
shall have no right to demand, counterclaim, setoff, deduct, abate, defer,
decrease or in any other way reduce any payment of Monthly Base Rent or
Supplemental Rent by the Lessee hereunder for amounts due from the Lessor
under this Section 2.8.
2.9. Limitations on the Acquisition or Redesignation of
Certain Vehicles. Unless otherwise specified in a Supplement or unless waived
by the Required Noteholders as specified in a Supplement, (a) the aggregate
Net Book Value of all Vehicles (or such portion thereof as is specified in
such Supplement) manufactured by Manufacturers other than Eligible Non-Program
Manufacturers and leased under this Agreement (after giving effect to the
inclusion of such Vehicle under this Agreement) and the AESOP I Operating
Lease as of such date shall not exceed any applicable Maximum Non-Eligible
Manufacturer Amount, (b) the aggregate Net Book Value of all Vehicles (or such
portion thereof as is specified in such Supplement) leased hereunder (after
giving effect to the inclusion of such Vehicle under this Agreement) as of
such date shall not exceed any applicable Maximum Financed Vehicle Amount, (c)
the aggregate Net Book Value of all Non-Program Vehicles (or such portion
thereof as is specified in such Supplement) leased hereunder (after giving
effect to the inclusion or redesignation, as the case may be, of such Vehicle
under this Agreement) and the AESOP I Operating Lease as of such date shall
not exceed any applicable Maximum Non-Program Vehicle Amount, (d) the
aggregate Net Book Value of all Vehicles (or such portion thereof as is
specified in such Supplement) manufactured by a particular Manufacturer or
group of Manufacturers and leased under the Leases (after giving effect to the
inclusion of such Vehicle under this Agreement) as of such date shall not
exceed any applicable Maximum Manufacturer Amount and (e) after giving effect
to the inclusion or redesignation of such Vehicle under this Agreement, there
shall not be a failure or violation of any other conditions, requirements or
restrictions with respect to the leasing of Eligible Vehicles under this
Agreement as is specified in any Supplement.
3. TERM.
3.1. Vehicle Term. (a) The "Vehicle Finance Lease
Commencement Date" (x) for each Initial Leased Vehicle shall mean the Initial
Closing Date, (y) for each Franchisee Vehicle shall
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mean the day as referenced in the Officer's Certificate from the Lessee with
respect to such Vehicle and (z) for each other Vehicle shall mean the day as
referenced in the Vehicle Acquisition Schedule with respect to such Vehicle,
but in each case in no event shall such date be a date later than the date
that funds are expended or allocated by the Lessor to acquire such Franchisee
Vehicle or other Vehicle. The "Vehicle Term" with respect to each Vehicle
shall extend from the Vehicle Finance Lease Commencement Date through the
earliest of (i) if such Vehicle is a Program Vehicle or a Non-Program Vehicle
returned to a Manufacturer under a Manufacturer Program in accordance with
Section 2.6(b), the Turnback Date for such Vehicle, (ii) if such Vehicle is
sold to a third party (other than through an auction conducted by or through
or arranged by the Manufacturer pursuant to its Manufacturer Program), the
date on which such funds in respect of such sale are deposited in the
Collection Account (by such third party or by the Lessee or the Guarantor on
behalf of such third party) and such funds equal or exceed the Termination
Value of such Vehicle, (iii) if such Vehicle becomes a Standard Casualty or an
Ineligible Vehicle, the date funds in the amount of the Termination Value
thereof are deposited in the Collection Account by the Lessee, (iv) if the
Lessee purchases the Vehicle pursuant to Section 2.5, the date on which the
Vehicle Purchase Price is deposited in the Collection Account by the Lessee,
(v) the date that is the last Business Day of the month that is 18 months (or
such longer term as agreed to by the Lessee and the Lessor) after the month in
which the Vehicle Finance Lease Commencement Date occurs with respect to such
Vehicle, or (vi) the date described under clause (i) of Section 3.2 (the
earliest of such six dates being referred to as the "Vehicle Finance Lease
Expiration Date").
(b) Subject to the provisions of Sections 2.5 and
2.6, the Lessee shall use its commercially reasonable efforts to return each
Program Vehicle leased hereunder to the related Manufacturer (or such
Manufacturer's agent or as otherwise directed by such Manufacturer in
accordance with such Manufacturer Program) (a) not prior to the end of the
minimum holding period specified in the related Manufacturer Program (prior to
which the Lessor may not return such Program Vehicle without penalty (the
"Minimum Term")) and (b) not later than the end of the maximum holding period
(after which the Lessor may not return such Program Vehicle without penalty
(the "Maximum Term")); provided, however, that the Lessee shall in any case
return each Program Vehicle leased hereunder to the related Manufacturer (or
such Manufacturer's agent or as otherwise directed by such Manufacturer in
accordance with such Manufacturer Program) on or before the Vehicle Finance
Lease Expiration Date with respect to such Vehicle pursuant to Section 13.2(b)
hereof. The Lessee will pay to the Lessor the equivalent of the Monthly Base
Rent for the Minimum Term plus any early turn back surcharges payable by the
Lessor or deductible from the Repurchase Price for Program Vehicles returned
before the Minimum Term, regardless of actual
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usage, unless such Vehicle is a Standard Casualty or becomes an Ineligible
Vehicle, in which case, the disposition of such Vehicle will be handled in
accordance with Section 6 hereof.
3.2. Term. The "Finance Lease Commencement Date" shall mean
the Initial Closing Date. The "Finance Lease Expiration Date" shall mean the
latest of (i) the date of the payment in full of all Loans (including any Loan
Interest thereon) the proceeds of which were used by the Lessor to finance the
purchase of Vehicles subject to this Agreement, (ii) the Vehicle Finance Lease
Expiration Date for the last Vehicle leased by the Lessee hereunder and (iii)
the date on which all amounts payable hereunder and under the Loan Agreements
have been paid in full. The "Term" of this Agreement shall mean the period
commencing on the Finance Lease Commencement Date and ending on the Finance
Lease Expiration Date.
4. RENT AND CHARGES. The Lessee will pay Monthly Base Rent
and any Supplemental Rent due and payable on a monthly basis as set forth in
this Section 4.
4.1. Payment of Rent. On each Payment Date the Lessee shall
pay in immediately available funds to the Lessor not later than 11:00 a.m.,
New York City time, on such Payment Date (i) all Monthly Base Rent that has
accrued during the Related Month with respect to each Vehicle leased hereunder
by the Lessee during or prior to the Related Month and (ii) all Supplemental
Rent due and payable on such Payment Date.
4.2. [RESERVED].
4.3. Net Lease. THIS AGREEMENT SHALL BE A NET LEASE, AND THE
LESSEE'S OBLIGATION TO PAY ALL MONTHLY BASE RENT, SUPPLEMENTAL RENT AND OTHER
SUMS HEREUNDER SHALL BE ABSOLUTE AND UNCONDITIONAL, AND SHALL NOT BE SUBJECT
TO ANY ABATEMENT, SETOFF, COUNTERCLAIM, DEDUCTION OR REDUCTION FOR ANY REASON
WHATSOEVER. The obligations and liabilities of the Lessee hereunder shall in
no way be released, discharged or otherwise affected (except as may be
expressly provided herein including, without limitation, the right of the
Lessee to reject Vehicles pursuant to Section 2.2 hereof) for any reason,
including without limitation: (i) any defect in the condition,
merchantability, quality or fitness for use of the Vehicles or any part
thereof; (ii) any damage to, removal, abandonment, salvage, loss, scrapping or
destruction of or any requisition or taking of the Vehicles or any part
thereof; (iii) any restriction, prevention or curtailment of or interference
with any use of the Vehicles or any part thereof; (iv) any defect in or any
Lien on title to the Vehicles or any part thereof; (v) any change, waiver,
extension, indulgence or other action or omission in respect of any obligation
or liability of the Lessee or the Lessor; (vi) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other
like proceeding relating to the Lessee, the Lessor or
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any other Person, or any action taken with respect to this Agreement by any
trustee or receiver of any Person mentioned above, or by any court; (vii) any
claim that the Lessee has or might have against any Person, including without
limitation the Lessor; (viii) any failure on the part of the Lessor to perform
or comply with any of the terms hereof or of any other agreement; (ix) any
invalidity or unenforceability or disaffirmance of this Agreement or any
provision hereof or any of the other Related Documents or any provision of any
thereof, in each case whether against or by the Lessee or otherwise; (x) any
insurance premiums payable by the Lessee with respect to the Vehicles; or (xi)
any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether or not the Lessee shall have notice or knowledge of any of
the foregoing and whether or not foreseen or foreseeable. This Agreement shall
be noncancelable by the Lessee and, except as expressly provided herein, the
Lessee, to the extent permitted by law, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender this
Agreement, or to any diminution or reduction of Monthly Base Rent,
Supplemental Rent or other amounts payable by the Lessee hereunder. All
payments by the Lessee made hereunder shall be final (except to the extent of
adjustments provided for herein), absent manifest error and, except as
otherwise provided herein, the Lessee shall not seek to recover any such
payment or any part thereof for any reason whatsoever, absent manifest error.
If for any reason whatsoever this Agreement shall be terminated in whole or in
part by operation of law or otherwise except as expressly provided herein, the
Lessee shall nonetheless pay an amount equal to each Monthly Base Rent
payment, all Supplemental Rent and all other amounts due hereunder at the time
and in the manner that such payments would have become due and payable under
the terms of this Agreement as if it had not been terminated in whole or in
part. All covenants and agreements of the Lessee herein shall be performed at
its cost, expense and risk unless expressly otherwise stated.
5. INSURANCE. The Lessee represents that it shall at
all times maintain or cause to be maintained insurance coverage
in force as follows:
5.1. Personal Injury and Damage. Insurance coverage as set
forth in Section 31.3 hereof. In addition, the Lessee will maintain with
respect to its properties and businesses insurance against loss or damage of
the kind customarily insured against by corporations engaged in the same or
similar businesses, of such types and in such amounts as are customarily
carried by such similarly situated corporations.
5.2. Delivery of Certificate of Insurance. Within 10
days after the Initial Closing Date, the Lessee or the Guarantor
shall deliver to the Lessor a certificate(s) of insurance naming
the Lender, the Lessor, Original AESOP, PVHC, Quartx and the
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Trustee as additional insureds as to the item required by Section 31.3. Such
insurance shall not be changed or canceled except as provided below in Section
5.3.
5.3. Changes in Insurance Coverage. No changes shall be made
in any of the foregoing insurance requirements unless the prior written
consent of the Lessor, the Lender and the Trustee are first obtained. The
Lessor may grant or withhold its consent to any proposed change in such
insurance in its sole discretion. The Lender and the Trustee shall be required
to grant their consent to any proposed change in such insurance upon
compliance with the following conditions:
(i) The Lessee or the Guarantor shall deliver not
less than 30 days' prior written notice of any proposed change in
such insurance to the Lender and the Trustee;
(ii) The Lessee or the Guarantor shall furnish to
the Lender and the Trustee a letter from each Rating Agency with
respect to all Outstanding Commercial Paper Notes and Notes rated by
such Rating Agency to the effect that such proposed change will not
cause a reduction in or a withdrawal of the current rating of such
Commercial Paper Notes or the Notes; and
(iii) the proposed change will satisfy the Rating
Agency Confirmation Condition.
6. RISK OF LOSS; CASUALTY AND INELIGIBLE VEHICLE
OBLIGATIONS.
6.1. Risk of Loss Borne by Lessee. Upon delivery of each
Vehicle to the Lessee, as between the Lessor and the Lessee, the Lessee
assumes and bears the risk of loss, damage, theft, taking, destruction,
attachment, seizure, confiscation or requisition with respect to such Vehicle,
however caused or occasioned, and all other risks and liabilities, including
personal injury or death and property damage, arising with respect to such
Vehicle or the manufacture, purchase, acceptance, rejection, ownership,
delivery, leasing, subleasing, possession, use, inspection, registration,
operation, condition, maintenance, repair, storage, sale, return or other
disposition of such Vehicle, howsoever arising.
6.2. Casualty; Ineligible Vehicles. If a Vehicle becomes a
Standard Casualty or an Ineligible Vehicle, then the Lessee will (i) promptly
notify the Lessor thereof and (ii) promptly, but in no event later than the
Payment Date with respect to the Related Month during which such Vehicle
became a Standard Casualty or an Ineligible Vehicle, pay to the Lessor the
Termination Value of such Vehicle (as of the date such Vehicle became a
Standard Casualty or an Ineligible Vehicle). Upon
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payment by the Lessee to the Lessor of the Termination Value of any Vehicle
that has become a Standard Casualty or an Ineligible Vehicle (i) the Lessee
shall be entitled to any physical damage insurance proceeds applicable to such
Vehicle and (ii) the Administrator shall request the Trustee to cause its Lien
to be removed from the Certificate of Title for such Vehicle.
7. VEHICLE USE. So long as no Finance Lease Event of
Default, Liquidation Event of Default or Limited Liquidation Event of Default
has occurred (subject, however, to Section 2.6 hereof), the Lessee may use
Vehicles leased hereunder in its regular course of business. Such use shall be
confined primarily to the United States; provided, however, that the principal
place of business or rental office of the Lessee with respect to the Vehicles
is located in the United States. The Administrator shall promptly and duly
execute, deliver, file and record all such documents, statements, filings and
registrations, and take such further actions as the Lessor, the Lender or the
Trustee shall from time to time reasonably request in order to establish,
perfect and maintain the Trustee's Lien on the Vehicles leased hereunder and
the Certificates of Title (other than noting the Lien of the Trustee on the
Certificates of Title with respect to the (i) Initial Financed Vehicles (which
shall reflect the Lien of BONY) and (ii) Franchisee Vehicles (which shall
reflect the Lien of the nominee lienholder under the applicable Franchisee
Nominee Agreement)) with respect to such Vehicles as a perfected first lien in
any applicable jurisdiction. The Lessee may, at its sole expense, change the
place of principal location of any Vehicles leased hereunder. Notwithstanding
the foregoing, no change of location shall be undertaken unless and until (x)
all actions necessary to maintain the Lien of the Trustee on such Vehicles and
the Certificates of Title (other than noting the Lien of the Trustee on the
Certificates of Title with respect to the (i) Initial Financed Vehicles (which
shall reflect the Lien of BONY) and (ii) Franchisee Vehicles (which shall
reflect the Lien of the nominee lienholder under the applicable Franchisee
Nominee Agreement)) with respect to such Vehicles shall have been taken and
(y) all legal requirements applicable to such Vehicles shall have been met or
obtained. Following the occurrence of a Finance Lease Event of Default, a
Limited Liquidation Event of Default, a Liquidation Event of Default or a
Manufacturer Event of Default, and upon the Lender's request, the Lessee shall
advise the Lender in writing where all Vehicles leased hereunder as of such
date are principally located. The Lessee shall not knowingly use any Vehicles
or knowingly permit the same to be used for any unlawful purpose. The Lessee
shall use reasonable precautions to prevent loss or damage to Vehicles. The
Lessee shall comply with all applicable statutes, decrees, ordinances and
regulations regarding acquiring, titling, registering, leasing, insuring and
disposing of Vehicles and shall take reasonable steps to ensure that operators
are licensed. The Lessee and the Lessor agree that the Lessee shall perform,
at the
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Lessee's own expense, such Vehicle preparation and conditioning services with
respect to Vehicles leased hereunder as are customary. The Lessor, the Lender
or the Trustee or any authorized representative of the Lessor, the Lender or
the Trustee may during reasonable business hours from time to time, without
disruption of the Lessee's business, subject to applicable law, inspect
Vehicles and registration certificates, Certificates of Title and related
documents covering Vehicles wherever the same be located. The Lessee shall not
sublease any Vehicles, nor shall the Lessee assign any right or interest
herein or in any Vehicles; provided, however, the foregoing shall not be
deemed to prohibit the Lessee from renting Vehicles to third party customers
in the ordinary course of its car rental business; and provided further that
the Lessee may sublease Vehicles to any Eligible Rental Car Company, which
sublease shall only be effective upon written notice thereof (confirmed by the
Guarantor) delivered to the Lessor (a "Sublease Notice"). Any such sublease
shall not relieve the Lessee or the Guarantor of any of their respective
duties and obligations under this Agreement or any other Related Document.
8. LIENS. Except for Permitted Liens, the Lessee shall keep
all Vehicles leased by it hereunder free of all Liens arising during the Term.
Upon the Vehicle Finance Lease Expiration Date for each Vehicle leased
hereunder should any such Lien exist the Lessor may, in its discretion, remove
such Lien and any sum of money that may be paid by the Lessor in release or
discharge thereof, including attorneys' fees and costs, will be paid by the
Lessee upon demand by the Lessor. The Lessor may grant security interests in
the Vehicles leased hereunder without consent of the Lessee; provided,
however, that if any such Liens would interfere with the rights of the Lessee
under this Agreement, the Lessor must obtain the prior written consent of the
Lessee. The Lessee agrees and acknowledges that the granting of Liens and the
taking of other actions pursuant to the Loan Agreements, the Indenture and the
other Related Documents does not interfere with the rights of the Lessee under
this Agreement.
9. NON-DISTURBANCE. So long as the Lessee satisfies its
obligations hereunder, its quiet enjoyment, possession and use of the Vehicles
will not be disturbed during the Term subject, however, to Sections 2.6 and 18
hereof and except that the Lessor, the Lender and the Trustee each retains the
right, but not the duty, to inspect the Vehicles without disturbing the
ordinary conduct of the Lessee's business. Upon the request of the Lessor, the
Lender or the Trustee from time to time, the Lessee will make reasonable
efforts to confirm to the Lessor, the Lender and the Trustee the location,
mileage and condition of each Vehicle and to make available for the Lessor's,
the Lender's or the Trustee's inspection within a reasonable time period, not
to exceed 45 days, the Vehicles at the location where the Vehicles are
normally domiciled. Further, the Lessee will, during
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normal business hours and with a notice of 3 Business Days, make its records
pertaining to the Vehicles available to the Lessor, the Lender or the Trustee
for inspection at the location where the Lessee's records are normally
domiciled.
10. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND
FINES. The Lessee, at its expense, shall be responsible for proper
registration, licensing and titling of Vehicles (with the Lien of the Trustee
noted thereon (except with respect to the (i) Initial Financed Vehicles for
which BONY is noted as the first lienholder and (ii) Franchisee Vehicles for
which the nominee lienholder under the applicable Franchisee Nominee Agreement
is noted as the first lienholder)) and, where required, shall have Vehicles
inspected by any appropriate governmental authority; provided, however, that
notwithstanding the foregoing, possession of all Certificates of Title shall
at all times remain with the Administrator, who will hold such Certificates of
Title in its capacity as agent for the Lessor and on behalf of the Lender and
the Trustee. The Lessee shall be responsible for the payment of all
registration fees, title fees, license fees, traffic summonses, penalties,
judgments and fines incurred with respect to any Vehicle during the Vehicle
Term for such Vehicle or imposed during the Vehicle Term for such Vehicle by
any governmental authority or any court of law or equity with respect to
Vehicles in connection with the Lessee's operation of Vehicles. The Lessor
agrees to execute a power of attorney in substantially the form of Attachment
C hereto (each, a "Power of Attorney"), and such other documents as may be
necessary in order to allow the Lessee to dispose of the Vehicles in
accordance with the terms hereof; provided, however, that possession of all
Certificates of Title shall at all times remain with the Administrator who
will hold such Certificates of Title in its capacity as agent for the Lessor
and on behalf of the Lender and the Trustee, and the Lessee acknowledges that
its right, title and interest in or with respect to each Certificate of Title
remains subject to the Lien of the Lessor granted hereunder, of the Lender
under the AESOP I Finance Lease Loan Agreement and of the Trustee under the
Indenture. Notwithstanding anything herein to the contrary, the Lessor may
terminate such Power of Attorney as provided in Section 18.3(iii) hereof.
11. MAINTENANCE AND REPAIRS. The Lessee shall pay for all
maintenance and repairs to keep Vehicles in good working order and condition,
and the Lessee will maintain Vehicles as required in order to keep the
Manufacturer's warranty in force. The Lessee will return Vehicles to an
authorized Manufacturer facility or the Lessee's Manufacturer authorized
warranty station for warranty work. The Lessee will comply with any
Manufacturer's recall of any Vehicle. The Lessee will pay, or cause to be
paid, all usual and routine expenses incurred in the use and operation of
Vehicles including, but not limited to, fuel, lubricants, and coolants. The
Lessee shall not make any
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material alterations to any Vehicles without the prior consent of the Lessor.
The Lessor shall have a first priority security interest in all of the
Lessee's right, title and interest, if any, in and to any improvements or
additions to any Vehicles.
12. VEHICLE WARRANTIES.
12.1. No Lessor Warranties. THE LESSEE ACKNOWLEDGES THAT THE
LESSOR IS NOT THE MANUFACTURER, THE AGENT OF THE MANUFACTURER, OR THE
DISTRIBUTOR OF THE VEHICLES LEASED HEREUNDER. THE LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE FITNESS, SAFENESS, DESIGN,
MERCHANTABILITY, CONDITION, QUALITY, CAPACITY OR WORKMANSHIP OF THE VEHICLES
NOR ANY WARRANTY THAT THE VEHICLES WILL SATISFY THE REQUIREMENTS OF ANY LAW OR
ANY CONTRACT SPECIFICATION, AND AS BETWEEN THE LESSOR AND THE LESSEE, THE
LESSEE AGREES TO BEAR ALL SUCH RISKS AT ITS SOLE COST AND EXPENSE. THE LESSEE
SPECIFICALLY WAIVES ALL RIGHTS TO MAKE CLAIMS AGAINST THE LESSOR AND ANY
VEHICLE FOR BREACH OF ANY WARRANTY OF ANY KIND WHATSOEVER AND, AS TO THE
LESSOR, THE LESSEE LEASES THE VEHICLES "AS IS." IN NO EVENT SHALL THE LESSOR
BE LIABLE FOR SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, WHATSOEVER OR
HOWSOEVER CAUSED.
12.2. Manufacturer's Warranties. If a Vehicle is
covered by a Manufacturer's warranty, the Lessee, during the
Vehicle Term for such Vehicle, shall have the right to make any
claims under such warranty which the Lessor could make.
13. VEHICLE USAGE GUIDELINES AND RETURN; SPECIAL DEFAULT
PAYMENTS; EARLY TERMINATION PAYMENTS.
13.1. Usage. As used herein "Vehicle Turn-In Condition" (a)
with respect to each Program Vehicle leased hereunder will be determined in
accordance with the related Manufacturer Program and (b) with respect to each
Non-Program Vehicle leased hereunder shall mean (i) if such Non-Program
Vehicle is manufactured by the same Manufacturer as any Program Vehicle leased
hereunder, the same standard as required with respect to such Program Vehicle
and (ii) if such Non-Program Vehicle does not satisfy clause (i) above, the
standard specified in Section 13.2 (a)(y)(1) (other than clause (H) thereof),
and the equivalent of any Excess Damage Charges and Excess Mileage Charges
with respect to such Vehicle shall be determined by the Administrator and the
Lessor in accordance with the foregoing standard.
13.2. Return. (a) On or prior to the date that is 90 days
prior to the end of the Term of this Agreement, the Lessee shall notify the
Lessor in writing if it elects to purchase all the Vehicles leased hereunder
at the end of the Term of this Agreement pursuant to Section 2.5. If the
Lessee does not elect to purchase such Vehicles pursuant to the terms of
Section 2.5, as long as no Finance Lease Event of Default shall have occurred
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and be continuing, the Lessee shall, on or prior to the Finance Lease
Expiration Date (x) pay to the Lessor an amount equal to the Residual Value
Payment for all such non-purchased Vehicles leased hereunder as of the Vehicle
Finance Lease Expiration Date for each such Vehicle plus all accrued but
unpaid Monthly Base Rent and all Supplemental Rent payable at such time and
(y) return each such Vehicle to the Lessor in accordance with the following,
as applicable:
(1) each such Vehicle shall:
(A) have an engine, transmission, differential,
exhaust system (including the catalytic converter and any other
Pollution control equipment), brakes, and any other operating part or
system or accessory which is necessary or advisable to be in an
operating condition which is generally considered as "good" for a
vehicle of such Vehicle's age, and/or which is necessary to enable
such Vehicle to meet any motor vehicle inspection standard or
environmental standard applicable to such Vehicle on its Vehicle
Finance Lease Expiration Date;
(B) be in a condition which would meet its next
inspection as required by such applicable federal, state or local
law;
(C) other than any condition that would reasonably
be considered to be normal wear and tear or otherwise de minimis by a
Manufacturer (or its authorized agent) accepting possession of a
Vehicle subject to its Manufacturer Program: have no body dents,
rust, corrosion, paint mismatches or special colors, or paint which
is less than factory grade, dented, rusted, broken, missing chrome or
trim, ripped or stained, upholstery, seats, dash, headliner,
carpeting, trunk, or convertible vinyl top, missing interior trim,
sprung or misaligned doors or their openings, or worn, cracked,
split, broken or leaking weather-stripping, faulty window mechanisms,
or broken, cracked, missing glass, mirrors or lights, faulty
electronic systems, including on-board computers, processors,
sensors, controls, radios, stereos, and the like, faulty heating, air
conditioning or climate control systems, worn or faulty shock
absorbers or other suspension or steering parts, systems or
mechanisms;
(D) have an engine that does not burn an abnormal
amount of oil for a vehicle of comparable age or mileage, and there
shall be no uneven compression ratios across cylinders; no fluid
leaks in the engine, transmission(s), differential(s), steering
mechanism, brake system, or cooling system, faulty hoses, or faulty
exhaust systems;
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(E) have all accessories, insignia, decals,
lettering or special identification, or other auxiliary equipment or
markings on the body, fenders, bumpers, dash or elsewhere removed and
there must be no holes left by the removal thereof;
(F) have tires:
I. comparable to those initially delivered with such
Vehicle in design and quality;
II. in accordance with the specifications of the
Manufacturer of the Vehicle;
III. part of a matching set of four, plus spare (which
may be a "donut" if a "donut" spare is initially delivered
with such Vehicle);
IV. no less than 1/8 inch in tread remaining at its
shallowest point, show an excess wear marker built in by
its manufacturer; and
V. no obvious defect;
(G) have wheels:
I. comparable to those initially delivered with such
Vehicle in design and quality;
II. in accordance with the specifications of the
manufacturer of the Vehicle;
III. part of a matching set of four, plus spare (which
may be a "donut" if a "donut" spare is initially delivered
with such Vehicle); and
IV. no obvious defect; and
(H) be in Vehicle Turn-In Condition.
(b) The Lessee will return each Program Vehicle leased
hereunder (other than a Standard Casualty or a Program Vehicle which has
become an Ineligible Vehicle) to the nearest related Manufacturer official
auction or other facility designated by such Manufacturer at the Lessee's sole
expense or to such other location designated by the Lessor (with any
additional cost of delivery in excess of what would have been incurred upon
delivery to the related Manufacturer at the expense of the Lessor), in each
case in accordance with the requirements of Section 3.1(b) hereof.
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(c) Any rebate or credits applicable to the
unexpired term of any license plates for a Vehicle shall inure to
the benefit of the Lessee.
(d) If the Lessee shall fail to satisfy any
provision of Section 13.2(a), then the Lessee shall pay to the Lessor within 5
days after the end of the Term of this Agreement the aggregate amount of the
Termination Value of all the Vehicles subject to this Agreement immediately
prior to such end of Term (rather than the Residual Value Payment required by
subclause (x) of Section 13.2(a)).
13.3. Special Default Payments. (a) The Lessee will use its
best efforts to maintain the Program Vehicles leased hereunder such that no
Excess Damage Charges or Excess Mileage Charges will be deductible from the
Repurchase Price due from a Manufacturer or payable by Lessor upon the turn
back of such Program Vehicles under the applicable Manufacturer Program. Upon
receipt of payment of the Repurchase Price of each such Program Vehicle leased
hereunder from the Manufacturer (or the receipt of payment of the Repurchase
Price of each such Program Vehicle sold through an auction conducted by or
through a Manufacturer) or upon the date by which the Repurchase Price of each
such Program Vehicle turned back to a Manufacturer would have been paid if not
for a Manufacturer Event of Default, the Lessor will charge the Lessee for any
Excess Damage Charges and/or Excess Mileage Charges applicable to such Program
Vehicle pursuant to the applicable Manufacturer Program (any such charges are
referred to as "Program Vehicle Special Default Payments").
(b) The Lessee will use its best efforts to
maintain the Non-Program Vehicles leased hereunder in a manner such that no
Non-Program Vehicle Special Default Payments (as defined below) shall be due
upon disposition of such Non-Program Vehicles by or for the benefit of the
Lessor. Upon disposition of each Non-Program Vehicle leased hereunder by or
for the benefit of the Lessor, other than the sale of any such NonProgram
Vehicle to the Lessee in accordance with the terms hereof, the Lessor will
charge the Lessee (i) if such Non-Program Vehicle is manufactured by the same
Manufacturer as any Program Vehicle or is subject to a Manufacturer Program,
an amount equal to any Excess Damage Charges and/or Excess Mileage Charges
that would be applicable to the comparable Program Vehicle pursuant to the
applicable Manufacturer Program or an amount equal to any Excess Damage
Charges and/or Excess Mileage Charges that are applicable to such Vehicle
pursuant to the applicable Manufacturer Program, as the case may be, and (ii)
if such Non-Program Vehicle is subject to a Vehicle Turn-In Condition standard
established pursuant to Section 13.1(b)(ii), an amount equal to any charges
applicable to such Non-Program Vehicle pursuant to such Vehicle Turn-In
Condition standard (any such charges are referred to as "Non-Program Vehicle
Special Default Payments"
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and, together with the Program Vehicle Special Default Payments, the "Special
Default Payments").
(c) On each Payment Date, the Lessee shall pay to
the Lessor all Special Default Payments that have accrued during the Related
Month. The obligation of the Lessee to pay Special Default Payments shall
constitute the sole remedy respecting the breach of its covenant contained in
the first sentence of Section 13.3(a) and Section 13.3(b). The provisions of
this Section 13.3 will survive the expiration or earlier termination of the
Term.
13.4. Early Termination Payments. If the Lessee turns back
any Program Vehicle leased hereunder to a Manufacturer under its Manufacturer
Program, upon the receipt of the Repurchase Price of such Vehicle from such
Manufacturer or upon the date by which the Repurchase Price would have been
paid if not for a Manufacturer Event of Default, the Lessor will charge the
Lessee an amount equal to (i) the excess, if any, of (x) the Termination Value
of such Vehicle (as of the Turnback Date) over (y) the sum of the Repurchase
Price received with respect to such Vehicle or that would have been received
but for a Manufacturer Event of Default, as applicable, and any Special
Default Payments made by Lessee in respect of such Vehicle pursuant to Section
13.3, plus (ii) any unpaid Monthly Base Rent for the Minimum Term plus any
early turn back charges payable or deductible from the Repurchase Price for
Program Vehicles returned before the Minimum Term in accordance with Section
3.1(b) hereof (any such amount is referred to as an "Early Termination
Payment"). On each Payment Date, the Lessee shall pay to the Lessor all Early
Termination Payments that have accrued during the Related Month. The
provisions of this Section 13.4 will survive the expiration or earlier
termination of the Term.
14. DISPOSITION PROCEDURE. The Lessee will comply with the
requirements of law and the requirements of the Manufacturer Programs in
connection with, among other things, the delivery of Certificates of Title and
documents of transfer signed as necessary, signed Condition Reports, and
signed odometer statements to be submitted with the Program Vehicles or
NonProgram Vehicles returned to a Manufacturer pursuant to Section 2.6(b) and
accepted by the Manufacturer or its agent at the time of Program Vehicle or
Non-Program Vehicle return.
15. ODOMETER DISCLOSURE REQUIREMENT. The Lessee agrees to
comply with all requirements of law and all Manufacturer Program requirements
with respect to Program Vehicles leased hereunder in connection with the
transfer of ownership of any such Vehicle by the Lessor, including, without
limitation, the submission of any required odometer disclosure statement at
the time of any such transfer of ownership.
16. GENERAL INDEMNITY.
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16.1. Indemnity by the Lessee and the Guarantor. Each of the
Lessee and the Guarantor agrees jointly and severally to indemnify and hold
harmless the Lessor, the Lender and the Trustee and the Lessor's, the Lender's
and the Trustee's directors, officers, stockholders, agents and employees
(collectively, the "Indemnified Persons"), on a net after-tax basis against
any and all claims, demands and liabilities of whatsoever nature and all costs
and expenses relating to or in any way arising out of:
16.1.1. the ordering, delivery, acquisition, title
on acquisition, rejection, installation, possession, titling,
retitling, registration, re-registration, custody by the Lessee or
the Guarantor of title and registration documents, use, non-use,
misuse, operation, deficiency, defect, transportation, repair,
control or disposition of any Vehicle leased hereunder or to be
leased hereunder pursuant to a request by the Lessee. The foregoing
shall include, without limitation, any liability (or any alleged
liability) of the Lessor to any third party arising out of any of the
foregoing, including, without limitation, all legal fees, costs and
disbursements arising out of such liability (or alleged liability);
16.1.2. any document, stamp, filing, recording,
mortgage or other taxes (other than net income taxes of the Lessor)
which may be payable in connection with the lease of any Vehicles
hereunder or the execution, delivery, recording or filing of this
Agreement or of any other instruments or documents provided for
herein or delivered or to be delivered hereunder or in connection
herewith.
16.1.3. any violation by the Lessee or the
Guarantor of this Agreement or of any Related Documents to which the
Lessee or the Guarantor is a party or by which it is bound or any
laws, rules, regulations, orders, writs, injunctions, decrees,
consents, approvals, exemptions, authorizations, licenses and
withholdings of objecting of any governmental or public body or
authority and all other requirements having the force of law
applicable at any time to any Vehicle or any action or transaction by
the Lessee or the Guarantor with respect thereto or pursuant to this
Agreement;
16.1.4. all out of pocket costs of the Lessor
(including the fees and out of pocket expenses of counsel
for the Lessor) in connection with the execution, delivery
and performance of this Agreement and the other Related
Documents;
16.1.5. all out of pocket costs and expenses
(including reasonable attorneys' fees and legal expenses)
incurred by the Lessor, the Lender or the Trustee in connec-
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tion with the administration, enforcement, waiver or amendment of
this Agreement and any other Related Documents and all
indemnification obligations of the Lender or the Lessor under the
Related Documents (including all obligations of Lessor under Section
13.4 and Section 13.5 of the AESOP I Finance Lease Loan Agreement);
and
16.1.6. all costs, fees, expenses, damages and
liabilities (including, without limitation, the fees and out of
pocket expenses of counsel) in connection with, or arising out of,
any claim made by any third party against the Lessor for any reason
(including, without limitation in connection with any audit or
investigation conducted by a Manufacturer under its Manufacturer
Program).
If the Lessor shall actually receive any tax benefit (whether by way
of offset, credit, deduction, refund or otherwise) not already taken
into account in calculating the net after-tax basis for such payment
as a result of the payment of any tax indemnified pursuant to this
Section 16 or in connection with the circumstances giving rise to the
imposition of such tax, such tax benefit shall be used to offset any
indemnity payment owed pursuant to this Section 16 or shall be paid
to the Lessee (but only to the extent of any prior indemnity payments
actually made pursuant to this Section 16 and only after the Lessor
shall actually receive such tax benefits), provided, however, that no
such payment to the Lessee shall be made while a Finance Lease Event
of Default shall have occurred and be continuing.
16.2. Reimbursement Obligation by the Lessee and the
Guarantor. Each of the Lessee and the Guarantor shall forthwith upon demand
reimburse the Lessor or the relevant Indemnified Person for any sum or sums
expended with respect to any of the foregoing; provided, however, that to the
extent such amounts constitute Excluded Payments, such amounts shall be paid
only to the AESOP I Segregated Account; and provided further that, if so
requested by the Lessee or the Guarantor, the Lessor shall submit to the
Lessee or the Guarantor, as applicable, a statement documenting any such
demand for reimbursement or prepayment. To the extent that the Lessee or the
Guarantor in fact indemnifies the Lessor under the indemnity provisions of
this Agreement, the Lessee or the Guarantor, as applicable, shall be
subrogated to the Lessor's rights in the affected transaction and shall have a
right to determine the settlement of claims therein. The foregoing indemnity
as contained in this Section 16 shall survive the expiration or earlier
termination of this Agreement or any lease of any Vehicle hereunder.
16.3. Defense of Claims. The Lessor agrees to notify
the Lessee of any claim made against it for which the Lessee may
be liable pursuant to this Section 16 and, if the Lessee re-
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quests, to contest or allow the Lessee to contest such claim. If any Finance
Lease Event of Default shall have occurred and be continuing, no contest shall
be required, and any contest which has begun shall not be required to be
continued to be pursued, unless arrangements to secure the payment of the
Lessee's obligations pursuant to this Section 16 hereunder have been made and
such arrangements are reasonably satisfactory to the Lessor. The Lessor shall
not settle any such claim without the Lessee's consent, which consent shall
not be unreasonably withheld. Defense of any claim referred to in this Section
16 for which indemnity may be required shall, at the option and request of the
Indemnified Person, be conducted by the Lessee or the Guarantor, as
applicable. The Lessee or the Guarantor, as the case may be, will inform the
Indemnified Person of any such claim and of the defense thereof and will
provide copies of material documents relating to any such claim or defense to
such Indemnified Person upon request. Such Indemnified Person may participate
in any such defense at its own expense provided such participation does not
interfere with the Lessee's or the Guarantor's assertion of such claim or
defense. The Lessee and the Guarantor agree that no Indemnified Person will be
liable to the Lessee or the Guarantor, as applicable, for any claim caused
directly or indirectly by the inadequacy of any Vehicle for any purpose or any
deficiency or defect therein or the use or maintenance thereof or any repairs,
servicing or adjustments thereto or any delay in providing or failure to
provide such repairs, servicing or adjustments or any interruption or loss of
service or use thereof or any loss of business, all of which shall be the risk
and responsibility of the Lessee or the Guarantor. The rights and indemnities
of each Indemnified Person hereunder are expressly made for the benefit of,
and will be enforceable by, each Indemnified Person notwithstanding the fact
that such Indemnified Person is either no longer a party to (or entitled to
receive the benefits of) this Agreement, or was not a party to (or entitled to
receive the benefits of) this Agreement at its outset. Except as otherwise set
forth herein, nothing herein shall be deemed to require the Lessee or the
Guarantor to indemnify the Lessor for any of the Lessor's acts or omissions
which constitute gross negligence or willful misconduct. This general
indemnity shall not affect any claims of the type discussed above which the
Lessee or the Guarantor may have against the Manufacturer.
17. ASSIGNMENT.
17.1. Right of the Lessor to Assign this Agreement. The
Lessor shall have the right to finance the acquisition and ownership of
Vehicles by selling or assigning its right, title and interest in this
Agreement, including, without limitation, in moneys due from the Lessee and
any third party under this Agreement; provided, however, that any such sale or
assignment shall be subject to the rights and interest of the Lessee in such
Vehicles, including but not limited to the Lessee's right of
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quiet and peaceful possession of the Vehicles as set forth in Section 9 hereof,
and under this Agreement.
17.2. Limitations on the Right of the Lessee to Assign this
Agreement. The Lessee shall not, without prior written consent of the Lessor,
AFC II and the Trustee and without having satisfied the Rating Agency Consent
Condition and the CP Rating Agency Condition, assign this Agreement or any of
its rights hereunder to any other party; provided, however, the Lessee may
rent the Vehicles under the terms of its normal daily rental programs. Any
purported assignment in violation of this Section 17.2 shall be void and of no
force or effect. Nothing contained herein shall be deemed to restrict the
right of the Lessee to acquire or dispose of, by purchase, lease, financing,
or otherwise, motor vehicles that are not subject to the provisions of this
Agreement.
18. DEFAULT AND REMEDIES THEREFOR.
18.1. Events of Default. Any one or more of the following
will constitute an event of default (a "Finance Lease Event of Default") as
that term is used herein:
18.1.1. there occurs (i) a default in the payment
of the portion of Monthly Base Rent that relates to the Loan
Principal Amount, the Special Default Payments, the Early Termination
Payments, Vehicle Purchase Price or Termination Value upon a Standard
Casualty or when a Vehicle becomes an Ineligible Vehicle or upon a
Vehicle Return Default or any Supplemental Rent (to the extent not
included in any of the foregoing) and the continuance thereof for a
period of five Business Days or (ii) a default and continuance
thereof for five Business Days after notice thereof by the Lessor or
the Trustee to the Lessee or the Guarantor in the payment of any
amount payable under this Agreement (other than amounts described in
clause (i) above);
18.1.2. any unauthorized assignment or transfer
of this Agreement by the Lessee or the Guarantor occurs;
18.1.3. the failure, in any material respect, of
the Lessee and the Guarantor to maintain, or cause to be
maintained, insurance as required in Section 5 or Section
31.3;
18.1.4. the failure of the Lessee and the Guarantor
to observe or perform any other covenant, condition, agreement or
provision hereof, including, but not limited to, usage, and
maintenance, and such default continues for more than thirty (30)
days after the date written notice thereof is delivered by the Lessor
or the Trustee to the Lessee;
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18.1.5. if any representation or warranty made by
the Lessee or the Guarantor herein is inaccurate or incorrect or is
breached or is false or misleading in any material respect as of the
date of the making thereof or any schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf
of the Lessee or the Guarantor to the Lessor or the Trustee is false
or misleading in any material respect on the date as of which the
facts therein set forth are stated or certified, and the circumstance
or condition in respect of which such representation, warranty or
writing was inaccurate, incorrect, breached, false or misleading in
any material respect, as the case may be, shall not have been
eliminated or otherwise cured for thirty (30) days after the earlier
of (x) the date of the receipt of written notice thereof from the
Lessor, the Lender or the Trustee to the Guarantor or the Lessee and
(y) the date the Guarantor or the Lessee learns of such circumstance
or condition;
18.1.6. an Event of Bankruptcy occurs with re-
spect to the Lessee or the Guarantor;
18.1.7. a Loan Event of Default occurs;
18.1.8. an AESOP I Operating Lease Event of
Default or an AESOP II Operating Lease Event of Default
occurs; or
18.1.9. the Pension Benefit Guaranty Corporation or
the Internal Revenue Service shall have filed notice of one or more
liens against the Lessee (unless such lien does not purport to cover
the Collateral or any amount payable under the Leases), and, in the
case of notice filed by the Internal Revenue Service, such notice
shall have remained in effect for more than thirty (30) days unless,
prior to the expiration of such period, the Lessee shall have
provided the Lessor with a bond in an amount at least equal to the
amount of such lien or, in the case of any such lien in an amount
less than $1,000,000, the Lessee shall have established to the
reasonable satisfaction of the Lessor that such lien is being
contested in good faith and that adequate reserves have been
established in respect of the claim giving rise to such lien.
18.2. Effect of Finance Lease Event of Default or
Liquidation Event of Default. If any Finance Lease Event of Default described
in Section 18 or any Liquidation Event of Default shall occur, (i) the rights
of the Lessee to place Vehicle Orders pursuant to Section 2.1 and to lease
additional Vehicles from the Lessor shall immediately terminate, (ii) if AFC
II has declared the Loan Note under any Loan Agreement to be due and payable
pursuant to Section 12.2 of such Loan Agreement, any
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accrued and unpaid Monthly Base Rent, Supplemental Rent and all other payments
accrued but unpaid under this Agreement (calculated as if all Vehicles had
become a Standard Casualty for the Related Month and the full amount of
interest on such Loan Note was then due and payable in full) shall,
automatically, without further action by the Lessor or the Trustee, become
immediately due and payable and (iii) the Lessee shall, at the request of the
Lessor, return or cause to be returned all Vehicles subject to this Agreement
(and the Servicer shall deliver to the Trustee the Certificates of Title
relating thereto) to the Lessor in accordance with the provisions of Section
13.2 hereof.
18.3. Rights of Lessor Upon Finance Lease Event of Default,
Limited Liquidation Event of Default or Liquidation Event of Default. If a
Finance Lease Event of Default, Limited Liquidation Event of Default or
Liquidation Event of Default shall occur, then the Lessor at its option may:
(i) Proceed by appropriate court action or actions,
either at law or in equity, to enforce performance by the Lessee or
the Guarantor of the applicable covenants and terms of this Agreement
or to recover damages for the breach hereof calculated in accordance
with Section 18.5; or
(ii) By notice in writing to the Lessee terminate
this Agreement in its entirety and/or the right of possession
hereunder of the Lessee of the Vehicles, and the Lessor may direct
delivery by the Lessee or the Guarantor of documents of title to the
Vehicles, whereupon all rights and interests of the Lessee and the
Guarantor to the Vehicles will cease and terminate (but the Lessee
and the Guarantor will remain liable hereunder as herein provided;
provided, however, their liability will be calculated in accordance
with Section 18.5); and thereupon, the Lessor or its agents may
peaceably enter upon the premises of the Lessee or other premises
where the Vehicles may be located and take possession of them and
thenceforth hold, possess and enjoy the same free from any right of
the Lessee or the Guarantor, or their successors or assigns, to use
the Vehicles for any purpose whatsoever, and the Lessor will,
nevertheless, have a right to recover from the Lessee or the
Guarantor any and all amounts which under the terms of this Section
18.3 (as limited by Section 18.5 of this Agreement) as may be then
due. The Lessor will provide the Lessee with written notice of the
place and time of the sale at least five days prior to the proposed
sale, which shall be deemed commercially reasonable, and the Lessee
may purchase the Vehicle(s) at the sale. Each and every power and
remedy hereby specifically given to the Lessor will be in addition to
every other power and remedy hereby specifically given or now or
hereafter existing at law, in equity or in bankruptcy and each and
every power and remedy may be exercised from time to time
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and simultaneously and as often and in such order as may be deemed
expedient by the Lessor; provided, however, that the measure of
damages recoverable against the Lessee will in any case be calculated
in accordance with Section 18.5. All such powers and remedies will be
cumulative, and the exercise of one will not be deemed a waiver of
the right to exercise any other or others. No delay or omission of
the Lessor in the exercise of any such power or remedy and no renewal
or extension of any payments due hereunder will impair any such power
or remedy or will be construed to be a waiver of any default or any
acquiescence therein. Any extension of time for payment hereunder or
other indulgence duly granted to the Lessee or the Guarantor will not
otherwise alter or affect the Lessor's rights or the obligations
hereunder of the Lessee and the Guarantor. The Lessor's acceptance of
any payment after it will have become due hereunder will not be
deemed to alter or affect the Lessor's rights hereunder with respect
to any subsequent payments or defaults therein; or
(iii) By notice in writing to the Lessee, termi-
nate the Power of Attorney.
18.4. Rights of Lender and Trustee Upon Liquidation Event of
Default, Limited Liquidation Event of Default and Non-Performance of Certain
Covenants.
(i) If a Liquidation Event of Default or a Limited
Liquidation Event of Default shall have occurred and be continuing,
the Lender and the Trustee, to the extent provided in the Indenture,
shall have the rights against the Guarantor, the Lessee, and the
AESOP I Finance Lease Loan Collateral provided in the Indenture upon
a Liquidation Event of Default or a Limited Liquidation Event of
Default, as the case may be, including the right to take possession
of all or a portion of the Vehicles immediately from the Lessee.
(ii) If the Guarantor or the Lessee shall default
in the due performance and observance of any of its obligations under
Section 31.3, 31.4, 31.5(iv), 31.10, 32.3 or 32.4 hereof, and such
default shall continue unremedied for a period of 30 days after
notice thereof shall have been given to the Lessee by the Lessor, the
Lender or the Trustee, as assignee of the Lessor's rights hereunder,
shall have the ability to exercise all rights, remedies, powers,
privileges and claims of the Guarantor or the Lessee against the
Manufacturers under or in connection with the Manufacturer Programs
with respect to (i) Program Vehicles leased hereunder that the Lessee
has determined to turn back to the Manufacturers under such
Manufacturer Programs and (ii) whether or not the Lessee shall then
have determined to turn
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back such Program Vehicles, any Program Vehicles leased hereunder for
which the applicable Repurchase Period will end within one week or
less.
(iii) Upon a default in the performance (after
giving effect to any grace periods provided herein) by the Guarantor
or the Lessee of its obligations hereunder to keep the Vehicles free
of Liens (other than Permitted Liens) and to maintain the Trustee's
first priority perfected security interest in the AESOP I Finance
Lease Loan Collateral, the Lessor or the Trustee shall have the right
to take actions reasonably necessary to correct such default with
respect to the subject Vehicles including the execution of UCC
financing statements with respect to Manufacturer Programs and other
general intangibles and the completion of Vehicle Perfection and
Documentation Requirements on behalf of the Guarantor or the Lessee
as applicable.
(iv) Upon the occurrence of a Liquidation Event of
Default or a Limited Liquidation Event of Default, the Lessee shall
return any Program Vehicles leased hereunder to the related
Manufacturer in accordance with the instructions of the Lessor. To
the extent any Manufacturer fails to accept any such Program Vehicles
under the terms of the applicable Manufacturer Program, the Lessor
shall have the right to otherwise dispose of such Program Vehicles
and to direct the Lessee to dispose of such Program Vehicles in
accordance with its instructions. Upon the occurrence of a
Liquidation Event of Default or a Limited Liquidation Event of
Default, the Lessee shall dispose of any such Non-Program Vehicles
leased hereunder in accordance with the instructions of the Lessor.
To the extent the Lessee fails to so dispose of any such Non-Program
Vehicles, the Lessor shall have the right to otherwise dispose of
such Non-Program Vehicles. In addition, following the occurrence of a
Liquidation Event of Default or a Limited Liquidation Event of
Default, the Lessor shall have all of the rights, remedies, powers,
privileges and claims vis-a-vis the Guarantor or the Lessee,
necessary or desirable to allow (a) the Lender to exercise the
rights, remedies, powers, privileges and claims given to the Lender
pursuant to Section 12.3 of the AESOP I Finance Lease Loan Agreement,
and each of the Guarantor and the Lessee acknowledges that it has
hereby granted to the Lessor all of the rights, remedies, powers,
privileges and claims granted by the Lessor to the Lender pursuant to
Article 7 of the AESOP I Finance Lease Loan Agreement and that, under
certain circumstances set forth in the AESOP I Finance Lease Loan
Agreement, the Lender may act in lieu of the Lessor in the exercise
of such rights, remedies, powers, privileges and claims and (b) the
Trustee to exercise the rights, remedies, powers, privileges and
claims given to the Trustee pursuant to Sections 3.3 and 9.2 of the
Indenture,
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and each of the Guarantor and the Lessee acknowledges that it has
hereby granted to the Lessor all of the rights, remedies, powers,
privileges and claims granted by the Lender to the Trustee pursuant
to Article 3 of the Indenture and that, under certain circumstances
set forth in the Indenture, the Trustee may act in lieu of the Lessor
in the exercise of such rights, remedies, powers, privileges and
claims.
18.5. Measure of Damages. If a Finance Lease Event of
Default, a Limited Liquidation Event of Default or a Liquidation Event of
Default occurs and the Lessor, the Lender or the Trustee exercises the
remedies granted to the Lessor, the Lender or the Trustee under this Article
18, the amount that the Lessor shall be permitted to recover shall be equal
to:
(i) all Monthly Base Rent, all Supplemental Rent
and all other payments payable under this Agreement (calculated as
provided in Section 18.2); plus
(ii) any damages and expenses, including reasonable
attorneys' fees and expenses (but excluding net after-tax losses of
federal and state income tax benefits to which the Lessor would
otherwise be entitled as a result of this Agreement), which the
Lessor, the Lender or the Trustee will have sustained by reason of
the Finance Lease Event of Default, Limited Liquidation Event of
Default or Liquidation Event of Default, together with reasonable
sums for such attorneys' fees and such expenses as will be expended
or incurred in the seizure, storage, rental or sale of the Vehicles
or in the enforcement of any right or privilege hereunder or in any
consultation or action in such connection; plus
(iii) interest on amounts due and unpaid under this
Agreement at the applicable Lender's Carrying Cost Interest Rate plus
1.0% from time to time computed from the date of the Finance Lease
Event of Default, Limited Liquidation Event of Default or Liquidation
Event of Default or the date payments were originally due or from the
date of each expenditure by the Lessor which is recoverable from the
Lessee pursuant to this Section 18, as applicable, to and including
the date payments are made by the Lessee.
18.6. Vehicle Return Default. If the Lessee fails to comply
with the provisions of (a) Section 13.2 or (b) Section 3.1(b) or (c) hereof
(each, a "Vehicle Return Default"), and the Vehicle is not redesignated as a
Non-Program Vehicle in accordance with Section 2.7, then the Lessor at its
option may:
(i) proceed by appropriate court action or actions,
either at law or equity, to enforce performance by
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the Lessee of such covenants and terms of this Agreement or to
recover damages for the breach hereof calculated in accordance with
Section 18.5 as it relates to such Vehicles; or
(ii) by notice in writing to the Lessee following
the occurrence of such Vehicle Return Default, terminate the
Agreement with respect to such Vehicle and/or the right of possession
hereunder of the Lessee with respect to such Vehicle and the Lessor
may direct delivery by the Lessee or the Guarantor of documents of
title to such Vehicle, whereupon all rights and interests of the
Lessee and the Guarantor to such Vehicle will cease and terminate
(but the Lessee and the Guarantor will remain liable hereunder as
herein provided, provided, however, that their liability will be
calculated in accordance with Section 18.5 as it relates to such
Vehicle); and thereupon the Lessor or its agents may peaceably enter
upon the premises of the Lessee or other premises where such Vehicle
may be located and take possession of it and thenceforth hold,
possess and enjoy the same free from any right of the Lessee or the
Guarantor or their successors or assigns to use such Vehicle for any
purpose whatsoever and the Lessor will nevertheless have a right to
recover from the Lessee or the Guarantor any and all amounts which,
under the terms of this Agreement may then be due. The Lessor will
provide the Lessee with written notice of the place and time of the
sale of such Vehicle at least five days prior to the proposed sale,
which sale shall be deemed commercially reasonable and the Lessee may
purchase the Vehicle at such sale; or
(iii) hold, keep idle or lease to others such
Vehicle, as the Lessor in its sole discretion may determine, free and
clear of any rights of the Lessee without any duty to account to the
Lessee with respect to such action or inaction or for any proceeds
with respect to such action or inaction except that the Lessee's
obligation to pay Monthly Base Rent for periods commencing after the
Lessee shall have been deprived of the use of such Vehicle pursuant
to this clause (iii) shall be reduced by the net proceeds, if any,
received by the Lessor from leasing such Vehicle to any person other
than the Lessee for the same period or any portion thereof; or
(iv) whether or not the Lessor shall have exercised
or shall thereafter exercise any of the rights under the foregoing
clauses (i), (ii) or (iii), demand by written notice to the Lessee
that the Lessee pay to the Lessor immediately, and the Lessee shall
so pay to the Lessor as liquidated damages for loss of a bargain and
not as a penalty, any unpaid Monthly Base Rent due through the
Payment Date with respect to the Related Month during which such
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Vehicle is rejected by the Manufacturer or otherwise is not returned
to the Manufacturer or on the date the Lessee is required to, but
does not, sell, return or otherwise dispose of such Vehicle pursuant
to Section 3.1 or 2.6(b) hereof, any Supplemental Rent then accrued
and unpaid, plus whichever of the following amounts the Lessor, in
its sole discretion, shall specify in such notice:
(1) an amount equal to the excess, if any,
of the Termination Value for such Vehicle over the Market
Value of such Vehicle as of (a) the date such Vehicle (if
such Vehicle is a Program Vehicle) is rejected by a
Manufacturer for not meeting its Manufacturer Program's
Vehicle Turn-In Condition guidelines, or (b) the date the
Lessee is required to, but does not sell, return or
otherwise dispose of such Vehicle (if such Vehicle is a
Non-Program Vehicle) pursuant to Section 3.1 or 2.6(b)
hereof; or
(2) an amount equal to the Termination
Value for such Vehicle as of (a) the date such Vehicle is
rejected by a Manufacturer for not meeting its Manufacturer
Program's Vehicle Turn-In Condition guidelines (if such
Vehicle is a Program Vehicle), or (b) the date the Lessee is
required to, but does not sell, return or otherwise dispose
of such Vehicle (if such Vehicle is a Non-Program Vehicle)
pursuant to Section 3.1 or 2.6(b) hereof, in which event (x)
the Lessee shall be entitled to any physical damage
insurance proceeds applicable to such Vehicle, and (y) the
Administrator shall request the Trustee to cause its Lien to
be removed from the Certificate of Title for such Vehicle.
(v) If the Lessor shall have sold any Vehicle
pursuant to clause (ii) above, the Lessor in lieu of exercising its
rights under clause (iv) above with respect to such Vehicle may, if
it shall so elect, demand that the Lessee pay to the Lessor and the
Lessee shall pay to the Lessor on the date of such sale as liquidated
damages for loss of a bargain and not as a penalty, any unpaid
Monthly Base Rent and Supplemental Rent due through such date of sale
plus the amount of any deficiency between the net proceeds of such
sale and the Termination Value of such Vehicle computed as of the
date of the sale.
18.7. Application of Proceeds. The proceeds of any sale or
other disposition pursuant to Section 18.2, 18.3 or 18.6 shall be applied in
the following order: (i) to the reasonable costs and expenses incurred by the
Lessor, the Lender or the Trustee in connection with such sale or disposition,
including any reasonable costs associated with repairing any Vehicles, and
reasonable attorneys' fees in connection with the enforcement of
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this Agreement, (ii) to the payment of outstanding Monthly Base Rent, (iii) to
the payment of any Supplemental Rent, (iv) to the payment of all other amounts
due hereunder, and (v) any remaining amounts to the Lessor, or such Person(s)
as may be lawfully entitled thereto.
19. MANUFACTURER EVENTS OF DEFAULT. (a) Upon the occurrence
of a Manufacturer Event of Default with respect to any Manufacturer (a
"Defaulting Manufacturer"), the Lessee, on behalf of the Lessor (i) shall no
longer place Vehicle Orders for additional Program Vehicles from such
Manufacturer and (ii) shall cancel any Vehicle Order with such Defaulting
Manufacturer for any Program Vehicle with respect to which a VIN has not been
assigned as of the date such Manufacturer Event of Default occurs.
(b) Upon the occurrence of a Manufacturer Event
of Default, the Lessee agrees to (i) act at the direction of the Lessor, the
Lender or the Trustee to take commercially reasonable action to liquidate the
Program Vehicles subject to a Manufacturer Program with respect to which such
Manufacturer Event of Default has occurred or (ii) convert such Program
Vehicles to Non-Program Vehicles in accordance with Section 2.7 hereof and
subject to the limitations set forth therein.
(c) Upon the occurrence of a Manufacturer Event
of Default, the Lessee shall be liable for any failure by the Lessor to
recover all or any portion of the Repurchase Price with respect to any Program
Vehicles subject to the Manufacturer Program of the Defaulting Manufacturer or
any Non-Program Vehicle returned to a Defaulting Manufacturer under a
Manufacturer Program pursuant to Section 2.6(b). The Lessee may satisfy its
obligation hereunder by purchasing the Program Vehicles of the Defaulting
Manufacturer pursuant to Section 2.5 or by selling such Program Vehicles to a
third party; provided, however, that the funds received by the Lessor with
respect to such Vehicle shall equal the Termination Value for such Vehicle,
together with all Monthly Base Rent and Supplemental Rent with respect to such
Vehicle.
20. [RESERVED].
21. [RESERVED].
22. CERTIFICATION OF TRADE OR BUSINESS USE. The Lessee hereby
warrants and certifies, under penalties of perjury, that it intends to use the
Vehicles which are subject to this Agreement, in its trade or business.
23. SURVIVAL. In the event that, during the term of this
Agreement, the Lessee or the Guarantor becomes liable for the payment or
reimbursement of any obligations, claims or taxes pursuant to any provision
hereof, such liability will continue,
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notwithstanding the expiration or termination of this Agreement, until all
such amounts are paid or reimbursed by the Lessee.
24. [RESERVED].
25. [RESERVED].
26. GUARANTY.
26.1. Guaranty. In order to induce the Lessor to execute and
deliver this Agreement and to lease Vehicles to the Lessee, and in
consideration thereof, the Guarantor hereby (i) unconditionally and
irrevocably guarantees to the Lessor the obligations of the Lessee to make any
payments required to be made by them under this Agreement, (ii) agrees to
cause the Lessee to duly and punctually perform and observe all of the terms,
conditions, covenants, agreements and indemnities of the Lessee under this
Agreement, and (iii) agrees that, if for any reason whatsoever, the Lessee
fails to so perform and observe such terms, conditions, covenants, agreements
and indemnities, the Guarantor will duly and punctually perform and observe
the same (the obligations referred to in clauses (i) through (iii) above are
collectively referred to as the "Guaranteed Obligations"). The liabilities and
obligations of the Guarantor under the guaranty contained in this Section 26
(this "Guaranty") will be absolute and unconditional under all circumstances.
This Guaranty shall be a guaranty of payment and performance and not merely of
collection, and the Guarantor hereby agrees that it shall not be required that
the Lessor, the Lender or the Trustee assert or enforce any rights against the
Lessee or any other person before or as a condition to the obligations of the
Guarantor pursuant to this Guaranty.
26.2. Scope of Guarantor's Liability. The Guarantor's
obligations hereunder are independent of the obligations of the Lessee, any
other guarantor or any other Person, and the Lessor may enforce any of its
rights hereunder independently of any other right or remedy that the Lessor
may at any time hold with respect to this Agreement or any security or other
guaranty therefor. Without limiting the generality of the foregoing, the
Lessor may bring a separate action against the Guarantor without first
proceeding against the Lessee, any other guarantor or any other Person, or any
security held by the Lessor, and regardless of whether the Lessee or any other
guarantor or any other Person is joined in any such action. The Guarantor's
liability hereunder shall at all times remain effective with respect to the
full amount due from the Lessee hereunder, notwithstanding any limitations on
the liability of the Lessee to the Lessor contained in any of the Related
Documents or elsewhere. The Lessor's rights hereunder shall not be exhausted
by any action taken by the Lessor until all Guaranteed Obligations have been
fully paid and performed. The liability of the Guarantor hereunder shall be
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reinstated and revived, and the rights of the Lessor shall continue, with
respect to any amount at any time paid on account of the Guaranteed
Obligations which shall thereafter be required to be restored or returned by
the Lessor upon the bankruptcy, insolvency or reorganization of the Lessee,
any other guarantor or any other Person, or otherwise, all as though such
amount had not been paid.
26.3. Lessor's Right to Amend this Agreement, Etc. The
Guarantor authorizes the Lessor, at any time and from time to time without
notice and without affecting the liability of the Guarantor hereunder, to: (a)
alter the terms of all or any part of the Guaranteed Obligations and any
security and guaranties therefor including without limitation modification of
times for payment and rates of interest; (b) accept new or additional
instruments, documents, agreements, security or guaranties in connection with
all or any part of the Guaranteed Obligations; (c) accept partial payments on
the Guaranteed Obligations; (d) waive, release, reconvey, terminate, abandon,
subordinate, exchange, substitute, transfer, compound, compromise, liquidate
and enforce all or any part of the Guaranteed Obligations and any security or
guaranties therefor, and apply any such security and direct the order or
manner of sale thereof (and bid and purchase at any such sale), as the Lessor
in its discretion may determine; (e) release the Lessee, any other guarantor
or any other Person from any personal liability with respect to all or any
part of the Guaranteed Obligations; and (f) assign its rights under this
Guaranty in whole or in part.
26.4. Waiver of Certain Rights by Guarantor. The Guarantor
hereby waives each of the following to the fullest extent allowed by law:
(a) all statutes of limitation as a defense to any
action brought by the Lessor against the Guarantor;
(b) any defense based upon:
(i) the unenforceability or invalidity of all or
any part of the Guaranteed Obligations or any security or
other guaranty for the Guaranteed Obligations or the lack of
perfection or failure of priority of any security for the
Guaranteed Obligations; or
(ii) any act or omission of the Lessor or any other
Person that directly or indirectly results in the discharge
or release of the Lessee or any other Person or any of the
Guaranteed Obligations or any security therefor; or
(iii) any disability or any other defense of the
Lessee or any other Person with respect to the Guar-
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anteed Obligations, whether consensual or arising by
operation of law or any bankruptcy, insolvency or
debtor-relief proceeding, or from any other cause;
(c) any right (whether now or hereafter existing) to
require the Lessor, as a condition to the enforcement of
this Guaranty, to:
(i) accelerate the Guaranteed Obligations;
(ii) give notice to the Guarantor of the terms,
time and place of any public or private sale of any
security for the Guaranteed Obligations; or
(iii) proceed against the Lessee, any other
guarantor or any other Person, or proceed against or exhaust
any security for the Guaranteed Obligations;
(d) all rights of subrogation, all rights to enforce any
remedy that the Lessor now or hereafter has against the Lessee or any
other Person, and any benefit of, and right to participate in, any
security now or hereafter held by the Lessor with respect to the
Guaranteed Obligations;
(e) presentment, demand, protest and notice of any kind,
including without limitation notices of default and notice of
acceptance of this Guaranty;
(f) all suretyship defenses and rights of every nature
otherwise available under New York law and the laws of any
other jurisdiction; and
(g) all other rights and defenses the assertion or exercise
of which would in any way diminish the liability of the Guarantor
hereunder.
26.5. [RESERVED].
26.6. Guarantor to Pay Lessor's Expenses. The Guarantor
agrees to pay to the Lessor, on demand, all costs and expenses, including
attorneys' and other professional and paraprofessional fees, incurred by the
Lessor in exercising any right, power or remedy conferred by this Guaranty, or
in the enforcement of this Guaranty, whether or not any action is filed in
connection therewith. Until paid to the Lessor, such amounts shall bear
interest, commencing with the Lessor's demand therefor, at the Prime Rate plus
1.0%.
26.7. Reinstatement. This Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time payment of any
of the amounts payable by the Lessee under this Agreement is rescinded or must
otherwise be restored or returned
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by the Lessor, upon an event of bankruptcy, dissolution, liquidation or
reorganization of the Lessee or the Guarantor or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Lessee or the Guarantor or any substantial part of their
respective property, or otherwise, all as though such payment had not been
made.
26.8. Pari Passu Indebtedness. The Guarantor (i) represents
and warrants that, as of the date hereof, the obligations of the Guarantor
under this Guaranty will rank pari passu with any existing unsecured
indebtedness of the Guarantor and (ii) covenants and agrees that from and
after the date hereof the obligations of the Guarantor under this Guaranty
will rank pari passu with any unsecured indebtedness of the Guarantor incurred
after the date hereof.
27. RIGHTS OF LESSOR ASSIGNED TO TRUSTEE. Notwithstanding
anything to the contrary contained in this Agreement, each of the Lessee and
the Guarantor acknowledges that the Lessor has assigned all of its rights
under this Agreement (other than its right to receive Excluded Payments) to
AFC-II pursuant to the AESOP I Finance Lease Loan Agreement and AFC-II has
assigned such rights to the Trustee pursuant to the Indenture. Accordingly,
each of the Lessee and the Guarantor agrees that:
(i) Subject to the terms of the AESOP I Loan Agreement and
the Indenture, the Trustee shall have all the rights, powers,
privileges and remedies of the Lessor hereunder (other than the right
to receive Excluded Payments, which shall be paid to the AESOP I
Segregated Account) and the Guarantor's and the Lessee's obligations
hereunder (including the payment of Monthly Base Rent, Supplemental
Rent and all other amounts payable hereunder) shall not be subject to
any claim or defense which the Guarantor or the Lessee may have
against the Lessor or any Lessee (other than the defense of payment
actually made) and shall be absolute and unconditional and shall not
be subject to any abatement, setoff, counterclaim, deduction or
reduction for any reason whatsoever. Specifically, each of the Lessee
and the Guarantor agrees that, upon the occurrence of a Finance Lease
Event of Default, a Limited Liquidation Event of Default or a
Liquidation Event of Default, the Trustee may exercise (for and on
behalf of the Lessor) any right or remedy against the Lessee or the
Guarantor provided for herein (other than with respect to the right
to receive Excluded Payments) and neither the Lessee nor the
Guarantor will interpose as a defense that such claim should have
been asserted by the Lessor;
(ii) Upon the delivery by the Trustee of any notice to the
Lessee or the Guarantor stating that a Finance Lease Event of
Default, a Limited Liquidation Event of Default or
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a Liquidation Event of Default has occurred, the Lessee or the
Guarantor, as the case may be, will, if so requested by the Trustee,
treat the Trustee or the Trustee's designee for all purposes (other
than with respect to the right to receive Excluded Payments) as the
Lessor hereunder and in all respects comply with all obligations
under this Agreement that are asserted by the Trustee as the
successor to the Lessor hereunder, irrespective of whether the Lessee
or the Guarantor has received any such notice from the Lessor;
provided, however, the Trustee, shall in no event be liable to the
Lessee for any action taken by it in its capacity as successor to the
Lessor other than actions that constitute negligence or willful
misconduct;
(iii) Each of the Lessee and the Guarantor acknowledges that
pursuant to the AESOP I Finance Lease Loan Agreement and the
Indenture the Lessor has irrevocably authorized and directed the
Lessee or the Guarantor to, and each of the Lessee and the Guarantor
shall, make payments of Monthly Base Rent and Supplemental Rent
hereunder (and any other payments hereunder) (other than Excluded
Payments, which shall be paid to the AESOP I Segregated Account)
directly to the Trustee for deposit in the Collection Account
established by the Trustee for receipt of such payments pursuant to
the Indenture and such payments shall discharge the obligation of the
Lessee and the Guarantor to the Lessor hereunder to the extent of
such payments. Upon written notice to the Lessee or the Guarantor of
a sale or assignment by the Trustee of its right, title and interest
in moneys due under this Agreement to a successor Trustee, the Lessee
or the Guarantor, as the case may be, shall thereafter make payments
of all Monthly Base Rent and Supplemental Rent (and any other
payments hereunder) (other than Excluded Payments, which shall be
paid to the AESOP I Segregated Account) to the party specified in
such notice;
(iv) Upon request made by the Trustee at any time, each of
the Lessee and the Guarantor will take such actions as are requested
by the Trustee to assist the Trustee in maintaining the Trustee's
first priority perfected security interest in the Vehicles leased
hereunder, the Certificates of Title with respect thereto and any
other portion of the AESOP I Finance Lease Loan Collateral; and
(v) In the event that the Indenture terminates and all
obligations owing under the Indenture have been paid in full, the
Lender shall have all rights under this Agreement previously assigned
to the Trustee.
28. [RESERVED].
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29. MODIFICATION AND SEVERABILITY. The terms of this
Agreement will not be waived, altered, modified, amended, supplemented or
terminated in any manner whatsoever unless (i) the same shall be in writing
and signed and delivered by the Lessor, the Guarantor and the Lessee and
consented to in writing by the Lender and the Trustee, (ii) the Lessor shall
have received in writing confirmation from each of the Rating Agencies that
its then current rating of the Notes and the Commercial Paper Notes will not
be reduced or withdrawn as a result thereof and (iii) the Rating Agency
Consent Condition shall have been satisfied. If any part of this Agreement is
not valid or enforceable according to law, all other parts will remain
enforceable. The Lessor shall provide prompt written notice to each Rating
Agency of any such waiver, modification or amendment.
30. CERTAIN REPRESENTATIONS AND WARRANTIES. The Lessee
represents and warrants to the Lessor and the Trustee as to itself, and the
Guarantor represents and warrants to the Lessor and the Trustee as to itself
and as to the Lessee, that as of the Initial Closing Date and as of each
Series Closing Date:
30.1. Organization; Ownership; Power; Qualification. Each of
the Guarantor and the Lessee is (i) a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the corporate power and authority to own its
properties and to carry on its business as now being and hereafter proposed to
be conducted, and (iii) is duly qualified, in good standing and authorized to
do business in each jurisdiction in which the character of its properties or
the nature of its businesses requires such qualification or authorization.
30.2. Authorization; Enforceability. Each of the Guarantor
and the Lessee has the corporate power and has taken all necessary corporate
action to authorize it to execute, deliver and perform this Agreement and each
of the other Related Documents to which it is a party in accordance with their
respective terms, and to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by each of the
Guarantor and the Lessee and is, and each of the other Related Documents to
which the Guarantor or the Lessee is a party is, a legal, valid and binding
obligation of the Guarantor and the Lessee, enforceable in accordance with its
terms.
30.3. Compliance. The execution, delivery and performance,
in accordance with their respective terms, by each of the Guarantor and the
Lessee of this Agreement and each of the other Related Documents to which it
is a party, and the consummation of the transactions contemplated hereby and
thereby, do not and will not (i) require any consent, approval, authorization
or registration not already obtained or effected, (ii) violate any applica-
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ble law with respect to the Guarantor or the Lessee which violation could
result in a Material Adverse Effect, (iii) conflict with, result in a breach
of, or constitute a default under the certificate or articles of incorporation
or by-laws, as amended, of the Guarantor or the Lessee, (iv) conflict with,
result in a breach of, or constitute a default under any indenture, agreement,
or other instrument to which the Guarantor or the Lessee is a party or by
which its properties may be bound which conflict, breach or default could
result in a Material Adverse Effect, or (v) result in or require the creation
or imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by the Lessee except Permitted Encumbrances.
30.4. Financial Information; Financial Condition. All
balance sheets, all statements of operations, of shareholders' equity and of
cash flow, and other financial data (other than projections) which have been
or shall hereafter be furnished to the Lessor, the Lender or the Trustee for
the purposes of or in connection with this Agreement or the Related Documents
have been and will be prepared in accordance with GAAP and do and will present
fairly the financial condition of the entities involved as of the dates
thereof and the results of their operations for the periods covered thereby.
Such financial data include the following financial statements and reports
which have been furnished to the Lessor and the Trustee on or prior to such
Closing Date:
(i) the audited consolidated financial statements consisting
of a statement of financial position of the Guarantor and its
Consolidated Subsidiaries as of December 31, 1996 and as to the
Predecessor Companies as of December 31, 1995, and the related
statements of operations, stockholder's equity and cash flows of the
Guarantor and its Consolidated Subsidiaries for the period October
17, 1996 (Date of Acquisition) to December 31, 1996 and, as to the
Predecessor Companies, the related statements of operations,
stockholder's equity and cash flows for each of the two years in the
period ended December 31, 1995 and the period January 1, 1996 to
October 16, 1996;
(ii) the unaudited condensed consolidated financial
statements consisting of a statement of financial position of the
Guarantor and its Consolidated Subsidiaries as of March 31, 1997, and
the related statements of operations, stockholder's equity and cash
flows of the Guarantor and its Consolidated Subsidiaries for the
three months ended March 31, 1997 and, as to the Predecessor
Companies, the related statements of operations, stockholder's equity
and cash flows for the three months ended March 31, 1996; and
(iii) the unaudited pro forma consolidated financial
statements consisting of a statement of financial position
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of the Guarantor and its Consolidated Subsidiaries as of March 31,
1997, and the related statements of operations of the Guarantor and
its Consolidated Subsidiaries for the year ended December 31, 1996
and for the three months ended March 31, 1997, and such pro forma
consolidated financial statements present fairly the information
shown therein, have been prepared in accordance with the Securities
and Exchange Commission's rules and guidelines with respect to pro
forma financial statements and have been properly compiled on the
basis described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances
referred to therein.
30.5. Litigation. Except as set forth in Schedule 30.5
hereto and except for claims as to which the insurer has admitted coverage in
writing which are fully covered by insurance, no claims, litigation
(including, without limitation, derivative actions), arbitration, governmental
investigation or proceeding or inquiry is pending or, to the best of the
Guarantor's or the Lessee's knowledge, threatened against the Guarantor or the
Lessee which would, if adversely determined, have a Material Adverse Effect.
30.6. Liens. The Vehicles and other Collateral are free and
clear of all Liens other than (i) Permitted Liens and (ii) Liens in favor of
the Lessor, the Lender or the Trustee. The Trustee has obtained, and will
continue to obtain, for the benefit of the Secured Parties pursuant to the
Indenture, a first priority perfected Lien on all Vehicles leased hereunder.
All Vehicle Perfection and Documentation Requirements with respect to all
Vehicles on or after the date hereof have and will continue to be satisfied.
30.7. Employee Benefit Plans. (a) During the twelve
consecutive month period prior to the Closing Date: (i) no steps have been
taken by the Guarantor, the Lessee or any member of the Controlled Group, or
to the knowledge of the Guarantor, by any Person, to terminate any Pension
Plan; and (ii) no contribution failure has occurred with respect to any
Pension Plan maintained by the Guarantor, the Lessee or any member of the
Controlled Group sufficient to give rise to a Lien under Section 302(f)(1) of
ERISA in connection with such Pension Plan; and (b) no condition exists or
event or transaction has occurred with respect to any Pension Plan which could
reasonably be expected to result in the incurrence by the Guarantor or the
Lessee or any member of the Controlled Group of liabilities, fines or
penalties in an amount that could have a Material Adverse Effect.
30.8. Investment Company Act. Neither the Guarantor nor the
Lessee is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the
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Investment Company Act of 1940, as amended, and neither the Guarantor nor the
Lessee is subject to any other statute which would impair or restrict its
ability to perform its obligations under this Agreement or the other Related
Documents, and neither the entering into or performance by the Guarantor or
the Lessee of this Agreement violates any provision of such Act.
30.9. Regulations G, T, U and X. Neither the Guarantor nor
the Lessee is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System). None of the Guarantor, the Lessee,
any Affiliates of any of them or any Person acting on their behalf has taken
or will take action to cause the execution, delivery or performance of this
Agreement or the Loan Note, the making or existence of the Loans or the use of
proceeds of the Loans to violate Regulation G, T, U, or X of the Board of
Governors of the Federal Reserve System.
30.10. Business Locations; Trade Names; Principal Places of
Business Locations. Schedule 30.10 lists each of the locations where each of
the Lessee and the Guarantor maintains a chief executive office, principal
place of business, or any records; and Schedule 30.10 also lists the Lessee's
and the Guarantor's legal name, each name under or by which each of the Lessee
and the Guarantor conducts its business, each state in which each of the
Lessee and the Guarantor conducts business and each state in which each of the
Lessee and the Guarantor has its principal place of business.
30.11. Taxes. Each of the Guarantor and the Lessee has filed
all tax returns which have been required to be filed by it (except where the
requirement to file such return is subject to a valid extension or such
failure relates to returns which, in the aggregate, show taxes due in an
amount of not more than $500,000), and has paid or provided adequate reserves
for the payment of all taxes shown due on such returns or required to be paid
as a condition to such extension, as well as all payroll taxes and federal and
state withholding taxes, and all assessments payable by it that have become
due, other than those that are payable without penalty or are being contested
in good faith by appropriate proceedings and with respect to which adequate
reserves have been established, and are being maintained, in accordance with
GAAP. As of such Closing Date, to the best of the Guarantor's or the Lessee's
knowledge, there is no unresolved claim by a taxing authority concerning the
Guarantor's or the Lessee's tax liability for any period for which returns
have been filed or were due other than those contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
established and are being maintained in accordance with GAAP.
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30.12. Governmental Authorization. Each of the Guarantor and
the Lessee has all licenses, franchises, permits and other governmental
authorizations necessary for all businesses presently carried on by it
(including owning and leasing the real and personal property owned and leased
by it), except where failure to obtain such licenses, franchises, permits and
other governmental authorizations would not have a Material Adverse Effect.
30.13. Compliance with Laws. Except as disclosed in Schedule
30.13 hereto, each of the Guarantor and the Lessee: (i) is not in violation of
any law, ordinance, rule, regulation or order of any Governmental Authority
applicable to it or its property, which violation would have a Material
Adverse Effect, and no such violation has been alleged, (ii) has filed in a
timely manner all reports, documents and other materials required to be filed
by it with any governmental bureau, agency or instrumentality (and the
information contained in each of such filings is true, correct and complete in
all material respects), except where failure to make such filings would not
have a Material Adverse Effect, and (iii) has retained all records and
documents required to be retained by it pursuant to any Requirement of Law,
except where failure to retain such records would not have a Material Adverse
Effect.
30.14. Eligible Vehicles. Each Vehicle is or will be, as the
case may be, on the Vehicle Finance Lease Commencement Date with respect to
such Vehicle, an Eligible Vehicle.
30.15. Supplemental Documents True and Correct. All
information contained in any Vehicle Order or other Supplemental Document
which has been submitted, or which may hereafter be submitted by the Lessee to
the Lessor is, or will be, true, correct and complete.
30.16. Manufacturer Programs. No Manufacturer Event of
Default has occurred and is continuing with respect to any Eligible Program
Manufacturer.
30.17. Absence of Default. Each of the Guarantor and the
Lessee is in compliance with all of the provisions of its certificate or
articles of incorporation and by-laws and no event has occurred or failed to
occur which has not been remedied or waived, the occurrence or non-occurrence
of which constitutes, or with the passage of time or giving of notice or both
would constitute, (i) a Finance Lease Event of Default or a Potential Finance
Lease Event of Default or (ii) a default or event of default by the Guarantor
or the Lessee under any material indenture, agreement or other instrument, or
any judgment, decree or final order to which the Guarantor or the Lessee is a
party or by which the Guarantor or the Lessee or any of their properties may
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be bound or affected that could result in a Material Adverse Effect.
30.18. Title to Assets. Each of the Guarantor and the Lessee
has good, legal and marketable title to, or a valid leasehold interest in, all
of its assets, except to the extent no Material Adverse Effect could result.
None of such properties or assets is subject to any Liens, except for
Permitted Encumbrances. Except for financing statements or other filings with
respect to or evidencing Permitted Encumbrances, no financing statement under
the UCC of any state, application for a Certificate of Title or certificate of
ownership, or other filing which names the Guarantor or the Lessee as debtor
or which covers or purports to cover any of the assets of the Guarantor or the
Lessee is on file in any state or other jurisdiction, and neither the
Guarantor nor the Lessee has signed any such financing statement, application
or instrument authorizing any secured party or creditor of such Person
thereunder to file any such financing statement, application or filing other
than with respect to Permitted Encumbrances and except, in each case, to the
extent no Material Adverse Effect could result.
30.19. Burdensome Provisions. Neither the Guarantor nor the
Lessee is a party to or bound by any Contractual Obligation that could have
a Material Adverse Effect.
30.20. No Adverse Change. Since March 31, 1997, (x) no
material adverse change in the business, assets, liabilities, financial
condition, results of operations or business prospects of the Guarantor or the
Lessee has occurred, and (y) no event has occurred or failed to occur, which
has had or may have, either alone or in conjunction with all other such events
and failures, a Material Adverse Effect.
30.21. No Adverse Fact. No fact or circumstance is known to
the Guarantor or the Lessee, as of such Closing Date, which, either alone or
in conjunction with all other such facts and circumstances, has had or might
in the future have (so far as the Guarantor or the Lessee can foresee) a
Material Adverse Effect which has not been set forth or referred to in the
financial statements referred to in Section 30.4 or 31.5 or in a writing
specifically captioned "Disclosure Statement" and delivered to the Lessor
prior to such Closing Date. If a fact or circumstance disclosed in such
financial statements or Disclosure Statement, or if an action, suit or
proceeding disclosed to the Lessor, should in the future have a Material
Adverse Effect, such Material Adverse Effect shall be a change or event
subject to Section 30.20 notwithstanding such disclosure.
30.22. Accuracy of Information. All data, certificates,
reports, statements, opinions of counsel, documents and other information
furnished to the Lessor, the Lender or the
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Trustee by or on behalf of the Guarantor or the Lessee pursuant to any
provision of any Related Document, or in connection with or pursuant to any
amendment or modification of, or waiver under, any Related Document, shall, at
the time the same are so furnished, (i) be complete and correct in all
material respects to the extent necessary to give the Lessor, the Lender or
the Trustee, as the case may be, true and accurate knowledge of the subject
matter thereof, (ii) not contain any untrue statement of a material fact, and
(iii) not omit to state a material fact necessary in order to make the
statements contained therein (in light of the circumstances in which they were
made) not misleading, and the furnishing of the same to the Lessor, the Lender
or the Trustee, as the case may be, shall constitute a representation and
warranty by the Guarantor and the Lessee made on the date the same are
furnished to the Lessor, the Lender or the Trustee, as the case may be, to the
effect specified in clauses (i), (ii) and (iii).
30.23. Solvency. Both before and after giving effect to the
transactions contemplated by this Agreement and the other Related Documents,
each of the Guarantor and the Lessee is solvent within the meaning of the
Bankruptcy Code and each of the Guarantor and the Lessee is not the subject of
any voluntary or involuntary case or proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy or insolvency law and no Event of Bankruptcy has occurred with
respect to the Guarantor or the Lessee.
31. CERTAIN AFFIRMATIVE COVENANTS. Until the expiration or
termination of this Agreement, and thereafter until the obligations of the
Lessee and the Guarantor under this Agreement and the Related Documents are
satisfied in full, the Lessee covenants and agrees as to itself, and the
Guarantor covenants and agrees as to itself and as to the Lessee that, unless
at any time the Lessor, the Lender and the Trustee shall otherwise expressly
consent in writing, it will (and, in the case of the Guarantor, will cause the
Lessee to):
31.1. Corporate Existence; Foreign Qualification. Do and
cause to be done at all times all things necessary to (i) maintain and
preserve the corporate existence of the Guarantor and the Lessee (it being
understood that subject to Section 32.1 the Lessee shall remain a direct or
indirect Wholly-Owned Subsidiary of the Guarantor); (ii) be, and ensure that
the Lessee is, duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction where the nature of its business makes such
qualification necessary and the failure to so qualify would have a Material
Adverse Effect; and (iii) comply with all Contractual Obligations and
Requirements of Law binding upon it and its Subsidiaries, except to the extent
that the failure to comply therewith would not, in the aggregate, have a
Material Adverse Effect.
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31.2. Books, Records and Inspections. (i) Maintain or cause
to be maintained by the Administrator complete and accurate books and records
with respect to the Vehicles leased by it under this Agreement and (ii) permit
any Person designated by the Lessor, the Lender or the Trustee in writing to
visit and inspect any of the properties, corporate books and financial records
of the Guarantor and its Subsidiaries and to discuss its affairs, finances and
accounts with officers of the Guarantor and its Subsidiaries, agents of the
Guarantor and with the Guarantor's independent public accountants, all at such
reasonable times and as often as the Lessor, the Lender or the Trustee may
reasonably request.
31.3. Insurance. Obtain and maintain with respect to all
Vehicles that are subject to this Agreement (a) vehicle liability insurance to
the full extent required by law and in any event not less than $500,000 per
Person and $1,000,000 per occurrence, (b) property damage insurance with a
limit of $1,000,000 per occurrence, and (c) excess coverage public liability
insurance with a limit of not less than $50,000,000 or the limit maintained
from time to time by the Lessee at any time hereafter, whichever is greater,
with respect to all passenger cars and vans comprising the Lessee's rental
fleet. The Lessor acknowledges and agrees that the Lessee may, to the extent
permitted by applicable law, self-insure for the first $1,000,000 per
occurrence, or a greater amount up to a maximum of $3,000,000, with the
consent of each Enhancement Provider, per occurrence, of vehicle liability and
property damage which is otherwise required to be insured hereunder. All such
policies shall be from financially sound and reputable insurers, shall name
the Lender, the Lessor and the Trustee as additional insured parties and, in
the case of catastrophic physical damage insurance on such Vehicles, shall
name the Trustee as loss payee as its interest may appear and will provide
that the Lender, the Lessor and the Trustee shall receive at least 10 days'
prior written notice of cancellation of such policies. The Lessee will notify
promptly the Lender, the Lessor and the Trustee of any curtailment or
cancellation of the Lessee's right to self-insure in any jurisdiction.
31.4. Manufacturer Programs. Turn in the Program Vehicles
leased by the Lessee to the relevant Manufacturer within the Repurchase Period
therefor (unless the Lessee purchases such Program Vehicle pursuant to the
terms hereof or sells such Program Vehicle prior to the end of the Repurchase
Period therefor and receives sales proceeds thereof in cash in an amount equal
to or greater than the repurchase price under such Manufacturer Program); and
comply with all of its obligations under each Manufacturer Program.
31.5. Reporting Requirements. Furnish, or cause to be
furnished to the Lessor, the Lender and the Trustee:
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(i) Audit Report. As soon as available and in any event
within 120 days after the end of each fiscal year of the Guarantor,
(a) consolidated financial statements consisting of a statement of
financial position of the Guarantor and its Consolidated Subsidiaries
as of the end of such fiscal year and a statement of operations,
stockholders' equity and cash flows of the Guarantor and its
Consolidated Subsidiaries for such fiscal year, setting forth in
comparative form the corresponding figures for the preceding fiscal
year, certified by and containing an opinion, unqualified as to
scope, of independent certified public accountants of recognized
standing selected by the Guarantor and acceptable to the Lessor, the
Lender and the Trustee, accompanied by (b) a letter from such
accountants addressed to the Lessor, the Lender and the Trustee
stating that, in the course of their annual audit of the books and
records of the Guarantor, no Potential Finance Lease Event of Default
or Finance Lease Event of Default has come to their attention which
was continuing at the close of such fiscal year or on the date of
their letter, or, if such an event has come to the attention of such
accountants and was continuing at the close of such fiscal year or on
the date of their letter, the nature of such event, it being
understood that such accountants shall have no liability to the
Lessor, the Lender or the Trustee by reason of the failure of such
accountants to obtain knowledge of the occurrence or continuance of
such an Finance Lease Event of Default or Potential Finance Lease
Event of Default;
(ii) Quarterly Statements. As soon as available and in any
event within 45 days after the end of each of the first three
quarters of each fiscal year of the Guarantor, (a) financial
statements consisting of a consolidated statement of financial
position of the Guarantor and its Consolidated Subsidiaries as of the
end of such quarter and a statement of operations, stockholders'
equity and cash flows of the Guarantor and its Consolidated
Subsidiaries for each such quarter, setting forth in comparative form
the corresponding figures for the corresponding periods of the
preceding fiscal year, all in reasonable detail and certified
(subject to year-end audit adjustments) by a senior financial officer
of the Guarantor as having been prepared in accordance with GAAP
consistently applied, accompanied by (b) a letter from such officer
addressed to the Lessor, the Lender and the Trustee stating that no
Potential Finance Lease Event of Default or Finance Lease Event of
Default has come to his attention which was continuing at the end of
such quarter or on the date of his letter, or, if such an event has
come to his attention and was continuing at the end of such quarter
or on the date of his letter, indicating the nature of such event and
the action which the Guarantor proposes to take with respect thereto;
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(iii) Amortization Events and Finance Lease Events of
Default. As soon as possible but in any event within two Business
Days after the occurrence of any Amortization Event, Potential
Amortization Event, Finance Lease Event of Default or Potential
Finance Lease Event of Default, a written statement of an Authorized
Officer describing such event and the action that the Guarantor or
the Lessee, as the case may be, proposes to take with respect
thereto;
(iv) Manufacturers. Promptly after obtaining actual knowledge
thereof, notice of any Manufacturer Event of Default or termination or
replacement of a Manufacturer Program;
(v) Interim Financial Statements. Promptly following the
Guarantor's receipt thereof, copies of all other financial reports
submitted to the Guarantor by independent public accountants relating
to any annual or interim audit of the books of the Guarantor, or
opinion as to the proper book value of the assets of the Guarantor;
(vi) Reports. Promptly, from time to time, such information
with respect to the Vehicles leased hereunder and payments made and
owing hereunder as the Lessor may require to satisfy its reporting
obligations to the Lender pursuant to Section 9.5 of the AESOP I
Finance Lease Loan Agreement; and
(vii) Other. Promptly, from time to time, such other
information, documents, or reports respecting the Vehicles leased
hereunder or the condition or operations, financial or otherwise, of
the Guarantor or the Lessee as the Lessor, the Lender or the Trustee
may from time to time reasonably request in order to protect the
interests of the Lessor, the Lender or the Trustee under or as
contemplated by this Agreement or any other Related Document.
31.6. Payment of Taxes; Removal of Liens. Pay when due all
taxes, assessments, fees and governmental charges of any kind whatsoever that
may be at any time lawfully assessed or levied against or with respect to the
Lessee, the Guarantor or their respective property and assets or any interest
thereon. Notwithstanding the previous sentence, but subject in any case to the
other requirements hereof and of the Related Documents, neither the Lessee nor
the Guarantor shall be required to pay any tax, charge, assessment or
imposition nor to comply with any law, ordinance, rule, order, regulation or
requirement so long as the Lessee or the Guarantor shall contest, in good
faith, the amount or validity thereof, in an appropriate manner or by
appropriate proceedings. Each such contest shall be promptly prosecuted to
final conclusion (subject to the right of the Guarantor or the Lessee to
settle any such contest).
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31.7. Business. The Lessee will engage only in businesses in
substantially the same or related fields as the businesses conducted on the
date hereof and such other lines of business, which, in the aggregate, do not
constitute a material part of the operations of the Lessee.
31.8. Maintenance of Separate Existence. Each of the
Guarantor and the Lessee acknowledges its receipt of a copy of that certain
opinion letter issued by Skadden, Arps, Slate, Meagher & Flom LLP dated the
Initial Closing Date and addressing the issue of substantive consolidation as
it may relate to the Guarantor, the Lessee, the Lessor, AESOP Leasing,
Original AESOP, AFC-II and AFC. Each of the Guarantor and the Lessee hereby
agrees to maintain in place all policies and procedures, and take and continue
to take all action, described in the factual assumptions set forth in such
opinion letter and relating to such Person.
31.9. Trustee as Lienholder. Concurrently with each leasing
of a Vehicle under this Agreement, the Administrator shall indicate on its
computer records that the Trustee as assignee of the Lender is the holder of a
Lien on such Vehicle pursuant to the terms of the Indenture.
31.10. Maintenance of the Vehicles. Maintain and cause to be
maintained in good repair, working order, and condition all of the Vehicles
leased by the Lessee in accordance with its ordinary business practices with
respect to all other vehicles owned by it, except to the extent that any such
failure to comply with such requirements does not, in the aggregate,
materially adversely affect the interests of the Lessor under this Agreement,
the interests of the Lender under the AESOP I Finance Lease Loan Agreement or
the interests of the Secured Parties under the Indenture or the likelihood of
repayment of the Loans. From time to time the Guarantor and the Lessee will
make or cause to be made all appropriate repairs, renewals, and replacements
with respect to the Vehicles. The Guarantor and the Lessee shall maintain
good, legal and marketable title to, or a valid lease-hold interest in, all of
its assets, free and clear of all Liens except for Permitted Liens, and except
to the extent sold or otherwise disposed of in accordance with this Agreement
or any of the other Related Documents, and except to the extent no Material
Adverse Effect could result.
31.11. Enhancement. If the Enhancement with respect to any
Series of Notes is provided by a letter of credit and (i) the short-term debt
or deposit rating of the Enhancement Provider of such letter of credit shall
be downgraded below the then-current rating of such Series of Notes by the
Rating Agencies with respect to such Series of Notes or (ii) such Enhancement
Provider shall notify the Lessees that its compliance with any of its
obligations under such letter of credit would be unlawful,
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use its best efforts to obtain a successor institution to act as Enhancement
Provider or, in the alternative, to otherwise credit enhance the payments to
be made under this Agreement by the Lessees, subject to the satisfaction of
the Rating Agency Confirmation Condition and any other requirements set forth
in the Related Documents.
31.12. Manufacturer Payments. Cause each Manufacturer and
auction dealer to make all payments made by it under the Manufacturer Programs
with respect to Vehicles leased hereunder directly to the Collection Account.
Any such payments from Manufacturers or related auction dealers received
directly by the Guarantor or the Lessee, will be, within three Business Days
of receipt, deposited into the Collection Account.
31.13. Accounting Methods; Financial Records. Maintain, and
cause each of its material Subsidiaries to maintain, a system of accounting
and keep, and cause each of its material Subsidiaries to keep, such records
and books of account (which shall be true and complete) as may be required or
necessary to permit the preparation of financial statements in accordance with
GAAP.
31.14. Disclosure to Auditors. Disclose, and cause each of
its material Subsidiaries to disclose, to its independent certified public
accountants in a timely manner all loss contingencies of a type requiring
disclosure to auditors under accounting standards promulgated by the Financial
Accounting Standards Board.
31.15. Disposal of Non-Program Vehicles. Dispose of the
Non-Program Vehicles leased by the Lessee in accordance with Section 2.6(b)
(unless the Lessee purchases such Non-Program Vehicle in accordance with the
terms hereof).
32. CERTAIN NEGATIVE COVENANTS. Until the expiration or
termination of this Agreement and thereafter until the obligations of the
Lessee and the Guarantor under this Agreement and the Related Documents are
satisfied in full, the Lessee covenants and agrees as to itself, and the
Guarantor covenants and agrees as to itself and as to the Lessee that, unless
at any time the Lessor and the Trustee shall otherwise expressly consent in
writing, it will not (and, in the case of the Guarantor, will not permit the
Lessee to):
32.1. Mergers, Consolidations. Merge or consolidate with any
Person, except that, if after giving effect thereto, no Potential Finance
Lease Event of Default or Finance Lease Event of Default would exist, this
Section 32.1 shall not apply to (i) any merger or consolidation, provided that
the Guarantor or the Lessee, as applicable, is the surviving corporation and,
if the Lessee is the surviving corporation, it is a direct or indirect
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Wholly-Owned Subsidiary of the Guarantor after such merger or consolidation
and (ii) any merger or consolidation of the Lessee with or into another
Subsidiary of the Guarantor, provided that the surviving entity executes an
agreement of assumption to perform every obligation of the Lessee under this
Agreement and that such surviving entity is a direct or indirect Wholly-Owned
Subsidiary of the Guarantor.
32.2. Other Agreements. Enter into any agreement containing
any provision which would be violated or breached by the performance of its
obligations hereunder or under any instrument or document delivered or to be
delivered by it hereunder or in connection herewith.
32.3. Liens. Create or permit to exist any Lien with respect
to any Vehicle leased hereunder now or hereafter existing or acquired, except
for Permitted Liens.
32.4. Use of Vehicles. Use or allow the Vehicles to be used
in any manner that would (i) make such Vehicles that are Program Vehicles
ineligible for repurchase under an Eligible Manufacturer Program, (ii) for any
illegal purposes or (iii) subject the Vehicles to confiscation.
32.5. Termination of Agreement. Allow this Agreement
to terminate prior to the termination of each other Lease.
33. ADMINISTRATOR ACTING AS AGENT OF THE LESSOR. The parties
to this Agreement acknowledge and agree that ARAC shall act as Administrator
and, in such capacity, as the agent for the Lessor, for purposes of performing
certain duties of the Lessor under this Agreement and the Related Documents.
As compensation for the Administrator's performance of such duties, the Lessor
shall pay to the Administrator on each Payment Date (i) the portion of the
Monthly Administration Fee payable by the Lessor pursuant to the
Administration Agreement and (ii) the reasonable costs and expenses of the
Administrator incurred by it as a result of arranging for the sale of Vehicles
returned to the Lessor in accordance with Section 2.6(c) or as a result of a
Vehicle Return Default and sold to third parties, provided, however, that such
costs and expenses shall only be payable to the Administrator to the extent of
any excess of the sale price received by the Lessor for any such Vehicle over
the Termination Value thereof.
34. NO PETITION. Each of the Guarantor, the Lessee and the
Administrator hereby covenants and agrees that, prior to the date which is one
year and one day after the payment in full of all of the Notes and the
Commercial Paper Notes, it will not institute against, or join any other
Person in instituting against, the Lessor, Original AESOP, AESOP Leasing II,
Quartx, PVHC, AFC or AFC-II any bankruptcy, reorganization, arrangement,
52
<PAGE>
insolvency or liquidation proceedings or other similar proceeding (including,
without limitation, any such action or proceeding against the Lessor as a
result of non-payment (or alleged non-payment) with respect to the Vehicle
Purchase Surplus Amount due pursuant to Section 2.8 hereof) under the laws of
the United States or any state of the United States. In the event that the
Guarantor, the Lessee or the Administrator takes action in violation of this
Section 34, the Lessor agrees, for the benefit of the Secured Parties, that it
shall file an answer with the bankruptcy court or otherwise properly contest
the filing of such a petition by the Guarantor, the Lessee or the
Administrator against the Lessor, Original AESOP, AESOP Leasing II, Quartx,
PVHC, AFC or AFC-II or the commencement of such action and raise the defense
that the Guarantor, the Lessee or the Administrator has agreed in writing not
to take such action and should be estopped and precluded therefrom and such
other defenses, if any, as its counsel advises that it may assert. The
provisions of this Section 34 shall survive the termination of this Agreement.
35. SUBMISSION TO JURISDICTION. The Lessor and the Trustee
may enforce any claim arising out of this Agreement in any state or federal
court having subject matter jurisdiction, including, without limitation, any
state or federal court located in the State of New York. For the purpose of
any action or proceeding instituted with respect to any such claim, the
Guarantor and the Lessee hereby irrevocably submits to the jurisdiction of
such courts. Each of the Guarantor and the Lessee further irrevocably consents
to the service of process out of said courts by mailing a copy thereof, by
registered mail, postage prepaid, to the Guarantor or the Lessee, as the case
may be, and agrees that such service, to the fullest extent permitted by law,
(i) shall be deemed in every respect effective service of process upon it in
any such suit, action or proceeding and (ii) shall be taken and held to be
valid personal service upon and personal delivery to it. Nothing herein
contained shall affect the right of the Trustee, the Lender and the Lessor to
serve process in any other manner permitted by law or preclude the Lessor, the
Lender or the Trustee from bringing an action or proceeding in respect hereof
in any other country, state or place having jurisdiction over such action.
Each of the Guarantor and the Lessee hereby irrevocably waives, to the fullest
extent permitted by law, any objection which it may have or hereafter have to
the laying of the venue of any such suit, action or proceeding brought in any
such court located in the State of New York and any claim that any such suit,
action or proceeding brought in such a court has been brought in an
inconvenient forum.
36. GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT
MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Whenev-
er possible each provision of this Agreement shall be interpreted
53
<PAGE>
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. All obligations of the Guarantor and
the Lessee and all rights of the Lessor, the Lender or the Trustee expressed
herein shall be in addition to and not in limitation of those provided by
applicable law or in any other written instrument or agreement.
37. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT TO WHICH IT IS A
PARTY, OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR ARISING FROM
ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED
TRANSACTION, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
38. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing including facsimile transmission or
similar writing) and shall be given to such party, addressed to it, at its
address or telephone number set forth on the signature pages below, or at such
other address or telephone number as such party may hereafter specify for the
purpose by notice to the other party. In each case, a copy of all notices,
requests and other communications that are sent by any party hereunder shall
be sent to the Trustee and the Lender and a copy of all notices, requests and
other communications that are sent by the Lessee or the Guarantor to each
other that pertain to this Agreement shall be sent to the Lessor, the Lender
and the Trustee. Copies of notices, requests and other communications
delivered to the Trustee, the Lender and/or the Lessor pursuant to the
foregoing sentence shall be sent to the following addresses:
TRUSTEE: Harris Trust and Savings Bank
311 Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Corporate Trust Officer
Telephone: (312) 461-2532
Fax: (312) 461-3525
LENDER: AESOP Funding II L.L.C.
c/o Lord Securities Corporation
Two Wall Street
New York, New York 10055
Attention: Frank Bilotta
54
<PAGE>
Telephone: (212) 346-9000
Fax: (212) 346-9012
LESSOR: AESOP Leasing L.P.
c/o Lord Securities Corporation
Two Wall Street
New York, New York 10055
Attention: Frank Bilotta
Telephone: (212) 346-9000
Fax: (212) 346-9012
Each such notice, request or communication shall be effective when received at
the address specified below. Copies of all notices must be sent by first class
mail promptly after transmission by facsimile.
39. LIABILITY. The Lessee and the Guarantor shall be held
jointly and severally liable for all of the obligations of each other
hereunder.
40. TITLE TO MANUFACTURER PROGRAMS IN LESSOR. The Lessee, by
its execution hereof, acknowledges and agrees that (a) its right, title and
interest in and to the Manufacturer Programs have been assigned on a
nonexclusive basis to the Lessor, (b) in accordance with the Assignment
Agreements, such right, title and interest in and to the Manufacturer Programs
shall be assigned by the Lessor to Trustee, and (c) the Lessee shall also
retain right, title or interest in such Manufacturer Programs (provided,
however, that in no event may Lessee assign such right, title or interest to
any Person other than the Lessor). To confirm the foregoing, the Lessee, by
its execution hereof, hereby assigns any rights that it may have in respect of
any Manufacturer Programs.
41. HEADINGS. Section headings used in this Agreement are
for convenience of reference only and shall not affect the construction of
this Agreement.
42. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute one and the same Agreement.
43. EFFECTIVENESS. This Agreement shall become effective
concurrently with the issuance of the Loan Note under the AESOP I Finance
Lease Loan Agreement.
44. NO RECOURSE. The obligations of AESOP Leasing under this
Agreement are solely the corporate obligations of
55
<PAGE>
AESOP Leasing. No recourse shall be had for the payment of any obligation or
claim arising out of or based upon this Agreement against any shareholder,
employee, officer, director or incorporator of AESOP Leasing.
56
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement or caused it to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
LESSOR:
AESOP LEASING L.P.
By: AESOP LEASING CORP.,
its general partner
By: /s/ Frank B. Bilotta
Address: c/o Lord Securities Corporation
Two Wall Street
New York, New York 10055
Attention: Frank Bilotta
Telephone: (212) 346-9000
Telefax: (212) 346-9012
LESSEE AND ADMINISTRATOR:
AVIS RENT A CAR SYSTEM, INC.
By: /s/ Steven L. Greenberger
Address: 900 Old Country Road
Garden City, NY 11530
Attention: Treasurer
cc: General Counsel
Telephone: (516) 222-3000
Telefax: (516) 222-3751
<PAGE>
GUARANTOR:
AVIS RENT A CAR, INC.
By: /s/ Kevin M. Sheehan
---------------------------
Address: 900 Old Country Road
Garden City, NY 11530
Attention: Treasurer
cc: General Counsel
Telephone: (516) 222-3000
Telefax: (516) 222-3751
COUNTERPART NO. ___ OF TEN (10) SERIALLY NUMBERED MANUALLY EXECUTED
COUNTERPARTS. TO THE EXTENT IF ANY THAT THIS DOCUMENT CONSTITUTES CHATTEL
PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT
MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER
THAN COUNTERPART NO. 1.
<PAGE>
SCHEDULE 30.5
Litigation
[NONE]
<PAGE>
SCHEDULE 30.10
Business Locations
<TABLE>
<CAPTION>
=============================================================================================================================
PARTY PRINCIPAL PLACE OF ADDITIONAL RECORDS STATES IN WHICH CON-
BUSINESS LOCATION DUCTS BUSINESS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Avis Rent A Car 900 Old Country Road 300 Centre Pointe Dr. AZ, AR, CA, CO, CT,
System, Inc. Garden City, NY Virginia Beach, VA DE, DC, FL, GA, HI,
d/b/a/ Avis Rent 11530 23462 ID, IL, IN, KS, KY, LA,
A Car and Avis ME, MD, MA, MI, MN,
MS, MO, MT, NE, NV,
NJ, NM, NY, NC, OH,
OK, OR, PA, RI, SC,
TN, TX, UT, VT, VA,
WA, WV, WI and WY
- -----------------------------------------------------------------------------------------------------------------------------
Avis Rent A 900 Old Country Road NY
Car, Inc. Garden City, NY
11530
=============================================================================================================================
</TABLE>
<PAGE>
SCHEDULE 30.13
Compliance with Law
[NONE]
<PAGE>
ATTACHMENT A
Information Relating to Initial Leased Vehicles
I. Initial Financed Vehicles (as of the Initial Closing Date)
a. [For each Vehicle] Vehicle Identification Number
b. [For each Vehicle] Net Book Value
A-1
<PAGE>
ATTACHMENT B
Vehicle Acquisition Schedule and Related Information
1. Principal amount of Loan financing the Vehicle
2. Date of Loan financing the Vehicle
3. Vehicle Finance Lease Commencement Date
4. Vehicle Identification Number (VIN)
5. Summary of Vehicles being financed (including, for Vehicles
subject to the GM Repurchase Program, the Designated Period
for such Vehicles)
6. Program or Non-Program Vehicle
7. Capitalized Cost (if applicable)
8. Net Book Value (if applicable)
B-1
<PAGE>
ATTACHMENT C
Form of Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that AESOP LEASING L.P. does
hereby make, constitute and appoint Avis Rent A Car System, Inc. ("ARAC") its
true and lawful Attorney-in-Fact for it and in its name, stead and behalf, (i)
to execute any and all documents pertaining to the titling of motor vehicles
in the name of ARAC or [name of nominee lienholder under the Franchisee
Nominee Agreement], (ii) the noting of the lien of Harris Trust and Savings
Bank, as trustee (in such capacity, the "Trustee"), as the first lienholder on
certificates of title, (iii) the licensing and registration of motor vehicles,
(iv) designating ARAC as the mailing address of the Trustee for all
documentation relating to the title and registration of such motor vehicles,
(v) applying for duplicate certificates of title indicating the lien of the
Trustee where original certificates of title have been lost or destroyed and
(vi) upon the sale of any such motor vehicle pursuant to the Master Motor
Vehicle Finance Lease Agreement, dated as of July 30, 1997, among AESOP
Leasing L.P., ARAC, any other Eligible Rental Car Company that becomes a party
thereto pursuant to the terms thereof and Avis Rent A Car, Inc., in accordance
with the terms and conditions thereof, releasing the lien of the Trustee on
such motor vehicle by executing any documents required in connection
therewith. This power is limited to the foregoing and specifically does not
authorize the creation of any liens or encumbrances on any of said motor
vehicles.
The powers and authority granted hereunder shall, unless
sooner terminated, revoked or extended, cease eight years from the date of
execution as set forth below.
C-1
<PAGE>
IN WITNESS WHEREOF, AESOP LEASING L.P. has caused this
instrument to be executed on its behalf by its duly authorized officer this
___ day of ______, 19__.
AESOP LEASING L.P.
By:
State of ________ )
County of _______ )
Subscribed and sworn before me, a notary public, in and for
said county and state, this ___ day of _____, 19__.
----------------------------------------------
Notary Public
My Commission Expires: _______
C-2
<PAGE>
MASTER MOTOR VEHICLE OPERATING LEASE AGREEMENT
dated as of July 30, 1997
among
AESOP LEASING L.P.,
as Lessor,
AVIS RENT A CAR SYSTEM, INC.,
as Lessee and as Administrator,
and
AVIS RENT A CAR, INC.,
as Guarantor
AS SET FORTH IN SECTION 27 HEREOF, LESSOR HAS ASSIGNED TO AFC-II (AS DEFINED
HEREIN) AND AFC-II HAS ASSIGNED TO THE TRUSTEE (AS DEFINED HEREIN) CERTAIN OF
ITS RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE. TO THE EXTENT, IF ANY,
THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION) NO
SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE TRANSFER OR
POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART,
WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR
EXECUTED BY THE TRUSTEE ON THE SIGNATURE PAGE THEREOF.
[THIS IS NOT COUNTERPART NO. 1]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. DEFINITIONS.......................................................................... 1
2. GENERAL AGREEMENT.................................................................... 1
2.1. Lease and Acquisition of Vehicles........................................... 5
2.2. Right of Lessees and Guarantor to Act as Lessor's
Agent....................................................................... 5
2.3. Payment of Capitalized Cost or Assignment of Net
Book Value by Lessor................................................................. 6
2.4. Non-Liability of Lessor..................................................... 6
2.5. Lessees' Rights to Purchase Vehicles........................................ 7
2.6. Lessor's Right to Cause Vehicles to be Sold................................. 7
2.7. Redesignation of Vehicles................................................... 9
2.8. Limitations on the Acquisition or Redesignation of
Certain Vehicles............................................................ 9
3. TERM................................................................................. 10
3.1. Vehicle Term................................................................ 10
3.2. Term........................................................................ 11
4. RENT AND CHARGES..................................................................... 12
4.1. Payment of Rent............................................................. 12
4.2. [RESERVED].................................................................. 12
4.3. Net Lease................................................................... 12
5. INSURANCE............................................................................ 14
5.1. Personal Injury and Damage.................................................. 14
5.2. Delivery of Certificate of Insurance........................................ 14
5.3. Changes in Insurance Coverage............................................... 14
6. RISK OF LOSS; CASUALTY AND INELIGIBLE VEHICLE OBLIGA................................. 15
6.1. Risk of Loss Borne by Lessees............................................... 15
6.2. Casualty; Ineligible Vehicles............................................... 15
7. VEHICLE USE.......................................................................... 15
8. LIENS................................................................................ 17
9. NON-DISTURBANCE...................................................................... 17
i
<PAGE>
10. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND
FINES................................................................................ 17
11. MAINTENANCE AND REPAIRS.............................................................. 18
12. VEHICLE WARRANTIES................................................................... 19
12.1. No Lessor Warranties.......................................................... 19
12.2. Manufacturer's Warranties..................................................... 19
13. VEHICLE USAGE GUIDELINES AND RETURN; SPECIAL DEFAULT
PAYMENTS; EARLY TERMINATION PAYMENTS..................................................... 19
13.1. Usage......................................................................... 19
13.2. Return........................................................................ 20
13.3. Special Default Payments...................................................... 20
13.4. Early Termination Payments.................................................... 21
14. DISPOSITION PROCEDURE................................................................ 22
15. ODOMETER DISCLOSURE REQUIREMENT...................................................... 22
16. GENERAL INDEMNITY.................................................................... 22
16.1. Indemnity by the Lessees and the Guarantor.................................... 22
16.2. Reimbursement Obligation by the Lessees and the
Guarantor..................................................................... 25
16.3. Defense of Claims............................................................. 26
17. ASSIGNMENT............................................................................... 27
17.1. Right of the Lessor to Assign this Agreement.................................. 27
17.2. Limitations on the Right of the Lessees to
Assign this Agreement......................................................... 27
18. DEFAULT AND REMEDIES THEREFOR............................................................ 27
18.1. Events of Default............................................................. 27
18.2. Effect of AESOP I Operating Lease Event of
Default or Liquidation Event of Default....................................... 29
18.3. Rights of Lessor Upon AESOP I Operating Lease
Event of Default, Limited Liquidation Event of
Default or Liquidation Event of Default....................................... 29
18.4. Rights of Lender and Trustee Upon Liquidation
Event of Default, Limited Liquidation Event of
Default and Non-Performance of Certain Covenants.............................. 31
18.5. Measure of Damages............................................................ 33
18.6. Vehicle Return Default........................................................ 34
18.7. Application of Proceeds....................................................... 36
19. MANUFACTURER EVENTS OF DEFAULT........................................................... 36
ii
<PAGE>
20. [RESERVED]............................................................................... 37
21. [RESERVED]............................................................................... 37
22. CERTIFICATION OF TRADE OR BUSINESS USE................................................... 37
23. SURVIVAL................................................................................. 37
24. ADDITIONAL LESSEES....................................................................... 37
25. TITLE.................................................................................... 40
26. GUARANTY................................................................................. 40
26.1. Guaranty...................................................................... 40
26.2. Scope of Guarantor's Liability................................................ 40
26.3. Lessor's Right to Amend this Agreement, Etc................................... 41
26.4. Waiver of Certain Rights by Guarantor......................................... 41
26.5. [RESERVED].................................................................... 43
26.6. Guarantor to Pay Lessor's Expenses............................................ 43
26.7. Reinstatement................................................................. 43
26.8. Pari Passu Indebtedness....................................................... 43
27. RIGHTS OF LESSOR ASSIGNED TO TRUSTEE..................................................... 43
28. [RESERVED]............................................................................... 45
29. MODIFICATION AND SEVERABILITY............................................................ 45
30. CERTAIN REPRESENTATIONS AND WARRANTIES................................................... 45
30.1. Organization; Ownership; Power; Qualification.................................... 46
30.2. Authorization; Enforceability.................................................... 46
30.3. Compliance....................................................................... 46
30.4. Financial Information; Financial Condition....................................... 46
30.5. Litigation....................................................................... 48
30.6. Liens............................................................................ 48
30.7. Employee Benefit Plans........................................................... 48
30.8. Investment Company Act........................................................... 48
30.9. Regulations G, T, U and X........................................................ 49
30.10. Business Locations; Trade Names; Principal
Places of Business Locations..................................................... 49
30.11. Taxes............................................................................ 49
30.12. Governmental Authorization....................................................... 49
30.13. Compliance with Laws............................................................. 50
30.14. Eligible Vehicles................................................................ 50
30.15. Supplemental Documents True and Correct.......................................... 50
30.16. Manufacturer Programs............................................................ 50
30.17. Absence of Default............................................................... 50
iii
<PAGE>
30.18. Title to Assets.............................................................. 51
30.19. Burdensome Provisions........................................................ 51
30.20. No Adverse Change............................................................ 51
30.21. No Adverse Fact.............................................................. 51
30.22. Accuracy of Information...................................................... 52
30.23. Solvency..................................................................... 52
31. CERTAIN AFFIRMATIVE COVENANTS............................................................ 52
31.1. Corporate Existence; Foreign Qualification................................... 52
31.2. Books, Records and Inspections............................................... 53
31.3. Insurance.................................................................... 53
31.4. Manufacturer Programs........................................................ 54
31.5. Reporting Requirements....................................................... 54
31.6. Payment of Taxes; Removal of Liens........................................... 56
31.7. Business..................................................................... 56
31.8. Maintenance of Separate Existence............................................ 56
31.9. Trustee as Lienholder........................................................ 56
31.10. Maintenance of the Vehicles.................................................. 57
31.11. Enhancement.................................................................. 57
31.12. Manufacturer Payments........................................................ 57
31.13. Accounting Methods; Financial Records........................................ 57
31.14. Disclosure to Auditors....................................................... 58
31.15. Disposal of Non-Program Vehicles............................................. 58
32. CERTAIN NEGATIVE COVENANTS............................................................... 58
32.1. Mergers, Consolidations....................................................... 58
32.2. Other Agreements.............................................................. 58
32.3. Liens......................................................................... 59
32.4. Use of Vehicles............................................................... 59
32.5. Termination of Agreement...................................................... 59
33. ADMINISTRATOR ACTING AS AGENT OF THE LESSOR.............................................. 59
34. NO PETITION.............................................................................. 59
35. SUBMISSION TO JURISDICTION............................................................... 60
36. GOVERNING LAW............................................................................ 60
37. JURY TRIAL............................................................................... 61
38. NOTICES.................................................................................. 61
39. LIABILITY................................................................................ 62
40. TITLE TO MANUFACTURER PROGRAMS IN LESSOR................................................. 62
iv
<PAGE>
41. HEADINGS................................................................................. 62
42. EXECUTION IN COUNTERPARTS................................................................ 62
43. EFFECTIVENESS. .......................................................................... 62
44. NO RECOURSE.............................................................................. 63
</TABLE>
SCHEDULES AND ATTACHMENTS
Schedule 30.5 Litigation
Schedule 30.10 Business Locations
Schedule 30.13 Compliance with Law
ATTACHMENT A Information Relating to Initial Leased Vehicles
ATTACHMENT B Vehicle Acquisition Schedule and Related Information
ATTACHMENT C Form of Power of Attorney
ATTACHMENT D Form of Joinder in Lease
v
<PAGE>
MASTER MOTOR VEHICLE OPERATING LEASE AGREEMENT
This Master Motor Vehicle Operating Lease Agreement (this
"Agreement"), dated as of July 30, 1997, by and among AESOP LEASING L.P., a
Delaware limited partnership (the "Lessor"), AVIS RENT A CAR SYSTEM, INC., a
Delaware corporation ("ARAC"), individually and as the Administrator, Eligible
Rental Car Companies that become party to this Agreement pursuant to the
provisions of Section 24 hereof (individually, ARAC and each such Eligible
Rental Car Company, a "Lessee" and, collectively, the "Lessees"), and AVIS
RENT A CAR, INC., a Delaware corporation, as guarantor (the "Guarantor").
W I T N E S S E T H:
WHEREAS, the Lessor (such capitalized term, together with all other
capitalized terms used herein, shall have the meaning assigned thereto in
Section 1) has purchased or will purchase Program Vehicles and Non-Program
Vehicles of one or more Manufacturers with proceeds provided to the Lessor by
the Lender pursuant to the AESOP I Operating Lease Loan Agreement and other
available funds;
WHEREAS, the Lessor desires to lease to the Lessees and the Lessees
desire to lease from the Lessor both Program Vehicles and Non-Program Vehicles
financed by the Lessor with the proceeds of Loans and other available funds
for use in the daily rental car businesses of the Lessees; and
WHEREAS, the Guarantor has, pursuant to Section 26 hereof, guaranteed
the obligations of the Lessees under this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. DEFINITIONS. Unless specified herein, capitalized terms used
herein (including the preamble and recitals hereto) shall have the meanings
ascribed to such terms in the Definitions List attached as Schedule I to the
Base Indenture, dated as of July 30, 1997 (the "Base Indenture"), between
AFC-II, as Issuer, and Harris Trust and Savings Bank, as Trustee.
2. GENERAL AGREEMENT. (a) Each Lessee and the Lessor intend that this
Agreement is a lease and that the relationship
<PAGE>
between the Lessor and each Lessee pursuant hereto shall always be only that
of lessor and lessee, and each Lessee hereby declares, acknowledges and agrees
that the Lessor is the owner of, and the Lessor or its Permitted Nominee holds
legal title to, the Vehicles. No Lessee shall acquire by virtue of this
Agreement any right, equity, title or interest in or to any Vehicles, except
the right to use the same under the terms hereof. The parties agree that this
Agreement is a "true lease" and agree to treat this Agreement as a lease for
all purposes, including tax, accounting and otherwise and each party hereto
will take no position on its tax returns and filings contrary to the position
that the Lessor is the owner of the Vehicles for federal and state income tax
purposes.
(b) If, notwithstanding the intent of the parties to this Agreement,
this Agreement is characterized by any third party as a financing arrangement
or as otherwise not constituting a "true lease," then it is the intention of
the parties that this Agreement shall constitute a security agreement under
applicable law, and, to secure all of its obligations under this Agreement,
each Lessee hereby grants to the Lessor a security interest in all of such
Lessee's right, title and interest, if any, in and to all of the following
assets, property and interests in property, whether now owned or hereafter
acquired or created:
(i) the rights of such Lessee under this Agreement, as same
may be amended, modified or supplemented from time to time in
accordance with its terms, and any other agreements related to or in
connection with this Agreement to which the Lessees are a party (the
"Lessee Agreements"), including, without limitation, (a) all monies,
if any, due and to become due to such Lessee from the Guarantor and
any other Lessee under or in connection with any of the Lessee
Agreements, whether payable as rent, guaranty payments, fees,
expenses, costs, indemnities, insurance recoveries, damages for the
breach of any of the Lessee Agreements or otherwise, (b) all rights,
remedies, powers, privileges and claims of such Lessee against any
other party under or with respect to the Lessee Agreements (whether
arising pursuant to the terms of such Agreements or otherwise
available to such Lessee at law or in equity), including the right to
enforce any of the Lessee Agreements and to give or withhold any and
all consents, requests, notices, directions, approvals, extensions or
waivers under or with respect to the Lessee Agreements or the
obligations and liabilities of any party thereunder, (c) all liens
and property from time to time purporting to secure payment of the
obligations and liabilities of such
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Lessee arising under or in connection with the Lessee Agreements, and
any documents or agreements describing any collateral securing such
obligations or liabilities and (d) all guarantees, insurance and
other agreements or arrangements of whatever character from time to
time supporting or securing payment of such obligations and
liabilities of such Lessee pursuant to the Lessee Agreements;
(ii) all Vehicles leased by such Lessee from the Lessor
under this Agreement which, notwithstanding that this Agreement is
intended to convey only a leasehold interest, are determined to be
owned by such Lessee, and all Certificates of Title with respect to
such Vehicles;
(iii) all right, title and interest of such Lessee in, to
and under any Manufacturer Programs, including any amendments
thereof, and all monies due and to become due thereunder, in each
case in respect of Vehicles leased by such Lessee which,
notwithstanding that this Agreement is intended to convey only a
leasehold interest, are determined to be owned by such Lessee,
whether payable as Vehicle repurchase prices, auction sales proceeds,
fees, expenses, costs, indemnities, insurance recoveries, damages for
breach of the Manufacturer Programs or otherwise (but excluding all
incentive payments payable to such Lessee or the Lessor in respect of
purchases of vehicles under the Manufacturer Programs) and all rights
to compel performance and otherwise exercise remedies thereunder;
(iv) all right, title and interest of such Lessee in and to
any proceeds from the sale of Vehicles leased by such Lessee which,
notwithstanding that this Agreement is intended to convey only a
leasehold interest, are determined to be owned by such Lessee,
including all monies due in respect of such Vehicles, whether payable
as the purchase price of such Vehicles, as auction sales proceeds, or
as fees, expenses, costs, indemnities, insurance recoveries, or
otherwise (including all upfront incentive payments payable by
Manufacturers to such Lessee or the Lessor in respect of purchases of
Non-Program Vehicles);
(v) all payments under insurance policies (whether or not
the Lessor, the Lender or the Trustee is named as the loss payee
thereof) or any warranty payable by reason of loss or damage to, or
otherwise with respect to, any of the Vehicles leased by such Lessee;
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(vi) all additional property that may from time to time
hereafter be subjected to the grant and pledge under this Agreement,
as same may be modified or supplemented from time to time, by such
Lessee or by anyone on its behalf; and
(vii) all proceeds of any and all of the foregoing
including, without limitation, payments under insurance (whether or
not the Lessor is named as the loss payee thereof) and cash.
(c) To secure the AFC-II Obligations, each Lessee hereby grants to
the Trustee, on behalf of the Secured Parties, a first priority security
interest in all of such Lessee's right, title and interest, if any, in and to
all of the collateral described in Section 2(b) above, whether now owned or
hereafter acquired or created. Upon the occurrence of a Liquidation Event of
Default or a Limited Liquidation Event of Default and subject to the
provisions of the Related Documents, the Trustee shall have all of the rights
and remedies of a secured party, including, without limitation, the rights and
remedies granted under the Uniform Commercial Code.
(d) Each Lessee agrees to deliver to the Lessor, the Lender and the
Trustee on or before the Initial Closing Date:
(i) a written search report from a Person satisfactory to
the Lessor, the Lender and the Trustee listing all effective
financing statements that name such Lessee as debtor or assignor, and
that are filed in the jurisdictions in which filings were made
pursuant to clause (ii) below, together with copies of such financing
statements, and tax and judgment lien search reports from a Person
satisfactory to the Lessor, the Lender and the Trustee showing no
evidence of liens filed against such Lessee that purport to affect
any Vehicles leased hereunder or any Collateral under the Base
Indenture;
(ii) evidence of the filing of proper financing statements
on Form UCC-1 naming such Lessee, as debtor, and the Lessor as
secured party covering the collateral described in Section 2(b)
hereof; and
(iii) evidence of the filing in the states in which such
Lessee conducts business of proper financing statements on Form UCC-1
naming such Lessee, as debtor, and the Trustee as secured party
covering the collateral described in Section 2(b) hereof.
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2.1. Lease and Acquisition of Vehicles. From time to time, subject to
the terms and provisions hereof, the Lessor agrees to lease to each Lessee and
each Lessee agrees to lease from the Lessor, subject to the terms hereof, (i)
the new Vehicles identified in Vehicle orders (each such Vehicle order, a
"Vehicle Order") placed by such Lessee, pursuant to the terms of the
Manufacturer Programs with respect to Program Vehicles and NonProgram Vehicles
to the extent subject to a Manufacturer Program and as otherwise agreed by the
Lessor, such Lessee and a dealer with respect to other Non-Program Vehicles
and (ii) the Vehicles identified in Attachment A hereto containing information
concerning the Initial PVT Vehicles and the Initial ARAC Vehicles leased by
ARAC under this Agreement (the "Initial Leased Vehicles") of a scope agreed
upon by ARAC and the Lessor (including, at a minimum, the Net Book Value (as
of the first day of the Related Month in which the Initial Closing Date
occurs) of each of the Initial Leased Vehicles). If requested by the Lessor, a
Lessee shall make each Vehicle Order with respect to each Vehicle leased by
such Lessee available to the Lessor, together with a schedule containing the
information with respect to such Vehicles included within such Vehicle Order
as is set forth in Attachment B hereto (each, a "Vehicle Acquisition
Schedule"), or in such form as is otherwise requested by the Lessor. In
addition, each Lessee agrees to provide such other information regarding such
Vehicles as the Lessor may require from time to time, including on the Initial
Closing Date, in the case of the Initial Leased Vehicles, such information as
may be required to determine the monthly Depreciation Charges applicable to
such Vehicles. This Agreement, together with the Manufacturer Programs and any
other related documents attached to this Agreement or submitted with a Vehicle
Order (collectively, the "Supplemental Documents"), will constitute the entire
agreement regarding the leasing of Vehicles by the Lessor to the Lessees.
2.2. Right of Lessees and Guarantor to Act as Lessor's Agent. The
Lessor agrees that each Lessee and the Guarantor may act as the Lessor's agent
in placing Vehicle Orders on behalf of the Lessor, as well as filing claims on
behalf of the Lessor for damage in transit, and other Manufacturer delivery
claims related to the Vehicles; provided, however, that the Lessor may hold a
Lessee or the Guarantor liable for losses due to such Lessee's or the
Guarantor's actions, or failure to act, in performing as the Lessor's agent in
accordance with the terms hereof. In addition, the Lessor agrees that each
Lessee may make arrangements for delivery of Vehicles leased by such Lessee to
a location selected by such Lessee at its expense. Each Lessee agrees to
accept Vehicles leased by such Lessee as produced and delivered except
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each Lessee will have the option to reject any such Vehicle that may be
rejected pursuant to the terms of the applicable Manufacturer Program (with
respect to Program Vehicles and Non-Program Vehicles subject to a Manufacturer
Program), or in accordance with its customary business practices with respect
to other Non-Program Vehicles. Each Lessee, acting as agent for the Lessor,
shall be responsible for pursuing any rights of the Lessor with respect to the
return of any Vehicle leased by such Lessee to the Manufacturer pursuant to
the preceding sentence. Each of the Lessees and the Guarantor agree that all
Program Vehicles ordered as provided herein shall be ordered utilizing the
procedures consistent with an Eligible Manufacturer Program.
2.3. Payment of Capitalized Cost or Assignment of Net Book Value by
Lessor. On the AESOP I Operating Lease Commencement Date, the Lessor shall
apply to each Initial Leased Vehicle the Net Book Value (as of the first day
of the Related Month) for such Vehicle as described on Attachment A hereto.
Upon delivery of any Vehicle, the Lessor shall pay to the authorized dealer,
if any, that sold such Vehicle to the Lessor, the Capitalized Cost for such
Vehicle and the Lessee leasing such Vehicle shall pay all applicable costs and
expenses of freight, packing, handling, storage, shipment and delivery of such
Vehicle, and sales and use tax (if any), to the extent that the same have not
been included in the Capitalized Cost for such Vehicle.
2.4. Non-Liability of Lessor. The Lessor shall not be liable to any
Lessee for any failure or delay in obtaining Vehicles or making delivery
thereof. AS BETWEEN THE LESSOR AND EACH LESSEE, ACCEPTANCE FOR LEASE OF THE
VEHICLES LEASED BY SUCH LESSEE SHALL CONSTITUTE SUCH LESSEE'S ACKNOWLEDGMENT
AND AGREEMENT THAT SUCH LESSEE HAS FULLY INSPECTED SUCH VEHICLES, THAT SUCH
VEHICLES ARE IN GOOD ORDER AND CONDITION AND ARE OF THE MANUFACTURE, DESIGN,
SPECIFICATIONS AND CAPACITY SELECTED BY SUCH LESSEE, THAT SUCH LESSEE IS
SATISFIED THAT THE SAME ARE SUITABLE FOR THIS USE AND THAT THE LESSOR IS NOT A
MANUFACTURER OR ENGAGED IN THE SALE OR DISTRIBUTION OF VEHICLES, AND HAS NOT
MADE AND DOES NOT HEREBY MAKE ANY REPRESENTATION, WARRANTY OR COVENANT WITH
RESPECT TO MERCHANTABILITY, CONDITION, QUALITY, DURABILITY OR SUITABILITY OF
SUCH VEHICLE IN ANY RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES OR USES
OF SUCH LESSEE, OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND
OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT THERETO. The Lessor shall not
be liable for any failure or delay in delivering any Vehicle ordered for lease
pursuant to this Agreement, or for any failure to perform any provision
hereof, resulting from fire or other casualty, natural disaster, riot, strike
or other labor difficul-
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ty, governmental regulation or restriction, or any cause beyond the Lessor's
direct control. IN NO EVENT SHALL THE LESSOR BE LIABLE FOR ANY INCONVENIENCES,
LOSS OF PROFITS OR ANY OTHER CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES
RESULTING FROM ANY DEFECT IN OR ANY THEFT, DAMAGE, LOSS OR FAILURE OF ANY
VEHICLE, AND THERE SHALL BE NO ABATEMENT OF MONTHLY BASE RENT, SUPPLEMENTAL
RENT OR OTHER AMOUNTS PAYABLE HEREUNDER BECAUSE OF THE SAME.
2.5. Lessees' Rights to Purchase Vehicles. Each Lessee shall have the
option, exercisable with respect to any Vehicle during the Vehicle Term with
respect to such Vehicle, to purchase any Vehicle leased by such Lessee at the
greater of (i) the Termination Value or (ii) the Market Value of such Vehicle
(the greater of such amounts being referred to as the "Vehicle Purchase
Price"), in which event such Lessee will pay the Vehicle Purchase Price to the
Lessor on or before the Payment Date with respect to the Related Month in
which such Lessee elects to purchase such Vehicle and such Lessee will pay on
or before such Payment Date all accrued and unpaid Monthly Base Rent and any
Supplemental Rent then due and payable with respect to such Vehicle through
such Payment Date. The Lessor shall request title to any such Vehicle to be
transferred to the relevant Lessee and the Administrator shall request the
Trustee to cause its Lien to be removed from the Certificate of Title for such
Vehicle, concurrently with or promptly after the Vehicle Purchase Price for
such Vehicle (and any such unpaid Monthly Base Rent and Supplemental Rent) is
deposited in the Collection Account.
2.6. Lessor's Right to Cause Vehicles to be Sold. If a Lessee does
not elect to purchase any Vehicle leased by such Lessee hereunder pursuant to
Section 2.5 hereof, then:
(a) Notwithstanding anything to the contrary contained herein, with
respect to Program Vehicles leased hereunder, and subject to Sections 13.2 and
2.5 hereof, the Lessor shall have the right, at any time following the date
ninety (90) days prior to the expiration of the Maximum Term for such Program
Vehicle, to require that the Lessee leasing such Program Vehicle from the
Lessor hereunder or another Person designated by the Lessor, which Person's
compensation will be payable solely from the proceeds from the sale of such
Vehicle, exercise commercially reasonable efforts to arrange for the sale of
such Vehicle to a third party for the Vehicle Purchase Price with respect to
such Vehicle, in which event such Lessee or such other designated Person
shall, until not later than the date thirty (30) days prior to the expiration
of such Maximum Term, exercise commercially reasonable efforts to arrange for
the sale of such Vehicle
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to a third party for a price (as reduced by the amount of compensation to be
paid to any such other designated Person) equal to or greater than the
Termination Value thereof. If a sale of such Program Vehicle is arranged by
such Lessee or such other designated Person prior to such date thirty (30)
days prior to the expiration of such Maximum Term, then (i) such Lessee or
such other designated Person shall deliver such Vehicle to the purchaser
thereof, (ii) such Lessee or such other designated Person shall cause to be
delivered to the Lessor the funds paid for such Vehicle by the purchaser and
(iii) the Administrator shall request the Trustee to cause its Lien to be
removed from the Certificate of Title for such Vehicle. If such Lessee or such
other designated Person is unable to arrange for a sale of such Vehicle prior
to such date thirty (30) days prior to the expiration of such Maximum Term,
then such Lessee or such other designated Person shall cease attempting to
arrange for such a sale and such Lessee shall return such Vehicle, if a
Manufacturer Event of Default has not occurred, to the applicable Manufacturer
as herein provided.
(b) With respect to Non-Program Vehicles leased hereunder and subject
to the exercise of each Lessee's rights under Section 2.5, each Lessee shall
use commercially reasonable efforts to arrange for the sale of each
Non-Program Vehicle leased by such Lessee to a third party for the Vehicle
Purchase Price with respect to such Vehicle on or prior to the applicable
Vehicle Operating Lease Expiration Date. Each Lessee may return a NonProgram
Vehicle subject to a Manufacturer Program to the applicable Manufacturer under
such Manufacturer Program provided that (i) the Repurchase Price of such
Vehicle, together with any Special Default Payments payable by such Lessee
with respect to such Vehicle, is at least equal to the Termination Value with
respect to such Vehicle, (ii) no Manufacturer Event of Default shall have
occurred with respect to such Manufacturer and (iii) by the later of the
sixtieth (60th) day after the Initial Closing Date and the date on which such
Vehicle is returned to the Manufacturer, the Trustee and the Lender shall have
received an assignment of the benefits of such Manufacturer Program,
acknowledged in writing by such Manufacturer. Notwithstanding the disposition
of a Non-Program Vehicle by such Lessee prior to the applicable Vehicle
Operating Lease Expiration Date, such Lessee shall pay to the Lessor all
accrued and unpaid Monthly Base Rent and any Supplemental Rent then due and
payable with respect to such Non-Program Vehicle through the Payment Date with
respect to the Related Month during which such disposition occurred, unless
such Non-Program Vehicle is a Standard Casualty or becomes an Ineligible
Vehicle, payment for which will be made in accordance
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<PAGE>
with Section 6 hereof. If a sale of such Non-Program Vehicle is arranged by
such Lessee pursuant to this Section 2.6(b), then (i) such Lessee shall
deliver the Vehicle to the purchaser thereof, (ii) such Lessee shall cause to
be delivered to the Lessor the funds paid for such Vehicle by the purchaser
and (iii) the Administrator shall request the Trustee to cause its Lien to be
removed from the Certificate for Title of such Vehicle.
(c) In the event any Vehicle or Vehicles leased hereunder are not
purchased by the Lessee of such Vehicle pursuant to Section 2.5, sold to a
third party pursuant to Section 2.6(a) or sold to a third party or returned to
a Manufacturer pursuant to Section 2.6(b), then, in the case of a Non-Program
Vehicle, such Lessee shall return such Vehicle to the Lessor or, in the case
of a Program Vehicle, such Lessee shall dispose of such Vehicle in accordance
with the procedures set forth in Section 13.2(a), in each case, on the Payment
Date with respect to the Related Month in which the applicable Vehicle
Operating Lease Expiration Date falls, and such Lessee shall pay an amount
equal to all accrued but unpaid Monthly Base Rent and all Supplemental Rent
payable with respect to such Vehicles through such Payment Date.
2.7. Redesignation of Vehicles. If a Program Vehicle becomes
ineligible for repurchase by its Manufacturer or for sale at auction under the
applicable Manufacturer Program or the return of a Program Vehicle to the
applicable Manufacturer cannot otherwise be effected for any reason (including
by reason of the occurrence of a Manufacturer Event of Default with respect to
the Manufacturer of such Program Vehicle or the failure of a Manufacturer to
accept such Program Vehicle for repurchase and acceptance is not expected upon
a subsequent return), the Lessee of such Vehicle may redesignate the related
Program Vehicle as a Non-Program Vehicle, provided that (i) no Amortization
Event or Potential Amortization Event has occurred and is continuing and (ii)
no violation of the requirements of Section 10.13 of the AESOP I Operating
Lease Loan Agreement or Section 2.8 hereof would be caused by such
redesignation, and provided further, in each case, that (x) the relevant
Lessee of such Vehicle shall pay to the Lessor on the next succeeding Payment
Date an amount equal to the difference, if any, between the Net Book Value of
such Vehicle as of the date of redesignation and an amount equal to the Net
Book Value of such Vehicle as of the date of redesignation had such Vehicle
been a Non-Program Vehicle at the time of delivery thereof pursuant to Section
2.1 and (y) the Required Enhancement Amount required under each Supplement,
after giving effect to such redesignation, shall be satisfied on the date of
redesignation.
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2.8. Limitations on the Acquisition or Redesignation of Certain
Vehicles. Unless otherwise specified in a Supplement or unless waived by the
Required Noteholders as specified in a Supplement, (a) the aggregate Net Book
Value of all Vehicles (or such portion thereof as is specified in such
Supplement) manufactured by Manufacturers other than Eligible Non-Program
Manufacturers and leased under this Agreement (after giving effect to the
inclusion of such Vehicle under this Agreement) and the Finance Lease as of
such date shall not exceed any applicable Maximum Non-Eligible Manufacturer
Amount, (b) the aggregate Net Book Value of all Non-Program Vehicles (or such
portion thereof as is specified in such Supplement) leased under this
Agreement (after giving effect to the inclusion or redesignation, as the case
may be, of such Vehicle under this Agreement) and the Finance Lease as of such
date shall not exceed any applicable Maximum Non-Program Vehicle Amount, (c)
the aggregate Net Book Value of all Vehicles (or such portion thereof as is
specified in such Supplement) manufactured by a particular Manufacturer or
group of Manufacturers and leased under the Leases (after giving effect to the
inclusion of such Vehicle under this Agreement) as of such date shall not
exceed any applicable Maximum Manufacturer Amount, (d) the aggregate Net Book
Value of all Vehicles (or such portion thereof as is specified in such
Supplement) titled in the States of Ohio, Oklahoma and Nebraska and leased
under this Agreement (after giving effect to the inclusion of such Vehicle
under this Agreement) and the AESOP II Operating Lease as of such date shall
not exceed any applicable Maximum Specified States Amount and (e) after giving
effect to the inclusion or redesignation of such Vehicle under this Agreement,
there shall not be a failure or violation of any other conditions,
requirements or restrictions with respect to the leasing of Eligible Vehicles
under this Agreement as is specified in any Supplement.
3. TERM.
3.1. Vehicle Term. (a) The "Vehicle Operating Lease Commencement
Date" (x) for each Initial Leased Vehicle shall mean the Initial Closing Date
and (y) for each other Vehicle shall mean the day as referenced in the Vehicle
Acquisition Schedule with respect to such Vehicle but in no event shall such
date be a date later than the date that funds are expended or allocated by the
Lessor to acquire such Vehicle. The "Vehicle Term" with respect to each
Vehicle shall extend from the Vehicle Operating Lease Commencement Date
through the earliest of (i) if such Vehicle is a Program Vehicle or a
Non-Program Vehicle returned to a Manufacturer under a Manufacturer Program in
accordance with Section 2.6(b), the Turnback Date for such Vehicle, (ii) if
such
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Vehicle is sold to a third party (other than through an auction conducted by
or through or arranged by the Manufacturer pursuant to its Manufacturer
Program), the date on which funds in respect of such sale are deposited in the
Collection Account (by such third party or by the applicable Lessee or the
Guarantor on behalf of such third party) and such funds equal or exceed the
Termination Value of such Vehicle, (iii) if such Vehicle becomes a Standard
Casualty or an Ineligible Vehicle, the date funds in the amount of the
Termination Value thereof are deposited in the Collection Account by the
applicable Lessee, (iv) the date that such Vehicle is purchased by the
applicable Lessee pursuant to Section 2.5 hereof and the Vehicle Purchase
Price with respect to such purchase (and any unpaid Monthly Base Rent and
Supplemental Rent with respect to such Vehicle) is deposited in the Collection
Account by such Lessee and (v) the date that is the last Business Day of the
month that is 18 months after the month in which the Vehicle Operating Lease
Commencement Date occurs with respect to such Vehicle (the earliest of such
five dates being referred to as the "Vehicle Operating Lease Expiration
Date").
(b) Subject to the provisions of Sections 2.5 and 2.6, each Lessee
shall use its commercially reasonable efforts to return each Program Vehicle
leased by such Lessee hereunder to the related Manufacturer (or such
Manufacturer's agent or as otherwise directed by such Manufacturer in
accordance with such Manufacturer Program) (a) not prior to the end of the
minimum holding period specified in the related Manufacturer Program (prior to
which the Lessor may not return such Program Vehicle without penalty (the
"Minimum Term")) and (b) not later than the end of the maximum holding period
(after which the Lessor may not return such Program Vehicle without penalty
(the "Maximum Term")); provided, however, that each Lessee shall in any case
return each Program Vehicle leased by such Lessee hereunder to the related
Manufacturer (or such Manufacturer's agent or as otherwise directed by such
Manufacturer in accordance with such Manufacturer Program) on or before the
Vehicle Operating Lease Expiration Date with respect to such Vehicle pursuant
to Section 13.2 hereof. The Lessee of any Program Vehicles returned before the
Minimum Term will pay to the Lessor the equivalent of the Monthly Base Rent
with respect to such vehicle for the Minimum Term plus any early turn back
surcharges payable by the Lessor or deductible from the Repurchase Price of
such Vehicle regardless of actual usage, unless such Vehicle is a Standard
Casualty or becomes an Ineligible Vehicle, in which case, the disposition of
such Vehicle will be handled in accordance with Section 6 hereof.
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3.2. Term. The "AESOP I Operating Lease Commencement Date" shall mean
the Initial Closing Date. The "AESOP I Operating Lease Expiration Date" shall
mean the latest of (i) the date of the payment in full of all Loans (including
any Loan Interest thereon) the proceeds of which were used by the Lessor to
finance the purchase of Vehicles subject to this Agreement, (ii) the Vehicle
Operating Lease Expiration Date for the last Vehicle leased by any Lessee
hereunder and (iii) the date on which all amounts payable hereunder and under
the Loan Agreements have been paid in full. The "Term" of this Agreement shall
mean the period commencing on the AESOP I Operating Lease Commencement Date
and ending on the AESOP I Operating Lease Expiration Date.
4. RENT AND CHARGES. Each Lessee will pay Monthly Base Rent and any
Supplemental Rent due and payable on a monthly basis as set forth in this
Section 4.
4.1. Payment of Rent. On each Payment Date each Lessee shall pay in
immediately available funds to the Lessor not later than 11:00 a.m. New York
City time, on such Payment Date, such Lessee's allocable portion of (i) all
Monthly Base Rent that has accrued during the Related Month with respect to
each Vehicle leased hereunder during or prior to the Related Month and (ii)
all Supplemental Rent due and payable on such Payment Date. The portion of
Monthly Base Rent allocable to each Lessee will equal (i) with respect to the
amounts described in clause (b) of the definition of Monthly Base Rent, the
portion thereof that relates to the particular Vehicles leased hereunder by
such Lessee and (ii) with respect to other amounts included in the definition
of Monthly Base Rent, such Lessee's Share, determined as of the beginning of
the Related Month, of such amounts. The portion of Supplemental Rent allocable
to each Lessee will equal (i) with respect to Supplemental Rent that relates
to particular Vehicles, the portion thereof that relates to the particular
Vehicles leased hereunder by such Lessee and (ii) with respect to Supplemental
Rent that does not relate to particular Vehicles, such Lessee's Share,
determined as of the beginning of the Related Month, of such amounts.
4.2. [RESERVED].
4.3. Net Lease. THIS AGREEMENT SHALL BE A NET LEASE, AND EACH
LESSEE'S OBLIGATION TO PAY ALL MONTHLY BASE RENT, SUPPLEMENTAL RENT AND
OTHER SUMS HEREUNDER SHALL BE ABSOLUTE AND UNCONDITIONAL, AND SHALL NOT BE
SUBJECT TO ANY ABATEMENT, SETOFF, COUNTERCLAIM, DEDUCTION OR REDUCTION FOR ANY
REASON WHATSOEVER. The obligations and liabilities of each Lessee hereunder
shall in
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no way be released, discharged or otherwise affected (except as may be
expressly provided herein including, without limitation, the right of each
Lessee to reject Vehicles pursuant to Section 2.2 hereof) for any reason,
including without limitation: (i) any defect in the condition,
merchantability, quality or fitness for use of the Vehicles or any part
thereof; (ii) any damage to, removal, abandonment, salvage, loss, scrapping or
destruction of or any requisition or taking of the Vehicles or any part
thereof; (iii) any restriction, prevention or curtailment of or interference
with any use of the Vehicles or any part thereof; (iv) any defect in or any
Lien on title to the Vehicles or any part thereof; (v) any change, waiver,
extension, indulgence or other action or omission in respect of any obligation
or liability of such Lessee or the Lessor; (vi) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other
like proceeding relating to such Lessee, the Lessor or any other Person, or
any action taken with respect to this Agreement by any trustee or receiver of
any Person mentioned above, or by any court; (vii) any claim that such Lessee
has or might have against any Person, including without limitation the Lessor;
(viii) any failure on the part of the Lessor or any other Lessee to perform or
comply with any of the terms hereof or of any other agreement; (ix) any
invalidity or unenforceability or disaffirmance of this Agreement or any
provision hereof or any of the other Related Documents or any provision of any
thereof, in each case whether against or by such Lessee or otherwise; (x) any
insurance premiums payable by such Lessee with respect to the Vehicles; or
(xi) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether or not such Lessee shall have notice or knowledge of any of
the foregoing and whether or not foreseen or foreseeable. This Agreement shall
be noncancelable by the Lessees and, except as expressly provided herein, each
Lessee, to the extent permitted by law, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender this
Agreement, or to any diminution or reduction of Monthly Base Rent,
Supplemental Rent or other amounts payable by such Lessee hereunder. All
payments by each Lessee made hereunder shall be final (except to the extent of
adjustments provided for herein), absent manifest error and, except as
otherwise provided herein, each Lessee shall not seek to recover any such
payment or any part thereof for any reason whatsoever, absent manifest error.
If for any reason whatsoever this Agreement shall be terminated in whole or in
part by operation of law or otherwise except as expressly provided herein,
each Lessee shall nonetheless pay an amount equal to such Lessee's allocable
portion of all Monthly Base Rent, all Supplemental Rent and all other amounts
due hereunder at the time and
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in the manner that such payments would have become due and payable under the
terms of this Agreement as if it had not been terminated in whole or in part.
All covenants and agreements of each Lessee herein shall be performed at its
cost, expense and risk unless expressly otherwise stated.
5. INSURANCE. Each Lessee represents that it shall at all times
maintain or cause to be maintained insurance coverage in force as follows:
5.1. Personal Injury and Damage. Insurance coverage as set forth in
Section 31.3 hereof. In addition, each Lessee will maintain with respect to
each Lessee's properties and businesses insurance against loss or damage of
the kind customarily insured against by corporations engaged in the same or
similar businesses, of such types and in such amounts as are customarily
carried by such similarly situated corporations.
5.2. Delivery of Certificate of Insurance. Within 10 days after the
Initial Closing Date (or, with respect to any additional party becoming a
"Lessee" hereunder pursuant to the provisions of Section 24 hereof, within 10
days after the date such party becomes a "Lessee" hereunder), each Lessee or
the Guarantor shall deliver to the Lessor a certificate(s) of insurance naming
the Lender, the Lessor, Original AESOP, PVHC, Quartx, and the Trustee as
additional insureds as to the item required by Section 31.3. Such insurance
shall not be changed or canceled except as provided below in Section 5.3.
5.3. Changes in Insurance Coverage. No changes shall be made in any
of the foregoing insurance requirements unless the prior written consent of
the Lessor, the Lender and the Trustee are first obtained. The Lessor may
grant or withhold its consent to any proposed change in such insurance in its
sole discretion. The Lender and the Trustee shall be required to grant its
consent to any proposed change in such insurance upon compliance with the
following conditions:
(i) The relevant Lessee or the Guarantor shall deliver not
less than 30 days' prior written notice of any proposed change in
such insurance to the Lender and the Trustee;
(ii) The relevant Lessee or the Guarantor shall furnish to
the Lender and the Trustee a letter from each Rating Agency with
respect to all Outstanding Commercial Paper Notes and Notes rated by
such Rating Agency to the effect that such proposed change will not
cause a reduction in or a
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withdrawal of the current rating of such Commercial Paper
Notes or the Notes; and
(iii) The proposed change will satisfy the Rating Agency
Confirmation Condition.
6. RISK OF LOSS; CASUALTY AND INELIGIBLE VEHICLE OBLIGATIONS.
6.1. Risk of Loss Borne by Lessees. Upon delivery of each Vehicle to
the Lessee of such Vehicle, as between the Lessor and such Lessee, such Lessee
assumes and bears the risk of loss, damage, theft, taking, destruction,
attachment, seizure, confiscation or requisition with respect to such Vehicle,
however caused or occasioned, and all other risks and liabilities, including
personal injury or death and property damage, arising with respect to such
Vehicle or the manufacture, purchase, acceptance, rejection, ownership,
delivery, leasing, subleasing, possession, use, inspection, registration,
operation, condition, maintenance, repair, storage, sale, return or other
disposition of such Vehicle, howsoever arising.
6.2. Casualty; Ineligible Vehicles. If a Vehicle becomes a Standard
Casualty or an Ineligible Vehicle, then the Lessee of such Vehicle will (i)
promptly notify the Lessor thereof and (ii) promptly, but in no event later
than the Payment Date with respect to the Related Month during which such
Vehicle became a Standard Casualty or an Ineligible Vehicle, pay to the Lessor
the Termination Value of such Vehicle (as of the date such Vehicle became a
Standard Casualty or an Ineligible Vehicle). Upon payment by such Lessee to
the Lessor of the Termination Value of any Vehicle that has become a Standard
Casualty or an Ineligible Vehicle (i) the Lessor shall cause title to such
Vehicle to be transferred to such Lessee to facilitate liquidation of such
Vehicle by such Lessee, (ii) such Lessee shall be entitled to any physical
damage insurance proceeds applicable to such Vehicle and (iii) the
Administrator shall request the Trustee to cause its Lien to be removed from
the Certificate of title for such Vehicle.
7. VEHICLE USE. So long as no AESOP I Operating Lease Event of
Default, Liquidation Event of Default or Limited Liquidation Event of Default
has occurred (subject, however, to Section 2.6 hereof), each Lessee may use
Vehicles leased hereunder in its regular course of business. Such use shall be
confined primarily to the United States; provided, however, that the principal
place of business or rental office of each Lessee with
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respect to the Vehicles is located in the United States. The Administrator
shall promptly and duly execute, deliver, file and record all such documents,
statements, filings and registrations, and take such further actions as the
Lessor, the Lender or the Trustee shall from time to time reasonably request
in order to establish, perfect and maintain the Lessor's title to and interest
in the Vehicles and the Certificates of Title as against each Lessee or any
third party in any applicable jurisdiction and to establish, perfect and
maintain the Trustee's Lien on the Vehicles and the Certificates of Title
(other than noting the Lien of the Trustee on the Certificates of Title with
respect to (i) the Initial PVT Vehicles (which shall reflect the Lien of BONY)
and (ii) Vehicles titled in the states of Ohio, Oklahoma and Nebraska) as a
perfected first lien in any applicable jurisdiction. Each Lessee may, at its
sole expense, change the place of principal location of any Vehicles.
Notwithstanding the foregoing, no change of location shall be undertaken
unless and until (x) all actions necessary to maintain the Lien of the Trustee
on such Vehicles and the Certificates of Title (other than noting the Lien of
the Trustee on the Certificates of Title with respect to (i) the Initial PVT
Vehicles (which shall reflect the Lien of BONY) and (ii) Vehicles titled in
the states of Ohio, Oklahoma and Nebraska) with respect to such Vehicles shall
have been taken and (y) all legal requirements applicable to such Vehicles
shall have been met or obtained. Following the occurrence of an AESOP I
Operating Lease Event of Default, a Limited Liquidation Event of Default, a
Liquidation Event of Default or a Manufacturer Event of Default, and upon the
Lender's request, each Lessee shall advise the Lender in writing where all
Vehicles leased hereunder as of such date are principally located. Each Lessee
shall not knowingly use any Vehicles or knowingly permit the same to be used
for any unlawful purpose. Each Lessee shall use reasonable precautions to
prevent loss or damage to Vehicles. Each Lessee shall comply with all
applicable statutes, decrees, ordinances and regulations regarding acquiring,
titling, registering, leasing, insuring and disposing of Vehicles and shall
take reasonable steps to ensure that operators are licensed. Each Lessee and
the Lessor agree that such Lessee shall perform, at such Lessee's own expense,
such Vehicle preparation and conditioning services with respect to Vehicles
leased by such Lessee hereunder as are customary. The Lessor, the Lender or
the Trustee or any authorized representative of the Lessor, the Lender or the
Trustee may during reasonable business hours from time to time, without
disruption of each Lessee's business, subject to applicable law, inspect
Vehicles and registration certificates, Certificates of Title and related
documents covering Vehicles wherever the same be located. No Lessee shall
sublease
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any Vehicles, nor shall any Lessee assign any right or interest herein or in
any Vehicles; provided, however, the foregoing shall not be deemed to prohibit
the Lessees from renting Vehicles to third party customers in the ordinary
course of their respective car rental businesses.
8. LIENS. Except for Permitted Liens, each Lessee shall keep all
Vehicles leased by it hereunder free of all Liens arising during the Term.
Upon the Vehicle Operating Lease Expiration Date for each Vehicle leased
hereunder should any such Lien exist the Lessor may, in its discretion, remove
such Lien and any sum of money that may be paid by the Lessor in release or
discharge thereof, including attorneys' fees and costs, will be paid by the
Lessee of such Vehicle upon demand by the Lessor. The Lessor may grant
security interests in the Vehicles leased by a Lessee hereunder without
consent of such Lessee; provided, however, that if any such Liens would
interfere with the rights of such Lessee under this Agreement, the Lessor must
obtain the prior written consent of such Lessee. Each Lessee agrees and
acknowledges that the granting of Liens and the taking of other actions
pursuant to the Loan Agreements, the Indenture and the other Related Documents
does not interfere with the rights of such Lessee under this Agreement.
9. NON-DISTURBANCE. So long as each Lessee satisfies its obligations
hereunder, its quiet enjoyment, possession and use of the Vehicles leased by
such Lessee hereunder will not be disturbed during the Term subject, however,
to Sections 2.6 and 18 hereof and except that the Lessor and the Trustee each
retains the right, but not the duty, to inspect such Vehicles without
disturbing the ordinary conduct of such Lessee's business. Upon the request of
the Lessor, the Lender or the Trustee from time to time, each Lessee will make
reasonable efforts to confirm to the Lessor, the Lender and the Trustee the
location, mileage and condition of each Vehicle leased by such Lessee
hereunder and to make available for the Lessor's, the Lender's or the
Trustee's inspection within a reasonable time period, not to exceed 45 days,
such Vehicles at the location where such Vehicles are normally domiciled.
Further, each Lessee will, during normal business hours and with a notice of 3
Business Days, make its records pertaining to the Vehicles leased by such
Lessee hereunder available to the Lessor, the Lender or the Trustee for
inspection at the location where such Lessee's records are normally domiciled.
10. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND FINES.
Each Lessee, at its expense, shall be responsible for
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proper registration and licensing of Vehicles leased by such Lessee hereunder,
and titling of such Vehicles in the name of the Lessor or its Permitted
Nominee (with the Lien of the Trustee noted thereon (except with respect to
the Initial PVT Vehicles for which BONY is noted as the first lienholder and
Vehicles titled in the States of Oklahoma, Nebraska and Ohio)), and, where
required, shall have such Vehicles inspected by any appropriate governmental
authority; provided, however, that notwithstanding the foregoing, possession
of all Certificates of Title shall at all times remain with the Administrator,
who will hold such Certificates of Title in its capacity as agent for the
Lessor and on behalf of the Lender and the Trustee. Each Lessee shall be
responsible for the payment of all registration fees, title fees, license
fees, traffic summonses, penalties, judgments and fines incurred with respect
to any Vehicle leased by such Lessee hereunder during the Vehicle Term for
such Vehicle or imposed during the Vehicle Term for such Vehicle by any
governmental authority or any court of law or equity with respect to such
Vehicles in connection with such Lessee's operation of such Vehicles. The
Lessor agrees to execute a power of attorney in substantially the form of
Attachment C hereto (each, a "Power of Attorney"), and such other documents as
may be necessary in order to allow the Lessees to title, register and dispose
of the Vehicles leased hereunder in accordance with the terms hereof;
provided, however, that possession of all Certificates of Title shall at all
times remain with the Administrator who will hold such Certificates of Title
in its capacity as agent for the Lessor and on behalf of the Lender and the
Trustee, and each Lessee acknowledges and agrees that it has no right, title
or interest in or with respect to any Certificate of Title. Notwithstanding
anything herein to the contrary, the Lessor may terminate such Power of
Attorney as provided in Section 18.3(iii) hereof.
11. MAINTENANCE AND REPAIRS. Each Lessee shall pay for all
maintenance and repairs to keep Vehicles leased by such Lessee hereunder in
good working order and condition, and such Lessee will maintain such Vehicles
as required in order to keep the Manufacturer's warranty in force. Each Lessee
will return Vehicles leased by such Lessee hereunder to an authorized
Manufacturer facility or such Lessee's Manufacturer authorized warranty
station for warranty work. Each Lessee will comply with any Manufacturer's
recall of any Vehicle leased by such Lessee hereunder. Each Lessee will pay,
or cause to be paid, all usual and routine expenses incurred in the use and
operation of Vehicles leased by such Lessee hereunder including, but not
limited to, fuel, lubricants, and coolants. Each Lessee shall not make
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any material alterations to any Vehicles without the prior consent of the
Lessor. Any improvements or additions to any Vehicles leased hereunder shall
become and remain the property of the Lessor, except that any addition to
Vehicles made by the Lessee of such Vehicles shall remain the property of such
Lessee if such addition can be disconnected from such Vehicles without
impairing the functioning of such Vehicles or its resale value, excluding such
addition.
12. VEHICLE WARRANTIES.
12.1. No Lessor Warranties. EACH LESSEE ACKNOWLEDGES THAT THE LESSOR
IS NOT THE MANUFACTURER, THE AGENT OF THE MANUFACTURER, OR THE DISTRIBUTOR OF
THE VEHICLES LEASED BY SUCH LESSEE HEREUNDER. THE LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE FITNESS, SAFENESS, DESIGN,
MERCHANTABILITY, CONDITION, QUALITY, CAPACITY OR WORKMANSHIP OF THE VEHICLES
NOR ANY WARRANTY THAT THE VEHICLES WILL SATISFY THE REQUIREMENTS OF ANY LAW OR
ANY CONTRACT SPECIFICATION, AND AS BETWEEN THE LESSOR AND EACH LESSEE, EACH
LESSEE AGREES TO BEAR ALL SUCH RISKS AT ITS SOLE COST AND EXPENSE. EACH LESSEE
SPECIFICALLY WAIVES ALL RIGHTS TO MAKE CLAIMS AGAINST THE LESSOR AND ANY
VEHICLE FOR BREACH OF ANY WARRANTY OF ANY KIND WHATSOEVER AND, AS TO THE
LESSOR, EACH LESSEE LEASES THE VEHICLES "AS IS." IN NO EVENT SHALL THE LESSOR
BE LIABLE FOR SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, WHATSOEVER OR
HOWSOEVER CAUSED.
12.2. Manufacturer's Warranties. If a Vehicle leased hereunder is
covered by a Manufacturer's warranty, the Lessee of such Vehicle, during the
Vehicle Term for such Vehicle, shall have the right to make any claims under
such warranty which the Lessor could make.
13. VEHICLE USAGE GUIDELINES AND RETURN; SPECIAL DEFAULT PAYMENTS;
EARLY TERMINATION PAYMENTS.
13.1. Usage. As used herein "Vehicle Turn-In Condition" (a) with
respect to each Program Vehicle leased hereunder will be determined in
accordance with the related Manufacturer Program and (b) with respect to each
Non-Program Vehicle leased hereunder shall mean (i) if such Non-Program
Vehicle is manufactured by the same Manufacturer as any Program Vehicle leased
hereunder, the same standard as required with respect to such Program Vehicle
and (ii) if such Non-Program Vehicle does not satisfy clause (i) above, that
each such Vehicle shall have no body dents, rust, corrosion, paint mismatches
or special colors, or paint which is less than factory grade, dented, rusted,
broken, missing chrome
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or trim, ripped or stained, upholstery, seats, dash, headliner, carpeting,
trunk, or convertible vinyl top, missing interior trim, sprung or misaligned
doors or their openings, or worn, cracked, split, broken or leaking
weather-stripping, faulty window mechanisms, or broken, cracked, missing
glass, mirrors or lights, faulty electronic systems, including on-board
computers, processors, sensors, controls, radios, stereos, and the like,
faulty heating, air conditioning or climate control systems, worn or faulty
shock absorbers or other suspension or steering parts, systems or mechanisms,
excessively worn tires, or any other condition that adversely affects the
appearance or operating condition of such Vehicle, in each case other than any
such condition that would reasonably be considered to be normal wear and tear
or otherwise de minimis by the Manufacturer of such Vehicle (or its authorized
agent) under such Manufacturer's Manufacturer Program or, if such Manufacturer
does not maintain a Manufacturer Program, under the Manufacturer Program of
another Manufacturer with comparable sales volume, and the equivalent of any
Excess Damage Charges and Excess Mileage Charges with respect to such Vehicle
shall be determined by the Administrator and the Lessor in accordance with the
foregoing standard.
13.2. Return. (a) Each Lessee will, subject to Sections 2.5 and 2.6,
return each Program Vehicle leased by such Lessee hereunder (other than a
Standard Casualty or a Program Vehicle which has become an Ineligible Vehicle)
to the nearest related Manufacturer official auction or other facility
designated by such Manufacturer at such Lessee's sole expense or to such other
location designated by the Lessor (with any additional cost of delivery in
excess of what would have been incurred upon delivery to the related
Manufacturer at the expense of the Lessor), in each case in accordance with
the requirements of Section 3.1(b) hereof.
(b) Each Lessee agrees that the Vehicles leased by such Lessee
hereunder will be in Vehicle Turn-In Condition upon return to or upon the
order of the Lessor. Any rebate or credits applicable to the unexpired term of
any license plates for a Vehicle leased by a Lessee hereunder shall inure to
the benefit of such Lessee.
13.3. Special Default Payments. (a) Each Lessee will use its best
efforts to maintain the Program Vehicles leased by such Lessee hereunder such
that no Excess Damage Charges or Excess Mileage Charges will be deductible
from the Repurchase Price due from a Manufacturer or payable by the Lessor
upon the turn back of such Program Vehicles under the applicable Manufacturer
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Program. Upon receipt of payment of the Repurchase Price of each Program
Vehicle leased by a Lessee hereunder from the Manufacturer (or the receipt of
payment of the Repurchase Price of each such Program Vehicle sold through an
auction conducted by or through a Manufacturer) or upon the date by which the
Repurchase Price of each such Program Vehicle turned-back to a Manufacturer
would have been paid if not for a Manufacturer Event of Default, the Lessor
will charge such Lessee for any Excess Damage Charges and/or Excess Mileage
Charges applicable to such Program Vehicle pursuant to the applicable
Manufacturer Program (any such charges are referred to as "Program Vehicle
Special Default Payments").
(b) Each Lessee will use its best efforts to maintain the Non-Program
Vehicles leased by such Lessee hereunder in a manner such that no Non-Program
Vehicle Special Default Payments (as defined below) shall be due upon
disposition of such Non-Program Vehicles by or for the benefit of the Lessor.
Upon disposition of each Non-Program Vehicle leased hereunder by or for the
benefit of the Lessor, other than the sale of any Non-Program Vehicle to the
Lessee of such Vehicle in accordance with the terms hereof, the Lessor will
charge such Lessee (i) if such NonProgram Vehicle is manufactured by the same
Manufacturer as any Program Vehicle or is subject to a Manufacturer Program,
an amount equal to any Excess Damage Charges and/or Excess Mileage Charges
that would be applicable to the comparable Program Vehicle pursuant to the
applicable Manufacturer Program or an amount equal to any Excess Damage
Charges and/or Excess Mileage Charges that are applicable to such Vehicle
pursuant to the applicable Manufacturer Program, as the case may be, and (ii)
if such Non-Program Vehicle is subject to a Vehicle Turn-In Condition standard
established pursuant to Section 13.1(b)(ii), an amount equal to any charges
applicable to such Non-Program Vehicle pursuant to such Vehicle Turn-In
Condition standard (any such charges are referred to as "Non-Program Vehicle
Special Default Payments" and, together with the Program Vehicle Special
Default Payments, the "Special Default Payments").
(c) On each Payment Date, each Lessee shall pay to the Lessor all
Special Default Payments that have accrued during the Related Month. The
obligation of such Lessee to pay Special Default Payments shall constitute the
sole remedy respecting the breach of its covenant contained in the first
sentence of each of Section 13.3(a) and 13.3(b). The provisions of this
Section 13.3 will survive the expiration or earlier termination of the Term.
13.4. Early Termination Payments. If a Lessee turns back any Program
Vehicle leased by such Lessee hereunder to a Manufac-
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turer under its Manufacturer Program, upon the receipt of the Repurchase Price
of such Vehicle from such Manufacturer or upon the date by which the
Repurchase Price would have been paid if not for a Manufacturer Event of
Default, the Lessor will charge such Lessee an amount equal to (i) the excess,
if any, of (x) the Termination Value of such Vehicle (as of the Turnback Date)
over (y) the sum of the Repurchase Price received with respect to such Vehicle
or that would have been received but for a Manufacturer Event of Default, as
applicable, and any Special Default Payments made by such Lessee in respect of
such Vehicle pursuant to Section 13.3, plus (ii) any unpaid Monthly Base Rent
for the Minimum Term plus any early turn back charges payable or deductible
from the Repurchase Price for Program Vehicles returned before the Minimum
Term in accordance with Section 3.1(b) hereof (any such amount is referred to
as an "Early Termination Payment"). On each Payment Date, each Lessee shall
pay to the Lessor all Early Termination Payments that have accrued during the
Related Month. The provisions of this Section 13.4 will survive the expiration
or earlier termination of the Term.
14. DISPOSITION PROCEDURE. Each Lessee will comply with the
requirements of law and the requirements of the Manufacturer Programs in
connection with, among other things, the delivery of Certificates of Title and
documents of transfer signed as necessary, signed Condition Reports, and
signed odometer statements to be submitted with the Program Vehicles or
Non-Program Vehicles returned to a Manufacturer pursuant to Section 2.6(b) and
accepted by the Manufacturer or its agent at the time of Program Vehicle or
Non-Program Vehicle return.
15. ODOMETER DISCLOSURE REQUIREMENT. Each Lessee agrees to comply
with all requirements of law and all Manufacturer Program requirements with
respect to Vehicles leased by such Lessee hereunder in connection with the
transfer of ownership by the Lessor of any such Vehicle leased by such Lessee
hereunder, including, without limitation, the submission of any required
odometer disclosure statement at the time of any such transfer of ownership.
16. GENERAL INDEMNITY.
16.1. Indemnity by the Lessees and the Guarantor. The Lessees and the
Guarantor agree jointly and severally to indemnify and hold harmless the
Lessor, the Lender and the Trustee and the Lessor's, the Lender's and the
Trustee's directors, officers, stockholders, agents and employees
(collectively, the "Indemnified Persons"), on a net after-tax basis against
any and all
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claims, demands and liabilities of whatsoever nature and all costs and expenses
relating to or in any way arising out of:
16.1.1. the ordering, delivery, acquisition, title on
acquisition, rejection, installation, possession, titling, retitling,
registration, re-registration, custody by the Lessees or the
Guarantor of title and registration documents, use, non-use, misuse,
operation, deficiency, defect, transportation, repair, control or
disposition of any Vehicle leased hereunder or to be leased hereunder
pursuant to a request by a Lessee. The foregoing shall include,
without limitation, any liability (or any alleged liability) of the
Lessor to any third party arising out of any of the foregoing,
including, without limitation, all legal fees, costs and
disbursements arising out of such liability (or alleged liability);
16.1.2. all (i) federal, state, county, municipal or foreign
license, qualification, registration, franchise, sales, use, gross
receipts, ad valorem, business, property (real or personal), excise,
motor vehicle, and occupation fees and taxes, and all federal, state
and local income taxes, and penalties and interest thereon, and all
other taxes, fees and assessments of any kind whatsoever whether
assessed, levied against or payable by the Lessor or otherwise, with
respect to any Vehicle leased hereunder or the acquisition, purchase,
sale, rental, delivery, use, operation, control, ownership or
disposition of any such Vehicle or measured in any way by the value
thereof or by the ownership by the Lessor with respect thereto and
(ii) documentary, stamp, filing, recording, mortgage or other taxes,
if any, which may be payable by the Lessor in connection with this
Agreement or any other Related Documents; provided, however, that the
following taxes are excluded from the indemnity provided in clauses
(i) and (ii) above:
(i) any tax on, based on, with respect to, or
measured by the net income (including federal alternative
minimum tax) other than any taxes or other charges which may
be imposed as a result of any determination by a taxing
authority that the Lessor is not the owner for tax purposes
of the Vehicles leased hereunder or that this Agreement is
not a "true lease" for tax purposes or that depreciation
deductions that would be available to the owner of such
Vehicles are disallowed, or that the Lessor is not entitled
to include the full purchase price for any such Vehicle in
basis including
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any amounts payable in respect of interest charges,
additions to tax and penalties that may be imposed, and all
attorneys and accountants fees and expenses and all other
fees and expenses that may be incurred in defending against
or contesting any such determination;
(ii) any withholding tax imposed by the United
States federal government other than such a tax imposed as a
result of a change in law enacted (including new
interpretations thereof), adopted or promulgated after the
Initial Closing Date or, if later, the date the Trustee or
the Lender acquires its interest in the Vehicles leased
hereunder or the Loan Agreements, the Indenture, the
Assignment Agreements, or any other related operative
documents that causes it to be an Indemnified Person
hereunder unless such a tax is enacted, adopted or
promulgated as a tax in lieu of, or in substitution for a
tax not otherwise indemnifiable hereunder;
(iii) any tax with respect to any Vehicle leased by
a Lessee hereunder or any transaction relating to such
Vehicle to the extent it covers any period beginning after
the earlier of (A) the discharge in full of such Lessee's
obligation to pay Monthly Base Rent, Supplemental Rent and
any other amount payable hereunder with respect to such
Vehicle or (B) the expiration or other termination of this
Agreement with respect to such Vehicle, unless such tax
accrues in respect of any period during which such Lessee
holds over such Vehicle; and
(iv) any tax that is imposed on an Indemnified
Person or any of its Affiliates, to the extent that such tax
results from the willful misconduct or gross negligence of
such Indemnified Person or such Affiliates;
16.1.3. any violation by any Lessee or the Guarantor of this
Agreement or of any Related Documents to which such Lessee or the
Guarantor is a party or by which it is bound or any laws, rules,
regulations, orders, writs, injunctions, decrees, consents,
approvals, exemptions, authorizations, licenses and withholdings of
objecting of any governmental or public body or authority and all
other requirements having the force of law applicable at any time to
any Vehicle leased hereunder or any action or transaction by any
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Lessee or the Guarantor with respect thereto or pursuant to
this Agreement;
16.1.4. all out of pocket costs of the Lessor (includ-
ing the fees and out of pocket expenses of counsel for the
Lessor) in connection with the execution, delivery and
performance of this Agreement and the other Related Docu-
ments;
16.1.5. all out of pocket costs and expenses (including
reasonable attorneys' fees and legal expenses) incurred by the
Lessor, the Lender or the Trustee in connection with the
administration, enforcement, waiver or amendment of this Agreement
and any other Related Documents and all indemnification obligations
of the Lender or the Lessor under the Related Documents (including
all obligations of the Lessor under Section 13.4 and Section 13.5 of
the AESOP I Operating Lease Loan Agreement); and
16.1.6. all costs, fees, expenses, damages and liabilities
(including, without limitation, the fees and out of pocket expenses
of counsel) in connection with, or arising out of, any claim made by
any third party against the Lessor for any reason (including, without
limitation, in connection with any audit or investigation conducted
by a Manufacturer under its Manufacturer Program).
If the Lessor shall actually receive any tax benefit (whether by way
of offset, credit, deduction, refund or otherwise) not already taken
into account in calculating the net after-tax basis for such payment
as a result of the payment of any tax indemnified pursuant to this
Section 16 or in connection with the circumstances giving rise to the
imposition of such tax, such tax benefit shall be used to offset any
indemnity payment owed pursuant to this Section 16 or shall be paid
to the relevant Lessee (but only to the extent of any prior indemnity
payments actually made pursuant to this Section 16 and only after the
Lessor shall actually receive such tax benefits), provided, however,
that no such payment to such Lessee shall be made while an AESOP I
Operating Lease Event of Default shall have occurred and be
continuing.
16.2. Reimbursement Obligation by the Lessees and the Guarantor. Each
of the Lessees and the Guarantor shall forthwith upon demand reimburse the
Lessor or the relevant Indemnified Person for any sum or sums expended with
respect to any of the
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foregoing; provided, however, that to the extent such amounts constitute
Excluded Payments, such amounts shall be paid only to the AESOP I Segregated
Account; and provided further that, if so requested by the relevant Lessee or
the Guarantor, the Lessor shall submit to such Lessee or the Guarantor, as
applicable, a statement documenting any such demand for reimbursement or
prepayment. To the extent that any Lessee or the Guarantor in fact indemnifies
the Lessor under the indemnity provisions of this Agreement, such Lessee or
the Guarantor, as applicable, shall be subrogated to the Lessor's rights in
the affected transaction and shall have a right to determine the settlement of
claims therein. The foregoing indemnity as contained in this Section 16 shall
survive the expiration or earlier termination of this Agreement or any lease
of any Vehicle hereunder.
16.3. Defense of Claims. The Lessor agrees to notify any relevant
Lessee of any claim made against it for which such Lessee may be liable
pursuant to this Section 16 and, if such Lessee requests, to contest or allow
such Lessee to contest such claim. If any AESOP I Operating Lease Event of
Default shall have occurred and be continuing, no contest shall be required,
and any contest which has begun shall not be required to be continued to be
pursued, unless arrangements to secure the payment of such Lessee's
obligations pursuant to this Section 16 hereunder have been made and such
arrangements are reasonably satisfactory to the Lessor. The Lessor shall not
settle any such claim without such Lessee's consent, which consent shall not
be unreasonably withheld. Defense of any claim referred to in this Section 16
for which indemnity may be required shall, at the option and request of the
Indemnified Person, be conducted by the relevant Lessee or the Guarantor, as
applicable. Such Lessee or the Guarantor, as the case may be, will inform the
Indemnified Person of any such claim and of the defense thereof and will
provide copies of material documents relating to any such claim or defense to
such Indemnified Person upon request. Such Indemnified Person may participate
in any such defense at its own expense provided such participation does not
interfere with such Lessee's or the Guarantor's assertion of such claim or
defense. Each Lessee and the Guarantor agrees that no Indemnified Person will
be liable to such Lessee or the Guarantor, as applicable, for any claim caused
directly or indirectly by the inadequacy of any Vehicle leased by such Lessee
for any purpose or any deficiency or defect therein or the use or maintenance
thereof or any repairs, servicing or adjustments thereto or any delay in
providing or failure to provide such repairs, servicing or adjustments or any
interruption or loss of service or use thereof or any loss of business, all of
which shall be the risk and responsibility of
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such Lessee or the Guarantor. The rights and indemnities of each Indemnified
Person hereunder are expressly made for the benefit of, and will be
enforceable by, each Indemnified Person notwithstanding the fact that such
Indemnified Person is either no longer a party to (or entitled to receive the
benefits of) this Agreement, or was not a party to (or entitled to receive the
benefits of) this Agreement at its outset. Except as otherwise set forth
herein, nothing herein shall be deemed to require any Lessee or the Guarantor
to indemnify the Lessor for any of the Lessor's acts or omissions which
constitute gross negligence or willful misconduct. This general indemnity
shall not affect any claims of the type discussed above which any Lessee or
the Guarantor may have against the Manufacturer.
17. ASSIGNMENT.
17.1. Right of the Lessor to Assign this Agreement. The Lessor shall
have the right to finance the acquisition and ownership of Vehicles by selling
or assigning its right, title and interest in this Agreement, including,
without limitation, in moneys due from each Lessee and any third party under
this Agreement; provided, however, that any such sale or assignment shall be
subject to the rights and interest of the each Lessee in the Vehicles leased
by such Lessee hereunder, including but not limited to such Lessee's right of
quiet and peaceful possession of such Vehicles as set forth in Section 9
hereof, and under this Agreement.
17.2. Limitations on the Right of the Lessees to Assign this
Agreement. Each Lessee shall not, without prior written consent of the Lessor,
AFC-II and the Trustee and without having satisfied the Rating Agency Consent
Condition and the CP Rating Agency Condition, assign this Agreement or any of
its rights hereunder to any other party; provided, however, that each Lessee
may rent the Vehicles leased by such Lessee hereunder under the terms of its
normal daily rental programs. Any purported assignment in violation of this
Section 17.2 shall be void and of no force or effect. Nothing contained herein
shall be deemed to restrict the right of any Lessee to acquire or dispose of,
by purchase, lease, financing, or otherwise, motor vehicles that are not
subject to the provisions of this Agreement.
18. DEFAULT AND REMEDIES THEREFOR.
18.1. Events of Default. Any one or more of the following will
constitute an event of default (an "AESOP I Operating Lease Event of Default")
as that term is used herein:
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18.1.1. there occurs (i) a default in the payment of the portion of
Monthly Base Rent that relates to the Loan Principal Amount, the Special
Default Payments, the Early Termination Payments, Vehicle Purchase Price or
Termination Value upon a Standard Casualty or when a Vehicle becomes an
Ineligible Vehicle or upon a Vehicle Return Default or any Supplemental Rent
(to the extent not included in any of the foregoing) and the continuance
thereof for a period of five Business Days or (ii) a default and continuance
thereof for five Business Days after notice thereof by the Lessor or the
Trustee to the relevant Lessee or the Guarantor in the payment of any amount
payable under this Agreement (other than amounts described in clause (i)
above);
18.1.2. any unauthorized assignment or transfer of this Agreement by
any Lessee or the Guarantor occurs;
18.1.3. the failure, in any material respect, of any Lessee and the
Guarantor to maintain, or cause to be maintained, insurance as required in
Section 5 or Section 31.3;
18.1.4. the failure of any Lessee and the Guarantor to observe or
perform any other covenant, condition, agreement or provision hereof,
including, but not limited to, usage, and maintenance, and such default
continues for more than thirty (30) days after the date written notice thereof
is delivered by the Lessor or the Trustee to such Lessee;
18.1.5. if any representation or warranty made by any Lessee or the
Guarantor herein is inaccurate or incorrect or is breached or is false or
misleading in any material respect as of the date of the making thereof or any
schedule, certificate, financial statement, report, notice, or other writing
furnished by or on behalf of such Lessee or the Guarantor to the Lessor or the
Trustee is false or misleading in any material respect on the date as of which
the facts therein set forth are stated or certified, and the circumstance or
condition in respect of which such representation, warranty or writing was
inaccurate, incorrect, breached, false or misleading in any material respect,
as the case may be, shall not have been eliminated or otherwise cured for
thirty (30) days after the earlier of (x) the date of the receipt of written
notice thereof from the Lessor, the Lender or the Trustee to the Guarantor or
such Lessee and (y) the date the Guarantor or such Lessee learns of such
circumstance or condition;
18.1.6. an Event of Bankruptcy occurs with respect to any Lessee or
the Guarantor;
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18.1.7. a Loan Event of Default occurs;
18.1.8. a Finance Lease Event of Default or an AESOP II Operating
Lease Event of Default occurs; or
18.1.9. the Pension Benefit Guaranty Corporation or the Internal
Revenue Service shall have filed notice of one or more liens against a Lessee
(unless such lien does not purport to cover the Collateral or any amount
payable under the Leases), and, in the case of notice filed by the Internal
Revenue Service, such notice shall have remained in effect for more than
thirty (30) days unless, prior to the expiration of such period, such Lessee
shall have provided the Lessor with a bond in an amount at least equal to the
amount of such lien or, in the case of any such lien in an amount less than
$1,000,000, such Lessee shall have established to the reasonable satisfaction
of the Lessor that such lien is being contested in good faith and that
adequate reserves have been established in respect of the claim giving rise to
such lien.
18.2. Effect of AESOP I Operating Lease Event of Default or
Liquidation Event of Default. If any AESOP I Operating Lease Event of Default
described in Section 18 or any Liquidation Event of Default shall occur, (i)
the rights of the Lessees to place Vehicle Orders pursuant to Section 2.1 and
to lease additional Vehicles from the Lessor shall immediately terminate, and
(ii) if AFC-II has declared the Loan Note under any Loan Agreement to be due
and payable pursuant to Section 12.2 of such Loan Agreement, (x) any accrued
and unpaid Monthly Base Rent, Supplemental Rent and all other payments accrued
but unpaid under this Agreement (calculated as if all Vehicles leased
hereunder had become a Standard Casualty for the Related Month and the full
amount of interest on such Loan Note was then due and payable in full) shall,
automatically, without further action by the Lessor or the Trustee, become
immediately due and payable and (y) each Lessee shall, at the request of the
Lessor, return or cause to be returned all Vehicles leased by such Lessee
subject to this Agreement (and the Administrator shall deliver to the Trustee
the Certificates of Title relating thereto) to the Lessor in accordance with
the provisions of Section 13.2 hereof.
18.3. Rights of Lessor Upon AESOP I Operating Lease Event of Default,
Limited Liquidation Event of Default or Liquidation Event of Default. If an
AESOP I Operating Lease Event of Default, Limited Liquidation Event of Default
or Liquidation Event of Default shall occur, then the Lessor at its option
may:
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(i) Proceed by appropriate court action or actions, either
at law or in equity, to enforce performance by the Lessees (or any
Lessee(s) against which the Lessor determines to exercise its
remedies hereunder) or the Guarantor of the applicable covenants and
terms of this Agreement or to recover damages for the breach hereof
calculated in accordance with Section 18.5; or
(ii) By notice in writing to the Lessees (or any Lessee(s)
against which the Lessor determines to exercise its remedies
hereunder), terminate this Agreement in its entirety and/or the right
of possession hereunder of the Lessees (or in respect only of the
applicable Lessee(s)) of Vehicles leased hereunder, and the Lessor
may direct delivery by the Lessees (or in respect only of the
applicable Lessee(s)) or the Guarantor of documents of title to the
Vehicles leased hereunder, whereupon all rights and interests of the
Lessees (or the applicable Lessee(s)) or the Guarantor to such
Vehicles will cease and terminate (but the Lessees (or the applicable
Lessee(s)) and the Guarantor will remain liable hereunder as herein
provided, provided, however, their liability will be calculated in
accordance with Section 18.5); and thereupon, the Lessor or its
agents may peaceably enter upon the premises of the applicable
Lessee(s) or other premises where such Vehicles may be located and
take possession of them and thenceforth hold, possess and enjoy the
same free from any right of the Lessees (or the applicable Lessee(s))
or the Guarantor, or their successors or assigns, to use such
Vehicles for any purpose whatsoever, and the Lessor will,
nevertheless, have a right to recover from the Lessees (or the
applicable Lessee(s)) or the Guarantor any and all amounts which
under the terms of this Section 18.3 (as limited by Section 18.5 of
this Agreement) as may be then due. The Lessor will provide the
applicable Lessee(s) with written notice of the place and time of the
sale at least five days prior to the proposed sale, which shall be
deemed commercially reasonable, and any Lessee may purchase such
Vehicle(s) at the sale. Each and every power and remedy hereby
specifically given to the Lessor will be in addition to every other
power and remedy hereby specifically given or now or hereafter
existing at law, in equity or in bankruptcy and each and every power
and remedy may be exercised from time to time and simultaneously and
as often and in such order as may be deemed expedient by the Lessor;
provided, however, that the measure of damages recoverable against
the Lessees will in any case be calculated in accordance with Section
18.5. All such powers and
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remedies will be cumulative, and the exercise of one will not be
deemed a waiver of the right to exercise any other or others. No
delay or omission of the Lessor in the exercise of any such power or
remedy and no renewal or extension of any payments due hereunder will
impair any such power or remedy or will be construed to be a waiver
of any default or any acquiescence therein. Any extension of time for
payment hereunder or other indulgence duly granted to the Lessees (or
the applicable Lessee(s)) or the Guarantor will not otherwise alter
or affect the Lessor's rights or the obligations hereunder of such
Lessee(s) and the Guarantor. The Lessor's acceptance of any payment
after it will have become due hereunder will not be deemed to alter
or affect the Lessor's rights hereunder with respect to any
subsequent payments or defaults therein; or
(iii) By notice in writing to the Lessees (or any Lessee(s)
against which the Lessor determines to exercise its remedies
hereunder), terminate the Power of Attorney.
18.4. Rights of Lender and Trustee Upon Liquidation Event of Default,
Limited Liquidation Event of Default and Non-Performance of Certain Covenants.
(i) If a Liquidation Event of Default or a Limited
Liquidation Event of Default shall have occurred and be continuing,
the Lender and the Trustee, to the extent provided in the Indenture,
shall have the rights against the Guarantor, the Lessee(s), and the
AESOP I Operating Lease Loan Collateral provided in the Indenture
upon a Liquidation Event of Default or a Limited Liquidation Event of
Default, as the case may be, including the right to take possession
of all or a portion of the Vehicles leased hereunder immediately from
the Lessee(s) of such Vehicles.
(ii) If the Guarantor or any Lessee shall default in the due
performance and observance of any of its obligations under Section
31.3, 31.4, 31.5(iv), 31.10, 32.3 or 32.4 hereof, and such default
shall continue unremedied for a period of 30 days after notice
thereof shall have been given to such Lessee by the Lessor, the
Lender or the Trustee, as assignee of the Lessor's rights hereunder,
shall have the ability to exercise all rights, remedies, powers,
privileges and claims of the Guarantor or any Lessee against the
Manufacturers under or in connection with the Manufacturer Programs
with respect to (i) Program Vehicles the Lessee thereof has
determined to turn back to the Manufacturers
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under such Manufacturer Programs and (ii) whether or not the Lessee
thereof shall then have determined to turn back such Program
Vehicles, any Program Vehicles for which the applicable Repurchase
Period will end within one week or less.
(iii) Upon a default in the performance (after giving effect
to any grace periods provided herein) by the Guarantor or any Lessee
of its obligations hereunder to keep the Vehicles leased hereunder
free of Liens (other than Permitted Liens) and to maintain the
Trustee's first priority perfected security interest in the AESOP I
Operating Lease Loan Collateral, the Lessor or the Trustee shall have
the right to take actions reasonably necessary to correct such
default with respect to the subject Vehicles including the execution
of UCC financing statements with respect to Manufacturer Programs and
other general intangibles and the completion of Vehicle Perfection
and Documentation Requirements on behalf of the Guarantor or any
Lessee as applicable.
(iv) Upon the occurrence of a Liquidation Event of Default
or a Limited Liquidation Event of Default, each Lessee shall return
any Program Vehicles leased by such Lessee hereunder to the related
Manufacturer in accordance with the instructions of the Lessor. To
the extent any Manufacturer fails to accept any such Program Vehicles
under the terms of the applicable Manufacturer Program, the Lessor
shall have the right to otherwise dispose of such Program Vehicles
and to direct the Lessee thereof to dispose of such Program Vehicles
in accordance with its instructions. Upon the occurrence of a
Liquidation Event of Default or a Limited Liquidation Event of
Default, each Lessee shall dispose of any Non-Program Vehicles leased
by such Lessee hereunder in accordance with the instructions of the
Lessor. To the extent any Lessee fails to so dispose of any such
Non-Program Vehicles, the Lessor shall have the right to otherwise
dispose of such Non-Program Vehicles. In addition, following the
occurrence of a Liquidation Event of Default or a Limited Liquidation
Event of Default, the Lessor shall have all of the rights, remedies,
powers, privileges and claims vis-a-vis the Guarantor or any Lessee,
necessary or desirable to allow (a) the Lender to exercise the
rights, remedies, powers, privileges and claims given to the Lender
pursuant to Section 12.3 of the AESOP I Operating Lease Loan
Agreement, and each of the Guarantor and each Lessee acknowledges
that it has hereby granted to the Lessor all of the rights, remedies,
powers, privileges and claims granted
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by the Lessor to the Lender pursuant to Article 7 of the AESOP I
Operating Lease Loan Agreement and that, under certain circumstances
set forth in the AESOP I Operating Lease Loan Agreement, the Lender
may act in lieu of the Lessor in the exercise of such rights,
remedies, powers, privileges and claims and (b) the Trustee to
exercise the rights, remedies, powers, privileges and claims given to
the Trustee pursuant to Sections 3.3 and 9.2 of the Indenture, and
each of the Guarantor and each Lessee acknowledges that it has hereby
granted to the Lessor all of the rights, remedies, powers, privileges
and claims granted by the Lender to the Trustee pursuant to Article 3
of the Indenture and that, under certain circumstances set forth in
the Indenture, the Trustee may act in lieu of the Lessor in the
exercise of such rights, remedies, powers, privileges and claims.
18.5. Measure of Damages. If an AESOP I Operating Lease Event of
Default, a Limited Liquidation Event of Default or a Liquidation Event of
Default occurs and the Lessor, the Lender or the Trustee exercises the
remedies granted to the Lessor, the Lender or the Trustee under this Article
18, the amount that the Lessor shall be permitted to recover shall be equal
to:
(i) all Monthly Base Rent, all Supplemental Rent and all
other payments payable under this Agreement (calculated as provided
in Section 18.2); plus
(ii) any damages and expenses, including reasonable
attorneys' fees and expenses (but excluding net after-tax losses of
federal and state income tax benefits to which the Lessor would
otherwise be entitled as a result of this Agreement), which the
Lessor, the Lender or the Trustee will have sustained by reason of
the AESOP I Operating Lease Event of Default, Limited Liquidation
Event of Default or Liquidation Event of Default, together with
reasonable sums for such attorneys' fees and such expenses as will be
expended or incurred in the seizure, storage, rental or sale of the
Vehicles leased hereunder or in the enforcement of any right or
privilege hereunder or in any consultation or action in such
connection; plus
(iii) interest on amounts due and unpaid under this
Agreement at the applicable Lender's Carrying Cost Interest Rate plus
1.0% from time to time computed from the date of the AESOP I
Operating Lease Event of Default, Limited Liquidation Event of
Default or Liquidation Event of Default or the date payments were
originally due to the Lessor under
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this Agreement or from the date of each expenditure by the Lessor
which is recoverable from the Lessees pursuant to this Section 18, as
applicable, to and including the date payments are made by the
Lessees.
18.6. Vehicle Return Default. If any Lessee fails to comply with the
provisions of (a) Section 13.2 hereof with respect to any Vehicle leased by
such Lessee hereunder or (b) Section 3.1 with respect to returning any Program
Vehicles leased by such Lessee hereunder to the related Manufacturer not later
than the end of the Maximum Term (each, a "Vehicle Return Default"), and the
Vehicle is not redesignated as a Non-Program Vehicle in accordance with
Section 2.7, then the Lessor at its option may:
(i) proceed by appropriate court action or actions, either
at law or equity, to enforce performance by such Lessee of such
covenants and terms of this Agreement or to recover damages for the
breach hereof calculated in accordance with Section 18.5 as it
relates to such Vehicle; or
(ii) by notice in writing to such Lessee following the
occurrence of such Vehicle Return Default, terminate the Agreement
with respect to such Vehicle and/or the right of possession hereunder
of such Lessee with respect to such Vehicle and the Lessor may direct
delivery by such Lessee or the Guarantor of documents of title to
such Vehicle, whereupon all rights and interests of such Lessee and
the Guarantor to such Vehicle will cease and terminate (but such
Lessee and the Guarantor will remain liable hereunder as herein
provided, provided, however, that their liability will be calculated
in accordance with Section 18.5 as it relates to such Vehicle); and
thereupon the Lessor or its agents may peaceably enter upon the
premises of such Lessee or other premises where the Vehicle may be
located and take possession of it and thenceforth hold, possess and
enjoy the same free from any right of such Lessee or the Guarantor or
their successors or assigns to use such Vehicle for any purpose
whatsoever and the Lessor will nevertheless have a right to recover
from such Lessee or the Guarantor any and all amounts which, under
the terms of this Agreement may then be due. The Lessor will provide
such Lessee with written notice of the place and time of the sale of
such Vehicle at least five days prior to the proposed sale, which
sale shall be deemed commercially reasonable and such Lessee may
purchase the Vehicle at such sale; or
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(iii) hold, keep idle or lease to others such Vehicle, as
the Lessor in its sole discretion may determine, free and clear of
any rights of such Lessee without any duty to account to such Lessee
with respect to such action or inaction or for any proceeds with
respect to such action or inaction except that such Lessee's
obligation to pay Monthly Base Rent for periods commencing after such
Lessee shall have been deprived of the use of such Vehicle pursuant
to this clause (iii) shall be reduced by the net proceeds, if any,
received by the Lessor from leasing such Vehicle to any person other
than such Lessee for the same period or any portion thereof; or
(iv) whether or not the Lessor shall have exercised or shall
thereafter exercise any of the rights under the foregoing clauses
(i), (ii) or (iii), demand by written notice to such Lessee that such
Lessee pay to the Lessor immediately, and such Lessee shall so pay to
the Lessor as liquidated damages for loss of a bargain and not as a
penalty, any unpaid Monthly Base Rent due through the Payment Date
with respect to the Related Month during which such Vehicle is
rejected by the Manufacturer or otherwise is not returned to the
Manufacturer or on the date such Lessee is required to, but does not,
sell, return or otherwise dispose of such Vehicle pursuant to Section
3.1 or 2.6(b) hereof, any Supplemental Rent then accrued and unpaid
plus whichever of the following amounts the Lessor, in its sole
discretion shall specify in such notice:
(1) an amount equal to the excess, if any, of the
Termination Value for such Vehicle over the Market Value of
such Vehicle as of (a) the date such Vehicle (if such
Vehicle is a Program Vehicle) is rejected by a Manufacturer
for not meeting its Manufacturer Program's Vehicle Turn-In
Condition guidelines, or (b) the date such Lessee is
required to, but does not, sell, return or otherwise dispose
of such Vehicle (if such Vehicle is a Non-Program Vehicle)
pursuant to Section 3.1 or 2.6(b) hereof; or
(2) an amount equal to the Termination Value for
such Vehicle as of (a) the date such Vehicle is rejected by
a Manufacturer for not meeting its Manufacturer Program's
Vehicle Turn-In Condition guidelines (if such Vehicle is a
Program Vehicle), or (b) the date such Lessee is required
to, but does not, sell, return or otherwise dispose of such
Vehicle (if such Vehicle is a
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Non-Program Vehicle) pursuant to Section 3.1 or 2.6(b)
hereof, in which event (x) the Lessor shall cause title to
such Vehicle to be transferred to such Lessee, (y) such
Lessee shall be entitled to any physical damage insurance
proceeds applicable to such Vehicle, and (z) the
Administrator shall request the Trustee to cause its Lien to
be removed from the Certificate of Title for such Vehicle.
(v) If the Lessor shall have sold any Vehicle pursuant to
clause (ii) above, the Lessor in lieu of exercising its rights under
clause (iv) above with respect to such Vehicle may, if it shall so
elect, demand that the relevant Lessee of such Vehicle pay to the
Lessor and such Lessee shall pay to the Lessor on the date of such
sale as liquidated damages for loss of a bargain and not as a
penalty, any unpaid Monthly Base Rent and Supplemental Rent due
through such date of sale plus the amount of any deficiency between
the net proceeds of such sale and the Termination Value of such
Vehicle computed as of the date of the sale.
18.7. Application of Proceeds. The proceeds of any sale or other
disposition pursuant to Section 18.2, 18.3 or 18.6 shall be applied by the
Lessor in its sole discretion as the Lessor deems appropriate.
19. MANUFACTURER EVENTS OF DEFAULT. (a) Upon the occurrence of a
Manufacturer Event of Default with respect to any Manufacturer (a "Defaulting
Manufacturer"), each Lessee, on behalf of the Lessor (i) shall no longer place
Vehicle Orders for additional Program Vehicles from such Manufacturer and (ii)
shall cancel any Vehicle Order with such Defaulting Manufacturer for any
Program Vehicle with respect to which a VIN has not been assigned as of the
date such Manufacturer Event of Default occurs.
(b) Upon the occurrence of a Manufacturer Event of Default, each
Lessee agrees to (i) act at the direction of the Lessor, the Lender or the
Trustee to take commercially reasonable action to liquidate the Program
Vehicles subject to a Manufacturer Program with respect to which such
Manufacturer Event of Default has occurred or (ii) convert such Program
Vehicles to Non-Program Vehicles in accordance with Section 2.7 hereof and
subject to the limitations set forth therein.
(c) Upon the occurrence of a Manufacturer Event of Default, except as
provided in Section 13.3, no Lessee shall be liable for any failure by the
Lessor to recover all or any portion of the
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Repurchase Price with respect to any Program Vehicles subject to the
Manufacturer Program of the Defaulting Manufacturer; provided, however, that
nothing in this Section 19 shall be construed to modify, terminate or
otherwise affect the Lessees' obligations under this Agreement.
20. [RESERVED].
21. [RESERVED].
22. CERTIFICATION OF TRADE OR BUSINESS USE. Each Lessee hereby
warrants and certifies, under penalties of perjury, that it intends to use the
Vehicles which are subject to this Agreement, in its trade or business.
23. SURVIVAL. In the event that, during the term of this Agreement,
any Lessee or the Guarantor becomes liable for the payment or reimbursement of
any obligations, claims or taxes pursuant to any provision hereof, such
liability will continue, notwithstanding the expiration or termination of this
Agreement, until all such amounts are paid or reimbursed by such Lessee or the
Guarantor.
24. ADDITIONAL LESSEES. Any Eligible Rental Car Company shall have
the right to become a "Lessee" under and pursuant to the terms of this
Agreement by complying with the provisions of this Section 24. In the event an
Eligible Rental Car Company desires to become a "Lessee" under this Agreement,
then the Guarantor and such Eligible Rental Car Company shall execute (if
appropriate) and deliver to the Lessor, the Lender and the Trustee:
(i) a Joinder in Lease Agreement in the form attached
hereto as Attachment D (each, a "Joinder in Lease");
(ii) the certificate of incorporation for such Eligible
Rental Car Company, duly certified by the Secretary of State of the
jurisdiction of such Eligible Rental Car Company's incorporation,
together with a copy of the by-laws of such Eligible Rental Car
Company, duly certified by a Secretary or Assistant Secretary of such
Eligible Rental Car Company;
(iii) copies of resolutions of the Board of Directors of
such Eligible Rental Car Company authorizing or ratifying the
execution, delivery and performance, respectively, of those documents
and matters required of it with respect to
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this Agreement, duly certified by the Secretary or Assistant
Secretary of such Eligible Rental Car Company;
(iv) a certificate of the Secretary or Assistant Secretary
of such Eligible Rental Car Company certifying the names of the
individual or individuals authorized to sign the Joinder in Lease and
the other Related Documents to be executed by it, together with
samples of the true signatures of each such individual;
(v) a good standing certificate for such Eligible Rental Car
Company in the jurisdiction of its incorporation and the jurisdiction
of its principal place of business;
(vi) a written search report from a Person satisfactory to
the Lessor, the Lender and the Trustee listing all effective
financing statements that name such Eligible Rental Car Company as
debtor or assignor, and that are filed in the jurisdictions in which
filings were made pursuant to clause (vii) below, together with
copies of such financing statements, and tax and judgment lien search
reports from a Person satisfactory to the Lessor, the Lender and the
Trustee showing no evidence of liens filed against such Eligible
Rental Car Company that purport to affect any Vehicles leased
hereunder or any Collateral under the Base Indenture;
(vii) evidence of the filing of proper financing statements
on Form UCC-1 naming such Eligible Rental Car Company, as debtor, and
the Lessor as secured party covering the collateral described in
Section 2(b) hereof;
(viii) evidence of the filing of proper financing statements
on Form UCC-1 naming such Eligible Rental Car Company, as debtor, and
the Trustee as secured party covering the collateral described in
Section 2(b) hereof;
(ix) an Officer's Certificate and an opinion of counsel each
stating that such joinder by such Eligible Rental Car Company
complies with this Section 24 and that all conditions precedent
herein provided for relating to such transaction have been complied
with;
(x) an Officer's Certificate from such Eligible Rental Car
Company, as to itself, and from the Guarantor, as to itself and such
Eligible Rental Car Company, stating that the representations and
warranties contained in Section 30 hereof are true and correct;
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(xi) an opinion of counsel stating that such Joinder in
Lease and the other Related Documents to which such Eligible Rental
Car Company is a party are legal, valid and binding agreements of
such Eligible Rental Car Company, enforceable in accordance with
their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting
creditors' rights generally and to general principles of equity;
(xii) (1) pro forma unaudited financial statements
consisting of consolidated and consolidating balance sheets and cash
flow statements of the Guarantor and its Consolidated Subsidiaries as
of the end of the fiscal year of the Guarantor immediately preceding
the date such Eligible Rental Car Company proposes to become a
"Lessee" under this Agreement and a statement of income and retained
earnings of the Guarantor and its Consolidated Subsidiaries for such
fiscal year, setting forth in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year;
(2) a computation of the financial covenants
required to be complied with pursuant to the Working Capital
Facility, in each case for each of the fiscal years referred to above
based on the pro forma financial information presented above; and
(3) an Officer's Certificate verifying the accuracy
and completeness of such financial statements and computations signed
by an Authorized Officer of the Guarantor.
Such unaudited financial statements and computations shall reflect
the financial results of such Eligible Rental Car Company as a
consolidated direct or indirect (as applicable) Wholly-Owned
Subsidiary of the Guarantor as if such Eligible Rental Car Company
had been directly or indirectly wholly-owned by the Guarantor as of
the beginning of the earliest fiscal year shown. No Eligible Rental
Car Company shall become a "Lessee" under this Agreement unless the
Guarantor is in compliance on a pro forma basis with the financial
covenants required to be complied with pursuant to the Working
Capital Facility for each of the fiscal years referred to above; and
(xiii) any additional documentation that the Lessor or
the Trustee may require to evidence the assumption by such
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Eligible Rental Car Company of the obligations and liabilities set
forth in this Agreement.
Upon satisfaction of the foregoing conditions and receipt by such Eligible
Rental Car Company of the applicable Joinder in Lease executed by the Lessor,
such Eligible Rental Car Company shall for all purposes be deemed to be a
"Lessee" for purposes of this Agreement and shall be entitled to the benefits
and subject to the liabilities and obligations of a Lessee hereunder. Each
Eligible Rental Car Company that becomes a Lessee hereunder shall provide
prompt written notice thereof to each Rating Agency.
25. TITLE. This is an agreement to lease only and title to Vehicles
will at all times remain in the Lessor's name or in the name of the Lessor's
Permitted Nominee. None of the Lessees nor the Guarantor will have any rights
or interest in Vehicles whatsoever other than the right of possession and use
as provided by this Agreement.
26. GUARANTY.
26.1. Guaranty. In order to induce the Lessor to execute and deliver
this Agreement and to lease Vehicles to the Lessees, and in consideration
thereof, the Guarantor hereby (i) unconditionally and irrevocably guarantees
to the Lessor the obligations of the Lessees to make any payments required to
be made by them under this Agreement, (ii) agrees to cause the Lessees to duly
and punctually perform and observe all of the terms, conditions, covenants,
agreements and indemnities of the Lessees under this Agreement, and (iii)
agrees that, if for any reason whatsoever, any Lessee fails to so perform and
observe such terms, conditions, covenants, agreements and indemnities, the
Guarantor will duly and punctually perform and observe the same (the
obligations referred to in clauses (i) through (iii) above are collectively
referred to as the "Guaranteed Obligations"). The liabilities and obligations
of the Guarantor under the guaranty contained in this Section 26 (this
"Guaranty") will be absolute and unconditional under all circumstances. This
Guaranty shall be a guaranty of payment and performance and not merely of
collection, and the Guarantor hereby agrees that it shall not be required that
the Lessor, the Lender or the Trustee assert or enforce any rights against any
Lessee or any other person before or as a condition to the obligations of the
Guarantor pursuant to this Guaranty.
26.2. Scope of Guarantor's Liability. The Guarantor's obligations
hereunder are independent of the obligations of any
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Lessee(s), any other guarantor or any other Person, and the Lessor may enforce
any of its rights hereunder independently of any other right or remedy that
the Lessor may at any time hold with respect to this Agreement or any security
or other guaranty therefor. Without limiting the generality of the foregoing,
the Lessor may bring a separate action against the Guarantor without first
proceeding against any Lessee(s), any other guarantor or any other Person, or
any security held by the Lessor, and regardless of whether any Lessee(s) or
any other guarantor or any other Person is joined in any such action. The
Guarantor's liability hereunder shall at all times remain effective with
respect to the full amount due from any Lessee(s) hereunder, notwithstanding
any limitations on the liability of any Lessee(s) to the Lessor contained in
any of the Related Documents or elsewhere. The Lessor's rights hereunder shall
not be exhausted by any action taken by the Lessor until all Guaranteed
Obligations have been fully paid and performed. The liability of the Guarantor
hereunder shall be reinstated and revived, and the rights of the Lessor shall
continue, with respect to any amount at any time paid on account of the
Guaranteed Obligations which shall thereafter be required to be restored or
returned by the Lessor upon the bankruptcy, insolvency or reorganization of
any Lessee(s), any other guarantor or any other Person, or otherwise, all as
though such amount had not been paid.
26.3. Lessor's Right to Amend this Agreement, Etc. The Guarantor
authorizes the Lessor, at any time and from time to time without notice and
without affecting the liability of the Guarantor hereunder, to: (a) alter the
terms of all or any part of the Guaranteed Obligations and any security and
guaranties therefor including without limitation modification of times for
payment and rates of interest; (b) accept new or additional instruments,
documents, agreements, security or guaranties in connection with all or any
part of the Guaranteed Obligations; (c) accept partial payments on the
Guaranteed Obligations; (d) waive, release, reconvey, terminate, abandon,
subordinate, exchange, substitute, transfer, compound, compromise, liquidate
and enforce all or any part of the Guaranteed Obligations and any security or
guaranties therefor, and apply any such security and direct the order or
manner of sale thereof (and bid and purchase at any such sale), as the Lessor
in its discretion may determine; (e) release any Lessee, any other guarantor
or any other Person from any personal liability with respect to all or any
part of the Guaranteed Obligations; and (f) assign its rights under this
Guaranty in whole or in part.
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26.4. Waiver of Certain Rights by Guarantor. The Guarantor hereby
waives each of the following to the fullest extent allowed by law:
(a) all statutes of limitation as a defense to any
action brought by the Lessor against the Guarantor;
(b) any defense based upon:
(i) the unenforceability or invalidity of all or
any part of the Guaranteed Obligations or any security or
other guaranty for the Guaranteed Obligations or the lack of
perfection or failure of priority of any security for the
Guaranteed Obligations; or
(ii) any act or omission of the Lessor or any other
Person that directly or indirectly results in the discharge
or release of any Lessee or any other Person or any of the
Guaranteed Obligations or any security therefor; or
(iii) any disability or any other defense of any
Lessee or any other Person with respect to the Guaranteed
Obligations, whether consensual or arising by operation of
law or any bankruptcy, insolvency or debtor-relief
proceeding, or from any other cause;
(c) any right (whether now or hereafter existing) to
require the Lessor, as a condition to the enforcement of
this Guaranty, to:
(i) accelerate the Guaranteed Obligations; or
(ii) give notice to the Guarantor of the terms,
time and place of any public or private sale of any
security for the Guaranteed Obligations; or
(iii) proceed against any Lessee, any other
guarantor or any other Person, or proceed against or exhaust
any security for the Guaranteed Obligations.
(d) all rights of subrogation, all rights to enforce any remedy that
the Lessor now or hereafter has against any Lessee or any other Person, and
any benefit of, and right to participate in, any security now or hereafter
held by the Lessor with respect to the Guaranteed Obligations;
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(e) presentment, demand, protest and notice of any kind, including
without limitation notices of default and notice of acceptance of this
Guaranty;
(f) all suretyship defenses and rights of every nature otherwise
available under New York law and the laws of any other jurisdiction; and
(g) all other rights and defenses the assertion or exercise of which
would in any way diminish the liability of the Guarantor hereunder.
26.5. [RESERVED].
26.6. Guarantor to Pay Lessor's Expenses. The Guarantor agrees to pay
to the Lessor, on demand, all costs and expenses, including attorneys' and
other professional and paraprofessional fees, incurred by the Lessor in
exercising any right, power or remedy conferred by this Guaranty, or in the
enforcement of this Guaranty, whether or not any action is filed in connection
therewith. Until paid to the Lessor, such amounts shall bear interest,
commencing with the Lessor's demand therefor, at the Prime Rate plus 1.0%.
26.7. Reinstatement. This Guaranty shall continue to be effective or
be reinstated, as the case may be, if at any time payment of any of the
amounts payable by any Lessee under this Agreement is rescinded or must
otherwise be restored or returned by the Lessor, upon an event of bankruptcy,
dissolution, liquidation or reorganization of any Lessee or the Guarantor or
upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, any Lessee or the Guarantor
or any substantial part of their respective property, or otherwise, all as
though such payment had not been made.
26.8. Pari Passu Indebtedness. The Guarantor (i) represents and
warrants that, as of the date hereof, the obligations of the Guarantor under
this Guaranty will rank pari passu with any existing unsecured indebtedness of
the Guarantor and (ii) covenants and agrees that from and after the date
hereof the obligations of the Guarantor under this Guaranty will rank pari
passu with any unsecured indebtedness of the Guarantor incurred after the date
hereof.
27. RIGHTS OF LESSOR ASSIGNED TO TRUSTEE. Notwithstanding anything to
the contrary contained in this Agreement, each of the Lessees and the
Guarantor acknowledges that the Lessor has assigned all of its rights under
this Agreement (other than its right to receive Excluded Payments) to AFC-II
pursuant to the
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AESOP I Operating Lease Loan Agreement and AFC-II has assigned such rights to
the Trustee pursuant to the Indenture. Accordingly, each of the Lessees and
the Guarantor agrees that:
(i) Subject to the terms of the AESOP I Loan Agreement and
the Indenture, the Trustee shall have all the rights, powers,
privileges and remedies of the Lessor hereunder (other than the right
to receive Excluded Payments, which shall be paid to the AESOP I
Segregated Account) and the Guarantor's and each Lessee's obligations
hereunder (including the payment of Monthly Base Rent, Supplemental
Rent and all other amounts payable hereunder) shall not be subject to
any claim or defense which the Guarantor or such Lessee may have
against the Lessor or any Lessee (other than the defense of payment
actually made) and shall be absolute and unconditional and shall not
be subject to any abatement, setoff, counterclaim, deduction or
reduction for any reason whatsoever. Specifically, each of the
Lessees and the Guarantor agrees that, upon the occurrence of an
AESOP I Operating Lease Event of Default, a Limited Liquidation Event
of Default or a Liquidation Event of Default, the Trustee may
exercise (for and on behalf of the Lessor) any right or remedy
against any Lessee or the Guarantor provided for herein (other than
with respect to the right to receive Excluded Payments) and none of
the Lessees nor the Guarantor will interpose as a defense that such
claim should have been asserted by the Lessor;
(ii) Upon the delivery by the Trustee of any notice to any
Lessee or the Guarantor stating that an AESOP I Operating Lease Event
of Default, a Limited Liquidation Event of Default or a Liquidation
Event of Default has occurred, the relevant Lessee or the Guarantor,
as the case may be, will, if so requested by the Trustee, treat the
Trustee or the Trustee's designee for all purposes (other than with
respect to the right to receive Excluded Payments) as the Lessor
hereunder and in all respects comply with all obligations under this
Agreement that are asserted by the Trustee as the successor to the
Lessor hereunder, irrespective of whether such Lessee or the
Guarantor has received any such notice from the Lessor; provided,
however, the Trustee, shall in no event be liable to any Lessee for
any action taken by it in its capacity as successor to the Lessor
other than actions that constitute negligence or willful misconduct;
(iii) Each of the Lessees and the Guarantor acknowledges that
pursuant to the AESOP I Operating Lease Loan
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Agreement and the Indenture the Lessor has irrevocably authorized and
directed each Lessee or the Guarantor to, and each Lessee and the
Guarantor shall, make payments of Monthly Base Rent and Supplemental
Rent hereunder (and any other payments hereunder) (other than
Excluded Payments, which shall be paid to the AESOP I Segregated
Account) directly to the Trustee for deposit in the Collection
Account established by the Trustee for receipt of such payments
pursuant to the Indenture and such payments shall discharge the
obligation of such Lessee and the Guarantor to the Lessor hereunder
to the extent of such payments. Upon written notice to the Lessees or
the Guarantor of a sale or assignment by the Trustee of its right,
title and interest in moneys due under this Agreement to a successor
Trustee, each Lessee or the Guarantor, as the case may be, shall
thereafter make payments of all Monthly Base Rent and Supplemental
Rent (and any other payments hereunder) (other than Excluded
Payments, which shall be paid to the AESOP I Segregated Account) to
the party specified in such notice;
(iv) Upon request made by the Trustee at any time, each of
the Lessees and the Guarantor will take such actions as are requested
by the Trustee to assist the Trustee in maintaining the Trustee's
first priority perfected security interest in the Vehicles leased
hereunder, the Certificates of Title with respect thereto and any
other portion of the AESOP I Operating Lease Loan Collateral; and
(v) In the event that the Indenture terminates and all
obligations owing under the Indenture have been paid in full, the
Lender shall have all rights under this Agreement previously assigned
to the Trustee.
28. [RESERVED].
29. MODIFICATION AND SEVERABILITY. The terms of this Agreement will
not be waived, altered, modified, amended, supplemented or terminated in any
manner whatsoever unless (i) the same shall be in writing and signed and
delivered by the Lessor, the Guarantor and each Lessee and consented to in
writing by the Lender and the Trustee, (ii) the Lessor shall have received in
writing confirmation from each of the Rating Agencies that its then current
rating of the Notes and the Commercial Paper Notes will not be reduced or
withdrawn as a result thereof and (iii) the Rating Agency Consent Condition
shall have been satisfied. If any part of this Agreement is not valid or
enforceable according to law, all other parts will remain enforceable. The
Lessor
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shall provide prompt written notice to each Rating Agency of any such waiver,
modification or amendment.
30. CERTAIN REPRESENTATIONS AND WARRANTIES. Each Lessee represents
and warrants to the Lessor and the Trustee as to itself, and the Guarantor
represents and warrants to the Lessor and the Trustee as to itself and as to
each Lessee, that as of the Initial Closing Date and as of each Series Closing
Date:
30.1. Organization; Ownership; Power; Qualification. The Guarantor
and each Lessee is (i) a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, (ii)
has the corporate power and authority to own its properties and to carry on
its business as now being and hereafter proposed to be conducted, and (iii) is
duly qualified, in good standing and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
businesses requires such qualification or authorization.
30.2. Authorization; Enforceability. The Guarantor and each Lessee
has the corporate power and has taken all necessary corporate action to
authorize it to execute, deliver and perform this Agreement and each of the
other Related Documents to which it is a party in accordance with their
respective terms, and to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by the Guarantor
and each Lessee and is, and each of the other Related Documents to which the
Guarantor or such Lessee is a party is, a legal, valid and binding obligation
of the Guarantor and such Lessee, enforceable in accordance with its terms.
30.3. Compliance. The execution, delivery and performance, in
accordance with their respective terms, by the Guarantor and each Lessee of
this Agreement and each of the other Related Documents to which it is a party,
and the consummation of the transactions contemplated hereby and thereby, do
not and will not (i) require any consent, approval, authorization or
registration not already obtained or effected, (ii) violate any applicable law
with respect to the Guarantor or such Lessee which violation could result in a
Material Adverse Effect, (iii) conflict with, result in a breach of, or
constitute a default under the certificate or articles of incorporation or
by-laws, as amended, of the Guarantor or such Lessee, (iv) conflict with,
result in a breach of, or constitute a default under any indenture, agreement,
or other instrument to which the Guarantor or such Lessee is a party or by
which its properties may be bound which conflict, breach or
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default could result in a Material Adverse Effect, or (v) result in or require
the creation or imposition of any Lien upon or with respect to any property
now owned or hereafter acquired by such Lessee except Permitted Encumbrances.
30.4. Financial Information; Financial Condition. All balance sheets,
all statements of operations, of shareholders' equity and of cash flow, and
other financial data (other than projections) which have been or shall
hereafter be furnished to the Lessor, the Lender or the Trustee for the
purposes of or in connection with this Agreement or the Related Documents have
been and will be prepared in accordance with GAAP and do and will present
fairly the financial condition of the entities involved as of the dates
thereof and the results of their operations for the periods covered thereby.
Such financial data include the following financial statements and reports
which have been furnished to the Lessor and the Trustee on or prior to such
Closing Date:
(i) the audited consolidated financial statements consisting
of a statement of financial position of the Guarantor and its
Consolidated Subsidiaries as of December 31, 1996 and as to the
Predecessor Companies as of December 31, 1995, and the related
statements of operations, stockholder's equity and cash flows of the
Guarantor and its Consolidated Subsidiaries for the period October
17, 1996 (Date of Acquisition) to December 31, 1996 and, as to the
Predecessor Companies, the related statements of operations,
stockholder's equity and cash flows for each of the two years in the
period ended December 31, 1995 and the period January 1, 1996 to
October 16, 1996;
(ii) the unaudited condensed consolidated financial
statements consisting of a statement of financial position of the
Guarantor and its Consolidated Subsidiaries as of March 31, 1997, and
the related statements of operations, stockholder's equity and cash
flows of the Guarantor and its Consolidated Subsidiaries for the
three months ended March 31, 1997 and, as to the Predecessor
Companies, the related statements of operations, stockholder's equity
and cash flows for the three months ended March 31, 1996; and
(iii) the unaudited pro forma consolidated financial
statements consisting of a statement of financial position of the
Guarantor and its Consolidated Subsidiaries as of March 31, 1997, and
the related statements of operations of the Guarantor and its
Consolidated Subsidiaries for the year
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ended December 31, 1996 and for the three months ended March 31,
1997, and such pro forma consolidated financial statements present
fairly the information shown therein, have been prepared in
accordance with the Securities and Exchange Commission's rules and
guidelines with respect to pro forma financial statements and have
been properly compiled on the basis described therein, and the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein.
30.5. Litigation. Except as set forth in Schedule 30.5 hereto and
except for claims as to which the insurer has admitted coverage in writing and
which are fully covered by insurance, no claims, litigation (including,
without limitation, derivative actions), arbitration, governmental
investigation or proceeding or inquiry is pending or, to the best of the
Guarantor's or each Lessee's knowledge, threatened against the Guarantor or
such Lessee which would, if adversely determined, have a Material Adverse
Effect.
30.6. Liens. The Vehicles and other Collateral are free and clear of
all Liens other than (i) Permitted Liens and (ii) Liens in favor of the
Lessor, the Lender or the Trustee. The Trustee has obtained, and will continue
to obtain, for the benefit of the Secured Parties pursuant to the Indenture, a
first priority perfected Lien on all Vehicles leased hereunder. All Vehicle
Perfection and Documentation Requirements with respect to all Vehicles on or
after the date hereof have and will continue to be satisfied.
30.7. Employee Benefit Plans. (a) During the twelve consecutive month
period prior to the Closing Date: (i) no steps have been taken by the
Guarantor, any Lessee or any member of the Controlled Group, or to the
knowledge of the Guarantor, by any Person, to terminate any Pension Plan; and
(ii) no contribution failure has occurred with respect to any Pension Plan
maintained by the Guarantor, any Lessee or any member of the Controlled Group
sufficient to give rise to a Lien under Section 302(f)(1) of ERISA in
connection with such Pension Plan; and (b) no condition exists or event or
transaction has occurred with respect to any Pension Plan which could
reasonably be expected to result in the incurrence by the Guarantor or any
Lessee or any member of the Controlled Group of liabilities, fines or
penalties in an amount that could have a Material Adverse Effect.
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30.8. Investment Company Act. Neither the Guarantor nor any Lessee is
an "investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended, and
neither the Guarantor nor any Lessee is subject to any other statute which
would impair or restrict its ability to perform its obligations under this
Agreement or the other Related Documents, and neither the entering into or
performance by the Guarantor or any Lessee of this Agreement violates any
provision of such Act.
30.9. Regulations G, T, U and X. Neither the Guarantor nor any Lessee
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulations G, T, U and X of the Board of Governors of
the Federal Reserve System). None of the Guarantor, any Lessee, any Affiliates
of any of them or any Person acting on their behalf has taken or will take
action to cause the execution, delivery or performance of this Agreement or
the Loan Note, the making or existence of the Loans or the use of proceeds of
the Loans to violate Regulation G, T, U, or X of the Board of Governors of the
Federal Reserve System.
30.10. Business Locations; Trade Names; Principal Places of Business
Locations. Schedule 30.10 lists each of the locations where each of the
Lessees and the Guarantor maintains a chief executive office, principal place
of business, or any records; and Schedule 30.10 also lists the Lessees' and
the Guarantor's legal names, each name under or by which each of the Lessees
and the Guarantor conducts its business, each state in which each of the
Lessees and the Guarantor conducts business and each state in which each of
the Lessees and the Guarantor has its principal place of business.
30.11. Taxes. The Guarantor and each Lessee has filed all tax returns
which have been required to be filed by it (except where the requirement to
file such return is subject to a valid extension or such failure relates to
returns which, in the aggregate, show taxes due in an amount of not more than
$500,000), and has paid or provided adequate reserves for the payment of all
taxes shown due on such returns or required to be paid as a condition to such
extension, as well as all payroll taxes and federal and state withholding
taxes, and all assessments payable by it that have become due, other than
those that are payable without penalty or are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
established, and are being maintained, in accordance with
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GAAP. As of such Closing Date, to the best of the Guarantor's or each Lessee's
knowledge, there is no unresolved claim by a taxing authority concerning the
Guarantor's or such Lessee's tax liability for any period for which returns
have been filed or were due other than those contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
established and are being maintained in accordance with GAAP.
30.12. Governmental Authorization. The Guarantor and each Lessee has
all licenses, franchises, permits and other governmental authorizations
necessary for all businesses presently carried on by it (including owning and
leasing the real and personal property owned and leased by it), except where
failure to obtain such licenses, franchises, permits and other governmental
authorizations would not have a Material Adverse Effect.
30.13. Compliance with Laws. Except as disclosed in Schedule 30.13
hereto, the Guarantor and each Lessee: (i) is not in violation of any law,
ordinance, rule, regulation or order of any Governmental Authority applicable
to it or its property, which violation would have a Material Adverse Effect,
and no such violation has been alleged, (ii) has filed in a timely manner all
reports, documents and other materials required to be filed by it with any
governmental bureau, agency or instrumentality (and the information contained
in each of such filings is true, correct and complete in all material
respects), except where failure to make such filings would not have a Material
Adverse Effect, and (iii) has retained all records and documents required to
be retained by it pursuant to any Requirement of Law, except where failure to
retain such records would not have a Material Adverse Effect.
30.14. Eligible Vehicles. Each Vehicle is or will be, as the case may
be, on the Vehicle Operating Lease Commencement Date with respect to such
Vehicle, an Eligible Vehicle.
30.15. Supplemental Documents True and Correct. All information
contained in any Vehicle Order or other Supplemental Document which has been
submitted, or which may hereafter be submitted by any Lessee to the Lessor is,
or will be, true, correct and complete.
30.16. Manufacturer Programs. No Manufacturer Event of Default has
occurred and is continuing with respect to any Eligible Program
Manufacturer.
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30.17. Absence of Default. The Guarantor and each Lessee is in
compliance with all of the provisions of its certificate or articles of
incorporation and by-laws and no event has occurred or failed to occur which
has not been remedied or waived, the occurrence or non-occurrence of which
constitutes, or with the passage of time or giving of notice or both would
constitute, (i) an AESOP I Operating Lease Event of Default or a Potential
AESOP I Operating Lease Event of Default or (ii) a default or event of default
by the Guarantor or any Lessee under any material indenture, agreement or
other instrument, or any judgment, decree or final order to which the
Guarantor or any Lessee is a party or by which the Guarantor or any Lessee or
any of their properties may be bound or affected that could result in a
Material Adverse Effect.
30.18. Title to Assets. The Guarantor and each Lessee has good, legal
and marketable title to, or a valid leasehold interest in, all of its assets,
except to the extent no Material Adverse Effect could result. None of such
properties or assets is subject to any Liens, except for Permitted
Encumbrances. Except for financing statements or other filings with respect to
or evidencing Permitted Encumbrances, no financing statement under the UCC of
any state, application for a Certificate of Title or certificate of ownership,
or other filing which names the Guarantor or any Lessee as debtor or which
covers or purports to cover any of the assets of the Guarantor or such Lessee
is on file in any state or other jurisdiction, and neither the Guarantor nor
any Lessee has signed any such financing statement, application or instrument
authorizing any secured party or creditor of such Person thereunder to file
any such financing statement, application or filing other than with respect to
Permitted Encumbrances and except, in each case, to the extent no Material
Adverse Effect could result.
30.19. Burdensome Provisions. Neither the Guarantor nor any Lessee is
a party to or bound by any Contractual Obligation that could have a Material
Adverse Effect.
30.20. No Adverse Change. Since March 31, 1997, (x) no material
adverse change in the business, assets, liabilities, financial condition,
results of operations or business prospects of the Guarantor or any Lessee has
occurred, and (y) no event has occurred or failed to occur, which has had or
may have, either alone or in conjunction with all other such events and
failures, a Material Adverse Effect.
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30.21. No Adverse Fact. No fact or circumstance is known to the
Guarantor or any Lessee, as of such Closing Date, which, either alone or in
conjunction with all other such facts and circumstances, has had or might in
the future have (so far as the Guarantor or any Lessee can foresee) a Material
Adverse Effect which has not been set forth or referred to in the financial
statements referred to in Section 30.4 or 31.5 or in a writing specifically
captioned "Disclosure Statement" and delivered to the Lessor prior to such
Closing Date. If a fact or circumstance disclosed in such financial statements
or Disclosure Statement, or if an action, suit or proceeding disclosed to the
Lessor, should in the future have a Material Adverse Effect, such Material
Adverse Effect shall be a change or event subject to Section 30.20
notwithstanding such disclosure.
30.22. Accuracy of Information. All data, certificates, reports,
statements, opinions of counsel, documents and other information furnished to
the Lessor, the Lender or the Trustee by or on behalf of the Guarantor or any
Lessee pursuant to any provision of any Related Document, or in connection
with or pursuant to any amendment or modification of, or waiver under, any
Related Document, shall, at the time the same are so furnished, (i) be
complete and correct in all material respects to the extent necessary to give
the Lessor, the Lender or the Trustee, as the case may be, true and accurate
knowledge of the subject matter thereof, (ii) not contain any untrue statement
of a material fact, and (iii) not omit to state a material fact necessary in
order to make the statements contained therein (in light of the circumstances
in which they were made) not misleading, and the furnishing of the same to the
Lessor, the Lender or the Trustee, as the case may be, shall constitute a
representation and warranty by the Guarantor and each Lessee made on the date
the same are furnished to the Lessor, the Lender or the Trustee, as the case
may be, to the effect specified in clauses (i), (ii) and (iii).
30.23. Solvency. Both before and after giving effect to the
transactions contemplated by this Agreement and the other Related Documents,
each of the Guarantor and each Lessee is solvent within the meaning of the
Bankruptcy Code and each of the Guarantor and each Lessee is not the subject
of any voluntary or involuntary case or proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy or insolvency law and no Event of Bankruptcy has occurred with
respect to the Guarantor or any Lessee.
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31. CERTAIN AFFIRMATIVE COVENANTS. Until the expiration or
termination of this Agreement, and thereafter until the obligations of the
Lessees and the Guarantor under this Agreement and the Related Documents are
satisfied in full, each Lessee covenants and agrees as to itself, and the
Guarantor covenants and agrees as to itself and as to each Lessee that, unless
at any time the Lessor, the Lender and the Trustee shall otherwise expressly
consent in writing, it will (and, in the case of the Guarantor, will cause
each Lessee to):
31.1. Corporate Existence; Foreign Qualification. Do and cause to be
done at all times all things necessary to (i) maintain and preserve the
corporate existence of the Guarantor and each Lessee (it being understood that
subject to Section 32.1, each Lessee shall remain a direct or indirect
Wholly-Owned Subsidiary of the Guarantor); (ii) be, and ensure that each
Lessee is, duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction where the nature of its business makes such
qualification necessary and the failure to so qualify would have a Material
Adverse Effect; and (iii) comply with all Contractual Obligations and
Requirements of Law binding upon it and its Subsidiaries, except to the extent
that the failure to comply therewith would not, in the aggregate, have a
Material Adverse Effect.
31.2. Books, Records and Inspections. (i) Maintain complete and
accurate books and records with respect to the Vehicles leased by it under
this Agreement and (ii) permit any Person designated by the Lessor, the Lender
or the Trustee in writing to visit and inspect any of the properties,
corporate books and financial records of the Guarantor and its Subsidiaries
and to discuss its affairs, finances and accounts with officers of the
Guarantor and its Subsidiaries, agents of the Guarantor and with the
Guarantor's independent public accountants, all at such reasonable times and
as often as the Lessor, the Lender or the Trustee may reasonably request.
31.3. Insurance. Obtain and maintain with respect to all Vehicles
that are subject to this Agreement (a) vehicle liability insurance to the full
extent required by law and in any event not less than $500,000 per Person and
$1,000,000 per occurrence, (b) property damage insurance with a limit of
$1,000,000 per occurrence, and (c) excess coverage public liability
insurance with a limit of not less than $50,000,000 or the limit maintained
from time to time by the relevant Lessee at any time hereafter, whichever is
greater, with respect to all passenger cars and vans comprising such
Lessee's rental fleet. The Lessor acknowledges and
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agrees that each Lessee may, to the extent permitted by applicable law,
self-insure for the first $1,000,000 per occurrence, or a greater amount up to
a maximum of $3,000,000, with the consent of each Enhancement Provider, per
occurrence, of vehicle liability and property damage which is otherwise
required to be insured hereunder. All such policies shall be from financially
sound and reputable insurers, shall name the Lender, the Lessor and the
Trustee as additional insured parties, in the case of catastrophic physical
damage insurance on such Vehicles, shall name the Trustee as loss payee as its
interest may appear and will provide that the Lender, the Lessor and the
Trustee shall receive at least 10 days' prior written notice of cancellation
of such policies. Each Lessee will notify promptly the Lender, the Lessor and
the Trustee of any curtailment or cancellation of such Lessee's right to
self-insure in any jurisdiction.
31.4. Manufacturer Programs. Turn in the Program Vehicles leased by
such Lessee to the relevant Manufacturer within the Repurchase Period therefor
(unless such Lessee sells such Program Vehicle prior to the end of the
Repurchase Period therefor and receives sales proceeds thereof in cash in an
amount equal to or greater than the repurchase price under such Manufacturer
Program); and comply with all of its obligations under each Manufacturer
Program.
31.5. Reporting Requirements. Furnish, or cause to be
furnished to the Lessor, the Lender and the Trustee and, in the
case of item (iv) below, each Rating Agency:
(i) Audit Report. As soon as available and in any event
within 120 days after the end of each fiscal year of the Guarantor,
(a) consolidated financial statements consisting of a statement of
financial position of the Guarantor and its Consolidated Subsidiaries
as of the end of such fiscal year and a statement of operations,
stockholders' equity and cash flows of the Guarantor and its
Consolidated Subsidiaries for such fiscal year, setting forth in
comparative form the corresponding figures for the preceding fiscal
year, certified by and containing an opinion, unqualified as to
scope, of independent certified public accountants of recognized
standing selected by the Guarantor and acceptable to the Lessor, the
Lender and the Trustee, accompanied by (b) a letter from such
accountants addressed to the Lessor, the Lender and the Trustee
stating that, in the course of their annual audit of the books and
records of the Guarantor, no Potential AESOP I Operating Lease Event
of Default or AESOP I Operating Lease Event of Default has come to
54
<PAGE>
their attention which was continuing at the close of such fiscal year
or on the date of their letter, or, if such an event has come to the
attention of such accountants and was continuing at the close of such
fiscal year or on the date of their letter, the nature of such event,
it being understood that such accountants shall have no liability to
the Lessor or the Trustee by reason of the failure of such
accountants to obtain knowledge of the occurrence or continuance of
such an AESOP I Operating Lease Event of Default or Potential AESOP I
Operating Lease Event of Default;
(ii) Quarterly Statements. As soon as available and in any
event within 45 days after the end of each of the first three
quarters of each fiscal year of the Guarantor, (a) financial
statements consisting of a consolidated statement of financial
position of the Guarantor and its Consolidated Subsidiaries as of the
end of such quarter and a statement of operations, stockholders'
equity and cash flows of the Guarantor and its Consolidated
Subsidiaries for each such quarter, setting forth in comparative form
the corresponding figures for the corresponding periods of the
preceding fiscal year, all in reasonable detail and certified
(subject to year-end audit adjustments) by a senior financial officer
of the Guarantor as having been prepared in accordance with GAAP
consistently applied, accompanied by (b) a letter from such officer
addressed to the Lessor, the Lender and the Trustee stating that no
Potential AESOP I Operating Lease Event of Default or AESOP I
Operating Lease Event of Default has come to his attention which was
continuing at the end of such quarter or on the date of his letter,
or, if such an event has come to his attention and was continuing at
the end of such quarter or on the date of his letter, indicating the
nature of such event and the action which the Guarantor proposes to
take with respect thereto;
(iii) Amortization Events and AESOP I Operating Lease Events
of Default. As soon as possible but in any event within two Business
Days after the occurrence of any Amortization Event, Potential
Amortization Event, AESOP I Operating Lease Event of Default or
Potential AESOP I Operating Lease Event of Default, a written
statement of an Authorized Officer describing such event and the
action that the Guarantor or such Lessee, as the case may be,
proposes to take with respect thereto;
(iv) Manufacturers. Promptly after obtaining actual
knowledge thereof, notice of any Manufacturer Event of
55
<PAGE>
Default or termination or replacement of a Manufacturer Program;
(v) Interim Financial Statements. Promptly following the
Guarantor's receipt thereof, copies of all other financial reports
submitted to the Guarantor by independent public accountants relating
to any annual or interim audit of the books of the Guarantor, or
opinion as to the proper book value of the assets of the Guarantor;
(vi) Reports. Promptly, from time to time, such information
with respect to the Vehicles leased hereunder and payments made and
owing hereunder as the Lessor may require to satisfy its reporting
obligations to the Lender pursuant to Section 9.5 of the AESOP I
Operating Lease Loan Agreement; and
(vii) Other. Promptly, from time to time, such other
information, documents, or reports respecting the Vehicles leased
hereunder or the condition or operations, financial or otherwise, of
the Guarantor or such Lessee as the Lessor, the Lender or the Trustee
may from time to time reasonably request in order to protect the
interests of the Lessor, the Lender or the Trustee under or as
contemplated by this Agreement or any other Related Document.
31.6. Payment of Taxes; Removal of Liens. Pay when due all taxes,
assessments, fees and governmental charges of any kind whatsoever that may be
at any time lawfully assessed or levied against or with respect to such
Lessee, the Guarantor or their respective property and assets or any interest
thereon. Notwithstanding the previous sentence, but subject in any case to the
other requirements hereof and of the Related Documents, neither such Lessee
nor the Guarantor shall be required to pay any tax, charge, assessment or
imposition nor to comply with any law, ordinance, rule, order, regulation or
requirement so long as such Lessee or the Guarantor shall contest, in good
faith, the amount or validity thereof, in an appropriate manner or by
appropriate proceedings. Each such contest shall be promptly prosecuted to
final conclusion (subject to the right of the Guarantor or such Lessee to
settle any such contest).
31.7. Business. Such Lessee will engage only in businesses in
substantially the same or related fields as the businesses conducted on the
date hereof and such other lines of business, which, in the aggregate, do not
constitute a material part of the operations of such Lessee.
56
<PAGE>
31.8. Maintenance of Separate Existence. Each of the Guarantor and
such Lessee acknowledges its receipt of a copy of that certain opinion letter
issued by Skadden, Arps, Slate, Meagher & Flom LLP dated the Initial Closing
Date and addressing the issue of substantive consolidation as it may relate to
the Guarantor, each Lessee, the Lessor, Original AESOP, AESOP Leasing II,
AFC-II and AFC. The Guarantor and each Lessee hereby agree to maintain in
place all policies and procedures, and take and continue to take all action,
described in the factual assumptions set forth in such opinion letter and
relating to such Person.
31.9. Trustee as Lienholder. Concurrently with each leasing of a
Vehicle under this Agreement, the Administrator shall indicate on its computer
records that the Trustee as assignee of the Lender is the holder of a Lien on
such Vehicle pursuant to the terms of the Indenture.
31.10. Maintenance of the Vehicles. Maintain and cause to be
maintained in good repair, working order, and condition all of the Vehicles
leased by such Lessee in accordance with its ordinary business practices with
respect to all other vehicles owned by it, except to the extent that any such
failure to comply with such requirements does not, in the aggregate,
materially adversely affect the interests of the Lessor under this Agreement,
the interests of the Lender under the AESOP I Operating Lease Loan Agreement
or the interests of the Secured Parties under the Indenture or the likelihood
of repayment of the Loans. From time to time the Guarantor and such Lessee
will make or cause to be made all appropriate repairs, renewals, and
replacements with respect to the Vehicles. The Guarantor and such Lessee shall
maintain good, legal and marketable title to, or a valid lease-hold interest
in, all of its assets, free and clear of all Liens except for Permitted Liens,
and except to the extent sold or otherwise disposed of in accordance with this
Agreement or any of the other Related Documents, and except to the extent no
Material Adverse Effect could result.
31.11. Enhancement. If the Enhancement with respect to any Series of
Notes is provided by a letter of credit and (i) the short-term debt or deposit
rating of the Enhancement Provider of such letter of credit shall be
downgraded below the then-current rating of such Series of Notes by the Rating
Agencies with respect to such Series of Notes or (ii) such Enhancement
Provider shall notify the Lessees that its compliance with any of its
obligations under such letter of credit would be unlawful, use its best
efforts to obtain a successor institution to act as Enhancement Provider or,
in the alternative, to otherwise credit
57
<PAGE>
enhance the payments to be made under this Agreement by the Lessees, subject
to the satisfaction of the Rating Agency Confirmation Condition and any other
requirements set forth in the Related Documents.
31.12. Manufacturer Payments. Cause each Manufacturer and auction
dealer to make all payments made by it under the Manufacturer Programs with
respect to Vehicles leased hereunder directly to the Collection Account. Any
such payments from Manufacturers or related auction dealers received directly
by the Guarantor or any Lessee, will be, within three Business Days of
receipt, deposited into the Collection Account.
31.13. Accounting Methods; Financial Records. Maintain, and cause
each of its material Subsidiaries to maintain, a system of accounting and
keep, and cause each of its material Subsidiaries to keep, such records and
books of account (which shall be true and complete) as may be required or
necessary to permit the preparation of financial statements in accordance with
GAAP.
31.14. Disclosure to Auditors. Disclose, and cause each of its
material Subsidiaries to disclose, to its independent certified public
accountants in a timely manner all loss contingencies of a type requiring
disclosure to auditors under accounting standards promulgated by the Financial
Accounting Standards Board.
31.15. Disposal of Non-Program Vehicles. Dispose of the Non-Program
Vehicles leased by the Lessee in accordance with Section 2.6(b) (unless the
Lessee purchases such Non-Program Vehicle in accordance with the terms hereof).
32. CERTAIN NEGATIVE COVENANTS. Until the expiration or termination
of this Agreement and thereafter until the obligations of each Lessee and the
Guarantor under this Agreement and the Related Documents are satisfied in
full, each Lessee covenants and agrees as to itself, and the Guarantor
covenants and agrees as to itself and as to each Lessee that, unless at any
time the Lessor and the Trustee shall otherwise expressly consent in writing,
it will not (and, in the case of the Guarantor, will not permit each Lessee
to):
32.1. Mergers, Consolidations. Merge or consolidate with any Person,
except that, if after giving effect thereto, no Potential AESOP I Operating
Lease Event of Default or AESOP I Operating Lease Event of Default would
exist, this Section 32.1 shall not apply to (i) any merger or consolidation,
provided that
58
<PAGE>
the Guarantor or such Lessee, as applicable, is the surviving corporation and
if such Lessee is the surviving corporation, it is a direct or indirect
Wholly-Owned Subsidiary of the Guarantor after such merger or consolidation
and (ii) any merger or consolidation of such Lessee with or into another
Subsidiary of the Guarantor, provided that the surviving entity executes an
agreement of assumption to perform every obligation of such Lessee under this
Agreement and such surviving entity is a direct or indirect Wholly-Owned
Subsidiary of the Guarantor.
32.2. Other Agreements. Enter into any agreement containing any
provision which would be violated or breached by the performance of its
obligations hereunder or under any instrument or document delivered or to be
delivered by it hereunder or in connection herewith.
32.3. Liens. Create or permit to exist any Lien with respect to any
Vehicle leased hereunder now or hereafter existing or acquired, except for
Permitted Liens.
32.4. Use of Vehicles. Use or allow the Vehicles to be used in any
manner that would (i) make such Vehicles that are Program Vehicles ineligible
for repurchase under an Eligible Manufacturer Program, (ii) for any illegal
purposes or (iii) subject the Vehicles to confiscation.
32.5. Termination of Agreement. Allow this Agreement to terminate
prior to the termination of each other Lease.
33. ADMINISTRATOR ACTING AS AGENT OF THE LESSOR. The parties to this
Agreement acknowledge and agree that ARAC shall act as Administrator and, in
such capacity, as the agent for the Lessor, for purposes of performing certain
duties of the Lessor under this Agreement and the Related Documents. As
compensation for the Administrator's performance of such duties, the Lessor
shall pay to the Administrator on each Payment Date (i) the portion of the
Monthly Administration Fee payable by the Lessor pursuant to the
Administration Agreement and (ii) the reasonable costs and expenses of the
Administrator incurred by it as a result of arranging for the sale of Vehicles
returned to the Lessor in accordance with Section 2.6(c) or as a result of a
Vehicle Return Default and sold to third parties, provided, however, that such
costs and expenses shall only be payable to the Administrator to the extent of
any excess of the sale price received by the Lessor for any such Vehicle over
the Termination Value thereof.
59
<PAGE>
34. NO PETITION. Each of the Guarantor, each Lessee and the
Administrator hereby covenants and agrees that, prior to the date which is one
year and one day after the payment in full of all of the Notes and the
Commercial Paper Notes, it will not institute against, or join any other
Person in instituting against, the Lessor, Original AESOP, AESOP Leasing II,
Quartx, PVHC, AFC or AFC-II any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the
laws of the United States or any state of the United States. In the event that
the Guarantor, any Lessee or the Administrator takes action in violation of
this Section 34, the Lessor agrees, for the benefit of the Secured Parties,
that it shall file an answer with the bankruptcy court or otherwise properly
contest the filing of such a petition by the Guarantor, such Lessee or the
Administrator against the Lessor, Original AESOP, AESOP Leasing II, Quartx,
PVHC, AFC or AFC-II or the commencement of such action and raise the defense
that the Guarantor, such Lessee or the Administrator has agreed in writing not
to take such action and should be estopped and precluded therefrom and such
other defenses, if any, as its counsel advises that it may assert. The
provisions of this Section 34 shall survive the termination of this Agreement.
35. SUBMISSION TO JURISDICTION. The Lessor and the Trustee may
enforce any claim arising out of this Agreement in any state or federal court
having subject matter jurisdiction, including, without limitation, any state
or federal court located in the State of New York. For the purpose of any
action or proceeding instituted with respect to any such claim, the Guarantor
and each Lessee hereby irrevocably submits to the jurisdiction of such courts.
The Guarantor and each Lessee further irrevocably consents to the service of
process out of said courts by mailing a copy thereof, by registered mail,
postage prepaid, to the Guarantor or such Lessee, as the case may be, and
agrees that such service, to the fullest extent permitted by law, (i) shall be
deemed in every respect effective service of process upon it in any such suit,
action or proceeding and (ii) shall be taken and held to be valid personal
service upon and personal delivery to it. Nothing herein contained shall
affect the right of the Trustee, the Lender and the Lessor to serve process in
any other manner permitted by law or preclude the Lessor, the Lender or the
Trustee from bringing an action or proceeding in respect hereof in any other
country, state or place having jurisdiction over such action. The Guarantor
and each Lessee hereby irrevocably waives, to the fullest extent permitted by
law, any objection which it may have or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in any such court
60
<PAGE>
located in the State of New York and any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient forum.
36. GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW). Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement. All obligations of
the Guarantor and each Lessee and all rights of the Lessor, the Lender or the
Trustee expressed herein shall be in addition to and not in limitation of
those provided by applicable law or in any other written instrument or
agreement.
37. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY, OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED
TRANSACTION, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
38. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing including facsimile transmission or
similar writing) and shall be given to such party, addressed to it, at its
address or telephone number set forth on the signature pages below, or at such
other address or telephone number as such party may hereafter specify for the
purpose by notice to the other party. In each case, a copy of all notices,
requests and other communications that are sent by any party hereunder shall
be sent to the Trustee and the Lender and a copy of all notices, requests and
other communications that are sent by any Lessee or the Guarantor to each
other that pertain to this Agreement shall be sent to the Lessor, the Lender
and the Trustee. Copies of notices, requests and other communications
delivered to the Trustee, the Lender and/or the Lessor pursuant to the
foregoing sentence shall be sent to the following addresses:
61
<PAGE>
TRUSTEE: Harris Trust and Savings Bank
311 Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Corporate Trust Officer
Telephone: (312) 461-2532
Fax: (312) 461-3525
LENDER: AESOP Funding II L.L.C.
c/o Lord Securities Corporation
Two Wall Street
New York, New York 10005
Attention: Frank Bilotta
Telephone: (212) 346-9000
Fax: (212) 346-9012
LESSOR: AESOP Leasing L.P.
c/o Lord Securities Corporation
Two Wall Street
New York, New York 10005
Attention: Frank Bilotta
Telephone: (212) 346-9000
Fax: (212) 346-9012
Each such notice, request or communication shall be effective when received at
the address specified below. Copies of all notices must be sent by first class
mail promptly after transmission by facsimile.
39. LIABILITY. Each Lessee shall be held jointly and severally liable
for all of the obligations of each other Lessee and the Guarantor hereunder.
The Guarantor shall be held jointly and severally liable for all the
obligations of each Lessee hereunder.
40. TITLE TO MANUFACTURER PROGRAMS IN LESSOR. The Lessee, by its
execution hereof, acknowledges and agrees that (i) the Lessor is the sole
owner and holder of all right, title and interest in and to the Manufacturer
Programs, (ii) in accordance with the Assignment Agreements, all of the
Lessor's right, title and interest in and to such Manufacturer Programs have
been assigned to the Trustee and (iii) no Lessee has any right, title or
interest in any Manufacturer Program. To confirm the foregoing, each Lessee,
by its execution hereof, hereby assigns and
62
<PAGE>
transfers to the Lessor any rights that such Lessee may have in respect of any
Manufacturer Programs.
41. HEADINGS. Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
42. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered,
shall be deemed to be an original and all of which counterparts, taken
together, shall constitute one and the same Agreement.
43. EFFECTIVENESS. This Agreement shall become effective concurrently
with the issuance of the Loan Note under the AESOP I Operating Lease Loan
Agreement.
44. NO RECOURSE. The obligations of AESOP Leasing under this
Agreement are solely the corporate obligations of AESOP Leasing. No recourse
shall be had for the payment of any obligation or claim arising out of or
based upon this Agreement against any shareholder, employee, officer, director
or incorporator of AESOP Leasing.
63
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
or caused it to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
LESSOR:
AESOP LEASING L.P.
By: AESOP LEASING CORP.,
its general partner
By: /s/ Frank B. Bilotta
--------------------------------
Address: c/o Lord Securities
Corporation
Two Wall Street
19th Floor
New York, New York 10005
Attention: Frank Bilotta
Telephone: (212) 346-9000
Telefax: (212) 346-9012
LESSEE AND ADMINISTRATOR:
AVIS RENT A CAR SYSTEM, INC.
By: /s/ Steven L. Greenberger
Address: 900 Old Country Road
Garden City, NY 11530
Attention: Treasurer
cc: General Counsel
Telephone: (516) 222-3000
Telefax: (516) 222-3751
<PAGE>
GUARANTOR:
AVIS RENT A CAR, INC.
By: /s/ Kevin M. Sheehan
Address: 900 Old Country Road
Garden City, NY 11530
Attention: Treasurer
cc: General Counsel
Telephone: (516) 222-3000
Telefax: (516) 222-3751
COUNTERPART NO. OF TEN (10) SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS.
TO THE EXTENT IF ANY THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE
UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED
THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART
NO. 1.
<PAGE>
SCHEDULE 30.5
Litigation
[NONE]
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 30.10
Business Locations
=============================================================================================================================
PARTY PRINCIPAL PLACE OF ADDITIONAL RECORDS STATES IN WHICH CON-
BUSINESS LOCATION DUCTS BUSINESS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Avis Rent A Car 900 Old Country Road 300 Centre Pointe Dr. AZ, AR, CA, CO, CT,
System, Inc. Garden City, NY Virginia Beach, VA DE, DC, FL, GA, HI,
d/b/a/ Avis Rent 11530 23462 ID, IL, IN, KS, KY, LA,
A Car and Avis ME, MD, MA, MI, MN,
MS, MO, MT, NE, NV,
NJ, NM, NY, NC, OH,
OK, OR, PA, RI, SC,
TN, TX, UT, VT, VA,
WA, WV, WI and WY
- -----------------------------------------------------------------------------------------------------------------------------
Avis Rent A 900 Old Country Road NY
Car, Inc. Garden City, NY
11530
=============================================================================================================================
</TABLE>
<PAGE>
SCHEDULE 30.13
Compliance with Law
[NONE]
<PAGE>
ATTACHMENT A
Information Relating to Initial Leased Vehicles
I. Initial PVT Vehicles (as of the Initial Closing Date)
a. [For each Vehicle] Vehicle Identification Number
b. [For each Vehicle] Net Book Value
II. Initial ARAC Vehicles (as of the Initial Closing Date)
a. [For each Vehicle] Vehicle Identification Number
b. [For each Vehicle] Net Book Value
A-1
<PAGE>
ATTACHMENT B
Vehicle Acquisition Schedule and Related Information
1. Principal amount of Loan financing the Vehicle
2. Date of Loan financing the Vehicle
3. Vehicle Operating Lease Commencement Date
4. Vehicle Identification Number (VIN)
5. Summary of Vehicles being financed (including, for Vehicles
subject to the GM Repurchase Program, the Designated Period
for such Vehicles)
6. Program or Non-Program Vehicle
7. Capitalized Cost (if applicable)
8. Net Book Value (if applicable)
B-1
<PAGE>
ATTACHMENT C
Form of Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that AESOP LEASING L.P. does hereby
make, constitute and appoint Avis Rent A Car System, Inc. ("ARAC") its true
and lawful Attorney-in-Fact for it and in its name, stead and behalf, (i) to
execute any and all documents pertaining to the titling of motor vehicles in
the name of AESOP LEASING L.P., PV HOLDING CORP. or QUARTX FLEET MANAGEMENT
INC., (ii) the noting of the lien of Harris Trust and Savings Bank, as trustee
(in such capacity, the "Trustee"), as the first lienholder on certificates of
title, (iii) the licensing and registration of motor vehicles, (iv)
designating c/o ARAC as the mailing address of the Trustee for all
documentation relating to the title and registration of such motor vehicles,
(v) applying for duplicate certificates of title indicating the lien of the
Trustee where original certificates of title have been lost or destroyed and
(vi) upon the sale of any such motor vehicle pursuant to the Master Motor
Vehicle Operating Lease Agreement, dated as of July 30, 1997, among AESOP
Leasing L.P., ARAC, any other Eligible Rental Car Company that becomes a party
thereto pursuant to the terms thereof and Avis Rent A Car, Inc., in accordance
with the terms and conditions thereof, releasing the lien of the Trustee on
such motor vehicle by executing any documents required in connection
therewith. This power is limited to the foregoing and specifically does not
authorize the creation of any liens or encumbrances on any of said motor
vehicles.
The powers and authority granted hereunder shall, unless sooner
terminated, revoked or extended, cease eight years from the date of execution
as set forth below.
C-1
<PAGE>
IN WITNESS WHEREOF, AESOP LEASING L.P. has caused this instrument to
be executed on its behalf by its duly authorized officer this ___ day of
______, 19__.
AESOP LEASING L.P.
By:
---------------
State of ________ )
County of _______ )
Subscribed and sworn before me, a notary public, in and for said
county and state, this ___ day of _____, 19__.
-------------------------------------------------------
Notary Public
My Commission Expires: _______
C-2
<PAGE>
ATTACHMENT D
Form of Joinder in Lease
THIS JOINDER IN LEASE AGREEMENT (this "Joinder") is executed
as of ___________ __, 19__, by _______________, a _______________ ("Joining
Party"), and delivered to AESOP Leasing L.P., a Delaware limited partnership
("AESOP Leasing"), as lessor pursuant to the Master Motor Vehicle Operating
Lease Agreement, dated as of July 30, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Agreement"), among AESOP Leasing,
Avis Rent A Car System, Inc., a Delaware corporation ("ARAC"), and other
Eligible Rental Car Companies that become party to the Lease pursuant to the
provisions of Section 24 thereof (individually, a "Lessee" and, collectively,
the "Lessees"), and Avis Rent A Car, Inc. ("ARC"), as guarantor. Capitalized
terms used herein but not defined herein shall have the meanings provided for
in the Lease.
R E C I T A L S:
WHEREAS, the Eligible Rental Car Company is a direct or
indirect Subsidiary of ARC; and
WHEREAS, the Eligible Rental Car Company desires to become a
"Lessee" under and pursuant to the Lease.
NOW, THEREFORE, the Eligible Rental Car Company agrees as
follows:
A G R E E M E N T:
1. The Joining Party hereby represents and warrants to and
in favor of AESOP Leasing and the Trustee that (i) the Eligible Rental Car
Company is a direct or indirect wholly-owned Subsidiary of ARC, (ii) all of
the conditions required to be satisfied pursuant to Section 24 of the Lease in
respect to the Eligible Rental Car Company becoming a Lessee thereunder have
been satisfied, and (iii) all of the representations and warranties contained
in Section 30 of the Lease with respect to the Lessees are true and correct as
applied to the Eligible Rental Car Company as of the date hereof.
2. The Eligible Rental Car Company hereby agrees to assume
all of the obligations of a "Lessee" under the Lease and agrees to be bound by
all of the terms, covenants and conditions therein.
D-1
<PAGE>
3. By its execution and delivery of this Joinder, the
Eligible Rental Car Company hereby becomes a Lessee for all purposes under the
Lease. By its execution and delivery of this Joinder, AESOP Leasing
acknowledges that the Joining Party is a Lessee for all purposes under the
Lease.
IN WITNESS WHEREOF, the Eligible Rental Car Company has
caused this Joinder to be duly executed as of the day and year first above
written.
[Name of Joining Party]
By: __________________________
Name:
Title:
Accepted and Acknowledged by:
AESOP LEASING L.P.
By: ___________________________
Name:
Title:
Acceptance and Acknowledgement by:
ARC as guarantor
By: ___________________________
Name:
Title:
D-2
<PAGE>
MASTER MOTOR VEHICLE OPERATING LEASE AGREEMENT
dated as of July 30, 1997
among
AESOP LEASING CORP. II,
as Lessor,
AVIS RENT A CAR SYSTEM, INC.,
as Lessee and as Administrator,
and
AVIS RENT A CAR, INC.,
as Guarantor
AS SET FORTH IN SECTION 27 HEREOF, LESSOR HAS ASSIGNED TO AFC-II (AS DEFINED
HEREIN) AND AFC-II HAS ASSIGNED TO THE TRUSTEE (AS DEFINED HEREIN) CERTAIN OF
ITS RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE. TO THE EXTENT, IF ANY, THAT
THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM
COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION) NO SECURITY
INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART, WHICH SHALL BE
IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE
TRUSTEE ON THE SIGNATURE PAGE THEREOF.
[THIS IS NOT COUNTERPART NO. 1]
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TABLE OF CONTENTS
Page
1. DEFINITIONS..................................................... 1
2. GENERAL AGREEMENT............................................... 1
2.1. Lease and Acquisition of Vehicles......................... 4
2.2. Right of Lessees and Guarantor to Act as Lessor's
Agent..................................................... 5
2.3. Payment of Capitalized Cost or Net Book Value by
Lessor.................................................... 6
2.4. Non-Liability of Lessor................................... 6
2.5. Lessees' Rights to Purchase Vehicles...................... 6
2.6. Lessor's Right to Cause Vehicles to be Sold............... 7
2.7. Limitations on the Acquisition of Certain Vehicles........ 8
3. TERM ................................................................ 9
3.1 Vehicle Term.............................................. 9
3.2. Term ..................................................... 10
4. RENT AND CHARGES..................................................... 10
4.1. Payment of Rent........................................... 10
4.2. [RESERVED]................................................ 11
4.3. Net Lease................................................. 11
5. INSURANCE............................................................ 12
5.1. Personal Injury and Damage................................ 12
5.2. Delivery of Certificate of Insurance...................... 12
5.3. Changes in Insurance Coverage............................. 12
6. RISK OF LOSS; CASUALTY AND INELIGIBLE VEHICLE OBLIGA-
TIONS........................................................... 13
6.1. Risk of Loss Borne by Lessees............................. 13
6.2. Casualty; Ineligible Vehicles............................. 13
7. VEHICLE USE.......................................................... 14
8. LIENS................................................................ 15
9. NON-DISTURBANCE...................................................... 15
10. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND
FINES........................................................... 16
11. MAINTENANCE AND REPAIRS......................................... 16
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12. VEHICLE WARRANTIES.............................................. 17
12.1. No Lessor Warranties..................................... 17
12.2. Manufacturer's Warranties................................ 17
13. VEHICLE USAGE GUIDELINES AND RETURN; SPECIAL DEFAULT
PAYMENTS; EARLY TERMINATION PAYMENTS............................ 18
13.1. Usage.................................................... 18
13.2. Return................................................... 18
13.3. Special Default Payments................................. 18
13.4. Early Termination Payments............................... 19
14. DISPOSITION PROCEDURE............................................... 19
15. ODOMETER DISCLOSURE REQUIREMENT..................................... 19
16. GENERAL INDEMNITY................................................... 19
16.1. Indemnity by the Lessees and the Guarantor............... 19
16.2. Reimbursement Obligation by the Lessees and the
Guarantor................................................ 22
16.3. Defense of Claims........................................ 23
17. ASSIGNMENT.......................................................... 24
17.1. Right of the Lessor to Assign this Agreement............. 24
17.2. Limitations on the Right of the Lessees to
Assign this Agreement................................. 24
18. DEFAULT AND REMEDIES THEREFOR....................................... 25
18.1. Events of Default........................................ 25
18.2. Effect of AESOP II Operating Lease Event of De-
fault or Liquidation Event of Default.................... 26
18.3. Rights of Lessor Upon AESOP II Operating Lease
Event of Default, Limited Liquidation Event of
Default or Liquidation Event of Default.................. 27
18.4. Rights of Lender and Trustee Upon Liquidation
Event of Default, Limited Liquidation Event of
Default and Non-Performance of Certain Covenants......... 28
18.5. Measure of Damages....................................... 30
18.6. Vehicle Return Default................................... 31
18.7. Application of Proceeds.................................. 33
19. MANUFACTURER EVENTS OF DEFAULT...................................... 33
20. [RESERVED].......................................................... 33
21. [RESERVED].......................................................... 33
22. CERTIFICATION OF TRADE OR BUSINESS USE.............................. 33
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23. SURVIVAL............................................................ 34
24. ADDITIONAL LESSEES.................................................. 34
25. TITLE............................................................... 37
26. GUARANTY............................................................ 37
26.1. Guaranty................................................. 37
26.2. Scope of Guarantor's Liability........................... 37
26.3. Lessor's Right to Amend this Agreement, Etc.............. 38
26.4. Waiver of Certain Rights by Guarantor.................... 38
26.5. [RESERVED]............................................... 40
26.6. Guarantor to Pay Lessor's Expenses....................... 40
26.7. Reinstatement............................................ 40
26.8. Pari Passu Indebtedness.................................. 40
27. RIGHTS OF LESSOR ASSIGNED TO TRUSTEE................................ 40
28. [RESERVED]...................................................... 42
29. MODIFICATION AND SEVERABILITY....................................... 42
30. CERTAIN REPRESENTATIONS AND WARRANTIES.......................... 42
30.1. Organization; Ownership; Power; Qualification............ 43
30.2. Authorization; Enforceability............................ 43
30.3. Compliance............................................... 43
30.4. Financial Information; Financial Condition............... 44
30.5. Litigation............................................... 45
30.6. Liens.................................................... 45
30.7. Employee Benefit Plans................................... 45
30.8. Investment Company Act................................... 45
30.9. Regulations G, T, U and X................................ 46
30.10. Business Locations; Trade Names; Principal
Places of Business Locations............................ 46
30.11. Taxes................................................... 46
30.12. Governmental Authorization.............................. 47
30.13. Compliance with Laws.................................... 47
30.14. Eligible Vehicles....................................... 47
30.15. Supplemental Documents True and Correct................. 47
30.16. Manufacturer Programs................................... 47
30.17. Absence of Default...................................... 47
30.18. Title to Assets......................................... 48
30.19. Burdensome Provisions................................... 48
30.20. No Adverse Change....................................... 48
30.21. No Adverse Fact......................................... 48
30.22. Accuracy of Information................................. 49
30.23. Solvency................................................ 49
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31. CERTAIN AFFIRMATIVE COVENANTS....................................... 49
31.1. Corporate Existence; Foreign Qualification............... 50
31.2. Books, Records and Inspections........................... 50
31.3. Insurance................................................ 50
31.4. Manufacturer Programs.................................... 51
31.5. Reporting Requirements................................... 51
31.6. Payment of Taxes; Removal of Liens....................... 53
31.7. Business................................................. 53
31.8. Maintenance of Separate Existence........................ 53
31.9. Trustee as Lienholder.................................... 54
31.10. Maintenance of the Vehicles............................. 54
31.11. Enhancement............................................. 54
31.12. Manufacturer Payments................................... 54
31.13. Accounting Methods; Financial Records................... 55
31.14. Disclosure to Auditors.................................. 55
32. CERTAIN NEGATIVE COVENANTS.......................................... 55
32.1. Mergers, Consolidations.................................. 55
32.2. Other Agreements......................................... 55
32.3. Liens ................................................... 56
32.4. Use of Vehicles.......................................... 56
32.5. Termination of Agreement................................. 56
33. ADMINISTRATOR ACTING AS AGENT OF THE LESSOR......................... 56
34. NO PETITION......................................................... 56
35. SUBMISSION TO JURISDICTION.......................................... 57
36. GOVERNING LAW....................................................... 57
37. JURY TRIAL.......................................................... 58
38. NOTICES............................................................. 58
39. LIABILITY........................................................... 59
40. TITLE TO MANUFACTURER PROGRAMS IN LESSOR............................ 59
41. HEADINGS............................................................ 59
42. EXECUTION IN COUNTERPARTS........................................... 59
43. EFFECTIVENESS. ..................................................... 59
44. NO RECOURSE......................................................... 59
iv
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SCHEDULES AND ATTACHMENTS
Schedule 30.5 Litigation
Schedule 30.10 Business Locations
Schedule 30.13 Compliance with Law
ATTACHMENT A Information relating to Initial Leased Vehicles
ATTACHMENT B Vehicle Acquisition Schedule and Related Information
ATTACHMENT C Form of Power of Attorney
ATTACHMENT D Form of Joinder in Lease
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MASTER MOTOR VEHICLE OPERATING LEASE AGREEMENT
This Master Motor Vehicle Operating Lease Agreement (this
"Agreement"), dated as of July 30, 1997, by and among AESOP LEASING CORP. II, a
Delaware corporation (the "Lessor"), AVIS RENT A CAR SYSTEM, INC., a Delaware
corporation ("ARAC"), individually and as the Administrator, Eligible Rental
Car Companies that become party to this Agreement pursuant to the provisions of
Section 24 hereof (individually, ARAC and each such Eligible Rental Car
Company, a "Lessee" and, collectively, the "Lessees"), and AVIS RENT A CAR,
INC., a Delaware corporation, as guarantor (the "Guarantor").
W I T N E S S E T H:
WHEREAS, the Lessor (such capitalized term, together with all other
capitalized terms used herein, shall have the meaning assigned thereto in
Section 1) has purchased or will purchase Program Vehicles of one or more
Manufacturers with proceeds provided to the Lessor by the Lender pursuant to
the AESOP II Loan Agreement and other available funds;
WHEREAS, the Lessor desires to lease to the Lessees and the Lessees
desire to lease from the Lessor Program Vehicles financed by the Lessor with
the proceeds of Loans and other available funds for use in the daily rental car
businesses of the Lessees; and
WHEREAS, the Guarantor has, pursuant to Section 26 hereof, guaranteed
the obligations of the Lessees under this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. DEFINITIONS. Unless specified herein, capitalized terms used herein
(including the preamble and recitals hereto) shall have the meanings ascribed
to such terms in the Definitions List attached as Schedule I to the Base
Indenture, dated as of July 30, 1997 (the "Base Indenture"), between AFC-II, as
Issuer, and Harris Trust and Savings Bank, as Trustee.
2. GENERAL AGREEMENT. (a) Each Lessee and the Lessor intend that this
Agreement is a lease and that the relationship between the Lessor and each
Lessee pursuant hereto shall always
<PAGE>
be only that of lessor and lessee, and each Lessee hereby declares,
acknowledges and agrees that the Lessor is the owner of, and the Lessor or its
Permitted Nominee holds legal title to, the Vehicles. No Lessee shall acquire
by virtue of this Agreement any right, equity, title or interest in or to any
Vehicles, except the right to use the same under the terms hereof. The parties
agree that this Agreement is a "true lease" and agree to treat this Agreement
as a lease for all purposes, including tax, accounting and otherwise and each
party hereto will take no position on its tax returns and filings contrary to
the position that the Lessor is the owner of the Vehicles for U.S. federal
income tax purposes.
(b) If, notwithstanding the intent of the parties to this Agreement,
this Agreement is characterized by any third party as a financing arrangement
or as otherwise not constituting a "true lease," then it is the intention of
the parties that this Agreement shall constitute a security agreement under
applicable law, and, to secure all of its obligations under this Agreement,
each Lessee hereby grants to the Lessor a security interest in all of such
Lessee's right, title and interest, if any, in and to all of the following
assets, property and interests in property, whether now owned or hereafter
acquired or created:
(i) the rights of such Lessee under this Agreement, as same
may be amended, modified or supplemented from time to time in
accordance with its terms, and any other agreements related to or in
connection with this Agreement to which the Lessees are a party (the
"Lessee Agreements"), including, without limitation, (a) all monies,
if any, due and to become due to such Lessee from the Guarantor and
any other Lessee under or in connection with any of the Lessee
Agreements, whether payable as rent, guaranty payments, fees,
expenses, costs, indemnities, insurance recoveries, damages for the
breach of any of the Lessee Agreements or otherwise, (b) all rights,
remedies, powers, privileges and claims of such Lessee against any
other party under or with respect to the Lessee Agreements (whether
arising pursuant to the terms of such Agreements or otherwise
available to such Lessee at law or in equity), including the right to
enforce any of the Lessee Agreements and to give or withhold any and
all consents, requests, notices, directions, approvals, extensions or
waivers under or with respect to the Lessee Agreements or the
obligations and liabilities of any party thereunder, (c) all liens and
property from time to time purporting to secure payment of the
obligations and liabilities of such Lessee arising under or in
connection with the Lessee Agree-
2
<PAGE>
ments, and any documents or agreements describing any collateral
securing such obligations or liabilities and (d) all guarantees,
insurance and other agreements or arrangements of whatever character
from time to time supporting or securing payment of such obligations
and liabilities of such Lessee pursuant to the Lessee Agreements;
(ii) all Vehicles leased by such Lessee from the Lessor under
this Agreement which, notwithstanding that this Agreement is intended
to convey only a leasehold interest, are determined to be owned by
such Lessee, and all Certificates of Title with respect to such
Vehicles;
(iii) all right, title and interest of such Lessee in, to and
under any Manufacturer Programs, including any amendments thereof, and
all monies due and to become due thereunder, in each case in respect
of Vehicles leased by such Lessee which, notwithstanding that this
Agreement is intended to convey only a leasehold interest, are
determined to be owned by such Lessee, whether payable as Vehicle
repurchase prices, auction sales proceeds, fees, expenses, costs,
indemnities, insurance recoveries, damages for breach of the
Manufacturer Programs or otherwise (but excluding all incentive
payments payable to such Lessee or the Lessor in respect of purchases
of vehicles under the Manufacturer Programs) and all rights to compel
performance and otherwise exercise remedies thereunder;
(iv) all payments under insurance policies (whether or not
the Lessor, the Lender or the Trustee is named as the loss payee
thereof) or any warranty payable by reason of loss or damage to, or
otherwise with respect to, any of the Vehicles leased by such Lessee;
(v) all additional property that may from time to time
hereafter be subjected to the grant and pledge under this Agreement,
as same may be modified or supplemented from time to time, by such
Lessee or by anyone on its behalf; and
(vi) all proceeds of any and all of the foregoing including,
without limitation, payments under insurance (whether or not the
Lessor is named as the loss payee thereof) and cash.
(c) To secure the AFC-II Obligations, each Lessee hereby grants to the
Trustee, on behalf of the Secured Parties, a first priority security interest
in all of such Lessee's right, title
3
<PAGE>
and interest, if any, in and to all of the collateral described in Section 2(b)
above, whether now owned or hereafter acquired or created; provided, however,
that in no event shall the Trustee's claim against such collateral exceed the
outstanding obligations of the Lessor to the Lender under the AESOP II Loan
Agreement. Upon the occurrence of a Liquidation Event of Default or a Limited
Liquidation Event of Default and subject to the provisions of the Related
Documents and the proviso contained in the immediately preceding sentence, the
Trustee shall have all of the rights and remedies of a secured party,
including, without limitation, the rights and remedies granted under the
Uniform Commercial Code.
(d) Each Lessee agrees to deliver to the Lessor, the Lender and the
Trustee on or before the Initial Closing Date:
(i) a written search report from a Person satisfactory to the
Lessor, the Lender and the Trustee listing all effective financing
statements that name such Lessee as debtor or assignor, and that are
filed in the jurisdictions in which filings were made pursuant to
clause (ii) below, together with copies of such financing statements,
and tax and judgment lien search reports from a Person satisfactory to
the Lessor, the Lender and the Trustee showing no evidence of liens
filed against such Lessee that purport to affect any Vehicles leased
hereunder or any Collateral under the Base Indenture;
(ii) evidence of the filing of proper financing statements on
Form UCC-1 naming such Lessee, as debtor, and the Lessor as secured
party covering the collateral described in Section 2(b) hereof; and
(iii) evidence of the filing in the states in which such
Lessee conducts business of proper financing statements on Form UCC-1
naming such Lessee, as debtor, and the Trustee as secured party
covering the collateral described in Section 2(b) hereof.
(e) Only Vehicles that are Program Vehicles shall be eligible to be
leased by the Lessor to the Lessees hereunder. All references in this Agreement
to "Vehicle" or "Vehicles" (other than such references in the recitals hereto)
shall refer to a Program Vehicle or Program Vehicles, respectively.
4
<PAGE>
2.1. Lease and Acquisition of Vehicles. From time to time, subject to
the terms and provisions hereof, the Lessor agrees to lease to each Lessee and
such Lessee agrees to lease from the Lessor, subject to the terms hereof, (i)
the new Vehicles identified in Vehicle orders (each such vehicle order, a
"Vehicle Order") placed by each Lessee, pursuant to the terms of the
Manufacturer Programs and (ii) the Vehicles identified in Attachment A hereto
containing information concerning the Initial AESOP Vehicles leased by ARAC
under this Agreement (the "Initial Leased Vehicles") of a scope agreed upon by
ARAC and the Lessor (including, at a minimum, the Net Book Value (as of the
first day of the Related Month in which the Initial Closing Date occurs) of
each of the Initial Leased Vehicles). If requested by the Lessor, each Lessee
shall make each Vehicle Order with respect to each Vehicle leased by such
Lessee available to the Lessor, together with a schedule containing the
information with respect to such Vehicles included within such Vehicle Order as
is set forth in Attachment B hereto (each, a "Vehicle Acquisition Schedule"),
or in such form as is otherwise requested by the Lessor. In addition, each
Lessee agrees to provide such other information regarding such Vehicles as the
Lessor may require from time to time, including on the Initial Closing Date, in
the case of the Initial Leased Vehicles, such information as may be required to
determine the monthly Depreciation Charges applicable to such Vehicles. This
Agreement, together with the Manufacturer Programs and any other related
documents attached to this Agreement or submitted with a Vehicle Order
(collectively, the "Supplemental Documents"), will constitute the entire
agreement regarding the leasing of Vehicles by the Lessor to the Lessees.
2.2. Right of Lessees and Guarantor to Act as Lessor's Agent. The
Lessor agrees that each Lessee and the Guarantor may act as the Lessor's agent
in placing Vehicle Orders on behalf of the Lessor, as well as filing claims on
behalf of the Lessor for damage in transit, and other Manufacturer delivery
claims related to the Vehicles; provided, however, that the Lessor may hold a
Lessee or the Guarantor liable for losses due to such Lessee's or the
Guarantor's actions, or failure to act, in performing as the Lessor's agent in
accordance with the terms hereof. In addition, the Lessor agrees that each
Lessee may make arrangements for delivery of Vehicles leased by such Lessee to
a location selected by such Lessee at its expense. Each Lessee agrees to accept
Vehicles leased by such Lessee as produced and delivered except each Lessee
will have the option to reject any such Vehicle that may be rejected pursuant
to the terms of the applicable Manufacturer Program. Each Lessee, acting as
agent for the Lessor, shall be responsible for pursuing any rights of the
Lessor with
5
<PAGE>
respect to the return of any Vehicle leased by such Lessee to the Manufacturer
pursuant to the preceding sentence. Each of the Lessees and the Guarantor agree
that all Vehicles ordered as provided herein shall be ordered utilizing the
procedures consistent with an Eligible Manufacturer Program.
2.3. Payment of Capitalized Cost or Net Book Value by Lessor. On the
AESOP II Operating Lease Commencement Date, the Lessor shall pay to Original
AESOP an amount equal to the aggregate Net Book Value (as of the first day of
the Related Month) of the Initial Leased Vehicles. Upon delivery of any
Vehicle, the Lessor shall pay to the authorized dealer, if any, that sold such
Vehicle to the Lessor, the Capitalized Cost for such Vehicle and the Lessee
leasing such Vehicle shall pay all applicable costs and expenses of freight,
packing, handling, storage, shipment and delivery of such Vehicle, and sales
and use tax (if any), to the extent that the same have not been included in the
Capitalized Cost for such Vehicle.
2.4. Non-Liability of Lessor. The Lessor shall not be liable to any
Lessee for any failure or delay in obtaining Vehicles or making delivery
thereof. AS BETWEEN THE LESSOR AND EACH LESSEE, ACCEPTANCE FOR LEASE OF THE
VEHICLES LEASED BY SUCH LESSEE SHALL CONSTITUTE SUCH LESSEE'S ACKNOWLEDGMENT
AND AGREEMENT THAT SUCH LESSEE HAS FULLY INSPECTED SUCH VEHICLES, THAT SUCH
VEHICLES ARE IN GOOD ORDER AND CONDITION AND ARE OF THE MANUFACTURE, DESIGN,
SPECIFICATIONS AND CAPACITY SELECTED BY SUCH LESSEE, THAT SUCH LESSEE IS
SATISFIED THAT THE SAME ARE SUITABLE FOR THIS USE AND THAT THE LESSOR IS NOT A
MANUFACTURER OR ENGAGED IN THE SALE OR DISTRIBUTION OF VEHICLES, AND HAS NOT
MADE AND DOES NOT HEREBY MAKE ANY REPRESENTATION, WARRANTY OR COVENANT WITH
RESPECT TO MERCHANTABILITY, CONDITION, QUALITY, DURABILITY OR SUITABILITY OF
SUCH VEHICLE IN ANY RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES OR USES
OF SUCH LESSEE, OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND
OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT THERETO. The Lessor shall not be
liable for any failure or delay in delivering any Vehicle ordered for lease
pursuant to this Agreement, or for any failure to perform any provision hereof,
resulting from fire or other casualty, natural disaster, riot, strike or other
labor difficulty, governmental regulation or restriction, or any cause beyond
the Lessor's direct control. IN NO EVENT SHALL THE LESSOR BE LIABLE FOR ANY
INCONVENIENCES, LOSS OF PROFITS OR ANY OTHER CONSEQUENTIAL, INCIDENTAL OR
SPECIAL DAMAGES RESULTING FROM ANY DEFECT IN OR ANY THEFT, DAMAGE, LOSS OR
FAILURE OF ANY VEHICLE, AND THERE SHALL BE NO ABATEMENT OF MONTHLY BASE RENT,
SUPPLEMENTAL RENT OR OTHER AMOUNTS PAYABLE HEREUNDER BECAUSE OF THE SAME.
6
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2.5. Lessees' Rights to Purchase Vehicles. Each Lessee shall have the
option, exercisable with respect to any Vehicle during the Vehicle Term with
respect to such Vehicle, to purchase any Vehicle leased by such Lessee at the
greater of (i) the Termination Value or (ii) the Market Value of such Vehicle
(the greater of such amounts being referred to as the "Vehicle Purchase
Price"), in which event such Lessee will pay the Vehicle Purchase Price to the
Lessor on or before the Payment Date with respect to the Related Month in which
such Lessee elects to purchase such Vehicle and such Lessee will pay on or
before such Payment Date all accrued and unpaid Monthly Base Rent and any
Supplemental Rent then due and payable with respect to such Vehicle through
such Payment Date. The Lessor shall cause title to any such Vehicle to be
transferred to the relevant Lessee and the Administrator shall request the
Trustee to cause its Lien to be removed from the Certificate of Title for such
Vehicle, concurrently with or promptly after the Vehicle Purchase Price for
such Vehicle (and any such unpaid Monthly Base Rent and Supplemental Rent) is
deposited in the Collection Account.
2.6. Lessor's Right to Cause Vehicles to be Sold. If a Lessee does not
elect to purchase any Vehicle leased by such Lessee hereunder pursuant to
Section 2.5 hereof:
(a) Notwithstanding anything to the contrary contained
herein, the Lessor shall have the right, at any time following the date ninety
(90) days prior to the expiration of the Maximum Term, to require that the
Lessee leasing such Vehicle from the Lessor hereunder or another Person
designated by the Lessor, which Person's compensation will be payable solely
from the proceeds from the sale of such Vehicle, exercise commercially
reasonable efforts to arrange for the sale of such Vehicle to a third party for
the Vehicle Purchase Price with respect to such Vehicle, in which event such
Lessee or such other designated Person shall, until not later than the date
thirty (30) days prior to the expiration of such Maximum Term, exercise
commercially reasonable efforts to arrange for the sale of such Vehicle to a
third party for a price (as reduced by the amount of compensation to be paid to
any such other designated Person) equal to or greater than the Termination
Value thereof. If a sale of such Vehicle is arranged by such Lessee or such
other designated Person prior to such date thirty (30) days prior to the
expiration of such Maximum Term, then (i) such Lessee or such other designated
Person shall deliver such Vehicle to the purchaser thereof, (ii) such Lessee or
such other designated Person shall cause to be delivered to the Lessor the
funds paid for such Vehicle by the purchaser and (iii) the Administrator shall
7
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request the Trustee to cause its Lien to be removed from the Certificate of
Title for such Vehicle. If such Lessee or such other designated Person is
unable to arrange for a sale of such Vehicle prior to such date thirty (30)
days prior to the expiration of such Maximum Term, then such Lessee or such
other designated Person shall cease attempting to arrange for such a sale and
such Lessee shall return such Vehicle, if a Manufacturer Event of Default has
not occurred, to the applicable Manufacturer as herein provided.
(b) The Lessor shall have the right at any time to request any Lessee
to permit a Vehicle being leased to such Lessee hereunder to be sold to a third
party and, if such Lessee is willing in its sole discretion to forego further
use of such Vehicle, such Lessee shall exercise commercially reasonable efforts
to arrange for the sale of such Vehicle to a third party for a price equal to
or greater than the Termination Value thereof. If a sale of a Vehicle leased by
a Lessee hereunder is arranged by such Lessee pursuant to this Section 2.6(b),
then (i) such Lessee shall deliver such Vehicle to the purchaser thereof, (ii)
such Lessee shall cause to be delivered to the Lessor the funds paid for such
Vehicle by the purchaser and (iii) the Administrator shall request the Trustee
to cause its Lien to be removed from the Certificate of Title for such Vehicle.
(c) In no event may any Vehicle be sold pursuant to this Section 2.6
unless the funds to be paid to the Lessor arising out of such sale (as reduced
by the amount of compensation to be paid to any such other designated Person)
equal or exceed the Termination Value of such Vehicle.
2.7. Limitations on the Acquisition of Certain Vehicles. Unless
otherwise specified in a Supplement or unless waived by the Required
Noteholders as specified in a Supplement, (a) the aggregate Net Book Value of
all Vehicles (or such portion thereof as is specified in such Supplement)
manufactured by a particular Manufacturer or group of Manufacturers and leased
under the Leases (after giving effect to the inclusion of such Vehicle under
this Agreement) as of such date shall not exceed any applicable Maximum
Manufacturer Amount, (b) the aggregate Net Book Value of all Vehicles (or such
portion thereof as is specified in such Supplement) titled in the States of
Ohio, Oklahoma and Nebraska and leased under this Agreement (after giving
effect to the inclusion of such Vehicle under this Agreement) and the AESOP I
Operating Lease as of such date shall not exceed any applicable Maximum
Specified States Amount and (c) after giving effect to the inclusion of such
Vehicle under this Agreement,
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there shall not be a failure or violation of any other conditions, requirements
or restrictions with respect to the leasing of Eligible Vehicles under this
Agreement as is specified in any Supplement.
3. TERM.
3.1. Vehicle Term. (a) The "Vehicle Operating Lease Commencement Date"
(x) for each Initial Leased Vehicle shall mean the Initial Closing Date and (y)
for each other Vehicle shall mean the day as referenced in the Vehicle
Acquisition Schedule with respect to such Vehicle but in no event shall such
date be a date later than the date that funds are expended or allocated by the
Lessor to acquire such Vehicle. The "Vehicle Term" with respect to each Vehicle
shall extend from the Vehicle Operating Lease Commencement Date through the
earliest of (i) the Turnback Date for such Vehicle, (ii) if such Vehicle is
sold to a third party (other than through an auction conducted by or through or
arranged by the Manufacturer pursuant to its Manufacturer Program), the date on
which such funds in respect of such sale are deposited in the Collection
Account (by such third party or by the applicable Lessee or the Guarantor on
behalf of such third party) and such funds equal or exceed the Termination
Value of such Vehicle, (iii) if such Vehicle becomes a Standard Casualty or an
Ineligible Vehicle, the date funds in the amount of the Termination Value
thereof are deposited in the Collection Account by the applicable Lessee, (iv)
the date that the Vehicle is purchased by the applicable Lessee pursuant to
Section 2.5 hereof and the Vehicle Purchase Price with respect to such purchase
(and any unpaid Monthly Base Rent and Supplemental Rent with respect to such
Vehicle) is deposited in the Collection Account by such Lessee and (v) the date
that is the last Business Day of the month that is 18 months after the month in
which the Vehicle Operating Lease Commencement Date occurs with respect to such
Vehicle (the earliest of such five dates being referred to as the "Vehicle
Operating Lease Expiration Date").
(b) Subject to the provisions of Sections 2.5 and 2.6, each Lessee
shall use its commercially reasonable efforts to return each Vehicle leased by
such Lessee hereunder to the related Manufacturer (or such Manufacturer's agent
or as otherwise directed by such Manufacturer in accordance with such
Manufacturer Program) (a) not prior to the end of the minimum holding period
specified in the related Manufacturer Program (prior to which the Lessor may
not return such Vehicle without penalty (the "Minimum Term")) and (b) not later
than the end of the maximum holding period (after which the Lessor may not
return such
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Vehicle without penalty (the "Maximum Term")); provided, however, that each
Lessee shall in any case return each Vehicle leased by such Lessee hereunder to
the related Manufacturer (or such Manufacturer's agent or as otherwise directed
by such Manufacturer in accordance with such Manufacturer Program) on or before
the Vehicle Operating Lease Expiration Date with respect to such Vehicle
pursuant to Section 13.2 hereof. The Lessee of any Vehicles returned before the
Minimum Term will pay the equivalent of the Monthly Base Rent with respect to
such Vehicle for the Minimum Term plus any early turn back surcharges payable
by the Lessor or deductible from the Repurchase Price of such Vehicle,
regardless of actual usage, unless such Vehicle is a Standard Casualty or
becomes an Ineligible Vehicle, in which case, the disposition of such Vehicle
will be handled in accordance with Section 6 hereof.
3.2. Term. The "AESOP II Operating Lease Commencement Date" shall mean
the Initial Closing Date. The "AESOP II Operating Lease Expiration Date" shall
mean the latest of (i) the date of the payment in full of all Loans (including
any Loan Interest thereon) the proceeds of which were used by the Lessor to
finance the purchase of Vehicles subject to this Agreement, (ii) the Vehicle
Operating Lease Expiration Date for the last Vehicle leased by any Lessee
hereunder and (iii) the date on which all amounts payable hereunder and under
the Loan Agreements have been paid in full. The "Term" of this Agreement shall
mean the period commencing on the AESOP II Operating Lease Commencement Date
and ending on the AESOP II Operating Lease Expiration Date.
4. RENT AND CHARGES. Each Lessee will pay Monthly Base Rent and any
Supplemental Rent due and payable on a monthly basis as set forth in this
Section 4.
4.1. Payment of Rent. On each Payment Date each Lessee shall pay in
immediately available funds to the Lessor not later than 11:00 a.m. New York
City time, on such Payment Date, such Lessee's allocable portion of (i) all
Monthly Base Rent that has accrued during the Related Month with respect to
each Vehicle leased hereunder during or prior to the Related Month and (ii) all
Supplemental Rent due and payable on such Payment Date. The portion of Monthly
Base Rent allocable to each Lessee will equal (i) with respect to the amounts
described in clause (b) of the definition of Monthly Base Rent, the portion
thereof that relates to the particular Vehicles leased hereunder by such Lessee
and (ii) with respect to other amounts included in the definition of Monthly
Base Rent, such Lessee's Share, determined as of the beginning of the Related
Month, of such amounts. The portion of
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Supplemental Rent allocable to each Lessee will equal (i) with respect to
Supplemental Rent that relates to particular Vehicles, the portion thereof that
relates to the particular Vehicles leased hereunder by such Lessee and (ii)
with respect to Supplemental Rent that does not relate to particular Vehicles,
such Lessee's Share, determined as of the beginning of the Related Month, of
such amounts.
4.2. [RESERVED].
4.3. Net Lease. THIS AGREEMENT SHALL BE A NET LEASE, AND EACH LESSEE'S
OBLIGATION TO PAY ALL MONTHLY BASE RENT, SUPPLEMENTAL RENT AND OTHER SUMS
HEREUNDER SHALL BE ABSOLUTE AND UNCONDITIONAL, AND SHALL NOT BE SUBJECT TO ANY
ABATEMENT, SETOFF, COUNTERCLAIM, DEDUCTION OR REDUCTION FOR ANY REASON
WHATSOEVER. The obligations and liabilities of each Lessee hereunder shall in
no way be released, discharged or otherwise affected (except as may be
expressly provided herein including, without limitation, the right of each
Lessee to reject Vehicles pursuant to Section 2.2 hereof) for any reason,
including without limitation: (i) any defect in the condition, merchantability,
quality or fitness for use of the Vehicles or any part thereof; (ii) any damage
to, removal, abandonment, salvage, loss, scrapping or destruction of or any
requisition or taking of the Vehicles or any part thereof; (iii) any
restriction, prevention or curtailment of or interference with any use of the
Vehicles or any part thereof; (iv) any defect in or any Lien on title to the
Vehicles or any part thereof; (v) any change, waiver, extension, indulgence or
other action or omission in respect of any obligation or liability of such
Lessee or the Lessor; (vi) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like proceeding
relating to such Lessee, the Lessor or any other Person, or any action taken
with respect to this Agreement by any trustee or receiver of any Person
mentioned above, or by any court; (vii) any claim that such Lessee has or might
have against any Person, including without limitation the Lessor; (viii) any
failure on the part of the Lessor or any other Lessee to perform or comply with
any of the terms hereof or of any other agreement; (ix) any invalidity or
unenforceability or disaffirmance of this Agreement or any provision hereof or
any of the other Related Documents or any provision of any thereof, in each
case whether against or by such Lessee or otherwise; (x) any insurance premiums
payable by such Lessee with respect to the Vehicles; or (xi) any other
occurrence whatsoever, whether similar or dissimilar to the foregoing, whether
or not such Lessee shall have notice or knowledge of any of the foregoing and
whether or not foreseen or foreseeable. This Agreement shall be
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noncancelable by the Lessees and, except as expressly provided herein, each
Lessee, to the extent permitted by law, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender this
Agreement, or to any diminution or reduction of Monthly Base Rent, Supplemental
Rent or other amounts payable by such Lessee hereunder. All payments by each
Lessee made hereunder shall be final (except to the extent of adjustments
provided for herein), absent manifest error and, except as otherwise provided
herein, each Lessee shall not seek to recover any such payment or any part
thereof for any reason whatsoever, absent manifest error. If for any reason
whatsoever this Agreement shall be terminated in whole or in part by operation
of law or otherwise except as expressly provided herein, each Lessee shall
nonetheless pay an amount equal to such Lessee's allocable portion of all
Monthly Base Rent, all Supplemental Rent and all other amounts due hereunder at
the time and in the manner that such payments would have become due and payable
under the terms of this Agreement as if it had not been terminated in whole or
in part. All covenants and agreements of each Lessee herein shall be performed
at its cost, expense and risk unless expressly otherwise stated.
5. INSURANCE. Each Lessee represents that it shall at all times
maintain or cause to be maintained insurance coverage in force as follows:
5.1. Personal Injury and Damage. Insurance coverage as set forth in
Section 31.3 hereof. In addition, each Lessee will maintain with respect to
each Lessee's properties and businesses insurance against loss or damage of the
kind customarily insured against by corporations engaged in the same or similar
businesses, of such types and in such amounts as are customarily carried by
such similarly situated corporations.
5.2. Delivery of Certificate of Insurance. Within 10 days after the
Initial Closing Date (or, with respect to any additional party becoming a
"Lessee" hereunder pursuant to the provisions of Section 24 hereof, within 10
days after the date such party becomes a "Lessee" hereunder), each Lessee or
the Guarantor shall deliver to the Lessor a certificate(s) of insurance naming
the Lender, the Lessor, Original AESOP, PVHC, Quartx and the Trustee as
additional insureds as to the item required by Section 31.3. Such insurance
shall not be changed or canceled except as provided below in Section 5.3.
5.3. Changes in Insurance Coverage. No changes shall be made in any of
the foregoing insurance requirements unless the
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prior written consent of the Lessor, the Lender and the Trustee are first
obtained. The Lessor may grant or withhold its consent to any proposed change
in such insurance in its sole discretion. The Lender and the Trustee shall be
required to grant their consent to any proposed change in such insurance upon
compliance with the following conditions:
(i) The relevant Lessee or the Guarantor shall deliver not
less than 30 days' prior written notice of any proposed change in such
insurance to the Lender and the Trustee;
(ii) The relevant Lessee or the Guarantor shall furnish to
the Lender and the Trustee a letter from each Rating Agency with
respect to all Outstanding Commercial Paper Notes and Notes rated by
such Rating Agency to the effect that such proposed change will not
cause a reduction in or a withdrawal of the current rating of such
Commercial Paper Notes or the Notes; and
(iii) The proposed change will satisfy the Rating Agency
Confirmation Condition.
6. RISK OF LOSS; CASUALTY AND INELIGIBLE VEHICLE OBLIGATIONS.
6.1. Risk of Loss Borne by Lessees. Upon delivery of each Vehicle to
the Lessee of such Vehicle, as between the Lessor and such Lessee, such Lessee
assumes and bears the risk of loss, damage, theft, taking, destruction,
attachment, seizure, confiscation or requisition with respect to such Vehicle,
however caused or occasioned, and all other risks and liabilities, including
personal injury or death and property damage, arising with respect to such
Vehicle or the manufacture, purchase, acceptance, rejection, ownership,
delivery, leasing, subleasing, possession, use, inspection, registration,
operation, condition, maintenance, repair, storage, sale, return or other
disposition of such Vehicle, howsoever arising.
6.2. Casualty; Ineligible Vehicles. If a Vehicle becomes a Standard
Casualty or an Ineligible Vehicle, then the Lessee of such Vehicle will (i)
promptly notify the Lessor thereof and (ii) promptly, but in no event later
than the Payment Date with respect to the Related Month during which such
Vehicle became a Standard Casualty or an Ineligible Vehicle, pay to the Lessor
the Termination Value of such Vehicle (as of the date such Vehicle became a
Standard Casualty or an Ineligible Vehicle). Upon
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payment by such Lessee to the Lessor of the Termination Value of any Vehicle
that has become a Standard Casualty or an Ineligible Vehicle (i) the Lessor
shall cause title to such Vehicle to be transferred to such Lessee to
facilitate liquidation of such Vehicle by such Lessee, (ii) such Lessee shall
be entitled to any physical damage insurance proceeds applicable to such
Vehicle, and (iii) the Administrator shall request the Trustee to cause its
Lien to be removed from the Certificate of Title for such Vehicle.
7. VEHICLE USE. So long as no AESOP II Operating Lease Event of
Default, Liquidation Event of Default or Limited Liquidation Event of Default
has occurred (subject, however, to Section 2.6 hereof), each Lessee may use
Vehicles leased hereunder in its regular course of business. Such use shall be
confined primarily to the United States; provided, however, that the principal
place of business or rental office of each Lessee with respect to the Vehicles
is located in the United States. The Administrator shall promptly and duly
execute, deliver, file and record all such documents, statements, filings and
registrations, and take such further actions as the Lessor, the Lender or the
Trustee shall from time to time reasonably request in order to establish,
perfect and maintain the Lessor's title to and interest in the Vehicles and the
Certificates of Title as against each Lessee or any third party in any
applicable jurisdiction and to establish, perfect and maintain the Trustee's
Lien on the Vehicles and the Certificates of Title (other than noting the Lien
of the Trustee on the Certificates of Title with respect to Vehicles titled in
the states of Ohio, Oklahoma and Nebraska) as a perfected first lien in any
applicable jurisdiction. Each Lessee may, at its sole expense, change the place
of principal location of any Vehicles. Notwithstanding the foregoing, no change
of location shall be undertaken unless and until (x) all actions necessary to
maintain the Lien of the Trustee on such Vehicles and the Certificates of Title
(other than noting the Lien of the Trustee on the Certificates of Title with
respect to Vehicles titled in the states of Ohio, Oklahoma and Nebraska) with
respect to such Vehicles shall have been taken and (y) all legal requirements
applicable to such Vehicles shall have been met or obtained. Following the
occurrence of an AESOP II Operating Lease Event of Default, a Limited
Liquidation Event of Default, a Liquidation Event of Default or a Manufacturer
Event of Default, and upon the Lender's request, each Lessee shall advise the
Lender in writing where all Vehicles leased hereunder as of such date are
principally located. Each Lessee shall not knowingly use any Vehicles or
knowingly permit the same to be used for any unlawful purpose. Each Lessee
shall use reasonable precautions
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to prevent loss or damage to Vehicles. Each Lessee shall comply with all
applicable statutes, decrees, ordinances and regulations regarding acquiring,
titling, registering, leasing, insuring and disposing of Vehicles and shall
take reasonable steps to ensure that operators are licensed. Each Lessee and
the Lessor agree that such Lessee shall perform, at such Lessee's own expense,
such Vehicle preparation and conditioning services with respect to Vehicles
leased by such Lessee hereunder as are customary. The Lessor or the Trustee or
any authorized representative of the Lessor or the Trustee may during
reasonable business hours from time to time, without disruption of each
Lessee's business, subject to applicable law, inspect Vehicles and registration
certificates, Certificates of Title and related documents covering Vehicles
wherever the same be located. No Lessee shall sublease any Vehicles, nor shall
any Lessee assign any right or interest herein or in any Vehicles; provided,
however, the foregoing shall not be deemed to prohibit the Lessees from renting
Vehicles to third party customers in the ordinary course of their respective
car rental businesses.
8. LIENS. Except for Permitted Liens, each Lessee shall keep all
Vehicles leased by it hereunder free of all Liens arising during the Term. Upon
the Vehicle Operating Lease Expiration Date for each Vehicle leased hereunder
should any such Lien exist the Lessor may, in its discretion, remove such Lien
and any sum of money that may be paid by the Lessor in release or discharge
thereof, including attorneys' fees and costs, will be paid by the Lessee of
such Vehicle upon demand by the Lessor. The Lessor may grant security interests
in the Vehicles leased by a Lessee hereunder without consent of such Lessee;
provided, however, that if any such Liens would interfere with the rights of
such Lessee under this Agreement, the Lessor must obtain the prior written
consent of such Lessee. Each Lessee agrees and acknowledges that the granting
of Liens and the taking of other actions pursuant to the Loan Agreements, the
Indenture and the other Related Documents does not interfere with the rights of
such Lessee under this Agreement.
9. NON-DISTURBANCE. So long as each Lessee satisfies its obligations
hereunder, its quiet enjoyment, possession and use of the Vehicles leased by
such Lessee hereunder will not be disturbed during the Term subject, however,
to Sections 2.6 and 18 hereof and except that the Lessor and the Trustee each
retains the right, but not the duty, to inspect such Vehicles without
disturbing the ordinary conduct of such Lessee's business. Upon the request of
the Lessor, the Lender or the Trustee from time to time, each Lessee will make
reasonable efforts to confirm to the
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Lessor, the Lender and the Trustee the location, mileage and condition of each
Vehicle leased by such Lessee hereunder and to make available for the Lessor's,
the Lender's or the Trustee's inspection within a reasonable time period, not
to exceed 45 days, such Vehicles at the location where such Vehicles are
normally domiciled. Further, each Lessee will, during normal business hours and
with a notice of 3 Business Days, make its records pertaining to the Vehicles
leased by such Lessee hereunder available to the Lessor, the Lender or the
Trustee for inspection at the location where such Lessee's records are normally
domiciled.
10. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND FINES.
Each Lessee, at its expense, shall be responsible for proper registration and
licensing of Vehicles leased by such Lessee hereunder, and titling of such
Vehicles in the name of the Lessor or its Permitted Nominee (with the Lien of
the Trustee noted thereon (except with respect to the Vehicles titled in the
States of Oklahoma, Nebraska and Ohio)), and, where required, shall have such
Vehicles inspected by any appropriate governmental authority; provided,
however, that notwithstanding the foregoing, possession of all Certificates of
Title shall at all times remain with the Administrator, who will hold such
Certificates of Title in its capacity as agent for the Lessor and on behalf of
the Lender and the Trustee. Each Lessee shall be responsible for the payment of
all registration fees, title fees, license fees, traffic summonses, penalties,
judgments and fines incurred with respect to any Vehicle leased by such Lessee
hereunder during the Vehicle Term for such Vehicle or imposed during the
Vehicle Term for such Vehicle by any governmental authority or any court of law
or equity with respect to such Vehicles in connection with such Lessee's
operation of such Vehicles. The Lessor agrees to execute a power of attorney in
substantially the form of Attachment C hereto (each, a "Power of Attorney"),
and such other documents as may be necessary in order to allow the Lessees to
title, register and dispose of the Vehicles leased hereunder in accordance with
the terms hereof; provided, however, that possession of all Certificates of
Title shall at all times remain with the Administrator who will hold such
Certificates of Title in its capacity as agent for the Lessor and on behalf of
the Lender and the Trustee, and each Lessee acknowledges and agrees that it has
no right, title or interest in or with respect to any Certificate of Title.
Notwithstanding anything herein to the contrary, the Lessor may terminate such
Power of Attorney as provided in Section 18.3(iii) hereof.
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11. MAINTENANCE AND REPAIRS. Each Lessee shall pay for all maintenance
and repairs to keep Vehicles leased by such Lessee hereunder in good working
order and condition, and such Lessee will maintain such Vehicles as required in
order to keep the Manufacturer's warranty in force. Each Lessee will return
Vehicles leased by such Lessee hereunder to an authorized Manufacturer facility
or such Lessee's Manufacturer authorized warranty station for warranty work.
Each Lessee will comply with any Manufacturer's recall of any Vehicle leased by
such Lessee hereunder. Each Lessee will pay, or cause to be paid, all usual and
routine expenses incurred in the use and operation of Vehicles leased by such
Lessee hereunder including, but not limited to, fuel, lubricants, and coolants.
Each Lessee shall not make any material alterations to any Vehicles leased by
such Lessee hereunder without the prior consent of the Lessor. Any improvements
or additions to any Vehicles shall become and remain the property of the
Lessor, except that any addition to Vehicles leased hereunder made by the
Lessee of such Vehicles shall remain the property of such Lessee if such
addition can be disconnected from such Vehicles without impairing the
functioning of such Vehicles or its resale value, excluding such addition.
12. VEHICLE WARRANTIES.
12.1. No Lessor Warranties. EACH LESSEE ACKNOWLEDGES THAT THE LESSOR
IS NOT THE MANUFACTURER, THE AGENT OF THE MANUFACTURER, OR THE DISTRIBUTOR OF
THE VEHICLES LEASED BY SUCH LESSEE HEREUNDER. THE LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE FITNESS, SAFENESS, DESIGN,
MERCHANTABILITY, CONDITION, QUALITY, CAPACITY OR WORKMANSHIP OF THE VEHICLES
NOR ANY WARRANTY THAT THE VEHICLES WILL SATISFY THE REQUIREMENTS OF ANY LAW OR
ANY CONTRACT SPECIFICATION, AND AS BETWEEN THE LESSOR AND EACH LESSEE, EACH
LESSEE AGREES TO BEAR ALL SUCH RISKS AT ITS SOLE COST AND EXPENSE. EACH LESSEE
SPECIFICALLY WAIVES ALL RIGHTS TO MAKE CLAIMS AGAINST THE LESSOR AND ANY
VEHICLE FOR BREACH OF ANY WARRANTY OF ANY KIND WHATSOEVER AND, AS TO THE
LESSOR, EACH LESSEE LEASES THE VEHICLES "AS IS." IN NO EVENT SHALL THE LESSOR
BE LIABLE FOR SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, WHATSOEVER OR
HOWSOEVER CAUSED.
12.2. Manufacturer's Warranties. If a Vehicle leased hereunder is
covered by a Manufacturer's warranty, the Lessee of such Vehicle, during the
Vehicle Term for such Vehicle, shall have the right to make any claims under
such warranty which the Lessor could make.
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13. VEHICLE USAGE GUIDELINES AND RETURN; SPECIAL DEFAULT PAYMENTS;
EARLY TERMINATION PAYMENTS.
13.1. Usage. As used herein "Vehicle Turn-In Condition" will be
determined in accordance with the related Manufacturer Program.
13.2. Return. (a) Each Lessee will, subject to Sections 2.5 and 2.6,
return each Vehicle leased by such Lessee hereunder (other than a Standard
Casualty or a Vehicle which has become an Ineligible Vehicle) to the nearest
related Manufacturer official auction or other facility designated by such
Manufacturer at such Lessee's sole expense or to such other location designated
by the Lessor (with any additional cost of delivery in excess of what would
have been incurred upon delivery to the related Manufacturer at the expense of
the Lessor), in each case in accordance with the requirements of Section 3.1(b)
hereof.
(b) Each Lessee agrees that the Vehicles leased by such Lessee
hereunder will be in Vehicle Turn-In Condition upon return to or upon the order
of the Lessor. Any rebate or credits applicable to the unexpired term of any
license plates for a Vehicle leased by a Lessee hereunder shall inure to the
benefit of such Lessee.
13.3. Special Default Payments. (a) Each Lessee will use its best
efforts to maintain the Vehicles leased by such Lessee hereunder such that no
Excess Damage Charges or Excess Mileage Charges will be deductible from the
Repurchase Price due from a Manufacturer or payable by the Lessor upon the turn
back of such Vehicles under the applicable Manufacturer Program. Upon receipt
of payment of the Repurchase Price of each Vehicle leased by a Lessee hereunder
from the Manufacturer (or the receipt of payment of the Repurchase Price of
each such Vehicle sold through an auction conducted by or through a
Manufacturer) or upon the date by which the Repurchase Price of each such
Vehicle turned-back to a Manufacturer would have been paid if not for a
Manufacturer Event of Default, the Lessor will charge such Lessee for any
Excess Damage Charges and/or Excess Mileage Charges applicable to such Vehicle
pursuant to the applicable Manufacturer Program (any such charges are referred
to as "Special Default Payments").
(b) On each Payment Date, each Lessee shall pay to the Lessor all
Special Default Payments that have accrued during the Related Month. The
obligation of such Lessee to pay Special Default Payments shall constitute the
sole remedy respecting the breach of its covenant contained in the first
sentence of Section
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13.3(a). The provisions of this Section 13.3 will survive the expiration or
earlier termination of the Term.
13.4. Early Termination Payments. If a Lessee turns back any Vehicle
leased by such Lessee hereunder to a Manufacturer under its Manufacturer
Program, upon the receipt of the Repurchase Price of such Vehicle from such
Manufacturer or upon the date by which the Repurchase Price would have been
paid if not for a Manufacturer Event of Default, the Lessor will charge such
Lessee an amount equal to (i) the excess, if any, of (x) the Termination Value
of such Vehicle (as of the Turnback Date) over (y) the sum of the Repurchase
Price received with respect to such Vehicle or that would have been received
but for a Manufacturer Event of Default, as applicable, and any Special Default
Payments made by such Lessee in respect of such Vehicle pursuant to Section
13.3, plus (ii) any unpaid Monthly Base Rent for the Minimum Term plus any
early turn back charges payable or deductible from the Repurchase Price for
Vehicles returned before the Minimum Term in accordance with Section 3.1(b)
hereof (any such amount is referred to as an "Early Termination Payment"). On
each Payment Date, each Lessee shall pay to the Lessor all Early Termination
Payments that have accrued during the Related Month. The provisions of this
Section 13.4 will survive the expiration or earlier termination of the Term.
14. DISPOSITION PROCEDURE. Each Lessee will comply with the
requirements of law and the requirements of the Manufacturer Programs in
connection with, among other things, the delivery of Certificates of Title and
documents of transfer signed as necessary, signed Condition Reports, and signed
odometer statements to be submitted with the Vehicles and accepted by the
Manufacturer or its agent at the time of Vehicle return.
15. ODOMETER DISCLOSURE REQUIREMENT. Each Lessee agrees to comply with
all requirements of law and all Manufacturer Program requirements in connection
with the transfer of ownership by the Lessor of any Vehicle leased by such
Lessee hereunder, including, without limitation, the submission of any required
odometer disclosure statement at the time of any such transfer of ownership.
16. GENERAL INDEMNITY.
16.1. Indemnity by the Lessees and the Guarantor. The Lessees and the
Guarantor agree jointly and severally to indemnify and hold harmless the
Lessor, the Lender and the Trustee and the Lessor's, the Lender's and the
Trustee's directors, officers,
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stockholders, agents and employees (collectively, the "Indemnified Persons"),
on a net after-tax basis against any and all claims, demands and liabilities of
whatsoever nature and all costs and expenses relating to or in any way arising
out of:
16.1.1. the ordering, delivery, acquisition, title on
acquisition, rejection, installation, possession, titling, retitling,
registration, re-registration, custody by the Lessees or the Guarantor
of title and registration documents, use, non-use, misuse, operation,
deficiency, defect, transportation, repair, control or disposition of
any Vehicle leased hereunder or to be leased hereunder pursuant to a
request by a Lessee. The foregoing shall include, without limitation,
any liability (or any alleged liability) of the Lessor to any third
party arising out of any of the foregoing, including, without
limitation, all legal fees, costs and disbursements arising out of
such liability (or alleged liability);
16.1.2. all (i) federal, state, county, municipal or foreign
license, qualification, registration, franchise, sales, use, gross
receipts, ad valorem, business, property (real or personal), excise,
motor vehicle, and occupation fees and taxes, and all federal, state
and local income taxes, and penalties and interest thereon, and all
other taxes, fees and assessments of any kind whatsoever whether
assessed, levied against or payable by the Lessor or otherwise, with
respect to any Vehicle leased hereunder or the acquisition, purchase,
sale, rental, delivery, use, operation, control, ownership or
disposition of any such Vehicle or measured in any way by the value
thereof or by the ownership by the Lessor with respect thereto and
(ii) documentary, stamp, filing, recording, mortgage or other taxes,
if any, which may be payable by the Lessor in connection with this
Agreement or any other Related Documents; provided, however, that the
following taxes are excluded from the indemnity provided in clauses
(i) and (ii) above:
(i) any tax on, based on, with respect to, or
measured by the net income (including federal alternative
minimum tax) other than any taxes or other charges which may
be imposed as a result of any determination by a taxing
authority that the Lessor is not the owner for tax purposes
of the Vehicles leased hereunder or that this Agreement is
not a "true lease" for tax purposes or that depreciation
deductions that would be available to the owner of such
Vehicles are disallowed,
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or that the Lessor is not entitled to include the full
purchase price for any such Vehicle in basis including any
amounts payable in respect of interest charges, additions to
tax and penalties that may be imposed, and all attorneys and
accountants fees and expenses and all other fees and expenses
that may be incurred in defending against or contesting any
such determination;
(ii) any withholding tax imposed by the United
States federal government other than such a tax imposed as a
result of a change in law enacted (including new
interpretations thereof), adopted or promulgated after the
Initial Closing Date or, if later, the date the Trustee or
the Lender acquires its interest in the Vehicles leased
hereunder or the Loan Agreements, the Indenture, the
Assignment Agreements, or any other related operative
documents that causes it to be an Indemnified Person
hereunder unless such a tax is enacted, adopted or
promulgated as a tax in lieu of, or in substitution for a tax
not otherwise indemnifiable hereunder;
(iii) any tax with respect to any Vehicle leased by
a Lessee hereunder or any transaction relating to such
Vehicle to the extent it covers any period beginning after
the earlier of (A) the discharge in full of such Lessee's
obligation to pay Monthly Base Rent, Supplemental Rent and
any other amount payable hereunder with respect to such
Vehicle or (B) the expiration or other termination of this
Agreement with respect to such Vehicle, unless such tax
accrues in respect of any period during which such Lessee
holds over such Vehicle; and
(iv) any tax that is imposed on an Indemnified
Person or any of its Affiliates, to the extent that such tax
results from the willful misconduct or gross negligence of
such Indemnified Person or such Affiliates;
16.1.3. any violation by any Lessee or the Guarantor of this
Agreement or of any Related Documents to which such Lessee or the
Guarantor is a party or by which it is bound or any laws, rules,
regulations, orders, writs, injunctions, decrees, consents, approvals,
exemptions, authorizations, licenses and withholdings of objecting of
any governmental or public body or authority and all other
requirements
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having the force of law applicable at any time to any Vehicle leased
hereunder or any action or transaction by any Lessee or the Guarantor
with respect thereto or pursuant to this Agreement;
16.1.4. all out of pocket costs of the Lessor (including
the fees and out of pocket expenses of counsel for the Lessor) in
connection with the execution, delivery and performance of this
Agreement and the other Related Documents;
16.1.5. all out of pocket costs and expenses (including
reasonable attorneys' fees and legal expenses) incurred by the Lessor,
the Lender or the Trustee in connection with the administration,
enforcement, waiver or amendment of this Agreement and any other
Related Documents and all indemnification obligations of the Lender or
the Lessor under the Related Documents (including all obligations of
Lessor under Section 13.4 and Section 13.5 of the AESOP II Loan
Agreement); and
16.1.6. all costs, fees, expenses, damages and liabilities
(including, without limitation, the fees and out of pocket expenses of
counsel) in connection with, or arising out of, any claim made by any
third party against the Lessor for any reason (including, without
limitation in connection with any audit or investigation conducted by
a Manufacturer under its Manufacturer Program).
If the Lessor shall actually receive any tax benefit (whether by way
of offset, credit, deduction, refund or otherwise) not already taken
into account in calculating the net after-tax basis for such payment
as a result of the payment of any tax indemnified pursuant to this
Section 16 or in connection with the circumstances giving rise to the
imposition of such tax, such tax benefit shall be used to offset any
indemnity payment owed pursuant to this Section 16 or shall be paid to
the relevant Lessee (but only to the extent of any prior indemnity
payments actually made pursuant to this Section 16 and only after the
Lessor shall actually receive such tax benefits), provided, however,
that no such payment to such Lessee shall be made while an AESOP II
Operating Lease Event of Default shall have occurred and be
continuing.
16.2. Reimbursement Obligation by the Lessees and the Guarantor. Each
of the Lessees and the Guarantor shall forthwith
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upon demand reimburse the Lessor or the relevant Indemnified Person for any sum
or sums expended with respect to any of the foregoing; provided, however, that
to the extent such amounts constitute Excluded Payments, such amounts shall be
paid only to the AESOP I Segregated Account; and provided further that, if so
requested by the relevant Lessee or the Guarantor, the Lessor shall submit to
such Lessee or the Guarantor, as applicable, a statement documenting any such
demand for reimbursement or prepayment. To the extent that any Lessee or the
Guarantor in fact indemnifies the Lessor under the indemnity provisions of this
Agreement, such Lessee or the Guarantor, as applicable, shall be subrogated to
the Lessor's rights in the affected transaction and shall have a right to
determine the settlement of claims therein. The foregoing indemnity as
contained in this Section 16 shall survive the expiration or earlier
termination of this Agreement or any lease of any Vehicle hereunder.
16.3. Defense of Claims. The Lessor agrees to notify any Lessee of any
claim made against it for which such Lessee may be liable pursuant to this
Section 16 and, if such Lessee requests, to contest or allow such Lessee to
contest such claim. If any AESOP II Operating Lease Event of Default shall have
occurred and be continuing, no contest shall be required, and any contest which
has begun shall not be required to be continued to be pursued, unless
arrangements to secure the payment of such Lessee's obligations pursuant to
this Section 16 hereunder have been made and such arrangements are reasonably
satisfactory to the Lessor. The Lessor shall not settle any such claim without
such Lessee's consent, which consent shall not be unreasonably withheld.
Defense of any claim referred to in this Section 16 for which indemnity may be
required shall, at the option and request of the Indemnified Person, be
conducted by the relevant Lessee or the Guarantor, as applicable. Such Lessee
or the Guarantor, as the case may be, will inform the Indemnified Person of any
such claim and of the defense thereof and will provide copies of material
documents relating to any such claim or defense to such Indemnified Person upon
request. Such Indemnified Person may participate in any such defense at its own
expense provided such participation does not interfere with such Lessee's or
the Guarantor's assertion of such claim or defense. Each Lessee and the
Guarantor agrees that no Indemnified Person will be liable to such Lessee or
the Guarantor, as applicable, for any claim caused directly or indirectly by
the inadequacy of any Vehicle leased by such Lessee for any purpose or any
deficiency or defect therein or the use or maintenance thereof or any repairs,
servicing or adjustments thereto or any delay in providing or failure to
provide such repairs, servicing or adjustments
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or any interruption or loss of service or use thereof or any loss of business,
all of which shall be the risk and responsibility of such Lessee or the
Guarantor. The rights and indemnities of each Indemnified Person hereunder are
expressly made for the benefit of, and will be enforceable by, each Indemnified
Person notwithstanding the fact that such Indemnified Person is either no
longer a party to (or entitled to receive the benefits of) this Agreement, or
was not a party to (or entitled to receive the benefits of) this Agreement at
its outset. Except as otherwise set forth herein, nothing herein shall be
deemed to require any Lessee or the Guarantor to indemnify the Lessor for any
of the Lessor's acts or omissions which constitute gross negligence or willful
misconduct. This general indemnity shall not affect any claims of the type
discussed above which any Lessee or the Guarantor may have against the
Manufacturer.
17. ASSIGNMENT.
17.1. Right of the Lessor to Assign this Agreement. The Lessor shall
have the right to finance the acquisition and ownership of Vehicles by selling
or assigning its right, title and interest in this Agreement, including,
without limitation, in moneys due from each Lessee and any third party under
this Agreement; provided, however, that any such sale or assignment shall be
subject to the rights and interest of each Lessee in the Vehicles leased by
such Lessee hereunder, including but not limited to such Lessee's right of
quiet and peaceful possession of such Vehicles as set forth in Section 9
hereof, and under this Agreement.
17.2. Limitations on the Right of the Lessees to Assign this
Agreement. Each Lessee shall not, without prior written consent of the Lessor,
AFC-II and the Trustee and without having satisfied the Rating Agency Consent
Condition and the CP Rating Agency Condition, assign this Agreement or any of
its rights hereunder to any other party; provided, however, that each Lessee
may rent the Vehicles leased by such Lessee hereunder under the terms of its
normal daily rental programs. Any purported assignment in violation of this
Section 17.2 shall be void and of no force or effect. Nothing contained herein
shall be deemed to restrict the right of any Lessee to acquire or dispose of,
by purchase, lease, financing, or otherwise, motor vehicles that are not
subject to the provisions of this Agreement.
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18. DEFAULT AND REMEDIES THEREFOR.
18.1. Events of Default. Any one or more of the following will
constitute an event of default (an "AESOP II Operating Lease Event of Default")
as that term is used herein:
18.1.1. there occurs (i) a default in the payment of the portion of
Monthly Base Rent that relates to the Loan Principal Amount, the Special
Default Payments, the Early Termination Payments, Vehicle Purchase Price or
Termination Value upon a Standard Casualty or when a Vehicle becomes an
Ineligible Vehicle or upon a Vehicle Return Default or any Supplemental Rent
(to the extent not included in any of the foregoing) and the continuance
thereof for a period of five Business Days or (ii) a default and continuance
thereof for five Business Days after notice thereof by the Lessor or the
Trustee to the relevant Lessee or the Guarantor in the payment of any amount
payable under this Agreement (other than amounts described in clause (i)
above);
18.1.2. any unauthorized assignment or transfer of this Agreement by
any Lessee or the Guarantor occurs;
18.1.3. the failure, in any material respect, of any Lessee and the
Guarantor to maintain, or cause to be maintained, insurance as required in
Section 5 or Section 31.3;
18.1.4. the failure of any Lessee and the Guarantor to observe or
perform any other covenant, condition, agreement or provision hereof,
including, but not limited to, usage and maintenance, and such default
continues for more than thirty (30) days after the date written notice thereof
is delivered by the Lessor or the Trustee to such Lessee;
18.1.5. if any representation or warranty made by any Lessee or the
Guarantor herein is inaccurate or incorrect or is breached or is false or
misleading in any material respect as of the date of the making thereof or any
schedule, certificate, financial statement, report, notice, or other writing
furnished by or on behalf of such Lessee or the Guarantor to the Lessor or the
Trustee is false or misleading in any material respect on the date as of which
the facts therein set forth are stated or certified, and the circumstance or
condition in respect of which such representation, warranty or writing was
inaccurate, incorrect, breached, false or misleading in any material respect,
as the case may be, shall not have been eliminated or otherwise cured for
thirty (30) days after the earlier of (x) the date of the receipt of written
notice thereof from the Lessor, the Lender
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or the Trustee to the Guarantor or such Lessee and (y) the date the Guarantor
or such Lessee learns of such circumstance or condition;
18.1.6. an Event of Bankruptcy occurs with respect to any Lessee or
the Guarantor;
18.1.7. a Loan Event of Default occurs;
18.1.8. a Finance Lease Event of Default or an AESOP I Operating Lease
Event of Default occurs; or
18.1.9. the Pension Benefit Guaranty Corporation or the Internal
Revenue Service shall have filed notice of one or more liens against a Lessee
(unless such lien does not purport to cover the Collateral or any amount
payable under the Leases), and, in the case of notice filed by the Internal
Revenue Service, such notice shall have remained in effect for more than thirty
(30) days unless, prior to the expiration of such period, such Lessee shall
have provided the Lessor with a bond in an amount at least equal to the amount
of such lien or, in the case of any such lien in an amount less than
$1,000,000, such Lessee shall have established to the reasonable satisfaction
of the Lessor that such lien is being contested in good faith and that adequate
reserves have been established in respect of the claim giving rise to such
lien.
18.2. Effect of AESOP II Operating Lease Event of Default or
Liquidation Event of Default. If any AESOP II Operating Lease Event of Default
described in Section 18 or any Liquidation Event of Default shall occur, (i)
the rights of the Lessees to place Vehicle Orders pursuant to Section 2.1 and
to lease additional Vehicles from the Lessor shall immediately terminate, and
(ii) if AFC-II has declared the Loan Note under any Loan Agreement to be due
and payable pursuant to Section 12.2 of such Loan Agreement, (x) any accrued
and unpaid Monthly Base Rent, Supplemental Rent and all other payments accrued
but unpaid under this Agreement (calculated as if all Vehicles leased hereunder
had become a Standard Casualty for the Related Month and the full amount of
interest on such Loan Note was then due and payable in full) shall,
automatically, without further action by the Lessor or the Trustee, become
immediately due and payable and (y) each Lessee shall, at the request of the
Lessor, return or cause to be returned all Vehicles leased by such Lessee
subject to this Agreement (and the Administrator shall deliver to the Trustee
the Certificates of Title relating thereto) to the Lessor in accordance with
the provisions of Section 13.2 hereof.
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18.3. Rights of Lessor Upon AESOP II Operating Lease Event of Default,
Limited Liquidation Event of Default or Liquidation Event of Default. If an
AESOP II Operating Lease Event of Default, Limited Liquidation Event of Default
or Liquidation Event of Default shall occur, then the Lessor at its option may:
(i) Proceed by appropriate court action or actions, either at
law or in equity, to enforce performance by the Lessees (or any
Lessee(s) against which the Lessor determines to exercise its remedies
hereunder) or the Guarantor of the applicable covenants and terms of
this Agreement or to recover damages for the breach hereof calculated
in accordance with Section 18.5; or
(ii) By notice in writing to the Lessees (or any Lessee(s)
against which the Lessor determines to exercise its remedies
hereunder), terminate this Agreement in its entirety and/or the right
of possession hereunder of the Lessees (or in respect only of the
applicable Lessee(s)) of the Vehicles leased hereunder, and the Lessor
may direct delivery by the Lessees (or in respect only of the
applicable Lessee(s)) or the Guarantor of documents of title to the
Vehicles leased hereunder, whereupon all rights and interests of the
Lessees (or the applicable Lessee(s)) or the Guarantor to such
Vehicles will cease and terminate (but the Lessees (or the applicable
Lessee(s)) and the Guarantor will remain liable hereunder as herein
provided, provided, however, their liability will be calculated in
accordance with Section 18.5); and thereupon, the Lessor or its agents
may peaceably enter upon the premises of the applicable Lessee(s) or
other premises where such Vehicles may be located and take possession
of them and thenceforth hold, possess and enjoy the same free from any
right of the Lessees (or the applicable Lessee(s)) or the Guarantor,
or their successors or assigns, to use such Vehicles for any purpose
whatsoever, and the Lessor will, nevertheless, have a right to recover
from the Lessees (or the applicable Lessee(s)) or the Guarantor any
and all amounts which under the terms of this Section 18.3 (as limited
by Section 18.5 of this Agreement) as may be then due. The Lessor will
provide the applicable Lessee(s) with written notice of the place and
time of the sale at least five days prior to the proposed sale, which
shall be deemed commercially reasonable, and any Lessee may purchase
such Vehicle(s) at the sale. Each and every power and remedy hereby
specifically given to the Lessor will be in addition to every other
power and remedy hereby specifically given or now or hereafter
existing at
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law, in equity or in bankruptcy and each and every power and remedy
may be exercised from time to time and simultaneously and as often and
in such order as may be deemed expedient by the Lessor; provided,
however, that the measure of damages recoverable against the Lessees
will in any case be calculated in accordance with Section 18.5. All
such powers and remedies will be cumulative, and the exercise of one
will not be deemed a waiver of the right to exercise any other or
others. No delay or omission of the Lessor in the exercise of any such
power or remedy and no renewal or extension of any payments due
hereunder will impair any such power or remedy or will be construed to
be a waiver of any default or any acquiescence therein. Any extension
of time for payment hereunder or other indulgence duly granted to the
Lessees (or the applicable Lessee(s)) or the Guarantor will not
otherwise alter or affect the Lessor's rights or the obligations
hereunder of such Lessee(s) and the Guarantor. The Lessor's acceptance
of any payment after it will have become due hereunder will not be
deemed to alter or affect the Lessor's rights hereunder with respect
to any subsequent payments or defaults therein; or
(iii) By notice in writing to the Lessees (or any Lessee(s)
against which the Lessor determines to exercise its remedies
hereunder), terminate the Power of Attorney.
18.4. Rights of Lender and Trustee Upon Liquidation Event
of Default, Limited Liquidation Event of Default and
Non-Performance of Certain Covenants.
(i) If a Liquidation Event of Default or a Limited
Liquidation Event of Default shall have occurred and be continuing,
the Lender and the Trustee, to the extent provided in the Indenture,
shall have the rights against the Guarantor, the Lessee(s), and the
AESOP II Loan Collateral provided in the Indenture upon a Liquidation
Event of Default or a Limited Liquidation Event of Default, as the
case may be, including the right to take possession of all or a
portion of the Vehicles leased hereunder immediately from the
Lessee(s) of such Vehicles.
(ii) If the Guarantor or any Lessee shall default in the due
performance and observance of any of its obligations under Section
31.3, 31.4, 31.5(iv), 31.10, 32.3 or 32.4 hereof, and such default
shall continue unremedied for a period of 30 days after notice thereof
shall have been given to such Lessee by the Lessor, the Lender or the
Trustee, as
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assignee of the Lessor's rights hereunder, shall have the ability to
exercise all rights, remedies, powers, privileges and claims of the
Guarantor or any Lessee against the Manufacturers under or in
connection with the Manufacturer Programs with respect to (i) Vehicles
the Lessee thereof has determined to turn back to the Manufacturers
under such Manufacturer Programs and (ii) whether or not the Lessee
thereof shall then have determined to turn back such Vehicles, any
Vehicles for which the applicable Repurchase Period will end within
one week or less.
(iii) Upon a default in the performance (after giving effect
to any grace periods provided herein) by the Guarantor or any Lessee
of its obligations hereunder to keep the Vehicles leased hereunder
free of Liens (other than Permitted Liens) and to maintain the
Trustee's first priority perfected security interest in the AESOP II
Loan Collateral, the Lessor or the Trustee shall have the right to
take actions reasonably necessary to correct such default with respect
to the subject Vehicles including the execution of UCC financing
statements with respect to Manufacturer Programs and other general
intangibles and the completion of Vehicle Perfection and Documentation
Requirements on behalf of the Guarantor or any Lessee as applicable.
(iv) Upon the occurrence of a Liquidation Event of Default or
a Limited Liquidation Event of Default, each Lessee shall return any
Vehicles leased by such Lessee hereunder to the related Manufacturer
in accordance with the instructions of the Lessor. To the extent any
Manufacturer fails to accept any such Vehicles under the terms of the
applicable Manufacturer Program, the Lessor shall have the right to
otherwise dispose of such Vehicles and to direct the Lessee thereof to
dispose of such Vehicles in accordance with its instructions. In
addition, following the occurrence of a Liquidation Event of Default
or a Limited Liquidation Event of Default, the Lessor shall have all
of the rights, remedies, powers, privileges and claims vis-a-vis the
Guarantor or any Lessee, necessary or desirable to allow (a) the
Lender to exercise the rights, remedies, powers, privileges and claims
given to the Lender pursuant to Section 12.3 of the AESOP II Loan
Agreement, and each of the Guarantor and each Lessee acknowledges that
it has hereby granted to the Lessor all of the rights, remedies,
powers, privileges and claims granted by the Lessor to the Lender
pursuant to Article 7 of the AESOP II Loan Agreement and that, under
certain circumstances set forth in the AESOP II
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Loan Agreement, the Lender may act in lieu of the Lessor in the
exercise of such rights, remedies, powers, privileges and claims and
(b) the Trustee to exercise the rights, remedies, powers, privileges
and claims given to the Trustee pursuant to Sections 3.3 and 9.2 of
the Indenture, and each of the Guarantor and each Lessee acknowledges
that it has hereby granted to the Lessor all of the rights, remedies,
powers, privileges and claims granted by the Lender to the Trustee
pursuant to Article 3 of the Indenture and that, under certain
circumstances set forth in the Indenture, the Trustee may act in lieu
of the Lessor in the exercise of such rights, remedies, powers,
privileges and claims.
18.5. Measure of Damages. If an AESOP II Operating Lease Event of
Default, a Limited Liquidation Event of Default or a Liquidation Event of
Default occurs and the Lessor, the Lender or the Trustee exercises the remedies
granted to the Lessor, the Lender or the Trustee under this Article 18, the
amount that the Lessor shall be permitted to recover shall be equal to:
(i) all Monthly Base Rent, all Supplemental Rent and all
other payments payable under this Agreement (calculated as provided in
Section 18.2); plus
(ii) any damages and expenses, including reasonable
attorneys' fees and expenses (but excluding net after-tax losses of
federal and state income tax benefits to which the Lessor would
otherwise be entitled as a result of this Agreement), which the
Lessor, the Lender or the Trustee will have sustained by reason of the
AESOP II Operating Lease Event of Default, Limited Liquidation Event
of Default or Liquidation Event of Default, together with reasonable
sums for such attorneys' fees and such expenses as will be expended or
incurred in the seizure, storage, rental or sale of the Vehicles
leased hereunder or in the enforcement of any right or privilege
hereunder or in any consultation or action in such connection; plus
(iii) interest on amounts due and unpaid under this Agreement
at the applicable Lender's Carrying Cost Interest Rate plus 1.0% from
time to time computed from the date of the AESOP II Operating Lease
Event of Default, Limited Liquidation Event of Default or Liquidation
Event of Default or the date payments were originally due to the
Lessor under this Agreement or from the date of each expenditure by
the Lessor which is recoverable from the Lessees pursuant to
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this Section 18, as applicable, to and including the date
payments are made by the Lessees.
18.6. Vehicle Return Default. If any Lessee fails to comply with the
provisions of (a) Section 13.2 hereof with respect to any Vehicle leased by
such Lessee hereunder or (b) Section 3.1 with respect to returning any Vehicles
leased by such Lessee hereunder to the related Manufacturer not later than the
end of the Maximum Term (each, a "Vehicle Return Default"), then the Lessor at
its option may:
(i) proceed by appropriate court action or actions, either at
law or equity, to enforce performance by such Lessee of such covenants
and terms of this Agreement or to recover damages for the breach
hereof calculated in accordance with Section 18.5 as it relates to
such Vehicle; or
(ii) by notice in writing to such Lessee following the
occurrence of such Vehicle Return Default, terminate the Agreement
with respect to such Vehicle and/or the right of possession hereunder
of such Lessee with respect to such Vehicle and the Lessor may direct
delivery by such Lessee or the Guarantor of documents of title to such
Vehicle, whereupon all rights and interests of such Lessee and the
Guarantor to such Vehicle will cease and terminate (but such Lessee
and the Guarantor will remain liable hereunder as herein provided,
provided, however, that their liability will be calculated in
accordance with Section 18.5 as it relates to such Vehicle); and
thereupon the Lessor or its agents may peaceably enter upon the
premises of such Lessee or other premises where such Vehicle may be
located and take possession of it and thenceforth hold, possess and
enjoy the same free from any right of such Lessee or the Guarantor or
their successors or assigns to use such Vehicle for any purpose
whatsoever and the Lessor will nevertheless have a right to recover
from such Lessee or the Guarantor any and all amounts which, under the
terms of this Agreement may then be due. The Lessor will provide such
Lessee with written notice of the place and time of the sale of such
Vehicle at least five days prior to the proposed sale, which sale
shall be deemed commercially reasonable and such Lessee may purchase
the Vehicle at such sale; or
(iii) hold, keep idle or lease to others such Vehicle, as
the Lessor in its sole discretion may determine, free and clear of any
rights of such Lessee without any duty to account to such Lessee with
respect to such action or
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inaction or for any proceeds with respect to such action or inaction
except that such Lessee's obligation to pay Monthly Base Rent for
periods commencing after such Lessee shall have been deprived of the
use of such Vehicle pursuant to this clause (iii) shall be reduced by
the net proceeds, if any, received by the Lessor from leasing such
Vehicle to any person other than such Lessee for the same period or
any portion thereof; or
(iv) whether or not the Lessor shall have exercised or shall
thereafter exercise any of the rights under the foregoing clauses (i),
(ii) or (iii), demand by written notice to such Lessee that such
Lessee pay to the Lessor immediately, and such Lessee shall so pay to
the Lessor as liquidated damages for loss of a bargain and not as a
penalty, any unpaid Monthly Base Rent due through the Payment Date
with respect to the Related Month during which such Vehicle is
rejected by the Manufacturer or otherwise is not returned to the
Manufacturer or on the date such Lessee is required to, but does not
sell, return or otherwise dispose of such Vehicle pursuant to Section
3.1 or 2.6(b) hereof, any Supplemental Rent then accrued and unpaid
plus whichever of the following amounts the Lessor, in its sole
discretion shall specify in such notice:
(1) an amount equal to the excess, if any, of the
Termination Value for such Vehicle over the Market Value of
such Vehicle as of (a) the date such Vehicle is rejected by a
Manufacturer for not meeting its Manufacturer Program's
Vehicle Turn-In Condition guidelines, or (b) the date such
Lessee is required to, but does not, sell return or otherwise
dispose of such Vehicle pursuant to Section 3.1 or 2.6(b)
hereof; or
(2) an amount equal to the Termination Value for
such Vehicle as of (a) the date such Vehicle is rejected by a
Manufacturer for not meeting its Manufacturer Program's
Vehicle Turn-In Condition guidelines, or (b) the date such
Lessee is required to, but does not, sell, return or
otherwise dispose of such Vehicle pursuant to Section 3.1 or
2.6(b) hereof, in which event (x) the Lessor shall cause
title to such Vehicle to be transferred to such Lessee, (y)
such Lessee shall be entitled to any physical damage
insurance proceeds applicable to such Vehicle, and (z) the
Administrator shall request the Trustee to cause its Lien to
be removed from the Certificate of Title for such Vehicle.
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(v) If the Lessor shall have sold any Vehicle pursuant to
clause (ii) above, the Lessor in lieu of exercising its rights under
clause (iv) above with respect to such Vehicle may, if it shall so
elect, demand that the relevant Lessee of such Vehicle pay to the
Lessor and such Lessee shall pay to the Lessor on the date of such
sale as liquidated damages for loss of a bargain and not as a penalty,
any unpaid Monthly Base Rent and Supplemental Rent due through such
date of sale plus the amount of any deficiency between the net
proceeds of such sale and the Termination Value of such Vehicle
computed as of the date of the sale.
18.7. Application of Proceeds. The proceeds of any sale or other
disposition pursuant to Section 18.2, 18.3 or 18.6 shall be applied by the
Lessor in its sole discretion as the Lessor deems appropriate.
19. MANUFACTURER EVENTS OF DEFAULT. (a) Upon the occurrence of a
Manufacturer Event of Default with respect to any Manufacturer (a "Defaulting
Manufacturer"), each Lessee, on behalf of the Lessor (i) shall no longer place
Vehicle Orders for additional Vehicles from such Manufacturer and (ii) shall
cancel any Vehicle Order with such Defaulting Manufacturer to which a VIN has
not been assigned as of the date such Manufacturer Event of Default occurs.
(b) Upon the occurrence of a Manufacturer Event of Default, each
Lessee agrees to act at the direction of the Lessor, the Lender or the Trustee
to take commercially reasonable action to liquidate the Vehicles subject to a
Manufacturer Program with respect to which such Manufacturer Event of Default
has occurred.
(c) Upon the occurrence of a Manufacturer Event of Default, except as
provided in Section 13.3, no Lessees shall be liable for any failure by the
Lessor to recover all or any portion of the Repurchase Price with respect to
any Vehicles subject to the Manufacturer Program of the Defaulting
Manufacturer; provided, however, that nothing in this Section 19 shall be
construed to modify, terminate or otherwise affect the Lessees' obligations
under this Agreement.
20. [RESERVED].
21. [RESERVED].
22. CERTIFICATION OF TRADE OR BUSINESS USE. Each Lessee hereby
warrants and certifies, under penalties of perjury, that
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it intends to use the Vehicles which are subject to this Agreement, in its
trade or business.
23. SURVIVAL. In the event that, during the term of this Agreement,
any Lessee or the Guarantor becomes liable for the payment, or reimbursement of
any obligations, claims or taxes pursuant to any provision hereof, such
liability will continue, notwithstanding the expiration or termination of this
Agreement, until all such amounts are paid or reimbursed by such Lessee or the
Guarantor.
24. ADDITIONAL LESSEES. Any Eligible Rental Car Company shall have the
right to become a "Lessee" under and pursuant to the terms of this Agreement by
complying with the provisions of this Section 24. In the event an Eligible
Rental Car Company desires to become a "Lessee" under this Agreement, then the
Guarantor and such Eligible Rental Car Company shall execute (if appropriate)
and deliver to the Lessor and the Trustee:
(i) a Joinder in Lease Agreement in the form attached
hereto as Attachment D (each, a "Joinder in Lease");
(ii) the certificate of incorporation for such Eligible
Rental Car Company, duly certified by the Secretary of State of the
jurisdiction of such Eligible Rental Car Company's incorporation,
together with a copy of the by-laws of such Eligible Rental Car
Company, duly certified by a Secretary or Assistant Secretary of such
Eligible Rental Car Company;
(iii) copies of resolutions of the Board of Directors of such
Eligible Rental Car Company authorizing or ratifying the execution,
delivery and performance, respectively, of those documents and matters
required of it with respect to this Agreement, duly certified by the
Secretary or Assistant Secretary of such Eligible Rental Car Company;
(iv) a certificate of the Secretary or Assistant Secretary of
such Eligible Rental Car Company certifying the names of the
individual or individuals authorized to sign the Joinder in Lease and
the other Related Documents to be executed by it, together with
samples of the true signatures of each such individual;
(v) a good standing certificate for such Eligible Rental Car
Company in the jurisdiction of its incorporation and the jurisdiction
of its principal place of business;
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(vi) a written search report from a Person satisfactory to
the Lessor, the Lender and the Trustee listing all effective financing
statements that name such Eligible Rental Car Company as debtor or
assignor, and that are filed in the jurisdictions in which filings
were made pursuant to clause (vii) below, together with copies of such
financing statements, and tax and judgment lien search reports from a
Person satisfactory to the Lessor, the Lender and the Trustee showing
no evidence of liens filed against such Eligible Rental Car Company
that purport to affect any Vehicles leased hereunder or any Collateral
under the Base Indenture;
(vii) evidence of the filing of proper financing statements
on Form UCC-1 naming such Eligible Rental Car Company, as debtor, and
the Lessor as secured party covering the collateral described in
Section 2(b) hereof;
(viii) evidence of the filing of proper financing statements
on Form UCC-1 naming such Eligible Rental Car Company, as debtor, and
the Trustee as secured party covering the collateral described in
Section 2(b) hereof;
(ix) an Officer's Certificate and an opinion of counsel each
stating that such joinder by such Eligible Rental Car Company complies
with this Section 24 and that all conditions precedent herein provided
for relating to such transaction have been complied with;
(x) an Officer's Certificate from such Eligible Rental Car
Company, as to itself, and from the Guarantor, as to itself and such
Eligible Rental Car Company, stating that the representations and
warranties contained in Section 30 hereof are true and correct;
(xi) an opinion of counsel stating that such Joinder in Lease
and the other Related Documents to which such Eligible Rental Car
Company is a party are legal, valid and binding agreements of such
Eligible Rental Car Company, enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights
generally and to general principles of equity;
(xii) (1) pro forma unaudited financial statements consisting
of consolidated and consolidating balance sheets and cash
flow statements of the Guarantor and its Consolidated
Subsidiaries as of the end of the
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fiscal year of the Guarantor immediately preceding the date
such Eligible Rental Car Company proposes to become a
"Lessee" under this Agreement and a statement of income and
retained earnings of the Guarantor and its Consolidated
Subsidiaries for such fiscal year, setting forth in
comparative form the corresponding figures for the
corresponding period of the preceding fiscal year;
(2) a computation of the financial covenants
required to be complied with pursuant to the Working Capital
Facility, in each case for each of the fiscal years referred
to above based on the pro forma financial information
presented above; and
(3) an Officer's Certificate verifying the accuracy
and completeness of such financial statements and
computations signed by an Authorized Officer of the
Guarantor.
Such unaudited financial statements and computations shall reflect the
financial results of such Eligible Rental Car Company as a
consolidated direct or indirect (as applicable) Wholly-Owned
Subsidiary of the Guarantor as if such Eligible Rental Car Company had
been directly or indirectly wholly-owned by the Guarantor as of the
beginning of the earliest fiscal year shown. No Eligible Rental Car
Company shall become a "Lessee" under this Agreement unless the
Guarantor is in compliance on a pro forma basis with the financial
covenants required to be complied with pursuant to the Working Capital
Facility for each of the fiscal years referred to above; and
(xiii) any additional documentation that the Lessor or the
Trustee may require to evidence the assumption by such Eligible Rental Car
Company of the obligations and liabilities set forth in this Agreement.
Upon satisfaction of the foregoing conditions and receipt by such Eligible
Rental Car Company of the applicable Joinder in Lease executed by the Lessor,
such Eligible Rental Car Company shall for all purposes be deemed to be a
"Lessee" for purposes of this Agreement and shall be entitled to the benefits
and subject to the liabilities and obligations of a Lessee hereunder. Each
Eligible Rental Car Company that becomes a Lessee hereunder shall provide
prompt written notice thereof to each Rating Agency.
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25. TITLE. This is an agreement to lease only and title to Vehicles
will at all times remain in the Lessor's name or in the name of the Lessor's
Permitted Nominee. None of the Lessees nor the Guarantor will have any rights
or interest in Vehicles whatsoever other than the right of possession and use
as provided by this Agreement.
26. GUARANTY.
26.1. Guaranty. In order to induce the Lessor to execute and deliver
this Agreement and to lease Vehicles to the Lessees, and in consideration
thereof, the Guarantor hereby (i) unconditionally and irrevocably guarantees to
the Lessor the obligations of the Lessees to make any payments required to be
made by them under this Agreement, (ii) agrees to cause the Lessees to duly and
punctually perform and observe all of the terms, conditions, covenants,
agreements and indemnities of the Lessees under this Agreement, and (iii)
agrees that, if for any reason whatsoever, any Lessee fails to so perform and
observe such terms, conditions, covenants, agreements and indemnities, the
Guarantor will duly and punctually perform and observe the same (the
obligations referred to in clauses (i) through (iii) above are collectively
referred to as the "Guaranteed Obligations"). The liabilities and obligations
of the Guarantor under the guaranty contained in this Section 26 (this
"Guaranty") will be absolute and unconditional under all circumstances. This
Guaranty shall be a guaranty of payment and performance and not merely of
collection, and the Guarantor hereby agrees that it shall not be required that
the Lessor, the Lender or the Trustee assert or enforce any rights against any
Lessee or any other person before or as a condition to the obligations of the
Guarantor pursuant to this Guaranty.
26.2. Scope of Guarantor's Liability. The Guarantor's obligations
hereunder are independent of the obligations of any Lessee(s), any other
guarantor or any other Person, and the Lessor may enforce any of its rights
hereunder independently of any other right or remedy that the Lessor may at any
time hold with respect to this Agreement or any security or other guaranty
therefor. Without limiting the generality of the foregoing, the Lessor may
bring a separate action against the Guarantor without first proceeding against
any Lessee(s), any other guarantor or any other Person, or any security held by
the Lessor, and regardless of whether any Lessee(s) or any other guarantor or
any other Person is joined in any such action. The Guarantor's liability
hereunder shall at all times remain effective with respect to the full amount
due from any Lessee(s) hereunder, notwithstanding any
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limitations on the liability of any Lessee(s) to the Lessor contained in any of
the Related Documents or elsewhere. The Lessor's rights hereunder shall not be
exhausted by any action taken by the Lessor until all Guaranteed Obligations
have been fully paid and performed. The liability of the Guarantor hereunder
shall be reinstated and revived, and the rights of the Lessor shall continue,
with respect to any amount at any time paid on account of the Guaranteed
Obligations which shall thereafter be required to be restored or returned by
the Lessor upon the bankruptcy, insolvency or reorganization of any Lessee(s),
any other guarantor or any other Person, or otherwise, all as though such
amount had not been paid.
26.3. Lessor's Right to Amend this Agreement, Etc. The Guarantor
authorizes the Lessor, at any time and from time to time without notice and
without affecting the liability of the Guarantor hereunder, to: (a) alter the
terms of all or any part of the Guaranteed Obligations and any security and
guaranties therefor including without limitation modification of times for
payment and rates of interest; (b) accept new or additional instruments,
documents, agreements, security or guaranties in connection with all or any
part of the Guaranteed Obligations; (c) accept partial payments on the
Guaranteed Obligations; (d) waive, release, reconvey, terminate, abandon,
subordinate, exchange, substitute, transfer, compound, compromise, liquidate
and enforce all or any part of the Guaranteed Obligations and any security or
guaranties therefor, and apply any such security and direct the order or manner
of sale thereof (and bid and purchase at any such sale), as the Lessor in its
discretion may determine; (e) release any Lessee, any other guarantor or any
other Person from any personal liability with respect to all or any part of the
Guaranteed Obligations; and (f) assign its rights under this Guaranty in whole
or in part.
26.4. Waiver of Certain Rights by Guarantor. The Guarantor
hereby waives each of the following to the fullest extent allowed
by law:
(a) all statutes of limitation as a defense to any
action brought by the Lessor against the Guarantor;
(b) any defense based upon:
(i) the unenforceability or invalidity of all or
any part of the Guaranteed Obligations or any security
or other guaranty for the Guaranteed Obligations or the
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lack of perfection or failure of priority of any secu-
rity for the Guaranteed Obligations; or
(ii) any act or omission of the Lessor or any other
Person that directly or indirectly results in the discharge
or release of any Lessee or any other Person or any of the
Guaranteed Obligations or any security therefor; or
(iii) any disability or any other defense of any
Lessee or any other Person with respect to the Guaranteed
Obligations, whether consensual or arising by operation of
law or any bankruptcy, insolvency or debtor-relief
proceeding, or from any other cause;
(c) any right (whether now or hereafter existing) to
require the Lessor, as a condition to the enforcement of
this Guaranty, to:
(i) accelerate the Guaranteed Obligations; or
(ii) give notice to the Guarantor of the terms,
time and place of any public or private sale of any
security for the Guaranteed Obligations; or
(iii) proceed against any Lessee, any other
guarantor or any other Person, or proceed against or exhaust
any security for the Guaranteed Obligations;
(d) all rights of subrogation, all rights to enforce any remedy that
the Lessor now or hereafter has against any Lessee or any other Person, and any
benefit of, and right to participate in, any security now or hereafter held by
the Lessor with respect to the Guaranteed Obligations;
(e) presentment, demand, protest and notice of any kind, including
without limitation notices of default and notice of acceptance of this
Guaranty;
(f) all suretyship defenses and rights of every nature
otherwise available under New York law and the laws of any other
jurisdiction; and
(g) all other rights and defenses the assertion or exercise of which
would in any way diminish the liability of the Guarantor hereunder.
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26.5. [RESERVED].
26.6. Guarantor to Pay Lessor's Expenses. The Guarantor agrees to pay
to the Lessor, on demand, all costs and expenses including attorneys' and other
professional and paraprofessional fees, incurred by the Lessor in exercising
any right, power or remedy conferred by this Guaranty, or in the enforcement of
this Guaranty, whether or not any action is filed in connection therewith.
Until paid to the Lessor, such amounts shall bear interest, commencing with the
Lessor's demand therefor, at the Prime Rate plus 1.0%.
26.7. Reinstatement. This Guaranty shall continue to be effective or
be reinstated, as the case may be, if at any time payment of any of the amounts
payable by any Lessee under this Agreement is rescinded or must otherwise be
restored or returned by the Lessor, upon an event of bankruptcy, dissolution,
liquidation or reorganization of any Lessee or the Guarantor or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, any Lessee or the Guarantor or any substantial
part of their respective property, or otherwise, all as though such payment had
not been made.
26.8. Pari Passu Indebtedness. The Guarantor (i) represents and
warrants that, as of the date hereof, the obligations of the Guarantor under
this Guaranty will rank pari passu with any existing unsecured indebtedness of
the Guarantor and (ii) covenants and agrees that from and after the date hereof
the obligations of the Guarantor under this Guaranty will rank pari passu with
any unsecured indebtedness of the Guarantor incurred after the date hereof.
27. RIGHTS OF LESSOR ASSIGNED TO TRUSTEE. Notwithstanding anything to
the contrary contained in this Agreement, each of the Lessees and the Guarantor
acknowledges that the Lessor has assigned all of its rights under this
Agreement (other than its right to receive Excluded Payments) to AFC-II
pursuant to the AESOP II Loan Agreement and AFC-II has assigned such rights to
the Trustee pursuant to the Indenture. Accordingly, each of the Lessees and the
Guarantor agrees that:
(i) Subject to the terms of the AESOP II Loan Agreement and
the Indenture, the Trustee shall have all the rights, powers,
privileges and remedies of the Lessor hereunder (other than the right
to receive Excluded Payments, which shall be paid to the AESOP II
Segregated Account) and the Guarantor's and each Lessee's obligations
hereunder
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(including the payment of Monthly Base Rent, Supplemental Rent and all
other amounts payable hereunder) shall not be subject to any claim or
defense which the Guarantor or such Lessee may have against the Lessor
or any Lessee (other than the defense of payment actually made) and
shall be absolute and unconditional and shall not be subject to any
abatement, setoff, counterclaim, deduction or reduction for any reason
whatsoever. Specifically, each of the Lessees and the Guarantor agrees
that, upon the occurrence of an AESOP II Operating Lease Event of
Default, a Limited Liquidation Event of Default or a Liquidation Event
of Default, the Trustee may exercise (for and on behalf of the Lessor)
any right or remedy against any Lessee or the Guarantor provided for
herein (other than with respect to the right to receive Excluded
Payments) and none of the Lessees nor the Guarantor will interpose as
a defense that such claim should have been asserted by the Lessor;
(ii) Upon the delivery by the Trustee of any notice to any
Lessee or the Guarantor stating that an AESOP II Operating Lease Event
of Default, a Limited Liquidation Event of Default or a Liquidation
Event of Default has occurred, the relevant Lessee or the Guarantor,
as the case may be, will, if so requested by the Trustee, treat the
Trustee or the Trustee's designee for all purposes (other than with
respect to the right to receive Excluded Payments) as the Lessor
hereunder and in all respects comply with all obligations under this
Agreement that are asserted by the Trustee as the successor to the
Lessor hereunder, irrespective of whether such Lessee or the Guarantor
has received any such notice from the Lessor; provided, however, the
Trustee, shall in no event be liable to any Lessee for any action
taken by it in its capacity as successor to the Lessor other than
actions that constitute negligence or willful misconduct;
(iii) Each of the Lessees and the Guarantor acknowledges that
pursuant to the AESOP II Loan Agreement and the Indenture the Lessor
has irrevocably authorized and directed each Lessee or the Guarantor
to, and each Lessee and the Guarantor shall, make payments of Monthly
Base Rent and Supplemental Rent hereunder (and any other payments
hereunder) (other than Excluded Payments, which shall be paid to the
AESOP II Segregated Account) directly to the Trustee for deposit in
the Collection Account established by the Trustee for receipt of such
payments pursuant to the Indenture and such payments shall discharge
the obligation of such Lessee
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and the Guarantor to the Lessor hereunder to the extent of such
payments. Upon written notice to the Lessees or the Guarantor of a
sale or assignment by the Trustee of its right, title and interest in
moneys due under this Agreement to a successor Trustee, each Lessee or
the Guarantor, as the case may be, shall thereafter make payments of
all Monthly Base Rent and Supplemental Rent (and any other payments
hereunder) (other than Excluded Payments, which shall be paid to the
AESOP II Segregated Account) to the party specified in such notice;
(iv) Upon request made by the Trustee at any time, each of
the Lessees and the Guarantor will take such actions as are requested
by the Trustee to assist the Trustee in maintaining the Trustee's
first priority perfected security interest in the Vehicles leased
hereunder, the Certificates of Title with respect thereto and any
other portion of the AESOP II Loan Collateral; and
(v) In the event that the Indenture terminates and all
obligations owing under the Indenture have been paid in full, the
Lender shall have all rights under this Agreement previously assigned
to the Trustee.
28. [RESERVED].
29. MODIFICATION AND SEVERABILITY. The terms of this Agreement will
not be waived, altered, modified, amended, supplemented or terminated in any
manner whatsoever unless (i) the same shall be in writing and signed and
delivered by the Lessor, the Guarantor and each Lessee and consented to in
writing by (x) the Lender and the Trustee and (y) if such waiver, alteration,
modification, amendment, supplement or termination would materially adversely
affect the rights of the holders of the outstanding Preferred Stock, the
holders of the outstanding Preferred Stock, (ii) the Lessor shall have received
in writing confirmation from each of the Rating Agencies that its then current
rating of the Notes and the Commercial Paper Notes will not be reduced or
withdrawn as a result thereof and (iii) the Rating Agency Consent Condition
shall have been satisfied. If any part of this Agreement is not valid or
enforceable according to law, all other parts will remain enforceable. The
Lessor shall provide prompt written notice to each Rating Agency of any such
waiver, modification or amendment.
30. CERTAIN REPRESENTATIONS AND WARRANTIES. Each Lessee
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represents and warrants to the Lessor and the Trustee as to itself, and the
Guarantor represents and warrants to the Lessor and the Trustee as to itself
and as to each Lessee, that as of the Initial Closing Date and as of each
Series Closing Date:
30.1. Organization; Ownership; Power; Qualification. The Guarantor and
each Lessee is (i) a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
corporate power and authority to own its properties and to carry on its
business as now being and hereafter proposed to be conducted, and (iii) is duly
qualified, in good standing and authorized to do business in each jurisdiction
in which the character of its properties or the nature of its businesses
requires such qualification or authorization.
30.2. Authorization; Enforceability. The Guarantor and each Lessee has
the corporate power and has taken all necessary corporate action to authorize
it to execute, deliver and perform this Agreement and each of the other Related
Documents to which it is a party in accordance with their respective terms, and
to consummate the transactions contemplated hereby and thereby. This Agreement
has been duly executed and delivered by the Guarantor and each Lessee and is,
and each of the other Related Documents to which the Guarantor or such Lessee
is a party is, a legal, valid and binding obligation of the Guarantor and such
Lessee, enforceable in accordance with its terms.
30.3. Compliance. The execution, delivery and performance, in
accordance with their respective terms, by the Guarantor and each Lessee of
this Agreement and each of the other Related Documents to which it is a party,
and the consummation of the transactions contemplated hereby and thereby, do
not and will not (i) require any consent, approval, authorization or
registration not already obtained or effected, (ii) violate any applicable law
with respect to the Guarantor or such Lessee which violation could result in a
Material Adverse Effect, (iii) conflict with, result in a breach of, or
constitute a default under the certificate or articles of incorporation or
by-laws, as amended, of the Guarantor or such Lessee, (iv) conflict with,
result in a breach of, or constitute a default under any indenture, agreement,
or other instrument to which the Guarantor or such Lessee is a party or by
which its properties may be bound which conflict, breach or default could
result in a Material Adverse Effect, or (v) result in or require the creation
or imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by such Lessee except Permitted Encumbrances.
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30.4. Financial Information; Financial Condition. All balance sheets,
all statements of operations, of shareholders' equity and of cash flow, and
other financial data (other than projections) which have been or shall
hereafter be furnished to the Lessor, the Lender or the Trustee for the
purposes of or in connection with this Agreement or the Related Documents have
been and will be prepared in accordance with GAAP and do and will present
fairly the financial condition of the entities involved as of the dates thereof
and the results of their operations for the periods covered thereby. Such
financial data include the following financial statements and reports which
have been furnished to the Lessor and the Trustee on or prior to such Closing
Date:
(i) the audited consolidated financial statements consisting
of a statement of financial condition of the Guarantor and its
Consolidated Subsidiaries as of December 31, 1996 and as to the
Predecessor Companies as of December 31, 1995, and the related
statements of operations, stockholder's equity and cash flows of the
Guarantor and its Consolidated Subsidiaries for the period October 17,
1996 (Date of Acquisition) to December 31, 1996 and, as to the
Predecessor Companies, the related statements of operations,
stockholder's equity and cash flows for each of the two years in the
period ended December 31, 1995 and the period January 1, 1996 to
October 16, 1996;
(ii) the unaudited condensed consolidated financial
statements consisting of a statement of financial position of the
Guarantor and its Consolidated Subsidiaries as of March 31, 1997, and
the related statements of operations, stockholder's equity and cash
flows of the Guarantor and its Consolidated Subsidiaries for the three
months ended March 31, 1997 and, as to the Predecessor Companies, the
related statements of operations, stockholder's equity and cash flows
for the three months ended March 31, 1996; and
(iii) the unaudited pro forma consolidated financial
statements consisting of a statement of financial position of the
Guarantor and its Consolidated Subsidiaries as of March 31, 1997, and
the related statements of operations of the Guarantor and its
Consolidated Subsidiaries for the year ended December 31, 1996 and for
the three months ended March 31, 1997, and such pro forma consolidated
financial statements present fairly the information shown therein,
have been prepared in accordance with the Securities and Exchange
Commission's rules and guidelines with respect to pro forma
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financial statements and have been properly compiled on the basis
described therein, and the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate to
give effect to the transactions and circumstances referred to therein.
30.5. Litigation. Except as set forth in Schedule 30.5 hereto and
except for claims as to which the insurer has admitted coverage in writing and
which are fully covered by insurance, no claims, litigation (including, without
limitation, derivative actions), arbitration, governmental investigation or
proceeding or inquiry is pending or, to the best of the Guarantor's or each
Lessee's knowledge, threatened against the Guarantor or such Lessee which
would, if adversely determined, have a Material Adverse Effect.
30.6. Liens. The Vehicles and other Collateral are free and clear of
all Liens other than (i) Permitted Liens and (ii) Liens in favor of the Lessor,
the Lender or the Trustee. The Trustee has obtained, and will continue to
obtain, for the benefit of the Secured Parties pursuant to the Indenture, a
first priority perfected Lien on all Vehicles leased hereunder. All Vehicle
Perfection and Documentation Requirements with respect to all Vehicles on or
after the date hereof have and will continue to be satisfied.
30.7. Employee Benefit Plans. (a) During the twelve consecutive month
period prior to the Closing Date: (i) no steps have been taken by the
Guarantor, any Lessee or any member of the Controlled Group, or to the
knowledge of the Guarantor, by any Person, to terminate any Pension Plan; and
(ii) no contribution failure has occurred with respect to any Pension Plan
maintained by the Guarantor, any Lessee or any member of the Controlled Group
sufficient to give rise to a Lien under Section 302(f)(1) of ERISA in
connection with such Pension Plan; and (b) no condition exists or event or
transaction has occurred with respect to any Pension Plan which could
reasonably be expected to result in the incurrence by the Guarantor or any
Lessee or any member of the Controlled Group of liabilities, fines or penalties
in an amount that could have a Material Adverse Effect.
30.8. Investment Company Act. Neither the Guarantor nor any Lessee is
an "investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended, and
neither the Guarantor nor any Lessee is subject to any other statute which
would impair or restrict its ability to perform its obligations under this
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Agreement or the other Related Documents, and neither the entering into or
performance by the Guarantor or any Lessee of this Agreement violates any
provision of such Act.
30.9. Regulations G, T, U and X. Neither the Guarantor nor any Lessee
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulations G, T, U and X of the Board of Governors of
the Federal Reserve System). None of the Guarantor, any Lessee, any Affiliates
of any of them or any Person acting on their behalf has taken or will take
action to cause the execution, delivery or performance of this Agreement or the
Loan Note, the making or existence of the Loans or the use of proceeds of the
Loans to violate Regulation G, T, U, or X of the Board of Governors of the
Federal Reserve System.
30.10. Business Locations; Trade Names; Principal Places of Business
Locations. Schedule 30.10 lists each of the locations where each of the Lessees
and the Guarantor maintains a chief executive office, principal place of
business, or any records; and Schedule 30.10 also lists the Lessees' and the
Guarantor's legal names, each name under or by which each of the Lessees and
the Guarantor conducts its business, each state in which each of the Lessees
and the Guarantor conducts business and each state in which each of the Lessees
and the Guarantor has its principal place of business.
30.11. Taxes. The Guarantor and each Lessee has filed all tax returns
which have been required to be filed by it (except where the requirement to
file such return is subject to a valid extension or such failure relates to
returns which, in the aggregate, show taxes due in an amount of not more than
$500,000), and has paid or provided adequate reserves for the payment of all
taxes shown due on such returns or required to be paid as a condition to such
extension, as well as all payroll taxes and federal and state withholding
taxes, and all assessments payable by it that have become due, other than those
that are payable without penalty or are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
established, and are being maintained, in accordance with GAAP. As of such
Closing Date, to the best of the Guarantor's or each Lessee's knowledge, there
is no unresolved claim by a taxing authority concerning the Guarantor's or such
Lessee's tax liability for any period for which returns have been filed or were
due other than those contested in good faith by appropriate proceed-
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ings and with respect to which adequate reserves have been established and are
being maintained in accordance with GAAP.
30.12. Governmental Authorization. The Guarantor and each Lessee has
all licenses, franchises, permits and other governmental authorizations
necessary for all businesses presently carried on by it (including owning and
leasing the real and personal property owned and leased by it), except where
failure to obtain such licenses, franchises, permits and other governmental
authorizations would not have a Material Adverse Effect.
30.13. Compliance with Laws. Except as disclosed in Schedule 30.13
hereto, the Guarantor and each Lessee: (i) is not in violation of any law,
ordinance, rule, regulation or order of any Governmental Authority applicable
to it or its property, which violation would have a Material Adverse Effect,
and no such violation has been alleged, (ii) has filed in a timely manner all
reports, documents and other materials required to be filed by it with any
governmental bureau, agency or instrumentality (and the information contained
in each of such filings is true, correct and complete in all material
respects), except where failure to make such filings would not have a Material
Adverse Effect, and (iii) has retained all records and documents required to be
retained by it pursuant to any Requirement of Law, except where failure to
retain such records would not have a Material Adverse Effect.
30.14. Eligible Vehicles. Each Vehicle is or will be, as the case may
be, on the Vehicle Operating Lease Commencement Date with respect to such
Vehicle, an Eligible Vehicle.
30.15. Supplemental Documents True and Correct. All information
contained in any Vehicle Order or other Supplemental Document which has been
submitted, or which may hereafter be submitted by any Lessee to the Lessor is,
or will be, true, correct and complete.
30.16. Manufacturer Programs. No Manufacturer Event of Default has
occurred and is continuing with respect to any Eligible Manufacturer Program.
30.17. Absence of Default. The Guarantor and each Lessee is in
compliance with all of the provisions of its certificate or articles of
incorporation and by-laws and no event has occurred or failed to occur which
has not been remedied or waived, the occurrence or non-occurrence of which
constitutes, or with the passage of time or giving of notice or both would
constitute, (i)
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an AESOP II Operating Lease Event of Default or a Potential AESOP II Operating
Lease Event of Default or (ii) a default or event of default by the Guarantor
or any Lessee under any material indenture, agreement or other instrument, or
any judgment, decree or final order to which the Guarantor or any Lessee is a
party or by which the Guarantor or any Lessee or any of their properties may be
bound or affected that could result in a Material Adverse Effect.
30.18. Title to Assets. The Guarantor and each Lessee has good, legal
and marketable title to, or a valid leasehold interest in, all of its assets,
except to the extent no Material Adverse Effect could result. None of such
properties or assets is subject to any Liens, except for Permitted
Encumbrances. Except for financing statements or other filings with respect to
or evidencing Permitted Encumbrances, no financing statement under the UCC of
any state, application for a Certificate of Title or certificate of ownership,
or other filing which names the Guarantor or any Lessee as debtor or which
covers or purports to cover any of the assets of the Guarantor or such Lessee
is on file in any state or other jurisdiction, and neither the Guarantor nor
any Lessee has signed any such financing statement, application or instrument
authorizing any secured party or creditor of such Person thereunder to file any
such financing statement, application or filing other than with respect to
Permitted Encumbrances and except, in each case, to the extent no Material
Adverse Effect could result.
30.19. Burdensome Provisions. Neither the Guarantor nor any Lessee is
a party to or bound by any Contractual Obligation that could have a Material
Adverse Effect.
30.20. No Adverse Change. Since March 31, 1997, (x) no material
adverse change in the business, assets, liabilities, financial condition,
results of operations or business prospects of the Guarantor or any Lessee has
occurred, and (y) no event has occurred or failed to occur, which has had or
may have, either alone or in conjunction with all other such events and
failures, a Material Adverse Effect.
30.21. No Adverse Fact. No fact or circumstance is known to the
Guarantor or any Lessee, as of such Closing Date, which, either alone or in
conjunction with all other such facts and circumstances, has had or might in
the future have (so far as the Guarantor or any Lessee can foresee) a Material
Adverse Effect which has not been set forth or referred to in the financial
statements referred to in Section 30.4 or 31.5 or in a writing
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specifically captioned "Disclosure Statement" and delivered to the Lessor prior
to such Closing Date. If a fact or circumstance disclosed in such financial
statements or Disclosure Statement, or if an action, suit or proceeding
disclosed to the Lessor, should in the future have a Material Adverse Effect,
such Material Adverse Effect shall be a change or event subject to Section
30.20 notwithstanding such disclosure.
30.22. Accuracy of Information. All data, certificates, reports,
statements, opinions of counsel, documents and other information furnished to
the Lessor, the Lender or the Trustee by or on behalf of the Guarantor or any
Lessee pursuant to any provision of any Related Document, or in connection with
or pursuant to any amendment or modification of, or waiver under, any Related
Document, shall, at the time the same are so furnished, (i) be complete and
correct in all material respects to the extent necessary to give the Lessor,
the Lender or the Trustee, as the case may be, true and accurate knowledge of
the subject matter thereof, (ii) not contain any untrue statement of a material
fact and (iii) not omit to state a material fact necessary in order to make the
statements contained therein (in light of the circumstances in which they were
made) not misleading, and the furnishing of the same to the Lessor, the Lender
or the Trustee, as the case may be, shall constitute a representation and
warranty by the Guarantor and each Lessee made on the date the same are
furnished to the Lessor, the Lender or the Trustee, as the case may be, to the
effect specified in clauses (i), (ii) and (iii).
30.23. Solvency. Both before and after giving effect to the
transactions contemplated by this Agreement and the other Related Documents,
each of the Guarantor and each Lessee is solvent within the meaning of the
Bankruptcy Code and each of the Guarantor and each Lessee is not the subject of
any voluntary or involuntary case or proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy or insolvency law and no Event of Bankruptcy has occurred with
respect to the Guarantor or any Lessee.
31. CERTAIN AFFIRMATIVE COVENANTS. Until the expiration or termination
of this Agreement, and thereafter until the obligations of the Lessees and the
Guarantor under this Agreement and the Related Documents are satisfied in full,
each Lessee covenants and agrees as to itself, and the Guarantor covenants and
agrees as to itself and as to each Lessee that, unless at any time the Lessor,
the Lender and the Trustee shall otherwise ex-
49
<PAGE>
pressly consent in writing, it will (and, in the case of the Guarantor, will
cause each Lessee to):
31.1. Corporate Existence; Foreign Qualification. Do and cause to be
done at all times all things necessary to (i) maintain and preserve the
corporate existence of the Guarantor and each Lessee (it being understood that
subject to Section 32.1, each Lessee shall remain a direct or indirect
Wholly-Owned Subsidiary of the Guarantor); (ii) be, and ensure that each Lessee
is, duly qualified to do business and in good standing as a foreign corporation
in each jurisdiction where the nature of its business makes such qualification
necessary and the failure to so qualify would have a Material Adverse Effect;
and (iii) comply with all Contractual Obligations and Requirements of Law
binding upon it and its Subsidiaries, except to the extent that the failure to
comply therewith would not, in the aggregate, have a Material Adverse Effect.
31.2. Books, Records and Inspections. (i) Maintain complete and
accurate books and records with respect to the Vehicles leased by it under this
Agreement and (ii) permit any Person designated by the Lessor, the Lender or
the Trustee in writing to visit and inspect any of the properties, corporate
books and financial records of the Guarantor and its Subsidiaries and to
discuss its affairs, finances and accounts with officers of the Guarantor and
its Subsidiaries, agents of the Guarantor and with the Guarantor's independent
public accountants, all at such reasonable times and as often as the Lessor or
the Trustee may reasonably request.
31.3. Insurance. Obtain and maintain with respect to all Vehicles that
are subject to this Agreement (a) vehicle liability insurance to the full
extent required by law and in any event not less than $500,000 per Person and
$1,000,000 per occurrence, (b) property damage insurance with a limit of
$1,000,000 per occurrence, and (c) excess coverage public liability insurance
with a limit of not less than $50,000,000 or the limit maintained from time to
time by the relevant Lessee at any time hereafter, whichever is greater, with
respect to all passenger cars and vans comprising such Lessee's rental fleet.
The Lessor acknowledges and agrees that each Lessee may, to the extent
permitted by applicable law, self-insure for the first $1,000,000 per
occurrence, or a greater amount up to a maximum of $3,000,000, with the consent
of each Enhancement Provider, per occurrence, of vehicle liability and property
damage which is otherwise required to be insured hereunder. All such policies
shall be from financially sound and reputable insurers, shall name the Lender,
the Lessor and the
50
<PAGE>
Trustee as additional insured parties and, in the case of catastrophic physical
damage insurance on such Vehicles, shall name the Trustee as loss payee as its
interest may appear and will provide that the Lender, the Lessor and the
Trustee shall receive at least 10 days' prior written notice of cancellation of
such policies. Each Lessee will notify promptly the Lender, the Lessor and the
Trustee of any curtailment or cancellation of such Lessee's right to
self-insure in any jurisdiction.
31.4. Manufacturer Programs. Turn in the Vehicles leased by such
Lessee to the relevant Manufacturer within the Repurchase Period therefor
(unless such Lessee sells such Program Vehicle prior to the end of the
Repurchase Period therefor and receives sales proceeds thereof in cash in an
amount equal to or greater than the repurchase price under such Manufacturer
Program); and comply with all of its obligations under each Manufacturer
Program.
31.5. Reporting Requirements. Furnish, or cause to be furnished to the
Lessor, the Lender and the Trustee:
(i) Audit Report. As soon as available and in any event
within 120 days after the end of each fiscal year of the Guarantor,
(a) consolidated financial statements consisting of a statement of
financial position of the Guarantor and its Consolidated Subsidiaries
as of the end of such fiscal year and a statement of operations,
stockholders' equity and cash flows of the Guarantor and its
Consolidated Subsidiaries for such fiscal year, setting forth in
comparative form the corresponding figures for the preceding fiscal
year, certified by and containing an opinion, unqualified as to scope,
of independent certified public accountants of recognized standing
selected by the Guarantor and acceptable to the Lessor, the Lender and
the Trustee, accompanied by (b) a letter from such accountants
addressed to the Lessor , the Lender and the Trustee stating that, in
the course of their annual audit of the books and records of the
Guarantor, no Potential AESOP II Operating Lease Event of Default or
AESOP II Operating Lease Event of Default has come to their attention
which was continuing at the close of such fiscal year or on the date
of their letter, or, if such an event has come to the attention of
such accountants and was continuing at the close of such fiscal year
or on the date of their letter, the nature of such event, it being
understood that such accountants shall have no liability to the
Lessor, the Lender or the Trustee by reason of the failure of such
accountants to obtain knowledge of the occurrence or
51
<PAGE>
continuance of such an AESOP II Operating Lease Event of Default or
Potential AESOP II Operating Lease Event of Default;
(ii) Quarterly Statements. As soon as available and in any
event within 45 days after the end of each of the first three quarters
of each fiscal year of the Guarantor, (a) financial statements
consisting of a consolidated statement of financial position of the
Guarantor and its Consolidated Subsidiaries as of the end of such
quarter and a statement of operations, stockholders' equity and cash
flows of the Guarantor and its Consolidated Subsidiaries for each such
quarter, setting forth in comparative form the corresponding figures
for the corresponding periods of the preceding fiscal year, all in
reasonable detail and certified (subject to year-end audit
adjustments) by a senior financial officer of the Guarantor as having
been prepared in accordance with GAAP consistently applied,
accompanied by (b) a letter from such officer addressed to the Lessor,
the Lender and the Trustee stating that no Potential AESOP II
Operating Lease Event of Default or AESOP II Operating Lease Event of
Default has come to his attention which was continuing at the end of
such quarter or on the date of his letter, or, if such an event has
come to his attention and was continuing at the end of such quarter or
on the date of his letter, indicating the nature of such event and the
action which the Guarantor proposes to take with respect thereto;
(iii) Amortization Events and AESOP II Operating Lease Events
of Default. As soon as possible but in any event within two Business
Days after the occurrence of any Amortization Event, Potential
Amortization Event, AESOP II Operating Lease Event of Default or
Potential AESOP II Operating Lease Event of Default, a written
statement of an Authorized Officer describing such event and the
action that the Guarantor or such Lessee, as the case may be, proposes
to take with respect thereto;
(iv) Manufacturers. Promptly after obtaining actual knowledge
thereof, notice of any Manufacturer Event of Default or termination or
replacement of a Manufacturer Program;
(v) Interim Financial Statements. Promptly following the
Guarantor's receipt thereof, copies of all other financial reports
submitted to the Guarantor by independent public accountants relating
to any annual or interim audit
52
<PAGE>
of the books of the Guarantor, or opinion as to the proper
book value of the assets of the Guarantor;
(vi) Reports. Promptly, from time to time, such information
with respect to the Vehicles leased hereunder and payments made and
owing hereunder as the Lessor may require to satisfy its reporting
obligations to the Lender pursuant to Section 9.5 of the AESOP II Loan
Agreement; and
(vii) Other. Promptly, from time to time, such other
information, documents, or reports respecting the Vehicles leased
hereunder or the condition or operations, financial or otherwise, of
the Guarantor or such Lessee as the Lessor, the Lender or the Trustee
may from time to time reasonably request in order to protect the
interests of the Lessor, the Lender or the Trustee under or as
contemplated by this Agreement or any other Related Document.
31.6. Payment of Taxes; Removal of Liens. Pay when due all taxes,
assessments, fees and governmental charges of any kind whatsoever that may be
at any time lawfully assessed or levied against or with respect to such Lessee,
the Guarantor or their respective property and assets or any interest thereon.
Notwithstanding the previous sentence, but subject in any case to the other
requirements hereof and of the Related Documents, neither such Lessee nor the
Guarantor shall be required to pay any tax, charge, assessment or imposition
nor to comply with any law, ordinance, rule, order, regulation or requirement
so long as such Lessee or the Guarantor shall contest, in good faith, the
amount or validity thereof, in an appropriate manner or by appropriate
proceedings. Each such contest shall be promptly prosecuted to final conclusion
(subject to the right of the Guarantor or such Lessee to settle any such
contest).
31.7. Business. Such Lessee will engage only in businesses in
substantially the same or related fields as the businesses conducted on the
date hereof and such other lines of business, which, in the aggregate, do not
constitute a material part of the operations of such Lessee.
31.8. Maintenance of Separate Existence. Each of the Guarantor and
such Lessee acknowledges its receipt of a copy of that certain opinion letter
issued by Skadden, Arps, Slate, Meagher & Flom LLP dated the Initial Closing
Date and addressing the issue of substantive consolidation as it may relate to
the Guarantor, each Lessee, the Lessor, AESOP Leasing, Original AESOP, AFC-II
and AFC. The Guarantor and each Lessee hereby
53
<PAGE>
agree to maintain in place all policies and procedures, and take and continue
to take all action, described in the factual assumptions set forth in such
opinion letter and relating to such Person.
31.9. Trustee as Lienholder. Concurrently with each leasing of a
Vehicle under this Agreement, the Administrator shall indicate on its computer
records that the Trustee as assignee of the Lender is the holder of a Lien on
such Vehicle pursuant to the terms of the Indenture.
31.10. Maintenance of the Vehicles. Maintain and cause to be
maintained in good repair, working order, and condition all of the Vehicles
leased by such Lessee in accordance with its ordinary business practices with
respect to all other vehicles owned by it, except to the extent that any such
failure to comply with such requirements does not, in the aggregate, materially
adversely affect the interests of the Lessor under this Agreement, the
interests of the Lender under the AESOP II Loan Agreement or the Secured
Parties under the Indenture or the likelihood of repayment of the Loans. From
time to time the Guarantor and such Lessee will make or cause to be made all
appropriate repairs, renewals, and replacements with respect to the Vehicles.
The Guarantor and such Lessee shall maintain good, legal and marketable title
to, or a valid leasehold interest in, all of its assets, free and clear of all
Liens except for Permitted Liens, and except to the extent sold or otherwise
disposed of in accordance with this Agreement or any of the other Related
Documents, and except to the extent no Material Adverse Effect could result.
31.11. Enhancement. If the Enhancement with respect to any Series of
Notes is provided by a letter of credit and (i) the short-term debt or deposit
rating of the Enhancement Provider of such letter of credit shall be downgraded
below the then-current rating of such Series of Notes by the Rating Agencies
with respect to such Series of Notes or (ii) such Enhancement Provider shall
notify the Lessees that its compliance with any of its obligations under such
letter of credit would be unlawful, use its best efforts to obtain a successor
institution to act as Enhancement Provider or, in the alternative, to otherwise
credit enhance the payments to be made under this Agreement by the Lessees,
subject to the satisfaction of the Rating Agency Confirmation Condition and any
other requirements set forth in the Related Documents.
31.12. Manufacturer Payments. Cause each Manufacturer and auction
dealer to make all payments made by it under the Manufac-
54
<PAGE>
turer Programs with respect to Vehicles leased hereunder directly to the
Collection Account. Any such payments from Manufacturers or related auction
dealers received directly by the Guarantor or any Lessee, will be, within three
Business Days of receipt, deposited into the Collection Account.
31.13. Accounting Methods; Financial Records. Maintain, and cause each
of its material Subsidiaries to maintain, a system of accounting and keep, and
cause each of its material Subsidiaries to keep, such records and books of
account (which shall be true and complete) as may be required or necessary to
permit the preparation of financial statements in accordance with GAAP.
31.14. Disclosure to Auditors. Disclose, and cause each of its
material Subsidiaries to disclose, to its independent certified public
accountants in a timely manner all loss contingencies of a type requiring
disclosure to auditors under accounting standards promulgated by the Financial
Accounting Standards Board.
32. CERTAIN NEGATIVE COVENANTS. Until the expiration or termination of
this Agreement and thereafter until the obligations of each Lessee and the
Guarantor under this Agreement and the Related Documents are satisfied in full,
each Lessee covenants and agrees as to itself, and the Guarantor covenants and
agrees as to itself and as to each Lessee that, unless at any time the Lessor
and the Trustee shall otherwise expressly consent in writing, it will not (and,
in the case of the Guarantor, will not permit each Lessee to):
32.1. Mergers, Consolidations. Merge or consolidate with any Person,
except that, if after giving effect thereto, no Potential AESOP II Operating
Lease Event of Default or AESOP II Operating Lease Event of Default would
exist, this Section 32.1 shall not apply to (i) any merger or consolidation,
provided that the Guarantor or such Lessee, as applicable, is the surviving
corporation and, if such Lessee is the surviving corporation, it is a direct or
indirect Wholly-Owned Subsidiary of the Guarantor after such merger or
consolidation and (ii) any merger or consolidation of such Lessee with or into
another Subsidiary of the Guarantor, provided that the surviving entity
executes an agreement of assumption to perform every obligation of such Lessee
under this Agreement and that such surviving entity is a direct or indirect
Wholly-Owned Subsidiary of the Guarantor.
32.2. Other Agreements. Enter into any agreement contain-
ing any provision which would be violated or breached by the
55
<PAGE>
performance of its obligations hereunder or under any instrument or document
delivered or to be delivered by it hereunder or in connection herewith.
32.3. Liens. Create or permit to exist any Lien with respect to any
Vehicle leased hereunder now or hereafter existing or acquired, except for
Permitted Liens.
32.4. Use of Vehicles. Use or allow the Vehicles to be used in any
manner that would (i) make such Vehicles ineligible for repurchase under an
Eligible Manufacturer Program, (ii) for any illegal purposes or (iii) subject
the Vehicles to confiscation.
32.5. Termination of Agreement. Allow this Agreement to terminate
prior to the termination of each other Lease.
33. ADMINISTRATOR ACTING AS AGENT OF THE LESSOR. The parties to this
Agreement acknowledge and agree that ARAC shall act as Administrator and, in
such capacity, as the agent for the Lessor, for purposes of performing certain
duties of the Lessor under this Agreement and the Related Documents. As
compensation for the Administrator's performance of such duties, the Lessor
shall pay to the Administrator on each Payment Date (i) the portion of the
Monthly Administration Fee payable by the Lessor pursuant to the Administration
Agreement and (ii) the reasonable costs and expenses of the Administrator
incurred by it as a result of arranging for the sale of Vehicles returned to
the Lessor as a result of a Vehicle Return Default and sold to third parties,
provided, however, that such costs and expenses shall only be payable to the
Administrator to the extent of any excess of the sale price received by the
Lessor for any such Vehicle over the Termination Value thereof.
34. NO PETITION. Each of the Guarantor, each Lessee and the
Administrator hereby covenants and agrees that, prior to the date which is one
year and one day after the payment in full of all of the Notes and the
Commercial Paper Notes, it will not institute against, or join any other Person
in instituting against, the Lessor, Original AESOP, AESOP Leasing, Quartx,
PVHC, AFC or AFC-II any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under the laws of the
United States or any state of the United States. In the event that the
Guarantor, any Lessee or the Administrator takes action in violation of this
Section 34, the Lessor agrees, for the benefit of the Secured Parties, that it
shall file an answer with the bankruptcy court or otherwise
56
<PAGE>
properly contest the filing of such a petition by the Guarantor, such Lessee or
the Administrator against the Lessor, Original AESOP, AESOP Leasing, Quartx,
PVHC, AFC or AFC-II or the commencement of such action and raise the defense
that the Guarantor, such Lessee or the Administrator has agreed in writing not
to take such action and should be estopped and precluded therefrom and such
other defenses, if any, as its counsel advises that it may assert. The
provisions of this Section 34 shall survive the termination of this Agreement.
35. SUBMISSION TO JURISDICTION. The Lessor and the Trustee may enforce
any claim arising out of this Agreement in any state or federal court having
subject matter jurisdiction, including, without limitation, any state or
federal court located in the State of New York. For the purpose of any action
or proceeding instituted with respect to any such claim, the Guarantor and each
Lessee hereby irrevocably submits to the jurisdiction of such courts. The
Guarantor and each Lessee further irrevocably consents to the service of
process out of said courts by mailing a copy thereof, by registered mail,
postage prepaid, to the Guarantor or such Lessee, as the case may be, and
agrees that such service, to the fullest extent permitted by law, (i) shall be
deemed in every respect effective service of process upon it in any such suit,
action or proceeding and (ii) shall be taken and held to be valid personal
service upon and personal delivery to it. Nothing herein contained shall affect
the right of the Trustee, the Lender and the Lessor to serve process in any
other manner permitted by law or preclude the Lessor, the Lender or the Trustee
from bringing an action or proceeding in respect hereof in any other country,
state or place having jurisdiction over such action. The Guarantor and each
Lessee hereby irrevocably waives, to the fullest extent permitted by law, any
objection which it may have or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court located in the State
of New York and any claim that any such suit, action or proceeding brought in
such a court has been brought in an inconvenient forum.
36. GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW). Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating
57
<PAGE>
the remainder of such provision or the remaining provisions of this Agreement.
All obligations of the Guarantor and each Lessee and all rights of the Lessor,
the Lender or the Trustee expressed herein shall be in addition to and not in
limitation of those provided by applicable law or in any other written
instrument or agreement.
37. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY, OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED
TRANSACTION, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
38. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing including facsimile transmission or similar
writing) and shall be given to such party, addressed to it, at its address or
telephone number set forth on the signature pages below, or at such other
address or telephone number as such party may hereafter specify for the purpose
by notice to the other party. In each case, a copy of all notices, requests and
other communications that are sent by any party hereunder shall be sent to the
Trustee and the Lender and a copy of all notices, requests and other
communications that are sent by any Lessee or the Guarantor to each other that
pertain to this Agreement shall be sent to the Lessor, the Lender and the
Trustee. Copies of notices, requests and other communications delivered to the
Trustee, the Lender and/or the Lessor pursuant to the foregoing sentence shall
be sent to the following addresses:
TRUSTEE: Harris Trust and Savings Bank
311 Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Corporate Trust Officer
Telephone: (312) 461-2532
Fax: (312) 461-3525
58
<PAGE>
LENDER: AESOP Funding II L.L.C.
------
c/o Lord Securities Corporation
Two Wall Street
New York, New York 10005
Attention: Frank Bilotta
Telephone: (212) 346-9000
Fax: (212) 346-9012
LESSOR: AESOP Leasing Corp. II
------
c/o Lord Securities Corporation
Two Wall Street
New York, New York 10005
Attention: Frank Bilotta
Telephone: (212) 346-9000
Fax: (212) 346-9012
Each such notice, request or communication shall be effective when received at
the address specified below. Copies of all notices must be sent by first class
mail promptly after transmission by facsimile.
39. LIABILITY. Each Lessee shall be held jointly and severally
liable for all of the obligations of each other Lessee and the Guarantor
hereunder. The Guarantor shall be held jointly and severably liable for all the
obligations of each Lessee hereunder.
40. TITLE TO MANUFACTURER PROGRAMS IN LESSOR. The Lessee, by its
execution hereof, acknowledges and agrees that (i) the Lessor is the sole owner
and holder of all right, title and interest in and to the Manufacturer
Programs, (ii) in accordance with the Assignment Agreements, all of the
Lessor's right, title and interest in and to such Manufacturer Programs have
been assigned to the Trustee and (iii) no Lessee has any right, title or
interest in any Manufacturer Program. To confirm the foregoing, each Lessee, by
its execution hereof, hereby assigns and transfers to the Lessor any rights
that such Lessee may have in respect of any Manufacturer Programs.
41. HEADINGS. Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
42. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and
59
<PAGE>
all of which counterparts, taken together, shall constitute one and the same
Agreement.
43. EFFECTIVENESS. This Agreement shall become effective concurrently
with the issuance of the Loan Note under the AESOP II Loan Agreement.
44. NO RECOURSE. The obligations of AESOP Leasing II under this
Agreement are solely the corporate obligations of AESOP Leasing II. No recourse
shall be had for the payment of any obligation or claim arising out of or based
upon this Agreement against any shareholder, employee, officer, director or
incorporator of AESOP Leasing II.
60
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
or caused it to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
LESSOR:
AESOP LEASING CORP. II
By: /s/ Peter H. Sorensen
Address: c/o Lord Securities
Corporation
Two Wall Street
19th Floor
New York, New York 10005
Attention: Frank Bilotta
Telephone: (212) 346-9000
Telefax: (212) 346-9012
LESSEE AND ADMINISTRATOR:
AVIS RENT A CAR SYSTEM, INC.
By: /s/ Steven L. Greenberger
--------------------------------
Address: 900 Old Country Road
Garden City, NY 11530
Attention: Treasurer
cc: General Counsel
Telephone: (516) 222-3000
Telefax: (516) 222-3751
<PAGE>
GUARANTOR:
AVIS RENT A CAR, INC.
By: /s/ Kevin M. Sheehan
------------------------------
Address: 900 Old Country Road
Garden City, NY 11530
Attention: Treasurer
cc: General Counsel
Telephone: (516) 222-3000
Telefax: (516) 222-3751
COUNTERPART NO. OF TEN (10) SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS.
TO THE EXTENT IF ANY THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE
UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED
THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART
NO. 1.
<PAGE>
SCHEDULE 30.5
Litigation
[NONE]
<PAGE>
SCHEDULE 30.10
Business Locations
<TABLE>
<CAPTION>
=============================================================================================================================
PARTY PRINCIPAL PLACE OF ADDITIONAL RECORDS STATES IN WHICH CON-
BUSINESS LOCATION DUCTS BUSINESS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Avis Rent A Car 900 Old Country Road 300 Centre Pointe Dr. AZ, AR, CA, CO, CT,
System, Inc. Garden City, NY Virginia Beach, VA DE, DC, FL, GA, HI,
d/b/a/ Avis Rent 11530 23462 ID, IL, IN, KS, KY, LA,
A Car and Avis ME, MD, MA, MI, MN,
MS, MO, MT, NE, NV,
NJ, NM, NY, NC, OH,
OK, OR, PA, RI, SC,
TN, TX, UT, VT, VA,
WA, WV, WI and WY
- -----------------------------------------------------------------------------------------------------------------------------
Avis Rent A 900 Old Country Road NY
Car, Inc. Garden City, NY
11530
=============================================================================================================================
</TABLE>
<PAGE>
SCHEDULE 30.13
Compliance with Law
[NONE]
<PAGE>
ATTACHMENT A
Information Relating to Initial Leased Vehicles
I. Initial AESOP Vehicles (as of the Initial Closing Date)
a. [For each Vehicle] Vehicle Identification Number
b. [For each Vehicle] Net Book Value
A-1
<PAGE>
ATTACHMENT B
Vehicle Acquisition Schedule and Related Information
1. Principal amount of Loan financing the Vehicle
2. Date of Loan financing the Vehicle
3. Vehicle Operating Lease Commencement Date
4. Vehicle Identification Number (VIN)
5. Summary of Vehicles being financed (including, for Vehicles
subject to the GM Repurchase Program, the Designated Period
for such Vehicles)
6. Program or Non-Program Vehicle
7. Capitalized Cost (if applicable)
8. Net Book Value (if applicable)
B-1
<PAGE>
ATTACHMENT C
Form of Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that AESOP LEASING CORP. II
does hereby make, constitute and appoint Avis Rent A Car System, Inc. ("ARAC")
its true and lawful Attorney-in-Fact for it and in its name, stead and behalf,
(i) to execute any and all documents pertaining to the titling of motor
vehicles in the name of AESOP LEASING CORP. II or AESOP LEASING CORP., (ii) the
noting of the lien of Harris Trust and Savings Bank, as trustee (in such
capacity, the "Trustee"), as the first lienholder on certificates of title,
(iii) the licensing and registration of motor vehicles, (iv) designating c/o
ARAC as the mailing address of the Trustee for all documentation relating to
the title and registration of such motor vehicles, (v) applying for duplicate
certificates of title indicating the lien of the Trustee where original
certificates of title have been lost or destroyed and (vi) upon the sale of any
such motor vehicle pursuant to the Master Motor Vehicle Operating Lease
Agreement, dated as of July 30, 1997, among AESOP Leasing Corp. II, ARAC, any
other Eligible Rental Car Company that becomes a party thereto pursuant to the
terms thereof and Avis Rent A Car, Inc., in accordance with the terms and
conditions thereof, releasing the lien of the Trustee on such motor vehicle by
executing any documents required in connection therewith. This power is limited
to the foregoing and specifically does not authorize the creation of any liens
or encumbrances on any of said motor vehicles.
The powers and authority granted hereunder shall, unless
sooner terminated, revoked or extended, cease eight years from the date of
execution as set forth below.
C-1
<PAGE>
IN WITNESS WHEREOF, AESOP LEASING CORP. II has caused
this instrument to be executed on its behalf by its duly autho-
rized officer this ___ day of ______, 19__.
AESOP LEASING CORP. II
By:
---------------------------------
State of ________ )
County of _______ )
Subscribed and sworn before me, a notary public, in and for said
county and state, this ___ day of _____, 19__.
----------------------------------------
Notary Public
My Commission Expires: _______
C-2
<PAGE>
ATTACHMENT D
Form of Joinder in Lease
THIS JOINDER IN LEASE AGREEMENT (this "Joinder") is executed
as of ___________ __, 19__, by _______________, a _______________ ("Joining
Party"), and delivered to AESOP Leasing Corp. II, a Delaware corporation
("AESOP Leasing II"), as lessor pursuant to the Master Motor Vehicle Operating
Lease Agreement, dated as of July 30, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Agreement"), among AESOP Leasing II,
Avis Rent A Car System, Inc., a Delaware corporation ("ARAC"), and other
Eligible Rental Car Companies that become party to the Lease pursuant to the
provisions of Section 24 thereof (individually, a "Lessee" and, collectively,
the "Lessees"), and Avis Rent A Car, Inc. ("ARC"), as guarantor. Capitalized
terms used herein but not defined herein shall have the meanings provided for
in the Lease.
R E C I T A L S:
WHEREAS, the Eligible Rental Car Company is a direct or
indirect Subsidiary of ARC; and
WHEREAS, the Eligible Rental Car Company desires to become a
"Lessee" under and pursuant to the Lease.
NOW, THEREFORE, the Eligible Rental Car Company agrees as
follows:
A G R E E M E N T:
1. The Joining Party hereby represents and warrants to and in
favor of AESOP Leasing II and the Trustee that (i) the Eligible Rental Car
Company is a direct or indirect wholly-owned Subsidiary of ARC, (ii) all of the
conditions required to be satisfied pursuant to Section 24 of the lease in
respect to the Eligible Rental Car Company becoming a Lessee thereunder have
been satisfied, and (iii) all of the representations and warranties contained
in Section 30 of the Lease with respect to the Lessees are true and correct as
applied to the Eligible Rental Car Company as of the date hereof.
2. The Eligible Rental Car Company hereby agrees to assume
all of the obligations of a "Lessee" under the Lease and agrees to be bound by
all of the terms, covenants and conditions therein.
D-1
<PAGE>
3. By its execution and delivery of this Joinder, the
Eligible Rental Car Company hereby becomes a Lessee for all purposes under the
Lease. By its execution and delivery of this Joinder, AESOP Leasing II
acknowledges that the Joining Party is a Lessee for all purposes under the
Lease.
IN WITNESS WHEREOF, the Eligible Rental Car Company has
caused this Joinder to be duly executed as of the day and year first above
written.
[Name of Joining Party]
By: __________________________
Name:
Title:
Accepted and Acknowledged by:
AESOP LEASING CORP. II
By: ___________________________
Name:
Title:
Acceptance and Acknowledegment by:
ARC as guarantor:
By: ___________________________
Name:
Title:
D-2
<PAGE>
CREDIT AGREEMENT
Dated as of July 30, 1997
Among
AVIS RENT A CAR SYSTEM, INC.,
AVIS RENT A CAR, INC.,
the LENDERS
parties hereto
from time to time,
THE CHASE MANHATTAN BANK
And
LEHMAN COMMERCIAL PAPER INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions 2
SECTION 1.01. Defined Terms............................................... 2
SECTION 1.02. Classification of Loans and Borrowings...................... 23
SECTION 1.03. Terms Generally............................................. 23
SECTION 1.04. Accounting Terms; GAAP...................................... 23
ARTICLE II
Amount and Terms of the Revolving Credit
Commitments and Term Loan Commitments 24
SECTION 2.01. Revolving Credit Commitments................................ 24
SECTION 2.02. Revolving Loans and Borrowings.............................. 24
SECTION 2.03. Requests for Revolving Borrowings........................... 24
SECTION 2.04. Term Loan Commitments....................................... 25
SECTION 2.05. Term Loans and Borrowings................................... 25
SECTION 2.06. WC Letters of Credit........................................ 26
SECTION 2.07. Funding of Borrowings....................................... 31
SECTION 2.08. Interest Elections.......................................... 32
SECTION 2.09. Termination and Optional and Mandatory Reduction of
Revolving Credit Commitment........................ 33
SECTION 2.10. Scheduled Repayment of Loans; Evidence of Debt.............. 33
SECTION 2.11. Optional and Mandatory Prepayment of Loans.................. 34
ARTICLE III
Amount and Terms of the CE Letters of Credit 36
SECTION 3.01. CE Commitments.............................................. 36
SECTION 3.02. Requests for CE Letter of Credit............................ 36
SECTION 3.03. Expiration Date............................................. 36
SECTION 3.04. Participations.............................................. 36
SECTION 3.05. Procedures for Extensions................................... 37
SECTION 3.06. Replacement of a Lender..................................... 38
SECTION 3.07. Exit Loans by Non-Extending Lenders......................... 38
SECTION 3.08. Reimbursement by Borrower................................... 39
SECTION 3.09. Replacement of the CE Issuing Bank.......................... 42
SECTION 3.10. Special Liquidity Draw...................................... 42
SECTION 3.11. CE Letter of Credit Fees.................................... 42
SECTION 3.12. Conversion of CE Disbursements.............................. 43
SECTION 3.13. Reduction of CE Commitment.................................. 43
<PAGE>
Page
ARTICLE IV
General Provisions 44
SECTION 4.01. Fees........................................................ 44
SECTION 4.02. Interest.................................................... 45
SECTION 4.03. Alternate Rate of Interest.................................. 45
SECTION 4.04. Increased Costs............................................. 46
SECTION 4.05. Break Funding Payments...................................... 47
SECTION 4.06. Taxes....................................................... 47
SECTION 4.07. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. 48
SECTION 4.08. Mitigation Obligations; Replacement of Lenders.............. 50
ARTICLE V
Representations and Warranties 51
SECTION 5.01. Organization; Powers........................................ 51
SECTION 5.02. Authorization; Enforceability............................... 51
SECTION 5.03. Approvals; No Conflicts..................................... 51
SECTION 5.04. Financial Condition; No Material Adverse Change............. 51
SECTION 5.05. Properties.................................................. 52
SECTION 5.06. Litigation and Environmental Matters........................ 53
SECTION 5.07. Compliance with Laws and Agreements......................... 53
SECTION 5.08. Investment and Holding Company Status....................... 53
SECTION 5.09. Taxes....................................................... 53
SECTION 5.10. ERISA....................................................... 53
SECTION 5.11. Disclosure.................................................. 54
SECTION 5.12. Federal Regulations......................................... 54
SECTION 5.13. The Security Documents...................................... 54
SECTION 5.14. Pledged Stock............................................... 55
SECTION 5.15. Real Estate Matters......................................... 55
SECTION 5.16. Subsidiaries................................................ 55
SECTION 5.17. Delivery of the Transaction Documents....................... 56
SECTION 5.18. Representations and Warranties Contained in
the other Transaction Documents.................... 56
SECTION 5.19. Labor Matters............................................... 56
SECTION 5.20. Purpose of Loans............................................ 56
SECTION 5.21. Non-Guarantor Subsidiaries.................................. 56
ARTICLE VI
Conditions 57
SECTION 6.01. Closing Date................................................ 57
SECTION 6.02. Each Extension of Credit.................................... 60
-ii-
<PAGE>
Page
ARTICLE VII
Affirmative Covenants 57
SECTION 7.01. Financial Statements and Other Information.................. 61
SECTION 7.02. Notices of Material Events.................................. 62
SECTION 7.03. Existence; Conduct of Business.............................. 63
SECTION 7.04. Payment of Obligations...................................... 63
SECTION 7.05. Maintenance of Properties; Insurance........................ 63
SECTION 7.06. Books and Records; Inspection Rights........................ 63
SECTION 7.07. Compliance with Laws Generally.............................. 63
SECTION 7.08. Environmental Laws.......................................... 64
SECTION 7.09. Real Property Matters....................................... 64
SECTION 7.10. After-Acquired Property and Fixtures........................ 66
SECTION 7.11. Further Assurances.......................................... 67
ARTICLE VIII
Negative Covenants 67
SECTION 8.01. Financial Condition Covenants............................... 67
SECTION 8.02. Indebtedness................................................ 68
SECTION 8.03. Liens....................................................... 70
SECTION 8.04. Limitation on Fundamental Changes........................... 70
SECTION 8.05. Limitation on Sale of Assets................................ 71
SECTION 8.06. Limitation on Restricted Payments........................... 71
SECTION 8.07. Limitation on Capital Expenditures.......................... 72
SECTION 8.08. Limitation on Investments, Loans and Advances............... 72
SECTION 8.09. Limitation on Sale and Leaseback Transactions............... 73
SECTION 8.10. Limitation on Optional Payments and Modifications
of Debt Instruments and Other Documents................... 73
SECTION 8.11. Limitation on Changes to Franchise Agreements............... 73
SECTION 8.12. Limitation on Changes in Fiscal Year........................ 73
SECTION 8.13. Limitation on Lines of Business............................. 73
SECTION 8.14. Limitations on Currency and Commodity Hedging
Transactions.............................................. 74
SECTION 8.15. Restrictive Agreements...................................... 74
SECTION 8.16. Limitation on Transactions with Affiliates.................. 74
SECTION 8.17. Limitation on Activities of Certain Subsidiaries............ 74
ARTICLE IX
Events of Default 75
ARTICLE X
The Administrative Agent 78
-iii-
<PAGE>
Page
ARTICLE XI
Miscellaneous 80
SECTION 11.01. Notices.................................................... 80
SECTION 11.02. Waivers; Amendments........................................ 80
SECTION 11.03. Expenses; Indemnity; Damage Waiver......................... 81
SECTION 11.04. Successors and Assigns..................................... 82
SECTION 11.05. Survival................................................... 85
SECTION 11.06. Counterparts; Integration; Effectiveness................... 85
SECTION 11.07. Severability............................................... 85
SECTION 11.08. Right of Setoff............................................ 85
SECTION 11.09. Governing Law; Jurisdiction; Consent to Service of Process. 86
SECTION 11.10. WAIVER OF JURY TRIAL....................................... 86
SECTION 11.11. Headings................................................... 86
SECTION 11.12. Confidentiality............................................ 87
SCHEDULES
1.01 Guarantor Subsidiaries
2.01 Revolving Credit Commitments
2.04 Term Loan Commitments
2.06(k) Outstanding Letters of Credit
3.01 CE Commitments
5.03 Required Consents
5.06 Disclosed Matters
5.13 Lien Searches
5.15 Material Real Property
5.16 Subsidiaries
8.02 Permitted Indebtedness
8.03 Permitted Liens
8.08(b) Permitted Investments
8.15 Restrictive Agreements
EXHIBITS
A Form of Assignment and Acceptance
B Form of Guarantee
C Form of Security Agreement
D Form of Pledge Agreement
E Form of Mortgage
F Form of CE Letter of Credit
G Form of Notice of Conversion
H Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, as counsel to
the Credit Parties
I Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, in respect of
the Franchise Agreements
J Form of Borrowing Certificate
-iv-
<PAGE>
CREDIT AGREEMENT, dated as of July 30, 1997, among Avis Rent A Car
System, Inc., a Delaware corporation (the "Borrower"), Avis Rent A Car, Inc., a
Delaware corporation ("Avis"), the several banks and other financial
institutions and entities from time to time parties to this Agreement (the
"Lenders"), The Chase Manhattan Bank, a New York banking corporation, as
administrative agent for the Lenders (the "Administrative Agent") and Lehman
Commercial Paper Inc., a Delaware corporation, as syndication agent for the
Lenders (the "Syndication Agent"; collectively with the Administrative Agent,
the "Agents").
W I T N E S S E T H :
WHEREAS, the Borrower is a wholly-owned subsidiary of Avis;
WHEREAS, as of the Closing Date, Avis is a wholly-owned subsidiary of
HFS Car Rental, Inc. (the "Franchisor"), which itself is a wholly-owned
subsidiary of HFS Incorporated ("HFS");
WHEREAS, prior to the execution and delivery of this Credit Agreement,
and pursuant to the Separation Agreement, dated as of July 30, 1997 (the
"Separation Agreement"), Franchisor transferred to Avis its equity interests in
all of its subsidiaries that currently conduct the business of owning and
managing car rental operations under the service mark and tradename "Avis";
WHEREAS, to effect the separation contemplated in the Separation
Agreement, Avis intends to make an initial public offering (the "IPO") of its
common stock, the net proceeds of which will be retained by Avis for general
corporate purposes and, after giving effect to which, the Franchisor expects to
own 25% of the then outstanding shares of Avis common stock;
WHEREAS, in connection with the transactions contemplated in the
Separation Agreement Avis will enter into (i) a master license agreement (the
"Master License Agreement") with the Franchisor and Wizard Co., Inc., an
indirect wholly-owned subsidiary of HFS ("Wizard"), (ii) a reservation services
agreement (the "Reservation Services Agreement") with HFS and (iii) a computer
services agreement (the "Computer Services Agreement"; collectively with the
Master License Agreement and the Reservation Services Agreement, the "Franchise
Agreements") with WizCom International Ltd., an indirect wholly-owned
subsidiary of HFS ("WizCom");
WHEREAS, (i) AESOP Funding Corp., a special-purpose, bankruptcy remote
Delaware corporation ("AESOP"), and AESOP Funding II, L.L.C., a bankruptcy
remote, special purpose Delaware limited liability company ("AESOP II") intend
to use the proceeds from the sale of (a) commercial paper notes (the
"Commercial Paper") by AESOP and (b) medium-term notes (the "Medium Term
Notes") by AESOP II to provide loans to AESOP Leasing L.P., a special purpose
bankruptcy-remote limited partnership ("AESOP Leasing") 99% owned by the
Borrower, and AESOP Leasing Corp. II, a special purpose bankruptcy-remote
entity ("AESOP Leasing II") for their purchase of a fleet of vehicles to be
leased to the Borrower, and (ii)
<PAGE>
2
AESOP proposes to enter into a 364 day revolving liquidity facility in an
amount up to $1,800,000,000 to provide backup liquidity for the Commercial
Paper (the "Liquidity Facility"; collectively with the Commercial Paper and the
Medium Term Notes, the "Fleet Financing Program");
WHEREAS, in connection with the Fleet Financing Program, the Borrower
will enter into certain operating lease and finance lease agreements with AESOP
Leasing and AESOP Leasing II for the leasing of vehicles (the "Leases") for the
conduct of its rental car business;
WHEREAS, the Borrower has requested that the Agents and the Lenders
enter into this agreement (i) to provide financing for the working capital and
other business requirements of the Borrower and its Subsidiaries and (ii) to
provide for the issuance of letters of credit to support the Fleet Financing
Program and to support obligations of workmans' compensation and other
insurance and bonding requirements; and
WHEREAS, in connection with entering into the Liquidity Facility,
AESOP and the Administrative Agent will enter into a collateral agreement (the
"Collateral Agreement") with the Collateral Agent (as defined herein) and the
Liquidity Agent (as defined in the Liquidity Facility) pursuant to which
reimbursement of certain drawings under letters of credit issued under this
Agreement would be made by AESOP pursuant to the terms of the Collateral
Agreement.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Adjusted EBITDA" means, with respect to any period, EBITDA for such
period, plus, to the extent deducted in determining such EBITDA for such
period, any portion of the royalty fees under the Franchise Agreements and
accrued interest thereon the payment of which is deferred minus any such
deferred portion paid in the period.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
<PAGE>
3
"Adjustment Date" means each date on or after June 30, 1998 that is
the second Business Day following receipt by the Lenders of both (i) the
financial statements required to be delivered pursuant to Section 7.01(a) or
7.01(b), as applicable, for the most recently completed fiscal period and (ii)
the related compliance certificate required to be delivered pursuant to Section
7.01(c) with respect to such fiscal period.
"AESOP" has the meaning assigned in the Recitals to this Agreement.
"AESOP II" has the meaning assigned in the Recitals to this Agreement.
"AESOP Leasing" has the meaning assigned in the Recitals to this
Agreement.
"AESOP Leasing II" has the meaning assigned in the Recitals to this
Agreement.
"Administrative Agent" means The Chase Manhattan Bank, in its capacity
as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a 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.
"Agents" has the meaning assigned in the Preamble to this Agreement.
"Aggregate Face Amount" has the meaning assigned in the Liquidity
Facility.
"Aggregate Liquidity Commitment" has the meaning assigned in the
Liquidity Facility.
"Alternate Base Rate" means, for any day, a rate per annum equal to
the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to
a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate shall be effective from and including the effective date of such change in
the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate,
respectively.
"Applicable CE Percentage" means, with respect to any Lender, the
percentage of the total CE Commitments represented by such Lender's CE
Commitment. If the CE Commitments have terminated or expired, the Applicable CE
Percentages shall be determined based upon the CE Commitments most recently in
effect, giving effect to any assignments.
"Applicable RC Percentage" means, with respect to any Lender, the
percentage of the total Revolving Credit Commitments represented by such
Lender's Revolving Credit Commitment. If the Revolving Credit Commitments have
terminated or expired, the Applicable
<PAGE>
4
RC Percentages shall be determined based upon the Revolving Credit Commitments
most recently in effect, giving effect to any eligible assignments.
"Applicable TL Percentage" means, with respect to any Lender, before
the Closing Date, the percentage of the total Term Loan Commitments represented
by such Lender's Term Loan Commitment and, after the Closing Date, the
percentage of the aggregate Term Loans then outstanding represented by such
Lender's Term Loan then outstanding, giving effect to any eligible assignments.
"Applicable Rate" means, for any day, with respect to any ABR Loan or
Eurodollar Loan, initially 0.50% and 2.25%, respectively, provided that
commencing from and after the quarter ended June 30, 1998, the applicable rate
per annum for all Types of Loans will be adjusted, on each Adjustment Date, as
set forth below under the caption "ABR Spread" or "Eurodollar Spread" as the
case may be, and provided further that, if the financial statements required to
be delivered pursuant to Section 7.01(a) or 7.01(b), as applicable, and the
related compliance certificate required to be delivered pursuant to Section
7.01(c), are not delivered when due, then, during the period from the date upon
which such financial statements were required to be delivered until two
Business Days following the date upon which such financial statements are
actually delivered, the applicable rate for ABR Loans and Eurodollar Loans
would be their respective rates at Margin Level 1:
=====================================================================
Margin Level Status: ABR Spread Eurodollar Spread
---------------------------------------------------------------------
Margin Level 1 0.50% 2.25%
---------------------------------------------------------------------
Margin Level 2 0.50% 2.00%
---------------------------------------------------------------------
Margin Level 3 0.375% 1.75%
=====================================================================
"Assessment Rate" means, for any day, the annual assessment rate in
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; provided that if, as a result of
any change in any law, rule or regulation, it is no longer possible to
determine the Assessment Rate as aforesaid, then the Assessment Rate shall be
such annual rate as shall be determined by the Administrative Agent to be
representative of the cost of such insurance to the Lenders.
"Asset Sale" any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, through a Sale and Leaseback
Transaction or as a result of casualty or condemnation) (a "Disposition") by
Avis or any Subsidiary, in one or a series of related
<PAGE>
5
transactions, of any real or personal, tangible or intangible, property
(including, without limitation, Capital Stock of a Subsidiary) of Avis or such
Subsidiary to any Person (other than to Avis or any of its Subsidiaries).
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any party whose consent
is required by Section 11.04), and accepted by the Administrative Agent, in the
form of Exhibit A or any other form approved by the Administrative Agent.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Beneficiary" means either the Trustee or the Collateral Agent, as the
case may be.
"Board" means the Board of Governors of the Federal Reserve System of
the United States of America.
"Borrower" has the meaning assigned in the preamble hereto.
"Borrowing" means (a) Revolving Loans of the same Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans,
as to which a single Interest Period is in effect, or (b) Term Loans of the
same Type made on the same date and as to which a single Interest Period is in
effect.
"Borrowing Request" means a request by the Borrower for a Revolving
Borrowing in accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by
law to remain closed; provided that, when used in connection with a Eurodollar
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market.
"Capital Expenditures" means with respect to any Person for any
period, the sum of the aggregate of all expenditures by such Person and its
consolidated Subsidiaries during such period which, in accordance with GAAP,
are or should be included in "capital expenditures" which such expenditures
shall exclude any amounts spent on vehicles.
"Capital Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
<PAGE>
6
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
"Cash Collateral Prepayment Account" has the meaning specified in
Section 2.11(c).
"CE" means, with respect to each Credit Document, Credit Enhancement.
"CE Commitment" means, with respect to each Lender, the commitment of
such Lender to acquire participations in CE Letters of Credit hereunder,
expressed as an amount representing the maximum aggregate amount of such
Lender's CE Exposure hereunder, as such commitment may be (a) reduced from time
to time pursuant to Sections 3.07 or 3.13 and (b) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to Section
11.04. The initial amount of each Lender's CE Commitment is set forth on
Schedule 3.01, or in the Assignment and Acceptance pursuant to which such
Lender shall have assumed its CE Commitment, as applicable.
"CE Issuing Bank" means Bayerische Vereinsbank, or any other financial
institution in its capacity as the issuer of CE Letters of Credit hereunder,
and such financial institution's successors in such capacity as provided in
Section 3.09. The CE Issuing Bank shall also be a Lender with respect to its CE
Commitment, if any.
"CE LC Disbursement" means a payment made by the CE Issuing Bank
pursuant to a CE Letter of Credit.
"CE LC Exposure" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding CE Letters of Credit at such time plus (b)
the aggregate amount of all CE LC Disbursements that have not yet been
reimbursed by or on behalf of the Borrower at such time. The CE LC Exposure of
any Lender at any time shall be its Applicable CE Percentage of the total CE LC
Exposure at such time.
"CE Letter of Credit" means any letter of credit issued pursuant to
Section 3.01.
"CE Termination Date" means the day on which the CE Letters of Credit
expires. Such day shall be the Business Day immediately preceding the first
anniversary of the Closing Date as extended pursuant to Section 3.05.
"Change in Control" means (a) the acquisition of ownership, directly
or indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), other than
HFS or any subsidiary of HFS, (i) of shares representing more than 40% of the
aggregate ordinary voting power represented by the issued and outstanding
capital stock of Avis at a time when HFS in the aggregate beneficially,
directly or indirectly, owns shares of such capital stock having at least 20%
of such voting power and (ii) of shares
<PAGE>
7
representing more than 30% otherwise; (b) occupation of a majority of the seats
(other than vacant seats) on the board of directors of Avis by Persons who were
neither (i) nominated by the board of directors of Avis nor (ii) appointed by
directors so nominated; or (c) the acquisition of direct or indirect Control of
Avis by any Person or group other than HFS and its subsidiaries.
"Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or any Issuing
Bank (including for purposes of Section 4.04, by any lending office of such
Lender or by such Lender's or such Issuing Bank's holding company, if any) with
any request, guideline or directive (whether or not having the force of law) of
any Governmental Authority made or issued after the date of this Agreement.
"Class", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans
or Term Loans or Exit Loans.
"Closing Date" means the date on which the conditions specified in
Section 6.01 are satisfied (or waived in accordance with Section 11.02).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" means all assets (including assets constituting shares of
Capital Stock) of the Credit Parties, now owned or hereafter acquired, upon
which a Lien is purported to be created by any Security Document.
"Collateral Agent" means The Chase Manhattan Bank, or any successor.
"Collateral Agreement" has the meaning assigned in the Recitals to
this Agreement.
"Commercial Paper" has the meaning assigned in the Recitals to this
Agreement.
"Commitment" means, with respect to each Lender, its Revolving Credit
Commitment, Term Loan Commitment and CE Commitment, as applicable.
"Computer Services Agreement" has the meaning assigned in the Recitals
to this Agreement.
"Consolidated" when used in connection with any defined term, and not
otherwise defined, means such term as it applies to any Person and its
subsidiaries on a consolidated basis, after eliminating all intercompany items.
"Contractual Obligation" means as to any Person, any provision of any
material security issued by such Person or of any material agreement,
instrument or other undertaking to which such Person is a party or by which it
or any of its property is bound.
<PAGE>
8
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Covered Foreign Fleet Debt" means, with respect to each Foreign
Subsidiary of Avis at any time the lesser of (i) the outstanding amount of
Indebtedness of such subsidiary incurred to finance the acquisition directly or
indirectly of vehicles by such subsidiary and (ii) 85% of the book value of
such vehicles at such time.
"CP Program" means the collective reference to the Commercial Paper
and the Liquidity Facility and the related transaction documents.
"Credit Draw" means a drawing in respect of the CE Letter of Credit
resulting from, or as a consequence of, or attributable to, a breach of one or
more of the Borrower's obligations under the Fleet Financing Program.
"Credit Disbursement" has the meaning assigned in Section 3.08.
"Credit Documents" means this Agreement, any notes, and the Security
Documents, each as amended, supplemented, waived or otherwise modified from
time to time.
"Credit Parties" means Avis, the Borrower and each Guarantor
Subsidiary; individually, a "Credit Party".
"Debt" means, as to Avis at the date of any determination thereof, the
sum of all items classified at such date as Consolidated Indebtedness of Avis
and its Subsidiaries (including, without duplication, outstanding Letters of
Credit) minus any such amounts that constitute Fleet Debt and minus any letters
of credit to the extent cash collateralized.
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 5.06.
"dollars" or "$" refers to lawful money of the United States of
America.
"Domestic Subsidiary" means any Subsidiary organized under the laws of
any jurisdiction within the United States of America (including territories),
excluding the Securitization Entities.
"Downgraded Issuing Bank" has the meaning assigned in Section 3.09.
<PAGE>
9
"EBITDA" means, with respect to any period, the Consolidated Net
Income of Avis for such period plus, in each case to the extent deducted in
determining such Consolidated Net Income for such period, the sum of the
following: (i) Consolidated Interest Expense of Avis (excluding any such
expense attributable to fleet interest expense), (ii) Consolidated income tax
expense of Avis and (iii) Consolidated depreciation and amortization expense of
Avis (excluding any such expense attributable to fleet depreciation).
"Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation,
fines, penalties or indemnities), of Avis or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"Environmental Permits" means any and all permits, licenses,
registrations, notifications, exemptions and any other authorization required
under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with Avis, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan
(other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by Avis or any ERISA Affiliate from
the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by Avis or any of its ERISA Affiliates of any liability with
respect to the withdrawal or partial withdrawal from any Plan or Multiemployer
Plan; or (g) the receipt by Avis or any ERISA Affiliate of any notice, or the
receipt by any Multiemployer Plan from Avis or any
<PAGE>
10
ERISA Affiliate of any notice, concerning the imposition of Withdrawal
Liability or a determination that a Multiemployer Plan is, or is expected to
be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Article
IX.
"Excess Cash Flow" means, with respect to any period, the net cash
provided by operating activities (excluding any expense attributable to vehicle
depreciation) as reflected on the consolidated statements of cash flows of Avis
for such period minus (i) Capital Expenditures made in accordance with Section
8.07 during such period, minus (ii) mandatory payments of principal on
Indebtedness (including any mandatory cash collateralization of Letters of
Credit) under this Agreement resulting in the permanent reduction of such
Indebtedness during such period, minus (iii) any increase in
overcollateralization requirements under the Fleet Financing Program during
such period, plus (iv) any reduction in overcollateralization requirements
under the Fleet Financing Program during such period. Any increase or reduction
in overcollateralization requirements shall be determined by comparing such
requirement as in effect as of the first day of such period with such
requirement as in effect on the last day of such period.
"Excess Face Amount" means, at any time, the amount by which the face
amount of the CE Letter of Credit could be reduced on such date in accordance
with the terms of the CP Program.
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, any Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction in which the Borrower is located and (c) in
the case of a Foreign Lender (other than an assignee pursuant to a request by
the Borrower under Section 4.08(b)), any withholding tax that is imposed on
amounts payable to such Foreign Lender at the time such Foreign Lender becomes
a party to this Agreement or is attributable to such Foreign Lender's failure
or inability to comply with Section 4.06(e), except to the extent that such
Foreign Lender's assignor (if any) was entitled, at the time of assignment, to
receive additional amounts from the Borrower with respect to such withholding
tax pursuant to Section 4.06(a).
"Exit Loan" has the meaning assigned in Section 3.07.
"Exit Loan Funding Account" means an account maintained by the
Collateral Agent pursuant to the Collateral Agreement.
<PAGE>
11
"Exit Percentage" means at any time with respect to any Non-Extending
Lender, the percentage equivalent of a fraction, the numerator of which is the
CE Commitment of such Lender and the denominator of which is the sum of the CE
Commitments of all Non-Extending Lenders at such time, in each case as in
effect immediately prior to the determination thereof.
"Extension of Credit" means, as to any Lender, the making of, or the
issuance of, or participation in, a Loan by such Lender or the issuance of, or
participation in, a Letter of Credit by such Lender.
"Federal Funds Effective Rate" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day that is a Business Day, the average (rounded upwards,
if necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of Avis.
"Fleet Debt" means at any time the collective reference to the
Commercial Paper, the Liquidity Facility, the Medium Term Notes and the Covered
Foreign Fleet Debt outstanding at such time.
"Fleet Financing Program" has the meaning assigned in the recitals
hereto.
"Foreign Lender" means any Lender that is organized under the laws of
a jurisdiction other than that in which the Borrower is located. For purposes
of this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" means any Subsidiary which is organized and
existing under the laws of any jurisdiction outside of the United States of
America.
"Franchise Agreements" has the meaning assigned in the Recitals to
this Agreement.
"Franchisor" has the meaning assigned in the Recitals to this
Agreement.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising
<PAGE>
12
executive, legislative, judicial, taxing, regulatory or administrative powers
or functions of or pertaining to government.
"Guarantee Obligation" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having
the economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee Obligation shall
not include endorsements for collection or deposit in the ordinary course of
business.
"Guarantee" means the Guarantee to be executed and delivered by each
of the Guarantors, substantially in the form of Exhibit B, as the same may be
amended, supplemented or otherwise modified from time to time.
"Guarantor" means any Person which is now or hereafter a party to (a)
the Guarantee or (b) any other guarantee hereafter delivered to the
Administrative Agent guaranteeing the obligations and liabilities of the
Borrower hereunder or under any other Credit Documents.
"Guarantor Subsidiaries" means each direct and indirect Domestic
Subsidiary listed on Schedule 1.01 or which becomes a party to the Guarantee
pursuant to Section 7.10(b) or Section 8.17.
"Hazardous Materials" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging
arrangement.
"HFS" has the meaning assigned in the Recitals to this Agreement.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations
<PAGE>
13
of such Person under conditional sale or other title retention agreements
relating to property acquired by such Person, (e) all obligations of such
Person in respect of the deferred purchase price of property or services
(excluding current accounts payable incurred in the ordinary course of
business), (f) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the Indebtedness secured thereby has been assumed, (g) all Guarantee
Obligations by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit and letters of
guaranty, (j) all obligations, contingent or otherwise, of such Person in
respect of bankers' acceptances, (k) all net liabilities of such Person in
respect of Permitted Hedging Arrangements and (l) all obligations of such
Person in respect of all classes of preferred stock of its subsidiaries. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Insurance Subsidiaries" means each direct or indirect Subsidiary
which is engaged in the insurance business and is regulated by a Governmental
Authority as an insurance company.
"Interest Coverage Ratio" means at the last day of each fiscal quarter
of Avis, the ratio of (a) EBITDA to (b) Consolidated Interest Expense, in each
case for the period of four full fiscal quarters ending on such date. With
respect to fiscal quarters ending on or prior to March 31, 1998, EBITDA and
Consolidated Interest Expense of Avis shall be calculated on a pro forma basis
as if the Transactions had occurred on January 1, 1997.
"Interest Election Request" means a request by the Borrower to convert
or continue a Borrowing in accordance with Section 2.08.
"Interest Expense" of any Person for any period, means (a) the amount
of interest expense, both expensed and capitalized, of such Person and its
Consolidated subsidiaries determined in accordance with GAAP for such period
minus (b) the amount of interest income of such Person and its Consolidated
subsidiaries determined in accordance with GAAP for such period. Interest
Expense of Avis shall exclude interest expense attributable to Fleet Debt and
shall include fees paid in respect of Letters of Credit.
"Interest Payment Date" means (a) with respect to any ABR Loan, the
last day of each March, June, September and December, and (b) with respect to
any Eurodollar Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than three months' duration, each day
prior to the last day of such Interest Period that occurs at intervals of three
months' duration after the first day of such Interest Period.
<PAGE>
14
"Interest Period" means with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect,; provided, that (i) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (ii) any Interest
Period that commences on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the last calendar month
of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
"IPO" has the meaning assigned in the Recitals to this Agreement.
"Issuing Bank" means the WC Issuing Bank or the CE Issuing Bank.
"LC Disbursement" means a payment made by an Issuing Bank pursuant to
a Letter of Credit.
"L/C Participants" means the collective reference to the Lenders other
then the Issuing Banks; individually, an "L/C Participant".
"Leases" has the meaning assigned in the Recitals to this Agreement.
"Lenders" means the Persons listed on Schedule 2.01, Schedule 2.04 or
Schedule 3.01 and any other Person that shall have become a party hereto
pursuant to an Assignment and Acceptance, other than any such Person that
ceases to be a party hereto pursuant to an Assignment and Acceptance.
"Letter of Credit" means any letter of credit issued pursuant to this
Agreement.
"Leverage Ratio" means at the last day of each fiscal quarter of Avis
commencing December 31, 1997, the ratio of (a) Consolidated Debt of Avis as of
the last day of such quarter to (b) EBITDA for the period of four full fiscal
quarters ending on such date. With respect to fiscal quarters ending on or
prior to December 31, 1997, Consolidated Debt and EBITDA shall be calculated on
a pro forma basis as if the Transactions had occurred on January 1, 1997.
Solely for determining Margin Level Status, following any acquisition of an
Avis franchise permitted by Section 8.08, such ratio shall be calculated on a
pro forma basis giving effect to such acquisition as of the beginning of the
relevant measurement period for determining such ratio.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Telerate Page 3750 at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, as the rate for dollar deposits with a maturity comparable to
such Interest Period. In the event that such rate is not available
<PAGE>
15
at such time for any reason, then the "LIBO Rate" with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period
are offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest
in, on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Liquidity Facility" has the meaning assigned in the Recitals to this
Agreement.
"Liquidity Draw" means a drawing in respect of a CE Letter of Credit
that is not classified as a Credit Draw.
"Loans" means the loans made by the Lenders to the Borrower pursuant
to this Agreement.
"Majority CE Lenders" means, at any time, Lenders the Applicable CE
Percentages of which aggregate more than 50% at such time.
"Majority Lenders" means, at any time, Lenders the Voting Percentages
of which aggregate more than 50% at such time.
"Majority Revolving Credit Lenders" means, at any time, Lenders the
Applicable RC Percentages of which aggregate more than 50% at such time.
"Majority Term Loan Lenders" means, at any time, Lenders the
Applicable TL Percentages of which aggregate more than 50% at such time.
"Margin Level 1 Status" exists on an Adjustment Date if the Leverage
Ratio, as of the last day of the preceding fiscal quarter, exceeded 4.0 to 1.0.
"Margin Level 2 Status" exists on an Adjustment Date if the Leverage
Ratio, as of the last day of the preceding fiscal quarter, exceeded 3.0 to 1.0
but was less than or equal to 4.0 to 1.0.
"Margin Level 3 Status" exists on an Adjustment Date if neither Margin
Level 1 Status nor Margin Level 2 Status exists on such date.
"Master License Agreement" has the meaning assigned in the Recitals to
this Agreement.
<PAGE>
16
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, prospects or condition, financial or otherwise, of Avis and
its Subsidiaries taken as a whole or (b) the validity or enforceability of any
of the Credit Documents or the rights and remedies of the Agents and the
Lenders thereunder.
"Material Indebtedness" means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of Avis and its Subsidiaries in an aggregate
principal amount exceeding $5,000,000. For purposes of determining Material
Indebtedness, the "principal amount" of the obligations of Avis or any
Subsidiary in respect of any Hedging Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that Avis or such
Subsidiary would be required to pay if such Hedging Agreement were terminated
at such time.
"Material Real Property" means, as of the Closing Date, the properties
listed on Schedule 5.15 and each other parcel of real estate, a fee interest in
which is acquired by a Credit Party after the Closing Date with a book value
(net of any Indebtedness secured by such parcel) of at least $1,000,000.
"Maturity Date" means December 31, 2000.
"Medium Term Notes" has the meaning assigned in the Recitals to this
Agreement.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means each Mortgage to be executed and delivered by each of
the applicable Credit Parties, substantially in the form of Exhibit E, as the
same may be amended, supplemented or otherwise modified from time to time.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Net Cash Proceeds" means with respect to any Asset Sale, any sale or
issuance of equity securities of Avis or any Subsidiary, or the issuance of any
debt securities or any borrowings by Avis or any Subsidiary, an amount equal to
the gross proceeds in cash (including cash equivalents and any cash payments
received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise,
but only as and when received) of such Asset Sale, sale, issuance or borrowing,
net of (i) attorneys' fees, accountants' fees, brokerage, consultant and other
fees, underwriting commissions and other fees and expenses actually incurred in
connection with such Asset Sale, sale, issuance or borrowing, (ii) taxes paid
or reasonably estimated to be payable as a result thereof, (iii) amounts
provided or to be provided by Avis or any Subsidiary as a reserve, in
accordance with GAAP, with respect to any liabilities associated with such
Asset Sale and retained by Avis or any such Subsidiary after such Asset Sale
and other amounts to be used by Avis or any Subsidiary to discharge or pay on a
current basis any other liabilities associated with such Asset Sale and (iv) in
the case of an Asset Sale, repayments of the principal amount of Indebtedness
(other than
<PAGE>
17
the Loans) required to be made upon the consummation of such transaction and
any related prepayment premiums and penalties.
"Net Income" of any Person for any period, means net income of such
Person and its Consolidated subsidiaries, determined on a consolidated basis in
accordance with GAAP for such period.
"Non-Extending Lender" has the meaning assigned in Section 3.07.
"Other Taxes" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes, assessments, levies and other
charges that are not yet due or are being contested in compliance with
Section 7.04;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 30 days
or are being contested in compliance with Section 7.04;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course
of business;
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of the Borrower or any Subsidiary;
and
(f) Liens arising by reason of any judgement, decree or order of any
court or Governmental Authority which do not, individually or in the
aggregate, give rise to any Event of Default,
<PAGE>
18
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Permitted Hedging Arrangement" has the meaning assigned in Section
8.14.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, a
rating of at least A-1 from S&P or P-1 from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not less than
$250,000,000; and
(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria described in clause
(c) above.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower
or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Pledge Agreement" means the Pledge Agreement to be executed and
delivered by each of the applicable Credit Parties, substantially in the form
of Exhibit D, as the same may be amended, supplemented or otherwise modified
from time to time.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by The Chase Manhattan Bank as its prime rate in effect at
its principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as
being effective.
"Rating Agencies" means the collective reference to Moody's and S&P.
<PAGE>
19
"Register" has the meaning set forth in Section 11.04.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Requirement of Law" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, statute, ordinance, code, decree, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
material property or to which such Person or any of its material property is
subject, including, without limitation, laws, ordinances and regulations
pertaining to zoning, occupancy and subdivision of real properties; provided
that the foregoing shall not apply to any non-binding recommendation of any
Governmental Authority.
"Reservation Services Agreement" has the meaning assigned in the
Recitals to this Agreement.
"Responsible Officer" means as to any Person, any Financial Officer,
the chief executive officer or the president of such Person.
"Revolving Credit Availability Period" means the period from and
including the Closing Date to but excluding the earlier of the Maturity Date
and the date of termination of the Revolving Credit Commitments.
"Revolving Credit Commitment" means, with respect to each Lender, the
commitment of such Lender to make Revolving Loans and to acquire participations
in WC Letters of Credit hereunder, expressed as an amount representing the
maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder,
as such commitment may be (a) reduced from time to time pursuant to Section
2.09 and (b) reduced or increased from time to time pursuant to assignments by
or to such Lender pursuant to Section 11.04. The initial amount of each
Lender's Revolving Credit Commitment is set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Revolving Credit Commitment, as applicable.
"Revolving Credit Exposure" means, with respect to any Lender
at any time, the sum of the outstanding principal amount of such Lender's
Revolving Loans and its WC LC Exposure at such time.
"Revolving Loan" means a Loan made pursuant to Section 2.03.
"S&P" means Standard & Poor's Ratings Group.
"Sale and Leaseback Transaction" has the meaning assigned in Section
8.09.
"Securitization Entity" means AESOP II.
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20
"Security Agreement" means the Security Agreement to be executed and
delivered by each of the applicable Credit Parties, substantially in the form
of Exhibit C, as the same may be amended, supplemented or otherwise modified
from time to time.
"Security Documents" means the collective reference to the Mortgages,
the Guarantee, the Pledge Agreement, the Security Agreement, and all other
similar security documents hereafter delivered to the Administrative Agent
granting a Lien on any asset or assets of any Person to secure the obligations
and liabilities of the Borrower hereunder, under any notes and/or under any of
the other Credit Documents or to secure any guarantee of any such obligations
and liabilities.
"Separation Agreement" has the meaning assigned in the Recitals to
this Agreement.
"Series 1997-2 Supplement" means the Series 1997-2 Supplement, dated
as of July 30, 1997, between AESOP II and the Trustee, to the Amended and
Restated Base Indenture, dated as of July 30, 1997, between AESOP II and the
Trustee.
"Solvent" and "Solvency" means with respect to any Person on a
particular date, the condition that, on such date, (a) the fair value of the
property of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person, (b) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured, (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (d) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
an unreasonably small amount of capital.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including
any marginal, special, emergency or supplemental reserves) expressed as a
decimal established by the Board to which the Administrative Agent is subject
(a) with respect to the Base CD Rate, for new negotiable nonpersonal time
deposits in dollars of over $100,000 with maturities approximately equal to
and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of the
Board). Such reserve percentages shall include those imposed pursuant to such
Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date,
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21
as well as any other corporation, limited liability company, partnership,
association or other entity of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary
voting power or, in the case of a partnership, more than 50% of the general
partnership interests are, as of such date, owned, controlled or held by such
Person.
"Subsidiary" means any subsidiary of Avis.
"Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Telerate Page 3750" means the display page currently so designated on
the Dow Jones Telerate Service (or on any successor or substitute page of such
Service, or any successor to or substitute for such Service, providing rate
quotations comparable to those currently provided on such page of such Service,
as determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market).
"Term Loan" means a Loan made pursuant to Section 2.04.
"Term Loan Commitment" means, with respect to each Lender, the
commitment of such Lender to make a Term Loan on the Closing Date. The initial
amount of each Lender's Term Loan Commitment is set forth on Schedule 2.04, or
in the Assignment and Acceptance pursuant to which such Lender shall have
assumed its Term Loan Commitment, as applicable.
"Three-Month Secondary CD Rate" means, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or
such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day is not a Business Day, on the next preceding Business
Day) by the Administrative Agent from three negotiable certificate of deposit
dealers of recognized standing selected by it.
"Transaction Documents" means the collective reference to the (i)
Franchise Agreements, (ii) Separation Agreement, (iii) Credit Documents and
(iv) the instruments and agreements executed and delivered in connection with
the establishment of, and the initial issuance of securities under the Fleet
Financing Program.
"Transactions" means (i) the execution, delivery and performance by
Avis and the Borrower of the Credit Documents, the Extensions of Credit and the
use of the proceeds thereof, (ii) the establishment of, and the initial
issuance of securities under, the Fleet Financing Program and (iii) the
execution and delivery of the Franchise Agreements.
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22
"Trustee" means Harris Trust and Savings Bank ("Harris"), or any
successor of Harris as the Trustee.
"Type", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.
"UCC Filing Collateral" means Collateral (other than fixtures) as to
which filing financing statements under the uniform commercial code of the
applicable jurisdiction is an appropriate method of perfection of a security
interest in such Collateral.
"UCC Local Filing Collateral" means with respect to any State, UCC
Filing Collateral located in such State as to which a security interest may be
perfected only by filing a uniform commercial code financing statement in each
county or other local filing office of such State in which such Collateral is
located.
"Voting Percentage" means as to any Lender the percentage which (i)
the sum of (x) such Lender's Revolving Credit Commitment (or, after the
Revolving Credit Commitments have terminated, the Revolving Credit Exposure of
such Lender) plus (y) such Lender's Term Loan Commitment (or, after the Term
Loans are made, the outstanding principal amount of such Lender's Term Loan)
plus (z) such Lender's CE Commitment (or, after such Lender's CE Commitment has
terminated, the CE Exposure of such Lender or the outstanding principal amount
of such Lender's Exit Loan) then constitutes of (ii) the sum of (x) the
Revolving Credit Commitments of all the Lenders (or, after the Revolving Credit
Commitments have terminated, the Revolving Credit Exposure of all Lenders) plus
(y) the Term Loan Commitments of all the Lenders (or, after the Term Loans are
made, the aggregate principal amount of Term Loans of all the Lenders then
outstanding) plus (z) the CE Commitments of all the Lenders (or, after the CE
Commitments have terminated, the CE Exposure of all Lenders and the aggregate
principal amount of the Exit Loans).
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Wizard" has the meaning assigned in the Recitals to this Agreement.
"WizCom" has the meaning assigned in the Recitals to this Agreement.
"WC LC Disbursement" means a payment made by the WC Issuing Bank
pursuant to a WC Letter of Credit.
"WC LC Exposure" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding WC Letters of Credit at such time plus (b)
the aggregate amount of all WC LC Disbursements that have not yet been
reimbursed by or on behalf of the Borrower at such time. The WC LC Exposure of
any Lender at any time shall be its Applicable RC Percentage of the total WC LC
Exposure at such time.
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23
"WC Issuing Bank" means PNC Bank and any successor in such capacity as
provided in Section 2.06(i).
"WC Letter of Credit" means any letter of credit issued pursuant to
Section 2.06.
"Wholly-Owned" means with respect to any subsidiary, all of the
outstanding voting securities (other than directors' qualifying shares or
shares held pursuant to similar requirements of law in respect of Foreign
Subsidiaries) of which are owned, directly or indirectly, by Avis.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of
this Agreement, Loans may be classified and referred to by Class (e.g., a
"Revolving Loan" or a "Term Loan") or by Type (e.g., a "Eurodollar Loan") or by
Class and Type (e.g., a "Eurodollar Revolving Loan" or a "Eurodollar Term
Loan"). Borrowings also may be classified and referred to by Class (e.g., a
"Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class
and Type (e.g., a "Eurodollar Revolving Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The word
"will" shall be construed to have the same meaning and effect as the word
"shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth
herein), (b) any reference herein to any Person shall be construed to include
such Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Majority Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have
been withdrawn or such provision amended in accordance herewith.
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24
ARTICLE II
Amount and Terms of the Revolving Credit Commitments and
Term Loan Commitments
SECTION 2.01. Revolving Credit Commitments. Subject to the terms and
conditions set forth herein, each Lender with a Revolving Credit Commitment
agrees to make Revolving Loans to the Borrower from time to time during the
Revolving Credit Availability Period in an aggregate principal amount that will
not result in such Lender's Revolving Credit Exposure exceeding such Lender's
Revolving Credit Commitment. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrower may borrow, prepay and
reborrow Revolving Loans.
SECTION 2.02. Revolving Loans and Borrowings. (a) Each Revolving Loan
shall be made as part of a Borrowing consisting of Revolving Loans made by the
Lenders ratably in accordance with their respective Revolving Credit
Commitments. The failure of any Lender to make any Revolving Loan required to
be made by it shall not relieve any other Lender of its obligations hereunder;
provided that the Revolving Credit Commitments of the Lenders are several and
no Lender shall be responsible for any other Lender's failure to make Revolving
Loans as required.
(b) Subject to Section 4.03, each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
in accordance herewith. Each Lender at its option may make any Eurodollar
Revolving Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; provided that any exercise of such option shall not
affect the obligation of the Borrower to repay such Loan in accordance with the
terms of this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $5,000,000. At the time that
each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate
amount that is an integral multiple of $1,000,000 and not less than $5,000,000;
provided that an ABR Revolving Borrowing may be in an aggregate amount that is
equal to the entire unused balance of the total Revolving Credit Commitments or
that is required to finance the reimbursement of an LC Disbursement as
contemplated by Section 2.06(e). Revolving Borrowings of more than one Type may
be outstanding at the same time; provided that there shall not at any time be
more than a total of 5 Eurodollar Revolving Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Revolving Borrowing if the Interest Period requested with respect thereto
would end after the Maturity Date.
SECTION 2.03. Requests for Revolving Borrowings. To request a
Revolving Borrowing, the Borrower shall notify the Administrative Agent of such
request by telephone (a)
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25
in the case of a Eurodollar Revolving Borrowing, not later than 11:00 a.m., New
York City time, three Business Days before the date of the proposed Borrowing
or (b) in the case of an ABR Revolving Borrowing, not later than 12:00 noon,
New York City time, one Business Day before the date of the proposed Borrowing;
provided that any such notice of an ABR Revolving Borrowing to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.06(e) may be
given not later than 10:00 a.m., New York City time, on the date of the
proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable
and shall be confirmed promptly by hand delivery or facsimile to the
Administrative Agent of a written Borrowing Request in a form approved by the
Administrative Agent and signed by the Borrower. Each such telephonic and
written Borrowing Request shall specify the following information in compliance
with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which funds
are to be disbursed, which shall comply with the requirements of Section
2.07.
If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing, then
the Borrower shall be deemed to have selected an Interest Period of one month's
duration. Promptly following receipt of a Borrowing Request in accordance with
this Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made as part of the
requested Borrowing.
SECTION 2.04. Term Loan Commitments. Subject to the terms and
conditions set forth herein, each Lender with a Term Loan Commitment agrees to
make a Term Loan to the Borrower on the Closing Date in an amount equal to such
Lender's Term Loan Commitment.
SECTION 2.05. Term Loans and Borrowings. (a) The Term Loans shall be
made as part of a Borrowing consisting of Term Loans made by the Lenders
ratably in accordance with their respective Term Loan Commitments. The failure
of any Lender to make the Term Loan required to be made by it shall not relieve
any other Lender of its obligations hereunder; provided that the Term Loan
Commitments of the Lenders are several and no Lender shall be responsible for
any other Lender's failure to make a Term Loan as required.
(b) Subject to Section 4.03, the Term Borrowing on the Closing Date
shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower
may request in
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26
accordance herewith. Each Lender at its option may make its Term Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Term Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $5,000,000 and not less than $10,000,000. Term Borrowings
of more than one Type may be outstanding at the same time; provided that there
shall not at any time be more than a total of 5 Eurodollar Term Borrowings
outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to elect to convert or continue, any Term
Borrowing if the Interest Period requested with respect thereto would end after
the Maturity Date.
(e) The Borrower hereby requests a Term Borrowing on the Closing Date
in an amount equal to the Term Loan Commitments. On or prior to the Closing
Date, the Borrower will notify the Administrative Agent of the following
information in compliance with Section 2.05(b):
(i) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing (in which latter case such notification shall be received by the
Administrative at least three Business Days prior to the Closing Date);
(ii) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(iii) the location and number of the Borrower's account to which funds
are to be disbursed, which shall comply with the requirements of Section
2.07.
If no election as to the Type of Term Borrowing is specified, then the
requested Term Borrowing shall be an ABR Borrowing. If no Interest Period is
specified with respect to any requested Eurodollar Term Borrowing, then the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. Promptly following receipt of the information set forth above in
accordance with this Section, the Administrative Agent shall advise each Term
Loan Lender of the details thereof and of the amount of such Lender's Term Loan
to be made as part of the requested Term Borrowing.
SECTION 2.06. WC Letters of Credit. (a) General. Subject to the terms
and conditions set forth herein, the Borrower may request that the WC Issuing
Bank issue letters of credit for the account of the Borrower, in a form
reasonably acceptable to the Administrative Agent and the WC Issuing Bank, at
any time and from time to time during the Revolving Credit Availability Period.
Each letter of credit issued pursuant to this Section shall be a standby letter
of credit issued to support obligations of a Credit Party in respect of
workmans' compensation and other insurance and bonding requirements of the
Credit Parties in the ordinary course of
<PAGE>
27
business; provided that such letters of credit may not be used to provide
credit support for the Fleet Financing Program, and up to $7,500,000 in
aggregate face amount of such letters of credit may be used to support
borrowings of Avis's Subsidiary in Argentina. If there is any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any form of letter of credit application or other agreement submitted by a
Credit Party to, or entered into by a Credit Party with, the WC Issuing Bank
relating to any Letter of Credit, the terms and conditions of this Agreement
shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a WC Letter of Credit (or the amendment,
renewal or extension of an outstanding WC Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the WC Issuing Bank) to the WC
Issuing Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a WC Letter of Credit, or identifying the WC Letter
of Credit to be amended, renewed or extended, the date of issuance, amendment,
renewal or extension, the date on which such WC Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such WC
Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
WC Letter of Credit. If requested by the WC Issuing Bank, the Borrower also
shall submit a letter of credit application on the WC Issuing Bank's standard
form in connection with any request for a WC Letter of Credit. A WC Letter of
Credit shall be issued, amended, renewed or extended only if (and upon
issuance, amendment, renewal or extension of each WC Letter of Credit the
Borrower shall be deemed to represent and warrant that), after giving effect to
such issuance, amendment, renewal or extension (i) the WC LC Exposure shall not
exceed $75,000,000 and (ii) the sum of the total Revolving Credit Exposures
shall not exceed the total Revolving Credit Commitments.
(c) Expiration Date. Each WC Letter of Credit shall expire at or prior
to the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date; provided that the WC
Letters of Credit supporting bonds issued in respect of the Denver Airport
Facility may have a tenor of two years (subject to the requirements of clause
(ii) above).
(d) Participations. By the issuance of a WC Letter of Credit (or an
amendment to a WC Letter of Credit increasing the amount thereof) and without
any further action on the part of the WC Issuing Bank or the Lenders, the WC
Issuing Bank hereby grants to each Lender that has a Revolving Credit
Commitment, and each such Lender hereby acquires from the WC Issuing Bank, a
participation in such WC Letter of Credit equal to such Lender's Applicable RC
Percentage of the aggregate amount available to be drawn under such WC Letter
of Credit. In consideration and in furtherance of the foregoing, each such
Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of the WC Issuing Bank, such Lender's
Applicable RC Percentage of each WC LC Disbursement made by the WC Issuing Bank
and not reimbursed by the Borrower on the date due as provided in paragraph (e)
of this Section, or of any reimbursement payment required to be refunded to the
Borrower for any reason. Each such Lender acknowledges and agrees that its
obligation to acquire
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28
participations pursuant to this paragraph in respect of WC Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any WC Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Revolving Credit Commitments, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever.
(e) Reimbursement. If the WC Issuing Bank shall make any WC LC
Disbursement, the Borrower shall reimburse such WC LC Disbursement by paying to
the Administrative Agent an amount equal to such WC LC Disbursement not later
than 12:00 p.m., New York City time, on the date that such WC LC Disbursement
is made, if the Borrower shall have received notice of such WC LC Disbursement
prior to 10:00 a.m., New York City time, on such date, or, then not later than
12:00 p.m., New York City time, on the Business Day immediately following the
day that the Borrower receives such notice; provided that the Borrower may,
subject to the conditions to borrowing set forth herein, request in accordance
with Section 2.03 that such payment be financed with an ABR Revolving Borrowing
in an equivalent amount and, to the extent so financed, the Borrower's
obligation to make such payment shall be discharged and replaced by the
resulting ABR Revolving Borrowing. If the Borrower fails to make such payment
when due, the Administrative Agent shall notify each Lender that participates
in the WC Letters of Credit of the applicable WC LC Disbursement, the payment
then due from the Borrower in respect thereof and such Lender's Applicable RC
Percentage thereof. Promptly following receipt of such notice, each such Lender
shall pay to the Administrative Agent its Applicable RC Percentage of the
payment then due from the Borrower, in the same manner as provided in Section
2.07 with respect to Revolving Loans made by such Lender (and Section 2.07
shall apply, mutatis mutandis, to the payment obligations of such Lenders), and
the Administrative Agent shall promptly pay to the WC Issuing Bank the amounts
so received by it from such Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the WC
Issuing Bank or, to the extent that Lenders have made payments pursuant to this
paragraph to reimburse the WC Issuing Bank, then to such Lenders and the WC
Issuing Bank as their interests may appear. Any payment made by a Lender
pursuant to this paragraph to reimburse the WC Issuing Bank for any WC LC
Disbursement (other than the funding of ABR Revolving Loans as contemplated
above) shall not constitute a Loan and shall not relieve the Borrower of its
obligation to reimburse such WC LC Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse WC LC
Disbursements as provided in paragraph (e) of this Section 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 WC Letter of Credit
or this Agreement, 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 WC Letter of Credit or this Agreement;
<PAGE>
29
(iii) the existence of any claim, setoff, defense or other right that
the Borrower, any other party guaranteeing, or otherwise obligated with,
the Borrower, any Subsidiary or other Affiliate thereof or any other Person
may at any time have against the beneficiary under any WC Letter of Credit,
the WC Issuing Bank, the Administrative Agent or any Lender 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 WC Letter of Credit
proving to be forged, fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect;
(v) payment by the WC Issuing Bank under a WC Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such WC Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of the WC
Issuing Bank, the Lenders, the Administrative Agent 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 Borrower's obligations
hereunder.
Neither the Administrative Agent, the Lenders nor the WC Issuing Bank, nor any
of their Related Parties, shall have any liability or responsibility by reason
of or in connection with the issuance or transfer of any WC Letter of Credit or
any payment or failure to make any payment thereunder, including any of the
circumstances specified in clauses (i) through (vi) above, as well as any
error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any WC Letter of
Credit (including any document required to make a drawing thereunder), any
error in interpretation of technical terms or any consequence arising from
causes beyond the control of the WC Issuing Bank; provided that the foregoing
shall not be construed to excuse the WC Issuing Bank from liability to the
Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
the WC Issuing Bank's failure to exercise the agreed standard of care (as set
forth below) in determining whether drafts and other documents presented under
a WC Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that the WC Issuing Bank shall have exercised the agreed
standard of care in the absence of gross negligence or wilful misconduct on the
part of the WC Issuing Bank. Without limiting the generality of the foregoing,
it is understood that the WC Issuing Bank may accept documents that appear on
their face to be in substantial compliance with the terms of a WC Letter of
Credit, without responsibility for further investigation, regardless of any
notice or information to the contrary, and may make payment upon presentation
of documents that appear on their face to be in substantial compliance with the
terms of such WC Letter of Credit; provided that the WC Issuing Bank shall have
the right, in its sole discretion, to decline to accept such documents and to
make such payment if such documents are not in strict compliance with the terms
of such WC Letter of Credit.
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(g) Disbursement Procedures. The WC Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a WC Letter of Credit. The WC Issuing Bank shall
promptly notify the Administrative Agent and the Borrower by telephone
(confirmed by telecopy) of such demand for payment and whether the WC Issuing
Bank has made or will make a WC LC Disbursement thereunder; provided that any
failure to give or delay in giving such notice shall not relieve the Borrower
of its obligation to reimburse the WC Issuing Bank and the Lenders with respect
to any such WC LC Disbursement.
(h) Interim Interest. If the WC Issuing Bank shall make any WC LC
Disbursement, then, unless the Borrower shall reimburse such WC LC Disbursement
in full on the date such WC LC Disbursement is made, the unpaid amount thereof
shall bear interest, for each day from and including the date such WC LC
Disbursement is made to but excluding the date that the Borrower reimburses
such WC LC Disbursement, at the rate per annum then applicable to ABR Revolving
Loans; provided that, if the Borrower fails to reimburse such WC LC
Disbursement when due pursuant to paragraph (e) of this Section, then Section
4.02(c) shall apply. Interest accrued pursuant to this paragraph shall be for
the account of the WC Issuing Bank, except that interest accrued on and after
the date of payment by any Lender pursuant to paragraph (e) of this Section to
reimburse the WC Issuing Bank shall be for the account of such Lender to the
extent of such payment.
(i) Replacement of the WC Issuing Bank. The WC Issuing Bank may be
replaced at any time by written agreement among the Borrower, the
Administrative Agent, the replaced WC Issuing Bank and the successor WC Issuing
Bank. The Administrative Agent shall notify the Lenders of any such replacement
of the WC Issuing Bank. At the time any such replacement shall become
effective, the Borrower shall pay all unpaid fees accrued for the account of
the replaced WC Issuing Bank pursuant to Section 4.01(b). From and after the
effective date of any such replacement, (i) the successor WC Issuing Bank shall
have all the rights and obligations of the replaced WC Issuing Bank under this
Agreement with respect to WC Letters of Credit to be issued thereafter and (ii)
references herein to the term "WC Issuing Bank" shall be deemed to include and
refer to such successor or to any previous WC Issuing Bank, or to such
successor and all previous WC Issuing Banks, as the context shall require.
After the replacement of the WC Issuing Bank hereunder, the replaced WC Issuing
Bank shall remain a party hereto and shall continue to have all the rights and
obligations of the WC Issuing Bank under this Agreement with respect to Letters
of Credit issued by it prior to such replacement, but shall not be required to
issue additional WC Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Majority Lenders or the Majority Revolving Credit
Lenders demanding the deposit of cash collateral pursuant to this paragraph,
the Borrower shall deposit in an account with the Administrative Agent, in the
name of the Administrative Agent and for the benefit of the Lenders, an amount
in cash equal to the WC LC Exposure as of such date plus any accrued and unpaid
interest thereon; provided that the obligation to deposit such cash collateral
shall become effective immediately, and such deposit shall become immediately
due and payable, without demand or other notice of any kind, upon the
occurrence of any Event of Default with respect
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to the Borrower described in clause (h) or (i) of Article IX. Such deposit
shall be held by the Administrative Agent as collateral for the payment and
performance of the obligations of the Borrower under this Agreement. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. The deposits in such account
shall be invested in Permitted Investments at the Borrower's risk and expense,
and other than any interest earned on such Permitted Investments, such deposits
shall not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall be applied by the
Administrative Agent to reimburse the WC Issuing Bank for the WC Issuing Bank's
LC Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the WC LC Exposure at such time or, if the maturity of the
Loans has been accelerated, be applied to satisfy other obligations of the
Borrower under this Agreement. If the Borrower is required to provide an amount
of cash collateral hereunder as a result of the occurrence of an Event of
Default, such amount (to the extent not applied as aforesaid) shall be returned
to the Borrower within three Business Days after all Events of Default have
been cured or waived.
(k) As of the Closing Date, the letters of credit listed on Schedule
2.06(k) shall be deemed to have been issued hereunder and be deemed to be WC
Letters of Credit for all purposes hereof.
SECTION 2.07. Funding of Borrowings. (a) Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer
of immediately available funds by 12:00 noon, New York City time, to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in
like funds, to an account of the Borrower maintained with the Administrative
Agent in New York City and designated by the Borrower in the applicable
Borrowing Request or pursuant to Section 2.05(e); provided that ABR Revolving
Loans made to finance the reimbursement of a WC LC Disbursement as provided in
Section 2.06(e) shall be remitted by the Administrative Agent to the WC Issuing
Bank.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the
case of the Borrower, the interest rate applicable to ABR Loans. If such Lender
pays such amount to the Administrative Agent, then such amount shall constitute
such Lender's Loan included in such Borrowing.
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32
SECTION 2.08. Interest Elections. (a) Each Borrowing initially shall
be of the Type specified in the applicable Borrowing Request or pursuant to
Section 2.05(e) and, in the case of a Eurodollar Borrowing, shall have an
initial Interest Period as specified in such Borrowing Request or pursuant to
Section 2.05(e). Thereafter, the Borrower may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in
this Section. The Borrower may elect different options with respect to
different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that
a Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery
or facsimile to the Administrative Agent of a written Interest Election Request
in a form approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02 or Section
2.05:
(i) the Borrowing to which such Interest Election Request applies and,
if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Borrowing
(in which case the information to be specified pursuant to clauses (iii)
and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each relevant Lender of the details thereof
and of such Lender's portion of each resulting Borrowing.
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33
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Majority Revolving Credit Lenders or Majority Term Loan Lenders,
as the case may be, so notifies the Borrower, then, so long as an Event of
Default is continuing (i) no outstanding Borrowing may be converted to or
continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
SECTION 2.09. Termination and Optional and Mandatory Reduction of
Revolving Credit Commitment. (a) Unless previously terminated, the Revolving
Credit Commitments shall terminate on the Maturity Date.
(b) The Borrower may at any time terminate, or from time to time
permanently reduce, the Revolving Credit Commitments; provided that (i) each
reduction of the Revolving Credit Commitments shall be in an amount that is an
integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the
Borrower shall not terminate or reduce the Revolving Credit Commitments if,
after giving effect to any concurrent prepayment of the Revolving Loans in
accordance with Section 2.11, the Revolving Credit Exposures would exceed the
total Revolving Credit Commitments.
(c) The Revolving Credit Commitments shall be reduced permanently by
an amount equal to the amount by which the Net Cash Proceeds described in
clauses (i) through (iv) of Section 2.11(b) exceeds the amount thereof that is
applied to prepay the Term Loans, if any, then outstanding pursuant to such
Section.
(d) The Borrower shall notify the Administrative Agent of any election
to terminate or reduce the Revolving Credit Commitments under paragraph (b) of
this Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the relevant Lenders of the contents thereof. Each notice
delivered by the Borrower pursuant to this Section shall be irrevocable;
provided that a notice of termination of the Revolving Credit Commitments
delivered by the Borrower may state that such notice is conditioned upon the
effectiveness of other credit facilities, in which case such notice may be
revoked by the Borrower (by notice to the Administrative Agent on or prior to
the specified effective date) if such condition is not satisfied. Any
termination or reduction of the Revolving Credit Commitments shall be
permanent. Each reduction of the Revolving Credit Commitments shall be made
ratably among the Lenders in accordance with their respective Applicable RC
Percentages.
SECTION 2.10. Scheduled Repayment of Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay (i) to the Administrative Agent
for the account of each relevant Lender the then unpaid principal amount of
each Revolving Loan and each Exit
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34
Loan on the Maturity Date, and (ii) to the Administrative Agent for the account
of each relevant Lender the Term Loans in four installments as follows:
Date Amount
---- ------
June 30, 1998 $1,000,000
June 30, 1999 $1,000,000
June 30, 2000 $1,000,000
Maturity Date $117,000,000
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type thereof
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of a particular Class made by it
be evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note for such Class of Loans
payable to the order of such Lender (or, if requested by such Lender, to such
Lender and its registered assigns) and in a form approved by the Administrative
Agent. Thereafter, the Loans evidenced by such promissory note and interest
thereon shall at all times (including after assignment pursuant to Section
11.04) be represented by one or more promissory notes in such form payable to
the order of the payee named therein (or, if such promissory note is a
registered note, to such payee and its registered assigns).
SECTION 2.11. Optional and Mandatory Prepayment of Loans. (a) The
Borrower shall have the right at any time and from time to time to prepay any
Borrowing (other than Exit Loans) in whole or in part, subject to prior notice
in accordance with paragraph (d) of this Section and Section 4.05. Exit Loans
shall be payable as and to the extent provided in Section 3.07.
(b) The Borrower shall prepay the Term Loans in an amount equal to:
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35
(i) 100% of the Net Cash Proceeds of the sale or issuance by Avis or any
Subsidiary of Capital Stock after the Closing Date (excluding up to
$225,000,000 of the Net Cash Proceeds of the IPO);
(ii) 100% of the Net Cash Proceeds of any Indebtedness incurred by a Credit
Party after the Closing Date (excluding Indebtedness permitted by Section
8.02);
(iii) 100% of the Net Cash Proceeds of any Asset Sale by Avis or any
Subsidiary after the Closing Date (excluding any Asset Sale permitted by
Section 8.05 and other Asset Sales to the extent that the aggregate amount
of Net Cash Proceeds received by Avis and its Subsidiaries in respect of
such other Asset Sales has not exceeded $10,000,000);
(iv) on the date that is eighteen months following the closing date of the
IPO, 100% of the excess, if any, of (A) the lesser of (x) the actual amount
of Net Cash Proceeds of the IPO and (y) $225,000,000 over (B) the amount of
the cash purchase consideration paid by Avis and its Subsidiaries to
acquire additional Avis franchises and the related assets after the Closing
Date; and
(v) on or prior to the ninetieth day following the end of each fiscal year
of Avis ending on or after December 31, 1998, 50% of Excess Cash Flow for
such fiscal year.
Prepayments of the Term Loans required by clauses (i) through (iv) of this
paragraph shall be made on or prior to the Business Day following receipt of
any such proceeds.
(c) On any day when the Revolving Credit Commitments are reduced
pursuant to Section 2.09(c), the Borrower shall prepay the Revolving Loans in
an amount equal to the amount, if any, by which the Revolving Credit Exposures
would exceed the total Revolving Credit Commitments as so reduced. If, after
giving effect to any such prepayment, the Revolving Credit Exposures exceed the
total Revolving Credit Commitments as so reduced, the Borrower shall, without
notice or demand, immediately deposit in a Cash Collateral Prepayment Account
upon terms reasonably satisfactory to the Administrative Agent an amount equal
to the amount of such remaining excess. The Administrative Agent shall apply
any cash deposited in the Cash Collateral Prepayment Account (to the extent
thereof) to repay any WC LC Disbursement which becomes due thereafter, provided
that the Administrative Agent shall release to the Borrower from time to time
such portion of the amount on deposit in the Cash Collateral Prepayment Account
which is equal to the amount by which the amount on deposit therein at such
time exceeds the total Revolving Credit Exposures at such time. "Cash
Collateral Prepayment Account" means an account established by the Borrower
with the Administrative Agent and over which the Administrative Agent shall
have exclusive dominion and control, including the right of withdrawal for
application in accordance with this Section.
(d) The Borrower shall notify the Administrative Agent by telephone
(confirmed by facsimile) of any optional prepayment hereunder (i) in the case
of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York
City time, three Business Days before the date of prepayment and (ii) in the
case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York
City time, one Business Day before the date of prepayment. Each such notice
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36
shall be irrevocable and shall specify the prepayment date, Class and the
principal amount of each Borrowing or portion thereof to be prepaid; provided
that, if a notice of prepayment is given in connection with a conditional
notice of termination of the Revolving Credit Commitments as contemplated by
Section 2.09, then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.09. Promptly following
receipt of any such notice relating to a Borrowing, the Administrative Agent
shall advise the relevant Lenders of the contents thereof. Each optional
partial prepayment of any Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $5,000,000. Each prepayment
of a Borrowing shall be applied ratably to the Loans included in the prepaid
Borrowing. Prepayments of the Term Loans shall be applied to reduce the
remaining installments thereof ratably in accordance with the then remaining
amounts thereof and may not be reborrowed. Prepayments shall be accompanied by
accrued interest to the extent required by Section 4.02.
ARTICLE III
Amount and Terms of the CE Letters of Credit
SECTION 3.01. CE Commitments. Subject to the terms and conditions set
forth herein, the CE Issuing Bank hereby agrees to issue to the Beneficiary a
letter of credit, substantially in the form of Exhibit F, in a face amount from
time to time that will not result in the total CE LC Exposure exceeding the
total CE Commitments.
SECTION 3.02. Requests for CE Letter of Credit. To request the
issuance of a CE Letter of Credit (or the amendment, renewal or extension
thereof), the Borrower shall notify the Administrative Agent and the CE Issuing
Bank of such request in writing reasonably in advance of the requested date of
issuance, amendment, renewal or extension a notice requesting the issuance of a
CE Letter of Credit, or providing the details of the requested amendment,
renewal or extension (which details shall comply with Section 3.03). If
requested by the CE Issuing Bank, the Borrower also shall submit a letter of
credit application on the CE Issuing Bank's standard form in connection with
any such request. The CE Letter of Credit shall be issued, amended, renewed or
extended only if (and upon issuance, amendment, renewal or extension of the CE
Letter of Credit the Borrower shall be deemed to represent and warrant that),
after giving effect to such issuance, amendment, renewal or extension the sum
of the total CE Exposures shall not exceed the total CE Commitments.
SECTION 3.03. Expiration Date. The CE Letter of Credit shall expire at
or prior to the close of business on the CE Termination Date in effect on the
date of issuance or renewal thereof which shall in no event be later than the
date that is five Business Days prior to the Maturity Date.
SECTION 3.04. Participations. By the issuance of the CE Letter of
Credit (or an amendment to the CE Letter of Credit increasing the amount
thereof) and without any further action on the part of the CE Issuing Bank or
the Lenders, the CE Issuing Bank hereby grants to each Lender that has a CE
Commitment, and each such Lender hereby acquires from the CE
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37
Issuing Bank, a participation in the CE Issuing Bank's CE Letter of Credit
equal to such Lender's Applicable CE Percentage of the aggregate amount
available to be drawn under the CE Letter of Credit. In consideration and in
furtherance of the foregoing, each such Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of
the CE Issuing Bank, such Lender's Applicable CE Percentage of (i) each Credit
Disbursement not reimbursed by the Borrower on the date due as provided in
Section 3.08, (ii) each Liquidity Disbursement made by the CE Issuing Bank and
(iii) any reimbursement payment in respect of a CE LC Disbursement required to
be refunded to the Borrower for any reason. Each such Lender acknowledges and
agrees that its obligation to acquire participations pursuant to this paragraph
in respect of CE Letters of Credit is absolute and unconditional and shall not
be affected by any circumstance whatsoever, including any amendment, renewal or
extension of the CE Letter of Credit or the occurrence and continuance of a
Default or reduction or termination of the CE Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever. The Administrative Agent shall notify each Lender that participates
in the CE Letter of Credit of the applicable CE LC Disbursement, the payment
then due from the Borrower or AESOP in respect thereof and such Lender's
Applicable CE Percentage thereof. Promptly following receipt of such notice,
each such Lender shall pay to the Administrative Agent, for the account of the
CE Issuing Bank, its Applicable CE Percentage of, in the case of any Credit
Draw, the payment then due from the Borrower, and in the case of any Liquidity
Draw, of the amount of such drawing, in the same manner as provided in Section
2.07 with respect to Revolving Loans (and Section 2.07 shall apply, mutatis
mutandis, to the payment obligations of such Lenders), and the Administrative
Agent shall promptly pay to the CE Issuing Bank the amounts so received by it
from such Lenders. Any payment made by a Lender pursuant to this Section to
reimburse the CE Issuing Bank for any CE LC Disbursement shall not relieve the
Borrower of its obligation to reimburse such CE LC Disbursement pursuant to
Section 3.08.
SECTION 3.05. Procedures for Extensions. If the Borrower desires to
extend the CE Termination Date, then the Borrower shall notify the
Administrative Agent at least 60 but no earlier than 120 days prior to the then
current CE Termination Date of its desire to extend the CE Termination Date for
a period of 364 days (or such shorter period as shall be necessary to comply
with Section 3.03), whereupon the Administrative Agent shall notify the CE
Issuing Bank and each Lender with a CE Commitment of the Borrower's desire to
so extend the Expiration Date. Each such Lender and the CE Issuing Bank shall
use its reasonable best efforts to notify the Administrative Agent whether it
agrees to such extension within 45 days after receipt of any such request;
provided that failure of the CE Issuing Bank or by a Lender to respond to such
request shall not be construed as a consent by the CE Issuing Bank or such
Lender to such extension. The decision to extend or not to extend shall be made
by the CE Issuing Bank and each Lender in its sole discretion. Each consent by
the CE Issuing Bank or a Lender to an extension shall be in writing signed by
the CE Issuing Bank or such Lender. If the CE Issuing Bank declines to agree to
the extension request, it shall be treated as a Downgraded Issuing Bank
pursuant to Sections 3.09 and 3.10 commencing on the current CE Termination
Date but otherwise shall nevertheless be obligated to provide such extension if
the agreement of the Majority CE Lenders thereto is obtained. The
Administrative Agent shall periodically notify the Borrower in writing of the
decision of each Lender, which notice shall separately set forth the name and
the CE Commitment of each Lender which shall have decided to extend or not to
agree
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38
to such extension. If the Majority CE Lenders agree to an extension, the CE
Termination Date shall be extended as requested by the Borrower. If any Lender
desires to agree to such extension for a commitment amount that is less than
the amount of its CE Commitment prior to the Borrower's request for an
extension, the Borrower, in its sole discretion, may accept such extension;
provided, however, that such Lender (x) shall be deemed to be a Non-Extending
Lender for purposes of Section 3.06 and (y) for purposes of Section 3.07 shall
be deemed to be both (i) a Non-Extending Lender with a CE Commitment equal to
the portion of its CE Commitment that will not be available after the extension
of the CE Termination Date and (ii) a consenting CE Lender with a CE Commitment
equal to the portion of its CE Commitment that will be available after the
current CE Termination Date. Subject to compliance by a Non-Extending Lender
with the provisions of Section 3.07, the total CE Commitments (and the face
amount of the CE Letter of Credit) shall be reduced by the CE Commitment of
such Non-Extending Lender on the then current CE Termination Date of such
Non-Extending Lender (or, in the case of a Lender described in the immediately
preceding sentence, the portion that will not be available after such
extension). Promptly after the effective date of each such extension, the CE
Issuing Bank shall either (i) issue to the Beneficiary in exchange for and upon
receipt of, its currently outstanding CE Letter of Credit a substitute letter
of credit having terms identical to the currently outstanding CE Letter of
Credit of the CE Issuing Bank but expiring on the extended CE Termination Date
or (ii) deliver to the Beneficiary an amendment to the currently outstanding CE
Letter of Credit of the CE Issuing Bank to reflect the extension of the CE
Termination Date.
SECTION 3.06. Replacement of a Lender. If a Lender becomes a
Non-Extending Lender, the Borrower shall have the right to replace such Lender,
in whole or in part, by giving five Business Days' prior written notice to the
Administrative Agent and such Lender, specifying the date on which all or a
portion of such Lender's rights and obligations hereunder as a Lender with a CE
Commitment shall be terminated; provided, however, that the Borrower covenants
and agrees to use its reasonable efforts (without the expenditure of money for
the sole purpose of inducing such replacement) to find a bank or other
financial institution (a "replacement bank") to replace any such Non-Extending
Lender. In the event of the replacement of a Lender, such Lender agrees to
assign its rights and obligations hereunder in respect of its CE Commitment (or
a portion thereof, as the case may be) to a replacement bank selected by the
Borrower upon payment by such replacement bank to such Lender of the funded
portion of its CE Exposure and any outstanding Exit Loans and any accrued and
unpaid interest thereon, accrued commitment fees and any other amounts owed to
such Lender in respect of its CE Commitment (or, in each case, the pro rata
portion thereof being acquired by the replacement bank) and to execute and
deliver an Assignment and Acceptance evidencing such assignment.
SECTION 3.07. Exit Loans by Non-Extending Lenders. (a) If any Lender
shall not have consented to the extension of the then current CE Termination
Date pursuant to Section 3.05 (each such Lender, a "Non-Extending Lender"),
unless the Borrower shall have replaced such Non-Extending Lender pursuant to
Section 3.06 or unless the face amount of the CE Letter of Credit can be
reduced pursuant to the terms of the CP Program such that the total CE
Commitments as reduced by the amount of all Non-Extending Lender's CE
Commitments would be at least equal to the such reduced face amount (taking
into account any replacement Lenders as contemplated by Section 3.06), on the
fifth Business Day immediately preceding the then current CE Termination Date,
the Borrower shall request each such Non-Extending Lender to
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39
make, and on the CE Termination Date each such Non-Extending Lender shall make
in accordance with the provisions hereof, a loan (an "Exit Loan") in an amount
equal to the lesser of (i) the Exit Percentage of such Non-Extending Lender of
the amount by which the CE Letters of Credit (giving effect to any reduction in
the face amounts thereof on or prior to such day) are less than the amount
required under the CP Program and (ii) the CE Commitment of such Lender. After
such Borrowing or, if there is no such Borrowing, after the current CE
Termination Date, such Non-Extending Lender shall have no further obligation
under its CE Commitment to fund drawings under the CE Letters of Credit. The
proceeds of any such Exit Loan shall be deposited in the Exit Loan Funding
Account and shall be applied on a pro rata basis with the CE Letter of Credit
as provided in the Collateral Agreement and the Series 1997-2 Supplement. Any
funded participation of a Lender in a CE LC Disbursement at such time shall be
deemed to be part of such Lender's Exit Loan and shall reduce the amount
thereof that must be funded on such date. Each Non-Extending Lender's CE
Commitment shall be cancelled on the date it makes its Exit Loan.
(b) After a Non-Extending Lender has made an Exit Loan, the
Beneficiary may withdraw the funds of such Non-Extending Lender on deposit in
the Exit Loan Funding Account on a pro rata basis with the draws made on the CE
Letters of Credit in accordance with the Collateral Agreement and the Series
1997-2 Supplement. Any amount which would otherwise have been applied to
reimburse such Lender pursuant to Section 3.08 prior to the date the CE
Commitments shall have been terminated pursuant hereto, will be deposited in
the Exit Loan Funding Account.
(c) Each Exit Loan shall bear interest at the rate applicable to ABR
Revolving Loans, payable as provided in Section 4.02. Exit Loans shall mature
on the Maturity Date. On the Maturity Date, after giving effect to any
withdrawals from the Exit Loan Funding Account pursuant to paragraph (b) of
this Section, to the extent permitted under the Series 1997-2 Supplement, the
Trustee shall withdraw the entire amount on deposit in the Exit Loan Funding
Account and pay such amount to the Administrative Agent who shall then repay
the Non-Extending Lenders to the extent of their outstanding exit loan amounts.
(d) While any Exit Loans are outstanding, the Borrower shall to the
extent possible cause the amount of the Commercial Paper outstanding to be
reduced pursuant to the terms of the CP Program such that the face amount of
the CE Letter of Credit equals or exceeds the amount required under the CP
Program. If the sum of the amount on deposit in the Exit Loan Funding Account
and the face amount of the CE Letter of Credit exceeds the amount required
under the CP Program on any distribution date under the CP Program, the excess
amount will be released by the Trustee and paid to the Non-Extending Lenders as
a repayment of the Exit Loans.
SECTION 3.08. Reimbursement by Borrower (a) The Borrower agrees to
reimburse the CE Issuing Bank on demand, upon receipt by the Borrower of notice
from the CE Issuing Bank (i) of a CE LC Disbursement on account of a Credit
Draw (a "Credit Disbursement") or (ii) that any amount is converted to a Credit
Disbursement pursuant to Section 3.12 for the amount of (i) each Credit
Disbursement so made and (ii) any taxes, fees, charges or other costs or
expenses reasonably incurred by the CE Issuing Bank in connection with such
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payment. Each such payment shall be made directly to the CE Issuing Bank, at
its address for notices specified herein in immediately available funds, on the
date on which the Borrower receives such notice, if received prior to 12:00
noon, New York City time, on a Business Day and otherwise on the next
succeeding Business Day.
(b) The Borrower agrees to reimburse the CE Issuing Bank (i) on the
Maturity Date in an amount equal to the unreimbursed amounts of the CE LC
Disbursements of the CE Issuing Bank on account of a Liquidity Draw (a
"Liquidity Disbursement"), and (ii) upon receipt by the Borrower of notice from
the CE Issuing Bank of each Liquidity Disbursement by the CE Issuing Bank, for
any taxes, fees, charges or other costs or expenses reasonably incurred by the
CE Issuing Bank in connection with each Liquidity Disbursement by the CE
Issuing Bank. In addition Liquidity Disbursements shall be reimbursed as and to
the extent provided pursuant to the terms of the Collateral Agreement.
(c) Promptly following receipt by the CE Issuing Bank of any payment
from the Borrower pursuant to this Section, the CE Issuing Bank shall
distribute such payment, to the extent that Lenders have made payments pursuant
to Section 3.04 to reimburse the CE Issuing Bank, to such Lenders.
(d) If the CE Issuing Bank shall make a CE LC Disbursement, then,
unless the Borrower shall reimburse such CE LC Disbursement in full on the date
such CE LC Disbursement is made, the unpaid amount thereof shall bear interest,
for each day from and including the date such CE LC Disbursement is made to but
excluding the date that the Borrower reimburses such CE LC Disbursement, at the
rate per annum then applicable to ABR Revolving Loans; provided that, if the
Borrower fails to reimburse such CE LC Disbursement when due pursuant to
paragraph (a) or (b) of this Section, as applicable, then Section 4.02(c) shall
apply. Interest accrued pursuant to this paragraph shall be for the account of
the CE Issuing Bank, except that interest accrued on and after the date of
payment by any Lender pursuant to Section 3.04 to reimburse the CE Issuing Bank
shall be for the account of such Lender to the extent of such payment.
(e) The Borrower's obligation to reimburse CE LC Disbursements as
provided in this Section 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 the CE Letter of Credit
or this Agreement, 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 the CE Letter of Credit or this Agreement;
(iii) the existence of any claim, setoff, defense or other right that
the Borrower, any other party guaranteeing, or otherwise obligated with,
the Borrower, any Subsidiary or other Affiliate thereof or any other Person
may at any time have against the Beneficiary, the CE Issuing Bank, the
Administrative Agent or any Lender or any other
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41
Person, whether in connection with this Agreement or any other related
or unrelated agreement or transaction;
(iv) any draft or other document presented under the CE Letter of
Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect;
(v) payment by the CE Issuing Bank under the CE Letter of Credit
against presentation of a draft or other document that does not comply with
the terms of the CE Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of the CE
Issuing Bank, the Lenders, the Administrative Agent 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 Borrower's obligations
hereunder.
Neither the Administrative Agent, the Lenders nor the CE Issuing Bank, nor any
of their Related Parties, shall have any liability or responsibility by reason
of or in connection with the issuance or transfer of the CE Letter of Credit or
any payment or failure to make any payment thereunder, including any of the
circumstances specified in clauses (i) through (vi) above, as well as any
error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to the CE Letter of
Credit (including any document required to make a drawing thereunder), any
error in interpretation of technical terms or any consequence arising from
causes beyond the control of the CE Issuing Bank; provided that the foregoing
shall not be construed to excuse the CE Issuing Bank from liability to the
Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
the CE Issuing Bank's failure to exercise the agreed standard of care (as set
forth below) in determining whether drafts and other documents presented under
the CE Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that the CE Issuing Bank shall have exercised the agreed
standard of care in the absence of gross negligence or wilful misconduct on the
part of the CE Issuing Bank. Without limiting the generality of the foregoing,
it is understood that the CE Issuing Bank may accept documents that appear on
their face to be in substantial compliance with the terms of the CE Letter of
Credit, without responsibility for further investigation, regardless of any
notice or information to the contrary, and may make payment upon presentation
of documents that appear on their face to be in substantial compliance with the
terms of the CE Letter of Credit; provided that the CE Issuing Bank shall have
the right, in its sole discretion, to decline to accept such documents and to
make such payment if such documents are not in strict compliance with the terms
of the CE Letter of Credit.
(f) The CE Issuing Bank shall, promptly following its receipt thereof,
examine all documents purporting to represent a demand for payment under the CE
Letter of Credit. The CE Issuing Bank shall promptly notify the Administrative
Agent and the Borrower by telephone (confirmed by facsimile) of such demand for
payment and whether the CE Issuing Bank has
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made or will make a CE LC Disbursement thereunder; provided that any failure to
give or delay in giving such notice shall not relieve the Borrower of its
obligation to reimburse the CE Issuing Bank and the Lenders with respect to any
such CE LC Disbursement.
(g) While any Exit Loans are outstanding, amounts disbursed from the
Exit Loan Funding Account will be treated as a Credit Disbursement or Liquidity
Disbursement, as applicable and shall be reimburseable by the Borrower or AESOP
(by deposit into the Exit Loan Funding Account) on the same basis as and pro
rata with, the obligations of the Borrower pursuant to Sections 3.08(a) and
(b). If not repaid when due, then Section 4.02(c) shall apply.
SECTION 3.09. Replacement of the CE Issuing Bank. The CE Issuing Bank
may be replaced at any time by written agreement among the Borrower, the
Administrative Agent, the replaced CE Issuing Bank and the successor CE Issuing
Bank. In addition, if at any time, the CE Issuing Bank's short-term credit
ratings are lowered to below "A-1" by S&P or "P-1" by Moody's (a "Downgraded
Issuing Bank"), then the Borrower shall use its best efforts to replace the CE
Issuing Bank. The appointment of any successor CE Issuing Bank shall not be
effective until approved by the Rating Agencies. The Administrative Agent shall
notify the Lenders having a CE Commitment of any replacement of the CE Issuing
Bank. At the time any such replacement shall become effective, the Borrower
shall pay all unpaid fees accrued for the account of the replaced CE Issuing
Bank pursuant to Section 3.11. From and after the effective date of any such
replacement, (i) the successor CE Issuing Bank shall have all the rights and
obligations of the replaced CE Issuing Bank under this Agreement and (ii)
references herein to the term "CE Issuing Bank" shall be deemed to refer to
such successor or to any previous CE Issuing Banks, or to such successor, and
all previous CE Issuing Banks, as the context shall require.
SECTION 3.10. Special Liquidity Draw. If a replacement CE Issuing Bank
has not been appointed within 60 days after the existing CE Issuing Bank
becomes a Downgraded Issuing Bank, or if the CE Letter of Credit has not been
extended in accordance with Section 3.05 on or prior to the fifth Business Day
prior to the then current expiration date thereof, then and at any time
thereafter until such a replacement has been appointed or such extension is
effected, the Beneficiary shall have the right to immediately request a
Liquidity Draw, in accordance with Section 5.07 of the Collateral Agreement, in
an amount equal to the aggregate undrawn amount of the CE Letter of Credit
(such disbursement referred to as a "Special Liquidity Draw"). The Beneficiary
shall, in accordance with Section 5.07 of the Collateral Agreement, deposit the
amount of the Special Liquidity Draw into the CE cash collateral account and
shall use such funds in the same manner as the CE Letter of Credit would be
used hereunder.
SECTION 3.11. CE Letter of Credit Fees. (a) The Borrower agrees to pay
to the Administrative Agent, for the account of each Lender with a CE
Commitment, a commitment fee for the period from the Closing Date to the CE
Termination Date, which fee shall accrue at the rate of 1/2 of 1% per annum on
the average daily amount of the excess of the CE Commitment of such Lender over
the CE LC Exposure of such Lender during the period for which payment is made.
Accrued commitment fees shall be payable in arrears on the last day of March,
June, September and December of each year and on the date on which the CE
Commitment of a Lender terminates, commencing on the first such date to occur
after the date
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hereof. All such commitment fees shall be computed on the basis of a year of
360 days and shall be payable for the actual number of days elapsed (including
the first day but excluding the last day).
(b) The Borrower agrees to pay (i) to the Administrative Agent, for
the account of each Lender with a CE Commitment, a participation fee with
respect to its participations in CE Letters of Credit, which shall accrue at a
rate per annum equal to the Applicable Rate applicable to interest on
Eurodollar Revolving Loans on the average daily amount of such Lender's CE LC
Exposure (excluding any portion thereof attributable to unreimbursed CE LC
Disbursements) during the period from and including the Closing Date to but
excluding the later of the date on which such Lender's CE Commitment terminates
and the date on which such Lender ceases to have any CE LC Exposure, and (ii)
to the CE Issuing Bank a fronting fee, which shall accrue at the rate of 1/8 of
1% per annum on the average daily amount of the CE LC Exposure (excluding any
portion thereof attributable to unreimbursed CE LC Disbursements) during the
period from and including the Closing Date to but excluding the later of the
date of termination of the CE Commitments and the date on which there ceases to
be any CE LC Exposure, as well as the CE Issuing Bank's standard fees with
respect to the issuance, amendment, renewal or extension of the CE Letter of
Credit or processing of drawings thereunder. Participation fees and fronting
fees accrued through and including the last day of March, June, September and
December of each year shall be payable on the third Business Day following such
last day, commencing on the first such date to occur after the Closing Date;
provided that all such fees shall be payable on the date on which the CE
Commitments terminate and the CE LC Exposure is reduced to zero. All
participation fees and fronting fees shall be computed on the basis of a year
of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).
SECTION 3.12. Conversion of CE Disbursements. Upon receipt from the
Beneficiary of a Notice of Conversion substantially in the form of Exhibit G,
the CE Issuing Bank shall, on such date, to the extent permitted by applicable
law, decrease the amount of the outstanding Liquidity Disbursements and
increase the amount of the outstanding Credit Disbursements of the CE Issuing
Bank by the amount specified in such Notice of Conversion.
SECTION 3.13. Reduction of CE Commitment. (a) The Borrower may from
time to time reduce, the CE Commitments; provided that (i) each reduction of
the CE Commitments shall be in an amount that is an integral multiple of
$1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not reduce
the CE Commitments if, the CE LC Exposures would exceed the aggregate CE
Commitments then in effect.
(b) The Borrower shall notify the Administrative Agent of any election
to reduce the CE Commitments under paragraph (a) of this Section at least three
Business Days prior to the effective date of such reduction, specifying such
election and the effective date thereof. Promptly following receipt of any
notice, the Administrative Agent shall advise the relevant Lenders of the
contents thereof. Each notice delivered by the Borrower pursuant to this
Section shall be irrevocable. Any reduction of the CE Commitments shall be
permanent. Each reduction
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of the CE Commitments shall be made ratably among the Lenders in accordance
with their respective CE Commitments.
ARTICLE IV
General Provisions
SECTION 4.01. Fees. (a) The Borrower agrees to pay to the
Administrative Agent, for the account of each Lender with a Revolving Credit
Commitment, a commitment fee for the Revolving Credit Availability Period,
which fee shall accrue at the rate of 1/2 of 1% per annum on the average daily
amount of the excess of the Revolving Credit Commitment of such Lender over the
Revolving Credit Exposure of such Lender during the period for which payment is
made. Accrued commitment fees shall be payable in arrears on the last day of
March, June, September and December of each year and on the date on which the
Revolving Credit Commitments terminate, commencing on the first such date to
occur after the date hereof. All commitment fees shall be computed on the basis
of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
(b) The Borrower agrees to pay (i) to the Administrative Agent, for
the account of each Lender with a Revolving Credit Commitment, a participation
fee with respect to its participations in WC Letters of Credit, which shall
accrue at a rate per annum equal to the Applicable Rate applicable to interest
on Eurodollar Revolving Loans on the average daily amount of such Lender's WC
LC Exposure (excluding any portion thereof attributable to unreimbursed WC LC
Disbursements) during the period from and including the Closing Date to but
excluding the later of the date on which such Lender's Revolving Credit
Commitment terminates and the date on which such Lender ceases to have any WC
LC Exposure, and (ii) to the WC Issuing Bank a fronting fee, which shall accrue
at the rate of 1/8 of 1% per annum on the average daily amount of the WC LC
Exposure (excluding any portion thereof attributable to unreimbursed WC LC
Disbursements) during the period from and including the Closing Date to but
excluding the later of the date of termination of the Revolving Credit
Commitments and the date on which there ceases to be any WC LC Exposure, as
well as the WC Issuing Bank's standard fees with respect to the issuance,
amendment, renewal or extension of any WC Letter of Credit or processing of
drawings thereunder. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year
shall be payable on the third Business Day following such last day, commencing
on the first such date to occur after the Closing Date; provided that all such
fees shall be payable on the date on which the Revolving Credit Commitments
terminate and any such fees accruing after the date on which the Revolving
Credit Commitments terminate shall be payable on demand. Any other fees payable
to the WC Issuing Bank pursuant to this paragraph shall be payable within 10
days after demand. All participation fees and fronting fees shall be computed
on the basis of a year of 360 days and shall be payable for the actual number
of days elapsed (including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed
upon between the Borrower and the Administrative Agent.
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(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the WC Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
commitment fees and participation fees, to the Lenders owed such fees. Fees
paid shall not be refundable under any circumstances.
SECTION 4.02. Interest. (a) The Loans comprising each ABR Borrowing
shall bear interest at a rate per annum equal to the Alternate Base Rate plus
the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest
at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in
effect for such Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus
the rate otherwise applicable to such Loan as provided above or (ii) in the
case of any other amount, 2% plus the rate applicable to ABR Loans as provided
above.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued
pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in
the event of any repayment or prepayment of any Loan (other than a prepayment
of an ABR Revolving Loan prior to the end of the Revolving Credit Availability
Period), accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment, (iii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion and (iv) all accrued interest shall be
payable upon termination of the Revolving Credit Commitments.
(e) All interest hereunder shall be computed on the basis of a year of
360 days, except that interest computed by reference to the Alternate Base Rate
at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate
and Adjusted LIBO Rate shall be determined by the Administrative Agent, and
such determination shall be conclusive absent manifest error.
SECTION 4.03. Alternate Rate of Interest. If prior to the commencement
of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Majority Revolving
Credit Lenders or Majority Term Loan Lenders, as the case may be, that the
Adjusted LIBO Rate, for
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such Interest Period will not adequately and fairly reflect the cost to
such Lenders of making or maintaining their Loans included in such
Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
relevant Lenders by telephone or facsimile as promptly as practicable
thereafter and, until the Administrative Agent notifies the Borrower and the
relevant Lenders that the circumstances giving rise to such notice no longer
exist, (i) any Interest Election Request that requests the conversion of any
Revolving Borrowing to, or continuation of any Revolving Borrowing as, a
Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request
requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an
ABR Borrowing.
SECTION 4.04. Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender (except any such reserve requirement
reflected in the Adjusted LIBO Rate) or an Issuing Bank; or
(ii) impose on any Lender or an Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurodollar Loans
made by such Lender or any WC Letter of Credit, CE Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or an
Issuing Bank of participating in, issuing or maintaining any Letter of Credit
or to reduce the amount of any sum received or receivable by such Lender or an
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or such Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or such Issuing
Bank, as the case may be, for such additional costs incurred or reduction
suffered.
(b) If any Lender or an Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or such Issuing Bank's capital or on the
capital of such Lender's or such Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in WC
Letters of Credit held by, such Lender, or Letters of Credit issued by an
Issuing Bank, to a level below that which such Lender or such Issuing Bank or
such Lender's or such Issuing Bank's holding company could have achieved but
for such Change in Law (taking into consideration such Lender's or such Issuing
Bank's policies and the policies of such Lender's or such Issuing Bank's
holding company with respect to capital adequacy), then from time to time the
Borrower will pay to such Lender or such Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or such Issuing
Bank or such Lender's or such Issuing Bank's holding company for any such
reduction suffered.
(c) A certificate of a Lender or an Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or such Issuing Bank or
its holding company, as
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the case may be, as specified in paragraph (a) or (b) of this Section shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender or such Issuing Bank, as the case may be, the
amount shown as due on any such certificate within 10 days after receipt
thereof.
(d) Failure or delay on the part of any Lender or an Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or such Issuing Bank's right to demand such compensation;
provided that the Borrower shall not be required to compensate a Lender or an
Issuing Bank pursuant to this Section for any increased costs or reductions
incurred more than six months prior to the date that such Lender or such
Issuing Bank, as the case may be, notifies the Borrower of the Change in Law
giving rise to such increased costs or reductions and of such Lender's or such
Issuing Bank's intention to claim compensation therefor; provided further that,
if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the six-month period referred to above shall be extended to
include the period of retroactive effect thereof.
SECTION 4.05. Break Funding Payments. In the event of (a) the payment
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Eurodollar Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice is permitted to be
revocable under Section 2.11(d) and is revoked in accordance herewith), or (d)
the assignment of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto as a result of a request by the Borrower
pursuant to Section 3.08 or Section 4.08, then, in any such event, the Borrower
shall compensate each Lender for the loss, cost and expense attributable to
such event. In the case of a Eurodollar Loan, the loss to any Lender
attributable to any such event shall be deemed to include an amount determined
by such Lender to be equal to the excess, if any, of (i) the amount of interest
that such Lender would pay for a deposit equal to the principal amount of such
Loan for the period from the date of such payment, conversion, failure or
assignment to the last day of the then current Interest Period for such Loan
(or, in the case of a failure to borrow, convert or continue, the duration of
the Interest Period that would have resulted from such borrowing, conversion or
continuation) if the interest rate payable on such deposit were equal to the
Adjusted LIBO Rate for such Interest Period, over (ii) the amount of interest
that such Lender would earn on such principal amount for such period if such
Lender were to invest such principal amount for such period at the interest
rate that would be bid by such Lender (or an affiliate of such Lender) for
dollar deposits from other banks in the eurodollar market at the commencement
of such period. A certificate of any Lender setting forth any amount or amounts
that such Lender is entitled to receive pursuant to this Section shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.
SECTION 4.06. Taxes. (a) Any and all payments by or an account of any
obligation of the Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if
the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes
from such payments, then (i) the sum payable shall be
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increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section) the
Administrative Agent, Lender or the Issuing Bank (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall
pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each Lender
and each Issuing Bank, within 10 days after written demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) paid by the Administrative Agent, such Lender or such
Issuing Bank, as the case may be, and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the amount of such
payment or liability delivered to the Borrower by a Lender or an Issuing Bank,
or by the Administrative Agent on its own behalf or on behalf of a Lender or an
Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy
of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by
applicable law or reasonably requested by the Borrower, such properly completed
and executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate.
SECTION 4.07. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs. (a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or under Section 4.04, 4.05 or 4.06, or otherwise) prior to
12:00 noon, New York City time, on the date when due, in immediately available
funds, without set-off or counterclaim. Any amounts received after such time on
any date may, in the discretion of the Administrative Agent, be deemed to have
been received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the Administrative Agent
at its offices at 270 Park Avenue, New York, New York, except payments to be
made directly to them as expressly provided herein and except that payments
pursuant to Sections 4.04, 4.05, 4.06 and 11.03 shall be made directly to the
Persons entitled thereto. The Administrative Agent shall distribute any such
payments
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49
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension.
All payments hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available to
the Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, to pay interest and fees then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of interest and
fees then due to such parties, and (ii) second, to pay principal and
unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed
LC Disbursements then due to such parties.
(c) If any Lender shall, while an Event of Default has occurred and is
continuing, by exercising any right of set-off or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of its Loans
or participations in LC Disbursements resulting in such Lender receiving
payment of a greater proportion of the aggregate amount of its Loans and
participations in LC Disbursements and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
and participations in LC Disbursements of other Lenders to the extent necessary
so that the benefit of all such payments shall be shared by the Lenders ratably
in accordance with the aggregate amount of principal of and accrued interest on
their respective Loans and participations in LC Disbursements; provided that
(i) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be
rescinded and the purchase price restored to the extent of such recovery,
without interest, and (ii) the provisions of this paragraph shall not be
construed to apply to any payment made by the Borrower pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by
a Lender as consideration for the assignment of or sale of a participation in
any of its Loans or participations in LC Disbursements to any assignee or
participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this paragraph shall apply). The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or an Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to
the Lenders or such Issuing Bank, as the case may be, the amount due. In such
event, if the Borrower has not in fact made such payment, then each of the
Lenders or such Issuing Bank, as the case may be, severally agrees to repay to
the Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such
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50
amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the Federal Funds Effective Rate.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.06(d) or (e), 2.07(b), 3.04 or 4.07(d), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender's obligations under
such Sections until all such unsatisfied obligations are fully paid.
SECTION 4.08. Mitigation Obligations; Replacement of Lenders. (a) If
any Lender requests compensation under Section 4.04, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 4.06, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the
judgment of such Lender, such designation or assignment (i) would eliminate or
reduce amounts payable pursuant to Section 4.04 or 4.06, as the case may be, in
the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender
in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 4.04, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 4.06,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 11.04), all its interests, rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be
another Lender, if a Lender accepts such assignment); provided that (i) the
Borrower shall have received the prior written consent of the Administrative
Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans and participations in LC Disbursements, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder, from the assignee (to the
extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts) and (iii) in the case of any such
assignment resulting from a claim for compensation under Section 4.04 or
payments required to be made pursuant to Section 4.06, such assignment will
result in a reduction in such compensation or payments. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.
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51
ARTICLE V
Representations and Warranties
Each of Avis and the Borrower represents and warrants to the Lenders
that:
SECTION 5.01. Organization; Powers. Each of Avis and its Subsidiaries
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority to
carry on its business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.
SECTION 5.02. Authorization; Enforceability. Each Credit Party has the
corporate power and authority, and the legal right, to make, deliver and
perform the Credit Documents and the other Transaction Documents to which it is
a party and, in the case of the Borrower, to obtain Extensions of Credit
hereunder, and each such Credit Party has taken all necessary corporate action
to authorize the execution, delivery and performance of the Credit Documents
and the other Transaction Documents to which it is a party and, in the case of
the Borrower, to authorize the Extensions of Credit on the terms and conditions
of this Agreement. This Agreement has been duly executed and delivered by both
Avis and the Borrower, and each other Credit Document and other Transaction
Document to which any Credit Party is a party will be duly executed and
delivered on behalf of such Credit Party. This Agreement constitutes, and each
other Credit Document and other Transaction Document to which any Credit Party
is a party when executed and delivered will constitute, a legal, valid and
binding obligation of such Credit Party, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in
equity or at law.
SECTION 5.03. Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority or any other Person, except such as have
been obtained or made and are in full force and effect, (b) will not violate
any applicable law or regulation or the charter, by-laws or other
organizational documents of Avis or any of its Subsidiaries or any order of any
Governmental Authority, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon Avis or any of its
Subsidiaries or its assets, or give rise to a right thereunder to require any
payment to be made by Avis or any of its Subsidiaries except as described in
Schedule 5.03, and (d) will not result in the creation or imposition of any
Lien on any asset of Avis or any of its Subsidiaries except pursuant to the
Security Documents or as otherwise permitted by Section 8.03.
SECTION 5.04. Financial Condition; No Material Adverse Change. (a) The
audited consolidated Statement of Financial Position of the Borrower and its
consolidated Subsidiaries as of December 31, 1995 and December 31, 1996 and the
audited consolidated statements of operations, statements of shareholders'
equity and statements of cash flows for the years ended December 31, 1994 and
1995, and for the periods January 1, 1996 to October 16,
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52
1996 and October 17, 1996 to December 31, 1996, the unaudited condensed
consolidated statement of financial position of the Borrower and its
Subsidiaries at March 31, 1997 and the related unaudited condensed consolidated
statements of operations and cash flows for the three months ended March 31,
1996 and 1997 certified by a Responsible Officer, have heretofore been
furnished to each Lender. Such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of the Borrower and its consolidated Subsidiaries as of such dates and
for such periods in accordance with GAAP, subject to year-end audit adjustments
and the absence of footnotes in the case of the unaudited statements referred
to above. During the period from December 31, 1996 to and including the Closing
Date, there has been no sale, transfer or other disposition by Avis and its
Subsidiaries of any material part of the business or property of Avis and its
Subsidiaries, taken as a whole, and no purchase or other acquisition by any of
them of any business or property (including any Capital Stock of any other
Person) material in relation to the financial condition of Avis and its
Subsidiaries, taken as a whole, in each case, which is not reflected in the
foregoing financial statements or in the notes thereto or that has not
otherwise been disclosed in a writing to the Lenders on or prior to the Closing
Date.
(b) The pro forma consolidated statement of financial position at
December 31, 1996 of Avis and its consolidated Subsidiaries (the "Pro Forma
Statement of Financial Position") certified by a Financial Officer of Avis,
copies of which have heretofore been furnished to each Lender, is the pro forma
statement of financial position of Avis and its Consolidated Subsidiaries
adjusted to give effect (as if such events had occurred on December 31, 1996)
to the Separation, the initial Extensions of Credit and the application of the
proceeds thereof and the application of the proceeds from the settlement of a
net intercompany receivable from HFS and its affiliated companies. The Pro
Forma Statement of Financial Position was prepared in accordance with Article
11 (Pro Forma Financial Information) of Regulation S-X under the Securities
Act.
(c) Since December 31, 1996 there has been no material adverse change
in the business, assets, property, operations, prospects or condition,
financial or otherwise, of Avis and its Subsidiaries, taken as a whole from
that reflected in the Pro Forma Statement of Financial Position. As of the
Closing Date, after giving effect to the consummation of the Transactions, the
Borrower is Solvent.
SECTION 5.05. Properties. (a) Each of Avis and its Subsidiaries has
good title to, or valid leasehold interests in, all its real and personal
property material to its business, except for minor defects in title that do
not interfere with its ability to conduct its business as currently conducted
or to utilize such properties for their intended purposes, and none of such
property is subject to any Lien, except for Liens permitted by Section 8.03.
(b) Each of Avis and its Subsidiaries owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by Avis and its Subsidiaries does
not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
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53
SECTION 5.06. Litigation and Environmental Matters. (a) There are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of Avis or the Borrower,
threatened against or affecting Avis or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve this Agreement or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither Avis nor any of its
Subsidiaries (i) has failed to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required under
any Environmental Law, (ii) has become subject to any Environmental Liability,
(iii) has received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 5.07. Compliance with Laws and Agreements. Each of Avis and
its Subsidiaries is in compliance with all laws, regulations and orders of any
Governmental Authority or Requirement of Law applicable to it or its property
and all indentures, agreements, other instruments and other Contractual
Obligations binding upon it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect. No Default or Event of Default has occurred and is
continuing.
SECTION 5.08. Investment and Holding Company Status. Neither Avis nor
any of its Subsidiaries is (a) an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
SECTION 5.09. Taxes. Each of Avis and its Subsidiaries has timely
filed or caused to be filed all tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which Avis or such Subsidiary, as applicable, has set aside
on its books adequate reserves or (b) to the extent that the failure to do so
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect. The present value of all
accumulated benefit obligations under each Plan (based on the assumptions used
for purposes of Statement of Financial Accounting Standards No. 87) did not, as
of the date of the most recent financial statements reflecting such amounts,
exceed by more than $808,000 the fair market value of the assets of such Plan,
and the present value of all
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54
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $808,000 the fair market value of
the assets of all such underfunded Plans.
SECTION 5.11. Disclosure. Each of Avis and the Borrower has disclosed
to the Lenders all agreements, instruments and corporate or other restrictions
to which it or any of its Subsidiaries is subject, and all other matters known
to it, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect. None of the reports, financial statements,
certificates or other information furnished by or on behalf of Avis or the
Borrower to the Administrative Agent or any Lender in connection with the
negotiation of this Agreement or delivered hereunder (as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, each of Avis and the Borrower represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.
SECTION 5.12. Federal Regulations. No part of the proceeds of any
Extensions of Credit will be used for any purpose which violates the provisions
of the Regulations of the Board, including, without limitation, Regulation G,
Regulation U, Regulation T or Regulation X of the Board. If requested by any
Lender or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-1, FR Form U-1 or such other
similar form referred to in Regulation G, Regulation U, Regulation T or
Regulation X of the Board, as the case may be.
SECTION 5.13. The Security Documents. (a) When executed and delivered,
the provisions of the Security Agreement will be effective to create in favor
of the Administrative Agent a legal and valid security interest in all right,
title and interest of each Credit Party party thereto in the collateral
described therein, and when the financing statements referred to on Schedule
5.13 have been filed as specified in Schedule 5.13, the Administrative Agent
shall have a fully perfected security interest in all right, title and interest
of each Credit Party in all "accounts", "chattel paper", "inventory" or
"general intangibles" (other than "uncertificated securities") (each as defined
in the applicable uniform commercial code) described in such financing
statements, all other UCC Filing Collateral (other than UCC Local Filing
Collateral) described in such financing statements and, to the best knowledge
of Avis, all UCC Local Filing Collateral described in such financing
statements, in each case superior (to the extent that priority can be obtained
by filing uniform commercial code financing statements) in right to any Liens
of any third person against such collateral or interests therein, subject only
to Liens permitted under Section 8.03;
(b) When executed and delivered, the provisions of the Pledge
Agreement, together with possession by the Administrative Agent (or any agent
acting on its behalf) of the Pledged Securities described therein (or, in the
case of Pledged Securities constituting "securities" (as defined in the
applicable uniform commercial code), together with the "transfer" to the
Administrative Agent (or any agent acting on its behalf) of such Pledged
Securities in accordance
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55
with the applicable uniform commercial code), will be effective to create in
favor of the Administrative Agent a legal and valid security interest in all
right, title and interest of the Credit Parties party thereto, as the case may
be, in the Pledged Securities. Thereafter, the Administrative Agent will have a
fully perfected security interest in the Pledged Stock and all other Pledged
Securities described in the Pledge Agreement which are then in the possession
of the Administrative Agent (or any agent acting on its behalf) (or, in the
case of Pledged Securities constituting "securities" (as defined in the
applicable uniform commercial code), which have been "transferred" to the
Administrative Agent (or any agent acting on its behalf) in accordance with the
applicable uniform commercial code), which security interest will be (i) in the
case of Pledged Stock, superior in right to any Liens of any third person
against such collateral or interests therein, and to Liens permitted under
Section 8.03(a) and (ii) in the case of all other Pledged Securities, superior
(to the extent that priority can be obtained by possession or "transfer" of
such other Pledged Securities) in right to any Liens of any third person
against such collateral or interests therein, and to Liens permitted by Section
8.03(a);
(c) When executed and delivered, each Mortgage will be effective to
create in favor of the Administrative Agent, a legal, valid and enforceable
Lien on all right, title and interest of the Credit Party thereto, in the
Material Real Property thereunder. When each Mortgage and the related fixture
filings are duly recorded in the appropriate office or offices and the mortgage
recording fees and taxes in respect thereof are paid and compliance is
otherwise had with the formal requirements of state law applicable to the
recording of real estate mortgages generally, such Mortgage shall constitute a
fully perfected Lien on and security interest in such Material Real Property
(prior to all mortgages on the Material Real Property), subject only to the
encumbrances and exceptions to title expressly set forth or referred to in such
Mortgage, and to Liens permitted by Section 8.03(a);
subject, in the case of clauses (a) through (c) above, to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and to principles of equity whether
considered in a proceeding in equity or at law.
SECTION 5.14. Pledged Stock. On the Closing Date, the shares of
Capital Stock listed on Schedule A to the Pledge Agreement will constitute all
the issued and outstanding shares of Capital Stock of the issuers thereof
listed on said Schedule owned by the Credit Parties; all such shares have been
duly and validly issued and are fully paid and nonassessable; the relevant
Pledgor of said shares is the record and beneficial owner of said shares; and
said shares are free of any Liens or options in favor of, or claims of, any
other Person, except the Lien of the Pledge Agreement and Liens permitted under
Section 8.03(a).
SECTION 5.15. Real Estate Matters. The real property described on
Schedule 5.15 constitutes each of the real estate owned in fee by the Credit
Parties on the Closing Date hereof with each such parcel having a net book
value of at least $1,000,000.
SECTION 5.16. Subsidiaries. Schedule 5.16 sets forth all the
Subsidiaries of Avis at the Closing Date, the jurisdiction of their
incorporation and the direct or indirect ownership interest of Avis therein.
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56
SECTION 5.17. Delivery of the Transaction Documents. The
Administrative Agent has received for itself and for each Lender a complete
photocopy of each of the Transaction Documents, other than the Credit Documents
(including all exhibits, schedules and disclosure letters referred to therein
or delivered pursuant thereto, if any) and all amendments thereto, waivers
relating thereto and other side letters or agreements affecting the terms
thereof in any material respect.
SECTION 5.18. Representations and Warranties Contained in the other
Transaction Documents. Each of the Transaction Documents, other than the Credit
Documents, will have been duly executed and delivered by each of the Credit
Parties which is a party thereto prior to the Closing Date and, to the
knowledge of Avis and the Borrower, all other parties thereto, and will be in
full force and effect on the Closing Date. As of the Closing Date, the
representations and warranties of each Credit Party, and, to the knowledge of
Avis and the Borrower, any of the other parties thereto contained in any of the
Transaction Documents, other than the Credit Documents (after giving effect to
any amendments, supplements, waivers or other modifications of any of the
Transaction Documents, other than the Credit Documents, prior to the Closing
Date in accordance with this Agreement when made or deemed made) are true and
correct in all material respects, when made or deemed made, except as otherwise
disclosed to the Administrative Agent in writing prior to the Closing Date.
SECTION 5.19. Labor Matters. There are no strikes pending or, to the
knowledge of Avis or the Borrower, reasonably expected to be commenced against
Avis or any Subsidiary which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. The hours worked and
payments made to employees of Avis and its Subsidiaries have not been in
violation of any applicable laws, rules or regulations, except where such
violations would not reasonably be expected to have a Material Adverse Effect.
The consummation of the Transactions will not give rise to a right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which any Credit Party (or any predecessor)
is a party or by which Avis or any Subsidiary (or any predecessor) is bound.
SECTION 5.20. Purpose of Loans. The proceeds of the Term Loans and the
Revolving Credit Loans shall be used for general corporate purposes, including
to finance the working capital needs of the Borrower and its Subsidiaries in
the ordinary course of business, and WC Letters of Credit shall be available to
support workers' compensation and other insurance and bonding requirements of
the Credit Parties in the ordinary course of business. The CE Letters of Credit
will be available to fund Credit Draws and Liquidity Draws.
SECTION 5.21. Non-Guarantor Subsidiaries. As of the date hereof, the
net book value of assets owned by the direct and indirect Domestic Subsidiaries
of Avis (other than any Insurance Subsidiary) which are not Guarantor
Subsidiaries does not exceed $1,000,000 in the aggregate and, during the fiscal
year ended December 31, 1996, such Domestic Subsidiaries did not have revenues
in excess of $1,000,000 in the aggregate.
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57
ARTICLE VI
Conditions
SECTION 6.01. Closing Date. The obligations of the Lenders to make
Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 11.02):
(a) Credit Agreement. The Administrative Agent shall have received
from each party hereto either (i) a counterpart of this Agreement signed on
behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include facsimile transmission of a signed
signature page of this Agreement) that such party has signed a counterpart
of this Agreement.
(b) Other Credit Documents. The Administrative Agent shall have
received the following Credit Documents, executed and delivered as required
below, with a copy for each applicable Lender:
(i) the Guarantee, executed and delivered by a duly authorized
officer of each Credit Party (other than the Borrower);
(ii) the Security Agreement, executed and delivered by a duly
authorized officer of each of the Credit Parties; and
(iii) the Pledge Agreement, executed and delivered by a duly
authorized officer of each of the applicable Credit Parties.
(c) Affiliate Payment. The Administrative Agent shall have received
evidence satisfactory to it that the Borrower shall have received in cash
the amount reflected on its books as "due from affiliate" ($194,000,000
plus accrued interest thereon).
(d) Other Transaction Documents. The Administrative Agent shall have
received evidence satisfactory to it that: (i) with respect to the
Liquidity Facility (X) all documentation shall have been executed and
delivered by the appropriate parties thereto in form and substance
satisfactory to the Administrative Agent and such documentation shall be in
full force and effect, (Y) all conditions to the initial extensions of
credit under the Liquidity Facility shall have been satisfied and (Z) no
default or event of default shall exist under the Liquidity Facility; (ii)
with respect to the Medium Term Notes (X) the initial series of Medium Term
Notes shall have been issued on terms satisfactory to the Administrative
Agent and (Y) the sum of the face amount of the initial series of Medium
Term Notes plus the amount of Commercial Paper that can be issued by AESOP
pursuant to the Fleet Financing Program shall not be less than
$3,000,000,000; and (iii) with respect to the Franchise Agreements (X) each
one of the Franchise Agreements, each in form and substance satisfactory to
the Lenders, shall have been executed and delivered
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by each of the parties thereto, (Y) each such agreement shall be in full
force and effect and (Z) no default or event which, with the passage of
time or the giving of notice or both, would constitute a default shall have
occurred pursuant to any of the Franchise Agreements.
(e) Refinancing. The Administrative Agent shall have received evidence
satisfactory to it that all amounts owing under the existing fleet
financing facilities of the Borrower (other than the vehicle lease from
General Electric Credit Corporation in the amount not in excess of
$18,000,000) shall have been repaid and the related facilities shall have
been terminated and the related security interests shall have been
released.
(f) Fees. The Administrative Agent shall have received, for its own
account and the account of the Lenders, all fees and other amounts due and
payable on or prior to the Closing Date, including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by the Borrower hereunder.
(g) Approvals. All governmental and third party approvals (including
landlords' and other consents) necessary or reasonably advisable in
connection with the Transactions, the financing contemplated hereby and the
continuing operations of the Credit Parties shall have been obtained and be
in full force and effect, and all applicable waiting periods under
applicable law shall have expired without any action being taken or
threatened by any competent authority which would restrain, prevent or
otherwise impose material adverse conditions on the Transactions or the
financing contemplated hereby.
(h) Environmental Compliance. The Administrative Agent shall be
reasonably satisfied with the Credit Parties internal compliance policies
in respect of environmental laws and regulations.
(i) Lien Searches. The Administrative Agent shall have received
the results of a recent search by a Person reasonably satisfactory to
the Administrative Agent of the Uniform Commercial Code, judgment and
tax lien filings which may have been filed with respect to personal
property of each Credit Party in any of the jurisdictions set forth in
Part I of Schedule 5.13, and the results of such search shall not
reveal any liens other than liens permitted by Section 8.03 or liens
to be discharged on or prior to the Closing Date pursuant to
documentation satisfactory to the Administrative Agent.
(j) Legal Opinions. The Administrative Agent shall have received, with
a photocopy for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, counsel to Avis, the Borrower and the other Credit Parties,
substantially in the form of Exhibit H; and
(ii) the executed legal opinion of Skadden, Arps, Slate, Meagher
& Flom LLP, in respect of the Franchise Agreements, substantially in
the form of Exhibit I.
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(k) Actions to Perfect Liens. The Administrative Agent shall have
received evidence in form and substance reasonably satisfactory to it that
all filings, recordings, registrations and other actions, including,
without limitation, the filing of duly executed financing statements on
Form UCC-1 in each jurisdiction set forth on Schedule 5.13, necessary or,
in the reasonable opinion of the Administrative Agent, advisable to perfect
the Liens created by the Security Documents shall have been completed or
shall be ready to be completed promptly following the Closing Date, and all
agreements, statements and other documents relating thereto shall be in
form and substance reasonably satisfactory to the Administrative Agent.
(l) Pledged Stock; Stock Powers; Pledged Notes; Endorsements. The
Administrative Agent shall have received:
(i) the certificates representing the Pledged Stock under (and as
defined in) the Pledge Agreement, together with an undated stock power
for each such certificate executed in blank by a duly authorized
officer of the pledgor thereof; and
(ii) the promissory notes representing each of the Pledged Notes
under (and as defined in) the Pledge Agreement, duly endorsed as
required by the Pledge Agreement.
The Credit Parties shall have taken such other action as is reasonably
satisfactory to the Administrative Agent to perfect the security interests
created by the Security Documents.
(m) Borrowing Certificate. The Administrative Agent shall have
received, with a photocopy for each Lender, a certificate of the Borrower,
dated the Closing Date, substantially in the form of Exhibit J with
appropriate insertions and attachments, reasonably satisfactory in form and
substance to the Administrative Agent, executed by a Responsible Officer
and the Secretary or any Assistant Secretary of the Borrower.
(n) Corporate Proceedings of the Credit Parties. The Administrative
Agent shall have received, with a photocopy for each Lender, a copy of the
resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the board of directors of each Credit Party
authorizing, as applicable, (i) the execution, delivery and performance of
this Agreement, any notes and the other Credit Documents and the other
Transaction Documents to which it is or will be a party as of the Closing
Date, (ii) in the case of the Borrower, the Extensions of Credit to the
Borrower and (iii) the granting by it of the Liens to be created pursuant
to the Security Documents to which it is or will be a party as of the
Closing Date, certified by the Secretary or an Assistant Secretary of such
Credit Party as of the Closing Date, which certificate shall be in form and
substance reasonably satisfactory to the Administrative Agent and shall
state that the resolutions thereby certified have not been amended,
modified (except as any later such resolution may modify any earlier such
resolution), revoked or rescinded and are in full force and effect.
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(o) Incumbency Certificates of the Credit Parties. The Administrative
Agent shall have received, with a photocopy for each Lender, a certificate
of each Credit Party, dated the Closing Date, as to the incumbency and
signature of the officers of such Credit Party executing any Credit
Document, reasonably satisfactory in form and substance to the
Administrative Agent, executed by a Responsible Officer and the Secretary
or any Assistant Secretary of such Credit Party.
(p) Governing Documents. The Administrative Agent shall have received,
with a photocopy for each Lender, copies of the certificate or articles of
incorporation and by-laws (or other similar governing documents serving the
same purpose) of each Credit Party, certified as of the Closing Date as
complete and correct copies thereof by the Secretary or an Assistant
Secretary of such Credit Party.
(q) Insurance. The Administrative Agent shall have received evidence
in form and substance reasonably satisfactory to it that all of the
requirements of Section 7.05 shall have been satisfied.
The Administrative Agent shall notify the Borrower and the Lenders of the
Closing Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Banks to issue Letters of Credit hereunder shall not become effective unless
each of the foregoing conditions is satisfied (or waived pursuant to Section
11.02 at or prior to 5:00 p.m., New York City time, on August 29, 1997 (and, in
the event such conditions are not so satisfied or waived, the Commitments shall
terminate at such time).
SECTION 6.02. Each Extension of Credit. The obligation of each Lender
to make a Loan (other than an Exit Loan), and of an Issuing Bank to issue,
amend, renew or extend any Letter of Credit, is subject to the satisfaction of
the following conditions:
(a) Representations and Warranties. The representations and warranties
of each Credit Party in or pursuant to this Agreement or any other Credit
Document shall be true and correct on and as of the date of such Borrowing
or the date of issuance, amendment, renewal or extension of such Letter of
Credit, as applicable.
(b) No Default. At the time of and immediately after giving effect to
such Loan or the issuance, amendment, renewal or extension of such Letter
of Credit, as applicable, no Default shall have occurred and be continuing.
Each Extension of Credit shall be deemed to constitute a representation and
warranty by the Borrower on the date thereof as to the matters specified in
paragraphs (a) and (b) of this Section.
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ARTICLE VII
Affirmative Covenants
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall
have been paid in full and all Letters of Credit shall have expired or
terminated and all LC Disbursements shall have been reimbursed, each of Avis
and the Borrower covenants and agrees with the Lenders that:
SECTION 7.01. Financial Statements and Other Information. Avis will
furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year of Avis, its
audited consolidated balance sheet and related statements of operations,
stockholders' equity and cash flows as of the end of and for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all reported on by Deloitte & Touche LLP or other independent
public accountants of recognized national standing (without a "going
concern" or like qualification or exception and without any qualification
or exception as to the scope of such audit) to the effect that such
consolidated financial statements present fairly in all material respects
the financial condition and results of operations of Avis and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of Avis its consolidated balance sheet and
related statements of operations, stockholders' equity and cash flows as of
the end of and for such fiscal quarter and the then elapsed portion of the
fiscal year, setting forth in each case in comparative form the figures for
the corresponding period or periods of (or, in the case of the balance
sheet, as of the end of) the previous fiscal year, all certified by one of
its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of Avis and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of
footnotes;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of Avis (i)
certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed
to be taken with respect thereto, (ii) setting forth reasonably detailed
calculations demonstrating compliance with Section 8.01 and (iii) stating
whether any change in GAAP or in the application thereof has occurred since
the date of the audited financial statements referred to in Section 5.04
and, if any such change has occurred, specifying the effect of such change
on the financial statements accompanying such certificate;
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(d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any Default
(which certificate may be limited to the extent required by accounting
rules or guidelines);
(e) as soon as available, but in any event not later than the 90th day
after the beginning of each fiscal year of Avis, a copy of the projections
by Avis of the operating budget and cash flow budget of Avis and its
Subsidiaries for such fiscal year, such projections to be accompanied by a
certificate of a Financial Officer of Avis to the effect that such
Financial Officer believes such projections to have been prepared on the
basis of reasonable assumptions;
(f) as soon as available, copies of the pro forma balance sheet of
Avis and its consolidated Subsidiaries delivered in the prospectus of Avis
pursuant to the IPO;
(g) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
Avis or any Subsidiary with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by
Avis to its shareholders generally, as the case may be; and
(h) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of Avis
or any Subsidiary, or compliance with the terms of this Agreement, as the
Administrative Agent or any Lender may reasonably request.
SECTION 7.02. Notices of Material Events. The Borrower as soon as
possible after a Responsible Officer of a Credit Party knows or reasonably
should know thereof, will furnish to the Administrative Agent and each Lender
prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting Avis
or any Affiliate thereof that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;
(c) any litigation or proceeding affecting a Credit Party in which the
amount involved (not covered by insurance) is $1,000,000 or more or in
which injunctive or similar relief is sought that could reasonably be
expected to result in a Material Adverse Effect;
(d) the occurrence of any default under any of the Franchise
Agreements or other Transaction Documents;
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(e) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to
result in liability of Avis and its Subsidiaries in an aggregate amount
exceeding $5,000,000; and
(f) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Responsible Officer of Avis setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.
SECTION 7.03. Existence; Conduct of Business. Avis will, and will
cause each of its Subsidiaries to, continue to engage in business of the same
general type as conducted by Avis and its Subsidiaries on the Closing Date,
taken as a whole, and do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence and the rights,
licenses, permits, privileges and franchises material to the conduct of its
business; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 8.04.
SECTION 7.04. Payment of Obligations. Avis will, and will cause each
of its Subsidiaries to, pay its obligations, including Tax liabilities, that,
if not paid, could result in a Material Adverse Effect before the same shall
become delinquent or in default, except where (a) the validity or amount
thereof is being contested in good faith by appropriate proceedings, (b) Avis
or such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending
such contest could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 7.05. Maintenance of Properties; Insurance. Avis will, and
will cause each of its Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted, and (b) maintain, with financially sound and
reputable insurance companies, insurance in such amounts and against such risks
as are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations; and furnish to the
Administrative Agent, upon written request, information in reasonable detail as
to the insurance carried.
SECTION 7.06. Books and Records; Inspection Rights. Avis will, and
will cause each of its Subsidiaries to, keep proper books of record and account
in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. Avis will, and will
cause each of its Subsidiaries to, permit any representatives designated by the
Administrative Agent, upon reasonable prior notice, to visit and inspect its
properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.
SECTION 7.07. Compliance with Laws Generally. Avis will, and will
cause each of its Subsidiaries to, comply with all laws, rules, regulations and
orders of any Governmental
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64
Authority applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
SECTION 7.08. Environmental Laws. (a) Avis will, and will cause each
of its Subsidiaries to, (i) comply substantially with, and require substantial
compliance by all tenants, subtenants and contractors with, all applicable
Environmental Laws; (ii) obtain, comply substantially with and maintain any and
all Environmental Permits necessary for its operations as conducted and as
planned; and (iii) require that all tenants, subtenants and contractors obtain,
comply substantially with and maintain any and all Environmental Permits
necessary for their operations as conducted and as planned, with respect to any
property leased or subleased from, or operated by any Credit Party.
(b) Avis will, and will cause each of its Subsidiaries to, conduct and
complete or cause to be conducted and completed all investigations, studies,
sampling and testing, and all remedial, removal, and other actions required
under applicable Environmental Laws; and promptly comply with all orders and
directives of all Governmental Authorities regarding Environmental Laws, (i)
except where non-compliance with any such order or directive could not
reasonably be expected to have a Material Adverse Effect or (ii) other than any
such order or directive as to which an appeal or other appropriate contest is
or has been timely and properly taken, is being diligently pursued in good
faith, and as to which appropriate reserves have been established in accordance
with GAAP, and, if the effectiveness of such order or directive has not been
stayed, the pendency of such appeal or other appropriate contest could not
reasonably be expected to have a Material Adverse Effect.
(c) Avis will, and will cause each of its Subsidiaries to, maintain,
update as appropriate, and implement in all material respects an ongoing
program to ensure that all their respective properties and operations are
regularly and reasonably reviewed by competent professionals to identify and
promote compliance with and to reasonably and prudently manage any liabilities
or potential liabilities under any Environmental Law that may affect any of the
Credit Parties, including, without limitation, compliance and liabilities
relating to: discharges to air and water; acquisition, transportation, storage
and use of hazardous materials; waste disposal; repair, maintenance and
improvement of properties; employee health and safety; species protection; and
recordkeeping (the "Environmental Program").
SECTION 7.09. Real Property Matters. (a) No later than 120 days
following the Closing Date, Avis will, and will cause each of its applicable
Subsidiaries to (i) provide to the Administrative Agent executed copies of each
of the Mortgages, executed and delivered by a duly authorized officer of the
Credit Party thereto, with respect to each Material Real Property and (ii) take
all actions necessary or, in the opinion of the Administrative Agent, desirable
to cause the Liens created by the Mortgages to be duly perfected in accordance
with all applicable Requirements of Law.
(b) At or prior to the time the Mortgages are delivered to the
Administrative Agent pursuant to Section 7.09(a), Avis will, and will cause
each of its applicable Subsidiaries to provide to the Administrative Agent, and
the title insurance company issuing the policy referred to in Section 7.09(c)
(the "Title Insurance Company"), maps or plats of an as-built
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survey of the sites of each of the Material Real Properties certified to the
Administrative Agent and the Title Insurance Company in a manner reasonably
satisfactory to them, dated a date reasonably satisfactory to the
Administrative Agent and the Title Insurance Company by an independent
professional licensed land surveyor reasonably satisfactory to the
Administrative Agent and the Title Insurance Company, which maps or plats and
the surveys on which they are based shall be made in accordance with the
Minimum Standard Detail Requirements for Land Title Surveys jointly established
and adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1992, and, without limiting the generality of the
foregoing, there shall be surveyed and shown on such maps, plats or surveys the
following: (i) the locations on such sites of all the buildings, structures and
other improvements and the established building setback lines; (ii) the lines
of streets abutting the sites and width thereof; (iii) all access and other
easements appurtenant to the sites necessary to use the sites; (iv) all
roadways, paths, driveways, easements, encroachments and overhanging
projections and similar encumbrances affecting the sites, whether recorded,
apparent from a physical inspection of the sites or otherwise known to the
surveyor; (v) any encroachments on any adjoining property by the building
structures and improvements on the sites; and (vi) if the site is described as
being on a filed map, a legend relating the survey to said map.
(c) At or prior to the time the Mortgages are delivered to the
Administrative Agent pursuant to Section 7.09(a), Avis will, and will cause
each of its applicable Subsidiaries, to provide to the Administrative Agent in
respect of each of the Material Real Properties a mortgagee's title policy (or
policies) or marked up unconditional binder for such insurance dated a date
reasonably satisfactory to the Administrative Agent, or such other date as
agreed to by the Administrative Agent. Each such policy shall (i) be in an
amount reasonably satisfactory to the Administrative Agent; (ii) insure that
the Mortgage insured thereby creates a valid first Lien on the Material Real
Property encumbered thereby free and clear of all defects and encumbrances,
except those permitted by Section 8.03 and such as may be approved by the
Administrative Agent; (iii) name the Administrative Agent for the benefit of
the Lenders as the insured thereunder; (iv) be in the form of an ALTA Loan
Policy; (v) contain such endorsements and affirmative coverage as the
Administrative Agent may reasonably request; (vi) be issued by title companies
reasonably satisfactory to the Administrative Agent (including any such title
companies acting as reinsurers, at the option of the Administrative Agent) and
(vii) be issued at ordinary rates (other than with respect to affirmative
insurance). The Administrative Agent shall have received evidence reasonably
satisfactory to it that all premiums in respect of each such policy, and all
charges for mortgage recording tax, if any, have been paid. The Administrative
Agent shall have also received a copy of all recorded documents referred to, or
listed as exceptions to title in, the title policy or policies referred to in
this Section and a copy, certified by such parties as the Administrative Agent
may deem reasonably appropriate, of all other documents affecting the property
covered by each Mortgage (including documents relating to insurance coverage
with respect to such property) as shall have been reasonably requested by the
Administrative Agent.
(d) At or prior to the time the Mortgages are delivered to the
Administrative Agent pursuant to Section 7.09(a), with respect to any of the
Material Real Properties which is located in an area identified by the
Secretary of Housing and Urban Development as having
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special flood hazards, the Administrative Agent shall have received
acknowledgement from the relevant Credit Party as required pursuant to Section
208.8(e)(3) of Regulation H of the Board.
SECTION 7.10. After-Acquired Property and Fixtures. Avis will, and
will cause each of its Subsidiaries to:
(a) With respect to any assets (or any interest therein) acquired
after the Closing Date by any Credit Party that are intended to be subject
to the Lien created by any of the Security Documents but which are not so
subject (including, without limitation any assets described in paragraph
(b)), promptly (and in any event within 120 days after the acquisition
thereof): (i) execute and deliver to the Administrative Agent such
amendments to the relevant Security Documents or such other documents as
the Administrative Agent shall deem necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a Lien on such assets
(or such interest therein), (ii) take all actions necessary or advisable to
cause such Lien to be duly perfected in accordance with all applicable
Requirements of Law, including, without limitation, the filing of financing
statements and the recording of Mortgages in such jurisdictions as may be
requested by the Administrative Agent, (iii) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in clauses (i) and (ii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent, and (iv) if requested
by the Administrative Agent, deliver to the Administrative Agent surveys,
title insurance and flood insurance as required by Sections 7.09(b),
7.09(c) or 7.09(d).
(b) With respect to any Person that, subsequent to the Closing Date,
becomes a Domestic Subsidiary of Avis, promptly: (i) execute and deliver to
the Administrative Agent, for the benefit of the Lenders, a pledge
agreement or such amendments to the Pledge Agreement as the Administrative
Agent shall deem necessary or advisable to grant to the Administrative
Agent, for the benefit of the Lenders, a Lien on the Capital Stock of such
Subsidiary which is, directly or indirectly, owned by Avis, (ii) deliver to
the Administrative Agent the certificates representing such Capital Stock,
together with undated stock powers executed and delivered in blank by a
duly authorized officer of the appropriate Credit Party, (iii) cause such
new Subsidiary (A) to become a party to the Guarantee and the Security
Agreement and to the Pledge Agreement and any other Security Documents, as
the Administrative Agent determines in its reasonable judgment, or to a new
guarantee and security agreement, in each case pursuant to an annex to the
Guarantee or otherwise pursuant to documentation which is in form and
substance satisfactory to the Administrative Agent, and (B) to take all
actions necessary or advisable to cause the Lien created by the Security
Agreement or such other security agreement to be duly perfected in
accordance with all applicable Requirements of Law, including, without
limitation, the filing of financing statements in such jurisdictions as may
be requested by the Administrative Agent and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in clauses (i), (ii) and (iii)
immediately preceding, which opinions shall be in form and substance, and
from counsel, reasonably satisfactory to the Administrative Agent.
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(c) With respect to any Person that, subsequent to the Closing Date,
becomes a first tier Foreign Subsidiary of a Credit Party, promptly: (i)
execute and deliver to the Administrative Agent a pledge agreement or such
amendments to the Guarantee and the Security Agreement, and the other
Security Documents as the Administrative Agent shall deem necessary or
advisable to grant to the Administrative Agent, for the benefit of the
Lenders, a Lien on the Capital Stock of such Subsidiary (provided that in
no event shall more than 65% of the Capital Stock of any such Subsidiary be
required to be so pledged), (ii) deliver to the Administrative Agent any
certificates representing such Capital Stock, together with undated stock
powers executed and delivered in blank by a duly authorized officer of the
applicable Credit Party, and take or cause to be taken all such other
actions under the laws of the jurisdiction of organization of such Foreign
Subsidiary as may be necessary or advisable to perfect such Lien on such
Capital Stock and (iii) if requested by the Administrative Agent, deliver
to the Administrative Agent legal opinions relating to the matters
described in clauses (i) and (ii) immediately preceding, which opinions
shall be in form and substance, and from counsel, reasonably satisfactory
to the Administrative Agent.
SECTION 7.11. Further Assurances. Avis will, and will cause each of
its Subsidiaries to, upon the request of the Administrative Agent, promptly
perform or cause to be performed any and all acts and execute or cause to be
executed any and all documents (including, without limitation, financing
statements and continuation statements) for filing under the provisions of the
Uniform Commercial Code or any other Requirement of Law which are necessary or
advisable to maintain in favor of the Administrative Agent, for the benefit of
the Lenders, Liens on the Collateral that are duly perfected in accordance with
all applicable Requirements of Law.
ARTICLE VIII
Negative Covenants
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, each of Avis and the Borrower covenants and agrees
with the Lenders that:
SECTION 8.01. Financial Condition Covenants. Avis will not,
(a) Minimum Consolidated EBITDA. Permit the EBITDA of Avis for the
quarter ended September 30, 1997 to be less than $30,000,000.
(b) Maintenance of Leverage Ratio. Permit, for any period of four
consecutive fiscal quarters of Avis ending during the periods set forth
below, the Leverage Ratio of Avis for such period to be greater than the
ratio set forth opposite such date below:
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Quarters ending on or after Ratio
--------------------------- -----
December 31, 1997 6.25 to 1
December 31, 1998 5.85 to 1
December 31, 1999 5.25 to 1
June 30, 2000 4.75 to 1.
(c) Maintenance of Interest Coverage Ratio. Permit, for any period of
four consecutive fiscal quarters of Avis ending during the periods set
forth below (except for September 30, 1997 which shall be the period from
January 1, 1997), the Interest Coverage Ratio of Avis to be less than the
ratio set forth opposite such date below:
Quarters ending on or after Ratio
--------------------------- -----
September 30, 1997 2.25 to 1
December 31, 1998 2.75 to 1
December 31, 1999 3.50 to 1.
(d) Maintenance of Adjusted EBITDA Coverage Ratio. Permit the ratio of
(i) Adjusted EBITDA to (ii) the sum of (a) Consolidated Interest Expense of
Avis, (b) Consolidated income tax expense of Avis, (c) Consolidated Capital
Expenditures and (d) dividends declared on the Capital Stock of Avis, in
each case for any period of four consecutive fiscal quarters (or, if
shorter, the period from January 1, 1997 to the last day of the current
quarter) to be less than 1.05 to 1.00.
SECTION 8.02. Indebtedness. Avis will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the date hereof and set forth in Schedule
8.02 and extensions, renewals and replacements of any such Indebtedness
that do not increase the outstanding principal amount thereof;
(c) Indebtedness of (i) any Credit Party to any other Credit Party or
(ii) Indebtedness of any Foreign Subsidiary to any Credit Party in an
aggregate principal amount of Indebtedness for all Foreign Subsidiaries
permitted by this clause (c)(ii) not to exceed $25,000,000 at any time
outstanding;
(d) Guarantee Obligations by any Credit Party of Indebtedness of any
other Credit Party otherwise permitted hereunder;
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(e) Indebtedness of Avis or any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in
connection with the acquisition of any such assets or secured by a Lien on
any such assets prior to the acquisition thereof, and extensions, renewals
and replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof; provided that (i) such Indebtedness
is incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement and (ii) the aggregate
principal amount of Indebtedness permitted by this clause (e) shall not
exceed $25,000,000 at any time outstanding;
(f) Indebtedness of any Person that becomes a Subsidiary after the
date hereof; provided that (i) such Indebtedness exists at the time such
Person becomes a Subsidiary and is not created in contemplation of or in
connection with such Person becoming a Subsidiary and (ii) the aggregate
principal amount of Indebtedness permitted by this clause (f) shall not
exceed $10,000,000 at any time outstanding;
(g) to the extent that any Indebtedness may be incurred or arise
thereunder, Indebtedness of Avis or any Subsidiary under Permitted Hedging
Arrangements;
(h) Indebtedness of Foreign Subsidiaries;
(i) Indebtedness of any Credit Party to AESOP Leasing or AESOP Leasing
II incurred in connection with the Fleet Financing Program;
(j) Indebtedness of AESOP Leasing or any of its subsidiaries incurred
in connection with the Fleet Financing Program;
(k) Indebtedness of Avis or any Subsidiary in respect of Capital Lease
Obligations of such Credit Party for vehicles financed from time to time
under the Fleet Financing Program;
(l) other unsecured Indebtedness in an aggregate principal amount not
exceeding $1,000,000 at any time outstanding;
(m) Indebtedness of Avis or any Subsidiary assumed in connection with
a franchise acquisition permitted by Section 8.08(h), which Indebtedness
(i) finances the acquiree's fleet of vehicles and (ii) is not greater than
the net book value of such vehicles;
(n) Indebtedness incurred in connection with the acquisition of
vehicles directly from a manufacturer pursuant to such manufacturer's
repurchase program, provided that (i) such Indebtedness is not greater than
the net book value of such vehicles and (ii) such vehicles could not be
financed under the Fleet Financing Program.
(o) unsecured purchase money Indebtedness of Avis or any Subsidiary
incurred as part of the purchase of an Avis franchisee provided that such
Indebtedness in the aggregate shall not exceed $5,000,000 at any time
outstanding.
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SECTION 8.03. Liens. Avis will not, and will not permit any Subsidiary
to, create, incur, assume or permit to exist any Lien on any property or asset
now owned or hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect of any thereof, except:
(a) Permitted Encumbrances;
(b) Liens created pursuant to the Security Documents or otherwise
securing Indebtedness permitted by Section 8.02(a);
(c) any Lien on any property or asset of Avis or any Subsidiary
existing on the date hereof, securing Indebtedness permitted pursuant to
Section 8.02(b) and set forth in Schedule 8.03; provided that (i) such Lien
shall not apply to any other property or asset of Avis or any Subsidiary
and (ii) such Lien shall secure only those obligations which it secures on
the date hereof and extensions, renewals and replacements thereof that do
not increase the outstanding principal amount thereof;
(d) any Lien existing on any property or asset prior to the
acquisition thereof by Avis or any Subsidiary or existing on any property
or asset of any Person that becomes a Subsidiary after the date hereof
prior to the time such Person becomes a Subsidiary; provided that (i) such
Lien is not created in contemplation of or in connection with such
acquisition or such Person becoming a Subsidiary, (ii) such Lien shall not
apply to any other property or assets of the Borrower or any Subsidiary and
(iii) such Lien shall secure Indebtedness permitted by Section 8.02(f) and
extensions, renewals and replacements thereof that are so permitted;
(e) Liens on fixed or capital assets acquired, constructed or improved
by Avis or any Subsidiary; provided that (i) such security interests secure
Indebtedness permitted by Section 8.02(e), (ii) such security interests and
the Indebtedness secured thereby are incurred prior to or within 90 days
after such acquisition or the completion of such construction or
improvement and (iii) such security interests shall not apply to any other
property or assets of Avis or any Subsidiary;
(f) Liens on the assets of AESOP Leasing or any of its subsidiaries
securing Indebtedness permitted by Section 8.02(j);
(g) Liens on vehicles owned by Avis or any Subsidiary securing
Indebtedness permitted by Section 8.02(k) or 8.02(m); and
(h) Liens on property of any Foreign Subsidiary securing Indebtedness
of such Foreign Subsidiary permitted by Section 8.02(c) or (h).
SECTION 8.04. Limitation on Fundamental Changes. Avis will not, and
will not permit any Subsidiary to, enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of, all or substantially all of its property, business or
assets, except:
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(a) any Credit Party may be merged or consolidated with or into Avis
(provided that Avis shall be the continuing or surviving corporation) or
with or into any one or more other Credit Parties (provided that a Credit
Party which is directly, or indirectly, Wholly Owned shall be the
continuing or surviving entity);
(b) any Credit Party may sell, lease, transfer or otherwise dispose of
any or all of its assets (upon voluntary liquidation or otherwise) to Avis
or any other Credit Party; and
(c) as expressly permitted by Sections 8.05 and 8.08.
SECTION 8.05. Limitation on Sale of Assets. Avis will not, and will
not permit any Subsidiary to, convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares
of such Subsidiary's Capital Stock, to any Person other than Avis or another
Credit Party, except:
(a) the sale or other Disposition of obsolete, worn out or surplus
property, whether now owned or hereafter acquired, in the ordinary course
of business;
(b) the sale or other Disposition of any property in the ordinary
course of business;
(c) the sale or discount without recourse of accounts receivable or
notes receivable arising in the ordinary course of business, or the
conversion or exchange of accounts receivable into or for notes receivable,
in connection with the compromise or collection thereof;
(d) as permitted by Section 8.04(b); and
(e) the sale of vehicles in connection with a securitization program.
SECTION 8.06. Limitation on Restricted Payments. Avis will not, and
will not permit any Subsidiary to, declare or pay any dividend (other than
dividends payable solely in common stock of Avis or options, warrants or other
rights to purchase common stock of Avis) on, or make any payment on account of,
or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of any
class of Capital Stock of Avis or any warrants or options to purchase any such
Capital Stock, whether now or hereafter outstanding, or make any other
distribution (other than distributions payable solely in common stock of Avis
or options, warrants or other rights to purchase common stock of Avis) in
respect thereof, either directly or indirectly, whether in cash or property or
in obligations of Avis, except that Avis may declare and pay cash dividends in
respect of its Capital Stock in respect of any fiscal year commencing with the
fiscal year ended December 31, 1998, if and to the extent that (i) the Leverage
Ratio for the period of such fiscal year ended was less than 3.50 to 1.00, (ii)
the amount of any such dividend does not exceed 50% of Excess Cash
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Flow for such fiscal year and (iii) after giving effect thereto no Default has
occurred and is continuing.
SECTION 8.07. Limitation on Capital Expenditures. Avis will not, and
will not permit any Subsidiary to, make or commit to make any Capital
Expenditures (excluding any expenses incurred in connection with the Fleet
Financing Program) in any fiscal year in an amount that exceeds $35,000,000.
SECTION 8.08. Limitation on Investments, Loans and Advances. Avis will
not, and will not permit any Subsidiary to, make any advance, loan, extension
of credit or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of, or any assets constituting a business unit
of, or make any other investment, in cash or by transfer of assets or property,
in (each an "Investment"), any Person, except:
(a) Permitted Investments;
(b) Investments existing on the Closing Date and described in Schedule
8.08(b), setting forth the respective amounts of such Investments as of a
recent date;
(c) loans and advances to officers, directors or employees in the
ordinary course of business for travel and entertainment expenses;
(d) Investments by the Credit Parties in other Credit Parties;
(e) Investments of the Credit Parties under Permitted Hedging
Arrangements;
(f) Investments in the nature of pledges or deposits with respect to
leases or utilities provided to third parties in the ordinary course of
business;
(g) Investments representing evidences of Indebtedness, securities or
other property received from another Person in connection with any
bankruptcy proceeding or other reorganization of such other Person or as a
result of foreclosure, perfection or enforcement of any Lien or exchange
for evidences of Indebtedness, securities or other property of such other
Person held by a Credit Party;
(h) Investments by Avis, during the eighteen months immediately
following the consummation of the IPO, for the purpose of acquiring
additional Avis franchises in an amount not to exceed (excluding the value
of any Capital Stock of Avis issued in connection with such Investment) the
lesser of (a) the Net Cash Proceeds of the IPO and (b) $225,000,000;
provided, that after giving effect to any such acquisition (i) no Default
would occur and be continuing, (ii) EBITDA for the twelve months preceding
the effective date of such acquisition (on a pro forma basis taking into
account the effects of the proposed acquisition) would be greater than
zero, (iii) Avis would be in pro forma compliance with the financial
covenants set forth in Section 8.01 for the four quarters preceding the
effective date of the acquisition and (iv) the amount of Indebtedness
assumed in such acquisition (other than Indebtedness that finances the
acquiree's fleet of
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vehicles) when added to the aggregate Indebtedness assumed for all such
acquisitions and any acquisitions permitted by clause (i) below would not
exceed $10,000,000;
(i) Investments by Avis not otherwise permitted by clause (h) above,
for the purpose of acquiring additional Avis franchises, paid for solely in
common stock of Avis; provided, that after giving effect to any such
acquisition (i) no Default would occur and be continuing, (ii) EBITDA for
the twelve months preceding the effective date of such acquisition (on a
pro forma basis taking into account the effects of the proposed
acquisition) would be greater than zero, (iii) Avis would be in pro forma
compliance with the financial covenants set forth in Section 8.01 for the
four quarters preceding the effective date of the acquisition and (iv) the
amount of Indebtedness assumed in such acquisition (other than Indebtedness
that finances the acquiree's fleet of vehicles) when added to the aggregate
Indebtedness assumed for all such acquisitions (including any such
acquisition permitted pursuant to Section 8.08(h)) would not exceed
$10,000,000; and
(j) Investments in AESOP Leasing in connection with the Fleet
Financing Program.
SECTION 8.09. Limitation on Sale and Leaseback Transactions. Avis will
not, and will not permit any Subsidiary to, enter into any arrangement with any
Person providing for the leasing by Avis or any Subsidiary of real or personal
property which has been or is to be sold or transferred by Avis or such
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of such Credit Party (any of such arrangements, a "Sale and
Leaseback Transaction").
SECTION 8.10. Limitation on Optional Payments and Modifications of
Debt Instruments and Other Documents. Avis will not, and will not permit any
Subsidiary to, (a) make any optional payment or prepayment on or optional
repurchase or redemption of any part of any Indebtedness (other than the Loans)
or any portion of the deferred royalty fee under the Master License Agreement,
or any interest thereon, including, without limitation, any payments on account
of, or for a sinking or other analogous fund for, the repurchase, redemption,
defeasance or other acquisition thereof or (b) amend, modify or change, or
consent or agree to any amendment, modification or change to any terms relating
to the payment or prepayment of any such deferred amounts or interest thereon
(other than any such amendment, modification or change that would extend the
maturity or reduce the amount of any such deferred amounts or interest
thereon).
SECTION 8.11. Limitation on Changes to Franchise Agreements. Avis will
not, and will not permit any Subsidiary to, amend, supplement, waive or
otherwise modify any of the provisions of the Franchise Agreements.
SECTION 8.12. Limitation on Changes in Fiscal Year. Avis will not
permit its fiscal year to end on a day other than December 31.
SECTION 8.13. Limitation on Lines of Business. Avis will not, and will
not permit any Subsidiary to, enter into any business, either directly or
through any Subsidiary or
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joint venture, except for those businesses of the same general type as those in
which Avis and its Subsidiaries are engaged on the Closing Date or which are
directly related thereto.
SECTION 8.14. Limitations on Currency and Commodity Hedging
Transactions. Avis will not, and will not permit any Subsidiary to, enter into,
purchase or otherwise acquire agreements or arrangements relating to currency,
commodity or other hedging except, to the extent and only to the extent that,
such agreements or arrangements are entered into, purchased or otherwise
acquired in the ordinary course of business with reputable financial
institutions and not for purposes of speculation (any such agreement or
arrangement permitted by this Section, a "Permitted Hedging Arrangement").
SECTION 8.15. Restrictive Agreements. Avis will not, and will not
permit any of its Domestic Subsidiaries (other than Securitization Entities)
to, directly or indirectly, enter into, incur or permit to exist any agreement
or other arrangement that prohibits, restricts or imposes any condition upon
(a) the ability of Avis or any such Subsidiary to create, incur or permit to
exist any Lien upon any of its property or assets, or (b) the ability of any
such Subsidiary to pay dividends or other distributions with respect to any
shares of its capital stock or to make or repay loans or advances to Avis or
any other Subsidiary or to guarantee Indebtedness of Avis or any other
Subsidiary; provided that (i) the foregoing shall not apply to restrictions and
conditions imposed by law or by this Agreement, (ii) the foregoing shall not
apply to restrictions and conditions existing on the date hereof identified on
Schedule 8.15 (but shall apply to any extension or renewal of, or any amendment
or modification expanding the scope of, any such restriction or condition),
(iii) the foregoing shall not apply to customary restrictions and conditions
contained in agreements relating to the sale of a Subsidiary pending such sale,
provided such restrictions and conditions apply only to the Subsidiary that is
to be sold and such sale is permitted hereunder, (iv) clause (a) of the
foregoing shall not apply to restrictions or conditions imposed by any
agreement relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness and (v) clause (a) of the foregoing shall not apply to customary
provisions in leases and other contracts restricting the assignment thereof.
SECTION 8.16. Limitation on Transactions with Affiliates. Avis will
not, and will not permit any Subsidiary to, enter into any transaction (other
than the Franchise Agreements), including, without limitation, any purchase,
sale, lease or exchange of property or the rendering of any service, with any
Affiliate (other than Subsidiary) unless such transaction is (a) otherwise
permitted under this Agreement, and (b) upon terms no less favorable to Avis or
such Subsidiary than it would obtain in a comparable arm's length transaction
with a Person which is not an Affiliate.
SECTION 8.17. Limitation on Activities of Certain Subsidiaries. Avis
will not permit, and will cause each Subsidiary not to permit, each direct or
indirect Domestic Subsidiary which is not a Guarantor Subsidiary (other than
the Insurance Subsidiaries) to acquire any additional assets or to conduct any
additional business, either directly or indirectly, unless prior to owning such
assets or conducting such business such Domestic Subsidiary executes and
delivers to the Administrative Agent those documents set forth in Section
7.10(b).
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ARTICLE IX
Events of Default
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement, when and as the same shall become
due and payable, and such failure shall continue unremedied for a period of
five Business Days;
(c) any representation or warranty made or deemed made by or on behalf
of Avis or any Subsidiary in or in connection with the Credit Documents or
any amendment or modification thereof, or in any report, certificate,
financial statement or other document furnished pursuant to or in
connection with this Agreement or any amendment or modification hereof,
shall prove to have been incorrect in any material respect when made or
deemed made;
(d) Avis or the Borrower, as the case may be, shall fail to observe or
perform any covenant, condition or agreement contained in Section 7.02,
7.03 (with respect to Avis' or the Borrower's existence) or 7.09 or in
Article VIII;
(e) Avis, the Borrower or any other Credit Party, shall fail to
observe or perform any covenant, condition or agreement contained in this
Agreement or the Security Documents (other than those specified in clause
(a), (b) or (d) of this Article), and such failure shall continue
unremedied for a period of 30 days after notice thereof from the
Administrative Agent (given at the request of any Lender) to the Borrower;
(f) Avis or any Subsidiary shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material
Indebtedness (including but not limited to any Indebtedness incurred
pursuant to the Fleet Financing Program), when and as the same shall become
due and payable;
(g) any event or condition occurs that results in any Material
Indebtedness (including but not limited to any Indebtedness incurred
pursuant to the Fleet Financing Program) becoming due prior to its
scheduled maturity or that enables or permits (with or without the giving
of notice, the lapse of time or both) the holder or holders of any Material
Indebtedness or any trustee or agent on its or their behalf to cause any
Material Indebtedness to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; provided that this clause (g) shall not
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apply to secured Indebtedness that becomes due as a result of the voluntary
sale or transfer of the property or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of Avis or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for Avis or any Subsidiary or
for a substantial part of its assets, and, in any such case, such
proceeding or petition shall continue undismissed for 60 days or an order
or decree approving or ordering any of the foregoing shall be entered;
(i) Avis or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or
other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Article, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for Avis or any Subsidiary or
for a substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding,
(v) make a general assignment for the benefit of creditors or (vi) take any
action for the purpose of effecting any of the foregoing;
(j) Avis or any Subsidiary shall become unable, admit in writing or
fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against Avis, any
Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of Avis or any
Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Majority Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of Avis and
its Subsidiaries in an aggregate amount exceeding (i) $2,000,000 in any
year or (ii) $5,000,000 for all periods; or
(m) (i) Any of the Security Documents shall cease for any reason to be
in full force and effect (other than pursuant to the terms hereof or
thereof), or any Credit Party which is a party to any of the Security
Documents shall so assert in writing, or (ii) the Lien created by any of
the Security Documents shall cease to be perfected and enforceable in
accordance with its terms or of the same effect as to perfection and
priority purported to be created thereby with respect to any significant
portion of the Collateral (other than in connection with any termination of
such Lien in respect of any Collateral as permitted hereby or by any
Security Document), and such failure of such Lien to be
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perfected and enforceable with such priority shall have continued
unremedied for a period of 20 days; or
(n) Any Guarantee Obligation shall cease for any reason to be in full
force and effect (other than pursuant to the terms hereof or thereof) or
any Guarantor shall so assert in writing;
(o) Any event or condition occurs that enables or permits any party to
any of the Franchise Agreements (other than Avis or any Subsidiary), with
or without the giving of notice, the lapse of time or both, to terminate
such Franchise Agreement; or
(p) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Majority Lenders shall, by notice to the Borrower, take either
or both of the following actions, at the same or different times: (i) terminate
the Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower;
and in case of any event with respect to the Borrower described in clause (h)
or (i) of this Article, the Commitments shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
With respect to any Letter of Credit with respect to which presentment
for honor shall not have occurred at the time of an acceleration pursuant to
the preceding paragraph, the Borrower shall at such time deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letter of Credit. The
Borrower hereby grants to the Administrative Agent, for the benefit of the
applicable Issuing Bank and the applicable L/C Participants, a security
interest in such cash collateral to secure all obligations of the Borrower in
respect of such Letter of Credit under this Agreement and the other Credit
Documents. The Borrower shall execute and deliver to the Administrative Agent,
for the account of the Issuing Banks and the L/C Participants, such further
documents and instruments as the Administrative Agent may request to evidence
the creation and perfection of such security interest in such cash collateral
account. Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letter of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrower hereunder and under any notes. When there is no CE
and/or WC LC Exposure remaining and
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all obligations of the Borrower hereunder and under any notes shall have been
paid in full, the balance, if any, in such cash collateral account shall be
returned to the Borrower.
ARTICLE X
The Administrative Agent
Each of the Lenders and each Issuing Bank hereby irrevocably appoints
the Administrative Agent as its agent and authorizes the Administrative Agent
to take such actions on its behalf and to exercise such powers as are delegated
to the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary
or other implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent
is required to exercise in writing by the Majority Lenders, and (c) except as
expressly set forth herein, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of its Subsidiaries that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates
in any capacity. The Administrative Agent shall not be liable for any action
taken or not taken by it with the consent or at the request of the Majority
Lenders or in the absence of its own gross negligence or wilful misconduct. The
Administrative Agent shall be deemed not to have knowledge of any Default
unless and until written notice thereof is given to the Administrative Agent by
the Borrower, any other Credit Party or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness
of this Agreement or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article VI or elsewhere herein,
other than to confirm receipt of items expressly required to be delivered to
the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing believed by it to be
genuine and to have been signed or sent by the proper
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Person. The Administrative Agent also may rely upon any statement made to it
orally or by telephone and believed by it to be made by the proper Person, and
shall not incur any liability for relying thereon. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent
may resign at any time by notifying the Lenders, the Issuing Banks and the
Borrower. Upon any such resignation, the Majority Lenders shall have the right,
in consultation with the Borrower, to appoint a successor. If no successor
shall have been so appointed by the Majority Lenders and shall have accepted
such appointment within 30 days after the retiring Administrative Agent gives
notice of its resignation, then the retiring Administrative Agent may, on
behalf of the Lenders and the Issuing Bank, appoint a successor Administrative
Agent which shall be a bank with an office in New York, New York, or an
Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After the Administrative Agent's resignation hereunder, the
provisions of this Article shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as
Administrative Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement, any related agreement or any document furnished hereunder or
thereunder.
In connection with the sale or other disposition of all of the Capital
Stock of any Guarantor or the sale or other disposition of Collateral (as
defined in each of the Security Documents) permitted under Section 8.05, the
Administrative Agent shall, and is hereby
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authorized by the Lenders to, promptly, upon the request of the Borrower and at
the sole expense of the Borrower, take all actions reasonably necessary to
release such Guarantor from its guarantee contained in the Guarantee or to
release the Collateral subject to such sale or other disposition, as the case
may be, and shall take any other actions reasonably requested by the Borrower
to effect the transactions permitted under Section 8.05.
ARTICLE XI
Miscellaneous
SECTION 11.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all 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 Borrower or Avis, to it at Old Country Road, Garden
City, New York 11530, Attention of Treasurer, with a copy to the General
Counsel, (Telecopy No. 516-222-3751);
(b) if to the Administrative Agent, to The Chase Manhattan Bank, Agent
Bank Services, 1 Chase Manhattan Plaza, 8th Floor, New York, New York
10081, Attention of Margaret Swales (Telecopy No. (212) 552-5662), with a
copy to The Chase Manhattan Bank, 270 Park Avenue, New York 10017,
Attention of Stewart Wallace (Telecopy No. 270-0002);
(c) if to the WC Issuing Bank, to it at PNC Bank, National
Association, 345 Park Avenue, New York, New York 10017, Attention of Sarah
McClintock (Telecopy No. 212-409-3737);
(d) if to the CE Issuing Bank, to it at Bayerische Vereinsbank, 335
Madison Avenue, 19th Floor, New York, New York 10017, Attention of Marianne
Weinzinger (Telecopy No. 212-880-9724);
(e) if to any other Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.
SECTION 11.02. Waivers; Amendments. (a) No failure or delay by the
Administrative Agent, the Issuing Bank or any Lender in exercising any right or
power 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
<PAGE>
81
remedies of the Administrative Agent, the Issuing Bank and the Lenders
hereunder 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 Credit Party therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. Without limiting the generality
of the foregoing, the making of a Loan or issuance of a Letter of Credit shall
not be construed as a waiver of any Default, regardless of whether the
Administrative Agent, any Lender or an Issuing Bank may have had notice or
knowledge of such Default at the time.
(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 Avis, the Borrower and the Majority Lenders or by Avis, the
Borrower and the Administrative Agent with the consent of the Majority Lenders;
provided that no such agreement shall (i) increase the Commitment of any Lender
without the written consent of such Lender, (ii) reduce the principal amount of
any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce
any fees payable hereunder, without the written consent of each Lender affected
thereby, (iii) postpone the scheduled date of payment of the principal amount
of any Loan or LC Disbursement, or any interest thereon, or any fees payable
hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the
written consent of each Lender affected thereby, (iv) change Section 4.07(b) or
(c) in a manner that would alter the pro rata sharing of payments required
thereby, without the written consent of each Lender, (v) release, or
subordinate the interest of the Administrative Agent in, all or substantially
all of the collateral for the obligations hereunder or release all or
substantially all of the Guarantors from their guarantees hereof without the
written consent of each Lender, or (vi) change any of the provisions of this
Section or the definition of "Majority Lenders" or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Lender; provided further that no
such agreement shall amend, modify or otherwise affect the rights or duties of
the Administrative Agent or an Issuing Bank hereunder without the prior written
consent of the Administrative Agent or such Issuing Bank, as the case may be.
SECTION 11.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower
shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent, in connection with
the syndication of the credit facilities provided for herein, the preparation
and administration of this Agreement or any amendments, modifications or
waivers of the provisions hereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all out-of-pocket expenses
incurred by an Issuing Bank in connection with the issuance, amendment, renewal
or extension of any Letter of Credit or any demand for payment thereunder and
(iii) all out-of-pocket expenses incurred by the Administrative Agent, an
Issuing Bank or any Lender, including the fees, charges and disbursements of
any counsel for the Administrative Agent, an Issuing Bank or any Lender, in
connection with the enforcement or protection of its rights in connection with
this Agreement, including its rights under this Section, or in connection with
the Loans made or Letters of Credit
<PAGE>
82
issued hereunder, including in connection with any workout, restructuring or
negotiations in respect thereof.
(b) The Borrower shall indemnify the Administrative Agent, each
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an "Indemnitee") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the performance
by the parties hereto of their respective obligations hereunder or the
consummation of the Transactions or any other transactions contemplated hereby,
(ii) any Loan or Letter of Credit or the use of the proceeds therefrom
(including any refusal by the Issuing Bank to honor a demand for payment under
a Letter of Credit if the documents presented in connection with such demand do
not strictly comply with the terms of such Letter of Credit), (iii) any actual
or alleged presence or release of Hazardous Materials on or from any property
owned or operated by Avis or any of its Subsidiaries, or any Environmental
Liability related in any way to Avis or any of its Subsidiaries, or (iv) any
actual or prospective claim, litigation, investigation or proceeding relating
to any of the foregoing, whether based on contract, tort or any other theory
and regardless of whether 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.
(c) To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent or to an Issuing Bank under
paragraph (a) or (b) of this Section, each Lender severally agrees to pay to
the Administrative Agent, or such Issuing Bank, as the case may be, such
Lender's Voting Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent or the Issuing Bank in its capacity as such.
(d) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable not later than
10 Business Days after written demand therefor.
SECTION 11.04. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that
neither the Borrower nor Avis may assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of each
<PAGE>
83
Lender (and any attempted assignment or transfer by the Borrower without such
consent shall be null and void). Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby and, to the
extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion of
any of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided that
(i) except in the case of an assignment to a Lender or an Affiliate of a
Lender, each of the Borrower and the Administrative Agent (and, in the case of
an assignment of all or a portion of a Commitment or any Lender's obligations
in respect of its CE and/or WC LC Exposure, the relevant Issuing Bank) must
give their prior written consent to such assignment (which consent shall not be
unreasonably withheld or delayed), (ii) except in the case of an assignment to
a Lender or an Affiliate of a Lender or an assignment of the entire remaining
amount of a particular Commitment of an assigning Lender, the amount of a
particular Commitment of an assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Administrative Agent) shall not be less than
$5,000,000 unless each of the Borrower and the Administrative Agent otherwise
consent, (iii) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with a processing
and recordation fee of $3,500, and (iv) the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; provided further that any consent of the Borrower otherwise
required under this paragraph shall not be required if an Event of Default
under clause (h) or (i) of Article IX has occurred and is continuing. Upon
acceptance and recording pursuant to paragraph (d) of this Section, from and
after the effective date specified in each Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of
a Lender under this Agreement, and the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of the assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a party hereto
but shall continue to be entitled to the benefits of Sections 4.04, 4.05, 4.06
and 11.03). Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with this paragraph shall be treated
for purposes of this Agreement as a sale by such Lender of a participation in
such rights and obligations in accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive, and the Borrower, the Administrative Agent,
each Issuing Bank and the Lenders may treat each Person whose name is recorded
in the Register
<PAGE>
84
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent, or any Issuing Bank, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
rights and obligations under this Agreement (including all or a portion of its
Commitments and the Loans owing to it); provided that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent, each Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant,
agree to any amendment, modification or waiver described in the first proviso
to Section 11.02(b) that affects such Participant. Subject to paragraph (f) of
this Section, the Borrower agrees that each Participant shall be entitled to
the benefits of Sections 4.04, 4.05 and 4.06 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section.
(f) A Participant shall not be entitled to receive any greater payment
under Section 4.04 or 4.06 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent. A Participant that would be a Foreign Lender if it were
a Lender shall not be entitled to the benefits of Section 4.06 unless the
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
4.06(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any such pledge or assignment to a Federal Reserve Bank,
and this Section shall not apply to any such pledge or assignment of a security
interest; provided that no such pledge or assignment of a security interest
shall release a Lender from any of its obligations hereunder or substitute any
such assignee for such Lender as a party hereto.
<PAGE>
85
SECTION 11.05. Survival. All covenants, agreements, representations
and warranties made by Avis or the Borrower herein and in the certificates or
other instruments delivered in connection with or pursuant to this Agreement
shall be considered to have been relied upon by the other parties hereto and
shall survive the execution and delivery of this Agreement and the making of
any Loans and issuance of any Letters of Credit, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that the Administrative Agent, the Issuing Bank or any Lender may have had
notice or knowledge of any Default or incorrect representation or warranty at
the time any credit is extended hereunder, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Agreement is outstanding and unpaid
or any Letter of Credit is outstanding and so long as the Commitments have not
expired or terminated. The provisions of Sections 4.04, 4.05, 4.06 and 11.03
and Article X shall survive and remain in full force and effect regardless of
the consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
SECTION 11.06. Counterparts; Integration; Effectiveness. 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
and any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 6.01, this Agreement shall become effective when it
shall have been executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be
effective as delivery of a manually executed counterpart of this Agreement.
SECTION 11.07. Severability. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 11.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender 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 Lender to or
for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
<PAGE>
86
SECTION 11.09. Governing Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(b) Each of Avis and the Borrower hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, 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 Administrative Agent, the Issuing Banks or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement against Avis or the
Borrower or its properties in the courts of any jurisdiction.
(c) Each of Avis and the Borrower 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 court referred to in paragraph (b) of this Section. 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.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 11.01. 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 11.10. 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 ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). 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 BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 11.11. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
<PAGE>
87
SECTION 11.12. Confidentiality. Each of the Administrative Agent, the
Issuing Banks and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the Borrower or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach
of this Section or (ii) becomes available to the Administrative Agent, the
Issuing Bank or any Lender on a nonconfidential basis from a source other than
the Borrower. For the purposes of this Section, "Information" means all
information received from the Borrower relating to the Borrower or its
business, other than any such information that is available to the
Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis
prior to disclosure by the Borrower; provided that, in the case of information
received from the Borrower after the date hereof, such information is clearly
identified at the time of delivery as confidential. Any Person required to
maintain the confidentiality of Information as provided in this Section shall
be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
<PAGE>
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.
Avis Rent A Car System, Inc.
by /s/ Gerard J. Kennell
---------------------------------
Name: Gerard J. Kennell
Title: Vice President and Treasurer
Avis Rent A Car, Inc.
by /s/ Gerard J. Kennell
---------------------------------
Name: Gerard J. Kennell
Title: Vice President and Treasurer
<PAGE>
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.
Avis Rent A Car System, Inc.
by /s/ Kevin M. Sheehan
---------------------------------
Name: Kevin M. Sheehan
Title: Executive Vice President and
Chief Financial Officer
Avis Rent A Car, Inc.
by /s/ Kevin M. Sheehan
---------------------------------
Name: Kevin M. Sheehan
Title: Executive Vice President and
Chief Financial Officer
<PAGE>
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent,
by /s/ Laurie B. Perper
---------------------------------
Name: Laurie B. Perper
Title: Vice President
<PAGE>
LEHMAN COMMERCIAL PAPER INC.,
individually and as Syndication Agent,
by /s/ Demci J. Dee
---------------------------------
Name: Demci J. Dee
Title: Attorney
<PAGE>
Bank of Montreal (Chicago)
by /s/ Marc R. Heyden
---------------------------------
Name: Marc R. Heyden
Title: Director
<PAGE>
Dai Ichi Kangyo Bank Ltd (New York)
by /s/ David J. McCawn
---------------------------------
Name: David J. McCawn
Title: Account Officer
<PAGE>
Fleet Bank, N.A.
by /s/ Andrew A. Lee
---------------------------------
Name: Andrew A. Lee
Title: V P
<PAGE>
The Sumitomo Bank, Limited
New York Branch
by /s/ John C. Kissinger
---------------------------------
Name: John C. Kissinger
Title: Joint General Manager
<PAGE>
CIBC Inc.
by /s/ Ihor Zaluckyj
---------------------------------
Name: IHOR ZALUCKYJ
Title: ASSOCIATE DIRECTOR
CIBC WOOD GUNDY SECURITIES
CORP. AS AGENT
<PAGE>
Mitsubishi Trust & Banking Corporation
(U.S.A.)
by /s/ Gary T. Maciak
---------------------------------
Name: Gary T. Maciak
Title: First Vice President
<PAGE>
Compagnie Financiere de CIC et de
L'Union Europeene
by /s/ Eric Longuet
---------------------------------
Name: Eric Longuet
Title: Vice President
by /s/ Albert Calo
---------------------------------
Name: Albert Calo
Title: Vice President
<PAGE>
The Long-Term Credit Bank of Japan,
Limited New York Branch
by /s/ Noboru Kubota
---------------------------------
Name: Noboru Kubota
Title: Deputy General Manager
<PAGE>
The Fuji Bank, Limited
by /s/ Toshiaki Yakura
---------------------------------
Name: Toshiaki Yakura
Title: Senior Vice President
<PAGE>
Dresdner Bank AG,
New York and Grand Cayman Branches
by /s/ Richard W. Conroy
---------------------------------
Name: Richard W. Conroy
Title: Vice President
by /s/ Peter M. Kay
---------------------------------
Name: Peter M. Kay
Title: Assistant Vice President
<PAGE>
Barnett Bank, N.A.
by /s/ Melinda J. Lemen
---------------------------------
Name: Melinda J. Lemen
Title: Vice President
<PAGE>
Credit Lyonnais New York Branch
by /s/ Vladimir Labun
---------------------------------
Name: Vladimir Labun
Title: First Vice President-Manager
<PAGE>
Bayerische Hypotheken-und-Wechsel-Bank,
Aktiengesellschaft New York Branch
by /s/ Wolfgang Novotny
---------------------------------
Name: Wolfgang Novotny
Title: Vice President
by /s/ Richard G. Pankuch
---------------------------------
Name: Richard G. Pankuch
Title: First Vice President
<PAGE>
NationsBank, N.A.
by /s/ Patricia G. McCormack
---------------------------------
Name: Patricia G. McCormack
Title: Senior Vice President
<PAGE>
Comerica Bank (Detroit)
by /s/ David W. Shirey
---------------------------------
Name: David W. Shirey
Title: Account Officer
<PAGE>
Bayerische Vereinsbank AG
by /s/ Marianne Weinsinger
---------------------------------
Name: Marianne Weinsinger
Title: Vice President
by /s/ David McCollum
---------------------------------
Name: David McCollum
Title: Vice President
<PAGE>
BHF Bank Aktiengesellschaft
by /s/ Paul Travers
---------------------------------
Name: Paul Travers
Title: VP
by /s/ Linda Pace
---------------------------------
Name: Linda Pace
Title: VP
<PAGE>
The Bank of Tokyo-Mitsubishi, Ltd.
New York Branch
by /s/ Paula Maelier
---------------------------------
Name: Paula Maelier
Title: Vice President
<PAGE>
Industrial Bank of Japan, Limited
New York
by /s/ John V. Veltri
---------------------------------
Name: John V. Veltri
Title: Deputy General Manager
<PAGE>
CoreStates Bank, N.A.
by /s/ Geoffrey D. Minott
---------------------------------
Name: Geoffrey D. Minott
Title: Vice President
<PAGE>
PNC Bank, National Association
by /s/ Sharah McCintor
---------------------------------
Name: Sharah McCintor
Title: VP
<PAGE>
Van Kampen American Capital
Prime Rate Income Trust
by /s/ Jeffrey W. Maillet
---------------------------------
Name: Jeffrey W. Maillet
Title: Sr. Vice Pres. Portfolio Mgr.
<PAGE>
EXHIBIT B TO
CREDIT AGREEMENT
GUARANTEE
GUARANTEE, dated as of July 30, 1997, made by each of the signatories
hereto (together with any other entity that may become a party hereto, the
"Guarantors"), in favor of THE CHASE MANHATTAN BANK, as administrative agent
(in such capacity, the "Administrative Agent") for the lenders (the "Lenders")
from time to time parties to the Credit Agreement, dated as of July 30, 1997
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Avis Rent A Car System, Inc., a Delaware corporation (the
"Borrower"), Avis Rent A Car, Inc., a Delaware corporation ("Avis"),the
Lenders, the Administrative Agent and Lehman Commercial Paper Inc., a Delaware
corporation, as syndication agent for the Lenders (the "Syndication Agent"),
and the other Secured Parties (as defined herein).
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make Loans to the Borrower upon the terms and subject to the
conditions set forth therein, to be evidenced by the notes issued by the
Borrower under the Credit Agreement;
WHEREAS, the Borrower is a member of an affiliated group of companies
that includes each Guarantor;
WHEREAS, the proceeds of the extensions of credit will be used in part
to enable the Borrower to make valuable transfers to one or more of the
Guarantors in connection with the operation of their respective businesses;
WHEREAS, the Borrower and the Guarantors are engaged in related
businesses, and each such Guarantor will derive substantial direct and indirect
benefit from the making of the extensions of credit under the Credit Agreement;
and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective extensions of credit to the Borrower under the Credit
Agreement that the Guarantors shall have executed and delivered this Agreement
to the Administrative Agent for the ratable benefit of the Secured Parties;
<PAGE>
2
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective loans to the Borrower under the
Credit Agreement, the Guarantors hereby agree with the Administrative Agent,
for the ratable benefit of the Secured Parties, as follows:
SECTION 1. TERMS
1.1 Defined Terms. (a) Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them
in the Credit Agreement.
(b) "Obligations" means the collective reference to the unpaid
principal of and interest on the Loans, the L.C. Disbursements and all other
obligations and liabilities of the Borrower to the Administrative Agent, the
Issuing Bank and the Lenders (including, without limitation, interest accruing
at the then applicable rate provided in the Credit Agreement after the maturity
of the Loans and interest accruing at the then applicable rate provided in the
Credit Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Borrower whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Credit Agreement, the
notes, the Letters of Credit, the other Credit Documents or any other document
made, delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or to the Lenders that are
required to be paid by the Borrower pursuant to the terms of the Credit
Agreement or this Agreement or any other Credit Document).
(c) "Secured Parties" means the collective reference to the
Administrative Agent, the Lenders (including, without limitation, the Issuing
Banks.
(d) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guarantee shall refer to this Guarantee as a whole and
not to any particular provision of this Guarantee, and section and paragraph
references are to this Guarantee unless otherwise specified.
(e) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
<PAGE>
3
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Secured Parties and their respective
successors, indorsees, transferees and assigns, the prompt and complete payment
and performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations.
(b) Anything herein or in any other Credit Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under
the other Credit Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating
to the insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
(c) Each Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or
affecting the rights and remedies of the Administrative Agent or any other
Secured Party hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until the earlier to occur of (i) the first date on which all
the Obligations and the obligations of each Guarantor under the guarantee
contained in this Section 2 shall have been satisfied by payment in full, no
Letter of Credit shall be outstanding and the Commitments shall be terminated,
notwithstanding that from time to time during the term of the Credit Agreement
the Borrower may be free from any Obligations or (ii) as to any Guarantor, the
sale or other disposition of all of the Capital Stock of such Guarantor
permitted under Section 8.05 of the Credit Agreement and the release of such
Guarantor from its Guarantee in accordance with Article X of the Credit
Agreement.
(e) No payment made by the Borrower, any of the Guarantors, any other
guarantor or any other Person or received or collected by the Administrative
Agent or any other Secured Party from the Borrower, any of the Guarantors, any
other guarantor or any other Person by virtue of any action or proceeding or
any set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify,
reduce, release or otherwise affect the liability of any Guarantor hereunder
which shall, notwithstanding any such payment (other than any payment made by
such Guarantor in respect of the Obligations or any
<PAGE>
4
payment received or collected from such Guarantor in respect of the
Obligations), remain liable for the Obligations up to the maximum liability of
such Guarantor hereunder until the earlier to occur of (i) the first date on
which the Obligations are paid in full, no Letter of Credit shall be
outstanding and the Commitments are terminated or (ii) the sale or other
disposition of all of the Capital Stock of such Guarantor permitted under
Section 8.05 of the Credit Agreement and the release of such Guarantor from its
Guarantee in accordance with Article X of the Credit Agreement.
(f) Each Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Administrative Agent or any Secured
Party on account of its liability hereunder, it will notify the Administrative
Agent and such Lender in writing that such payment is made under this Guarantee
for such purpose.
2.2 Right of Contribution. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of
any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder which has
not paid its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section 2.3. The
provisions of this Section 2.2 shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent and the other Secured
Parties, and each Guarantor shall remain liable to the Administrative Agent and
the Lenders for the full amount guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by the
Administrative Agent or any other Secured Party, no Guarantor shall be entitled
to be subrogated to any of the rights of the Administrative Agent or any other
Secured Party against the Borrower or any Guarantor or any collateral security
or guarantee or right of offset held by the Administrative Agent or any other
Secured Party for the payment of the Obligations, nor shall any Guarantor seek
or be entitled to seek any contribution or reimbursement from the Borrower or
any Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Administrative Agent and the other Secured Parties by
the Borrower on account of the Obligations are paid in full, no Letter of
Credit shall be outstanding and the Commitments are terminated. If any amount
shall be paid to any Guarantor on account of such subrogation rights at any
time when all of the Obligations shall not have been paid in full, such amount
shall be held by such Guarantor in trust for the Administrative Agent and the
other Secured Parties, segregated
<PAGE>
5
from other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Administrative Agent may
determine.
2.4 Amendments, etc. with respect to the Obligations. Each Guarantor
shall remain obligated hereunder notwithstanding that, without any reservation
of rights against any Guarantor and without notice to or further assent by any
Guarantor, any demand for payment of any of the Obligations made by the
Administrative Agent or any other Secured Party may be rescinded by the
Administrative Agent or such other Secured Party and any of the Obligations
continued, and the Obligations, or the liability of any other Person upon or
for any part thereof, or any collateral security or guarantee therefor or right
of offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent or any other Secured Party,
and the Credit Agreement and the other Credit Documents and any other documents
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Administrative Agent
(or the Required Lenders, as the case may be) may deem advisable from time to
time, and any collateral security, guarantee or right of offset at any time
held by the Administrative Agent or any other Secured Party for the payment of
the Obligations may be sold, exchanged, waived, surrendered or released.
Neither the Administrative Agent nor any other Secured Party shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by
it as security for the Obligations or for the guarantee contained in this
Section 2 or any property subject thereto.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent or
any other Secured Party upon the guarantee contained in this Section 2 or
acceptance of the guarantee contained in this Section 2; the Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Borrower
and any of the Guarantors, on the one hand, and the Administrative Agent and
the other Secured Parties, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon the guarantee
contained in this Section 2. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Borrower or any of
<PAGE>
6
the Guarantors with respect to the Obligations. Each Guarantor understands and
agrees that the guarantee contained in this Section 2 shall be construed as a
continuing, absolute and unconditional guarantee of payment. Each Guarantor
hereby waives any and all defenses that it may have arising out of or in
connection with any and all of the following: (a) the validity or
enforceability of the Credit Agreement or any other Credit Document, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the
Administrative Agent or any other Secured Party, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Borrower against the Administrative
Agent or any other Secured Party, (c) any change in the time, place, manner or
place of payment, amendment, or waiver or increase in the Obligations, (d) any
exchange, taking, or release of Collateral, (e) any change in the corporate
structure or existence of the Borrower, (f) any application of Collateral to
Obligations or (g) any other circumstance whatsoever (with or without notice to
or knowledge of the Borrower or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrower for
the Obligations, or of such Guarantor under the guarantee contained in this
Section 2, in bankruptcy or in any other instance. When making any demand under
this Agreement or otherwise pursuing its rights and remedies under this
Agreement against any Guarantor, the Administrative Agent or any other Secured
Party may, but shall be under no obligation to, make a similar demand on or
otherwise pursue such rights and remedies as it may have against the Borrower,
any other Guarantor or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset with respect thereto, and
any failure by the Administrative Agent or any other Secured Party to make any
such demand, to pursue such other rights or remedies or to collect any payments
from the Borrower, any other Guarantor or any other Person or to realize upon
any such collateral security or guarantee or to exercise any such right of
offset, or any release of the Borrower, any other Guarantor or any other Person
or any such collateral security, guarantee or right of offset, shall not
relieve any Guarantor of any obligation or liability hereunder, and shall not
impair or affect the rights and remedies, whether express, implied or available
as a matter of law, of the Administrative Agent or any other Secured Party
against any Guarantor. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
2.6 Reinstatement. The guarantee contained in this Agreement shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is rescinded or must
otherwise be restored
<PAGE>
7
or returned by the Administrative Agent or any other Secured Party upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments hereunder
will be paid to the Administrative Agent without set-off or counterclaim in
Dollars at the office of the Administrative Agent located at 270 Park Avenue,
New York, New York 10017.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Each Guarantor hereby represents and warrants to the Administrative
Agent and each other Secured Party that, the representations and warranties set
forth in Article 5 of the Credit Agreement as they relate to such Guarantor or
to the Credit Documents to which such Guarantor is a party, each of which is
hereby incorporated herein by reference, are true and correct, and the
Administrative Agent and each other Secured Party shall be entitled to rely on
each of them as if they were fully set forth herein; provided that each
reference in each such representation and warranty to the Borrower's knowledge
shall, for the purposes of this Section 3 be deemed to be a reference to such
Guarantor's knowledge.
SECTION 4. COVENANTS
Each Guarantor covenants and agrees with the Administrative Agent and
the other Secured Parties that, from and after the date of this Agreement until
the Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have terminated, such Guarantor shall
take, or shall refrain from taking, as the case may be, each action that is
necessary to be taken or not taken, as the case may be, so that no Default or
Event of Default is caused by the failure to take such action or to refrain
from taking such action by such Guarantor.
SECTION 5. MISCELLANEOUS
5.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by
a written instrument executed by each affected Guarantor and the Administrative
Agent, provided that any provision of this Agreement imposing obligations on
any
<PAGE>
8
Guarantor may be waived by the Administrative Agent in a written instrument
executed by the Administrative Agent.
5.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Guarantor hereunder shall be effected in the manner
provided for in subsection 11.01 of the Credit Agreement; provided that any
such notice, request or demand to or upon any Guarantor shall be addressed to
such Guarantor at its notice address set forth on Schedule 1.
5.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
Administrative Agent nor any other Secured Party shall by any act (except by a
written instrument pursuant to Section 5.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any other Secured Party,
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent or any other
Secured Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or
such other Secured Party would otherwise have on any future occasion. The
rights and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any other rights or remedies provided by
law.
5.4 Enforcement Expenses; Indemnification. (a) Each Guarantor agrees
to pay or reimburse each Secured Party and the Administrative Agent for all
their respective costs and expenses incurred in collecting against such
Guarantor under the guarantee contained in Section 2 or otherwise enforcing or
preserving any rights under this Agreement and the other Credit Documents to
which such Guarantor is a party, including, without limitation, the reasonable
fees and disbursements of counsel (including the allocated fees and expenses of
in-house counsel) to each Secured Party and of counsel to the Administrative
Agent.
(b) Each Guarantor agrees to pay, and to save the Administrative Agent
and the Secured Parties harmless from, any and all liabilities with respect to,
or resulting from any delay in paying, any and all stamp, excise, sales or
other taxes which may be payable or determined to be payable with respect to
any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.
<PAGE>
9
(c) Each Guarantor agrees to pay, and to save the Administrative Agent
and the Secured Parties harmless from, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement
(collectively, the "indemnified liabilities") to the extent the Borrower would
be required to do so pursuant to Section 11.03 of the Credit Agreement.
(d) The agreements in this Section 5.4 shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Credit Documents.
5.5 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Guarantor and shall inure to the benefit of the
Administrative Agent and the Secured Parties and their successors and assigns;
provided that no Guarantor may assign, transfer or delegate any of its rights
or obligations under this Agreement without the prior written consent of the
Administrative Agent.
5.6 Set-Off. Each Guarantor hereby irrevocably authorizes the
Administrative Agent and each other Secured Party at any time and from time to
time without notice to such Guarantor, any other Guarantor or the Borrower, any
such notice being expressly waived by each Guarantor and by the Borrower, upon
any amount remaining unpaid after it becomes due and payable by such Guarantor
hereunder to set-off and appropriate and apply against any such amount any and
all deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by the Administrative Agent or such other
Secured Party to or for the credit or the account of such Guarantor, or any
part thereof in such amounts as the Administrative Agent or such other Secured
Party may elect. The Administrative Agent and each other Secured Party shall
notify such Guarantor promptly of any such set-off and the application made by
the Administrative Agent or such other Secured Party of the proceeds thereof;
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Administrative Agent and each
other Secured Party under this Section 5.6 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Administrative Agent or such other Secured Party may have.
5.7 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken
<PAGE>
10
together shall be deemed to constitute one and the same instrument.
5.8 Severability. Any provision of this 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.
5.9 Section Headings. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
5.10 Integration. This Agreement and the other Credit Documents
represent the agreement of the Guarantors, the Administrative Agent and the
other Secured Parties with respect to the subject matter hereof, and there are
no promises, undertakings, representations or warranties by the Administrative
Agent or any other Secured Party relative to subject matter hereof not
expressly set forth or referred to herein or in the other Credit Documents.
5.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
5.12 Submission To Jurisdiction; Waivers. Each Guarantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Credit Documents to
which it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar
<PAGE>
11
form of mail), postage prepaid, to such Guarantor at its address referred
to in Section 5.2 or at such other address of which the Administrative
Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
5.13 Acknowledgements. Each Guarantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Credit Documents to which it is a
party;
(b) neither the Administrative Agent nor any other Secured Party has
any fiduciary relationship with or duty to any Guarantor arising out of or
in connection with this Agreement or any of the other Credit Documents, and
the relationship between the Guarantors, on the one hand, and the
Administrative Agent and the Secured Parties, on the other hand, in
connection herewith or therewith is solely that of creditor and debtor; and
(c) no joint venture is created hereby or by the other Credit
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Secured Parties or among the Guarantors and the Secured
Parties.
5.14 WAIVER OF JURY TRIAL. EACH GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
5.15 Additional Guarantors. Each new Domestic Subsidiary that is
required to become a party to this Agreement pursuant to Section 7.09 of the
Credit Agreement shall become a Guarantor for all purposes of this Agreement
upon execution and delivery by such Subsidiary of a Joinder Agreement in the
form of Annex 1 hereto.
5.16 Authority of Administrative Agent. Each Guarantor acknowledges
that the rights and responsibilities of the Administrative Agent under this
Guarantee with respect to any
<PAGE>
12
action taken by the Administrative Agent or the exercise or non-exercise by the
Administrative Agent of any option, right, request, judgment or other right or
remedy provided for herein or resulting or arising out of this Guarantee shall,
as between the Administrative Agent and the Lenders, be governed by the Credit
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Administrative Agent and such
Guarantor, the Administrative Agent shall be conclusively presumed to be acting
as agent for the Lenders with full and valid authority so to act or refrain
from acting, and such Guarantor shall not be under any obligation, or
entitlement, to make any inquiry respecting such authority.
<PAGE>
13
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered by its duly authorized officer as of the day and
year first above written.
AVIS RENT A CAR, INC.
By: /s/ Kevin M. Sheehan
-------------------------------------
Title: Executive Vice President and
Chief Financial Officer
AVIS INTERNATIONAL, LTD.
By: /s/ Gerard J. Kennell
-------------------------------------
Title: Vice President and Treasurer
AVIS ASIA AND PACIFIC, LIMITED
By: /s/ Steven L. Greenberger
-------------------------------------
Title: Vice President and Tax Counsel
AVIS CARIBBEAN, LIMITED
By: /s/ Steven L. Greenberger
-------------------------------------
Title: Vice President and Tax Counsel
AVIS ENTERPRISES, INC.
By: /s/ Gerard J. Kennell
-------------------------------------
Title: Vice President and Treasurer
<PAGE>
14
AVIS SERVICE, INC.
By: /s/ Gerard J. Kennell
-------------------------------------
Title: Vice President and Treasurer
AVIS LUBE, INC.
By: /s/ Gerard J. Kennell
-------------------------------------
Title: Vice President and Treasurer
<PAGE>
15
---------------------------
SCHEDULE 1
Address of Guarantors
<PAGE>
Annex 1 to
Guarantee
JOINDER AGREEMENT, dated as of ________________, 199_, made by
______________________________, a ______________ corporation (the "Additional
Guarantor"), in favor of THE CHASE MANHATTAN BANK, as administrative agent (in
such capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") from time to time parties to the Credit Agreement
referred to below and the other Secured Parties hereto (as defined below). All
capitalized terms not defined herein shall have the meaning ascribed to them in
such Credit Agreement.
W I T N E S S E T H :
WHEREAS, Avis Rent A Car System, Inc., a Delaware corporation (the
"Borrower"), Avis Rent A Car, Inc., a Delaware corporation ("Avis"),the
Lenders, the Administrative Agent and Lehman Commercial Paper Inc., a Delaware
corporation, as syndication agent for the Lenders (the "Syndication Agent")
have entered into a Credit Agreement, dated as of ______ __, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, certain Affiliates
of the Borrower (other than the Additional Guarantor) have entered into the
Guarantee, dated as of July __, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Guarantee") in favor of the Administrative
Agent, for the ratable benefit of the Secured Parties (as defined in the
Guarantee);
WHEREAS, the Credit Agreement requires the Additional Guarantor to
become a party to the Guarantee; and
WHEREAS, the Additional Guarantor has agreed to execute and deliver
this Joinder Agreement in order to become a party to the Guarantee;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee. By executing and delivering this Joinder Agreement, the
Additional Guarantor, as provided in Section 5.15 of the Guarantee, hereby
becomes a party to the Guarantee as a Guarantor thereunder with the same force
and effect as if originally named therein as a Guarantor and, without limiting
the generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Guarantor thereunder. The information set forth in Annex 1-A
hereto is hereby added to the information set forth in Annex 1 to the
Guarantee. The Additional Guarantor hereby represents and warrants that each of
the representations and warranties contained in Section 3 of the Guarantee is
true and correct on
<PAGE>
2
and as of the date hereof (after giving effect to this Joinder Agreement) as if
made on and as of such date.
2. GOVERNING LAW. THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Joinder Agreement
to be duly executed and delivered as of the date first above written.
[ADDITIONAL GUARANTOR]
By:
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT C TO
CREDIT AGREEMENT
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of July 30, 1997, made by each of the
signatories hereto (together with any other entity that may become a party
hereto, the "Pledgors"), in favor of THE CHASE MANHATTAN BANK, as
administrative agent (in such capacity, the "Administrative Agent") for the
lenders (the "Lenders") from time to time parties to the Credit Agreement,
dated as of July 30, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Avis Rent A Car System, Inc., a
Delaware corporation (the "Borrower"), Avis Rent A Car, Inc., a Delaware
corporation ("Avis"), the Lenders, the Administrative Agent and Lehman
Commercial Paper Inc., a Delaware corporation, as syndication agent for the
Lenders (the "Syndication Agent"), and the other Secured Parties (as defined
herein).
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make Loans to the Borrower upon the terms and subject to the
conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective Loans to the Borrower under the Credit Agreement that
the Pledgors (other than the Borrower) guarantee payment and performance of the
Borrower's obligations under the Credit Agreement and the other Credit
Documents; and
WHEREAS, in satisfaction of such condition, the Pledgors (other than
the Borrower) have entered into a Guarantee of even date herewith (as amended,
supplemented or otherwise modified from time to time, the "Guarantee") for the
benefit of the Administrative Agent and the Secured Parties; and
WHEREAS, it is a further condition precedent to the obligation of the
Lenders to make their respective Loans to the Borrower under the Credit
Agreement that the Pledgors shall have executed and delivered this Security
Agreement to secure payment and performance of the Pledgors' obligations under
the Guarantee.
NOW, THEREFORE, in consideration of the premises and to induce the
Agents and the Lenders to enter into the Credit Agreement and to induce the
Lenders to make their respective Loans to the Borrower, the Pledgors hereby
agree with the Administrative Agent, for the ratable benefit of the Secured
Parties, as follows:
<PAGE>
2
SECTION 1. Defined Terms.
A. Definitions. 1. Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement and the following terms which are
defined in the Uniform Commercial Code in effect in the State of New
York on the date hereof are used herein as so defined: Accounts,
Chattel Paper, Documents, Farm Products, General Intangibles,
Instruments, and Proceeds.
2. The following terms shall have the following meanings:
"Agreement": this Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Code": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral": as defined in Section .
"Collateral Account": any collateral account established by the
Administrative Agent as provided in subsection or subsection .
"Contracts": the Franchise Agreements and each of the contracts
and agreements listed in Schedule 1, in each case as the same may be
amended, supplemented or otherwise modified from time to time,
including, without limitation, (a) all rights of such Pledgor to
receive moneys due and to become due to it thereunder or in connection
therewith, (b) all rights of such Pledgor to damages arising out of or
for breach or default in respect thereof and (c) all rights of such
Pledgor to exercise all remedies thereunder.
"LP Interests": the limited partnership interests in AESOP
Leasing, including without limitation all present and future rights
(i) to receive any payment of money or other distribution or payment
on account of such limited partnership interests and (ii) under the
Partnership Agreement in respect of such limited partnership
interests.
"Obligations": as defined in the Guarantee.
"Partnership Agreement": the limited partnership agreement of
AESOP Leasing as the same may be further amended, supplemented or
modified from time to time.
"Patents": (a) all letters patent of the United States or any
other country and all reissues and extensions thereof, including,
without limitation, any thereof referred to in Schedule 3 hereto, and
(b) all applications for
<PAGE>
3
letters patent of the United States or any other country and all
divisions, continuations and continuations-in-part thereof, including,
without limitation, any thereof referred to in Schedule 3 hereto.
"Patent License": all agreements, whether written or oral,
providing for the grant by or to such Pledgor of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in Schedule 3.
"Receivable": any right to payment for goods sold or leased or
for services rendered, whether or not such right is evidenced by an
Instrument or Chattel Paper and whether or not it has been earned by
performance (including, without limitation, any Account).
"Secured Obligations": with respect to any Pledgor, the
collective reference to (a) the Obligations and (b) all obligations
and liabilities of such Pledgor which may arise under or in connection
with this Agreement or any other Credit Document to which such Pledgor
is a party, whether on account of reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all reasonable fees and disbursements of counsel to the
Administrative Agent or to the Lenders that are required to be paid by
such Pledgor pursuant to the terms of this Agreement or any other
Credit Document).
"Secured Parties" means the collective reference to the
Administrative Agent, the Syndication Agent, the Lenders (including,
without limitation, the CE Issuing Bank and the WC Issuing Bank).
"Securitization Collateral" means all of the assets, property and
interests in property of any kind or nature whatsoever in which a
security interest has been granted pursuant to any Related Documents
(as defined in Schedule 1 to the Amended and Restated Base Indenture,
dated as of July 30, 1997, between AESOP Funding II, L.L.C. and Harris
Trust and Savings Bank, as amended, supplemented or otherwise modified
from time to time).
"Trademarks": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or
<PAGE>
4
otherwise, including, without limitation, any thereof referred to
in Schedule 3, and (b) all renewals thereof.
"Trademark License" means any agreement, written or oral,
providing for the grant by or to any Pledgor of any right to use any
Trademark, including, without limitation, any thereof referred to in
Schedule 3.
B. Other Definitional Provisions. 1. The words "hereof,"
"herein", "hereto" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section,
subsection and Schedule references are to this Agreement unless
otherwise specified.
2. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. Grant of Security Interest.
As collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Secured Obligations, each Pledgor hereby grants to the
Administrative Agent for the benefit of the Secured Parties a security interest
in all of the following property now owned or at any time hereafter acquired by
such Pledgor or in which such Pledgor now has or at any time in the future may
acquire any right, title or interest other than the Securitization Collateral
(collectively, the "Collateral"):
1. all Accounts;
2. all Chattel Paper;
3. all Contracts;
4. all Documents;
5. all General Intangibles, including, without limitation, the LP
Interests;
6. all Instruments;
7. all Patents;
8. all Patent Licenses;
9. all Trademarks;
10. all Trademark Licenses;
<PAGE>
5
11. all books and records pertaining to the Collateral; and
12. to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the
foregoing; provided that no security interest shall be granted in
the Securitization Collateral.
SECTION 3. Representations and Warranties.
Each Pledgor hereby represents and warrants that:
A. Power and Authority. Such Pledgor has the corporate power and
authority and the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the Collateral
pursuant to, this Agreement and has taken all necessary corporate action to
authorize its execution, delivery and performance of, and grant of the security
interest in the Collateral pursuant to, this Agreement.
B. Chief Executive Office. On the date hereof, such Pledgor's
chief executive office or sole place of business is specified on Schedule 2.
C. Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
SECTION 4. Covenants.
Each Pledgor covenants and agrees with the Administrative Agent and
the Secured Parties that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have expired or otherwise been
terminated:
A. Further Documentation. At any time and from time to time, upon
the written request of the Administrative Agent, and at the sole expense of the
Pledgor, such Pledgor will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the Administrative
Agent may reasonably request for the purpose of obtaining or preserving the
full benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code in effect in any jurisdiction with
respect to the security interests created hereby.
B. Delivery of Instruments and Chattel Paper. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument (other than an
<PAGE>
6
Instrument that also constitutes Chattel Paper), such Instrument shall be
immediately delivered to the Administrative Agent, duly indorsed in a manner
reasonably satisfactory to the Administrative Agent, to be held as Collateral
pursuant to this Agreement.
C. Changes in Locations, Name, etc. Such Pledgor will not:
1. change the location of its chief executive office from that
specified in subsection ; or
2. change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent
in connection with this Agreement would become seriously misleading,
unless in each case written above, it shall have given the
Administrative Agent and the Lenders at least 30 days' prior written
notice of such change.
D. Further Identification of Collateral. Such Pledgor will furnish to
the Administrative Agent and the Lenders from time to time statements and
schedules further identifying and describing any Collateral acquired after the
date hereof and such other reports in connection with such Collateral as the
Administrative Agent may reasonably request, all in reasonable detail.
E. Notices. Such Pledgor will advise the Administrative Agent and the
Lenders promptly, in reasonable detail, at their respective addresses for
notices provided for in the Credit Agreement about:
1. any Lien (other than security interests created hereby or
Liens permitted under the Credit Agreement) on any of the Collateral;
and
2. of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of
the Collateral or on the security interests created hereby.
F. Indemnification. Such Pledgor agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and all liabilities,
costs and expenses (including, without limitation, reasonable legal fees and
expenses) with respect to the execution, delivery, enforcement, performance and
administration of this Agreement ("indemnified liabilities"), provided that
such Pledgor shall have no obligation hereunder to the Administrative Agent or
any Lender with respect to indemnified liabilities arising from (i) the gross
negligence or willful misconduct of the Administrative Agent or any such Lender
or (ii) legal proceedings commenced against the Administrative Agent or any
Lender by any security holder or creditor thereof
<PAGE>
7
arising out of and based upon rights afforded any such security holder or
creditor solely in its capacity as such. The agreements in this subsection
shall survive repayment of the Loans and all other amounts payable under the
Credit Agreement and the other Credit Documents.
SECTION 5. Provisions Relating to Receivables.
A. Pledgor Remains Liable under Receivables. Anything herein to the
contrary notwithstanding, each Pledgor shall remain liable under each of such
Pledgor's Receivables to observe and perform all the conditions and obligations
to be observed and performed by it thereunder, all in accordance with the terms
of any agreement giving rise to each such Receivable. Neither the
Administrative Agent nor any Lender shall have any obligation or liability
under any Receivable (or any agreement giving rise thereto) by reason of or
arising out of this Agreement or the receipt by the Administrative Agent or any
Lender of any payment relating to such Receivable pursuant hereto, nor shall
the Administrative Agent or any Lender be obligated in any manner to perform
any of the obligations of such Pledgor under or pursuant to any Receivable (or
any agreement giving rise thereto), to make any payment, to make any inquiry as
to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Receivable (or any
agreement giving rise thereto), to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.
B. Analysis of Receivables. If an Event of Default shall have occurred
and be continuing, the Administrative Agent shall have the right to make test
verifications of the Receivables in any manner and through any medium that it
reasonably considers advisable, and such Pledgor shall furnish all such
assistance and information as the Administrative Agent may require in
connection with such test verifications. At any time and from time to time,
upon the Administrative Agent's request and at the expense of such Pledgor,
such Pledgor shall cause independent public accountants or others satisfactory
to the Administrative Agent to furnish to the Administrative Agent reports
showing reconciliations, aging and test verifications of, and trial balances
for, the Receivables. The Administrative Agent in its own name or in the name
of others may at any time after the occurrence and during the continuance of an
Event of Default communicate with the obligors on the Receivables to verify
with them to the Administrative Agent's satisfaction the existence, amount and
terms of any Receivables.
C. Collections on Receivables. 1. The Pledgor shall collect the
Accounts in the ordinary course of its business, except that, if required
by the Administrative Agent, at any time after the occurrence and during
the continuance of an
<PAGE>
8
Event of Default, any payments of Receivables, when collected by such
Pledgor, (a) shall be forthwith (and, in any event, within two Business
Days) deposited by such Pledgor in the exact form received, duly indorsed
by such Pledgor to the Administrative Agent if required, in a Collateral
Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for
the account of the Lenders only as provided in subsection , and (b) until
so turned over, shall be held by such Pledgor in trust for the
Administrative Agent and the Secured Parties, segregated from other funds
of such Pledgor.
2. Each such deposit of Proceeds of Receivables shall be accompanied
by a report identifying in reasonable detail the nature and source of the
payments included in the deposit.
3. At the Administrative Agent's request, such Pledgor shall deliver
to the Administrative Agent all original and other documents evidencing,
and relating to, the agreements and transactions which gave rise to the
Receivables, including, without limitation, all original orders, invoices
and shipping receipts.
D. Representations and Warranties. 1. No amount payable to such
Pledgor under or in connection with any Receivable is evidenced by any
Instrument (other than an Instrument that constitutes Chattel Paper) which
has not been delivered to the Administrative Agent.
2. The amounts represented by such Pledgor to the Lenders from time to
time as owing to such Pledgor in respect of the Receivables will at such
time be accurate.
E. Covenants. 1. Other than in the ordinary course of business
consistent with its past practice, such Pledgor will not (i) grant any
extension of the time of payment of any Receivable, (ii) compromise or
settle any Receivable for less than the full amount thereof, (iii) release,
wholly or partially, any Person liable for the payment of any Receivable,
(iv) allow any credit or discount whatsoever on any Receivable, (v) amend,
supplement or modify any Receivable in any manner that could adversely
affect the value thereof or (vi) fail to exercise promptly and diligently
each and every material right which it may have under each agreement giving
rise to a Receivable (other than any right of termination).
2. At any time after the occurrence and during the continuance of an
Event of Default, such Pledgor will deliver to the Administrative Agent a
copy of each material demand, notice or document received by it that
questions the
<PAGE>
9
validity or enforceability of more than 5% of the aggregate amount of
the then outstanding Receivables.
SECTION 6. Provisions Relating to Contracts.
A. Pledgor Remains Liable under Contracts. Anything herein to the
contrary notwithstanding, each Pledgor shall remain liable under each of such
Pledgor's Contracts to observe and perform all the conditions and obligations
to be observed and performed by it thereunder, all in accordance with and
pursuant to the terms and provisions of such Contract. Neither the
Administrative Agent nor any Lender shall have any obligation or liability
under any Contract by reason of or arising out of this Agreement or the receipt
by the Administrative Agent or any such Secured Party of any payment relating
to such Contract pursuant hereto, nor shall the Administrative Agent or any
Secured Party be obligated in any manner to perform any of the obligations of
such Pledgor under or pursuant to any Contract, to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it
or as to the sufficiency of any performance by any party under any Contract, to
present or file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
B. Communication With Contracting Parties. The Administrative Agent in
its own name or in the name of others may at any time after the occurrence and
during the continuance of an Event of Default communicate with parties to the
Contracts to verify with them to the Administrative Agent's reasonable
satisfaction the existence, amount and terms of any Contracts.
C. Representations and Warranties. 1. No consent of any party (other
than such Pledgor) to any Contract is required, or purports to be required,
in connection with the execution, delivery and performance of this
Agreement.
2. Each Contract is in full force and effect and constitutes a valid
and legally enforceable obligation of each Pledgor party thereto, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of
good faith and fair dealing.
3. No consent or authorization of, filing with or other act by or in
respect of any Governmental Authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of the
Contracts by any Pledgor party thereto other than those which have been
duly obtained, made or performed, are in
<PAGE>
10
full force and effect and do not subject the scope of any such
Contract to any material adverse limitation, either specific or general in
nature.
4. Neither such Pledgor nor (to the best of such Pledgors's knowledge)
any of the other parties to the Contracts is in default or is likely to
become in default in the performance or observance of any of the terms
thereof in any manner that, in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
5. Such Pledgor has fully performed all its obligations under each
Contract.
6. The right, title and interest of such Pledgor in, to and under the
Contracts are not subject to any defenses, offsets, counterclaims or claims
that, in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
7. Such Pledgor has delivered to the Administrative Agent a complete
and correct copy of each Contract, including all amendments, supplements
and other modifications thereto.
D. Covenants. 1. Such Pledgor will perform and comply in all material
respects with all its obligations under the Contracts.
2. Such Pledgor will not amend, modify, terminate or waive any
provision of any Contract in any manner which could reasonably be expected
to materially adversely affect the value of such Contract as Collateral.
3. Such Pledgor will exercise promptly and diligently each and every
material right which it may have under each Contract (other than any right
of termination).
4. Such Pledgor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it relating in any way
to any Contract that questions the validity or enforceability of such
Contract.
SECTION 7. Provisions Relating to Patents and Trademarks.
A. Representations and Warranties. 1. Schedule 3 includes all Patents
and Patent Licenses owned by each Pledgor in its own name on the date
hereof.
2. Schedule 3 includes all Trademarks and Trademark Licenses owned by
each Pledgor in its own name on the date hereof.
<PAGE>
11
3. To the best of each Pledgors's knowledge, each Patent and Trademark
of such Pledgor is on the date hereof valid, subsisting, unexpired,
enforceable and has not been abandoned.
4. Except as set forth in Schedule 3, none of such Patents and
Trademarks is on the date hereof the subject of any licensing or franchise
agreement.
5. No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity
of any Patent or Trademark in any respect that could reasonably be expected
to have a Material Adverse Change.
6. No action or proceeding is pending on the date hereof (a) seeking
to limit, cancel or question the validity of any Patent or Trademark, or
(b) which, if adversely determined, would have a material adverse effect on
the value of any Patent or Trademark.
B. Covenants. 1. Each Pledgor, with respect to its own Patents and
Trademarks, covenants that it (either itself or through licensees) will (a)
continue to use each material Trademark on each and every trademark class
of goods applicable to its current line as reflected in its current
catalogs, brochures and price lists in order to maintain such Trademark in
full force free from any claim of abandonment for non-use, (b) maintain as
in the past the quality of products and services offered under such
Trademark, (c) employ such Trademark with the appropriate notice of
registration, (d) not adopt or use any mark which is confusingly similar or
a colorable imitation of such Trademark unless the Administrative Agent,
for the ratable benefit of the Secured Parties, shall obtain a perfected
security interest in such mark pursuant to this Agreement, and (e) not (and
not permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby such Trademark may become invalidated.
2. Such Pledgor will not do any act, or omit to do any act, whereby
any material Patent may become abandoned or dedicated.
3. Such Pledgor will notify the Administrative Agent and the Secured
Parties immediately if it knows, or has reason to know, that any
application or registration relating to any material Patent or Trademark
may become abandoned or dedicated, or of any adverse determination or
development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Patent
and Trademark Office or any court or tribunal in any country) regarding the
Pledgors's ownership of any material Patent or Trademark or
<PAGE>
12
its right to register the same or to keep and maintain the same.
4. Whenever such Pledgor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or
any political subdivision thereof, such Pledgor shall report such filing to
the Administrative Agent and the Secured Parties within five Business Days
after the last day of the fiscal quarter in which such filing occurs. Upon
request of the Administrative Agent, such Pledgor shall execute and deliver
any and all agreements, instruments, documents, and papers as the
Administrative Agent may request to evidence the Administrative Agent's and
the Secured Parties' security interest in any Patent or Trademark and the
goodwill and general intangibles of the Pledgors relating thereto or
represented thereby.
5. Such Pledgor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States
Patent and Trademark Office, or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain each
registration of the material Patents and Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
6. In the event that any Patent or Trademark included in the
Collateral is infringed, misappropriated or diluted by a third party, such
Pledgor shall (i) take such actions as such Pledgor shall reasonably deem
appropriate under the circumstances to protect such Patent or Trademark and
(ii) if such Patent or Trademark is of material economic value, promptly
notify the Administrative Agent and the Secured Parties after it learns
thereof and sue for infringement, misappropriation or dilution, to seek
injunctive relief where appropriate and to recover any and all damages for
such infringement, misappropriation or dilution.
SECTION 8. Remedies.
A. Notice to Obligors and Contract Parties. Upon the request of the
Administrative Agent at any time after the occurrence and during the
continuance of an Event of Default, such Pledgor shall notify obligors on
the Receivables that the Receivables have been assigned to the
Administrative Agent for the ratable benefit of the Secured Parties and
that payments in respect thereof shall be made directly to the
Administrative Agent.
<PAGE>
13
B. Proceeds to be Turned Over To Administrative Agent. In addition to
the rights of the Administrative Agent and the Lenders specified in subsection
with respect to payments of Receivables, if an Event of Default shall occur and
be continuing all Proceeds received by any Pledgor consisting of cash, checks
and other near-cash items shall be held by such Pledgor in trust for the
Administrative Agent and the Secured Parties, segregated from other funds of
such Pledgor, and shall, forthwith upon receipt by such Pledgor, be turned over
to the Administrative Agent in the exact form received by such Pledgor (duly
indorsed by such Pledgor to the Administrative Agent, if required) and held by
the Administrative Agent in a Collateral Account maintained under the sole
dominion and control of the Administrative Agent. All Proceeds while held by
the Administrative Agent in a Collateral Account (or by such Pledgor in trust
for the Administrative Agent and the Secured Parties) shall continue to be held
as collateral security for all the Secured Obligations and shall not constitute
payment thereof until applied as provided in subsection 8.C.
C. Application of Proceeds. 1. At such intervals as may be agreed upon
by such Pledgor and the Administrative Agent, or, if an Event of Default
shall have occurred and be continuing, at any time at the Administrative
Agent's election, the Administrative Agent may apply all or any part of
Proceeds held in any Collateral Account in payment of the Secured
Obligations, to the extent available for distribution, to be distributed by
the Administrative Agent in the following order of priority:
First: to the Administrative Agent for any unpaid fees and
expenses and then to any Secured Party which has theretofore advanced
or paid any such fees, an amount equal to the amount thereof so
advanced or paid by such Secured Party and for which such Secured
Party has not been reimbursed prior to such date, and, if such moneys
shall be insufficient to pay such amounts in full, then ratably
(without priority of any one over any other) to such Secured Parties
in proportion to the unpaid amounts thereof on such distribution date;
Second: to the Secured Parties in an amount equal to the unpaid
principal or face amount of, and unpaid interest on, and premium or
fees, if any, in respect of, the Secured Obligations then outstanding
whether or not then due and payable, including, without limitation,
the aggregate undrawn amounts available to be drawn (assuming
compliance with all conditions to drawing) under all Letters of
Credit, and, if such moneys shall be insufficient to pay such amounts
in full, then ratably (without priority of any one over any
<PAGE>
14
other) to the Secured Parties in proportion to the unpaid amounts
thereof on such date;
Third: to the Secured Parties, amounts equal to all other sums
which constitute Secured Obligations, including without limitation the
costs and expenses of the Secured Parties and their representatives
which are due and payable and which constitute Secured Obligations as
of such date, and, if such moneys shall be insufficient to pay such
sums in full, then ratably to the Secured Parties in proportion to
such sums; and
Fourth: any surplus then remaining shall be paid to the Obligors
or their successors or assigns or to whomsoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction
may direct.
2. The term "unpaid" as used in clause Second of subsection 9.3(a)
refers:
(a) in the absence of a bankruptcy proceeding with respect to the
relevant Pledgor(s), to all amounts of Secured Obligations outstanding
as of a distribution date, whether or not such amounts are fixed or
contingent, and
(b) during the pendency of a bankruptcy proceeding with respect
to the relevant Pledgor(s), to all amounts allowed by the bankruptcy
court in respect of Secured Obligations, as a basis for distribution
(including estimated amounts, if any, allowed in respect of contingent
claims),
to the extent that prior distributions (whether actually distributed
or set aside pursuant to subsection 9.3(c)) have not been made in respect
thereof.
3. If any Secured Party shall be entitled to receive any moneys
pursuant to clause Second of subsection 9.3(a) in respect of the
unliquidated, unmatured or contingent portion of the outstanding Secured
Obligations (including, without limitation, obligations under then
outstanding Letters of Credit), then the Administrative Agent shall invest
such moneys in obligations of the kinds referred to in Permitted
Investments maturing within three months after they are acquired by the
Administrative Agent and shall hold all such amounts so distributable, and
all such investments and the net proceeds thereof, in trust solely for such
Secured Party and for no other purpose until (i) such Secured Party shall
have notified the Administrative Agent that all or part of
<PAGE>
15
such unliquidated, unmatured or contingent claim shall have become
matured or fixed, in which case the Administrative Agent shall distribute
from such investments and the proceeds thereof an amount equal to such
matured or fixed claim to such Secured Party for application to the payment
of such matured or fixed claim, and shall promptly give notice thereof to
the Borrower or (ii) all or part of such unliquidated, unmatured or
contingent claim shall have been extinguished, whether as the result of an
expiration without drawing of any Letter of Credit, payment of amounts
secured or covered by any Letter of Credit other than by drawing
thereunder, or otherwise, in which case (x) such Secured Party shall, as
soon as practicable thereafter, notify the Administrative Agent and (y)
such investments, and the proceeds thereof, shall be redistributed in
accordance with subsection 9.3(a) taking into account such extinguishment.
D. Code Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Secured Parties may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, all rights and remedies of a secured party
under the Code. Without limiting the generality of the foregoing, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Pledgor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any Secured
Party or elsewhere upon such terms and conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. The Administrative Agent or any
Secured Party shall have the right upon any such public sale or sales, and, to
the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Pledgor, which right or equity is hereby waived or released.
Each Pledgor further agrees, at the Administrative Agent's request, to assemble
its Collateral and make it available to the Administrative Agent at places
which the Administrative Agent shall reasonably select, whether at such
Pledgors's premises or elsewhere. The Administrative Agent shall apply the net
proceeds of any action taken by it pursuant to this subsection, after deducting
all reasonable costs and expenses of every kind incurred in connection
therewith or incidental to the care or safekeeping of any of the Collateral or
in any way relating to
<PAGE>
16
the Collateral or the rights of the Administrative Agent and the Secured
Parties hereunder, including, without limitation, reasonable attorneys' fees
and disbursements, to the payment in whole or in part of the Secured
Obligations, as provided in subsection 9.3, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to such
Pledgor. To the extent permitted by applicable law, each Pledgor waives all
claims, damages and demands it may acquire against the Administrative Agent or
any Lender arising out of the exercise by them of any rights hereunder. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition.
E. Waiver; Deficiency. Each Pledgor waives and agrees not to assert
any rights or privileges which it may acquire under Section 9-112 of the Code.
Each Pledgor shall remain liable for any deficiency if the proceeds of any sale
or other disposition of its Collateral are insufficient to pay the Secured
Obligations and the reasonable fees and disbursements of any attorneys employed
by the Administrative Agent or any Secured Party to collect such deficiency.
SECTION 9. Administrative Agent's Appointment as Attorney-in-Fact;
Administrative Agent's Performance of Pledgors's
Obligations.
A. Powers. Each Pledgor hereby irrevocably constitutes and appoints
the Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Pledgor and in the name of
such Pledgor or in its own name, from time to time in the Administrative
Agent's discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this Agreement, and, without limiting the generality of the
foregoing, each Pledgor hereby gives the Administrative Agent the power and
right, on behalf of such Pledgor, without notice to or assent by such Pledgor,
to do any or all of the following:
1. in the name of such Pledgor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or Contract or with respect to any other Collateral and file any
claim or take any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by the Administrative Agent for the purpose
of collecting any and
<PAGE>
17
all such moneys due under any Receivable or Contract or with respect
to any other Collateral whenever payable;
2. in the case of any Patent or Trademark, execute and deliver any and
all agreements, instruments, documents, and papers as the Administrative
Agent may request to evidence the Administrative Agent's and the Secured
Parties' security interest in such Patent or Trademark and the goodwill and
general intangibles of such Pledgor relating thereto or represented
thereby;
3. pay or discharge taxes and Liens levied or placed on or threatened
against the Collateral, effect any repairs or any insurance called for by
the terms of this Agreement and to pay all or any part of the premiums
therefor and the costs thereof;
4. execute, in connection with the sale provided for in subsection
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
5. (a) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (b) ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; (c) sign
and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (d) commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any Proceeds thereof and to enforce any other right in
respect of any Collateral; (e) defend any suit, action or proceeding
brought against such Pledgor with respect to any Collateral; (f) settle,
compromise or adjust any such suit, action or proceeding and, in connection
therewith, to give such discharges or releases as the Administrative Agent
may deem appropriate; (g) assign any Patent or Trademark (along with the
goodwill of the business to which any such Patent or Trademark pertains),
throughout the world for such term or terms, on such conditions, and in
such manner, as the Administrative Agent shall in its sole discretion
determine; and (h) generally, sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and do, at the Administrative Agent's option and
such Pledgor's expense, at any time, or from time to time, all acts and
things which the Administrative Agent deems
<PAGE>
18
necessary to protect, preserve or realize upon the Collateral and the
Administrative Agent's and the Lenders' security interests therein and to
effect the intent of this Agreement, all as fully and effectively as such
Pledgor might do.
Anything in this subsection to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the
power of attorney provided for in this subsection unless an Event of Default
shall have occurred and be continuing.
B. Performance by Administrative Agent of Pledgor's Obligations. If
any Pledgor fails to perform or comply with any of its agreements contained
herein, the Administrative Agent, at its option, but without any obligation so
to do, may perform or comply, or otherwise cause performance or compliance,
with such agreement.
C. Pledgors' Reimbursement Obligation. Each Pledgor agrees to pay on
demand the expenses of the Administrative Agent incurred in connection with
actions undertaken as provided in this Section, together with interest thereon
at a rate per annum equal to the rate per annum at which interest would then be
payable on past due ABR Loans under the Credit Agreement, from the date of
payment by the Administrative Agent to the date reimbursed by such Pledgor.
D. Ratification; Power Coupled With An Interest. Each Pledgor hereby
ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are released.
SECTION 10. Duty of Administrative Agent.
The Administrative Agent's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession,
under Section 9-207 of the Code or otherwise, shall be to deal with it in the
same manner as the Administrative Agent deals with similar property for its own
account. Neither the Administrative Agent, any Secured Party nor any of their
respective officers, directors, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgors or any other Person or to take any
other action whatsoever with regard to the Collateral or any part thereof. The
powers conferred on the Administrative Agent and the Secured Parties hereunder
are solely to protect the Administrative Agent's and the Secured Parties'
interests in the Collateral and shall not impose any duty upon
<PAGE>
19
the Administrative Agent or any Secured Party to exercise any such powers. The
Administrative Agent and the Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of 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 willful misconduct.
SECTION 11. Execution of Financing Statements.
Pursuant to Section 9-402 of the Code, each Pledgor authorizes the
Administrative Agent, upon giving written notice to such Pledgor, to file
financing statements with respect to the Collateral without the signature of
such Pledgor in such form and in such filing offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of
the Administrative Agent under this Agreement. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement for
filing in any jurisdiction.
SECTION 12. Authority of Administrative Agent.
Each Pledgor acknowledges that the rights and responsibilities of the
Administrative Agent under this Agreement with respect to any action taken by
the Administrative Agent or the exercise or non-exercise by the Administrative
Agent of any option, voting right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Agreement shall, as
between the Administrative Agent and the Secured Parties, be governed by the
Credit Agreement and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Administrative Agent and the
Pledgors, the Administrative Agent shall be conclusively presumed to be acting
as agent for the Secured Parties with full and valid authority so to act or
refrain from acting, and the Pledgors shall be under no obligation, or
entitlement, to make any inquiry respecting such authority.
SECTION 13. Notices.
All notices, requests and demands to or upon the Administrative Agent
or any Pledgor hereunder shall be effected in the manner provided for in
subsection 11.01 of the Credit Agreement; provided that any such notice,
request or demand to or upon any Pledgor shall be addressed to such Pledgor at
its notice address set forth on Schedule 2.
<PAGE>
20
SECTION 14. Severability.
Any provision of this 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 15. Amendments in Writing; No Waiver; Cumulative Remedies.
A. Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by
a written instrument executed by each affected Pledgor and the Administrative
Agent, provided that any provision of this Agreement imposing obligations on
any Pledgor may be waived by the Administrative Agent in a written instrument
executed by the Administrative Agent.
B. No Waiver by Course of Conduct. Neither the Administrative Agent
nor any Secured Party shall by any act (except by a written instrument pursuant
to subsection hereof), delay, indulgence, omission or otherwise be deemed to
have waived any right or remedy hereunder or to have acquiesced in any Default
or Event of Default. No failure to exercise, nor any delay in exercising, on
the part of the Administrative Agent or any Secured Party, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar
to any right or remedy which the Administrative Agent or such Secured Party
would otherwise have on any future occasion.
C. Remedies Cumulative. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
SECTION 16. Section Headings.
The Section and subsection headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
<PAGE>
21
SECTION 17. Successors and Assigns.
This Agreement shall be binding upon the successors and assigns of
each Pledgor and shall inure to the benefit of the Administrative Agent and
Secured Parties and their successors and assigns.
SECTION 18. Governing Law.
This Agreement shall be governed by, and construed and interpreted in
accordance with, the law of the State of New York.
<PAGE>
22
IN WITNESS WHEREOF, the undersigned have caused this Security
Agreement to be duly executed and delivered as of the date first above written.
AVIS RENT A CAR, INC.
By: /s/ Kevin M. Sheehan
-------------------------------------
Title: Executive Vice President and
Chief Financial Officer
AVIS RENT A CAR SYSTEM, INC.
By: /s/ Kevin M. Sheehan
-------------------------------------
Title: Executive Vice President and
Chief Financial Officer
AVIS INTERNATIONAL, LTD.
By: /s/ Gerard J. Kennell
-------------------------------------
Title: Vice President and Treasurer
AVIS ASIA AND PACIFIC, LIMITED
By: /s/ Steven L. Greenberger
-------------------------------------
Title: Vice Presdient and Tax Counsel
AVIS CARIBBEAN, LIMITED
By: /s/ Steven L. Greenberger
-------------------------------------
Title: Vice Presdient and Tax Counsel
AVIS ENTERPRISES, INC.
By: /s/ Gerard J. Kennell
-------------------------------------
Title: Vice President and Treasurer
<PAGE>
23
AVIS SERVICE, INC.
By: /s/ Gerard J. Kennell
-------------------------------------
Title: Vice President and Treasurer
AVIS LUBE, INC.
By: /s/ Gerard J. Kennell
-------------------------------------
Title: Vice President and Treasurer
<PAGE>
Schedule 1
CONTRACTS
<PAGE>
Schedule 2
CHIEF EXECUTIVE OFFICE OR SOLE PLACE OF BUSINESS
<PAGE>
Schedule 3
PATENTS AND PATENT LICENSES
TRADEMARKS AND TRADEMARK LICENSES
<PAGE>
EXHIBIT D TO
CREDIT AGREEMENT
FORM OF PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of July 30, 1997, made by each of the
signatories hereto (together with any other entity that may become a party
hereto, the "Pledgors"), in favor of THE CHASE MANHATTAN BANK, as
administrative agent (in such capacity, the "Administrative Agent") for the
lenders (the "Lenders") from time to time parties to the Credit Agreement,
dated as of July 30, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Avis Rent A Car System, Inc., a
Delaware corporation (the "Borrower"), Avis Rent A Car, Inc., a Delaware
corporation ("Avis"), the Lenders, the Administrative Agent and Lehman
Commercial Paper Inc., a Delaware corporation, as syndication agent for the
Lenders (the "Syndication Agent"), and the other Secured Parties (as defined
herein).
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make Loans to the Borrower upon the terms and subject to the
conditions set forth therein, to be evidenced by the notes issued by the
Borrower under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective Loans to the Borrower that each Pledgor (other than
the Borrower) guarantee payment and performance of the Borrower's obligations
under the Credit Agreement, the notes and the other Credit Documents; and
WHEREAS, in satisfaction of such condition, each Pledgor (other than
the Borrower) has entered into a Guarantee of even date herewith (as amended,
supplemented or otherwise modified from time to time, the "Guarantee") for the
benefit of the Administrative Agent and the Secured Parties; and
WHEREAS, it is a further condition precedent to the obligation of the
Lenders to make their respective Loans to the Borrower under the Credit
Agreement that each Pledgor shall have executed and delivered this Pledge
Agreement to secure payment and performance of such Pledgor's obligations under
the Guarantee.
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective Loans to the Borrower, each Pledgor
hereby agrees with
<PAGE>
2
the Administrative Agent, for the benefit of the Secured Parties, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them
in the Credit Agreement.
(b) The following terms shall have the following meanings:
"Agreement": this Pledge Agreement, as the same may be amended,
modified or otherwise supplemented from time to time.
"Code": the Uniform Commercial Code from time to time in effect in the
State of New York.
"Collateral": the Pledged Stock and all Proceeds.
"Collateral Account": any account established to hold money Proceeds,
maintained under the sole dominion and control of the Administrative Agent,
subject to withdrawal by the Administrative Agent for the account of the
Secured Parties only as provided in paragraph .
"Issuers": the collective reference to the companies identified on
Schedule 2 attached hereto as the issuers of the Pledged Stock; individually,
each an "Issuer."
"Obligations": as defined in the Guarantee.
"Pledged Stock": the shares of capital stock listed on Schedule 2
hereto, together with all stock certificates, options or rights of any nature
whatsoever in respect of Capital Stock of any Issuer that may be issued or
granted by such Issuer to any Pledgor while this Agreement is in effect
(provided that in no event shall any Pledgor be required to pledge more than
65% of the Capital Stock of any Foreign Subsidiary pursuant to this Agreement).
"Proceeds": all "proceeds" as such term is defined in Section 9-306(1)
of the Uniform Commercial Code in effect in the State of New York on the date
hereof and, in any event, shall include, without limitation, all dividends or
other income from the Pledged Stock, collections thereon or distributions with
respect thereto.
"Secured Obligations": with respect to any Pledgor, the collective
reference to (a) the Obligations and (b) all obligations and liabilities of
such Pledgor which may arise under or in connection with this Agreement or any
other Credit Document to which such Pledgor is a party, in each case whether on
account of reimbursement obligations, fees, indemnities, costs, expenses
<PAGE>
3
or otherwise (including, without limitation, all reasonable fees and
disbursements of counsel to the Administrative Agent or to the Lenders that are
required to be paid by such Pledgor pursuant to the terms of this Agreement or
any other Credit Document).
"Secured Parties" means the collective reference to the Administrative
Agent, the Syndication Agent, the Lenders (including, without limitation, the
CE Issuing Bank and the WC Issuing Bank).
"Securities Act": the Securities Act of 1933, as amended.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section and paragraph
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Pledge; Grant of Security Interest. Each Pledgor hereby delivers to
the Administrative Agent, for the benefit of the Secured Parties, all of such
Pledgor's Pledged Stock and hereby grants to Administrative Agent, for the
benefit of the Secured Parties, a first security interest in the Collateral, as
collateral security for the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration or otherwise) of the
Secured Obligations.
3. Stock Powers. Concurrently with the delivery to the Administrative
Agent of each certificate representing one or more shares of Pledged Stock to
the Administrative Agent, the relevant Pledgor shall deliver an undated stock
power covering such certificate, duly executed in blank by such Pledgor with.
4. Representations and Warranties. Each Pledgor represents and
warrants that:
(a) such Pledgor has the corporate power and authority and the legal
right to execute and deliver, to perform its obligations under, and to grant
the security interest in the Collateral pursuant to, this Agreement and has
taken all necessary corporate action to authorize its execution, delivery and
performance of, and grant of the security interest in the Collateral pursuant
to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding obligation
of such Pledgor, enforceable in accordance with its terms, and upon delivery to
the Administrative Agent of the stock
<PAGE>
4
certificates evidencing such Pledgor's Pledged Stock, the security interest
created pursuant to this Agreement will constitute a valid, perfected first
priority security interest in the Collateral, enforceable in accordance with
its terms against all creditors of such Pledgor and any Persons purporting to
purchase any Collateral from such Pledgor, except in each case as
enforceability may be affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(c) The execution, delivery and performance of this Agreement will not
violate any provision of any Requirement of Law or Contractual Obligation of
such Pledgor and will not result in the creation or imposition of any Lien on
any of the properties or revenues of such Pledgor pursuant to any Requirement
of Law or Contractual Obligation of such Pledgor, except the security interest
created by this Agreement.
(d) No consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any
other Person (including, without limitation, any stockholder or creditor of
such Pledgor), is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement except where the
failure to obtain the same would not result in a Material Adverse Effect.
(e) No litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of such
Pledgor, threatened by or against such Pledgor or against any of its properties
or revenues with respect to this Agreement or any of the transactions
contemplated hereby as to which there is a reasonable possibility of an adverse
determination, which individually, or in the aggregate, would have a Material
Adverse Effect.
(f) The shares of Pledged Stock constitute all the issued and
outstanding shares of all classes of the capital stock of each domestic Issuer
(and 65% of all classes of the capital stock of each foreign Issuer).
(g) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(h) Such Pledgor is the record and beneficial owner of, and has good
and marketable title to, such Pledgor's Pledged Stock, free of any and all
Liens or options in favor of, or claims of,
<PAGE>
5
any other Person, except the security interest created by this Agreement.
5. Covenants. Each Pledgor covenants and agrees with the
Administrative Agent and the Secured Parties that, from and after the date of
this Agreement until this Agreement is terminated and the security interests
created hereby are released:
(a) If such Pledgor shall, as a result of its ownership of the Pledged
Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend
or a distribution in connection with any reclassification, increase or
reduction of capital or any certificate issued in connection with any
reorganization), option or rights, whether in addition to, in substitution of,
as a conversion of, or in exchange for any shares of the Pledged Stock, or
otherwise in respect thereof, such Pledgor shall accept the same as the agent
of the Administrative Agent and the Secured Parties, hold the same in trust for
the Administrative Agent and the Secured Parties and deliver the same forthwith
to the Administrative Agent in the exact form received, duly indorsed by such
Pledgor to the Administrative Agent, if required, together with an undated
stock power covering such certificate duly executed in blank by such Pledgor,
to be held by the Administrative Agent, subject to the terms hereof, as
additional collateral security for the Secured Obligations. Any sums paid upon
or in respect of the Pledged Stock upon the liquidation or dissolution of any
Issuer shall be paid over to the Administrative Agent to be held by it
hereunder as additional collateral security for the Secured Obligations, and in
case any distribution of capital shall be made on or in respect of the Pledged
Stock or any property shall be distributed upon or with respect to the Pledged
Stock pursuant to the recapitalization or reclassification of the capital of
any Issuer or pursuant to the reorganization thereof, the property so
distributed shall be delivered to the Administrative Agent to be held by it
hereunder as additional collateral security for the Secured Obligations. If any
sums of money or property so paid or distributed in respect of the Pledged
Stock shall be received by such Pledgor, such Pledgor shall, until such money
or property is paid or delivered to the Administrative Agent, hold such money
or property in trust for the Secured Parties, segregated from other funds of
such Pledgor, as additional collateral security for the Secured Obligations.
(b) Without the prior written consent of the Administrative Agent,
such Pledgor will not (1) vote to enable, or take any other action to permit,
any Issuer to issue any stock or other equity securities of any nature or to
issue any other securities convertible into or granting the right to purchase
or exchange for any stock or other equity securities of any nature of any
<PAGE>
6
Issuer, (2) sell, assign, transfer, exchange, or otherwise dispose of, or grant
any option with respect to, the Collateral, (3) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Collateral, or any interest therein, except for the security
interests created by this Agreement or (4) enter into any agreement or
undertaking restricting the right or ability of such Pledgor or the
Administrative Agent to sell, assign or transfer any of the Collateral.
(c) Such Pledgor shall maintain the security interest created by this
Agreement as a first, perfected security interest and shall defend such
security interest against claims and demands of all Persons whomsoever. At any
time and from time to time, upon the written request of the Administrative
Agent, and at the sole expense of such Pledgor, such Pledgor will promptly and
duly execute and deliver such further instruments and documents and take such
further actions as the Administrative Agent may reasonably request for the
purposes of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note, other instrument or chattel paper, such note, instrument or
chattel paper shall be immediately delivered to the Administrative Agent, duly
endorsed in a manner satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Agreement.
(d) Such Pledgor shall pay, and save the Administrative Agent and the
Secured Parties harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of Default shall
have occurred and be continuing and the Administrative Agent shall have given
notice to the relevant Pledgor of the Administrative Agent's intent to exercise
its corresponding rights pursuant to Section below, such Pledgor shall be
permitted to receive all cash dividends paid in the normal course of business
of the Issuer[s] and consistent with past practice, to the extent permitted in
the Credit Agreement, in respect of the Pledged Stock and to exercise all
voting and corporate rights with respect to the Pledged Stock; provided,
however, that no vote shall be cast or corporate right exercised or other
action taken which, in the Administrative Agent's reasonable judgment, would
impair the Collateral or which would be inconsistent with or result in any
violation of any provision
<PAGE>
7
of the Credit Agreement, the notes, this Agreement or any other Credit
Document.
7. Rights of the Secured Parties and the Administrative Agent. (a) All
money Proceeds received by the Administrative Agent hereunder, upon the
occurrence and during the continuance of an Event of Default, shall be held by
the Administrative Agent for the benefit of the Secured Parties in a Collateral
Account. All Proceeds while held by the Administrative Agent in a Collateral
Account (or by the Pledgor in trust for the Administrative Agent and the
Secured Parties) shall continue to be held as collateral security for all the
Secured Obligations and shall not constitute payment thereof until applied as
provided in paragraph .
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Pledgor, (1) the Administrative Agent shall have the right to
receive any and all cash dividends paid in respect of the applicable Pledged
Stock and make application thereof to the Secured Obligations as provided in
paragraph 8(a), and (2) all shares of the Pledged Stock shall be registered in
the name of the Administrative Agent or its nominee, and the Administrative
Agent or its nominee may thereafter exercise (A) all voting, corporate and
other rights pertaining to such shares of the Pledged Stock at any meeting of
shareholders of the applicable Issuer or otherwise and (B) any and all rights
of conversion, exchange, subscription and any other rights, privileges or
options pertaining to such shares of the Pledged Stock as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of such Issuer, or upon the exercise by such Pledgor or the
Administrative Agent of any right, privilege or option pertaining to such
shares of the Pledged Stock, and in connection therewith, the right to deposit
and deliver any and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Administrative Agent may determine), all without liability
except to account for property actually received by it, but the Administrative
Agent shall have no duty to such Pledgor to exercise any such right, privilege
or option and shall not be responsible for any failure to do so or delay in so
doing.
8. Remedies. (a) If an Event of Default shall have occurred and be
continuing, at any time at the Administrative Agent's election, the
Administrative Agent may apply all or any part of the Proceeds held in any
Collateral Account in payment of
<PAGE>
8
the Secured Obligations, to the extent available for distribution, in the
following order of priority:
First: to the Administrative Agent for any unpaid fees and expenses
and then to any Secured Party which has theretofore advanced or paid any
such fees, an amount equal to the amount thereof so advanced or paid by
such Secured Party and for which such Secured Party has not been reimbursed
prior to such date, and, if such moneys shall be insufficient to pay such
amounts in full, then ratably (without priority of any one over any other)
to such Secured Parties in proportion to the unpaid amounts thereof on such
distribution date;
Second: to the Secured Parties in an amount equal to the unpaid
principal or face amount of, and unpaid interest on, and premium or fees,
if any, in respect of, the Secured Obligations then outstanding whether or
not then due and payable, including, without limitation, the aggregate
undrawn amounts available to be drawn (assuming compliance with all
conditions to drawing) under all Letters of Credit, and, if such moneys
shall be insufficient to pay such amounts in full, then ratably (without
priority of any one over any other) to the Secured Parties in proportion to
the unpaid amounts thereof on such date;
Third: to the Secured Parties, amounts equal to all other sums which
constitute Secured Obligations, including without limitation the costs and
expenses of the Secured Parties and their representatives which are due and
payable and which constitute Secured Obligations as of such date, and, if
such moneys shall be insufficient to pay such sums in full, then ratably to
the Secured Parties in proportion to such sums; and
Fourth: any surplus then remaining shall be paid to the Pledgors or
their successors or assigns or to whomsoever may be lawfully entitled to
receive the same or as a court of competent jurisdiction may direct.
(1) The term "unpaid" as used in clause Second of subsection 8(a)
refers:
(A) in the absence of a bankruptcy proceeding with respect to the
relevant Pledgor(s), to all amounts of Secured Obligations outstanding as
of a distribution date, whether or not such amounts are fixed or
contingent, and
(B) during the pendency of a bankruptcy proceeding with respect to the
relevant Pledgor(s), to all amounts allowed by the bankruptcy court in
respect of Secured
<PAGE>
9
Obligations, as a basis for distribution (including estimated amounts,
if any, allowed by the bankruptcy court in respect of contingent claims),
to the extent that prior distributions (whether actually distributed or set
aside pursuant to subsection 8(a)(2)) have not been made in respect thereof.
(2) If any Secured Party shall be entitled to receive any moneys
pursuant to clause Second of subsection 8(a) in respect of the unliquidated,
unmatured or contingent portion of the outstanding Secured Obligations
(including, without limitation, obligations under then outstanding Letters of
Credit), then the Administrative Agent shall invest such moneys in obligations
of the kinds referred to in Permitted Investments maturing within three months
after they are acquired by the Administrative Agent and shall hold all such
amounts so distributable, and all such investments and the net proceeds
thereof, in trust solely for such Secured Party and for no other purpose until
(i) such Secured Party shall have notified the Administrative Agent that all or
part of such unliquidated, unmatured or contingent claim shall have become
matured or fixed, in which case the Administrative Agent shall distribute from
such investments and the proceeds thereof an amount equal to such matured or
fixed claim to such Secured Party for application to the payment of such
matured or fixed claim, and shall promptly give notice thereof to the Borrower
or (ii) all or part of such unliquidated, unmatured or contingent claim shall
have been extinguished, whether as the result of an expiration without drawing
of any Letter of Credit, payment of amounts secured or covered by any Letter of
Credit other than by drawing thereunder, or otherwise, in which case (x) such
Secured Party shall, as soon as practicable thereafter, notify the
Administrative Agent and (y) such investments, and the proceeds thereof, shall
be redistributed in accordance with subsection 8.(a) taking into account such
extinguishment.
(b) If an Event of Default shall occur and be continuing, the
Administrative Agent, on behalf of the Secured Parties, may exercise, in
addition to all other rights and remedies granted in this Agreement and in any
other instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon any Pledgor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell,
<PAGE>
10
assign, give option or options to purchase or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, in the over-the-counter
market, at any exchange, broker's board or office of the Administrative Agent
or any Secured Party or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The Administrative Agent
or any Secured Party shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in the relevant Pledgor, which right or equity is hereby
waived or released. The Administrative Agent shall apply any Proceeds from time
to time held by it and the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Administrative Agent and the Secured Parties
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements of counsel to the Administrative Agent, to the payment in whole
or in part of the Secured Obligations, in such order as the Administrative
Agent may elect, and only after such application and after the payment by the
Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the
Administrative Agent account for the surplus, if any, to the relevant Pledgor.
To the extent permitted by applicable law, each Pledgor waives all claims,
damages and demands it may acquire against the Administrative Agent or any
Secured Party arising out of the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.
(c) Each Pledgor waives and agrees not to assert any rights or
privileges which it may acquire under Section 9-112 of the Code. The Pledgors
shall remain liable for any deficiency if the proceeds of any sale or other
disposition of Collateral are insufficient to pay the Secured Obligations and
the fees and disbursements of any attorneys employed by the Administrative
Agent or any Secured Party to collect such deficiency.
9. Registration Rights; Private Sales. (a) If the Administrative Agent
shall determine to exercise its right to sell any or all of the Pledged Stock
pursuant to paragraph hereof, and if in the opinion of the Administrative Agent
it is necessary or advisable to have the Pledged Stock, or that portion
<PAGE>
11
thereof to be sold, registered under the provisions of the Securities Act, the
relevant Pledgor will cause the Issuer thereof to (1) execute and deliver, and
cause the directors and officers of such Issuer to execute and deliver, all
such instruments and documents, and do or cause to be done all such other acts
as may be, in the opinion of the Administrative Agent, necessary or advisable
to register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (2) to use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering
of the Pledged Stock, or that portion thereof to be sold, and (3) to make all
amendments thereto and/or to the related prospectus which, in the opinion of
the Administrative Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Such Pledgor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Administrative Agent shall
designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(b) Such Pledgor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Such
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so.
(c) Such Pledgor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales
of all or any portion of the Pledged Stock pursuant to this Section valid and
binding and in compliance with any and all other applicable Requirements of
Law. Such Pledgor further agrees that a breach of any of the covenants
<PAGE>
12
contained in this Section will cause irreparable injury to the Administrative
Agent and the Lenders, that the Administrative Agent and the Lenders have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section shall be specifically
enforceable against such Pledgor, and such Pledgor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred and is
continuing under the Credit Agreement.
10. Irrevocable Authorization and Instruction to Issuer. Each Pledgor
hereby authorizes and instructs each applicable Issuer to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and is continuing and (b) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Pledgor, and such Pledgor agrees that each
applicable Issuer shall be fully protected in so complying.
11. Administrative Agent's Appointment as Attorney-in-Fact. (a) Upon
the occurrence and during the continuance of an Event of Default, each Pledgor
hereby irrevocably constitutes and appoints the Administrative Agent and any
officer or agent of the Administrative Agent, with full power of substitution,
as its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of such Pledgor and in the name of such
Pledgor or in the Administrative Agent's own name, from time to time in the
Administrative Agent's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, including, without limitation, any financing
statements, endorsements, assignments or other instruments of transfer.
(b) Each Pledgor hereby ratifies all that said attorneys shall
lawfully do or cause to be done pursuant to the power of attorney granted in
paragraph . All powers, authorizations and agencies contained in this Agreement
are coupled with an interest and are irrevocable until this Agreement is
terminated and the Security Obligations are paid in full.
12. Duty of Administrative Agent. The Administrative Agent's sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar securities and property for its own account, except that the
Administrative Agent shall have no obligation to invest funds
<PAGE>
13
held in any Collateral Account and may hold the same as demand deposits.
Neither the Administrative Agent, any Secured Party nor any of their respective
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of any Pledgor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
13. Execution of Financing Statements. Pursuant to Section 9-402 of
the Code, each Pledgor authorizes the Administrative Agent to file financing
statements, upon providing notice to such Pledgor, with respect to the
Collateral without the signature of such Pledgor in such form and in such
filing offices as the Administrative Agent reasonably determines appropriate to
perfect the security interests of the Administrative Agent under this
Agreement. A carbon, photographic or other reproduction of this Agreement shall
be sufficient as a financing statement for filing in any jurisdiction.
14. Authority of Administrative Agent. Each Pledgor acknowledges that
the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Secured Parties, be governed by the Credit Agreement and by such
other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Pledgors, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Secured Parties with full and valid authority so to act or refrain from
acting, and neither the Pledgors nor any Issuer shall be under any obligation,
or entitlement, to make any inquiry respecting such authority.
15. Notices. All notices, requests and demands to or upon the
Administrative Agent or any Pledgor hereunder shall be effected in the manner
provided for in subsection 11.01 of the Credit Agreement; provided that any
such notice, request or demand to or upon any Pledgor shall be addressed to
such Pledgor at its notice address set forth on Schedule 1 hereto.
16. Severability. Any provision of this 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
<PAGE>
14
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
17. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
the terms or provisions of this Agreement may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by each affected
Pledgor and the Administrative Agent, provided that any provision of this
Agreement may be waived by the Administrative Agent and the Secured Parties in
a letter or agreement executed by the Administrative Agent or by telex or
facsimile transmission from the Administrative Agent.
(b) Neither the Administrative Agent nor any Secured Party shall by
any act (except by a written instrument pursuant to paragraph hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Administrative Agent or any Secured
Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any Secured Party of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Administrative Agent
or such Secured Party would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
18. Section Headings. The section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
19. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Pledgor and shall inure to the benefit of the
Administrative Agent and the Secured Parties and their successors and assigns.
20. Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the law of the State of New York.
<PAGE>
15
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.
AVIS RENT A CAR, INC.
By: /s/ Kevin M. Sheehan
-------------------------------------
Title: Executive Vice President and
Chief Financial Officer
AVIS RENT A CAR SYSTEM, INC.
By: /s/ Kevin M. Sheehan
-------------------------------------
Title: Executive Vice President and
Chief Financial Officer
AVIS INTERNATIONAL, LTD.
By: /s/ Gerard J. Kennell
-------------------------------------
Title: Vice President and Treasurer
AVIS ASIA AND PACIFIC, LIMITED
By: /s/ Steven L. Greenberger
-------------------------------------
Title: Vice President and Tax Counsel
AVIS CARIBBEAN, LIMITED
By: /s/ Steven L. Greenberger
-------------------------------------
Title: Vice President and Tax Counsel
AVIS ENTERPRISES, INC.
By: /s/ Gerard J. Kennell
--------------------------------
Title: Vice President and Treasurer
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Pledge
Agreement dated as of July __, 1997, made by [Name of Pledgor] for the benefit
of The Chase Manhattan Bank, as Administrative Agent (the "Pledge Agreement").
The undersigned agrees for the benefit of the Administrative Agent and the
Secured Parties as follows:
1. The undersigned will be bound from the date hereof by the terms of
the Pledge Agreement and will comply with such terms insofar as such terms are
applicable to the undersigned.
2. The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in paragraph of the
Pledge Agreement.
3. The terms of paragraph of the Pledge Agreement shall apply to it,
mutatis mutandis, with respect to all actions that may be required of it under
or pursuant to or arising out of Section of the Pledge Agreement.
[NAME OF ISSUER]
By
--------------------------------------
Title
-----------------------------------
Address for Notices:
----------------------------------------
----------------------------------------
Telex:
----------------------------------
Fax:
------------------------------------
Date:
--------------
<PAGE>
SCHEDULE 1
TO PLEDGE AGREEMENT
ADDRESSES OF PLEDGORS
<PAGE>
SCHEDULE 2
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
Stock
Class of Certificate No. of
Issuer Stock* No. Shares
- ------------------ ------------ --------------- ------------
- --------------
* Stock is assumed to be common stock unless otherwise indicated.
<PAGE>
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TEL: (212) 735-3000
FAX: (212) 735-2000
September 22, 1997
Avis Rent A Car, Inc.
900 Old Country Road
Garden City, New York 11530
Re: Avis Rent A Car, Inc.
Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Avis Rent A Car, Inc., a
Delaware corporation (the "Company"), in connection with the initial public
offering by the Company of up to 22,425,000 shares (including 2,925,000 shares
subject to an over-allotment option) (the "Shares") of the Company's Common
Stock, par value $.01 per share (the "Common Stock").
This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of
1933, as amended (the "Act").
In connection with this opinion, we have examined originals
or copies, certified or otherwise identified to our satisfaction, of (i) the
Registration Statement on Form S-1 (File No. 333-28609) as filed with the
Securities and Exchange Commission (the "Commission") on June 6, 1997; (ii)
Amendment No. 1 to the Registration Statement as filed with the Commission on
August 8, 1997; (iii) Amendment No. 2 to the Registration Statement as filed
with the Commission on August 20, 1997; (iv) Amendment No. 3 to the
Registration Statement as filed with the Commission on August 28, 1997; (v)
Amendment No. 4 to the Registration Statement as filed with the Commission on
September 19, 1997; (vi) Amendment No. 5 to the Regis-
<PAGE>
Avis Rent A Car, Inc.
September 22, 1997
Page 2
tration Statement to be filed with the Commission on the date hereof (such
Registration Statement, as so amended, being hereinafter referred to as the
"Registration Statement"); (vi) the form of U.S. Underwriting Agreement (the
"U.S. Underwriting Agreement") proposed to be entered into between the Company,
as issuer, and Bear, Stearns & Co. Inc., Blaylock & Partners, L.P., Chase
Securities Inc., Goldman, Sachs & Co., Lehman Brothers Inc., Montgomery
Securities and Robertson, Stephens & Company LLC, as representatives of the
several underwriters named therein (the "U.S. Underwriters"), filed as an
exhibit to the Registration Statement; (vii) the form of International
Underwriting Agreement (together with the U.S. Underwriting Agreement, the
"Underwriting Agreements") proposed to be entered into between the Company, as
issuer, and Bear, Stearns International Limited, Bayerische Vereinsbank AG,
Chase Manhattan International Limited, Credit Lyonnais Securities, Goldman
Sachs International, Lehman Brothers International (Europe), Montgomery
Securities and Robertson, Stephens & Company LLC, as representatives of the
several international managers named therein (together with the U.S.
Underwriters, the "Underwriters"), filed as an exhibit to the Registration
Statement; (viii) a specimen certificate representing the Common Stock; (ix)
the Restated Certificate of Incorporation of the Company, as presently in
effect and the form of Amended and Restated Certificate of Incorporation of the
Company to become effective upon consummation of the offerings contemplated by
the Registration Statement; (x) the By-Laws of the Company, as presently in
effect and the form of Amended and Restated By-Laws of the Company to become
effective upon consummation of the offerings contemplated by the Registration
Statement; (xi) certain resolutions of the sole shareholder of the Company and
the Board of Directors of the Company relating to the adoption of the Amended
and Restated Certificate of Incorporation of the Company; and (xii) certain
resolutions of the Board of Directors of the Company relating to the issuance
and sale of the Shares and related matters. We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of such records
of the Company and such agreements, certificates of public officials,
certificates of officers or other representatives of the Company and others,
and such other documents, certificates and re-
<PAGE>
Avis Rent A Car, Inc.
September 22, 1997
Page 3
cords as we have deemed necessary or appropriate as a basis for the opinions
set forth herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed by parties other than the
Company, we have assumed that such parties had or will have the power,
corporate or other, to enter into and perform all obligations thereunder and
have also assumed the due authorization by all requisite action, corporate or
other, and execution and delivery by such parties of such documents and the
validity and binding effect thereof. As to any facts material to the opinions
expressed herein which we have not independently established or verified, we
have relied upon statements and representations of officers and other
representatives of the Company and others.
Members of our firm are admitted to the bar in the State of
New York, and we do not express any opinion as to the laws of any other
jurisdiction other than the Delaware General Corporation Law.
Based upon and subject to the foregoing, we are of the
opinion that when (i) the Amended and Restated Certificate of Incorporation of
the Company in the form examined by us has been duly authorized by all
requisite corporate action and duly executed and filed with the Secretary of
State of the State of Delaware and has become effective; (ii) the Registration
Statement becomes effective; (iii) the Underwriting Agreements and the
transactions contemplated thereby have been duly authorized and the
Underwriting Agreements have been duly executed and delivered; and (iv)
certificates representing the Shares in the form of the specimen certificates
examined by us have been manually signed by an authorized officer of the
transfer agent and registrar for the Common Stock and registered by such
transfer agent and registrar, and delivered to and paid for by the Underwriters
at a price per share not less than the per share
<PAGE>
Avis Rent A Car, Inc.
September 22, 1997
Page 4
par value of the Common Stock as contemplated by the Underwriting Agreements,
the Shares will have been duly authorized, and the Shares will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the
Commission as Exhibit 5.1 to the Registration Statement. We also consent to the
reference to our firm under the caption "Legal Matters" in the Registration
Statement. In giving this consent, we do not thereby admit that we are included
in the category of persons whose consent is required under Section 7 of the Act
or the rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
<PAGE>
SEPARATION AGREEMENT
dated as of
July 30th, 1997
between
HFS Car Rental, Inc.
and
Avis Rent A Car, Inc.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS..................................................... 2
Section 1.1 Definitions............................... 2
ARTICLE II
TRANSFER OF CAR RENTAL BUSINESS................................. 7
Section 2.1 Transfer of Assets........................ 7
Section 2.2 Assignment and Assumption of
Liabilities........................... 8
Section 2.3 Transfers Not Effected Prior to the
Separation Date....................... 8
Section 2.4 No Representations or Warranties;
Consents.............................. 9
Section 2.5 Conveyancing and Stock Assumption
Instruments........................... 10
ARTICLE III
THE SEPARATION.................................................. 10
Section 3.1 Cooperation Prior to the
Separation............................ 10
Section 3.2 Conduct of Car Rental Business
Pending Separation.................... 11
Section 3.3 Holdings Board Action; Conditions
Precedent to the Separation........... 11
ARTICLE IV
INDEMNIFICATION................................................. 13
Section 4.1 ARAC Indemnification of
Holdings.......................... 13
Section 4.2 Holdings Indemnification of ARAC.......... 13
Section 4.3 Notice and Payment of Claims.............. 14
Section 4.4 Notice and Defense of Third-Party
Claims................................ 14
Section 4.5 Insurance Proceeds........................ 16
Section 4.6 Contribution.............................. 17
Section 4.7 Subrogation............................... 17
Section 4.8 No Third-Party Beneficiaries.............. 17
Section 4.9 Remedies Cumulative....................... 18
Section 4.10 Survival of Indemnities................... 18
Section 4.11 After-Tax Indemnification
Payments.............................. 18
i
<PAGE>
ARTICLE V
CERTAIN ADDITIONAL MATTERS...................................... 18
Section 5.1 Intercompany Payables/
Receivables........................... 18
Section 5.2 Ancillary Agreements...................... 19
Section 5.3 ARAC Officers and Board of
Directors............................. 19
Section 5.4 ARAC Certificate of Incorporation
and By-laws........................... 19
Section 5.5 Credit Facilities......................... 19
Section 5.6 Insurance Policies and Claims
Administration........................ 19
ARTICLE VI
ACCESS TO INFORMATION........................................... 22
Section 6.1 Provision of Corporate Records............ 22
Section 6.2 Access to Information..................... 22
Section 6.3 Litigation Cooperation.................... 22
Section 6.4 Reimbursement............................. 23
Section 6.5 Retention of Records...................... 23
Section 6.6 Confidentiality........................... 23
Section 6.7 Mail...................................... 24
ARTICLE VII
MISCELLANEOUS................................................... 25
Section 7.1 Termination............................... 25
Section 7.2 Expenses.................................. 25
Section 7.3 Notices................................... 25
Section 7.4 Amendment and Waiver...................... 26
Section 7.5 Counterparts.............................. 26
Section 7.6 Governing Law; Jurisdiction;
Forum................................. 26
Section 7.7 Entire Agreement.......................... 26
Section 7.8 Parties in Interest....................... 27
Section 7.9 Tax Disaffiliation Agreement.............. 27
Section 7.10 Further Assurances and Consents........... 27
Section 7.11 Exhibits and Schedules.................... 28
Section 7.12 Legal Enforceability...................... 28
Section 7.13 Dispute Resolution........................ 28
Section 7.14 Titles and Headings....................... 29
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Schedule 1 - Direct Car Rental Subsidiaries
Schedule 2 - Franchise Agreements
Schedule 3 - Guarantees
Schedule 4 - WizCom Transferred Assets
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SEPARATION AGREEMENT
SEPARATION AGREEMENT ("Agreement") dated as of July 30th, 1997
by and between HFS Car Rental, Inc., a Delaware corporation, and an indirect
wholly owned subsidiary of HFS Incorporated (together with its successors and
permitted assigns, "Holdings"), and Avis Rent A Car, Inc., a Delaware
corporation (together with its successors and permitted assigns, "ARAC").
RECITALS
WHEREAS, ARAC and certain of its subsidiaries currently
conduct the business of owning and managing car rental operations under the
service mark and tradename "Avis" (the "Car Rental Business") primarily through
certain subsidiaries of ARAC (the "Direct Car Rental Subsidiaries"), their
respective subsidiaries and joint ventures, all as identified on Schedule 1
hereto (collectively, the "Car Rental Subsidiaries");
WHEREAS, ARAC is presently a direct wholly owned subsidiary of
Holdings established for the purposes of taking title to the capital stock and
associated goodwill of the Direct Car Rental Subsidiaries and certain assets
associated with the Car Rental Business, and assuming certain liabilities
associated with the Car Rental Business, all as specified herein, such that ARAC
will own substantially all of the assets, business and operations currently
conducted by the Car Rental Business other than the System (as defined herein)
and the business of granting franchise rights or licenses with respect to the
operation of Avis car rental locations under the System and the Proprietary
Marks (as defined herein);
WHEREAS, the Board of Directors of Holdings has determined
that it is in the best interest of Holdings and the stockholder of Holdings to
conduct a public offering (the "Separation") of approximately 75% of ARAC Common
Stock; and
WHEREAS, the parties have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
the Separation and to set forth other agreements that will govern certain other
matters following such Separation.
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NOW, THEREFORE, in consideration of the foregoing premises and
the mutual agreements, provisions and covenants contained in this Agreement, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used herein, the following terms
have the following meanings:
"Action" means any claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, governmental or regulatory
or administrative agency or commission or any other tribunal.
"Affiliate" of any specified person means any other person
that, directly or indirectly, controls, is controlled by or is under direct or
indirect common control with such specified person.
"Agreement" has the meaning specified in the
Recitals.
"Ancillary Agreements" means the Master License Agreement, the
Computer Services Agreement, the Reservation Agreement, the Employee Benefits
and Other Employment Matters Allocation Agreement, the Lease Agreements, the
Cost Sharing Agreement, and the Tax Disaffiliation Agreement.
"ARAC" has the meaning specified in the Recitals.
"ARAC Bylaws" means the bylaws of ARAC in the form filed as an
exhibit to the Form S-1.
"ARAC Certificate" means the restated certificate of
incorporation of ARAC in the form filed as an exhibit to the Form S-1.
"ARAC Common Stock" means the outstanding shares of common
stock, par value $.01 per share, of ARAC.
"ARAC Liabilities" means all of (i) the Liabilities of ARAC
under this Agreement, (ii) the Assumed Liabilities, (iii) the Liabilities of
ARAC arising after the Separation Date and (iv) any liabilities for Taxes for
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which HFS Incorporated is entitled to indemnification from ARAC pursuant to the
Tax Disaffiliation Agreement.
"ARAC Transferred Assets" has the meaning specified in
Section 2.1.
"Assumed Liabilities" means the Liabilities arising directly
or indirectly from the operation of the Car Rental Business or the ownership or
use of assets (including the ARAC Transferred Assets) or other activities in
connection therewith whether arising before, on or after the Separation Date,
including but not limited to any Liabilities arising or in connection with or
related to (i) information contained in or omitted from the Form S-1, (ii) any
Liabilities set forth or referenced in the audited financial statements of ARAC
included in the Form S-1, (iii) all litigation relating to the Car Rental
Business, including any liability arising from the franchise agreements arising
prior to the Separation Date and (iv) the Wizard Note pursuant to the Wizard
Note Assumption and Release Agreement between Wizard Co., and ARAC and Reserve
Claims Management Co. dated as of the date hereof. Notwithstanding the
foregoing, the Assumed Liabilities shall not include (i) operating leases under
which Holdings remains liable, and (ii) liabilities related to alleged acts of
illegal discrimination against customers in the Car Rental Business which are
alleged to have occurred prior to the Separation Date.
"Car Rental Business" has the meaning specified in the first
recital of this Agreement.
"Car Rental Subsidiaries" has the meaning specified in the
first recital of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Computer Services Agreement" means the Computer Services
Agreement dated as of the date hereof between WizCom and Rent A Car, pursuant to
which WizCom has granted ARAC rights to use the Wizard System in the conduct of
its car rental business and pursuant to which WizCom receives fees in exchange
therefor as such agreement may be amended
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from time to time.
"Cost Sharing Agreement" means the Cost Sharing Agreement
dated as of the date hereof between WizCom and ARAC, providing for certain
matters relating to the sharing of space and support services, as such agreement
may be amended from time to time.
"Covered Claims" means any claim that is of a type covered by
insurance or self insurance of Holdings as in effect on the Separation Date and
that is a type of claim specified as a covered claim on Schedule 5.6(a).
"Direct Car Rental Subsidiaries" has the meaning specified in
the first recital of this Agreement.
"Employee Benefits Agreement" means the Employment Benefits &
Other Employment Matters Allocation Agreement dated as of the date hereof
between Holdings, HFS and ARAC, providing for certain matters relating to the
allocation of employee benefits and related matters, as such agreement may be
amended from time to time.
"Fleet Financing Program" means the approximately $3.5
billion asset-backed fleet financing program of ARAC being structured jointly
by Chase Securities Inc. and Lehman Brothers Inc.
"Form S-1" means the registration statement on Form S-1 filed
by ARAC with the Commission to effect the registration of the ARAC Common Stock
pursuant to the Securities Act, as such registration statement may be amended
from time to time.
"Franchise Agreements" means all franchise agreements to which
Holdings or any Car Rental Subsidiary is a party, pursuant to which
Holdings(either directly or through any such Car Rental Subsidiary) has granted
franchise rights with respect to the operation of Avis car rental facilties, and
in exchange therefor, receives franchise fees, royalties, license fees and
service fees.
"Guarantees" means the guarantees of Holdings listed on
Schedule 3 hereto.
"HFS" means HFS Incorporated, a Delaware
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corporation.
"Holdings" has the meaning specified in the Recitals.
"Holdings Liabilities" means all of (i) the Liabilities of
Holdings under this Agreement, (ii) the Liabilities of Holdings (other than any
ARAC Liabilities), arising after the Separation Date, (iii) liabilities related
to alleged acts of illegal discrimination against customers in the Car Rental
Business which are alleged to have occurred prior to the Separation Date, and
(iv) any liabilities for Taxes as for which ARAC is entitled to indemnification
from HFS Incorporated pursuant to the Tax Disaffiliation Agreement.
"Holdings Transferred Assets" has the meaning
specified in Section 2.1.
"Lease Agreements" means the Lease Agreements and Sublease
Agreements, as the case may be, between WizCom and Rent A Car providing for the
allocation of the executive and other offices of ARAC and WizCom, as such
agreements may be amended from time to time.
"Liabilities" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or not accrued, known or unknown, whenever arising,
including all costs and expenses (including reasonable attorney's fees) relating
thereto under any law, rule, regulation, action, order or consent decree of any
Governmental entity or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
"Loss" has the meaning specified in Section 4.1.
"Master License Agreement" means the Master License Agreement
dated as of the date hereof between Rent A Car and Holdings pursuant to which
Holdings has granted franchise rights to Rent A Car with respect to the
operation of Avis car rental facilities, and in exchange therefor receives
royalties, license fees and service fees, as amended from time to time.
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"New Credit Facilities" means a revolving credit facility in
the amount of up to $125 million, a term loan facility in the amount of $120
million and a $225 million standby letter of credit facility, each with the
Chase Manhattan Bank, as agent, and the other lenders thereto.
"Rent A Car" means Avis Rent A Car System, Inc., a wholly
owned subsidiary of ARAC.
"Reservation Agreement" means the Reservation Services
Agreement dated as of the date hereof between HFS and Rent A Car pursuant to
which HFS is to provide certain reservation services to Rent A Car, as amended
from time to time.
"Securities Act" means the Securities Act of 1933, as
amended.
"Separation" has the meaning specified in the third recital
of this Agreement.
"Separation Date" means the date determined by the Board of
Directors of Holdings as the date on which the Separation shall be effected,
which is contemplated to occur on or about September 22, 1997.
"System" shall have the meaning given to such term in the
Master License Agreement.
"Tax" or "Taxes" shall have the meaning given to such term in
the Tax Disaffiliation Agreement.
"Tax Disaffiliation Agreement" means the Tax Disaffiliation
Agreement dated as of the date hereof between HFS Incorporated and ARAC
providing for certain tax related matters, as such agreement may be amended from
time to time.
"Wizard Note" means the note, dated October 1996, made by
Wizard Co., Inc. in the principal amount of $194,100,000.
"WizCom" means WizCom International, Ltd., a Delaware
corporation and an indirect wholly owned subsidiary of HFS.
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"WizCom Transferred Assets" means the assets and agreements
identified on Schedule 4 hereto which were intended to be transferred on
October 16, 1996 in connection with the acquisition of ARAC by HFS
Incorporated.
ARTICLE II
TRANSFER OF CAR RENTAL BUSINESS
Section 2.1 Transfer of Assets. (a) Prior to the Separation
Date, Holdings shall take or shall cause to be taken all actions necessary to
cause the transfer, assignment, delivery and conveyance to ARAC of all of
Holdings' and its subsidiaries' rights, title and interest in the assets listed
below (collectively, the "ARAC Transferred Assets"):
(i) the shares of common stock and preferred stock, if any, of
the Direct Car Rental Subsidiaries owned by Holdings as set forth on
Schedule 1 hereto; and
(ii) all books, records and files of, or relating exclusively
to, the Car Rental Business; provided, however, that Holdings shall
retain access to such books, records and files to the extent required
to carry out its obligations under the Master License Agreement.
(b) Prior to the Separation Date, ARAC shall take or shall
cause to be taken all actions necessary to cause the transfer, assignment and
conveyance to Holdings or its subsidiaries or affiliates of all of ARAC's and
its subsidiaries, rights, title and interest in the assets
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listed below (collectively, the "Holdings Transferred Assets"):
(i) the System;
(ii) the Franchise Agreements identified on
Schedule 2 hereto;
(iii) the WizCom Transferred Assets; and
(iv) all books, records and files of, or relating to, the
System, the Franchise Agreements identified on Schedule 2 hereto and
the WizCom Transferred Assets; provided, however, that ARAC shall
retain access to such books, records and files to the extent required
to carry out its obligations under the Master License Agreement.
Section 2.2 Assignment and Assumption of Liabilities. Except
as set forth in one or more of the Ancillary Agreements, from and after the
Separation Date, (i) ARAC shall, and/or shall cause its subsidiaries to, assume,
pay, perform and discharge in due course all of the ARAC Liabilities, and (ii)
Holdings shall, and/or shall cause its subsidiaries to, assume, pay, perform and
discharge in due course all of the Holdings Liabilities.
Section 2.3 Transfers Not Effected Prior to the Separation
Date. To the extent any transfers contemplated by this Article II shall not have
been fully effected prior to the Separation Date, Holdings and ARAC shall
cooperate to effect such transfers as promptly as possible following the
Separation Date. Nothing herein shall be deemed to require the transfer of any
assets or the assumption of any Liabilities that by their terms or by operation
of law cannot be transferred or assumed; provided, however, that Holdings and
ARAC and their respective subsidiaries and Affiliates shall cooperate in seeking
to obtain any necessary consents or approvals for the transfer of all assets and
Liabilities as contemplated by this Article II. In the event that any such
transfer of assets or Liabilities has not been consummated effective as of the
Separation Date, the party retaining such asset or Liability shall thereafter
hold such assets in trust for the use and benefit of the party entitled thereto
(at the expense of the party entitled thereto) and retain such
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Liability for the account of the party to whom such Liability is to be assumed
pursuant hereto, and take such other actions as may be reasonably required in
order to place the parties, insofar as reasonably possible, in the same position
as would have existed had such asset been transferred, or such Liability been
assumed as contemplated hereby. As and when any such asset or Liability becomes
transferable, such transfer and assumption shall be effected forthwith. Holdings
and ARAC agree that, as of the Separation Date, each party hereto shall be
deemed to have acquired complete and sole beneficial ownership over all of the
assets, together with all of the rights, powers and privileges incidental
thereto, that such party is entitled to acquire pursuant to the terms of this
Agreement.
Section 2.4 No Representations or Warranties; Consents. Each
of the parties hereto understands and agrees that no party hereto is, in this
Agreement or in any other agreement or document contemplated by this Agreement
or otherwise, representing or warranting in any way as to the value or freedom
from encumbrance of, or any other matter concerning, any assets of such party,
or as to the legal sufficiency to convey title to an asset transferred pursuant
to this Agreement or an Ancillary Agreement, including, without limitation, any
conveyancing or assumption instruments. It is also agreed and understood that
there are no warranties whatsoever, express or implied, given by either party to
this Agreement, as to the condition, quality, merchantability or fitness of any
of the assets, businesses or other rights transferred or retained by the
parties, as the case may be, and all such assets, businesses and other rights
shall be "as is, where is" and "with all faults" (provided that the absence of
warranties given by the parties shall not negate the allocation of Liabilities
under this Agreement and shall have no effect on any manufacturers, sellers, or
other third party warranties that are intended to be transferred with such
assets). Similarly, each party hereto understands and agrees that no party
hereto is, in this Agreement or in any other agreement or document contemplated
by this Agreement or otherwise, representing or warranting in any way that the
obtaining of any consents or approvals, the execution and delivery of any
amendatory agreements and the taking of any filings or applications contemplated
by this Agreement will satisfy the provisions
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of any or all applicable laws or judgments or other instruments or agreements
relating to such assets.
Notwithstanding the foregoing, the parties shall use their
good faith efforts to obtain all consents and approvals, to enter into all
reasonable amendatory agreements and to make all filings and applications
contemplated by this Agreement, and shall take all such further actions as shall
be deemed reasonably necessary to preserve for each of Holdings and ARAC, to the
greatest extent reasonably feasible, consistent with this Agreement, the
economic and operational benefits of the allocation of assets provided for in
this Agreement. In case at any time after the Separation Date any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each party to this Agreement shall take all
such necessary or desirable action, provided that any financial cost shall be
borne by the party receiving the benefit of the action.
Section 2.5 Conveyancing and Stock Assumption Instruments. In
connection with the asset and stock transfers and the assumptions of Liabilities
contemplated by this Agreement, the parties shall execute, or cause to be
executed by the appropriate entities, conveyancing and assumption instruments,
including appropriate releases and novations, in such forms as the parties shall
reasonably agree, including deeds as may be appropriate, the assignment of
trademarks and franchise rights, and the assignment and assumption of existing
lease agreements. Any transfer of capital stock shall be effected by means of
delivery of stock certificates and executed stock powers and notation on the
stock record books of the corporations, or other legal entities involved and, to
the extent required by applicable law, by notation on public registries.
ARTICLE III
THE SEPARATION
Section 3.1 Cooperation Prior to the Separation.
(a) Holdings and ARAC have prepared the Form S-1 which sets
forth disclosure concerning ARAC, the Separation and other matters. Holdings
and ARAC shall each use
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reasonable efforts to cause the Form S-1 to become effective under the
Securities Act.
(b) Holdings and ARAC shall cooperate in preparing, filing
with the Commission and causing to become effective any registration statements
or amendments thereto that are appropriate to reflect the establishment of or
amendments to any employee benefit and other plans contemplated by the Employee
Benefits Agreement.
(c) Holdings and ARAC shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of the states or
other political subdivisions of the United States in connection with the
transactions contemplated by this Agreement.
(d) ARAC has prepared and filed a preliminary listing
application with and will pursue the approval of the application to permit
listing of the ARAC Common Stock on, the New York Stock Exchange.
Section 3.2 Conduct of Car Rental Business
Pending Separation.
(a) Prior to the Separation Date, the Car Rental Business
shall be operated by Holdings and ARAC and its subsidiaries for the sole benefit
of Holdings and its stockholder.
(b) Prior to the Separation Date, ARAC shall have no
operations or conduct any business except as a holding company for Rent A Car
and Reserve Claims Management Co. and in preparation for the consummation of the
transactions contemplated by this Agreement.
Section 3.3 Holdings Board Action; Conditions Precedent to the
Separation. Holdings' Board of Directors shall, in its discretion, establish any
appropriate procedures in connection with the Separation. In no event shall the
Separation occur unless the following conditions shall, unless waived by
Holdings in its sole discretion, have been satisfied:
(a) all necessary regulatory approvals and consents of third
parties shall have been received;
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(b) the Form S-1 shall have been declared effective under the
Securities Act;
(c) the Fleet Financing Program and the New Credit Facilities
shall be available;
(d) ARAC's Board of Directors, as named in the Form S-1 shall
have been elected by Holdings, as sole stockholder of ARAC, and the
ARAC Certificate and ARAC Bylaws shall be in effect;
(e) the ARAC Common Stock shall have been approved for listing
on the New York Stock Exchange, subject to official notice of issuance;
(f) Holdings' Board of Directors shall have formally approved
the Separation and shall not have abandoned, deferred or modified the
Separation at any time prior to the Separation Date;
(g) the transactions contemplated by Sections 2.1 and 2.2 and
Article V shall have been consummated in all material respects and each
of the Ancillary Agreements, in form and substance satisfactory to
Holdings, shall have been executed by the parties thereto and each of
the transactions contemplated by the Ancillary Agreements to be
consummated on or prior to the Separation Date shall have been
consummated;
(h) no preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
government, regulatory or administrative agency or commission, and no
statute, rule, regulation or executive order promulgated or enacted by
any governmental authority, shall be in effect preventing the
consummation of the Separation; and
(i) Holdings shall have been released from any liabilities,
Guarantees or other obligations with respect to any indebtedness or
otherwise of ARAC or its Subsidiaries;
provided, that the satisfaction of such conditions shall not create any
obligation on the part of Holdings to effect the Separation or in any way limit
Holdings' power of
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termination set forth in Section 7.1 or alter the consequences of any such
termination from those specified in such Section.
ARTICLE IV
INDEMNIFICATION
Section 4.1 ARAC Indemnification of Holdings. Except as
otherwise expressly provided in any of the Ancillary Agreements, from and after
the Separation Date, ARAC and its subsidiaries (the "ARAC Indemnitors") shall
jointly and severally indemnify, defend and hold harmless HFS, Holdings and
their respective subsidiaries, and each of their respective directors, officers,
employees, agents and Affiliates and each of the heirs, executors, successors
and assigns of any of the foregoing (the "Holdings Indemnitees") from and
against any and all damage, loss, liability and expense (including, without
limitation, reasonable expenses of investigation and reasonable attorneys' fees
and expenses in connection with any or all such investigations or any and all
Actions or threatened Actions) (collectively, "Losses") incurred or suffered by
any of the Holdings Indemnitees and arising out of or related to the ARAC
Liabilities. Losses shall include but not be limited to: (i) all amounts
required to be reimbursed to an insurer for insurance proceeds previously paid
by such insurer as a result of a Loss; (ii) all deductible amounts required to
be paid under any insurance policy before coverage attaches for a Loss; (iii)
all amounts paid to third parties in excess of insurance coverage; (iv) all
other amounts not paid by insurers in connection with Losses; and (v) the cost
of any action against insurers to obtain insurance coverage. Notwithstanding the
foregoing, Losses shall not include expenditures made prior to the Separation.
Section 4.2 Holdings Indemnification of ARAC. Except as
otherwise expressly provided in any of the Ancillary Agreements, from and after
the Separation Date, Holdings and its subsidiaries (the "Holdings Indemnitors")
shall indemnify, defend and hold harmless ARAC and its subsidiaries, and each of
their respective directors, officers, employees, agents and Affiliates and each
of the heirs, executors, successors and assigns of any of the foregoing (the
"ARAC Indemnitees") from and against any and
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all Losses incurred or suffered by any of the ARAC Indemnitees and arising out
of or related to the Holdings Liabilities.
Section 4.3 Notice and Payment of Claims. If any Holdings
Indemnitee or ARAC Indemnitee (the "Indemnified Party") determines that it is
or may be entitled to indemnification by the ARAC Indemnitors or the Holdings
Indemnitors, as the case may be (the "Indemnifying Party"), under this Article
IV (other than in connection with any Action subject to Section 4.4), the
Indemnified Party shall deliver to the Indemnifying Party a written notice
specifying, to the extent reasonably practicable, the basis for its claim for
indemnification and the amount for which the Indemnified Party reasonably
believes it is entitled to be indemnified. After the Indemnifying Party shall
have been notified of the amount for which the Indemnified Party seeks
indemnification, the Indemnifying Party shall, within 30 days after receipt of
such notice, either (i) pay the Indemnified Party such amount in cash or other
immediately available funds (or reach agreement with the Indemnified Party as
to a mutually agreeable alternative payment schedule) or (ii) object to the
claim for indemnification or the amount thereof by giving the Indemnified Party
written notice setting forth the grounds therefor. Any objection shall be
resolved in accordance with Section 7.13. If the Indemnifying Party does not
give such notice within such 30-day period, the Indemnifying Party shall be
deemed to have acknowledged its liability for such claim and the Indemnified
Party may exercise any and all of its rights under applicable law to collect
such amount.
Section 4.4 Notice and Defense of Third-Party Claims.
Promptly following the earlier of (A) receipt of written notice of the
commencement by a third party of any Action against or otherwise involving any
Indemnified Party or (B) receipt of written information from a third party
alleging the existence of a claim against an Indemnified Party, in either case,
with respect to which indemnification may be sought pursuant to this Agreement
(a "Third-Party Claim"), the Indemnified Party shall give the Indemnifying
Party prompt written notice thereof. The failure of the Indemnified Party to
give notice as provided in this Section 4.4 shall not relieve the Indemnifying
Party of its obligations under this agreement, except to the extent that the
Indemnifying Party is prejudiced by
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such failure to give notice. Such notice shall describe the Third-Party Claim in
reasonable detail and shall indicate the amount of the Loss that has been or
will be sustained by the Indemnified Party.
(a) Within 30 days after receipt of such notice, the Indemnifying Party
may by giving written notice thereof to the Indemnified Party, (i) acknowledge
liability for and at its option elect to assume the defense of such Third-Party
Claim at its sole cost and expense or (ii) object to the claim of
indemnification for such Third-Party Claim setting forth the grounds therefor.
Any objection shall be resolved in accordance with Section 7.13. If the
Indemnifying Party does not within such 30-day period give the Indemnified Party
such notice, the Indemnifying Party shall be claimed to have acknowledged its
liability for such Third-Party Claim.
(b) Any defense of a Third-Party Claim as to which the Indemnifying
Party has elected to assume the defense shall be conducted by attorneys employed
by the Indemnifying Party and reasonably satisfactory to Holdings in the case of
Holdings Indemnitees and ARAC in the case of ARAC Indemnitees. The Indemnified
Party shall have the right to participate in such proceedings and to be
represented by attorneys of its own choosing at the Indemnified Party's sole
cost and expense; provided that if the defendants or parties against which
relief is sought in any such claim include both the Indemnifying Party and one
or more Indemnified Parties and, in the reasonable judgment of Holdings in the
case of Holdings Indemnitees and ARAC in the case of ARAC Indemnitees, a
conflict of interest between such Indemnified Parties and such Indemnifying
Party exists in respect of such claim, such Indemnified Parties shall have the
right to employ one firm of counsel selected by Holdings for Holdings
Indemnities or ARAC for ARAC Indemnities and in that event the reasonable fees
and expenses of such separate counsel (but not more than one separate counsel
reasonably satisfactory to the Indemnifying Party) shall be paid by such
Indemnifying Party.
(c) If the Indemnifying Party assumes the defense of a Third-Party
Claim, the Indemnifying Party may settle or compromise the claim without the
prior written consent of the Indemnified Party; provided that without the prior
written consent of Holdings in the case of Holdings
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Indemnitees and ARAC in the case of ARAC Indemnitees, the Indemnifying Party may
not agree to any such settlement unless as a condition to such settlement the
Indemnified Party receives a written release from any and all liability relating
to such Third-Party Claim and such settlement or compromise does not include any
remedy or relief to be applied to or against the Indemnified Party, other than
monetary damages for which the Indemnifying Party shall be responsible
hereunder.
(d) If the Indemnifying Party does not assume the defense of a
Third-Party Claim for which it has acknowledged liability for indemnification
under this Article IV, Holdings in the case of Holdings Indemnitees and ARAC in
the case of ARAC Indemnitees may pursue the defense of such Third-Party Claim
and choose one firm of counsel in connection therewith. The Indemnifying Party
is required to reimburse Holdings or ARAC, as the case may be, on a current
basis for its reasonable expenses of investigation, reasonable attorney's fees
and reasonable out-of-pocket expenses incurred by Holdings in the case of
Holdings Indemnitees and ARAC in the case of ARAC Indemnitees in defending
against such Third-Party Claim and the Indemnifying Party shall be bound by the
result obtained with respect thereto, provided that the Indemnifying Party shall
not be liable for any settlement effected without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld.
(e) The Indemnifying Party shall pay to the Indemnified Party in cash
the amount for which the Indemnified Party is entitled to be indemnified (if
any) no later than the later of (i) the date on which the Indemnified Party
makes any payment in satisfaction (partial or otherwise) of the Third-Party
Claim or (ii) the date on which such Indemnifying Party's objection, if any, to
its responsibility for indemnification under this Article IV has been resolved
pursuant to section 7.13 or by settlement or compromise or the final
nonappealable judgment of a court of competent jurisdiction.
Section 4.5 Insurance Proceeds. The amount that any
Indemnifying Party is or may be required to pay to any Indemnified Party
pursuant to this Article IV shall be reduced (including, without limitation,
retroactively) by any insurance proceeds or other amounts actually recovered by
or on behalf of such Indemnified Parties in reduction of
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the related Loss. If an Indemnified Party shall have received the payment
required by this Agreement from an Indemnifying Party in respect of a Loss and
shall subsequently actually receive insurance proceeds, or other amounts in
respect of such Loss as specified above, then such Indemnified Party shall pay
to such Indemnifying Party a sum equal to the amount of such insurance proceeds
or other amounts actually received after deducting therefrom all of the
Indemnifying Party's costs and expenses associated with such Loss.
Section 4.6 Contribution. If the indemnification provided for
in this Article IV is unavailable to an Indemnified Party in respect of any Loss
arising out of or related to information contained in or omitted from the Form
S-1, then the ARAC Indemnitees, in lieu of indemnifying the Holdings
Indemnitees, shall contribute to the amount paid or payable by the Holdings
Indemnitees as a result of such Loss in such proportion as is appropriate to
reflect the relative fault of ARAC, on the one hand, and Holdings, on the other
hand, in connection with the statements or omissions which resulted in such
Loss. The relative fault of the ARAC Indemnitees on the one hand and of the
Holdings Indemnitees on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information concerning ARAC on the one hand or Holdings on the other hand.
Section 4.7 Subrogation. In the event of payment by an
Indemnifying Party to any Indemnified Party in connection with any Third-Party
Claim, such Indemnifying Party shall be subrogated to and shall stand in the
first place of such Indemnified Party as to any events or circumstances in
respect of which such Indemnified Party may have any right or claim relating to
such Third-Party Claim. Such Indemnified Party shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
Section 4.8 No Third-Party Beneficiaries. This Article IV
shall inure to the benefit of, and be enforceable by Holdings, the Holdings
Indemnitees, ARAC and the ARAC Indemnitees and their respective successors and
permitted assigns. The indemnification provided for by
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this Article IV shall not inure to the benefit of any other third party or
parties and shall not relieve any insurer who would otherwise be obligated to
pay any claim of the responsibility with respect thereto or, solely by virtue of
the indemnification provisions hereof, provide any subrogation rights with
respect thereto and each party agrees to waive such rights against the other to
the fullest extent permitted.
Section 4.9 Remedies Cumulative. The remedies provided in this
Article IV shall be cumulative and shall not preclude assertion by any
Indemnified Party of any other rights or the seeking of any and all other
remedies against an Indemnifying Party. The procedures set forth in this Article
IV, however, shall be the exclusive procedures governing any indemnity action
brought under this Article IV or otherwise relating to Losses.
Section 4.10 Survival of Indemnities. The obligations of each
of Holdings and ARAC under this Article IV shall survive the sale or other
transfer by it of any assets or businesses or the assignment by it of any
Liabilities, with respect to any Loss of the other related to such assets,
businesses or Liabilities.
Section 4.11 After-Tax Indemnification Payments. Except as
otherwise expressly provided herein or in an Ancillary Agreement,
indemnification payments made by either party under this Article shall give
effect to, and be reduced by the value of, any and all applicable deductions,
losses, credits, offsets or other items for Federal, state or other tax purposes
attributable to the payment of the indemnified liability by the Indemnified
Party.
ARTICLE V
CERTAIN ADDITIONAL MATTERS
Section 5.1 Intercompany Payables/Receivables. All
intercompany amounts payable or receivable by Holdings or ARAC shall be settled
on or before the Separation Date, other than amounts payable or receivable
pursuant to the Ancillary Agreements.
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Section 5.2 Ancillary Agreements. On the date hereof,
Holdings and ARAC shall execute and deliver the Ancillary Agreements.
Section 5.3 ARAC Officers and Board of Directors. On or prior
to the Separation Date, Holdings shall take and shall cause ARAC to take all
actions necessary to appoint as officers and directors of ARAC those persons
named in the Form S-1 to constitute the officers and directors of ARAC on the
Separation Date.
Section 5.4 ARAC Certificate of Incorporation and By-laws.
Prior to the Separation Date, Holdings shall take all action necessary to cause
the certificate of incorporation and by-laws of ARAC to be amended and restated
substantially in the form attached to the Form S-1 as exhibits thereto.
Section 5.5 Credit Facilities. (a) Prior to the Separation
Date, Holdings and ARAC shall take all necessary action to replace the existing
credit facilities and fleet financing arrangements so as to release Holdings
from any liability or obligation with respect thereto from and after the
Separation Date.
(b) Prior to the Separation Date, Holdings and ARAC shall take
all necessary action to obtain the Fleet Financing Program and the New Credit
Facilities.
(c) Prior to the Separation Date, ARAC and its subsidiaries
shall take all necessary action to release Holdings from any liabilities,
Guarantees, or other obligations with respect to indebtedness or other
obligations of ARAC or its subsidiaries, other than the obligations under the
Ancillary Agreements.
Section 5.6 Insurance Policies and Claims
Administration.
(a) Maintenance of Insurance Coverage Prior to Separation
Date. Holdings and ARAC shall use reasonable efforts to maintain in full force
and effect at all times up to and including the Separation Date its current
property and casualty insurance programs, including, without limitation, primary
and excess general liability, automobile, workers' compensation, property and
crime insurance policies (collectively, the "Policies" and
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individually, a "Policy"). Holdings and its subsidiaries shall retain with
respect to any Covered Claims as set forth on Schedule 5.6(a) relating to
periods prior to the Separation Date all of their respective rights, benefits
and privileges, if any, under such Policies. To the extent not already provided
for by the terms of a Policy, Holdings shall use reasonable efforts to cause
ARAC and its subsidiaries, as appropriate, to be named as additional insureds
under such Policy in respect of Covered Claims arising or relating to periods
prior to the Separation Date; provided, however, that nothing contain herein
shall be construed to require Holdings or any of its subsidiaries to pay any
additional premium or other charges in respect to, or waive or otherwise limit
any of its rights, benefits or privileges under, any such Policy to effect the
naming of ARAC and its subsidiaries as such additional insureds.
(b) ARAC Responsible for Establishing Insurance Coverage On
and After Separation Date. Commencing on and as of the Separation Date, ARAC and
each of its subsidiaries shall be responsible for establishing and maintaining
its own separate insurance programs (including, without limitation, primary and
excess general liability, automobile, workers, compensation, property, director
and officer liability, fire, crime, surety and other similar insurance policies)
for activities and claims relating to any period on or after the Separation Date
involving ARAC or any of its subsidiaries. Notwithstanding any other agreement
or understanding to the contrary, except as set forth in Section 5.6(c) with
respect to claims administration and financial administration of the Policies,
neither Holdings nor any of its subsidiaries shall have any responsibility for
or obligation to ARAC or its subsidiaries relating to liability and casualty
insurance matters for any period, whether prior to, at or after the Separation
Date.
(c) Administration and Procedure. (i) ARAC or a subsidiary of
ARAC, as appropriate, shall be responsible for the claims administration and
financial administration of all Policies for Covered Claims relating to the
assets, ownership or operation prior to the Separation Date of the Car Rental
Business; provided, however, that such retention by ARAC of the Policies and the
responsibility for claims administration and financial administration of the
Policies are in no way intended to limit, inhibit or preclude any right to
insurance coverage for any Covered Claims under
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<PAGE>
the Policies by Holdings. ARAC or a subsidiary thereof, as appropriate, shall be
responsible for all administrative and financial matters relating to insurance
policies established and maintained by ARAC and its subsidiaries for claims
relating to any period on or after the Separation Date involving ARAC or any of
its subsidiaries.
(ii) ARAC shall notify Holdings of any Covered Claim relating to ARAC or a
subsidiary thereof under one or more of the Policies relating to a period prior
to the Separation Date, and ARAC agrees to cooperate and coordinate with
Holdings concerning any strategy Holdings may reasonably elect to pursue to
secure coverage and payment for such Covered Claim by the appropriate insurance
carrier. Notwithstanding anything contained herein, in any other agreement or
applicable Policy or any understanding to the contrary, ARAC or an appropriate
subsidiary thereof assumes responsibility for, and shall pay to the appropriate
insurance carriers or otherwise, any premiums, retrospectively-rated premiums,
defense costs, indemnity payments, deductibles, retentions or other charges, as
appropriate (collectively, "Insurance Charges"), whenever arising, which shall
become due and payable under the terms and conditions of any applicable Policy
in respect of any liabilities, losses, claims, actions or occurrences, whenever
arising or becoming known, involving or relating to any of the assets,
businesses, operations or liabilities of ARAC or any of its subsidiaries, to the
extent set forth in Section 5.6(a) and any such charges that relate to the
period after the Separation Date. To the extent that the terms of any applicable
Policy provide that Holdings or a subsidiary thereof, as appropriate, shall have
an obligation to pay or guarantee the payment of any Insurance Charges, Holdings
or such subsidiary shall be entitled to demand that ARAC or a subsidiary thereof
make such payment directly to the person or entity entitled thereto. In
connection with any such demand, Holdings shall submit to ARAC or a subsidiary
thereof a copy of any invoice received by Holdings or a subsidiary pertaining to
such Insurance Charges, together with appropriate supporting documentation, if
available. In the event that ARAC or its subsidiary fails to pay any Insurance
Charges when due and payable, whether at the request of the party entitled to
payment or upon demand by Holdings or a subsidiary of Holdings, Holdings or a
subsidiary of Holdings may (but
21
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shall not be required to) pay such Insurance Charges for and on behalf of ARAC
or its subsidiary and, thereafter, ARAC or its subsidiary shall forthwith
reimburse Holdings or such subsidiary of Holdings for such payment.
ARTICLE VI
ACCESS TO INFORMATION
Section 6.1 Provision of Corporate Records. Each of Holdings
and ARAC shall arrange as soon as practicable following the Separation Date for
the provision to the other of existing corporate governance documents (e.g.
minute books, stock registers, stock certificates, documents of title, etc.) in
its possession relating to the other or to its business and affairs.
Section 6.2 Access to Information. From and after the
Separation Date, each of Holdings and ARAC shall afford the other, including its
accountants, counsel and other designated representatives, reasonable access
(including using reasonable efforts to give access to persons or firms
possessing information) and duplicating rights during normal business hours to
all records, books, contracts, instruments, computer data and other data and
information in such party's possession relating to the business and affairs of
the other (other than data and information subject to an attorney/client or
other privilege), insofar as such access is reasonably required by the other
party including, without limitation, for audit, accounting and litigation
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations.
Section 6.3 Litigation Cooperation. Each of Holdings and ARAC
shall use reasonable efforts to make available to the other, upon written
request, its officers, directors, employees and agents as witnesses to the
extent that such persons may reasonably be required in connection with any
legal, administrative or other proceedings arising out of the business of the
other prior to the Separation Date in which the requesting party may from time
to time be involved.
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Section 6.4 Reimbursement. Each party providing witnesses
under Section 6.3 to the other shall be entitled to receive from the recipient,
upon the presentation of invoices therefor, payment for all out-of-pocket costs
and expenses as may be reasonably incurred in providing such witnesses.
Section 6.5 Retention of Records. Except as otherwise required
by law or agreed to in writing, each party shall, and shall cause each of its
respective subsidiaries to, retain all information relating to the other party's
business in accordance with the past practice of such party. Notwithstanding the
foregoing, except as provided in the Tax Disaffiliation Agreement, any party may
destroy or otherwise dispose of any information at any time, providing that,
prior to such destruction or disposal, (a) such party shall provide no less than
30 days prior written notice to the other party, specifying the information
proposed to be destroyed or disposed of and (b) if the recipient of such notice
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the information as
was requested at the expense of the requesting party.
Section 6.6 Confidentiality. Each party shall hold and shall
cause its directors, officers, employees, agents, consultants and advisors to
hold, in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law, all information (other than any such information relating solely to the
business or affairs of such party) concerning the other party (except to the
extent that such information can be shown to have been (a) in the public domain
through no fault of such party, (b) later lawfully acquired on a
non-confidential basis from other sources by the party to which it was
furnished, (c) information that typically would have been disclosed by Holdings
or ARAC, as the case may be, in the ordinary course of business consistent with
past practice or (d) information that may be disclosed pursuant to any Ancillary
Agreement). Neither party shall release or disclose any such information to any
other person, except
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its auditors, attorneys, financial advisors, bankers and other consultants and
advisors who shall be advised of and agree to comply with the provisions of this
Section 6.6; provided, that with respect to the matters identified on Schedule
6.6 hereof, no information may be disclosed by either party under any
circumstance without the prior written consent of the other party hereto.
Section 6.7 Mail. After the Separation Date, each of Holdings
and ARAC may receive mail, telegrams, packages and other communications property
belonging to the other. Accordingly, at all times after the Separation Date,
each of Holdings and ARAC authorizes the other to receive and open all mail,
telegrams, packages and other communications received by it and not
unambiguously intended for the other party or any of the other party's officers
or directors specifically in their capacities as such, and to retain the same to
the extent that they relate to the business of the receiving party or, to the
extent that they do not relate to the business of the receiving party and do
relate to the business of the other party, or to the extent that they relate to
both businesses, the receiving party shall promptly contact the other party by
telephone for delivery instructions and such mail, telegrams, packages or other
communications (or, in case the same relate to both businesses, copies thereof)
shall promptly be forwarded to the other party in accordance with its delivery
instructions. The foregoing provisions of this Section 6.7 shall constitute full
authorization to the postal authorities, all telegraph and courier companies and
all other persons to make deliveries to Holdings or ARAC, as the case may be,
addressed to either of them or to any of their officers or directors
specifically in their capacities as such. The provisions of this Section 6.7 are
not intended to and shall not be deemed to constitute an authorization by either
Holdings or ARAC to permit the other to accept service of process on its behalf,
and neither party is or shall be deemed to be the agent of the other for service
of process purposes or for any other purpose.
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ARTICLE VII
MISCELLANEOUS
Section 7.1 Termination. This Agreement may be terminated and
the Separation deferred, modified or abandoned at any time prior to the
Separation Date by and in the sole discretion of the Board of Directors of
Holdings without the approval of ARAC. In the event of such termination, no
party shall have any liability to any other party pursuant to this Agreement.
Section 7.2 Expenses. Except as specifically provided in this
Agreement or in an Ancillary Agreement, all costs and expenses incurred in
connection with the interpretation, execution, delivery and implementation of
this Agreement and with the consummation of the transactions contemplated by
this Agreement shall be paid by the party incurring the expense. The
determination of who has incurred an expense shall be made by the Chief
Financial Officer of Holdings or HFS, which determination shall be binding and
final upon each of the parties hereto and not subject to further review. In
addition, it is understood and agreed that ARAC shall pay the legal, filing,
accounting, printing and other out-of-pocket expenditures in connection with (i)
the preparation, printing and filing of the Form S-1, (ii) obtaining the Fleet
Financing Program and (iii) obtaining the New Credit Facilities.
Section 7.3 Notices. All notices and communications under this
Agreement shall be in writing and any communication or delivery hereunder shall
be deemed to have been duly given when received addressed as follows:
If to Holdings, to:
HFS Car Rental, Inc.
c/o HFS Incorporated
6 Sylvan Way
Parsippany, NJ 07054
Attn: General Counsel
Telecopy Number: (973) 428-6057
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If to ARAC, to:
Avis Rent A Car, Inc.
900 Old Country Road
Garden City, NY 11530
Attn: General Counsel
Telecopy Number: (516) 222-3751
Any party may, by written notice so delivered to the other parties, change the
address to which delivery of any notice shall thereafter be made.
Section 7.4 Amendment and Waiver. This Agreement may not be
altered or amended, nor may rights hereunder be waived, except by an instrument
in writing executed by the party or parties to be charged with such amendment or
waiver. No waiver of any terms, provision or condition of or failure to exercise
or delay in exercising any rights or remedies under this Agreement, in any one
or more instances shall be deemed to be, or construed as, a further or
continuing waiver of any such term, provision, condition, right or remedy or as
a waiver of any other term, provision or condition of this Agreement.
Section 7.5 Counterparts. This Agreement may be executed in
one or more counterparts each of which shall be deemed an original instrument,
but all of which together shall constitute but one and the same Agreement.
Section 7.6 Governing Law; Jurisdiction; Forum. This Agreement
shall be construed in accordance with, and governed by, the laws of the State of
New York, without regard to the conflicts of law rules of such state. Each party
hereto expressly submits and consents in advance to the non-exclusive
jurisdiction of the State and Federal courts sitting in the City of New York,
Borough of Manhattan, State of New York, in any action to enforce an arbitration
agreement or award, or action seeking a pre-arbitral injunction, pre-arbitral
attachment or other order in aid of arbitration, and hereby waives any claim
that any such state or federal court is an inconvenient or improper forum.
Section 7.7 Entire Agreement. This Agreement including the
schedules hereto, together with the Ancillary Agreements, constitute the entire
understanding of the parties hereto with respect to the subject matter hereof,
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superseding all negotiations, prior discussions and prior agreements and
understandings relating to such subject matter. To the extent that the
provisions of this Agreement are inconsistent with the provisions of any
Ancillary Agreements, the provisions of such Ancillary Agreement shall prevail.
Section 7.8 Parties in Interest. Neither of the parties hereto
may assign its rights or delegate any of its duties under this Agreement without
the prior written consent of each other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. Nothing contained in this Agreement, express
or implied, is intended to confer any benefits, rights or remedies upon any
person or entity other than Holdings and ARAC, and Holdings Indemnitees and ARAC
Indemnitees under Article IV hereof.
Section 7.9 Tax Disaffiliation Agreement. Notwithstanding any
other provision of this Agreement to the contrary, any and all matters relating
to Taxes shall be exclusively governed by the Tax Disaffiliation Agreement.
Section 7.10 Further Assurances and Consents. In addition to
the actions specifically provided for elsewhere in this Agreement, each of the
parties hereto will use its reasonable efforts to (i) execute and deliver such
further instruments and documents and take such other actions as any other party
may reasonably request in order to effectuate the purposes of this Agreement and
to carry out the terms hereof and (ii) take, or cause to be taken, all actions,
and to do, or cause to be done, all things, reasonably necessary, proper or
advisable under applicable laws, regulations and agreements or otherwise to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, using its reasonable efforts to obtain any
consents and approvals and to make any filings and applications necessary or
desirable in order to consummate the transactions contemplated by this
Agreement; provided that no party hereto shall be obligated to pay any
consideration therefor (except for filing fees and other similar charges) to any
third party from whom such consents, approvals and amendments are
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requested or to take any action or omit to take any action if the taking of or
the omission to take such action would be unreasonably burdensome to the party
or its business.
Section 7.11 Exhibits and Schedules. The Exhibits and
Schedules shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
Section 7.12 Legal Enforceability. Any provision of this
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. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without prejudice
to any rights or remedies otherwise available to any party hereto, each party
hereto acknowledges that damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
Section 7.13 Dispute Resolution. (a) Resolution of any and all
disputes arising out of or relating to this Agreement or any of the Ancillary
Agreements, whether based on contract, tort, statute or otherwise, including,
but not limited to, disputes over arbitrability (collectively, "Disputes") shall
be exclusively governed by and settled in accordance with the provisions of this
Section 7.13; provided, however, that nothing contained herein shall preclude
either party from seeking or obtaining (a) injunctive relief or (b) equitable or
other judicial relief to enforce the provisions hereof or to preserve the status
quo pending resolution of Disputes hereunder.
(b) Holdings or ARAC (each a "Party") may commence proceedings
hereunder by delivering a written notice to the other Party providing a
reasonable description of the Dispute to the other (the "Demand").
(c) Within 10 days following receipt by a Party of a Demand,
the Dispute shall be referred to representatives of the parties for resolution,
each party being represented by a senior executive officer who has no direct
operational responsibility for the matters
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contemplated by this Agreement (the "Representatives"). The Representatives
shall promptly meet in a good faith effort to resolve the Dispute. If the
Representatives do not agree upon a resolution within thirty (30) calendar days
after receipt by a Party of a Demand, each of Holdings and ARAC shall be free to
exercise the remedies available to them under Section 7.13(d).
(d) The Parties hereby agree to submit all Disputes not
resolved by negotiation pursuant to Section 7.13(c) for resolution by
arbitration under the terms hereof, which arbitration shall be final, conclusive
and binding upon the parties, their successors and assigns. Except as expressly
provided otherwise in this Agreement, the arbitration shall be conducted in New
York, New York by three arbitrators (the "Panel") in accordance with the
JAMS/Endispute Comprehensive Arbitration Rules and Procedures then in effect as
amended herein. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. ss. 1, et seq. Notwithstanding the foregoing (a) each
Party shall have the right to examine the books and records of the other Party
that are reasonably related to the Dispute; (b) each Party shall provide to the
other, reasonably in advance of any hearing, copies of all documents which a
Party intends to present in such hearing; (c) each party shall be allowed to
conduct reasonable discovery through written requests for information, document
requests, requests for stipulation of fact, and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties and the desirability of making discovery expeditious
and cost effective. The Panel shall complete all hearings not later than ninety
(90) days after its appointment. The award shall be in writing and shall specify
the facts and law on which it is based. The arbitrators shall not be empowered
to award to any party any consequential damages, lost profits or punitive
damages in connection with any Dispute and each party hereby irrevocably waives
any right to recover such damages. Judgment upon any award may be entered in any
court having jurisdiction thereof.
Section 7.14 Titles and Headings. Titles and headings to
sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the day and year first above written.
HFS CAR RENTAL, INC.
By: /s/ James E. Buckman
---------------------------
Name:
Title:
AVIS RENT A CAR, INC.
By: /s/ Kevin M. Sheehan
---------------------------
Name:
Title:
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Schedule 1
AVIS RENT A CAR, INC.
SUBSIDIARIES
Avis Rent A Car, Inc. f/k/a Delaware
Rental Car System Holdings, Inc.
Subsidiaries (100% owned):
Avis Rent A Car System, Inc. Delaware
Subsidiaries (100% owned):
1. Avis International, Ltd. Delaware
Subsidiaries (100% owned):
( a ) Avis Management Pty. Limited Australia
Subsidiary (100% owned):
-We Try Harder Pty. Limited Australia
-Chaconne Pty. Limited Australia
-W.T.H. Pty. Limited Australia
Subsidiaries:
-Auto Accident Consultants Pty. Australia
Limited (100% owned)
-W.T.H. Fleet Leasing Pty. Limited Australia
(ownership shared with parent)
-Avis Services Pty. Ltd. Australia
(100% owned)
( b ) Avis Management Services, Limited Delaware
<PAGE>
( c ) Arbitra S.A. Argentina
( d ) Avis Caribbean, Limited Delaware
Subsidiaries (100% owned):
-Avis Rent A Car de Puerto Rico, Inc. Puerto Rico
-Virgin Islands Enterprises, Inc. Virgin Islands
( e ) Avis Asia and Pacific, Limited Delaware
Subsidiary (100% owned)
-Avis Rent A Car Limited New Zealand
subsidiary (100% owned)
- Altra Auto Rental Limited New Zealand
( f ) WTH Canada, Inc. Canada
Subsidiary (100% owned):
-Aviscar Inc. Canada
subsidiary ( 100% owned)
- Avis Services Canada, Inc. Canada
( g ) Avis Rent A Car (Hong Kong) Ltd. Hong Kong
Subsidiaries (less than 100% owned):
National Car Rentals (Private) Limited
(29% owned)* Singapore
Sistem Sewa Kereta Malaysia Sdn. Bhd.
(25% owned)* Malaysia
-----------
*By agreement with Avis Europe Limited ("AEL"), shares in these
companies will be transferred to AEL as soon as the other shareholders
consent to such transfer.
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Avis International, Ltd.
Subsidiaries (less than 100% owned):
West Indies Car Rental Limited (49% owned) Jamaica
2. Avis Enterprises, Inc. f/k/a Avis Leasing Corporation Delaware
Subsidiaries (100% owned)
( a ) Avis Service, Inc. Delaware
( b ) Avis Lube, Inc. Delaware
3. Pathfinder Insurance Company Colorado
4. PF Claims Management, Ltd. Delaware
5. Avis Leasing Corporation Delaware
6. Zam, Inc. West Virginia
7. Global Excess & Reinsurance Ltd. Bermuda
8. Constellation Reinsurance Company Limited Barbados
9. We Try Harder Japan Co., Ltd. Japan
10. Servicios Avis S.A. Mexico
11. Avis Rent A Car Limited Fiji
12. Avis Rent A Car Sdn. Bhd. Malaysia
13. Avis Rent A Car Sdn. Bhd. Singapore
14. Avis Rent A Car Limited Vanuatu
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Avis Rent A Car, Inc. f/k/a
Rental Car System Holdings, Inc.
Subsidiaries (less than 100% owned):
Reserve Claims Management Co. f/k/a Avis Leasing Delaware
International, Ltd.
34
<PAGE>
JOINT VENTURES
Sistem Sewa Kereta Malaysia Sdn. Bhd.
40 Jalan Sultan Ismail
50250 Kuala Lumpur
Malaysia
Capitalization: Authorized: 5,000,000
Issued: 2,000,000
Shareholders: Avis Rent A Car (Hong Kong) Ltd. 25%
Melewar Leisure Sdn. Bhd. 75%
West Indies Car Rental Ltd.
3 Oxford Road
Kingston 3
Jamaica, West Indies
Capitalization Authorized: 100,000 shares> at $0.10
Issued: 100,000 shares> Jamaican
Shareholders: Hilsons Limited: 50,000
Avis International, Ltd. 49,000
Peter George Mais, Esq. 1,000
National Car Rentals (Private) Limited
325 Telok Blangah Road
Singapore 0409
Capitalization Authorized: 900,000 ordinary shares at $1.00
Issued: 810,000
Shareholders: Avis Rent A Car (Hong Kong) Ltd. 234,000
Goodwood Hotels Corporation (Pte) Ltd. 180,000
Herbie Lim Pte. Ltd. 63,000
Straits Steamship Co. Ltd. 333,000
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Schedule 2
TERRITORIES OF OTHER SYSTEM LICENSEES
AVIS RENT A CAR SYSTEM, INC.
FRANCHISED LICENSEE LOCATIONS
REVISED 7/1/97
"1955" Type Franchise Agreements 292
"1992" Type Franchise Agreements 17
Letter Agreements (1955) Type 3
Agency Agreements (1955) Type 1
"1955" Type Truck Franchise Agreements 134
CITY-STATE DATE TYPE
1 Birmingham, AL Sep-59 B
Anniston, AL Nov-69 C
Tuscaloosa, AL Mar-66 B
Columbus, GA Aug-83 C
2 Dothan, AL May-74 C
3 Huntsville, AL Apr-56 B
Decatur, AL Feb-64 B
Florence, AL Apr-87 C
4 Mobile, AL May-63 C
Point Clear, AL Aug-69 C
5 Montgomery, AL Oct-51 B
Columbia, SC Oct-59 B
Camden, SC Sep-61 B
Sumter/Selma, AL Oct-73 C
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Greenville, AL Feb-79 C
Macon, GA May-96 New Agreement
Greenwood, SC May-96 New Agreement
6 Little Rock, AR Sep-52 B
El Dorado, AR May-68 B
Fayetteville, AR Oct-70 C
Fort Smith, AR Sep-64 B
Harrison, AR Jun-75 C
Hot Springs, AR Jan-62 B
Jonesboro, AR Dec-61 C
Pine Bluff, AR Dec-55 B
Stuttgart, AR Nov-56 C
Texarkana, AR May-72 C
Savannah, GA Jan-87 B
Midland, TX Dec-90 B
Abilene, TX Dec-90 B
San Angelo, TX Dec-90 C
Clovis, NM Dec-90 C
Albany, GA Apr-94 B
7 Los Angeles, CA Jan-53 C
Arcadia, CA Oct-79 C
Alhambra, CA Oct-79 C
Azusa, CA Oct-79 C
Bakersfield, CA Oct-78 B
Beverly Hills, CA May-56 C
Bishop, CA Aug-76 C
37
<PAGE>
Burbank, CA Jan-56 C
Coronado, CA May-56 C
Culver City, CA Jun-61 C
Disneyland, CA Aug-61 C
Glendale, CA May-56 C
Glendora, CA Oct-79 C
Imperial, CA Jul-80 C
Lancaster, CA Jan-56 C
Lennox, CA Dec-77 C
Long Beach, CA Jan-56 C
Marina Del Rey, CA Feb-78 C
Monrovia, CA Oct-79 C
Montebello, CA Oct-79 C
Monterey Parks, CA Oct-79 C
Oceanside, CA Sep-78 B
Oxnard, CA Jul-60 C
Palm Desert, CA Jul-74 C
Palm Springs, CA May-56 C
Pasedena, CA Jan-56 C
Pico Rivera, CA Oct-79 C
Ridgecrest, CA Sep-72 B%
San Diego, Ca Jan-56 C
Santa Barbara, CA Jan-56 C
Santa Monica, CA Jan-56 C
South Gate, CA Jun-61 C
Thousand Oaks, CA Jan-75 C
38
<PAGE>
Van Nuys, CA Nov-67 C
Ventura, CA Mar-61 C
Vernon, CA Jun-61 C
Victorville, CA Sep-72 B
West Covina, CA Oct-79 C
Whittier, CA Oct-79 C
Yuma, AZ Jul-80 B
Las Vegas, NV Jan-56 B
Barstow, CA Nov-87 B
8 McKinleyville, CA Jul-93 C
9 St. Simons Island, GA May-61 C
Brunswick, GA May-61 C
10 Valdosta, GA Nov-77 C
11 Galesburg, IL Mar-82 C
12 Evansville, IN Sep-54 B
13 Valparaiso, IN Feb-71 B
14 Burlington, IA Dec-73 C
15 Cedar Rapids, IA Nov-60 C
16 Davenport, IA May-68 C
Dubuque, IA Jan-75 C
Waterloo, IA May-78 C
Peoria, IL Jan-87 B
Bloomington, IL Jan-87 C
Champaign, IL Jan-87 B
Decatur, IL Jan-87 B
Pekin, IL Jan-87 C
39
<PAGE>
Springfield, IL Jan-87 B
Danville, IL Jan-87 B
17 Dex Moines, IA Jan-63 C
18 Sioux City, IA May-90 C
19 North Platte, NE Apr-89 C
20 Salina, KS Dec-94 C
Hays, KS Dec-96 C
Great Bend, KS Feb-96 C
Independence, KS Dec-95 New Agreement
Topeka, KS Dec-95 New Agreement
McPherson, KS Dec-95 New Agreement
21 Garden City, KS Aug-85 C
Liberal, KS Feb-84 C
22 Lexington, KY Sep-56 B
Frankfort, KY Dec-61 B
23 Alexandria, LA Jan-78 C
Gulfport, MS Feb-84 C
24 Shreveport, LA Aug-54 B
Monroe, LA Jun-57 B
25 Presque Isle, ME Jun-73 C
26 Alpena, MI Aug-71 C
Salt Ste. Marie, MI Jun-74 B
27 Hancock, MI Apr-56 C
28 Iron Mountain, MI Jun-60 C
29 Kalamazoo, MI Feb-72 C
Benton, MI Aug-76 C
40
<PAGE>
Traverse City, MI Jun-73 C
30 Pellston, MI Aug-89 C
Charlevoix, MI Jun-91 C
Gaylord, MI Aug-91 C
31 Duluth, MN Jan-65 B
Rhinelander, WI May-85 C
International Falls, MN Apr-95 New Agreement
Bemidji, MN Apr-95 New Agreement
Hibbing, MN Apr-95 New Agreement
Eveleth, MN Apr-95 New Agreement
Marquette, MI Jun-96 New Agreement
Brainerd, MN Jun-96 New Agreement
32 Rochester, MN Dec-60 B
Stevens Point, WI Aug-81 C
Eau Claire, WI Aug-81 C
Land O'Lakes, WI Aug-81 C
Marshfield, WI Aug-81 C
Wausau, WI Aug-81 C
33 Springfield, MO Mar-70 C
Branson, MO Apr-78 C
Joplin, MO May-84 C
34 Butte, MT Jan-87 C
Helena, MT Jan-90 C
Glacier Park, MT May-94 C
Great Falls, MT May-94 C
35 Glendive, MT Jul-87 C
41
<PAGE>
Sidney, MT Jul-87 C
36 Missoula, MT Sep-89 C
Kalispell, MT Sep-89 C
Billings, MT Feb-95 C
37 McCook, NE Aug-72 C
38 Manchester, NH Jun-75 C
Hampton, NH Apr-78 C
Nashua, NH Jun-75 C
Salem, NH Jun-76 C
Brattleboro, VT Jul-76 C
Merrimack, NH May-82 Letter Agreement
Laconia, NH Oct-82 Letter Agreement
Keene, NH Dec-89 C
39 Matawan, NJ Nov-64 B
Freehold, NJ Oct-60 B
Lakewood, NJ Oct-60 B
Point Pleasant, NJ Oct-60 B
Port Monmouth, NJ Nov-64 B
Sayreville, NJ Dec-62 B
Toms River, NJ Oct-60 B
Red Bank, NJ Jun-91 B
Eatontown, NJ May-93 New Agreement
Wall, NJ Apr-95 New Agreement
40 Piscataway (Plain), NJ Jun-57 B
Cranford, NJ Feb-58 B
Dover, NJ Dec-61 B
42
<PAGE>
East Orange, NJ Aug-74 (Truck) T
Flemington, NJ Jun-62 B
Fort Lee, NJ Jun-61 T
Hackettstown, NJ Dec-61 B
Linden, NJ Aug-60 B
Madison, NJ May-65 B
Millburn, NJ Aug-74 B
Montclair, NJ Jul-61 B
Morristown, NJ Aug-60 B
New Brunswick, NJ Apr-60 B
Oakland, NJ Aug-74 (Truck) T
Troy Hills, NJ Aug-74 B
Perth Amboy, NJ Aug-60 B
Rahway, NJ Sep-60 B
Ridgefield, NJ Jul-61 B
Ridgewood, NJ Jul-61 B
Saddle Brook, NJ Aug-74 (Truck) T
Somerville, NJ Mar-58 B
Springfield, NJ Aug-74 B
Roxbury, NJ Aug-74 B
Summit, NJ May-61 B
Union, NJ Jan-60 B
Port Jervis, NJ Dec-61 B
West Orange, NJ Aug-81 C
41 Roswell, NM Feb-84 C
Santa Fe, NM Apr-65 C
43
<PAGE>
Los Alamos, NM Apr-66 C
Alamogordo, NM Apr-95 New Agreement
42 Albany, NY Dec-64 B
Schenectady, NY Dec-64 B
Troy, Watervliet, NY Dec-64 B
Rutland, VT Sep-91 C
Hanover, NH Oct-95 B
Springfield, VT Aug-96
43 Plattsburgh, NY Sep-82 C
Lake Placid, NY Sep-82 B
44 White Plains, NY Jan-61 B
Larchmont, NY Jan-61 B
Mamaroneck, NY May-76 B
Rye, Tarrytown, NY Jan-61 B
Scarsdale, NY Jan-61 B
45 Wilmington, NC Nov-71 B%
Florence, SC Sep-74 B%
Rocky Mount, NC Sep-86 B
Goldsboro, NC Sep-86 B
Greenville, NC Sep-86 C
Kinston, NC Sep-86 B
Jacksonville, NC Sep-86 C
Morehead City, NC Sep-86 B
New Bern, NC Sep-86 B
46 Bismarck, ND Oct-64 B
47 Fargo, ND Oct-71 C
44
<PAGE>
48 Grand Forks, ND Dec-88 C
49 Jamestown, ND Dec-85 C
50 Minot, ND Jan-81 C
Williston, ND Jun-81 C
Aberdeen, SD Jul-77 C
51 Cambridge, OH Jan-87 C
52 Lima, OH Dec-82 C
53 Enid, OK Jul-63 C
54 Medford, OR Dec-91 C
55 Harrisburg, PA Sep-66 B%
State College, PA Mar-94 New Agreement
Mechanicsburgh, PA Mar-94 New Agreement
Hershey, PA Mar-94 New Agreement
56 Lancaster, PA Mar-57 C
57 New Kensington, PA Apr-59 B
Monroeville, PA Apr-59 B
Oakmont, PA Feb-61 B
Vandergrift, PA Feb-61 T
Wilkensburg, PA Feb-61 B
58 Greensburg, PA Jul-88 B
Waltz Mills, PA Feb-92 Agency Agreement
59 Pierre, SD Apr-79 C
60 Rapid City, SD Feb-92 C
Sioux Falls, SD Aug-95 C
61 Kingsport, TN Apr-81 B%
Greenville, TN Oct-81 C
45
<PAGE>
62 Nashville, TN Jun-65 C
Chattanooga, TN Jun-65 C
Knoxville, TN Oct-76 C
Memphis, TN Jun-65 C
Olive Branch, MS Jul-76 C
63 Amarillo, TX Jan-78 B
Lubbock, TX Jun-75 B
64 Corpus Christi, TX Jan-56 B
Brownsville, TX Jan-56 B
Harlingen, TX Jan-56 B
McAllen, TX Jan-56 B
Rockport, TX Apr-81 C
S. Padre Island, TX May-79 C
Victoria, TX Feb-56 B
Laredo, TX Dec-92 B
65 Dallas, TX Jan-56 B
Austin, TX Apr-56 B
Fort Worth, TX Mar-56 B
San Antonio, TX Jul-57 B
66 Ogden, UT Apr-94 B
67 St. George, UT Oct-74 C
Cedar City, UT Sep-77 C
Page, AZ May-75 C
Vernal, UT Feb-82 C
Ely, NV Mar-82 Letter Agreement
Elko, NV Oct-79 C
46
<PAGE>
68 Burlington, VT Feb-63 C
69 Richmond, VA Mar-56 B
Charlottesville, VA Sep-58 B
Harrisonville, VA Jul-65 B
Lynchburg, VA Dec-61 B
Newport, VA May-57 B
Petersburg, VA Jul-65 B
Waynesboro, VA Apr-60 B
Salisbury, MD May-87 B%
Cambridge, Easton, MD May-87 C
Dover, DE May-87 B%
Seaford, DE May-87 C
70 Roanoke, VA Apr-79 B
Bluefield, WV Feb-81 C
W. Sulpher Sprs, WV Dec-81 C
Clarksburg, WV Aug-83 B
Fairmount, WV Aug-83 B
Morgantown, WV Aug-83 B
Columbus, MS Oct-86 C
Paducah, KY Aug-77 C
Greenville, MS Jan-90 C
Longview, TX Feb-90 C
Tyler, TX Feb-90 C
Killeen, TX Mar-91 C
College Station, TX Jan-91 C
Temple, TX Mar-91 C
47
<PAGE>
Waco, TX Oct-90 C
Meridan, MS Sep-91 B
71 Appleton, WI Oct-58 C
Green Bay, WI Jul-63 C
Madison, WI Jun-72 C
Wisconsin Dells, WI Apr-78 C
Menominee, MI Jan-73 C
Sturgeon Bay, WI Sep-68 C
LaCrosse, WI Mar-85 C
72 Casper, WY Jul-65 C
Laramie, WY Jul-76 C
Riverton, WY Dec-69 B
Cody, WY Mar-89 B
73 Sheridan, WY Jul-78 B
Gillette, WY Jul-78 B%
74 Anchorage, AK Apr-56 B%
Fairbanks, AK Apr-56 B%
Juneau, AK Apr-56 B%
Kodiak, AK Apr-56 B%
75 Craig, CO Sep-68 T
76 Kelso, WA Feb-69 T
48
<PAGE>
<TABLE>
ARACS LICENSEES - CAR RENTAL
<CAPTION>
Country Expiration
Caribbean Licensee Name Address Date
<S> <C> <C> <C>
Anguilla Apex Car Rental, Ltd. P.O. Box 93, The Valley, Anguilla 31 DEC 02
Antigua Gomes Enterprises, Ltd. P.O. Box 849, St. John's 31 DEC 99
Aruba ASHA, N.V. P.O. Box 254, Oranjestad 31 DEC 98
Bahamas Windsor Servicentor, Ltd. One West Bay, P.O. Box CB 13999, Nassau YTY
Bonaire Drive Yourself(Bonaire), N.V. Strocofa, Zeelandia, Curacao 31 DEC 97
Cayman Brac T&D Auto Rentals P.O. Box 400, Georgetown, Grand Cayman, 31 DEC 01
Cayman Islands
Curacao Drive Yourself (Curacao), N.V. Stracoba, Zeelandia 31 DEC 97
Dominica A.C. Shillingford & Co., Ltd. P.O. Box 123, Roseau 31 DEC 99
Dominican Rep. Servicolt C. por A. P.O. Box 176-9, Santo Domingo 31 DEC 97
French Guiana Cefber, S.A.R.L. 7, lot La Desireee, 97351, Matoury 31 DEC 00
Grand Cayman David Foster/Stephen Foster P.O. Box 400, Airport Road, Georgetown 31 DEC 01
(Partnership)
Grenada Spice Isle Rentals, Ltd. P.O. Box 82, St. George's 31 DEC 00
Guadeloupe Cie. Generade de Location, S.A.R.L. Rue F. Forest, Z.I. Jarry 31 DEC 00
Haiti Soc. Haitienne de Commerce P.O. Box 15554, Petionville 31 DEC 99
Martinique Cie.Martiniquaise de Locations, S.A.R.L. Auto GM 2I La Lezarde, 97232, Lamenting 31 DEC 00
Nevis Holiday Car Rentals, Ltd. P.O. Box 45, Basseterre, St. Kitts, W.I. 31 DEC 00
Providenciales Provo Auto Supply, Ltd. P.O. Box, Providenciales, Turks & Caicos 31 DEC 00
St. Barthelemy Robert J. Ledee P.O. Box 561, 97133 St. Jean 31 DEC 99
St. Eustatius Mercury Transport (Statia), N.V. Lampweg #1 31 DEC 00
St. John V.I. V.I. Miscellaneous Services, Inc. P.O. Box 1388, Cruz Bay, St. John, USVI 00830 31 DEC 00
St. Kitts Holiday Car Rentals, Ltd. P.O. Box 45, Basseterre 31 DEC 99
St. Lucia Sun Drive Rentals, Ltd. P.O. Box 1010, Castries 31 DEC 99
St. Maarten Mercury Transport, N.V. P.O. Box 2015, Phillipsburg 31 DEC 98
St. Vincent Systems Car Rental Paul's Ave. Kingstown, St. Vincent 31 DEC 02
Tortola, B.V.I. Auto Parts & Sales, Ltd. P.O. Box 344, Road Town 31 DEC 98
<PAGE>
Central America
Belize Eco Rental, Ltd. P.O. Box 1007, Poinsetta Rd., Ladyville 31 DEC98
Costa Rica Linea de Accion, S.A. Agencia Mazda, La Uruca, San Jose YTY
Guatemala Arrendadora de Guatemala 12 Calle 2-73 Zona 9 Guatemala City 31DEC01
Honduras Arrandadora de Vehiculos, S.A. P.O. Box 1208, Tegucigalpa 31DEC99
Mexico Comercial Arriete S.A. Apartado 656, 97000 Merida, Yucatan 31JAN07
Panama Rent A Car Panamena, S.A. Distribuidora David, Via Simon Bolivar 31DEC01
Calle 12 de Octubre, Panama
South America
Chile Servic, S.A. San Pablo 9900, Santiago 31DEC01
Colombia Autosolving Avenida 15 - No. 101 - 45, Bogota 31DEC99
Ecuador Turismo, Carros y Botes Cia., Ltda. P.O. Box 6877, Guayaquil 31DEC97
Peru Vea Peru, S.A. Ave. Javier Prado Este 5235, Lima 12 31DEC98
Suriname Para Rent A Car, Ltd. Fred O'kirkstraat 11, Paramaribo, Suriname 31DEC02
Uruguay Urucar, S.A. Yaguaron 1527, Montevideo 30SEP99
Venezuela Dorado Rent A Car, C.A. Ave. Libertador Esq. Ave. Principal 31DEC01
de Bello Campo, Caracas
</TABLE>
2
<PAGE>
Schedule 3
GUARANTEES
1. Guaranty dated December 31, 1996 in favor of Scotiabank de Puerto
Rico with respect to the obligations of Avis Rent A Car de Puerto Rico,
Inc.
2. Guaranty dated 31 August 1995 in favor of the Participants and
Agents under a Bill Facility Agreement dated 15 April 1994, as amended by
the Amendment Agreement dated 31 August 1995 with respect to the
obligations of W.T.H. Pty. Limited. 3. Letter of Guarantee* dated May 14,
1996 in favor of OCBC Bank (Malaysia) Berhad with respect to the
obligations of Sister Sewa Kereta (but not exceeding 25% of such
obligations). 4. Deed of Guarantee and Indemnity* dated February 15, 1990
in favor of Malayan Banking Berhad with respect to the obligations of
Sister Sewa Kereta (but not exceeding 40% of such obligations).
------------
*Obligations of Avis, Inc. to be assumed by Avis Investment Services
Limited ("AIS") by Agreement dated 4 April, 1997 among AIS, Avis Rent
A Car (Hong Kong) Limited and Avis Rent A Car System, Inc.
<PAGE>
Schedule 4
WIZCOM TRANSFERRED ASSETS
(i) All Wizard System Agreements
(ii) All Computer Services Agreements
(iii) All Homepage Agreements
(iv) The following proprietary software:
Fleet System:
Fleet Distribution Model
Fleet Planning
Field Fleet Reporting System
Title Tracking Request
Electronic Repair Order
Fleet Receivables
Invoice System
Fleet Reporting System
Make Model Database
Pre-Delivery Inspection
Vehicle On-Line Transaction System
Purchase Order Database
Vehicle Order Database
Vehicle Order Status
Department of Sanitation System
Fleet Reconciliation System
Group Rate Depreciation System
Harris County Tax System
Insurance System
Licensee Reporting System
Vehicle Damage Claims
<PAGE>
SALES AND MARKETING SYSTEM
Pricing Model
IRDB
Coupon Reporting
Worldwide Prestige Insurance
Chairman's Tracking System
CEO Tracking System
Automated Fulfillment System
Brochure Request System
Wizard Credit Link
CAW Corporate Awards System
PSI (for Preferred Supplier Agreements)
Sales Incentive System
EMP Sales Employee Database
STC Sales STC Database
<PAGE>
FINANCIAL MANAGEMENT SYSTEM
Accounts Payable (AP)
General Ledger (GL)
Money Management System (MMS)
Time and Attendance (TAA)
Rental Agreement Processing
Rental Number System
Balance Forward System
Register Miscellaneous Reporting
Open Item System
Travel Agency System
Cash Application System
Invoicing
Licensee Chargebacks
Country Company database
Club Red
Preferred Supplier
AIM
International Direct Sell
User Rental File
Europe File
Wizard Licensee Billing
BIL
Roll and Slide Reporting
Currency Data Base
Open Rental System
Bonus System
Direct Billing System
Daily Business Reporting
<PAGE>
YIELD MANAGEMENT SYSTEM
Yield Management
Data Extraction and Conditioning
Product Forecasting
Revenue Optimization
Graphical User Interface
Supply and Demand
Availability by Length of Rental (AVLLOR)
Turndowns and Denials
Reservation and Rental History
Rate Opportunity System
Yield Management Price
Elasticity System
Rateshop System
Business Mix
Global Distribution System Rate Maintenance
Rate Availability
MISCELLANEOUS SYSTEMS
Coupon Tracking System
Worldwide Reporting System
Consumer Sales Incentive
Personal Liability and Property Damage Insurance Reserve
Operating Lease Commitment Reporting Facility
Treasury Debt Reporting Facility
Interactive Personnel System
Name Risk System
Credit Club Risk
Standard Interline Passenger Procedure (SIPP)
<PAGE>
MASTER LICENSE AGREEMENT
<PAGE>
MASTER LICENSE AGREEMENT
TABLE OF CONTENTS
SECTION PAGE
Recitals.......................................................... 1
1. DEFINITIONS.............................................. 2
2. GRANT.................................................... 9
3. TERM AND RENEWAL......................................... 12
4. FEES..................................................... 13
5. GENERAL UNDERTAKINGS OF LICENSOR......................... 14
6. GENERAL UNDERTAKINGS OF LICENSEE......................... 15
7. ESTABLISHMENT, USE, AND MAINTENANCE OF LICENSEE'S
FACILITIES............................................... 19
8. LICENSEE TRAINING........................................ 21
9. VEHICLE FLEET AND RENTAL................................. 22
10. PROVISION OF SERVICES BY LICENSEE ON BEHALF OF
LICENSOR................................................. 23
11. AIRPORT LOCATIONS........................................ 24
12. SYSTEM CHANGES AND OPERATIONAL DEVELOPMENTS.............. 24
13. ADVERTISING.............................................. 25
14. COVENANTS................................................ 27
15. TRANSFER OF INTEREST..................................... 29
16. OTHER REQUIREMENTS....................................... 32
17. DEFAULT AND TERMINATION.................................. 32
18. OBLIGATIONS UPON TERMINATION............................. 35
19. CONFIDENTIAL OPERATING MANUAL............................ 39
20. CONFIDENTIAL INFORMATION................................. 40
21. ACCOUNTING AND RECORDS................................... 41
22. INSURANCE................................................ 42
<PAGE>
23. PROPRIETARY MARKS........................................ 45
24. TAXES, PERMITS AND INDEBTEDNESS.......................... 47
25. INDEPENDENT CONTRACTOR AND INDEMNIFICATION............... 48
26. APPROVALS AND WAIVERS.................................... 50
27. NOTICES.................................................. 50
28. ENTIRE AGREEMENT......................................... 51
29. MODIFICATIONS OF AGREEMENT............................... 52
30. SEVERABILITY AND CONSTRUCTION............................ 52
31. APPLICABLE LAW; DISPUTE RESOLUTION....................... 53
32. ACKNOWLEDGMENTS.......................................... 55
SCHEDULE 1 - Exclusive Territories
SCHEDULE 1(a) - Acquired Exclusive Territories
SCHEDULE 2 - Services
SCHEDULE 3 - Proprietary Marks and Marks
SCHEDULE 4 - Territories of Other System Licensees
<PAGE>
MASTER LICENSE AGREEMENT
This Agreement is made this 30th day of July, 1997, among HFS
Car Rental, Inc., a Delaware corporation, with its principal place of business
at 6 Sylvan Way, Parsippany, New Jersey 07054 ("Licensor"), Avis Rent A Car
System, Inc., a Delaware corporation, with its principal place of business at
900 Old Country Road, Garden City, New York 11530 ("Licensee") and, for
purposes expressly stated in Sections 2, 3, 15, 17, 23 and 31 hereof only,
Wizard Co., Inc., a Delaware corporation, with its principal place of business
at 6 Sylvan Way, Parsippany, New Jersey 07054 ("Wizard Co.").
WITNESSETH:
WHEREAS, Licensee and certain of its subsidiaries currently
conduct the business of owning and managing car rental operations (the "Car
Rental Business") that engage in the business of renting passenger motor
vehicles under the service mark and trade name "Avis" (the "Licensed
Business");
WHEREAS, Licensee owns substantially all of the assets used
in, and business and operations currently conducted by, the Licensed Business,
other than the System (as defined herein) and the business of granting
franchise rights or licenses with respect to the operation of car rental
locations under the System and the Proprietary Marks (as defined herein);
WHEREAS, the franchise and ownership rights of the System
have been transferred (the "Transfer") to Licensor and the Proprietary Marks
are owned by Wizard Co.;
WHEREAS, the distinguishing characteristics of the System
include, without limitation, Licensor's standards and specifications for the
goods and services offered under the System; advertising and promotional
programs and services; specialized methods and techniques for accounting,
record keeping, reporting, and data transfers through written and electronic
means; a reservation referral system; a computerized information and data
processing system; distinctive exterior and
<PAGE>
interior design, decor, color schemes, and furnishings; standards,
specifications, and procedures for operations; Licensor's confidential
operating manual; and other programs and procedures designed to promote to the
public, and further the goal of fast, easy, and dependable vehicle rental
services; all of which may be changed, improved, and further developed by
Licensor from time to time;
WHEREAS, Licensor identifies the Licensed Business using the
System by means of the Proprietary Marks and unless specifically designated by
Wizard Co., any additional or other marks shall not be deemed as part of or
included in the System;
WHEREAS, Licensor and certain of its affiliates continue to
develop, use, and control the use of such Proprietary Marks in order to
identify for the public the source of products and services marketed
thereunder, and to represent the System's high standards of quality,
appearance, and service; and
WHEREAS, Licensee desires to be licensed hereunder to operate
its Car Rental Business under the System and Licensee understands and
acknowledges the necessity of operating the Licensed Business under the System
in strict conformity with the standards and specifications established by
Licensor from time to time.
NOW, THEREFORE, in consideration of the premises, and the
commitments of each party to the other as set forth herein, the parties hereto
agree as follows:
1. DEFINITIONS
As used in this Agreement, the terms listed below shall have
the meanings indicated:
1.1 Adjusted EBITDA -- Adjusted EBITDA shall have the meaning
set forth in the Credit Agreement dated as of the date hereof, among Licensee,
Avis Rent A Car, Inc., the lenders party thereto, The Chase Manhattan Bank, as
administrative agent and Lehman Commercial Paper Inc., as syndication agent.
Adjusted EBITDA shall be calculated based on the most recently completed four
full fiscal quarters; provided, however, that for the first three quarters
after the Commencement Date the
2
<PAGE>
calculation shall be made from the Commencement Date through the end of the
most recently completed fiscal quarter.
1.2 Airport Concession Agreement -- An agreement between an
agency or entity with authority and control over operations at an airport and
an operator of a vehicle rental business, whereby the airport authority grants
the operator the right to conduct its vehicle rental business at the airport,
utilizing space in the airport terminal, and in some cases, on additional
airport property leased from the airport authority.
1.3 Acquired Exclusive Territory -- Any one of the standard
metropolitan statistical areas set forth on Schedule 1(a) when such area
becomes an Acquired Territory.
1.4 Acquired Territory -- Acquired Territory shall have the
meaning set forth in Section 2.2 hereof.
1.5 Agency Arrangement -- An Agency Arrangement shall mean an
arrangement between the Licensee and another party acting as an agent for the
Licensee in the operation of a vehicle rental location. To qualify for an
Agency Arrangement, such Agent must act on behalf of and be subject to the
control of the Licensee and have no rights under this License Agreement.
1.6 Agency Operators -- An Agency Operator shall be an agent
acting on behalf of the Licensee pursuant to an Agency Arrangement.
1.7 Avis Europe -- Avis Europe shall mean Avis Europe plc.
1.8 Avis Intercity Rules -- Rules and regulations governing
relations between and among Rental Locations operated by Licensee and other
System Licensees with respect to customer rentals at one Rental Location and
returns at another, and other operations under the System, which include,
without limitation, procedures for allocating revenues and expenses in
connection with the maintenance and rental of such vehicles, and procedures for
administering the program referred to as the "Rent It Here Leave It There"
program or other similar programs,
3
<PAGE>
which program permits customers to rent a vehicle from one Rental Location and
return the vehicle to another Rental Location regardless of whether the Rental
Locations are located in different territories, or whether the Rental Locations
are operated by, or the vehicle is owned by Licensee, or other System
Licensees.
1.9 Change of Control Event -- A transaction or series of
related transactions by which (a) any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act) other than HFS or an
affiliate or successor to HFS, is or becomes after the date hereof the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act
as in effect on the date hereof), of more than 25% of the total voting power of
all voting stock of the Licensee then outstanding when HFS controls 25% or more
of such voting power and otherwise 20% of the total voting power of all voting
stock of the Licensee then outstanding (the "Relevant Percentage"); (b)(1)
another corporation merges into the Licensee or the Licensee consolidates with
or merges into any other corporation or (2) the Licensee conveys, transfers or
leases all or substantially all its assets to any person or group, in one
transaction or a series of related transactions other than a conveyance,
transfer or lease between the Licensee and a wholly owned subsidiary of the
Licensee, with the effect that a person or group, other than a person or group
which is the beneficial owner of more than the Relevant Percentage of the total
voting power of all voting stock of the Licensee immediately prior to such
transaction, becomes the beneficial owner of more than the Relevant Percentage
of the total voting power of all voting stock of the surviving or transferee
corporation of such transaction or series; or (c) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Licensee's Board of Directors (together with any new directors whose
election by the Licensee's Board of Directors, or whose nomination for election
by the Licensee's shareholders, was approved by a vote of a majority of the
Directors then still in office who were either Directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Directors then
in office.
4
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1.10 Composite Statement -- With respect to any period,
periodic bookkeeping and accounting statement compiled by Licensee reflecting
all monies and payments owed to Licensee by other System Licensees for the
preceding period, any adjustments to amounts shown on prior Composite
Statements, all monies and payments owed by Licensee to other System Licensees
for the preceding period, and any other charges to or set-offs against monies
owed between Licensee and other System Licensees.
1.11 Computer Services Agreement -- The Computer Services
Agreement dated as of the date hereof between WizCom and Licensee pursuant to
which WizCom is to provide certain computer services to Licensee, as such
agreement may be amended from time to time by the parties in accordance with
the terms thereof.
1.12 Cost Sharing Agreement -- The Cost Sharing Agreement
dated as of the date hereof between WizCom and Avis Rent A Car System, Inc.,
providing for certain matters relating to the sharing of space and support
services, as amended from time to time.
1.13 Exchange Act -- The Securities Exchange Act of 1934, as
amended.
1.14 Exclusive Territory -- Any one of the standard
metropolitan statistical areas set forth on Schedule 1 hereto, the Non-U.S.
Territory and any Acquired Territory.
1.15 Facility -- Any one of a variety of locations from which
the Licensed Business is operated, including, without limitation, those
facilities known as Rental Locations, and such service and repair facilities as
Licensor may specify.
1.16 Fleet -- All of Licensee's Vehicles.
1.17 HFS -- HFS Incorporated, or any successor thereto.
1.18 Gross Revenue -- All income recorded as revenue in the
ordinary course of business consistent with past practice by the Licensed
Business related to the rental of Vehicles, whether for cash or credit, and
regardless of collection in the case of credit, and
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whether received directly from Licensee's operations or an Agency Operator's or
Sublicensee's operations, including, but not limited to, (a) charges assessed
to rental customers (such as time and mileage, intercity fees, loss damage
waiver ("LDW"), personal accident insurance ("PAI"), additional liability
insurance ("ALI"), personal effects protection ("PEP"), prepaid rental fees and
additional mileage charges), and (b) all other charges assessed by Licensee and
recorded on the Standard Rental Agreement or other rental or sales documents
utilized by Licensee, including, without limitation, charges for rentals of
cellular telephones, child car seats, ski racks, or other equipment; provided,
however, that "Gross Revenue" shall not include, (i) refueling charges or fuel
purchase charges collected by Licensee from customers for refueling services
actually performed; (ii) any taxes, surcharges, fees or other funds collected
by Licensee, which are transmitted to a third party for which the Licensee acts
solely as a conduit of such funds on behalf of such third party; or (iii) any
other sums of money or payments received from Licensee's customers which are
forwarded directly to Licensor, including, without limitation, "customer cash
qualification charges" and such other charges as Licensor may specify in
writing.
1.19 Lease Agreements -- The Lease Agreements and Sublease
Agreements, as the case may be, between WizCom and Licensee providing for the
lease or sublease of space for the executive and other offices of Avis Rent A
Car, Inc. from WizCom, as amended from time to time.
1.20 Legal Requirements -- All laws, ordinances, regulations,
rules, administrative orders, decrees and policies of any territory,
government, governmental agency or department.
1.21 Manual -- Licensor's confidential operating manual or
manuals, as amended, modified or supplemented from time to time, which includes
guidelines, policies, procedures, and standards pertaining to, among other
things, System identity, operation, administration, rental procedures, and the
Avis Intercity Rules and the requirements, standards, specifications and
recommendations of the Licensor relating to the conduct of the Licensed
Business. Licensor may amend, modify, update or supplement the
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Manual at any time in its sole discretion.
1.22 Non-U.S. Territory -- Non-U.S. Territory shall have the
meaning set forth in Section 2.2 hereof.
1.23 Off-Airport Location -- A Rental Location situated not
on the property of an airport, but sufficiently close to such airport to, in
the reasonable judgment of Licensor, (i) provide reasonably quick shuttle bus
service between the airport terminal and the Rental Location, (ii) provide
adequate service to such airport and (iii) be actively marketed as an airport
location.
1.24 On-Airport Location -- A Rental Location situated on the
property of an airport.
1.25 Prime Rate -- Prime Rate means the rate of interest per
annum publicly announced from time to time by The Chase Manhattan Bank as its
prime rate in effect at its principal office in New York City; each change in
the Prime Rate shall be effective from and including the date such change is
publicly announced as being effective.
1.26 Promotional Programs -- programs developed, established
and marketed by Licensor or Licensee from time to time and intended to induce
the use of the System and awareness of the Proprietary Marks.
1.27 Proprietary Marks -- Certain trade names, service marks,
trademarks, logos, emblems, trade dress, distinctive color combinations and
other distinctive non-functional elements of design and decor, and other
indicia of origin, including, but not limited to, the marks "AVIS" and "AVIS
RENT A CAR" and such other trade names, trademarks, and service marks as are
now designated (and may hereafter be designated) by Licensor and Wizard Co. for
use by authorized licensees including the Licensee in connection with the
System.
1.28 Rental Location -- The site at which a member of the
public may rent a Vehicle, execute a Standard Rental Agreement, and/or pick up
and drop off the rental Vehicle.
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1.29 Reservation Agreement -- The Reservation Services
Agreement dated as of the date hereof between HFS and Licensee pursuant to
which HFS is to provide certain reservation services for Licensee, as such
agreement may be amended from time to time by the parties thereto in accordance
with the terms thereof.
1.30 Standard Rental Agreement -- A uniform rental agreement,
in a form presented from time to time by Licensor, between the customer of the
Licensed Business and Licensee.
1.31 Sublicensees -- Sublicensees shall have the meaning set
forth in Section 2.6 hereof.
1.32 System -- The comprehensive system for providing vehicle
rental services to customers for transient rentals and operating a vehicle
rental business serving transient rental customers under the Proprietary Marks
as Licensor specifies which at present includes only the following: (a) the
Proprietary Marks; (b) other intellectual property, including confidential
information, the Manual and know-how, including methods for accounting, record
keeping, reporting and data transfers using written and electronic means; (c)
marketing, advertising, publicity and other promotional materials and programs;
(d) System standards; (e) training programs and materials; (f) quality
assurance inspection and scoring programs; (g) access to the Wizard System; (h)
a credit card program for customers using the Proprietary Marks and third party
marks; (i) an information and data processing system; and (j) distinctive
design, decor, uniform and color schemes. The System shall not include existing
or subsequently developed software or systems which are owned by, or
exclusively licensed to, Licensee by WizCom pursuant to the Computer Services
Agreement or which are developed by Licensee or a third party on behalf of
Licensee and are not integrated with the Wizard System.
1.33 System Licensees -- Licensee and all other parties
authorized by Licensor to operate the Licensed Business.
1.34 Target EBITDA -- The amount of Adjusted EBITDA required
so that the Target EBITDA Ratio is not less than 1.05 to 1.00 at the time of
calculation.
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1.35 Target EBITDA Ratio -- The ratio of Adjusted EBITDA to
the sum of consolidated non-fleet interest expense, consolidated taxes,
dividends and consolidated capital expenditures equal to the lesser of actual
expenditures or $35 million, adjusted upward per annum by the Consumer Price
Index (as determined by the U.S. Bureau of Labor Statistics) for the most
recently completed four full fiscal quarters for which financial statements are
available; provided, however, for the first three quarters after the
Commencement Date, the calculation shall be made from the Commencement Date
through the end of the most recently completed fiscal quarter.
1.36 Territory -- Territory has the meaning set forth in
Section 2.2 hereof.
1.37 Term -- The Term of this Agreement shall be the term set
forth in Section 3.1 hereof.
1.38 U.S. Territory -- U.S. Territory shall have the meaning
set forth in Section 2.2 hereof.
1.39 Vehicle -- An automobile, passenger van, or 4-wheel
drive vehicle, and any other motor vehicle specified by Licensor, which is
owned, used, leased, under repair, or otherwise kept by Licensee for rental to
customers of the Licensed Business.
1.40 Wizard System -- The on-line, real time vehicle rental
and reservations system owned by WizCom and, utilized in the conduct of the
Licensed Business, permitting the use of equipment located at rental counters
and offices and data displays for reservation and rental transaction processing
purposes, all of which communicate through a communications network with
central site computers.
1.41 WizCom -- WizCom International, Ltd., or any successor
thereto.
2. GRANT
2.1 Licensor hereby grants to Licensee, upon the terms and
subject to conditions herein contained, the non-exclusive right and license,
and Licensee undertakes the obligation, to operate the Licensed Business within
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the Territory, and Wizard Co. hereby grants to Licensee, upon the terms and
subject to conditions herein contained, the non-exclusive right to use the
Proprietary Marks in the Territory solely in connection therewith. Wizard Co.
hereby grants Avis Rent A Car, Inc. and its wholly owned subsidiaries the right
to use the "Avis" Proprietary Mark in its corporate name.
2.2 The Territory shall include (i) those areas or regions in
the fifty (50) United States, the District of Columbia and the territories and
possessions of the United States that are not the subject, as of the date of
this Agreement, of exclusive Licenses granted to third parties as set forth on
Schedule 4 hereto (the "U.S. Territory"), (ii) those areas of the world other
than the U.S. Territory which are not the subject of the license agreements by
and among Wizard Co., Licensee and Avis Europe to Licensor (the "Non-U.S.
Territory") and (iii) any territories operated under the System that are
acquired, leased or managed by Licensee from, or on behalf of, other System
Licensees, including any territories set forth on Schedule 4 hereto (the
"Acquired Territories"). Subject to Section 7.2, Licensor shall have the right
to grant additional Licenses for locations located in the Territory, provided,
however, that Licensor shall not establish, nor license another to establish, a
vehicle rental business using the Proprietary Marks in the Exclusive
Territories. Other System Licensees may advertise and promote their car rental
business within the Territory, provided that Licensor shall not permit Avis
Europe to advertise in the Territory without the consent of Licensee.
2.3 Except as specifically provided in Section 2.2, this
license is non-exclusive. Licensor and Wizard Co., as the case may be, shall
retain the right, among others:
2.3.1 To use, and to license others to use, the System and
the Proprietary Marks at or from any location other than a location
in an Exclusive Territory;
2.3.2 To operate, and to license others to operate,
businesses specializing in the sale of new or used vehicles,
utilizing the Proprietary Marks, or other proprietary marks, in the
Territory;
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2.3.3 To solicit business from any potential customer
wherever located, including customers located within the Territory
and to engage in advertising and promotional activity on behalf of
other System Licensees in the Territory;
2.3.4 To develop, use, and license the use, at any
location, of proprietary marks, other than the Proprietary Marks, and
methods of operation the same as or substantially similar to the
System, using the know how and other components of the System in
connection with the operation of a business or system which offers
vehicle rental services which are the same as or similar to those
offered under the System, on any terms and conditions Licensor deems
advisable, and without granting Licensee any rights therein;
2.3.5 To develop, franchise, license, manage, operate,
finance, or lease businesses and/or systems using the Proprietary
Marks, for the provision of goods and services other than those
covered by this Agreement; and
2.3.6 To use, and to license others to use, the Avis Data
(as defined in the Computer Services Agreement), including, without
limitation, all customer lists and potential customer lists relating
to the Licensed Business, subject to all restrictions on the
disclosure and use of customer information expressly required by
corporate accounts, consortiums or tour operators provided Licensee
notifies the Licensor of the information to be restricted and the
nature of such restrictions, provided, however, that Wizard Co. and
Licensor shall not use or license others to use the Avis Data in
connection with a Car Rental Business other than the Licensed
Business.
2.4 The license granted in Section 2.1 hereof pertains only
to the Licensed Business, and except as provided below, Licensee shall not use
the Proprietary Marks or other names or marks using the word "Avis" in
connection with car leasing or truck rental or leasing or any other business
other than the Licensed Business. Notwithstanding the foregoing, Licensee shall
have the right under this Agreement to lease or rent noncommercial light duty
trucks with a GVWR of up to 18,000 pounds.
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2.5 Licensee shall not operate a business selling new or used
vehicles, at wholesale, or at retail, except for any such operation that sells
vehicles used in the Licensed Business as part of the disposition of the
Licensee's fleet in the ordinary course of business.
2.6 Licensee shall have no right or power to sublicense the
System or the Proprietary Marks under this Agreement, and shall not engage in
the offer or sale of franchises, licenses or contractual arrangements that are
the functional equivalent of a franchise. Notwithstanding the foregoing,
Licensee may, with Licensor's prior approval, enter into sublicense
arrangements with sublicensees acceptable to Licensor ("Sublicensees") provided
such sublicense arrangements license Sublicensees to operate the Licensed
Business only in Non-U.S. Territories; Licensee may also enter into Agency
Arrangements in the Territory.
3. TERM AND RENEWAL
3.1 The term of this Agreement and the license granted herein
shall commence upon the date of execution of this Agreement (the "Commencement
Date"), and, unless earlier terminated pursuant to Section 17 or renewed
pursuant to Section 3.3, shall terminate fifty (50) years after the
Commencement Date.
3.2 Licensee acknowledges and agrees that all rights granted
to Licensee under this Agreement shall terminate on the fiftieth anniversary of
the Commencement Date, unless sooner terminated pursuant to Section 17 herein
or renewed pursuant to Section 3.3.
3.3 Licensee shall have the right to renew this Agreement for
an unlimited number of five (5) year renewal terms, subject to the following
conditions:
(i) Licensee has conducted the Licensed Business in
accordance with the provisions of this Agreement, any amendments hereto, and
the Manual, and is not in material default under this Agreement;
(ii) For each five (5) year renewal term, Licensee executes
and agrees to be bound by Licensor's then current standard license agreement,
including but not limited to Licensee's payment for any additional
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products and/or services (including new advertising services) provided by
Licensor thereunder which Licensor is not obligated to provide pursuant to this
Agreement; and
(iii) At least 180 days prior to expiration of the term of
this Agreement then in effect, Licensee provides Licensor with written notice
of its intention to exercise its rights to continue the operation of the
Licensed Business in accordance with the above, and certifies that Licensee is
not in material default under this Agreement.
4. FEES
4.1 Licensee shall pay to Licensor a monthly royalty fee of
(a) three percent (3%) of Gross Revenue plus (b) 100% of any reveneue relating
to any royalty or other fees earned by Licensee from each Sublicensee up to,
but not exceeding, three percent (3%) plus the applicable percentage used to
calculate the Supplemental Fee for the applicable period of such Sublicensee's
Gross Revenue (the "Base Fee").
4.2 Licensee shall pay Licensor an additional royalty fee of
one percent (1.0%) of Gross Revenue payable quarterly in arrears which shall be
increased by one-tenth of one percent (0.1%) of Gross Revenue commencing on the
anniversary of the Commencement Date beginning in 1999 and in each of the next
four years thereafter to a maximum of one and one-half percent (1.5%) (the
"Supplemental Fee"). Until the fifth anniversary of the Commencement Date, the
Supplemental Fee or a portion thereof may be deferred to the extent that the
payment of such Fee will result in the Target EBITDA Ratio for the year in
which such Supplemental Fee accrues being less than 1.05 to 1.00. The amount of
any Supplemental Fees deferred pursuant to the previous sentence and any
interest thereon will be paid, in whole or in part, on the date on which such
payment would not result in the Target EBITDA Ratio being less than 1.05 to
1.00. Any amounts of the Supplemental Fee deferred pursuant hereto shall accrue
interest at the Prime Rate plus three percent (3%) per annum from the date such
Supplemental Fee was due, notwithstanding the deferral, until paid.
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4.3 Unless otherwise specified in writing by Licensor, all
monthly and quarterly payments required by this Section 4 shall be submitted to
Licensor by the twentieth (20th) day of each month or the twentieth (20th) day
following each quarter, as the case may be, together with any reports or
statements required under Section 21. Monthly and quarterly payments required
of Licensee hereunder which are based on Gross Revenue shall be based on Gross
Revenue for the most recently completed calendar month or quarter, as the case
may be. If any payment is overdue, Licensee shall pay to Licensor immediately
upon demand the overdue amount, together with interest thereon from the date it
was due until paid at the rate of the Prime Rate plus 3.5% per annum, or the
maximum rate permitted by law, whichever is less. The foregoing shall be in
addition to any other remedies Licensor may have.
5. GENERAL UNDERTAKINGS OF LICENSOR
In addition to any other functions specified elsewhere in this
Agreement:
5.1 Licensor may take such actions as it deems appropriate to
enhance, improve, update, refine, maintain, and develop the System, including
undertaking sales, promotional, and advertising campaigns, if any, in its
discretion.
5.2 Licensor may establish policies, procedures and standards
for the System, including those pertaining to operations, reservations, service
and product quality, service training and System identity or, in its
discretion, may adopt those which are currently in effect for the System,
subject to such changes from time to time as it may make thereto in its
discretion.
5.3 Licensor shall make vehicle rental reservation referral
services available to Licensee through a service or system administered,
operated, and managed by Licensor, its designee or affiliates. This obligation
shall be fully satisfied by the performance of HFS in accordance with the terms
set forth in the Reservation Agreement.
5.4 Licensor shall make available or shall cause its affiliate
or designee to make available to
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Licensee the Wizard System, as amended, modified, or altered from time to
time, or any successor system that provides the same functions of managing
vehicle rental transactions and reservations. This obligation shall be fully
satisfied by the performance of WizCom in accordance with the terms set forth
in the Computer Services Agreement.
5.5 Licensor shall provide Licensee, on loan, one copy on
disk of the Manual, and all updates to the Manual issued from time to time.
5.6 Licensor shall provide from time to time such advisory
assistance concerning the Car Rental Business as Licensor deems advisable.
5.7 Licensor reserves the right to assess Licensee a
reasonable fee for any training programs Licensor may, in its sole discretion,
provide to Licensee, as set forth in Section 8.2 hereof.
5.8 Licensor or its affiliates may, from time to time and in
its sole discretion, offer additional products and services to Licensee for
purchase at Licensee's option, including uniforms, equipment, furnishings,
stationery, standard "Avis Rent A Car" signs, advertising materials,
promotional materials, decals, and training programs upon such price, terms,
and conditions as Licensor may determine, in its sole discretion.
5.9 Any express or implied duty or obligation imposed on
Licensor by this Agreement or any other agreement referenced herein may be
performed by any designee, employee, or agent of Licensor or third party
contractor, including Licensee, as Licensor may direct; provided, however, that
Licensor shall remain responsible to perform such duties and obligations other
than the obligations of the Licensee to conduct certain functions of the System
pursuant to Section 10 hereto. Licensee shall conduct certain functions of the
System pursuant to the terms set forth in Section 10 hereof.
6. GENERAL UNDERTAKINGS OF LICENSEE
In addition to any other obligations specified elsewhere in this
Agreement:
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6.1 Licensee understands and acknowledges that every detail
of the System and the Licensed Business is important to Licensor and the other
System Licensees in order to develop and maintain high operating standards, to
maintain and increase the demand for the services and products offered by all
System Licensees, and to protect Licensor's reputation and goodwill, and the
goodwill of the Proprietary Marks. Licensee shall maintain and operate the
Licensed Business in general and at each Rental Location in strict conformity
with such methods, standards, and specifications as Licensor and, with respect
to the Proprietary Marks, Wizard Co. may from time to time prescribe including,
among other things, System identity requirements and quality assurance
standards which are, to the extent Licensor has the legal authority to do so,
uniformly imposed on all System Licensees.
6.2 Licensee shall maintain compliance with all provisions of
the Manual, as amended, modified, updated or supplemented from time to time.
Failure by Licensee to comply with all material provisions of the Manual shall
constitute a default under this Agreement.
6.3 Licensee shall fully comply with Licensor's Avis
Intercity Rules, including, without limitation, maintaining, servicing,
refueling, and washing vehicles rented to customers by other System Licensees
under the System which may be presented to Licensee, providing vehicle
exchanges, and the re-renting of such vehicles to customers of the Licensed
Business.
6.4 Licensee shall use the Facilities solely for the
operation of the Licensed Business; shall keep the Facilities open and in
normal operation for such minimum hours and days, and shall maintain an
adequate staff of trained rental agents at each Facility as may be necessary to
service the business generated at such Facilities to maintain the reputation
and goodwill associated with the System; and shall refrain from using or
permitting the use of the Facilities for any other purpose or activity at any
time without first obtaining the written consent of Licensor.
6.5 Licensee shall obtain, operate in a safe and efficient
manner, and maintain in good working order
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and condition and first class appearance, service vehicles, courtesy vehicles,
shuttle buses, and other equipment for use in connection with the Licensed
Business, identified with the Proprietary Marks in such manner as may be
prescribed by Licensor and Wizard Co., of sufficient number and type to provide
the manner and frequency of service to customers required to service the
business generated at each Facility and to maintain the reputation and goodwill
associated with the System.
6.6 Licensee shall maintain in sufficient supply at all
Facilities, and use at all times, only such supplies, forms, products,
advertising, promotional, sales and marketing materials as conform to
Licensor's standards and specifications and as Licensor may approve from time
to time; and shall refrain from using or selling non-conforming items without
Licensor's prior written consent.
6.7 Licensee shall purchase and/or lease all products,
supplies, forms, and other materials bearing the Proprietary Marks or unique to
the System and required for the operation of the Licensed Business and for the
maintenance of Vehicles, solely from suppliers (including manufacturers,
wholesalers, and distributors) who demonstrate to the reasonable satisfaction
of Licensor, the ability to meet Licensor's standards and specifications for
such items; and who possess adequate quality controls and capacity to supply
Licensee's needs promptly and reliably.
6.8 Licensee shall grant Licensor and its agents the right to
enter upon the premises of any Facility at any reasonable time, with or without
advance notice, for the purpose of conducting inspections of each Licensed
Business, including, but not limited to, inspections of the Facilities,
Vehicles, Vehicle service records, other records of the Licensed Business, and
to monitor Licensee's personnel in the performance of their duties; shall
cooperate with Licensor's representatives in such inspections by rendering such
assistance as they may reasonably request; and, upon notice from Licensor or
its agents, and without limiting Licensor's other rights under this Agreement,
shall take such steps as may be necessary to correct promptly the deficiencies
detected during any such inspection. Licensee acknowledges that such
inspections are solely for the purpose of assuring
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compliance with System standards and procedures, and are not intended to
supplant or replace Licensee's safety inspections of Vehicles and Facilities or
any other inspection relating to compliance with applicable law or insurance
requirements for which Licensee shall be solely responsible.
6.9 Licensee shall have sole discretion in determining any
rates for the Licensed Business and Licensor assumes no liability for any
failure by Licensee or Licensor's other System Licensees to honor any published
rates. Licensee agrees to adhere to and honor any rates it causes to be
published and to adhere to and honor any rates as quoted by Licensee for the
time period for which that quote is applicable. Licensee agrees to adhere to
and honor all rates at the prices quoted in the Wizard System and third-party
computerized reservation systems at the time the customer's reservation is
placed, and agrees not to impose any restrictions on rentals or rates which
Licensee did not disclose to Licensor when the rate(s) were transmitted to
Licensor. Licensee further agrees to comply with such other requirements with
respect to published rates as may be specified from time to time by Licensor.
6.10 Licensee shall comply strictly with all laws and
regulations pertaining to the operation and conduct of the Licensed Business
and shall refrain from engaging in any practice which tends to mislead or
deceive the public in any way, or which a reasonable person may characterize as
unconscionable or which a governmental body claims is an unfair or deceptive
business practice and Licensee shall not discriminate on the basis of race,
religion, citizenship or any other illegal basis in the operation of the
Licensed Business.
6.11 Licensee shall promptly pay to other System Licensees,
to third parties, or to Licensor for reimbursement to other System Licensees
and third parties to the extent paid by Licensor, all sums owing to such
entities, including, without limitation, travel agent commissions, telephone
bills, lease payments, airport concession fees, and frequent traveler fees.
6.12 Licensee shall comply with all other requirements set
forth in this Agreement, in the Manual, and as may be issued by Licensor in its
discretion
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through written or electronic bulletins.
6.13 Licensee shall disclose to Licensor all ideas, methods,
improvements, services, techniques and products relating to the operation of
the System conceived by Licensee during the Term and grants to Licensor a
perpetual, royalty-free, non-exclusive and world-wide right and license to
incorporate the same in the System for use with all System Licensees and
businesses world-wide and to license the same to Wizard Co. and System
Licensees, to the extent permitted by applicable Legal Requirements.
7. ESTABLISHMENT, USE, AND MAINTENANCE OF LICENSEE'S
FACILITIES
7.1 Licensee may establish additional Facilities or close
existing Facilities within the Territory, provided that the Licensee shall
provide Licensor with at least thirty (30) days written notice prior to any
such action and in the case of the closing of a Facility, specifying the reason
for closing such Facility.
7.2 Licensor may, in its sole discretion, determine that
additional Facilities are required in the Territory, but outside the Exclusive
Territories, to adequately service customers and to promote the benefits of and
services provided under the System. Licensor shall notify Licensee of the
requirement for an additional Facility or Facilities at the location or
locations specified in such notice (the "Right of First Refusal Offer"). Upon
receipt of the Right of First Refusal Offer, the Licensee shall have the right
and the option, within 30 days of receipt of such Offer, to irrevocably accept
such Offer. In the event Licensee accepts such Right of First Refusal Offer,
the Licensee shall commence actions to acquire and construct the necessary
Facilities within 30 days after acceptance of such Offer as may be specified by
Licensor. In the event Licensee does not accept such Right of First Refusal
Offer, or accepts such Right of First Refusal Offer but fails to commence
actions to acquire and construct the Facility(ies) within such 30 day period,
or fails to commence operations at the Facility(ies) within such reasonable
period thereafter as may be specified by Licensor, Licensor may itself, in its
sole discretion and
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notwithstanding the provisions of Section 2.2 hereof, establish, or license
others to establish, the required Facility(ies) at such location or locations.
Notwithstanding the foregoing, if Licensor does not accept the Right of First
Refusal Offer or otherwise fails to comply with the terms of this Section 7.2,
Licensee shall have the opportunity to present Licensor with its good faith
business reasons why the establishment of such Facility would be detrimental to
the System, and Licensor shall take such reasons into account in making its
decision whether or not to proceed with establishing such Facility.
7.3 In the event HFS or any of its affiliates, including
Licensor, acquires a Car Rental Business that is not related to the Licensed
Business (the "New Business"), Licensor shall notify Licensee of the Rental
Locations of the New Business that are within the Territories (the "New
Business Territories") which notice shall include an offer to Licensee to
operate such New Business Territories and the terms thereof (the "New Business
Offer"). Upon receipt of the New Business Offer, the Licensee shall have the
right and the option, within sixty (60) days of receipt of such New Business
Offer, to irrevocably accept such Offer. In the event Licensee accepts such New
Business Offer, the Licensee shall commence operating such Facilities within
sixty (60) days after acceptance of such Offer. In the event Licensee does not
accept such Offer or fails to commence operating such New Business in the New
Business Territories as specified above, Licensor may itself, in its sole
discretion, operate, or license others to operate, the New Business in the New
Business Territories. Notwithstanding the foregoing, in the event the consent
of a third party is required for Licensee to commence operating a Facility in a
New Business Territory, and Licensee is unable to obtain such consent within
the sixty (60) day period referred to above, the sixty (60) day period shall be
extended for a reasonable period, not to exceed an additional sixty (60) days,
provided Licensee diligently pursues obtaining such consent during such period.
7.4 Licensee shall maintain the Facilities (including
adjacent public areas) in a clean, orderly condition, and in good repair and in
compliance with the requirements set by Licensor hereunder as well as the
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Legal Requirements of any government authority having jurisdiction over the
Facilities or the Licensed Business; and, in connection therewith, Licensee
shall make such additions, alterations, repairs, and replacements thereto as
may be required for that purpose, including, without limitation, such periodic
repainting, repairing, and replacing of obsolete signs, fixtures, furnishings,
and equipment as Licensor may reasonably direct.
7.5 At Licensor's reasonable request, Licensee shall
refurbish the Facilities from time to time at Licensee's expense, to conform to
the trade dress, color schemes, and presentation of trademarks and service
marks consistent with the then-current public image of the System, including,
without limitation, structural changes, replacement or renovation of equipment,
remodeling, redecoration, and modifications to existing improvements.
7.6 Licensee hereby agrees that any Acquired Territories
shall be subject to the terms of this Agreement.
8. LICENSEE TRAINING
8.1 Licensee shall at all times maintain at each Facility a
competent, conscientious, fully-trained staff, and shall ensure that its
employees preserve good customer relations and goodwill of the System and
comply with such dress and grooming codes as Licensor may prescribe in the
Manual or otherwise in writing. Licensee's employees shall present a neat and
clean appearance at all times and render courteous service to all customers of
the Licensed Business and of the System.
8.2 Licensee and Licensee's rental agents, management
personnel, sales force, and other personnel shall attend additional training
programs as are conducted by Licensee with Licensor's approval from time to
time. Licensee or its employees shall be responsible for any and all expenses
incurred by them in connection with any training programs, including without
limitation, tuition fees, the cost of transportation, lodging, meals, and
wages.
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9. VEHICLE FLEET AND RENTAL
9.1 Licensee shall maintain only Vehicles in its Fleet which
satisfy such age, mileage, safety, operating, appearance, equipment, and
condition standards and specifications as may be specified by Licensor from
time to time for the System; shall maintain all Vehicles in excellent
mechanical and running order, and in a safe, efficient, clean, and presentable
condition; and shall discontinue using any Vehicle which fails to satisfy
Licensor's specifications. Licensee shall comply with all vehicle
manufacturers' specifications and procedures with respect to safety recalls
issued by the manufacturer, including the withdrawal of Vehicles from service
until all necessary repairs are completed.
9.2 Licensee shall comply with all government recall notices
promptly and shall keep maintenance records for each Vehicle for such period as
may be reasonably specified by Licensor and shall make such records available
for inspection by Licensor.
9.3 In renting Vehicles, Licensee shall use only Licensor's
sequentially-numbered Standard Rental Agreement forms and Standard Rental
Agreement jackets, purchased by Licensee from a source approved by Licensor,
and such other documents as may be specified by Licensor, in the form
prescribed by Licensor. Licensee may alter the Standard Rental Agreement, the
information contained in the Standard Rental Agreement or on the jacket, or the
format or presentation of data on the Standard Rental Agreement, or in any
other document or agreement, only with the prior written consent of Licensor,
which consent shall not be unreasonably withheld. Further, and without limiting
the foregoing, Licensee shall, in assessing and collecting legitimate and
legally permissible taxes and surcharges from customers for remittance to the
appropriate government agencies, identify such taxes and surcharges in the
appropriate places on the Standard Rental Agreement, and shall not impose
additional charges, surcharges, or taxes (which will not be remitted to the
appropriate government agencies) as part of the taxes identified in the
Standard Rental Agreement, or in a manner designed to, or which results in,
confusion or deception of the customer as to the appropriate federal, state, or
local tax imposed with respect to the transaction. Licensee shall maintain
copies of each
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executed Standard Rental Agreement in accordance with standards specified by
Licensor.
9.4 Licensee shall not rent, or allow customers or other
persons to use a Vehicle for a period in excess of eleven (11) consecutive
months. If a customer desires to rent a Vehicle for a period longer than
thirty (30) consecutive days and less than eleven (11) consecutive
months, Licensee and such customer shall, no later than at the conclusion of
the first thirty (30) day period, execute a "mini-lease" agreement and a
Standard Rental Agreement for the Vehicle for each thirty (30) day period
thereafter during the rental.
9.5 Licensee shall also comply with any requirements of
certain automobile dealers or manufacturers supplying vehicles to Licensee
which may impose more stringent restrictions regarding maximum rental periods
for such Vehicles.
10. PROVISION OF SERVICES BY LICENSEE ON BEHALF OF
LICENSOR
10.1 It is the intention of the parties hereto that Licensee
will undertake to provide certain services to other System Licensees on behalf
of Licensor. Such services include generally, but are not limited to, marketing
and advertising services, training, preparation of Composite Statements and
other accounting and management services, communications to System Licensees
and franchise relations and other services as more specifically set forth in
Schedule 2 attached hereto. Therefore, Licensee hereby agrees to provide, or
shall cause one of its wholly owned subsidiaries to provide, the services set
forth on Schedule 2 attached hereto for the benefit of the System Licensees on
behalf of the Licensor.
Licensee also expressly undertakes to collect all license fees and
other amounts due to Licensor from other System Licensees and remit such fees
in full to Licensor as collected. Licensee shall continue to follow its
established collection procedures in effect as of the Commencement Date.
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11. AIRPORT LOCATIONS
11.1 Licensee understands and acknowledges that a significant
aspect of the System involves fast, easy, and dependable vehicle rental
services, including providing such services at or from Rental Locations
situated at airports. To that end, Licensee shall utilize its best efforts to
maintain at all times an On-Airport Location at each airport located within
the Territory or an Off-Airport Location if an On-Airport Location is either
not available or not economically feasible.
11.1.1 In the event Licensee fails to
secure an On-Airport Location at an airport or Licensee determines that an
Off-Airport Location would provide substantially the same level of service and
revenue as an On-Airport Location, Licensor may, in its sole discretion,
require Licensee to use its best efforts to establish an Off-Airport Location.
11.2 In the event Licensee fails to secure an On-Airport
Location at a particular airport during the course of two consecutive airport
concession offerings by such airport or an Off-Airport Location with respect to
such airport has not been established pursuant to Section 11.1.1, Licensor may
terminate this Agreement with respect to that airport.
12. SYSTEM CHANGES AND OPERATIONAL DEVELOPMENTS
12.1 Services and products required or suggested to be
offered to customers under the System may be supplemented, improved, and
otherwise modified from time to time by Licensor in response to competition,
technical developments, consumer demands, opportunities, changing vehicle
styles, changing patterns in business, recreational, and personal travel,
governmental regulations, and other factors. Such changes may necessitate
replacement or renovation by Licensee of capital equipment and/or Vehicles,
remodeling, redecorating, and modifications to existing improvements. For
purposes of illustration only, such changes may include, without limitation,
new equipment required on all vehicles, such as passive restraint air bags,
alternative fuel equipment, cellular telephones, or computerized and electronic
location tracking and mapping
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devices; equipment to accommodate customers with disabilities; computer systems
and other facilities designed for customer rentals through personal computers
and other electronic or telecommunications devices; and the use of "master"
rental agreements to supplement the individualized Standard Rental Agreements.
Licensor shall consult with Licensee before making any such changes; but may
make such changes in its sole discretion.
12.2 Licensor shall notify Licensee, in the Manual or
otherwise in writing, of System changes and/or new or different products and
services which shall be offered to customers under the System. Licensee shall
comply with all requirements concerning implementation of such changes and/or
introduction of such new or different products and services for its customers,
including, without limitation, purchasing, leasing, or renovating capital
equipment and/or Vehicles, and undertaking and completing such changes within
the time periods specified by Licensor. Failure to comply with Licensor's
requirements concerning System changes and operational developments shall be a
default under this Agreement.
13. ADVERTISING
13.1 Licensee shall spend not less than one and two-tenths
percent (1.2%) of its Gross Revenue per year on advertising and promotional
activities to promote the System and the Licensed Business and to maintain the
standards prescribed by Licensor. Subject to Licensor's prior approval pursuant
to Section 13.2, all advertising and promotion by Licensee in any medium shall
be conducted in a dignified manner and shall conform to the standards and
requirements as may be specified by Licensor. Licensee shall promptly
discontinue use of any advertising or promotional plans or materials upon
notice of disapproval from Licensor.
13.2 Not less often than once per year, Licensee shall submit
to Licensor a plan of marketing and promotion, detailing Licensee's programs to
market and promote the System in the succeeding year. Such plan shall include
proposed advertising campaigns (including, by way of example and not of
limitation, storyboards for commercials and prepared print ads), promotional
offers, budgets (including specific information on media spending
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and production and other promotional expense) and other relevant information
regarding implementation of the marketing and promotional programs. Licensor
shall review such plan and meet with Licensee to discuss the plan and its
elements. Within a reasonable period of time after such meeting, Licensor shall
notify Licensee of its approval or disapproval of such plan, and if such plan
is disapproved, provide Licensee with details of what aspects of such plan are
disapproved. Licensee shall modify such plan to take into account Licensor's
objections. Licensor's review of such plan and approval or disapproval shall
not be unreasonably withheld or delayed, provided that Licensor reserves all
rights to determine, in its sole discretion, if any aspect of such plan would
adversely affect the System or the Proprietary Marks or Licensor's reputation
and goodwill.
13.3 Licensee shall participate in any and all programs,
campaigns or activities, regular or special, relating to advertising, sales
promotion, marketing, reservations, charge or credit cards, travel industry
commissions, or tour arrangements, or any other program, campaign, or activity
which Licensor may from time to time engage in, conduct, or prescribe, as
reasonably determined by Licensor, for the benefit of System Licensees, and
Licensee shall pay assessments and advances therefor on the same basis as other
System Licensees. The amount of said assessment(s) will be determined
periodically by Licensor, in its sole discretion, and will not exceed two
tenths of one percent (0.2%) of Licensee's Gross Revenue per year. In the event
Licensor imposes any assessment(s), Licensor's expenditure advertising
requirement in Section 13.1 hereof will be reduced by the amount of such
assessment(s). Such assessments may be used by Licensor to defray any of
Licensor's operating expenses and overhead directly related to the
administration, direction or operation of such programs, campaigns, or
activities.
13.4 Licensor may conduct advertising, at its own expense,
and in such manner and to such extent, as Licensor sees fit in its sole
discretion. Licensor does not guarantee the distribution of advertising in any
quantity or format, to or for any particular licensee or licensees, or in any
area which includes a particular licensee's licensed territory. The parties
hereto agree
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that Licensor shall have sole discretion over the placement and format of any
such advertising.
14. COVENANTS
14.1 Licensee covenants that during the term of this
Agreement, except as otherwise approved in writing by Licensor, Licensee shall
devote best efforts to the management and operation of the Licensed Business.
14.2 Licensee covenants that during the term of this
Agreement, except as otherwise approved in writing by Licensor, Licensee shall
not, either directly or indirectly, for itself, or through, on behalf of, or in
conjunction with any person, persons, partnership, corporation or limited
liability company:
14.2.1 Divert or attempt to divert any
business or customer of the Licensed Business or of Licensor or other System
Licensees under the System to any competitor, by direct or indirect inducement
or otherwise, or do or perform, directly or indirectly, any other act injurious
or prejudicial to the goodwill associated with the Proprietary Marks and the
System; and
14.2.2 Own, maintain, advise, help,
manage, invest in, make loans to, be employed by, engage in, or have any
interest in or relationship or association with any business engaged in the
rental of motor vehicles in the United States other than (i) the Licensed
Business, (ii) as is expressly contemplated pursuant to Section 10 hereof, with
respect to other System Licensees or (iii) which is acquired by Licensee and is
immediately converted to operate as part of the Licensed Business, without the
express written consent of Licensor.
14.3 Licensee covenants that, except as otherwise approved in
writing by Licensor, for a continuous, uninterrupted period commencing upon a
transfer permitted under Section 15.2 or 15.3 hereof, or upon the termination
of this Agreement, regardless of the cause for termination, and continuing for
one (1) year thereafter in the event Licensor exercises its rights under
Section 18.9, neither Licensee nor any affiliate of Licensee shall, either
directly or indirectly, for itself, or through, on behalf of, or in conjunction
with
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any person, persons, partnership, or corporation, own, maintain, advise, help,
manage, invest in, make loans to, be employed by, engage in, or have any
interest in any business engaged in the rental of motor vehicles, if such
business is located at or within five (5) miles of any of the Facilities in
operation at the time of such termination without the express written consent
of Licensor. This Section 14.3 shall not be applicable upon the expiration of
the initial term of this Agreement (specified in Section 3.1) if this Agreement
is not renewed pursuant to Section 3.3, or upon the expiration of any renewal
term if this Agreement is renewed pursuant to Section 3.3.
14.4 Licensee covenants that until all Base Fees and
Supplemental Fees and any deferrals thereof have been paid in full, Licensee
shall not pay any dividends to its parent, other than those dividends which are
necessary to cover the customary expenses of a public holding company.
14.5 Sections 14.2 and 14.3 shall not apply to ownership by
Licensee or an affiliate of Licensee of less than five percent (5%) beneficial
interest in the outstanding equity securities of any corporation registered
with the Securities and Exchange Commission pursuant to the Exchange Act and
traded on a national securities exchange or on a national automated quotation
system (a "Publicly-Held Corporation").
14.6 Licensee understands and acknowledges that Licensor
shall have the right, in its sole discretion, to reduce the scope of any
covenant set forth in Sections 14.2 and 14.3 of this Agreement, or any portion
thereof, without Licensee's consent, to be effective immediately upon receipt
by Licensee of Licensor's written notice thereof, and Licensee agrees that it
shall comply forthwith with any covenant as so modified, which shall be fully
enforceable notwithstanding the provisions of Section 29 hereof.
14.7 Licensee expressly agrees that the existence of any
alleged claims it may have against Licensor, whether or not arising from this
Agreement, shall not constitute an affirmative or equitable defense to the
enforcement by Licensor of the terms in this Section 14.
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14.8 Licensee acknowledges that Licensee's violation of the
terms of this Section 14 would result in irreparable injury to Licensor for
which no adequate remedy at law may be available, and Licensee accordingly
consents to the issuance of, and agrees to pay all court costs and reasonable
attorneys' fees incurred by Licensor in obtaining, a temporary restraining
order and/or an injunction prohibiting any conduct by Licensee in violation of
the terms of this Section 14. Licensor will not be required to post any bond to
obtain such injunction.
14.9 All covenants, obligations, and agreements of Licensee
which by their terms or by reasonable implication are to be performed, in whole
or in part, after the termination of this Agreement, shall survive such
termination.
15. TRANSFER OF INTEREST
15.1 Transfer by Licensor and Wizard Co.:
Licensor and Wizard Co. shall have the right to transfer or assign
all, but not part, of this Agreement and Licensor's and Wizard Co.'s rights or
obligations herein to any person or legal entity, and such transfer or
assignment shall constitute a novation of this Agreement whereby any designated
assignee of Licensor and Wizard Co. shall be substituted in place of Licensor
and Wizard Co. and shall become solely responsible for all obligations of
Licensor and Wizard Co. under this Agreement from the date of assignment,
provided, however, that no assignment shall be made by Licensor and Wizard Co.
except to an assignee who, in Licensor's and Wizard Co.'s good faith judgment,
is willing and able to assume the obligations of Licensor and Wizard Co. under
this Agreement.
15.2 Transfer by Licensee when Licensee is not
a Publicly-Held Corporation
15.2.1 Licensee understands and
acknowledges that the rights and duties set forth in this Agreement are
personal to Licensee, and that Licensor has granted this license in reliance on
the representations of Licensee concerning the business skill and financial
capacity of Licensee. Accordingly, when Licensee is not
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a Publicly-Held Corporation, neither Licensee nor any immediate or remote
successor to any part of Licensee's interest in this license nor any
individual(s), partnership, corporation, or other legal entity which directly
or indirectly controls Licensee (for the purpose of this Section 15, the
"transferor"), shall sell, assign, transfer, convey, or give away, in one
transaction or a series of transactions, any interest in this Agreement, in the
rights granted in this Agreement, in Licensee, or in substantially all of the
assets of the Licensed Business, without the prior written consent of Licensor;
provided, however, that the transfer of less than a ten percent (10%) equity
interest in Licensee in a single transaction, which does not have the affect of
transferring control (as "control" is defined in Section 15.2.2 hereof), shall
not require the prior approval of Licensor, provided that Licensee notifies
Licensor in writing of such transfer within thirty (30) days following such
transfer. Any such purported assignment or transfer, by operation of law or
otherwise, not having the written consent of Licensor shall be null and void
and shall constitute a material breach of this Agreement, for which Licensor
may then terminate without opportunity to cure pursuant to Section 17.2 of this
Agreement.
15.2.2 For the purposes of this
Agreement, "control" shall mean the possession, direct or indirect,
individually or with other stockholders, of the power to direct or cause the
direction of the management and policies of a person, corporation, or other
business entity, whether through the ownership of voting securities, by
contract, or otherwise.
15.3 Transfer by Licensee when Licensee is a Publicly-Held
Corporation.
15.3.1 At any time when Licensee is a
Publicly-Held Corporation, Licensee may not sell, assign, transfer, convey, or
give away, in one transaction or a series of transactions, any interest in this
Agreement, in the rights granted in this Agreement, in Licensee, or in
substantially all of the assets of the Licensed Business, without the prior
written consent of Licensor; provided, however, that any transfer that does not
constitute a Change of Control Event, shall not require the prior approval of
Licensor. Any such purported assignment or transfer, by operation of law or
otherwise,
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without the written consent of Licensor shall be null and void and shall
constitute a material breach of this Agreement, for which Licensor may then
terminate without opportunity to cure pursuant to Section 17.2 of this
Agreement.
15.4 Licensor's Purchase Right:
15.4.1 If any party (the "Seller") who
holds any interest in this Agreement, in Licensee (the transfer of which
interest would have the effect of causing a change of control in the ownership
of the Licensed Business), or in substantially all of the assets of the
Licensed Business, desires to accept any bona fide offer from a third party to
purchase such interest or assets, the Seller shall notify Licensor in writing
of the terms of each such offer, and Licensor shall have the right and option,
exercisable within thirty (30) days after receipt of such written notification,
to send written notice to the Seller that Licensor intends to purchase the
Seller's interest or assets on the same terms and conditions offered by the
third party. In the event that Licensor elects to purchase the Seller's
interest or assets, the closing on such purchase must occur within one hundred
and eighty (180) days from the date of notice to the seller of the election to
purchase by Licensor or such later date as may have been provided in the offer.
If Licensor does not exercise its right to purchase, any material change in the
terms of the third party's offer prior to closing shall constitute a new offer
subject to the same rights of first refusal by Licensor as in the case of the
initial offer. Failure of Licensor to exercise the option afforded by this
Section 15.4 shall not constitute a waiver of any other provision of this
Agreement, including all of the requirements of this Section 15, with respect
to a proposed transfer.
15.4.2 In the event the consideration,
terms, or conditions offered by the Seller are such that Licensor may not
reasonably be required to furnish the same consideration, terms, or conditions,
then Licensor may purchase the interest or assets proposed to be sold for the
reasonable equivalent in cash. If the parties cannot agree within a reasonable
time on the reasonable cash equivalent of the consideration, and upon the terms
or conditions offered by the third party, each of the parties shall designate
an independent appraiser and
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their determination shall be binding upon the parties. If the appraisers cannot
agree within a reasonable time upon the reasonable cash equivalent of the
consideration, they shall designate a third appraiser whose determination shall
be binding upon the parties. Each party shall bear the costs of its designated
appraiser, and the parties shall share equally the costs of the third
appraiser.
15.5 Non-Waiver of Claims:
Licensor's consent to a transfer of any interest in Licensee, the
Licensed Business, this Agreement, or in the license granted hereby shall not
constitute a waiver of any claims Licensor may have against the transferor, nor
shall it be deemed a waiver of Licensor's right to demand exact compliance with
any of the terms of this Agreement by the transferee.
16. OTHER REQUIREMENTS
16.1 Licensee shall comply with the following
requirements:
16.1.1 Copies of Licensee's Articles of
Incorporation or charter, its Bylaws and other governing documents shall be
furnished to Licensor prior to execution of this Agreement, and any amendments
thereto shall be furnished within ten (10) days of effecting such amendment;
and
16.1.2 Licensee shall not permit its
corporate charter to be revoked or suspended in the state in which Licensee is
organized, or the state or states in which Licensee is qualified to be
business.
17. DEFAULT AND TERMINATION
17.1 Automatic Default and Termination:
17.1.1 Licensee shall be in default under
this Agreement and all rights granted herein shall automatically terminate
without notice to Licensee if Licensee shall become insolvent or if a voluntary
bankruptcy case or proceeding is filed by Licensee or a proceeding is commenced
by Licensee under any provision of Title 11 of the United States Code or under
any other
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bankruptcy or insolvency law, including, but not limited to, assignments for
the benefit of creditors, moratoria (formal or informal), compositions, or
proceedings seeking reorganization, arrangements, or other similar relief or
the Licensee consents to the entry of an order for relief against it in an
involuntary case or an involuntary bankruptcy case is filed with respect to
Licensee and such involuntary case is not dismissed within 60 days of such
filing; or if a receiver or other custodian (permanent or temporary) of
Licensee's assets or property, or any part thereof, is appointed by any court
of competent jurisdiction; or if execution is levied against Licensee's
business or property; or if suit to foreclose any lien or mortgage against the
premises or equipment of the Licensed Business is instituted against Licensee
and not dismissed within sixty (60) days; or if the real or personal property
of the Licensed Business shall be sold after levy thereupon by any sheriff,
marshal, or constable; provided, that, this provision shall not apply to
proceedings related to any immaterial assets or property of the Licensee.
17.2 Non-Curable Defaults/Termination Upon
Notice:
17.2.1 Licensee shall be in default hereunder, and
Licensor and, with respect to the Proprietary Marks, Wizard Co. may, at their
option, terminate this Agreement and all rights granted hereunder, without
affording Licensee any opportunity to cure the default, upon not less than
thirty (30) days prior written notice, upon the occurrence of any of the
following events:
17.2.2 If Licensee purports to transfer
any rights or obligations under this Agreement, the license granted hereby, or
any interest in Licensee to any third party without compliance with the terms
of Section 15 of this Agreement;
17.2.3 If Licensee fails to comply with
the covenants in Section 14.2 hereof;
17.2.4 If, contrary to Sections 19 or 20
hereof, Licensee discloses or divulges the contents of the Manual or other
trade secret or confidential information provided to Licensee by Licensor or
obtained by Licensee in its operation of the Licensed Business prior to the
Transfer;
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17.2.5 If Licensee challenges Licensor's
right to license or the ownership of the Proprietary Marks; or
17.2.6 If Licensee has received three or
more prior Notices of Termination (as defined) pursuant to Section 17.3 hereof
for the same, similar, or different defaults in any twelve-month period,
whether or not such defaults have been cured after notice.
17.3 Curable Defaults/Termination Upon Notice:
17.3.1 Except as provided in Sections
17.1 and 17.2 of this Agreement, Licensee shall have thirty (30) days (ten (10)
days in the case of a payment default described in Section 17.3.1.1) after its
receipt from Licensor of a written notice of termination ("Notice of
Termination") within which to remedy any default hereunder and to provide
evidence thereof to Licensor. Other than with respect to payment defaults, in
the event such default is not cured within 30 days but the Licensee is
diligently making efforts to cure such default, the Licensee shall have an
additional 60 days to cure such default. If any such default is not cured
within that time, or such longer period as applicable law may require, this
Agreement shall terminate without further notice to Licensee effective
immediately upon the expiration of the period specified above or such longer
period as applicable law may require. Licensee shall be in default hereunder
for any failure to comply substantially with any of the requirements imposed by
this Agreement, as it may from time to time reasonably be supplemented by the
Manual or otherwise in writing, or for any failure to carry out the terms of
this Agreement in good faith. Such defaults shall include, without limitation,
the occurrence of any of the following events:
17.3.1.2 If Licensee fails, refuses, or neglects
to promptly pay when due any monies owing to Licensor or its affiliates under
this Agreement, the Computer Services Agreement, the Reservation Agreement, the
Lease Agreements or the Cost Sharing Agreement, or to submit, when due, the
financial information or any reports required by
Licensor under this Agreement;
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17.3.1.3 If Licensee misuses or makes any
unauthorized use of the Proprietary Marks or otherwise materially impairs the
goodwill associated therewith or Licensor's rights therein;
17.3.1.4 If Licensee engages in any business or
markets any service or product under a name or mark or uses trade dress or
styles which, in Licensor's opinion, is confusingly similar to the Proprietary
Marks; or
17.3.1.5 If Licensee fails to maintain material
compliance with the standards or procedures prescribed by Licensor in this
Agreement, the Manual, or otherwise in writing.
17.3.1.6 With respect to any Facility, if the
Licensee fails to maintain compliance with the standards or procedures
prescribed by Licensor in this Agreement, the Manual, or otherwise in writing
at such Facility.
17.4 Licensee may only terminate this Agreement, with cause,
after giving Licensor written notice of default, specifying the basis therefore
and Licensor fails to cure such default within ninety (90) days after notice is
given, and by providing written notice to Licensor at least one hundred and
eighty (180) days prior to the date Licensee intends to terminate this
Agreement.
18. OBLIGATIONS UPON TERMINATION
Upon termination or expiration of this Agreement, all rights granted
hereunder to Licensee shall forthwith terminate, and:
18.1 Licensee shall immediately cease to operate the Licensed
Business and shall not thereafter, directly or indirectly, represent itself to
the public or hold itself out as a present or former licensee of Licensor.
18.2 Licensee shall immediately and permanently cease to use,
by advertising or in any other manner whatsoever, any confidential methods,
procedures, or techniques associated with the System, and all
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Proprietary Marks, including any such Proprietary Marks used in the Licensee's
or any of its subsidiaries' corporate names, and distinctive forms, slogans,
signs, symbols, or devices associated with the System. In particular, without
limitation, Licensee shall cease to use all signs, equipment, advertising
materials, stationery, forms, and any other articles which display the
Proprietary Marks; provided, however, that this Section 18.2 shall not apply to
the operation by Licensee of another Avis vehicle rental business pursuant to
another agreement between Licensor and Licensee which is then in effect.
18.3 Licensee shall take such action as may be necessary to
cancel any assumed name or equivalent registration which contains the names
"Avis," "Avis Rent A Car," or any other service mark or trademark of Licensor;
and Licensee shall furnish Licensor with evidence satisfactory to Licensor of
compliance with this obligation within fifteen (15) days after termination or
expiration of this Agreement.
18.4 Licensee agrees, in the event it continues to operate or
subsequently begins to operate any other business, not to use any reproduction,
counterfeit, phonetic equivalent copy, or colorable imitation of the
Proprietary Marks either in connection with such other business or the
promotion thereof, which is likely to cause confusion, mistake, or deception,
or which is likely to dilute Licensor's rights in and to the Proprietary Marks;
and further agrees not to utilize any designation of origin or description or
representation which falsely suggests or represents an association or
connection with Licensor or the Proprietary Marks which constitutes dilution or
unfair competition.
18.5 Licensee shall promptly pay all sums owing to Licensor
and its subsidiaries and affiliates. In the event of termination due to any
default of Licensee or Licensee's termination of this Agreement without legal
cause, such sums shall include all damages, costs, and expenses, including
reasonable attorneys' fees, incurred by Licensor as a result of the default,
which obligation shall give rise to and remain a lien in favor of Licensor
against any and all of the personal property, equipment, inventory, and
fixtures owned by Licensee and on all facilities operated hereunder at the
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time of default, until paid in full.
18.6 Licensee shall promptly pay to Licensor all sums owing
to other System Licensees and to third parties, if such sums are typically paid
to Licensor, or if nonpayment will affect the on-going operations of Licensee's
terminated business. Such sums owing to third parties shall include, but not be
limited to, travel agent commissions, telephone bills, rent, airport concession
fees, and frequent flier fees.
18.7 Licensee shall immediately turn over to Licensor the
Manual, any and all other confidential and proprietary manuals, records, files,
instructions, bulletins and other materials relating to the operation of the
Licensed Business which are in Licensee's possession, and all copies thereof
(all of which are acknowledged to be Licensor's property).
18.8 Licensee shall notify the telephone companies serving
the Facilities and all listing agencies of the termination of Licensee's right
to use any telephone number and any regular, classified, or other telephone
directory listings associated with the Proprietary Marks and shall authorize
transfer of same to or at the direction of Licensor. Licensee acknowledges that
as between Licensor and Licensee, Licensor has the sole rights to and interest
in all telephone numbers and directory listings associated with the Proprietary
Marks. Licensee authorizes Licensor, and hereby appoints Licensor and any
officer of Licensor as Licensee's attorney-in-fact, which power shall be
coupled with an interest, to direct the telephone company and all listing
agencies to transfer such telephone numbers and directory listings to Licensor,
or at Licensor's direction, should Licensee fail or refuse to do so, the
telephone company and all listing agencies may accept such direction of this
Agreement as conclusive of the exclusive rights of Licensor in and to such
telephone numbers and directory listings and Licensor's authority to direct
their transfer. Licensee shall furnish to Licensor within ten days after the
effective date of termination of this Agreement evidence satisfactory to
Licensor of Licensee's compliance with the obligations contained in this
Section 18.8. Licensor may provide a copy of this Section to any telephone
service provider as proof of its authority.
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18.9 Licensee shall, at Licensor's option which shall be
exercised within 30 days from termination, sell all of the Licensee's interest
in its assets, including, without limitation, the Licensee's fleet, equipment
and real estate, used in connection with the Licensed Business at a value
agreed upon by Licensee and Licensor within thirty (30) days of the exercise of
such option. To the extent that Licensee and Licensor are unable to agree on
the value of such assets within such thirty (30) day period, then a nationally
recognized investment banking firm selected by Licensee and a nationally
recognized investment banking firm selected by Licensor shall attempt to agree
on the value of such assets. If such investment banking firms are unable to
agree on the value of such assets within thirty (30) days of such matter being
referred to them, then the matter shall be referred to a third nationally
recognized investment banking firm which shall be independent of Licensee and
its affiliates and Licensor and its affiliates and mutually acceptable to
Licensee and Licensor, and which shall determine the value of such assets
within 30 days of the matter being referred to it, which shall be final,
binding and conclusive on the parties hereto. The fees and disbursements of the
investment banking firms initially selected by Licensee and Licensor to
determine the value of the assets shall be borne by the party selecting such
investment banking firm and the fees and disbursements of independent
investment banking firms selected to resolve the dispute of the initial two
investment banking firms shall be borne equally by Licensee and Licensor. In
acting under this Section 18.9, the investment banking firms referred to herein
shall be entitled to the privileges and immunities of arbitrators. In the event
Licensor elects to purchase the Licensee's assets, the Licensee shall:
18.9.1 Assign to Licensor, or Licensor's
designee, Licensee's Airport Concession Agreement(s). Licensee shall execute
all documents reasonably necessary to do such other acts and steps necessary to
transfer the rights under each Airport Concession Agreement, subject to
approval by the airport authority party to such agreement.
18.9.2 Assign to Licensor any interest which
Licensee has in any lease or sublease for any of the premises or Facilities of
the Licensed Business.
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18.10 In the event Licensor does not elect to exercise its
option to acquire the assets of the Licensee pursuant to this Section 18.9,
Licensee, within the later of thirty (30) days after termination of this
Agreement or thirty (30) days after receipt of notice that Licensor will not
exercise its option pursuant to Section 18.9 hereof but in no event later than
sixty (60) days after termination, shall make such modifications or alterations
to the facilities operated hereunder (including, without limitation, assigning
the telephone number to Licensor, and changing the color scheme, and other
distinctive design features) as may be necessary to prevent the operation of
any business thereon by itself or others in derogation of this Section 18.10,
and shall make such specific additional changes thereto as Licensor may
reasonably request for that purpose.
18.11 Licensee shall transfer immediately to Licensor all
unused current versions of Avis Standard Rental Agreements and forms, signage,
uniforms, and any other equipment or supplies bearing the Proprietary Marks.
Licensor shall purchase any supplies useable by Licensor at Licensee's cost,
based on the most recent invoices received by Licensee.
18.12 Licensee acknowledges that any failure to comply with
the requirements of this Section 18 will cause Licensor irreparable injury, and
Licensee shall pay to Licensor all damages, costs, and expenses, including,
reasonable attorneys' fees, incurred by Licensor subsequent to the termination
of the license herein granted in obtaining injunctive or other relief for the
enforcement of any provisions of this Section 18 without bond.
19. CONFIDENTIAL OPERATING MANUAL
19.1 In order to protect the reputation and goodwill of
Licensor and to maintain uniform standards of operation under the Proprietary
Marks, Licensee shall conduct its business in accordance with the Manual, which
may consist of books, manuals, bulletins, compilations and other materials
relating to operations under the System, including additions and updates
thereto, as published, or disseminated through any means including electronic
or computer systems, by Licensor to Licensee from time to time. Without
limiting the foregoing, the
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Manual shall consist of, among other things, manuals, bulletins, notices,
letters, information, and other material pertaining to (a) the operation of the
Wizard System, and (b) the Avis Intercity Rules and the Rent It Here Leave It
There program. One copy of the Manual shall be furnished to Licensee on loan
for the term of this Agreement for each Facility or Rental Location.
19.2 Licensee shall at all times treat the Manual and the
information contained therein as confidential, and shall use all reasonable
efforts to maintain such information as secret and confidential. Licensee shall
not at any time copy, duplicate, record, or otherwise reproduce the Manual in
whole or in part, other than for use at the Licensee's Facilities, and shall
not otherwise make the Manual available to any unauthorized person.
19.3 The Manual shall at all time remain the sole property of
Licensor and shall at all times be kept in a secure place at Licensee's primary
office or facility.
19.4 Licensor may from time to time revise the Manual to
reflect changes in System standards, and Licensee expressly agrees to comply
with each new or changed standard. Licensor agrees that any such changes in the
Manual or changes issued through written or electronic bulletins shall be
applied equally to Licensee and to other System Licensees, to the extent
Licensor has the legal authority to impose such requirements on other System
Licensees.
19.5 Licensee shall at all times insure that its copy of the
Manual is kept current and up to date, and in the event of any dispute as to
the contents of the Manual, the terms of the master copy of the Manual
maintained by Licensor at Licensor's home office shall be controlling.
20. CONFIDENTIAL INFORMATION
20.1 Licensee shall not, during the term of this Agreement or
at any time after termination, communicate, divulge, or use for the benefit of
any other person, persons, partnership, association, or corporation any
confidential information, knowledge, or know-how
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concerning the methods of operation of the Licensed Business which may be
communicated to Licensee, or of which Licensee may be apprised, by virtue of
Licensee's operation under this Agreement or as a result of Licensor's
operation of the System prior to the Transfer. Licensee shall divulge such
confidential information only as required by law or to those of its employees
who must have access to such confidential information on a need-to-know basis
in order to operate the Licensed Business. Any and all information, knowledge,
know-how, and techniques which Licensor designates as confidential shall be
deemed confidential for purposes of this Agreement.
20.2 Licensee acknowledges that any failure to comply with
the requirements of Section 20.1 will cause Licensor irreparable injury, and
Licensee agrees to pay all court costs and reasonable attorneys' fees incurred
by Licensor in obtaining specific performance of, or an injunction against
violation of, the requirements of Section 20.1.
21. ACCOUNTING AND RECORDS
21.1 Licensee shall maintain, and shall preserve for at least
five (5) years from the dates of their preparation, full, complete, and
accurate books, records, and accounts in accordance with generally accepted
accounting principles and in the form and manner as may be prescribed by
Licensor from time to time in the Manual or otherwise in writing, including,
but not limited to, requirements that Licensor may reasonably prescribe with
regard to computer hardware and software, and input of and access to such
information in the Wizard System.
21.2 Licensee shall submit to Licensor within twenty (20)
days following the end of each month, a monthly business and transactions
report setting forth such data for such month then ended as Licensor may
reasonably require along with Licensee's payment of all monthly fees and other
payments required under Section 4 hereof.
21.3 Within forty-five (45) days following each calendar
quarter, Licensee shall, at Licensee's expense, submit to Licensor an unaudited
quarterly profit
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and loss statement and balance sheet in a form prescribed by and satisfactory
to Licensor, signed by Licensee attesting that it is true and correct.
21.4 Licensee shall, at its expense, provide to Licensor
within ninety (90) days after the end of each fiscal year of the Licensed
Business, audited financial statements, including a profit and loss statement,
a statement of cash flows, and balance sheet, certified by an independent
certified public accountant satisfactory to Licensor, showing the results of
operations of the Licensed Business during said fiscal year, and the comparable
prior year period.
21.5 Licensee shall also submit to Licensor, for review or
audit, such other forms, reports, records, information, and data as Licensor
may reasonably designate, in the form, and at the times and places, including,
if applicable, by telecommunications data transmission methods, as are
reasonably required by Licensor, upon request and as specified from time to
time in the Manual or otherwise in writing.
21.6 Licensor or its designated agents shall have the right
at all reasonable times to examine and copy, at Licensor's expense, the books,
records, microfiche, computer files, other computerized or electronically
sorted data, and business tax returns of Licensee. Licensor shall also have the
right, at any time, to have an independent audit made of the books of Licensee.
If an inspection by Licensor should reveal that any Gross Revenue has been
understated in any report to Licensor, then Licensee shall immediately upon
demand, reimburse Licensor for the costs incurred in such inspection, and pay
to Licensor all royalties and other required payments due on the amount
understated, in addition to interest from the date such royalties and other
payments were due until paid, at the rate of the Prime Rate plus three and
one-half percent (3.5%) per annum or the maximum rate permitted by law,
whichever is less. The foregoing remedies shall be in addition to any other
remedies Licensor may have.
22. INSURANCE
22.1 Licensee shall maintain in full force and effect, at
Licensee's expense, an insurance policy or
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policies protecting Licensee and Licensor (including its affiliates), and their
officers, directors, partners, and employees (Licensee, Licensor, Wizard Co.
and HFS shall be named insureds), against any claims for loss, liability,
personal injury, death, property damage, breach of contract, or any expense
whatsoever arising out of or in connection with the Licensed Business or
occurring upon the premises where the Facilities are located.
22.2 Such policy or policies shall be written by an insurance
company satisfactory to Licensor or through self insurance by Licensee, which
self insurance retention shall not exceed Five Million Dollars ($5,000,000), in
accordance with standards and specifications set forth in the Manual or
otherwise in writing, and shall include, at a minimum, the following:
22.2.1 Commercial general liability
insurance covering the premises, Facilities and operations of the Car Rental
Business, including coverage for public liability, garage liability, and
extended liability endorsements (including contractual liability, property
damage, products liability, completed operations, and fire legal liability
coverage), with combined single limits per occurrence, primary and excess
combined, of not less than Fifty Million Dollars ($50,000,000). Any pollution
exclusion must include an exception for hostile fire perils.
22.2.2 Comprehensive motor vehicle
liability coverage for both owned and non-owned vehicles, with primary and
excess limits of not less than Fifty Million Dollars ($50,000,000) combined
single limit.
22.2.3 Employer's liability, workers'
compensation, and such other insurance as may be required by statute or rule of
the state or localities in which any Licensed Business is located and operated.
22.2.4 Property and business interruption
insurance, or similar insurance coverage, including coverage for fire,
lightning, the extended coverages, vandalism, malicious mischief, and payments
to Licensor for loss of royalties and other monthly payments specified in
Section 4 hereof, as a result of any interruption in Licensee's business
operations at any
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Facility.
22.3 Licensee's obligation to obtain and maintain the
foregoing policy or policies in the amounts specified shall not be limited in
any way by reason of any insurance which may be maintained by Licensor, nor
shall Licensee's performance of that obligation relieve Licensee of liability
under the indemnity provisions set forth in Section 25 of this Agreement.
22.4 Upon obtaining the insurance required by this Agreement
and on each policy renewal date thereafter, Licensee shall promptly submit
evidence of satisfactory insurance to Licensor, together with, upon request,
copies of all policies and policy amendments. The evidence of insurance shall
include a statement by the insurer that the policy or policies will not be
cancelled or materially altered without at least thirty (30) days' prior
written notice to Licensor, or such other period of time as required by
applicable state law.
22.5 Should Licensee, for any reason, fail to procure or
maintain the insurance required by this Agreement, as such requirements may be
revised from time to time by Licensor in the Manual or otherwise in writing,
Licensor shall have the right and authority (without, however, any obligation
to do so), immediately to procure such insurance and to charge same to
Licensee, which charges, together with a fee for Licensor's reasonable costs
and expenses in so acquiring the policy or policies, shall be payable by
Licensee immediately upon demand.
22.6 Licensor shall have the right, in its sole discretion,
to require Licensee to maintain additional or different types of insurance, or
to increase the minimum limits of liability in response to identification of
new, changed, or increased risks, upon written notice to Licensee not less than
thirty days prior to such new, changed, or amended requirement.
22.7 All excess and umbrella policies shall be "follow form."
No "cut through" endorsements are acceptable. All insurance carriers must be
rated "A" or better by A.M. Best and be approved by Licensor.
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23. PROPRIETARY MARKS
23.1 Wizard Co. represents with respect to the Proprietary
Marks that:
23.1.1 Wizard Co., an affiliate of Licensor, is
the owner of all right, title, and interest in and to the Proprietary Marks
with respect to operations under the System and Licensor has been granted
the right to use and to grant others the right to use the Proprietary Marks;
and
23.1.2 Wizard Co. has taken and will take
all steps reasonably necessary to preserve and to protect its right and
interest in and to the Proprietary Marks and preserve the goodwill of the
Proprietary Marks.
23.2 With respect to Licensee's authorized use of the
Proprietary Marks pursuant to this Agreement, Licensee agrees that:
23.2.1 Licensee shall use only the Proprietary
Marks designated by Licensor in Schedule 3 hereto, as amended from time to
time, and shall use them only in the manner authorized and permitted by
Licensor or Wizard Co.;
23.2.2 Licensee shall use the Proprietary Marks
only for the operation of the Licensed Business at the Licensed Locations
specified in this Agreement;
23.2.3 Unless otherwise authorized or required
by Licensor, Licensee shall operate and advertise the Licensed Business only
under the names "AVIS" and "AVIS RENT A CAR," without prefix or suffix;
23.2.4 Licensee shall identify itself as the owner
of the Licensed Business in conjunction with any use of the Proprietary Marks,
including, but not limited to, such use in or on the Standard Rental
Agreements, automobile registrations and permits, stationery, invoices, order
forms, receipts, all contracts, in all dealings and transactions with third
parties, and in any public appearances, as well as at such conspicuous
locations at the Facilities or in Vehicles as Licensor shall designate in
writing. The form and content of such identification shall comply with
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standards set forth in the Manual;
23.2.5 Licensee's right to use the Proprietary
Marks is limited to such uses as are authorized under this Agreement, and any
unauthorized use thereof shall constitute a willful infringement of Licensor's
rights;
23.2.6 Licensee shall not use the Proprietary
Marks to incur any obligation or indebtedness on behalf of Licensor;
23.2.7 Licensee shall comply with Licensor's
instructions in filing and maintaining the requisite trade name or fictitious
name registrations, and shall execute any documents deemed necessary by
Licensor to obtain protection for the Proprietary Marks or to maintain their
continued validity and enforceability.
23.3 With respect to actual or potential litigation concerning
the Proprietary Marks:
23.3.1 Licensee shall promptly notify
Licensor and Wizard Co. of any unauthorized use of the Proprietary Marks or
marks confusingly similar thereto as well as any challenge to the Proprietary
Marks of which it becomes aware. Licensee acknowledges that Licensor and Wizard
Co. have the sole right to direct and control any administrative proceeding or
litigation involving the ownership or validity of the Proprietary Marks,
including any settlement thereof. Licensor has the right, but not the
obligation, to take action against uses by others that may constitute
infringement of the Proprietary Marks.
23.3.2 In the event Licensor undertakes
any litigation relating to the Proprietary Marks, Licensee agrees to execute
any and all documents and to do such acts and things as may, in the opinion of
Licensor, be necessary to carry out such litigation, including but not limited
to becoming a nominal party to any such litigation.
23.4 Licensee expressly understands and acknowledges that:
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23.4.1 Wizard Co. is the owner of all right,
title, and interest in and to the Proprietary Marks and the goodwill associated
with and symbolized by them, and Licensor has the right to use and license
others to use the Proprietary Marks;
23.4.2 The Proprietary Marks are valid and serve
to identify the System and those who are licensed to operate a Licensed
Business as part of the System;
23.4.3 Licensee shall not directly or indirectly
contest the validity of, or Wizard Co.'s ownership of, the Proprietary Marks,
or Wizard Co.'s right to use and license others to use the Proprietary Marks;
23.4.4 Licensee's use of the Proprietary
Marks pursuant to this Agreement does not give Licensee any ownership interest
or any security, equitable, beneficial or other interest in or to Proprietary
Marks;
23.4.5 Any and all goodwill arising from
Licensee's use of the Proprietary Marks in the Licensed Business under the
System shall inure solely and exclusively to Wizard Co.'s benefit, and upon
termination or expiration of this Agreement and the license granted hereby, no
monetary amount shall be assigned as attributable to any goodwill associated
with Licensee's use of the system or of the Proprietary Marks;
23.4.6 The license of the Proprietary Marks
granted hereby to Licensee is non-exclusive except as specifically set forth in
Section 2.2; and
23.4.7 Wizard Co. reserves the right to
substitute different Proprietary Marks for use in identifying the System and
the businesses operating thereunder if Wizard Co.'s currently owned Proprietary
Marks no longer can be used, or if Licensor, in its sole discretion, determines
that substitution of different Proprietary Marks could be beneficial to the
System.
24. TAXES, PERMITS AND INDEBTEDNESS
24.1 Licensee shall promptly pay when due all taxes levied
or assessed, including, without limitation,
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unemployment and sales taxes, and all accounts and other indebtedness of every
kind incurred by Licensee in the conduct of the Licensed Business. Licensee
shall pay to Licensor an amount equal to any sales tax, gross receipts tax, or
similar tax imposed on Licensor with respect to any payments to Licensor
required under this Agreement, except to the extent such tax is credited
against income tax otherwise payable by Licensor.
24.2 In the event of any bona fide dispute as to liability
for taxes assessed or other indebtedness, Licensee may contest the validity or
the amount of the tax or indebtedness in accordance with procedures of the
taxing authority or applicable law; provided, however, in no event shall
Licensee permit a tax sale or seizure by levy of execution or similar writ or
warrant, or attachment by a creditor, to occur against any of the Facilities or
premises, or any improvements thereon.
24.3 Licensee shall comply with all federal, state, and local
laws, rules, and regulations, and shall timely obtain any and all permits,
certificates, or licenses necessary for the full and proper conduct of the
Licensed Business generally and at each Facility, including without limitation,
licenses to do business, fictitious name registrations, sales tax permits, fire
clearances, and Vehicle registrations.
24.4 Licensee shall notify Licensor in writing within five(5)
days of the commencement and resolution of any action, suit, or proceeding, and
of the issuance of any order writ, injunction, award, or decree of any court,
agency, or other governmental instrumentality, which may adversely affect the
operation or financial condition of the Licensed Business.
25. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
25.1 It is understood and agreed by the parties hereto that
this Agreement does not create a fiduciary relationship between them; that
Licensee shall be an independent contractor; and that nothing in this Agreement
is intended to constitute either party an agent, legal representative,
subsidiary, joint venturer, partner, employee, or servant of the other for any
purpose whatsoever.
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25.2 During the term of this Agreement and any renewal
hereof, Licensee shall hold itself out to the public as an independent
contractor operating the Licensed Business and each Licensed Location pursuant
to a license from Licensor. Licensee agrees to take such affirmative action as
may be necessary to do so, including, without limitation, exhibiting a notice
of that fact in a conspicuous place at each Rental Location or other Facility
as may be specified by Licensor, the content of which Licensor reserves the
right to specify.
25.3 It is understood and agreed that nothing in this
Agreement authorizes Licensee to make any contract, agreement, warranty, or
representation on Licensor's behalf, or to incur any debt or other obligation
on Licensor's name; and, that Licensor shall in no event assume liability for,
or be deemed liable as a result of, any such action, or by reason of any act or
omission of Licensee in its conduct of the Licensed Business or for any claim
or judgment arising therefrom against anyone. Licensee shall indemnify and hold
harmless Licensor and Licensor's officers, directors, employees, affiliates,
agents, successors and assigns against any and all liabilities, claims,
demands, causes of action, damages, costs, expenses and amounts of any type
whatsoever, including, but not limited to environmental claims, whether
expended in settlement, in attorneys' fees' or however expended or disbursed,
which arise directly or indirectly from, as a result of, or in connection with
Licensee's operation of the Licensed Business and each Facility, or in
Licensee's dealings with third parties concerning said Business, this
Agreement, the System, or the Proprietary Marks, including claims in which
Licensor's negligence is alleged. In addition, Licensee shall, at Licensor's
request, defend, at Licensee's expense, Licensor, and Licensor's officers,
directors, employees, affiliates, agents, successors and assigns against such
claims, demands and causes of action; provided, however, that Licensee shall
relinquish such defense to Licensor immediately upon Licensor's request,
although Licensee shall remain obligated to pay Licensor's defense costs. In no
event may Licensee enter into any settlement of any such claim on behalf of
Licensor without Licensor's approval. Any and all claims for which
indemnification is sought hereunder shall be commenced within one (1) year from
the occurrence of the facts giving rise to such
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claim or action, or such claim or action shall be barred.
25.4 It is understood and agreed that Licensor shall
indemnify and hold harmless Licensee and Licensee's officers, directors,
employees, affiliates, agents, successors and assigns against any and all
liabilities, claims, demands, causes of action, damages, costs, expenses and
amounts of any type whatsoever, which arise from any action against such
parties for infringement relating to the use of the Proprietary Marks in
compliance with System Standards.
26. APPROVALS AND WAIVERS
26.1 Whenever this Agreement requires the prior approval or
consent of Licensor, Licensee shall make a timely written request to Licensor
therefor; and such approval or consent shall be obtained in writing.
26.2 Licensor makes no warranties or guarantees upon which
Licensee may rely, and assumes no liability or obligation to Licensee, by
providing any waiver, approval, consent, or suggestion to Licensee in
connection with this Agreement, or by reason of any neglect, delay, or denial
of any request therefor.
26.3 No delay, waiver, omission, or forbearance on the part
of Licensor to exercise any right, option, duty, or power arising out of any
breach of default by Licensee, or by any other licensee, of any of the terms,
provisions, or covenants hereof, shall constitute a waiver by Licensor to
enforce any such right, option, or power as against Licensee, or as to
subsequent breach or default by Licensee. Subsequent acceptance by Licensor of
any payments due to it hereunder shall not be deemed to be a waiver by Licensor
of any preceding breach by Licensee of any terms, covenants, or conditions of
this Agreement.
27. NOTICES
27.1 Any and all notices required or permitted under this
Agreement shall be in writing and shall be delivered personally, by a
recognized overnight delivery service, or mailed by certified or registered
mail, return receipt requested, to the respective parties at the following
addresses unless and until a different
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address has been designated by written notice to the other party:
Notices to Licensor: HFS Car Rental, Inc.
c/o HFS Incorporated
6 Sylvan Way
Parsippany, New Jersey 07054
Attention: General Counsel
Notices to Licensee: Avis Rent A Car System, Inc.
900 Old County Road
Garden City, New York 11530
Attention: General Counsel
Notices to Wizard Co.: Wizard Co., Inc.
c/o HFS Incorporated
6 Sylvan Way
Parsippany, NJ 07054
Attention: General Counsel
Any notice by certified or registered mail or by an overnight delivery service
shall be deemed to have been given at the date and time of mailing. Notice
personally delivered or delivered by an overnight delivery service shall be
deemed to have been given at the date and time when received by Licensee or
Licensor.
27.2 Any and all notices required or permitted under this
Agreement as provided for in this Section are designed to serve as a notice
only to the party to whom sent. If a copy of a notice is to be sent to a third
party, this requirement is not a condition precedent but only informational.
28. ENTIRE AGREEMENT
This Agreement, the documents referred to herein, and the Attachments
hereto, constitute the entire, full, and complete Agreement between the parties
concerning the subject matter hereof, and supersede any and all prior
agreements, representations, and arrangements between the parties whether oral
or written, and no other representation has induced Licensee to execute this
Agreement.
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29. MODIFICATIONS OF AGREEMENT
Except for those permitted to be made unilaterally by Licensor
hereunder, no amendment, change, or variance from this Agreement shall be
binding on the parties unless mutually agreed to by the parties and executed by
themselves or their authorized officers or agents in writing.
30. SEVERABILITY AND CONSTRUCTION
30.1 Except as expressly provided to the contrary herein,
each section, part, term, and provision of this Agreement shall be considered
severable; and if, for any reason, any section, part, term, or provision herein
is determined to be invalid and contrary to, or in conflict with, any existing
or future law or regulation by a court or agency having valid jurisdiction,
such shall not impair the operation of, or have any other effect upon, such
other sections, parts, terms, and provisions of this Agreement as may remain
otherwise intelligible; and, the latter shall continue to be given full force
and effect and bind the parties hereto; and said invalid sections, parts,
terms, or provisions shall be deemed not to be a part of this Agreement.
30.2 Notwithstanding anything to the contrary herein, nothing
in this Agreement is intended, nor shall be deemed, to confer upon any person
or legal entity other than Licensor, Licensee, their officers, directors,
partners, and such of their respective successors and assigns as may be
contemplated by Section 15 hereof, any rights or remedies under or by reason of
this Agreement.
30.3 The parties agree that each of the foregoing provisions
of this Agreement, including, but not limited to, the covenants set forth in
Section 14 hereof, shall be construed as independent of any other covenant or
provision of this Agreement. If all or any portion of this Agreement is held
unreasonable or unenforceable by a court or agency having valid jurisdiction in
an unappealed final decision to which Licensor is a party, Licensee expressly
agrees to be bound by any lesser provision subsumed within the terms of such
Agreement, including, but not limited to, the covenants set forth in Section 14
hereof, that imposes the maximum duty permitted by law, as if the resulting
provision were separately
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stated in and made a part of this Agreement.
30.4 All captions in this Agreement are intended solely for
the convenience of the parties, and none shall be deemed to affect the meaning
or construction of any provision hereof.
30.5 All references herein to the masculine, neuter, or
singular shall be construed to include the masculine, feminine, neuter, or
plural, where applicable, and all acknowledgments, promises, covenants,
agreements, and obligations herein made or undertaken by Licensee shall be
deemed jointly and severally undertaken by all the parties hereto on behalf of
Licensee.
31. APPLICABLE LAW; DISPUTE RESOLUTION
31.1 This Agreement takes effect upon its acceptance and
execution by the parties hereto in New York, and shall be interpreted and
construed under the laws of the State of New York. In the event of any conflict
of law, the laws of New York shall prevail, without regard to, and without
giving effect to, the application of New York conflict of law rules. If,
however, any provision of this Agreement would not be enforceable under the
laws of New York, and if the Licensed Business is located outside of New York
and such provision would be enforceable under the laws of the state in which
the Licensed Business is located, then such provision shall be interpreted and
construed under the laws of that state. Nothing in this Section 31.1 is
intended by the parties to subject this Agreement to any franchise law or
similar law, rule, or regulation of the State of New York or any other state to
which it would not otherwise be subject. The parties acknowledge that no waiver
by Licensee of Sections 687.4, 687.5 and Article 33 of the New York General
Business Law is contemplated by this Agreement.
31.2 The parties expressly submit and consent in advance to
the non-exclusive jurisdiction of the State and Federal courts sitting in the
City of New York, Borough of Manhattan, State of New York, in any action to
enforce an arbitration agreement or award, or action seeking a pre-arbitral
injunction, pre-arbitral attachment or other order in aid of arbitration. The
parties waive any claim that any such state or federal
53
<PAGE>
court is an inconvenient or improper forum.
31.3 Subject to Section 31.7, no right or remedy conferred
upon or reserved to Licensor or Licensee by this Agreement is intended to be,
nor shall be deemed, exclusive of any other right or remedy herein or by law or
equity provided or permitted, but each shall be cumulative of every other right
or remedy.
31.4 Nothing herein contained shall bar Licensor's right to
obtain injunctive relief or other equitable or other judicial relief in aid of
arbitration from a court of competent jurisdiction against threatened conduct
that will cause Licensor loss or damages, under the usual equity rules,
including the applicable rules for obtaining restraining orders and preliminary
injunctions.
31.5 Subject to Section 31.4, resolution of any and all
disputes (except for the dispute referenced in Section 18.9) arising from or in
connection with this Agreement, whether based on contract, tort, statute or
otherwise, including, but not limited to, disputes over arbitrability
(collectively, "Disputes") shall be exclusively governed by and settled in
accordance with the provisions of this Section 31.5.
31.5.1 Licensor, Wizard Co. or Licensee may
commence proceedings hereunder by delivering a written notice to the other
parties providing a reasonable description of the Dispute to the other parties
(the "Demand").
31.5.2 Within 10 days following receipt by a party
hereto of a Demand, the Dispute shall be referred to representatives of the
parties for resolution, each party being represented by a senior executive
officer who has no direct operational responsibility for the matters
contemplated by this Agreement (the "Representatives"). The Representatives
shall promptly meet in a good faith effort to resolve Dispute. If the
Representatives do not agree upon a resolution within thirty (30) calendar days
after receipt by a Party of a Demand, each of Licensor, Wizard Co. and Licensee
shall be free to exercise the remedies available to them under Section 31.5.3.
54
<PAGE>
31.5.3 The Parties hereby agree to submit
all Disputes not resolved by negotiation pursuant to Section 31.5.2 for
resolution by arbitration under the terms hereof, which arbitration shall be
final, conclusive and binding upon the parties, their successors and assigns.
The arbitration shall be conducted in New York, New York by three arbitrators
(the "Panel") in accordance with the JAMS/Endispute Comprehensive Arbitration
Rules and Procedures then in effect, as amended herein. The arbitration shall
be governed by the United States Arbitration Act, 9 U.S.C. ss. 1, et seq.
Notwithstanding the foregoing (a) each party to the Dispute shall have the
right to examine the books and records of the other party to the Dispute that
are reasonably related to the Dispute; (b) each party to the Dispute shall
provide to the other, reasonably in advance of any hearing, copies of all
documents which such party intends to present in such hearing; (c) each party
shall be allowed to conduct reasonable discovery through written requests for
information, document requests, requests for stipulation of fact and
depositions, the nature and extent of which discovery shall be determined by
the Panel, taking into account the needs of the parties and the desirability of
making discovery expeditious and cost effective. All hearings shall be
conducted on an expedited schedule, and all proceedings shall be confidential,
except to the extent disclosure is required by applicable securities or
franchise laws, and the rules of any stock exchange on which the securities of
Licensee, Licensor or the parent company of either are listed for trading. The
Panel shall complete all hearings not later than ninety (90) days after its
appointment. The award shall be in writing and shall specify the facts and law
upon which it is based. Judgment upon any award may be entered in any court
having jurisdiction thereof.
32. ACKNOWLEDGMENTS
32.1 Licensee acknowledges that it has conducted an
independent investigation of the Licensed Business, recognizes that the
business venture contemplated by this Agreement involves business risks, and
that its success will be largely dependent upon the ability of Licensee.
Licensor expressly disclaims the making of, and Licensee acknowledges that it
has not received, any warranty or guarantee, express or implied,
55
<PAGE>
as to the potential volume, profits, or success of the business venture
contemplated by this Agreement.
32.2 Licensee acknowledges that Licensor has informed
Licensee of the existence of other licensees operating under the System
pursuant to license agreements with Licensor which contain terms, conditions,
and obligations which differ from the terms, conditions, and obligations
contained in this Agreement.
56
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed,
and delivered this Agreement on the day and year first above written.
HFS CAR RENTAL, INC.
Licensor
By: /s/ James E. Buckman
Name:
Title:
AVIS RENT A CAR SYSTEM, INC.
Licensee
By: /s/ Kevin M. Sheehan
Name:
Title:
WIZARD CO., INC.
For purposes of Sections 2, 3,
15, 17, 23 and 31 only
By: /s/ David P. McNicholas
Name:
Title:
57
<PAGE>
Schedule 1
Exclusive Territories
New York, NY PMSA
Chicago, IL PMSA
Boston, MA-NH NECMA
Philadelphia, PA-NJ PMSA
Detroit, MI PMSA
Washington, DC-MD-VA-WV PMSA
Houston, TX PMSA
Atlanta, GA MSA
Nassau-Suffolk, NY PMSA
Riverside-San Benardino, CA PMSA
Minneapolis-St. Paul, MN-WI MSA
St. Louis, MO-IL MSA
Orange County, CA PMSA (other than Disneyland)
Pittsburgh, PA MSA
Baltimore, MD PMSA
Phoenix, Mesa, AZ MSA
Cleveland-Lorain-Elyria, OH PMSA
Oakland, CA PMSA
Tampa-St. Pete-Clearwater, FL MSA
Seattle-Bellevue-Everett, WA PMSA
Miami, FL PMSA
Fort Lauderdale, FL PMSA
West Palm Beach-Boca Raton, FL MSA
Newark, NJ PMSA
San Francisco, CA PMSA
San Jose, CA PMSA
Denver, CO PMSA
Orlando, FL MSA
<PAGE>
Schedule 1(a)
Acquired Exclusive Territories
Los Angeles-Long Bech, CA PMSA
Dallas, TX PMSA
San Diego, CA MSA
Las Vegas, NV-AZ MSA
2
<PAGE>
Schedule 2
SERVICES
DESCRIPTION OF SERVICES AVIS RENT A CAR, INC. OFFERS TO
DOMESTIC & INTERNATIONAL THIRD PARTY LICENSEES
Domestic
o Reservations - ARAC will continue to subsidize
reservation expenses for third-party licensees.
o Other services provided by ARAC:
o Licensee Relations - ARAC support provided to
licensees (currently one VP and one secretary).
o WizCom - ARAC subsidizes excess WizCom costs,
for services provided to licensees:
transaction processing (currently cost is $.632
per transaction; however WizCom only recovers
$.529 per transaction); communications
equipment; Garden City network backbone
allocation, terminal installations/help desk;
systems enhancements & maintenance-dedicated
and non-dedicated work, production jobs; and
sales support personnel. Following services
are provided at cost to licensees:
communications equipment; terminal
installations & help desk; and systems
enhancements.
o Receivable Processing - Central Billing and
Credit Club recoveries netted against the
following costs:
o Charge card/Wizard
o Credit Department
o CB Customer Service
o Collections
o Bad debt
o Corp/Travel CB Vouchers
o Buy/Sell
o Frequent Flyer
o CCS
o Direct Billing
o I/C Accounting & VAB - allocated time on
composite statements (see attachment 1).
o Purchasing & System Supply & Security/Safety -
allocated time on providing services.
o Sales & Marketing - unallocated costs on sales
& marketing.
o Training/QA - quality assurance, training
overhead and customer satisfaction costs less
3
<PAGE>
licensee funding.
o Fleet Warranty.
o Pricing - allocated services for providing
pricing and yield services to licensees.
o Field Operations - overhead associated with
fleet distribution, billing, researching, etc.
o Other - allocate costs for legal, accounting,
insurance, financial planning, audit and fleet.
Note: excludes costs for outside counsel
related to any licensee litigation.
International
o Reservations - ARAC will continue to subsidize
reservation expenses for third-party licensees.
o Services provided by ARAC - International
o Administrative/Financial Operations - Latin America Region (1
director & 2 administrators); Pacific Region (1 director & 1
administrator); WHQ/VAB (accounting, treasury & composite
processing personnel).
o Franchise Sales/Development - coordinate with
HFS prospecting, selection, and negotiation.
o General Consultation & Compliance - policy/procedures, car
rental business methods/strategies, site selection,
intercompany transactions (such as buy/sell), frequent flyer
fees, and network development. Also, periodic visits to
inspect facilities, signage, vehicles, etc.
o Purchasing - assistance in acquisition of uniforms, signage,
rental agreements, rental agreement folders, other
stationary, and printing.
o Training - provide training coordinator, new
hire, & supervisor daily duty programs.
o Liaison Role - between licensees and other
departments/countries to resolve questions/issues on
reservations, customer services, purchasing, etc.
o Preparation and dissemination of system
bulletins and other communications.
o Coordination of tour rates, special accounting pricing, and
retail pricing. Also, provide education on rate structures,
car groups and pricing strategies.
o Advertising & marketing strategies (also assist
in funding certain programs).
o Automation/System advice, including
coordination of installations, and training.
4
<PAGE>
o Coordinate & direct regional meetings, conventions and
periodic management seminars (topics include fleet planning,
managing for profit, etc.).
Other
o Licensee shall issue, not less often than annually, for
distribution among System Licensees, travelers, travel agents, customers, and
others, as determined by Licensor in its sole discretion, a directory which
contains the addresses and telephone numbers of Rental Locations operating
under the System, in such format as currently produced or as Licensor may in
its sole discretion approve, and Licensee shall list such System Licensees
whenever deemed appropriate by Licensor in such other sales promotion material
as may from time to time be developed or issued by Licensee. Licensee may, with
the approval of Licensor disseminate such information as described above in the
form of electronically or computer-generated notices and bulletins, or permit
access to such information via electronic, telecommunications or computer
systems by licensees, travelers, travel agents, customers, and others.
o Licensee shall, from time to time, at the request of the
Licensor, hold meetings, conferences and conventions for System Licensees.
Licensee shall attend such meetings, conferences, and conventions at its
expense.
5
<PAGE>
Schedule 3
PROPRIETARY MARKS
Licensor shall, pursuant to Section 24 of the License Agreement, cause
Wizard Co., Inc. to permit Licensee to use the following Proprietary Marks in
connection with the Licensed Business:
U.S. Trademark
PENDING
PROPRIETARY MARK REGISTRATION NO. APPLICATION NO.
- ----------------- ----------------- ---------------
AUTO CARTE LOGO(DESIGN) 1,364,881
AUTOCARTE 1,348,490
AUTO-MAIL 75/279,364
AVIS 703,700
AVIS 1,071,131
AVIS 1,121,618
AVIS (SPECIAL FORM) 1,353,304
AVIS (UNDERLINED BY RED BAR) 1,660,119
AVIS ALII CLUB & DESIGN 1,683,263
AVIS AND DESIGN 1,353,305
AVIS CARES 1,681,965
AVIS CARES CONCIERGE SERVICE 74/729,085
AVIS CARES LOGO 1,671,740
AVIS CHAIRMAN'S CLUB 1,835,715
AVIS EXPRESS 1,261,964
AVIS INTERNATIONAL 758,577
AVIS LINK 1,399,851
AVIS LUBE S/7358
AVIS LUBE 1,524,787
AVIS LUBE (PLAIN BLOCK) 1,648,339
AVIS LUBE (STYLIZED) 1,649,696
AVIS LUBE (STYLIZED) 1,646,271
AVIS LUBE FAST OIL CHANGE 1,522,866
CENTER
<PAGE>
PENDING
PROPRIETARY MARK REGISTRATION NO. APPLICATION NO.
- ---------------- ---------------- ---------------
AVIS LUBE FAST OIL CHANGE 1,528,583
CENTER
AVIS NEWS 1,011,004
AVIS ON RED RECTANGLE 1,139,027
AVIS PREFERRED 1,885,697
AVIS PREFERRED 1,755,771
AVIS RAPID RETURN 1,629,473
AVIS TRAVELER'S NETWORK 2,018,995
AVISSAVER 1,804,818
AVISSAVER WEEKEND ESCAPES 1,987,590
AVISVISION 180 1,718,922
CITYTRAVELER 1,718,837
CLUB RED 1,979,199
CYBER CITIZEN 75/000,149
CYBER CITIZEN 75/287,985
DRIVEN BY THE CUSTOMER PENDING
DRIVEN FOR DEPENDABILITY 1,531,500
HTV HOME TOWN VIEW 1,899,229
INFORMATION SUPERHIGHWAY 74/667,432
ROAD WARRIOR
PREFERRED EXPRESS 1,733,617
PREFERRED LOGO 1,821,729
PREFERRED RENTER 1,728,190
RENTSAVERS 1,712,287
RES-O-MATIC 75/279,365
RETURN VALET 2,104,729
ROUTE NAVIGATOR 74/688,466
ROVING RAPID RETURN 1,648,373
SATELLITE GUIDANCE 74/646,582
SAVEUS AVIS ONCALL 1,974,634
SUMMER RENT CONTROL 1560/77
<PAGE>
PENDING
PROPRIETARY MARK REGISTRATION NO. APPLICATION NO.
- ---------------- ---------------- ---------------
TRAVEL WIZ 74/686,692
TRYING HARDER TOGETHER 1,567,569
VACATION SUNSATION 1,640,802
WATSON (THE WIZARD) COPY- PENDING
RIGHT OF CHARACTER
WE TRY HARDER 1,718,765
WE TRY HARDER (BLOCK) 1,967,829
WE TRY HARDER (LOWER CASE) 1,681,462
WE'RE TRYING HARDER THAN 1,573,885
EVER
WEATHERFAX 75/084,572
WINTER RENT CONTROL 1,605,970
WIZARD 924,856
WIZARD OF AVIS 1,003,355
WIZARD WIZDOM 1,997,917
YOUR PREFERRED CONNNECTION 74/686,693
ZAP 1,459,480
<PAGE>
Schedule 4
TERRITORIES OF OTHER SYSTEM LICENSEES
AVIS RENT A CAR SYSTEM, INC.
FRANCHISED LICENSEE LOCATIONS
REVISED 7/1/97
"1955" Type Franchise Agreements 292
"1992" Type Franchise Agreements 17
Letter Agreements (1955) Type 3
Agency Agreements (1955) Type 1
"1955" Type Truck Franchise Agreements 134
CITY-STATE DATE TYPE
---------- ---- ----
1 Birmingham, AL Sep-59 B
Anniston, AL Nov-69 C
Tuscaloosa, AL Mar-66 B
Columbus, GA Aug-83 C
2 Dothan, AL May-74 C
3 Huntsville, AL Apr-56 B
Decatur, AL Feb-64 B
Florence, AL Apr-87 C
4 Mobile, AL May-63 C
Point Clear, AL Aug-69 C
5 Montgomery, AL Oct-51 B
Columbia, SC Oct-59 B
Camden, SC Sep-61 B
Sumter/Selma, AL Oct-73 C
Greenville, AL Feb-79 C
Macon, GA May-96 New Agreement
Greenwood, SC May-96 New Agreement
6 Little Rock, AR Sep-52 B
El Dorado, AR May-68 B
Fayetteville, AR Oct-70 C
<PAGE>
CITY-STATE DATE TYPE
---------- ---- ----
Fort Smith, AR Sep-64 B
Harrison, AR Jun-75 C
Hot Springs, AR Jan-62 B
Jonesboro, AR Dec-61 C
Pine Bluff, AR Dec-55 B
Stuttgart, AR Nov-56 C
Texarkana, AR May-72 C
Savannah, GA Jan-87 B
Midland, TX Dec-90 B
Abilene, TX Dec-90 B
San Angelo, TX Dec-90 C
Clovis, NM Dec-90 C
Albany, GA Apr-94 B
7 Los Angeles, CA Jan-53 C
Arcadia, CA Oct-79 C
Alhambra, CA Oct-79 C
Azusa, CA Oct-79 C
Bakersfield, CA Oct-78 B
Beverly Hills, CA May-56 C
Bishop, CA Aug-76 C
Burbank, CA Jan-56 C
Coronado, CA May-56 C
Culver City, CA Jun-61 C
Disneyland, CA Aug-61 C
Glendale, CA May-56 C
Glendora, CA Oct-79 C
Imperial, CA Jul-80 C
Lancaster, CA Jan-56 C
Lennox, CA Dec-77 C
Long Beach, CA Jan-56 C
Marina Del Rey, CA Feb-78 C
<PAGE>
CITY-STATE DATE TYPE
---------- ---- ----
Monrovia, CA Oct-79 C
Montebello, CA Oct-79 C
Monterey Parks, CA Oct-79 C
Oceanside, CA Sep-78 B
Oxnard, CA Jul-60 C
Palm Desert, CA Jul-74 C
Palm Springs, CA May-56 C
Pasedena, CA Jan-56 C
Pico Rivera, CA Oct-79 C
Ridgecrest, CA Sep-72 B%
San Diego, Ca Jan-56 C
Santa Barbara, CA Jan-56 C
Santa Monica, CA Jan-56 C
South Gate, CA Jun-61 C
Thousand Oaks, CA Jan-75 C
Van Nuys, CA Nov-67 C
Ventura, CA Mar-61 C
Vernon, CA Jun-61 C
Victorville, CA Sep-72 B
West Covina, CA Oct-79 C
Whittier, CA Oct-79 C
Yuma, AZ Jul-80 B
Las Vegas, NV Jan-56 B
Barstow, CA Nov-87 B
8 McKinleyville, CA Jul-93 C
9 St. Simons Island, GA May-61 C
Brunswick, GA May-61 C
10 Valdosta, GA Nov-77 C
11 Galesburg, IL Mar-82 C
12 Evansville, IN Sep-54 B
13 Valparaiso, IN Feb-71 B
<PAGE>
CITY-STATE DATE TYPE
---------- ---- ----
14 Burlington, IA Dec-73 C
15 Cedar Rapids, IA Nov-60 C
16 Davenport, IA May-68 C
Dubuque, IA Jan-75 C
Waterloo, IA May-78 C
Peoria, IL Jan-87 B
Bloomington, IL Jan-87 C
Champaign, IL Jan-87 B
Decatur, IL Jan-87 B
Pekin, IL Jan-87 C
Springfield, IL Jan-87 B
Danville, IL Jan-87 B
17 Dex Moines, IA Jan-63 C
18 Sioux City, IA May-90 C
19 North Platte, NE Apr-89 C
20 Salina, KS Dec-94 C
Hays, KS Dec-96 C
Great Bend, KS Feb-96 C
Independence, KS Dec-95 New Agreement
Topeka, KS Dec-95 New Agreement
McPherson, KS Dec-95 New Agreement
21 Garden City, KS Aug-85 C
Liberal, KS Feb-84 C
22 Lexington, KY Sep-56 B
Frankfort, KY Dec-61 B
23 Alexandria, LA Jan-78 C
Gulfport, MS Feb-84 C
24 Shreveport, LA Aug-54 B
Monroe, LA Jun-57 B
25 Presque Isle, ME Jun-73 C
26 Alpena, MI Aug-71 C
<PAGE>
CITY-STATE DATE TYPE
---------- ---- ----
Salt Ste. Marie, MI Jun-74 B
27 Hancock, MI Apr-56 C
28 Iron Mountain, MI Jun-60 C
29 Kalamazoo, MI Feb-72 C
Benton, MI Aug-76 C
Traverse City, MI Jun-73 C
30 Pellston, MI Aug-89 C
Charlevoix, MI Jun-91 C
Gaylord, MI Aug-91 C
31 Duluth, MN Jan-65 B
Rhinelander, WI May-85 C
International Falls, MN Apr-95 New Agreement
Bemidji, MN Apr-95 New Agreement
Hibbing, MN Apr-95 New Agreement
Eveleth, MN Apr-95 New Agreement
Marquette, MI Jun-96 New Agreement
Brainerd, MN Jun-96 New Agreement
32 Rochester, MN Dec-60 B
Stevens Point, WI Aug-81 C
Eau Claire, WI Aug-81 C
Land O'Lakes, WI Aug-81 C
Marshfield, WI Aug-81 C
Wausau, WI Aug-81 C
33 Springfield, MO Mar-70 C
Branson, MO Apr-78 C
Joplin, MO May-84 C
34 Butte, MT Jan-87 C
Helena, MT Jan-90 C
Glacier Park, MT May-94 C
Great Falls, MT May-94 C
35 Glendive, MT Jul-87 C
<PAGE>
CITY-STATE DATE TYPE
---------- ---- ----
Sidney, MT Jul-87 C
36 Missoula, MT Sep-89 C
Kalispell, MT Sep-89 C
Billings, MT Feb-95 C
37 McCook, NE Aug-72 C
38 Manchester, NH Jun-75 C
Hampton, NH Apr-78 C
Nashua, NH Jun-75 C
Salem, NH Jun-76 C
Brattleboro, VT Jul-76 C
Merrimack, NH May-82 Letter Agreement
Laconia, NH Oct-82 Letter Agreement
Keene, NH Dec-89 C
39 Matawan, NJ Nov-64 B
Freehold, NJ Oct-60 B
Lakewood, NJ Oct-60 B
Point Pleasant, NJ Oct-60 B
Port Monmouth, NJ Nov-64 B
Sayreville, NJ Dec-62 B
Toms River, NJ Oct-60 B
Red Bank, NJ Jun-91 B
Eatontown, NJ May-93 New Agreement
Wall, NJ Apr-95 New Agreement
40 Piscataway (Plain), NJ Jun-57 B
Cranford, NJ Feb-58 B
Dover, NJ Dec-61 B
East Orange, NJ Aug-74 T
(Truck)
Flemington, NJ Jun-62 B
Fort Lee, NJ Jun-61 T
Hackettstown, NJ Dec-61 B
Linden, NJ Aug-60 B
<PAGE>
CITY-STATE DATE TYPE
---------- ---- ----
Madison, NJ May-65 B
Millburn, NJ Aug-74 B
Montclair, NJ Jul-61 B
Morristown, NJ Aug-60 B
New Brunswick, NJ Apr-60 B
Oakland, NJ Aug-74 T
(Truck)
Troy Hills, NJ Aug-74 B
Perth Amboy, NJ Aug-60 B
Rahway, NJ Sep-60 B
Ridgefield, NJ Jul-61 B
Ridgewood, NJ Jul-61 B
Saddle Brook, NJ Aug-74 T
(Truck)
Somerville, NJ Mar-58 B
Springfield, NJ Aug-74 B
Roxbury, NJ Aug-74 B
Summit, NJ May-61 B
Union, NJ Jan-60 B
Port Jervis, NJ Dec-61 B
West Orange, NJ Aug-81 C
41 Roswell, NM Feb-84 C
Santa Fe, NM Apr-65 C
Los Alamos, NM Apr-66 C
Alamogordo, NM Apr-95 New Agreement
42 Albany, NY Dec-64 B
Schenectady, NY Dec-64 B
Troy, Watervliet, NY Dec-64 B
Rutland, VT Sep-91 C
Hanover, NH Oct-95 B
Springfield, VT Aug-96
43 Plattsburgh, NY Sep-82 C
<PAGE>
CITY-STATE DATE TYPE
---------- ---- ----
Lake Placid, NY Sep-82 B
44 White Plains, NY Jan-61 B
Larchmont, NY Jan-61 B
Mamaroneck, NY May-76 B
Rye, Tarrytown, NY Jan-61 B
Scarsdale, NY Jan-61 B
45 Wilmington, NC Nov-71 B%
Florence, SC Sep-74 B%
Rocky Mount, NC Sep-86 B
Goldsboro, NC Sep-86 B
Greenville, NC Sep-86 C
Kinston, NC Sep-86 B
Jacksonville, NC Sep-86 C
Morehead City, NC Sep-86 B
New Bern, NC Sep-86 B
46 Bismarck, ND Oct-64 B
47 Fargo, ND Oct-71 C
48 Grand Forks, ND Dec-88 C
49 Jamestown, ND Dec-85 C
50 Minot, ND Jan-81 C
Williston, ND Jun-81 C
Aberdeen, SD Jul-77 C
51 Cambridge, OH Jan-87 C
52 Lima, OH Dec-82 C
53 Enid, OK Jul-63 C
54 Medford, OR Dec-91 C
55 Harrisburg, PA Sep-66 B%
State College, PA Mar-94 New Agreement
Mechanicsburgh, PA Mar-94 New Agreement
Hershey, PA Mar-94 New Agreement
56 Lancaster, PA Mar-57 C
<PAGE>
CITY-STATE DATE TYPE
---------- ---- ----
57 New Kensington, PA Apr-59 B
Monroeville, PA Apr-59 B
Oakmont, PA Feb-61 B
Vandergrift, PA Feb-61 T
Wilkensburg, PA Feb-61 B
58 Greensburg, PA Jul-88 B
Waltz Mills, PA Feb-92 Agency Agreement
59 Pierre, SD Apr-79 C
60 Rapid City, SD Feb-92 C
Sioux Falls, SD Aug-95 C
61 Kingsport, TN Apr-81 B%
Greenville, TN Oct-81 C
62 Nashville, TN Jun-65 C
Chattanooga, TN Jun-65 C
Knoxville, TN Oct-76 C
Memphis, TN Jun-65 C
Olive Branch, MS Jul-76 C
63 Amarillo, TX Jan-78 B
Lubbock, TX Jun-75 B
64 Corpus Christi, TX Jan-56 B
Brownsville, TX Jan-56 B
Harlingen, TX Jan-56 B
McAllen, TX Jan-56 B
Rockport, TX Apr-81 C
S. Padre Island, TX May-79 C
Victoria, TX Feb-56 B
Laredo, TX Dec-92 B
65 Dallas, TX Jan-56 B
Austin, TX Apr-56 B
Fort Worth, TX Mar-56 B
San Antonio, TX Jul-57 B
<PAGE>
CITY-STATE DATE TYPE
---------- ---- ----
66 Ogden, UT Apr-94 B
67 St. George, UT Oct-74 C
Cedar City, UT Sep-77 C
Page, AZ May-75 C
Vernal, UT Feb-82 C
Ely, NV Mar-82 Letter Agreement
Elko, NV Oct-79 C
68 Burlington, VT Feb-63 C
69 Richmond, VA Mar-56 B
Charlottesville, VA Sep-58 B
Harrisonville, VA Jul-65 B
Lynchburg, VA Dec-61 B
Newport, VA May-57 B
Petersburg, VA Jul-65 B
Waynesboro, VA Apr-60 B
Salisbury, MD May-87 B%
Cambridge, Easton, MD May-87 C
Dover, DE May-87 B%
Seaford, DE May-87 C
70 Roanoke, VA Apr-79 B
Bluefield, WV Feb-81 C
W. Sulpher Sprs, WV Dec-81 C
Clarksburg, WV Aug-83 B
Fairmount, WV Aug-83 B
Morgantown, WV Aug-83 B
Columbus, MS Oct-86 C
Paducah, KY Aug-77 C
Greenville, MS Jan-90 C
Longview, TX Feb-90 C
Tyler, TX Feb-90 C
<PAGE>
CITY-STATE DATE TYPE
---------- ---- ----
Killeen, TX Mar-91 C
College Station, TX Jan-91 C
Temple, TX Mar-91 C
Waco, TX Oct-90 C
Meridan, MS Sep-91 B
71 Appleton, WI Oct-58 C
Green Bay, WI Jul-63 C
Madison, WI Jun-72 C
Wisconsin Dells, WI Apr-78 C
Menominee, MI Jan-73 C
Sturgeon Bay, WI Sep-68 C
LaCrosse, WI Mar-85 C
72 Casper, WY Jul-65 C
Laramie, WY Jul-76 C
Riverton, WY Dec-69 B
Cody, WY Mar-89 B
73 Sheridan, WY Jul-78 B
Gillette, WY Jul-78 B%
74 Anchorage, AK Apr-56 B%
Fairbanks, AK Apr-56 B%
Juneau, AK Apr-56 B%
Kodiak, AK Apr-56 B%
75 Craig, CO Sep-68 T
76 Kelso, WA Feb-69 T
<PAGE>
COMPUTER SERVICES AGREEMENT
BY
AND
BETWEEN
AVIS RENT A CAR SYSTEM, INC.
AND
WIZCOM INTERNATIONAL, LTD.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS...............................................1
1.1 Certain Definitions.........................................1
1.2 Other Definitions...........................................6
ARTICLE 2 TERM......................................................6
ARTICLE 3 SCOPE OF SERVICES.........................................6
3.1 Description of Services.....................................6
3.2 Additional WizCom Services..................................7
ARTICLE 4 CHARGES AND PAYMENT.......................................8
4.1 Invoicing and Payments......................................8
4.2 Taxes .................................................8
4.3 Disputed Charges............................................8
4.4 Pro-ration..................................................8
ARTICLE 5 MANAGEMENT................................................9
5.1 Organization................................................9
5.2 WizCom Management Process..................................10
5.3 Avis Authorized User.......................................11
5.4 Avis Responsibilities......................................12
5.5 Procedures Manual..........................................13
5.6 Use of Subcontractors......................................14
5.7 Reports and Meetings.......................................15
5.8 Avis Audit Rights..........................................16
ARTICLE 6 PERFORMANCE STANDARDS ...................................17
6.1 Performance Standards in General...........................17
6.2 Periodic Review............................................17
6.3 Measurement and Monitoring Tools...........................17
ARTICLE 7 RESPONSIBILITY FOR RESOURCES.............................18
7.1 Software License...........................................18
7.2 International Considerations...............................19
7.3 Hardware...................................................19
7.4 Avis Third Party Software..................................20
7.5 Escrow Agreement...........................................20
ARTICLE 8 APPLICATION MODIFICATIONS................................21
8.1 Modifications..............................................21
8.2 Methodology and Project Management Procedures..............23
8.3 Third Parties..............................................23
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8.4 Documentation..............................................24
ARTICLE 9 SAFEGUARDING OF DATA; CONFIDENTIALITY....................24
9.1 Avis Data..................................................24
9.2 Safeguarding of Avis Data..................................25
9.3 Confidentiality............................................25
ARTICLE 10 INDEMNITIES.............................................27
10.1 WizCom Indemnities.........................................27
10.2 Avis Indemnities...........................................28
10.3 Infringement...............................................29
10.4 Additional Indemnities.....................................29
10.5 Indemnification Procedures.................................30
10.6 Exclusive Remedy...........................................30
10.7 Subrogation................................................30
ARTICLE 11 REPRESENTATIONS, WARRANTIES AND COVENANTS...............30
11.1 Software Rights............................................30
11.2 Authorization..............................................31
11.3 Viruses....................................................31
11.4 Disabling Code.............................................31
11.5 Disclaimer.................................................31
ARTICLE 12 LIMITATION ON LIABILITY.................................32
12.1 Limitation on Liability....................................32
12.2 Force Majeure..............................................32
ARTICLE 13 INSURANCE AND RISK OF LOSS..............................33
13.1 WizCom Insurance...........................................33
13.2 Avis Insurance.............................................34
13.3 Risk of Loss...............................................34
ARTICLE 14 TERMINATION.............................................35
14.1 Termination for Cause......................................35
14.2 Termination for Cessation of Business......................36
14.3 Termination for Insolvency.................................37
14.4 Extension of Termination Effective Date....................37
14.5 Termination Assistance.....................................37
14.6 Equitable Remedies.........................................38
14.7 Unrecovered Allowable Costs................................38
ARTICLE 15 DISPUTE RESOLUTION......................................38
15.1 Dispute Resolution.........................................38
15.2 Continued Performance......................................40
15.3 Governing Law; Jurisdiction................................40
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ARTICLE 16 GENERAL.................................................40
16.1 Binding Nature; No Assignment..............................40
16.2 Timeliness.................................................40
16.3 Right to Perform Services for Others.......................40
16.4 Entire Agreement; Amendment................................41
16.5 Counterparts...............................................41
16.6 Headings...................................................41
16.7 Relationship of the Parties (Independent Contractor).......41
16.8 Equal Opportunity Employer.................................41
16.9 Non-Hiring.................................................41
16.10 Notices....................................................42
16.11 Severability...............................................43
16.12 Consents and Approvals.....................................43
16.13 No Waiver of Default.......................................43
16.14 Media Releases.............................................43
16.15 Survival...................................................44
16.16 No Third Party Beneficiaries...............................44
16.17 Compliance with Laws and Regulations.......................44
16.18 Covenant of Good Faith.....................................44
SCHEDULES
SCHEDULE A: Services
A1: Data Center And Systems Services
A2: Applications Development Services
A3: Data Communications Services
A4: Help Desk Services
SCHEDULE B: Performance Standards
SCHEDULE C: Charges
SCHEDULE D: WizCom Third Party Software
SCHEDULE E: Avis Third Party Software
SCHEDULE F: Wizard System Functions
SCHEDULE G Other Computer System Functions
SCHEDULE H Intentionally Omitted
SCHEDULE I Termination Assistance
SCHEDULE J Escrow Agreement
SCHEDULE K Exclusive Systems
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COMPUTER SERVICES AGREEMENT
This Computer Services Agreement (the "Agreement"), effective as of
July 30, 1997 (the "Effective Date"), is entered into by and between Avis Rent a
Car System, Inc., a Delaware corporation with its principal place of business
located at 900 Old Country Road, Garden City, New York 11530 ("Avis"), and
WizCom International, Ltd., a Delaware Corporation with a place of business
located at 900 Old Country Road, Garden City, New York 11530 ("WizCom"). As used
in this Agreement, "Party" means either Avis or WizCom and "Parties" means
WizCom and Avis.
W I T N E S S E T H
WHEREAS, Avis rents vehicles under the Avis trade name or mark to
customers in the United States and around the world at rental locations that are
owned and operated by Avis and its affiliates, and at other locations owned and
operated by entities that have entered into agency or other similar agreements
with Avis or its affiliates;
WHEREAS, WizCom is an information services company that provides car
rental and reservation processing systems and services and other information
services to companies in the hospitality and transportation industry; and
WHEREAS, Avis desires to obtain from WizCom car rental and reservation
processing systems and services and other information systems and services for
Avis's business operations, and WizCom desires to provide such systems and
services, all in a manner consistent with this Agreement.
NOW, THEREFORE, the Parties hereby agree as follows:
ARTICLE 1 DEFINITIONS.
1.1 Certain Definitions.
"Account Team for Avis" shall have the meaning ascribed to such term in
Section 5.1(b).
"Additional Services" shall have the meaning ascribed to such term in
Section 3.2.
"Affiliate" for either party shall mean, with respect to any entity,
any other entity Controlling, Controlled by or under common Control
with such entity.
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"Applications Software" or "Applications" shall mean those computer
programs, including supporting documentation and media, that WizCom
uses to perform the Services other than Systems Software.
"Avis Agency Operator" shall mean an individual or entity which rents
Avis vehicles pursuant to an Agency Operator Agreement with Avis.
"Avis Authorized User" shall mean an Affiliate, an Avis Agency
Operator, and their agents and representatives, which have, with Avis's
consent, access to use the Systems or any part thereof for the conduct
of the Avis vehicle rental business.
"Avis Data" shall mean information entered by or on behalf of Avis or
an Avis Authorized User into the Systems or derived from such
information through use of the Systems.
"Avis Location" shall mean any administrative or rental location from
which vehicle rental business is controlled or conducted by Avis or an
Avis Authorized User.
"Avis Owned Software" shall mean software owned by Avis or an Avis
Affiliate as of the Effective Date during the Term and designated by
Avis for WizCom to support and/or operate for Avis pursuant to the
terms and conditions of this Agreement. Avis Owned Software as of the
Effective Date is listed in Schedule L.
"Avis Software" shall mean, collectively, Avis Owned Software and Avis
Third Party Software.
"Avis Third Party Software" shall mean the software licensed by Avis or
an Avis Affiliate from third party vendors as of the Effective Date and
during the Term and designated by Avis for WizCom to support and/or
operate for Avis pursuant to the terms and conditions of this
Agreement. Avis Third Party Software as of the Effective Date is listed
in Schedule E.
"Backbone" shall mean WizCom-provided communication lines, services and
equipment, when applicable, which connect the WizCom Network Ports to
the Data Center computers. Backbone includes all communications
equipment or portions of such equipment at a Network Node site that is
not considered Port or Network Access.
"Confidential Information" shall have the meaning ascribed to such term
in Section 9.3(a)(2).
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"Control" and its derivatives shall mean, with regard to any entity,
the legal, beneficial, or equitable ownership, directly or indirectly,
of 50% or more of the capital stock (or other ownership interest, if
not a corporation) of such entity ordinarily having voting rights.
"Data Center" shall mean the facility or facilities, including the
related Equipment, Software and personnel, which WizCom uses to provide
the Services, as further described in Schedule A. As of the Effective
Date, the Data Center is primarily located in Garden City, New York.
"Effective Date" the effective date shall be July 30, 1997.
"End User Equipment" shall mean any equipment, workstations, data
terminals, LAN servers (other than LAN servers used to access or
control the Network), communications equipment and associated
peripheral equipment used by Avis and Avis Authorized Users to access
the Systems and/or manage the Avis vehicle rental business.
"End User Equipment Services" shall have the meaning ascribed to such
term in Section 3.1(b).
"Enhancement" shall have the meaning ascribed to such term in Section
8.1(b).
"Equipment" shall mean the computer equipment used by WizCom to provide
the Services, including associated attachments, features, accessories
and peripheral devices. The Equipment shall not include End User
Equipment.
"Escrow Agreement" shall have the meaning ascribed to such term in
Section 7.5.
"Financial Plan" shall have the meaning ascribed to such term in
Section 5.2(a)(1).
"Help Desk" shall have the meaning ascribed to such term in Schedule
A4.
"Maintenance" shall have the meaning ascribed to such term in Section
8.1(a)(1).
"Master License Agreement" shall mean the Master License Agreement
dated July 30, 1997 between Avis and HFS Car Rental, Inc.
"Modification" shall have the meaning ascribed to such term in Section
8.1.
"Network" shall mean the network comprised of communications equipment,
components and services for data communications used to transmit and
receive data signals among Avis Locations, the Data Center and other
locations mutually agreed upon by the Parties in accordance with this
Agreement. For purposes of
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communications between Avis Locations and the Data Center, the Network
shall consist of the communications components from the modem or DSU
attached to Avis's data terminal equipment through, to and including
the front-end processor at the Data Center.
"Network Access" shall mean communication lines, services, and
equipment required to provide and maintain a connection between Avis's
data terminal equipment and WizCom's Network Node site. Network Access
includes the modem or DSU at the Network Node site (called master modem
or DSU).
"Network Node" shall mean the WizCom-provided communications front-end,
router, multiplexor, or similar processor. The Data Center will contain
a Network Node. Multiple processors at any given site are considered
part of the Network Node at that site.
"New Equipment" shall have the meaning ascribed to such term in Section
8.3.
"New Service" shall have the meaning ascribed to such term in Section
8.3.
"New Systems" shall mean any System which is not included in the scope
of this Agreement as of the Effective Date.
"Out-of-Pocket Expenses" shall mean (i) reasonable out-of-pocket costs
and expenses owed by WizCom to third parties that are expenses of the
type that would be incurred on Avis's behalf; and (ii) expenses that
shall be actually paid or otherwise satisfied by WizCom.
"Performance Standards" shall have the meaning ascribed to such term in
Section 6.1.
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank as its prime
rate in effect as its principal office in New York City; each change in
the Prime Rate shall be effective from and including the date such
change is publicly announced as being effective.
"Port" shall mean WizCom-provided equipment which provides the entry
point to the WizCom Network Node for a given Network Access line. Port
includes any equipment or portions thereof which function to connect a
master modem or DSU to the Network Node. Port also includes a portion
of the Network Node input-output hardware.
"Procedures Manual" shall have the meaning ascribed to such term in
Section 5.5.
"Project" shall have the meaning ascribed to such term in Section
8.1(d).
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"Rental Agreement" shall mean a rental agreement processed through the
Systems which results in a new numbered transaction that Avis or Avis
Authorized Users cause to be entered into or generated by the Systems.
Modifications to a Rental Agreement shall not, for billing purposes,
constitute a separate Rental Agreement.
"Reservation" shall mean a reservation processed through the Systems
which results in a new numbered transaction (excluding reservations
created and canceled within the same operating day, as such day is
defined by WizCom) being entered into or generated by the Systems.
Modifications to a Reservation shall not, for billing purposes,
constitute a separate Reservation.
"Services" shall have the meaning ascribed to such term in Section 3.1.
"Software" shall mean Applications Software and Systems Software and
any other Software comprising part of the Systems.
"Systems" shall mean the hardware/software/firmware components required
to provide reservations, data processing and information management
(including data bases, systems and application software) for Avis's
vehicle rental business and any newly developed
hardware/software/firmware developed hereunder and used by WizCom to
provide Services hereunder.
"Systems Software" shall mean those software programs that perform
tasks basic to the functioning of the Equipment and which are required
to operate the Applications Software or otherwise support the provision
of Services by WizCom. Systems Software includes operating systems,
systems utilities, data security software, telecommunications monitors
and database managers.
"Technical Efficiency Projects" shall have the meaning ascribed to such
term in Section 8.1(a)(2)(iii).
"Term" shall have the meaning ascribed to such term in Section 2.1.
"Third Party Development" shall have the meaning ascribed to such term
in Section 5.6(b) and 7.1(b).
"Unrecovered Allowable Costs" shall have the meaning ascribed to such
term in Section 14.2.
"WizCom Managed Network" shall mean that portion of the Network managed
by WizCom at Avis's request, as further described in Section 1(a) of
Schedule A.
"WizCom Software" shall mean the WizCom proprietary software and the
WizCom Third Party Software.
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"WizCom Third Party Software" shall mean the software which is licensed
by WizCom or its Affiliates from third party vendors and which is used
to provide the Services, and shall include any maintenance commitment
contained in the agreement or license governing same. Software owned by
WizCom or its Affiliates, including Wizard Co., Inc., shall not be
deemed WizCom Third Party Software. The WizCom Third Party Software as
of the Effective Date is listed on Schedule D.
1.2 Other Definitions.
Other terms used in this Agreement are defined in the context in which
they are used and shall have the meanings there indicated.
ARTICLE 2 TERM.
The term of this Agreement will begin on the Effective Date and will remain in
effect until the Master License Agreement is terminated ("Term"), unless
terminated earlier in accordance with the provisions of this Agreement.
ARTICLE 3 SCOPE OF SERVICES.
3.1 Description of Services.
(a) Pursuant to the terms and conditions of this Agreement, Avis
shall use WizCom to process through the System, the
Reservations and Rental Agreements generated for Avis's
vehicle rental business worldwide, and shall obtain such other
Services as hereinafter provided (the "Services"):
(i) the Data Center Services described in Schedule A, the
Applications Development Services described in
Schedule A, the Data Communications Services
described in Schedule A and the Help Desk Services
described in Schedule A;
(ii) training of designated Avis personnel in order to
"train the trainer" (i) to support End User
Equipment and/or Software other than Avis Owned
Software or Avis Third Party Software and (ii) in the
use of the Systems;
(iii) access to and use of the Systems in the conduct of
Avis's vehicle rental business; and
(iv) any other services expressly described in this
Agreement such as termination assistance.
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(b) WizCom shall, on behalf of Avis, select, order, purchase, install and
maintain all End User Equipment Avis may require from time to time in
connection with Avis's use of the Systems (the "End User Equipment
Services"). WizCom shall make commercially reasonable efforts to
identify suppliers with favorable terms for End User Equipment. Except
as otherwise agreed in writing by the Parties or as otherwise provided
in this Agreement, all rights in and title to any End User Equipment
acquired by WizCom on behalf of Avis shall belong to WizCom. At Avis's
request, WizCom shall be permitted to enter into agreement(s) with
third party providers of services such as maintenance and equipment
leases. Avis shall be charged for purchase, installation and
maintenance of End User Equipment in accordance with Schedule C.
(c) WizCom will control the time, place and manner of its performance of
the Services, except as otherwise provided in this Agreement. Except
as may be necessary on an emergency basis to maintain the continuity
of the Services WizCom shall not, without Avis's consent, such consent
not to be unreasonably withheld or delayed, modify (i) the composition
or nature of the Services or (ii) the manner in which the Services are
provided or delivered, if such modification or modifications would
have a cost in excess of $50,000.00 per year or a non-cost material
adverse effect on the business of Avis. If WizCom must replace a line,
circuit, equipment or service provided to Avis by WizCom or another
vendor, except in an emergency, WizCom shall not remove, or ask the
other vendor to remove, the old service until the replacement has been
installed and accepted by Avis or WizCom, where appropriate.
3.2 Additional WizCom Services.
In the event Avis wants WizCom to provide additional services which are
not part of the Services ("Additional Services"), the Parties shall
follow the procedures set forth in the Procedures Manual and, if WizCom
is willing to provide such Additional Services, the Parties shall
execute a mutually agreeable addendum to this Agreement (the
"Addendum") with respect to such Additional Services. Additional
Services and the Addendum shall be subject to the terms and conditions
set forth in this Agreement. Additional Services shall be provided and
charged to Avis only upon Avis's prior approval.
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ARTICLE 4 CHARGES AND PAYMENT.
4.1 Invoicing and Payments.
Avis shall pay WizCom the charges set forth in Schedule C for the
Services. WizCom shall invoice Avis for all amounts payable by Avis in
respect of any calendar month pursuant to Schedule C no later than the
third business day of such month and Avis shall pay WizCom for
undisputed invoiced amounts within thirty (30) days following receipt
of such invoice.
4.2 Taxes.
Avis will pay, or reimburse WizCom for, all sales, use, transfer,
privilege, excise, value added, Canadian general sales, or other taxes,
whether foreign, national, state or local, however designated, which
are levied or imposed by reason of or are related to the Services
contemplated hereby including withholding taxes, excluding, however,
income and franchise taxes on profits which may be levied by any taxing
jurisdiction in the United States against WizCom.
4.3 Disputed Charges.
Avis shall pay all undisputed charges when such payments are due under
this Article. Avis may withhold payment of a particular charge, or
portion of a charge, where Avis in good faith disputes the entirety of
that charge or that portion. The parties shall be bound by the dispute
resolution provision set forth in Article 16 hereof with regard to all
disputed charges. Such withholding shall not extend to any portion of
the charge not included in said good faith dispute. In the event Avis
withholds payment erroneously, interest at the per annum rate of the
Prime Rate plus three percent (3%) shall be assessed from the date such
withheld amounts were in fact due and payable.
4.4 Pro-ration.
Charges payable periodically hereunder shall be prorated for any period
less than the specified period.
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ARTICLE 5 MANAGEMENT.
5.1 Organization.
(a) Retention and Replacement of Personnel.
(1) The Parties agree that it is in their mutual best
interests to keep the turnover rate of the personnel
performing the Services (by departure from WizCom,
removal from performing the Services, or otherwise)
to a reasonably low level. If Avis reasonably
believes the turnover rate to be excessive and so
notifies WizCom, WizCom shall use commercially
reasonable efforts to reduce the turnover rate to a
reasonably acceptable level.
(2) If Avis reasonably and in good faith determines that
an individual performing the Services is not
performing work for Avis in a satisfactory manner,
Avis will so notify WizCom and Avis and WizCom will
work together in good faith to resolve the situation.
If such discussions fail to produce a solution
satisfactory to Avis, WizCom shall promptly remove
such individual from performing the Services, and
provide a suitably qualified replacement as soon as
practicable.
(b) Account Team for Avis.
(1) The "Account Team for Avis" shall consist of a senior
WizCom representative from each major area of
Services, designated as Data Center, Help Desk,
WizCom-Managed Network, and Applications
Modifications. It shall be led by a WizCom Account
Executive who need not be one of the individuals
designated from the major Service areas. The
organizational structure and responsibilities of the
Account Team for Avis shall be subject to change from
time to time upon the mutual agreement of the
Parties. The Account Team for Avis shall have primary
WizCom responsibility for (i) overall management of
the relationship between Avis and WizCom and (ii)
communications between Avis and WizCom.
(2) The responsibilities of the Account Team for Avis
shall be to (i) understand Avis's business
requirements to the extent necessary to perform the
Services, as those requirements have been disclosed
by Avis to WizCom; (ii) discuss with the Avis Project
Executive issues and concerns of Avis regarding the
Services; (iii) take appropriate steps so that the
Services are performed in accordance with the
provisions of this Agreement; (iv) monitor the status
of efforts to resolve problems in delivery of the
Services and report such status to Avis; (v) review
the
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status of previously reported Avis change and service
requests; (vi) respond to Avis requests for
information and meet with Avis representatives at
Avis's request; and (vii) generally work with other
Avis employees during the Term.
5.2 WizCom Management Process.
(a) Annual Financial Plan.
(1) Avis will provide WizCom, no later than September
30th of each year, Avis's projected volume of
transactions and system development budget, together
with preliminary priorities for system development
projects, for the next succeeding calendar year (each
such calendar year, a "Planning Period"), and shall
reply within five (5) days to WizCom's request for
additional information regarding such projections, in
order to assist WizCom in developing an annual
financial plan (the "Financial Plan") reflecting the
projections for costs for the Services for Avis for
such Planning Period. Avis acknowledges that WizCom
will be making decisions regarding required staffing
levels (the "Staffing Plan") based on the information
provided by Avis and the final Financial Plan;
therefore, any required replacements and/or
reductions of personnel from such Staffing Plan which
are requested after the commencement of the Planning
Period must be submitted in writing and approved by
WizCom. In the event Avis's projections for system
development services for a Planning Period result in
a reduction of more than twenty percent (20%) in the
estimated number of person hours of system
development services to be performed on behalf of
Avis by WizCom as compared to the immediately
preceding Planning Period, or if Avis does not, in
fact, utilize in any Planning Period at least eighty
percent (80%) of the person hours for system
development services utilized in the preceding
Planning Period, then WizCom shall be entitled to
charge as a cost hereunder costs incurred in
connection with reductions in staff (including, but
not limited to, severance, benefits and other
termination costs) resulting from such reduction in
system development services commitment usage from
Avis; provided that WizCom shall use reasonable good
faith efforts to limit such costs through utilization
of staff, where possible, to provide services to
other WizCom customers.
(2) Provided Avis supplies the information contemplated
in subparagraph (1) above in a timely manner, WizCom
shall prepare the Financial Plan by November 15th of
each year during the Term, unless the Parties
mutually agree otherwise in writing. WizCom shall
consider such information provided by Avis in
developing each Financial Plan;
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provided, however, that Avis shall have right of
approval over only those portions of the Financial
Plan that represent costs chargeable solely to Avis,
(i.e., costs that are not to be shared among
customers).
(3) As Avis may reasonably request, WizCom shall provide
Avis with information regarding the items contained
in the Financial Plan and will review and discuss
such items with Avis.
(4) Until otherwise notified by Avis, and except as set
forth in the Financial Plan, WizCom shall obtain
Avis's written approval prior to (A) incurring costs
greater than $50,000 (excluding project development)
for a Service to be provided solely to Avis. If Avis
fails to provide written approval within five (5)
business days after WizCom provides notice of such
cost or commitment, WizCom will not be liable for any
costs, lost opportunities and/or deadlines missed.
(b) Management of Technology.
WizCom shall review annually with Avis the short- and
long-term technology and operations plans for providing
information services to Avis, and shall provide Avis with such
other plans and information regarding WizCom's technology
direction as Avis reasonably requests. WizCom shall consider
Avis's reasonable comments with respect to such technology
plans and operations, and shall follow Avis's direction with
respect to technology decisions affecting the Services to the
extent provided solely to Avis.
5.3 Avis Authorized Users.
(a) Designation By Avis.
WizCom shall provide the Services, or portions thereof, to
such Avis Authorized Users as Avis may from time to time
designate by notice to WizCom.
(b) Performance of Avis Obligations.
As Avis may from time to time designate by notice to WizCom,
Avis Authorized Users may perform certain of Avis's
obligations with respect to the Services, other than Avis's
payment obligations described in Article 4 and Schedule C.
Notwithstanding any such designation, Avis shall remain
responsible for the performance of its obligations under this
Agreement, and WizCom shall have direct recourse to Avis if
Avis's designees under this
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Section 7.3(b) fail to perform such obligations. Damages
suffered by Avis Authorized Users as a result of a breach by
WizCom shall be treated as damages of Avis for purposes of
this Agreement.
(c) Use of "Avis".
Subject to Sections 5.3(a) and (b), with respect to provisions
of this Agreement in which the term "Avis" appears, should a
question arise as to whether "Avis" applies to Avis Authorized
Users, the provision shall apply to Avis Authorized Users or
to Avis as Avis reasonably designates; provided, however, that
nothing in this Agreement shall give Avis Authorized Users
rights as third party beneficiaries.
(d) Responsibility of Avis for Avis Authorized Users.
Nothing in this Article 5.3 shall relieve Avis of
responsibility for its obligations under this Agreement. Avis
shall be responsible for its relationship with Avis Authorized
Users and for their use of the Systems. All usage of the
Systems by Avis Authorized Users under this Agreement shall,
for the purpose of calculating charges due under this
Agreement, be deemed to be usage by Avis and WizCom will bill
Avis for all Services provided to Avis Authorized Users. Avis
shall be responsible to pay such charges whether or not it
recovers payment from Avis Authorized Users. Notwithstanding
anything to the contrary in this Agreement, Avis shall be free
to offer to Avis Authorized Users the ability, subject to and
limited by Avis's rights and obligations under this Agreement,
to use part or all of the Systems on such terms (including
payment) in Avis's sole discretion.
5.4 Avis Responsibilities.
In addition to Avis's responsibilities as set forth elsewhere in this
Agreement, whether general or specific, Avis shall be responsible for
performing the following:
(a) Avis shall designate, as of the Effective Date, one individual
to whom all WizCom communications concerning this Agreement
may be addressed (the "Avis Project Executive") and one
alternate when the individual designated as the Avis Project
Executive is not available. Avis shall have the right to
change the designation of the individuals who will act as the
Avis Project Executive and the alternate upon prior written
notice to WizCom.
(b) Avis shall cooperate with WizCom by, among other things,
making available, as reasonably requested by WizCom,
management decisions, information, approvals and acceptances
so that WizCom may accomplish its obligations and
responsibilities under this Agreement.
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(c) Avis may establish and thereafter revise appropriate
priorities for the Services, including Projects, that relate
to Avis only. To the extent it does so, it shall communicate
the same to WizCom. Avis recognizes that changes in such
priorities may result in reordering of other priorities to
provide the Services or an increased cost. WizCom shall advise
Avis if Avis's proposed establishment or revision of
priorities may result in such reordering or increased cost.
(d) With respect to Avis Data, WizCom shall not be responsible to
Avis for inaccuracies entered into the Systems by Avis and/or
any Avis Authorized User.
(e) WizCom may accept as correct, accurate and reliable, without
any further inquiry, all information, data, documents and
other records of Avis delivered, supplied or made available to
WizCom hereunder.
Avis agrees that to the extent its failure to meet its obligations set
forth in this Article 5.4 adversely affects the ability of WizCom to
perform any of WizCom's obligations under this Agreement, WizCom shall
be relieved of the obligations so adversely affected to the extent (i)
WizCom's nonperformance results from Avis's failure to perform its
responsibilities, and (ii) WizCom provides Avis with prompt written
notice of such nonperformance.
5.5 Procedures Manual.
(a) The Procedures Manual describes the procedures to be followed
in connection with the Services, including (i) operation
and management of the Data Center, (ii) administration of
the Help Desk, including problem resolution, and (iii)
procedures for performing Maintenance and administration of
and requests for Projects. WizCom reserves the right to
modify or amend the procedures set forth in the Procedures
Manual.
(b) The Procedures Manual shall include standards for change
control procedures, which shall include the following
requirements:
(1) Prior to using any Software or Equipment to provide
the Services, WizCom shall have taken reasonable
steps to verify that the item has been properly
installed and is operating in accordance with its
specifications;
(2) WizCom shall make no change that WizCom reasonably
expects or should expect would materially and
adversely affect the function or performance of, or
decrease to any significant
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degree the resource efficiency of, the Services,
without obtaining Avis's prior approval. WizCom may
make temporary changes required by an emergency if it
has been unable to obtain such approval after making
reasonable efforts. WizCom shall promptly report such
emergency changes to Avis. If WizCom makes a change
not prohibited by the first sentence of this clause
(b)(2) and Avis subsequently determines that such
change has the effect described in such sentence then
WizCom shall, upon notice from Avis, take
commercially reasonable action to rectify same
promptly; and
(3) WizCom shall move programs from the development and
test environments into the production environment in
a tested, controlled and documented manner.
(c) The Procedures Manual shall include samples of the forms (if
any) with instructions on their completion and use, that Avis
will be requested to submit with respect to any of the
Services.
(d) The Services shall be performed in accordance with the
Procedures Manual. In the event of a conflict between the
provisions of this Agreement and the Procedures Manual, the
provisions of this Agreement shall control.
(e) WizCom, in consultation with Avis, shall periodically update
the Procedures Manual to reflect changes in the operations or
procedures described therein. Material modifications or
updates of the Procedures Manual shall be provided to Avis for
review and comment, which comment shall be given reasonable
consideration.
(f) Except as otherwise provided in this Agreement, nothing in the
Procedures Manual shall be deemed to expand on or affect the
scope of Services herein or the fees payable therefor.
5.6 Use of Subcontractors.
(a) Subject to Article 5.6(e), WizCom shall have the right to
subcontract any portion of the Services hereunder to third
party contractor(s), provided, however, that prior to entering
into a subcontract with a third party for services or products
that are material to a function provided solely to Avis,
WizCom shall give Avis reasonable prior notice, including the
identity of the subcontractor and the scope and nature of the
subcontract. If Avis disapproves of the proposed
subcontractor, WizCom may not subcontract that portion of
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the Services unless, in WizCom's reasonable judgment, there is
no suitable replacement, whether WizCom or another entity, for
the proposed subcontractor.
(b) Avis may not use consultants, subcontractors or other third
parties to provide any portion of the Services; provided,
however, Avis may, subject to Articles 8.3 and 5.6(e), use
such consultants, subcontractors or other third parties to
develop software or systems which do not directly or
indirectly interface with or affect the Systems, except to
accept and utilize Avis Data from the Systems ("Third Party
Development"). Third Party Development shall be either Avis
Owned Software or Avis Third Party Software.
(c) WizCom shall cooperate with Avis consultants, subcontractors
and third party representatives permitted pursuant to this
Agreement as reasonably requested by Avis. Avis shall
cooperate with WizCom's authorized consultants, subcontractors
and third party representatives as reasonably requested by
WizCom.
(d) Each Party shall ensure that its consultants, subcontractors
and third party representatives execute a confidentiality
agreement which requires the subcontractor to comply with the
confidentiality obligations set forth in Article 9.3. Each
Party shall provide the other with copies of each such
confidentiality agreement if requested.
(e) Each Party shall remain responsible and hold the other Party
harmless for performance of obligations subcontracted to its
subcontractors.
5.7 Reports and Meetings.
(a) General.
Subject to Articles 5.7(b) and (c), the Parties shall mutually
agree upon periodic meetings to discuss WizCom's Services, the
operation of the Data Center, and Maintenance and development
activities, as such items relate to the Systems and the
Services, and shall mutually agree on the form of periodic
reports from WizCom relating to such items, with each Party to
assume its own expenses related to such meetings.
(b) Reports.
Reports shall include a monthly performance report delivered
to Avis within 15 days after the end of each month, in a form
mutually established by the Parties, describing WizCom's
performance of the Services in the preceding month, including
performance with respect to Performance Standards, status of
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Projects, status of problem resolution efforts, and status of
changes and planned changes for Equipment and/or Software.
(c) Meetings.
Meetings shall include meetings with the Account Team for Avis
(or specific members thereof) as reasonably requested by Avis
to discuss the Services.
5.8 Avis Audit Rights.
(a) Access.
Upon reasonable prior written notice, WizCom shall provide to
Avis auditors (including internal audit staff) and other
representatives as Avis may from time to time designate in
writing, access at all reasonable times to the part of any
facility at which WizCom is providing the Services, to WizCom
personnel providing the Services, and to data and records
relating to the Services for the purpose of performing audits
and inspections of WizCom, to verify the accuracy of WizCom's
charges to Avis, provided that any such audits may not be
requested more frequently than once a year. Avis shall bear
the expense of any such audit. Notwithstanding the foregoing,
nothing herein contained shall prohibit Avis from conducting
its internal audit activities as conducted by it as of the
Effective Date of this Agreement.
(b) Cooperation.
WizCom shall provide to such auditors such assistance as they
reasonably require, including installing and operating audit
software. The cost of all services rendered by WizCom in
connection with any such audit, and any computer time to
operate such audit software, shall be charged as a cost
herein. Avis's auditors and other representatives shall comply
with applicable security requirements in effect at the Data
Center or any other WizCom facility.
(c) Fees.
If, as a result of such audit, Avis determines that WizCom has
charged Avis amounts in excess of the charges to be remitted
in accordance with Article 4, Avis shall notify WizCom of the
amount of such overcharge and WizCom shall provide a credit to
Avis for the amount of such overcharge. In the event of a
dispute over the result of any such audit, the amount so
disputed shall be deposited by the party to be charged with an
escrow agent acceptable to both parties and pursuant to an
escrow agreement acceptable to both parties and such escrow
agent until such time as the dispute is resolved.
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ARTICLE 6 PERFORMANCE STANDARDS.
6.1 Performance Standards in General.
(a) WizCom shall at a minimum perform the Services in accordance
with the performance standards described in Schedule B (the
"Performance Standards").
(b) WizCom shall use commercially reasonable efforts to remedy any
Performance Standards failure
(1) Such efforts shall include promptly (i) investigating
the causes of the problem and discussing
investigation results with Avis, (ii) undertaking to
correct the problem and its underlying cause and to
begin meeting the Performance Standards, and (iii)
advising Avis of the status of remedial efforts.
(2) In the event Performance Standards relating to the
Data Center are not met over a particular year of the
Term, in addition to the other remedies Avis may have
under this Agreement, Avis may (i) create a plan,
jointly with WizCom, to improve the performance of
the Data Center; or (ii) if the failure to meet the
Performance Standards occurs during two consecutive
years of the Term, have an independent third party
mutually agreeable to the Parties review the
situation and propose solutions, which shall be
implemented as promptly as practicable, provided both
Parties agree to such solutions.
6.2 Periodic Review.
Commencing upon the Effective Date, and at least annually thereafter,
the Parties shall review the Performance Standards and shall make
adjustments and additions to them as mutually agreed upon by the
Parties as appropriate, to reflect changes in technology and service
platforms, changes in the Services or in use, including a material
increase in Avis's use of the Data Center or enhancements,
modifications, additions or replacements in the Services.
6.3 Measurement and Monitoring Tools.
WizCom shall implement for Avis measurement and monitoring tools and
procedures required to measure for each appropriate time period
WizCom's performance of the Services against the applicable
Performance Standards in accordance with Schedule B, and shall provide
Avis with the reports required under Schedule B. To the extent
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that Avis requests any measurement and monitoring tools additional to
those in place as of the Effective Date of this Agreement or
implemented by WizCom for the benefit of its customers generally, the
cost of such tools shall be borne by Avis.
ARTICLE 7 RESPONSIBILITY FOR RESOURCES.
7.1 Software License.
WizCom Software.
(a) All Software is, or shall be, and shall remain, the exclusive property
of WizCom or its third party licensor(s), as applicable, and Avis
shall have no rights or interests in or to the WizCom Software, except
as set forth in this Section 7.1(a). Avis acknowledges that WizCom and
the assigns of WizCom shall have the right to obtain and hold in their
own corporate name any intellectual property rights in and to WizCom
Software. With respect to WizCom Software, WizCom hereby grants to
Avis such usage rights in the WizCom Software on WizCom's hardware in
WizCom's custody solely in connection with the Services as follows:
(i) WizCom hereby grants to Avis a non-exclusive worldwide fully paid
up perpetual license to use the software, including any
modifications and enhancements thereto, set forth in Schedule K
hereto (the "Exclusive Systems"). Notwithstanding anything
contained herein to the contrary, WizCom shall not permit a
competitor of Avis (subject to any existing Agreements or
obligations which WizCom has at the Effective Date of this
Agreement) to use any Systems set forth in Schedule K.
(ii) WizCom hereby grants to Avis for the Term a non-exclusive
worldwide fully paid up license to any New Systems which are
created by WizCom specifically for Avis. WizCom agrees that it
shall not license or permit the use of such New Systems by a
competitor of Avis for a period of two (2) years from the date of
implementation.
(iii)WizCom hereby grants to Avis a non-exclusive worldwide fully
paid up license for the Term to use the Systems, other than New
Systems and the Exclusive Systems.
Avis agrees to execute any documents or to take any other actions
as may be necessary, or as WizCom may request, to acknowledge and
confirm the licenses described above and the rights of WizCom to
any such licensed product.
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(b) If Avis engages a third party to develop a Third Party
Development as permitted hereunder, WizCom shall provide to
such third party information regarding the Systems in order
for such Third Party Development to interface with the
Systems sufficiently to retrieve required Avis Data and
shall grant to such third party a limited, non-exclusive,
non-transferable, temporary right during the Term to use
such information provided by WizCom for the sole benefit of
Avis and for the sole purpose of performing such work during
the term of such third party's engagement by Avis. Such
rights WizCom may grant pursuant to this Article are subject
to compliance with the requirements of Article 5.6(d).
(c) Except as may be approved by WizCom, Avis shall not make, or
cause to be made, any changes or modifications to any Avis
Software if changing such Avis Software would adversely
affect the functionality of the Software, degrade the
performance of the Software or adversely affect the
day-to-day operations of WizCom's business except as may be
necessary on a temporary basis to maintain the continuity of
the Services. In addition, Avis shall be responsible for any
modification or enhancement to or substitution for, the
WizCom Software, whether owned by WizCom or licensed from a
third party licensor(s) and any other equipment used in
connection with the Services necessitated by unauthorized
changes to the WizCom Software, whether owned by WizCom or
licensed from a third party licensor(s) (except as may be
necessary on a temporary basis to maintain the continuity of
the Services).
7.2 International Considerations.
(a) Certain Software and technical data to be provided, and certain
transactions contemplated, under this Agreement may be subject to export
controls under the laws and regulations of the United States and other
countries. No Party shall export or re-export any such items or any direct
product thereof or undertake any transaction in violation of any such laws or
regulations. Avis shall be responsible for obtaining any such export control
authorizations to the extent applicable to Avis and/or Avis Authorized Users.
WizCom shall be responsible for obtaining any such export control authorizations
to the extent applicable to WizCom.
(b) Each Party shall be responsible for its compliance with all laws and
regulations relating to data protection and privacy and/or transferred data flow
as may be applicable to its use of the Systems for its own benefit.
7.3 Hardware.
WizCom shall have control or charge of, and shall be responsible for,
the means, methods, techniques, sequences or procedures of
construction, fabrication,
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procurement, shipment, delivery or installation, in connection with all
Equipment required for the Services. To that end, WizCom shall, in its
sole discretion, from time to time during the Term, upgrade and/or
replace Equipment and End User Equipment used in connection with the
Systems in an effort to address hardware obsolescence or the need for
increased capacity. Avis shall be advised of all Equipment and End User
Equipment upgrades and the costs therefor.
7.4 Avis Third Party Software.
Prior to the Effective Date, the Parties will verify that Avis has
provided WizCom with access to and a copy of all Avis Third Party
Software (including source code, object code, system documentation and
related work product to the extent permitted by the underlying license
and necessary for the Services) for WizCom to operate for Avis's
benefit.
(a) WizCom shall manage and utilize Avis Third Party Software for
the purpose of providing Services to Avis, and shall comply
with all reasonable and customary use restrictions and
obligations of nondisclosure imposed on Avis by any license
for such Avis Third Party Software to the extent made known to
WizCom.
(b) All charges, if any, under the licenses for such Avis Third Party
Software, including, but not limited to royalties, license fees, access fees or
user fees, shall be the sole responsibility of Avis. Upon termination of this
Agreement, Avis shall be solely responsible for all subsequent charges, if any,
under the licenses for Avis Third Party Software. Notwithstanding the foregoing,
any charges incurred in connections with obtaining access for WizCom to any of
the Avis Third Party Software listed on Schedule E as of the Effective Date
shall be shared equally by Avis and WizCom.
(c) Except as otherwise requested or approved by Avis, WizCom
shall cease all use of Avis Third Party Software upon
termination of this Agreement, except as necessary for WizCom
to provide termination assistance.
7.5 Escrow Agreement.
As soon as reasonably practicable after the execution of this
Agreement, WizCom shall deposit in escrow, with an escrow agent in the
United States and under an agreement reasonably acceptable to Avis and
WizCom (the "Escrow Agreement"), as set forth in Schedule J for a term
concurrent with the Term, one (1) copy of the Licensed Software in the
source code form; if the Licensed Software is modified subsequent to
such deposit, WizCom shall replace the unmodified copy of the Licensed
Software then in escrow with a deposit of one (1) copy of the modified
Licensed Software in the source code form.
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ARTICLE 8 APPLICATION MODIFICATION AND DEVELOPMENT.
8.1 Modifications.
As of the Effective Date, WizCom shall be responsible for
modifications, enhancements, supplements and replacements to the
Systems, except as otherwise provided in this Agreement. With respect
to any type of modifications as to which initially WizCom is not
responsible, in whole or in part, then WizCom shall only accept future
responsibility on mutually agreeable terms. Modifications shall consist
of Maintenance and Enhancements as described in this Article 8.1
(collectively, "Modifications").
(a) Maintenance.
(1) "Maintenance" shall mean software maintenance
performed by WizCom on the Systems or any other
computer software, including supporting documentation
and media, used to provide the Services to Avis, so
that the Systems and computer software provide the
agreed upon functionality for Avis. Maintenance shall
include the WizCom activities described in Article
8.1(a)(2) as they are performed by WizCom with
respect to the Systems. A Modification to the Systems
or any other computer software, including supporting
documentation and media, that is not "Maintenance"
under this Article 8.1(a) shall be deemed to be an
"Enhancement" under Article 8.1(b).
(2) WizCom's Maintenance obligations for Avis shall include:
(i) Correction of malfunctions - WizCom shall use commercially
reasonable efforts to correct Applications malfunctions in the Systems,
including abnormal termination and situations which result in incorrect
results. If the incorrect results are a result of a System malfunction
(e.g., performance inconsistent with System documentation), the correction
will be performed as Maintenance. If the incorrect results are not a result
of a System malfunction, Avis will be given an opportunity to change the
performance of the System as an Enhancement. Avis shall provide WizCom with
reasonable assistance in WizCom's efforts to identify, locate and correct
the Applications malfunction.
(ii) System support - WizCom shall perform such Applications testing
and changes to the Systems as it deems necessary or as Avis reasonably
requires to support new Systems Software releases and upgrades and new
hardware installations and changes. Such
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system support shall also include Applications testing deemed
necessary by WizCom or reasonably required by Avis to support the Systems
for disaster recovery tests.
(iii) Technical efficiencies - WizCom may modify the Systems, subject
to the change control requirements set forth in the Procedures Manual (A)
to make an improvement in a current process or program that reduces the
shared costs, such as maintenance, system run time and manpower, or (B) to
improve WizCom's Applications staff productivity, including such items as
pilots for new tools (collectively, "Technical Efficiency Projects").
Technical Efficiency Projects that WizCom reasonably estimates will require
more than six person months of effort shall be considered an Enhancement,
and shall be subject to Avis's prior approval. An example of a Technical
Efficiency Project that would be considered an Enhancement is the expansion
or major rewrite of a database that requires more than six (6) person
months of effort.
(3) Charges for Maintenance shall be as provided in Schedule C.
(b) Enhancements. "Enhancements" shall mean modifications, enhancements,
replacements or supplements that add one or more new functions to the
Systems (e.g., to accommodate new surcharges, mandatory third party changes
(e.g., GDS or credit clubs), or mandatory changes required by law or
regulation), which are thereafter integrated into the Systems and are not
Maintenance. WizCom shall perform Enhancements for the Systems at Avis's
request, for the charges set forth in Schedule C for Projects ("Avis
Enhancements"). WizCom shall perform Avis Enhancements in accordance with the
methodology and Project management procedures described in Article 8.2.
(c) Third Party Supported Functions. Certain of the functions of the
Systems identified in Schedule A require additional hardware, software,
communications licenses, and/or other equipment or services to be provided
by a company other than WizCom or its Affiliates ("Third Party Supported
Functions"). During the Term, if any Enhancements to the Systems involve
additional Third Party Supported Functions, Avis shall bear all costs
associated with procuring the associated hardware, software, vendor
analysis, software development and support, licenses and services from the
third parties identified by WizCom or otherwise selected by Avis. The costs
of the hardware, software, licenses and services obtained from third parties
for Avis's Third Party Supported Functions shall be borne by Avis. As
requested by Avis, WizCom shall assist Avis in its implementation of new
Third Party Supported Functions as a Project.
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(d) New Systems. At the request of Avis, WizCom will submit a proposal to
develop New Systems desired by Avis. If Avis accepts WizCom's proposal, WizCom
will undertake to develop such New Systems.
(e) Projects. "Projects" shall mean all Enhancement or New System projects
requested by Avis or otherwise agreed to between Avis and WizCom.
(f) New Technology. WizCom shall use commercially reasonable efforts in
researching and developing new technologies and Services which are to be
utilized specifically by the car rental industry. Such new technology and/or
Services will be integrated with the existing Systems upon the mutual agreement
of cost by the Parties.
8.2 Methodology and Project Management Procedures.
WizCom shall perform Projects at Avis's request or as agreed by Avis
and WizCom. Proposals for initiating Projects made by WizCom or third
parties shall be subject to Avis's review and approval. Subject to the
provisions of this Article 8.2, detailed procedures for initiation and
approval of Avis Projects shall be set forth in the Procedures Manual.
8.3 Third Parties.
Avis shall have the right to contract with a third party to perform any
service not included in the Services (a "New Service"). Subject to
Article 5.6(b), should Avis contract with a third party to perform a
New Service, WizCom shall cooperate with Avis and such third party to
the extent reasonably required by Avis, at Avis's expense, including
provision of (i) appropriate interfaces between the Services and any
New Service and (ii) reasonable assistance and support services to such
third party at reasonable commercial rates; provided, however, Avis
shall require such third parties to comply with WizCom's reasonable
requirements regarding operations, standards and security, including
confidentiality obligations in Article 5.6(d).
Subject to any restrictions contained herein, the Parties agree that
should any New Service provided by a third party be subsequently
integrated into the System or should additional equipment (the "New
Equipment") requested by Avis be integrated into the Systems, such
integration shall be recognized as an Enhancement pursuant to Article
8.1(b). If integrated into the Systems, the integrated portion shall be
maintained by WizCom unless otherwise agreed by the Parties. If a New
Service or New Equipment is not integrated into the System, and will be
operated by WizCom, then Avis will provide the necessary maintenance
and support unless the Parties agree otherwise in advance. Any services
WizCom performs to correct problems in the
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Systems caused by any New Service and/or New Equipment shall be charged
to Avis as a Project under Schedule C. If, in WizCom's sole judgment,
such correction must be accomplished on an emergency basis, WizCom may
act accordingly to resolve such emergency.
8.4 Documentation.
(a) General.
WizCom shall provide to Avis, at Avis's expense, such
assistance and information on a timely basis as Avis may
reasonably require to understand and use all operations,
features and functions of the Systems for Avis's business. If
there is a disagreement between the Parties regarding whether
WizCom is required to provide certain assistance or
information, the Parties shall promptly attempt to resolve
such disagreement and shall discuss such matters at the
management meetings described in Article 5.7.
(b) Documentation.
(1) Subject to the terms hereof, during the Term,
preparation of documentation shall be provided and
charged as a Project and shall be subject to the
provisions applicable to Projects in this Agreement,
including those in the Procedures Manual.
(2) Upon completion of a Project WizCom will provide Avis
with not less than one (1) complete copy of
documentation required to operate such Project.
(3) All documentation provided by WizCom and portions
thereof incorporated in Avis's documentation shall
remain proprietary to WizCom and shall be deemed
Confidential Information of WizCom and subject to the
terms of Article 9.3.
ARTICLE 9 SAFEGUARDING OF DATA; CONFIDENTIALITY.
9.1 Avis Data.
Avis Data shall be and shall remain the property of Avis. Upon (i)
Avis's request, or (ii) the termination of this Agreement for any
reason and at Avis's expense, such Avis Data or other Avis Confidential
Information shall either be promptly returned to Avis by WizCom in the
form in which maintained by WizCom (or in such other form reasonably
requested by Avis to the extent Avis pays for the expense thereof) or,
if Avis so elects, shall be destroyed. Avis Data shall not be utilized
by WizCom for
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any purpose other than rendering the Services to Avis under this
Agreement, computing charges to Avis, or as required by law,
regulation, or order of a court or regulatory agency or other authority
having jurisdiction therefor. Notwithstanding the foregoing, so long as
the Master License Agreement remains in effect, WizCom and its
affiliates will have the right to use the Avis Data as provided in the
Master License Agreement.
9.2 Safeguarding of Avis Data.
WizCom shall maintain reasonable safeguards against the destruction,
loss, or alteration of Avis Data in the possession of WizCom which are
no less rigorous than those maintained by WizCom for other customers
for information of a similar nature. Avis at its sole cost and expense,
shall have the right to establish additional backup security for data,
and to keep in its possession backup Avis Data and files thereof;
provided, however, that WizCom shall have access to such backup data
and data files as reasonably required by WizCom for the provision of
Services hereunder.
9.3 Confidentiality.
(a) Confidential Information.
(1) WizCom and Avis each acknowledge to the other that it
possesses and will continue to possess information
that has been developed or received by it and that
has commercial value in its business or that of its
customers and is not in the public domain.
(2) Except as otherwise specifically agreed herein or
elsewhere in writing by the Parties, "Confidential
Information" shall mean all information of a Party
acquired by the other Party, that is marked
confidential, restricted, proprietary, or with a
similar designation.
(3) In the case of WizCom, Confidential Information also
shall include, subject to the provisions of this
Article and whether or not marked as described above
and except to the extent such information is owned by
Avis or constitutes Avis Confidential Information
under this Agreement, the Systems, any other Software
provided to Avis by or through WizCom to the extent
treated as confidential by WizCom, all user and
system documentation developed by or for WizCom that
is related to any of the foregoing.
(4) In the case of Avis, Confidential Information also
shall include, subject to the provisions of this
Article and whether or not marked as described above
and except to the extent such information is owned by
WizCom or constitutes WizCom Confidential Information
under this
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Agreement, Avis Owned Software and business
information of Avis and Avis Authorized Users
regarding planning, pricing, results and operations.
(b) Obligations.
(1) To prevent disclosing to any other entity the
Confidential Information of the other party, Avis and
WizCom shall each use at least the same degree of
care as it employs to avoid unauthorized disclosure,
publication or dissemination of its own information
of a similar nature.
(2) Neither WizCom nor Avis shall (i) make any use of the
Confidential Information of the other except as
contemplated by this Agreement, (ii) acquire any
right in or assert any lien against the Confidential
Information of the other except as expressly provided
hereunder, or (iii) refuse for any reason (including
a default or material breach of this Agreement by the
other Party) to return the other Party's Confidential
Information (including all copies thereof) promptly
to it if requested to do so.
(3) Upon termination of this Agreement, each Party shall
(except as otherwise provided in this Agreement)
return or destroy and certify to the destruction of,
as the owner may direct, all materials in whatever
medium that embody the owner's Confidential
Information or any information derived therefrom,
including all copies thereof.
(4) The Parties shall take reasonable steps to ensure
that their employees and employees of third parties
providing services, equipment and/or software comply
with these confidentiality provisions.
(c) Exclusions.
(1) This Article 9.3 shall not apply to any information
which the recipient demonstrates (i) at the time of
disclosure to it was in the public domain; (ii) after
disclosure to it became part of the public domain
through no fault of the receiving Party; (iii) was in
the possession of the receiving Party at the time of
disclosure to it, without confidentiality
restriction; (iv) after disclosure to it, was
received from a third party who had a right to
disclose such information to it free of any
confidentiality obligation; or (v) was independently
developed by the receiving Party, without reference
to Confidential Information of the furnishing Party.
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(2) A Party shall not be considered to have breached its
obligations under this Article for disclosing
Confidential Information to the extent such
disclosure is required to satisfy any legal
requirement of a competent government body provided
that, immediately upon receiving any such request or
demand and to the extent it may legally do so, such
Party advises the other Party promptly and prior to
making such disclosure, so that the other Party may
interpose an objection to such disclosure or take
such other action as it deems appropriate to protect
the Confidential Information.
(3) WizCom's receipt of Confidential Information from
Avis under this Agreement, shall not limit or
restrict assignment or reassignment of WizCom
employees within WizCom or between WizCom and its
Affiliates, subject to the following: (i) such
employees shall remain bound by the confidentiality
provisions of this Agreement; and (ii) WizCom shall
use good faith efforts to implement Avis's reasonable
recommendations on policies for maintaining the
confidentiality of Avis's Confidential Information.
(d) No Implied Rights.
Nothing contained in this Article shall be construed as
obligating a Party to disclose its Confidential Information to
the other Party, or as granting to or conferring on a Party,
expressly or by implication, any right or license to the
Confidential Information of the other Party, except as
expressly provided herein.
(e) Party's Own Information.
Nothing in this Article shall be deemed to restrict the
disclosure or use that a Party may make of its own
information, except as expressly provided herein.
ARTICLE 10 INDEMNITIES.
10.1 WizCom Indemnities.
WizCom shall indemnify, defend and hold harmless Avis, its Affiliates,
and their officers, directors, employees, agents, successors, and
assigns, in accordance with the indemnification procedures herein, from
any losses, liabilities and damages and related costs and expenses
(including reasonable attorneys' fees) arising from or in connection
with any of the following:
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(a) WizCom's failure to observe or perform any duties or
obligations to be observed or performed by WizCom under (i)
WizCom Third Party Software license agreements or service
contracts or (ii) any Avis Third Party Software license
agreement a copy of which was transmitted to WizCom prior to
the first alleged failure, except in each case failures
consented to by Avis in writing;
(b) Any claims of infringement of any U.S. patent, trade secret,
copyright or other proprietary rights, alleged to have
occurred (i) because of use of the Systems by Avis or Avis
Authorized Users (excluding any claims based on Avis
Software), or (ii) as a result of WizCom's activities under
this Agreement, except for (x) such activities for which Avis
indemnifies WizCom under Article 10.2;
(c) WizCom's breach of its obligations with respect to Avis's
Confidential Information; and
(d) WizCom's breach of its obligations under Article 9.2.
10.2 Avis Indemnities.
Avis shall indemnify, defend and hold harmless WizCom, its Affiliates,
and their officers, directors, employees, agents, successors, and
assigns, in accordance with the indemnification procedures herein, from
any losses, liabilities and damages and related costs and expenses
(including reasonable attorneys' fees) arising from or in connection
with any of the following;
(a) Avis's failure to observe or perform any duties or obligations
to be observed or performed (i) prior to the Effective Date by
Avis under the Avis Third Party Software license agreements,
and (ii) after the Effective Date by Avis or WizCom under any
Avis Third Party Software license agreement not disclosed to
WizCom prior to such failure;
(b) Any claims of infringement of any U.S. patent, trade secret,
copyright or other proprietary rights, alleged to have
occurred as a result of (i) Software provided to WizCom by
Avis, or (ii) Avis's activities under this Agreement,
including Modifications made to the Systems by Avis and/or its
Affiliates;
(c) Any claims made directly by Avis Authorized Users against
WizCom relating to their use of the Systems (without
limitation to Avis's rights to make such claims), and any
claims by third parties arising out of or relating to misuse
of the Systems or Avis Third Party Software by Avis Authorized
Users;
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(d) Avis's breach of its obligations with respect to WizCom's
Confidential Information;
(e) Violations by Avis Authorized Users of any of the obligations of Avis
under this Agreement to the extent Avis would be liable under this Agreement;
(f) Any claims made by an employee or consultant of Avis against
WizCom arising out of or related to WizCom's monitoring,
surveilling, investigating, testing or accessing such employee
or consultant's computer activity through use of an
identification number, code or password, at Avis's request
provided such activity is conducted in accordance with Avis's
procedures and guidelines which have been provided to WizCom
by Avis; and
10.3 Infringement.
Except to the extent that Avis has expressly agreed to the use of such
item notwithstanding such risk, if any item used by WizCom to provide
the Services, including any portion of the Systems or of Projects
developed for Avis, but not including any item provided by Avis or Avis
Third Party Software, becomes, or in WizCom's reasonable opinion is
likely to become, a basis for an injunction precluding WizCom from
providing Services for Avis, then in addition to indemnifying Avis as
provided in this Article 10, at WizCom's sole cost, expense and option,
WizCom shall forthwith: (i) secure the right to continue using the
item; or (ii) replace or modify the item to make it non-infringing,
provided that any such replacement or modification will not degrade the
performance or quality of the Services. If an infringing item is so
provided by Avis then all indemnifying costs shall be borne by Avis.
10.4 Additional Indemnities.
The Parties shall indemnify, defend and hold harmless one another, and
their Affiliates, officers, directors, employees, agents, successors,
and assigns, in accordance with the procedures described in this
Agreement, from any and all losses and threatened losses arising from
or in connection with any of the following:
(a) the death or bodily injury of any agent, employee, customer,
business invitee, or business visitor or other person to the extent that it
is caused by the tortious conduct of the indemnifying Party;
(b) the damage, loss or destruction of any real or tangible personal
property to the extent that it is caused by the tortious conduct of the
indemnifying Party; and
(c) any claim, demand, charge, action, cause of action, or other
proceeding asserted against the indemnitee but to the extent that it
results from an act or
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omission of the indemnifying Party in its capacity as an employer of
the person asserting the claim.
10.5 Indemnification Procedures.
With respect to third-party claims subject to the indemnities in this
Article 12, the following procedures shall apply:
(a) The indemnitee shall promptly after acquiring knowledge thereof notify
the indemnifying Party. The indemnitee shall give the indemnifying Party full
opportunity to control the response thereto and the defense thereof including
settlement, provided that the indemnitee shall have the right to approve any
settlement or any decision not to defend. The indemnitee's failure to promptly
give notice shall affect the indemnifying Party's obligation to indemnify the
indemnitee only to the extent the indemnifying Party's rights are materially
prejudiced thereby. The indemnitee may participate, at its own expense, in any
defense and any settlement directly or through counsel of its choice.
(b) If the indemnifying Party elects not to defend, the indemnitee shall
have the right to defend or settle the claim as it may deem appropriate, at the
cost and expense of the indemnifying Party, which shall promptly reimburse the
indemnitee for all such costs, expenses and settlement amounts.
10.6 Exclusive Remedy.
The indemnification rights of each indemnified Party pursuant to
Articles 10.1, 10.2 and/or 10.4 shall be the exclusive remedy of such
indemnified Party against the indemnifying Party with respect to the
claims to which such indemnification relates.
10.7 Subrogation.
In the event that an indemnifying Party shall be obligated to indemnify
an indemnitee pursuant to foregoing indemnities, the indemnifying
Party, shall, upon payment of such indemnity in full, be subrogated to
all rights of the indemnitee with respect to the claims to which such
indemnification relates.
ARTICLE 11 REPRESENTATIONS, WARRANTIES AND COVENANTS.
11.1 Software Rights.
WizCom represents and warrants that it is authorized to use,
distribute, and/or make available to Avis the Systems, and that the
Systems do not infringe, or constitute a misappropriation of the rights
of any third party.
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11.2 Authorization.
Each Party represents and warrants to the other that:
(a) It has the requisite corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated by this Agreement; and
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by the Board of Directors of each Party, and will not constitute (i)
a violation of any judgment, order, or decree, (ii) a default under any contract
by which it or any of its assets are bound (except to the extent excluded or
otherwise contemplated hereby), or (iii) an event that would, with notice or
lapse of time, or both, constitute such a default. Each Party shall provide the
other with a certification evidencing the Board of Directors approval.
11.3 Viruses.
Each Party shall use its best efforts to ensure that no viruses or
similar items ("Viruses") are introduced into any element of the
Software and/or Systems. If a Virus is introduced into any such element
by other than Avis, its employees, agents or contractors, WizCom shall
use its best efforts to assist Avis in reducing the effect of the Virus
and, if the Virus causes a loss of operational efficiency or data, to
assist Avis to the same extent to mitigate and restore such losses as
quickly as feasible. If a Virus is introduced into any such element by
Avis, its employees, agents or contractors, Avis, at Avis's expense,
shall use its best efforts to assist WizCom in reducing the effect of
the Virus and, if the Virus causes a loss of operational efficiency or
data, to assist WizCom to the same extent to mitigate and restore such
losses as quickly as feasible.
11.4 Disabling Code.
Without the prior written consent of the other Party, neither Party
shall insert into the Systems any code that would disable or otherwise
shut down all or any portion of the Services. Neither Party shall
invoke any disabling code embodied in the Systems or the Avis Software
at any time, including upon expiration or termination of this
Agreement, for any reason, without the other's prior written consent.
11.5 Disclaimer.
OTHER THAN THE WARRANTIES SET FORTH IN THIS ARTICLE 11, THE
PARTIES MAKE NO WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT
TO THEIR SERVICES OR WORK PRODUCT HEREUNDER, INCLUDING, BUT
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NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 12 LIMITATION ON LIABILITY.
12.1 Limitation on Liability.
(a) IN NO EVENT SHALL A PARTY BE LIABLE FOR ANY LOSS OF BUSINESS,
COST SAVINGS (ACTUAL OR PROJECTED, IT BEING UNDERSTOOD THAT A
CLAIM FOR ACTUAL EXPENDITURES WILL NOT BE EXCLUDED AS A CLAIM
FOR COST SAVINGS), PROFITS, OR OTHER INDIRECT DAMAGES, SPECIAL
DAMAGES, CONSEQUENTIAL DAMAGES OR PUNITIVE DAMAGES, EVEN IF
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
(b) IN NO EVENT SHALL WIZCOM OR ANY OTHER ENTITY BE LIABLE
FOR ANY LOSS, DAMAGE OR EXPENSE RESULTING FROM OR
ARISING OUT OF (i) ANY DELAY, FAILURE OR INADEQUACY OF
THE SYSTEMS OR ANY MODIFIED VERSION THEREOF, OR OF THE
DATA CENTER OR ANY PART THEREOF INCLUDING THE
EQUIPMENT, (ii) ANY FAILURE OF OR DELAY IN DEVELOPMENT,
DELIVERY, INSTALLATION, OR MAINTENANCE BY WIZCOM OR
ANY OTHER ENTITY, OR (iii) ANY FAILURE OF THE SYSTEMS OR
ANY MODIFIED VERSION THEREOF, TO FUNCTION OR PERFORM
AS CONTEMPLATED HEREUNDER, ALL FOR ANY REASON
WHATSOEVER, EXCEPT TO THE EXTENT ARISING FROM THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF WIZCOM.
(c) NO CAUSE OR CLAIM MAY BE ASSERTED AGAINST EITHER PARTY
MORE THAN TWO YEARS AFTER IT HAS ACCRUED.
12.2 Force Majeure.
(a) Neither Party shall be liable for any failure or delay in the
performance of its obligations under this Agreement if and to the extent such
failure or delay is caused, directly or indirectly, by fire, flood, earthquake,
elements of nature or acts of God, acts of war, terrorism, riots, civil
disorders, rebellions or revolutions in any country, strikes, lockouts, or labor
difficulties (legal or illegal) or any other cause beyond the reasonable control
of such Party, including failures or fluctuations in electrical power, heat,
light, air conditioning or telecommunications equipment, and such failure shall
not be deemed a default under this Agreement, or, subject to Article 13.2(c)
below, a ground for termination hereof.
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(b) In such event the non-performing Party will be excused from further
performance or observance of the obligation(s) so affected for as long as such
circumstances prevail and such Party continues to use its best efforts to
recommence performance or observance whenever and to whatever extent possible
without delay. A Party so delayed in performance shall immediately notify the
other Party to whom performance is due by telephone (to be confirmed in writing
within two days of the inception of such delay) and describe at a reasonable
level of detail the circumstances causing such delay.
(c) If any of the above-enumerated circumstances substantially delay
performance of the Services, then at Avis's option:
(1) if such delay extends for more than three consecutive
days, Avis may procure such Services from an
alternate source for so long as the delay in
performance shall continue;
(2) if such delay extends for more than seven consecutive
days, Avis may terminate any portion of this
Agreement so affected on 10 days' written notice to
WizCom, and the charges payable under this Agreement
shall be equitably adjusted to reflect those
terminated Services;
(3) if such delay extends more than 21 consecutive days,
Avis may terminate this Agreement on thirty (30) days
written notice to WizCom.
ARTICLE 13 INSURANCE AND RISK OF LOSS.
13.1 WizCom Insurance.
WizCom shall provide and maintain during the Term at least the
insurance described in this Article 13.1.
(a) Commercial general liability coverage with a combined single
limit of $3,000,000 per occurrence, the first $1,000,000 of
which may be self retained by WizCom. Coverage shall be broad
form, and shall include coverage for personal injury, and
completed operations. Avis shall be endorsed as an additional
insured with respect to WizCom's operations under this
Agreement.
(b) All-risk property coverage, in an amount equal to the
replacement cost of all real and personal property (including
all equipment, and media) of Avis under WizCom's care, custody
and control, including flood and earthquake coverage when
available, boiler and machinery coverage, and extra expense
coverage. Avis shall be named as a loss payee as its interests
appear.
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(c) All insurance shall be obtained from a carrier maintaining an A.M. Best
rating
of "A" or higher.
(1) A certificate of insurance evidencing each of the
coverages under this Article 13.1 shall be delivered
to Avis as soon as possible after the Effective Date.
(2) Such certificate shall:
(i) name Avis as an additional insured or loss payee where
provided above; and
(ii) contain an agreement by the insurance company(ies) issuing
the policy(ies) that such insurance shall respond as primary insurance
to any insurance carried by Avis, and that such insurance will not be
canceled, terminated or modified without at least thirty (30) days
prior written notice to Avis.
(3) Upon the renewal of any policy or policies required
by this Article 13.1, a new certificate of the
renewal of such insurance conforming to the above
requirements shall be delivered to Avis.
13.2 Avis Insurance.
Avis shall provide and maintain during the Term commercial general
liability coverage with a combined single limit of not less than
$3,000,000 per occurrence, the first $1,000,000 of which may be self
retained by Avis. Coverage shall be applicable to Avis's operations
under this Agreement.
13.3 Risk of Loss.
Except as otherwise provided under this Agreement, each Party shall be
responsible for risk of loss of, and damage to, any Equipment or
Software in its possession or under its control.
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ARTICLE 14 TERMINATION.
14.1 Termination for Cause.
(a) By Avis.
Avis may, by giving written notice to WizCom, terminate this
Agreement for cause as of a date specified in the notice of
termination, in the event that:
(1) Subject to Article 14.1(a)(2), WizCom breaches any of
its material duties or obligations under this
Agreement, and such breach is not substantially cured
within ninety (90) days of notice of breach by Avis
to WizCom;
(2) With respect to a breach (other than a payment
default) that WizCom demonstrates to Avis's
reasonable satisfaction cannot with due diligence be
cured within ninety (90) days of notice thereof, but
can be cured within 180 days, WizCom fails to (A)
proceed promptly and diligently to correct the
breach, (B) develop within thirty (30) days of notice
of breach a complete plan for curing the breach, or
(C) cure the breach within 180 days of notice of
breach to WizCom; or
(3) WizCom breaches any of its material duties or
obligations under this Agreement, and such breach
cannot be cured within 180 days of notice of breach
to WizCom.
(b) By WizCom.
WizCom may, by giving written notice to Avis, terminate this
Agreement for cause as of a date specified in the notice of
termination, in the event that:
(1) Avis fails to pay any undisputed amount when due, or disputed amount
within ten (10) days after the resolution of the dispute, to WizCom hereunder
and (i) such failure has not been cured within ten (10) business days following
notice of such failure from WizCom, and (ii) a similar default has occurred
within the six months prior to such default;
(2) Avis breaches its obligations under Article 4 and such breach is not
substantially cured within thirty (30) days of notice of breach to Avis; and
(3) Avis willfully discloses any material component or element of the
source or object code of the Systems in breach of its obligations of
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confidentiality set forth in this Agreement, and such breach is not
substantially cured within thirty (30) days of notice of breach to Avis;
14.2 Avis Termination of End User Equipment Services.
(a) Avis may terminate its obligation to receive, and WizCom's
obligation to provide, the End User Equipment Services without
cause at any time on or after the second anniversary of the
Effective Date, by giving WizCom at least ninety (90) days'
prior written notice designating the termination date, and as
further provided below:
(1) Within thirty (30) days after termination, Avis shall pay WizCom any
undisputed charges due and owing as of the effective date of termination, with
Avis to pay any amounts in dispute at such time promptly upon such amounts
becoming undisputed.
(2) Avis shall pay WizCom its costs for providing the termination
assistance associated with the termination of End User Equipment Services.
(3) Unless otherwise agreed by the Parties, Avis will pay to WizCom, within
thirty (30) days after the effective date of termination of the End User
Equipment Services, the unamortized portions of the purchase price of all End
User Equipment of which Avis wishes to retain possession and, upon receipt of
such payment, WizCom shall transfer title to such End User Equipment to Avis. To
the extent any such End User Equipment is leased by WizCom, Avis shall assume
all remaining obligations under such lease and such lease shall be assigned by
WizCom to Avis and assumed by Avis. Avis shall, at its expense, take all steps
necessary to obtain WizCom's release from such lease, unless WizCom agrees
otherwise in writing. Any End User Equipment not transferred to Avis as
described above, shall remain the property of WizCom and Avis shall, at its
expense and at the direction of WizCom, deliver such End User Equipment to
WizCom or WizCom's designee.
(4) Avis shall pay WizCom those costs WizCom has incurred and will incur to
provide the terminated End User Equipment Services that will not be recovered by
WizCom through the charges to Avis under this Agreement prior to the effective
date of termination ("Unrecovered Allowable Cost"). To be payable under this
Section 14.2(a)(4), Unrecovered Allowable Costs must be costs that (i) would not
have been incurred by WizCom but for WizCom's reasonable expectation that Avis
would continue to receive the End User Equipment Services during the Term, (ii)
cannot be reduced or eliminated by commercially
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reasonable efforts, including termination of leases and service contracts
and using resources to provide services for other WizCom customers, and (iii)
all other remaining costs, penalties and/or fees associated with the termination
of the End User Equipment and/or End User Equipment Services. Unrecovered
Allowable Costs shall be subject to audit by Avis prior to payment.
(b) WizCom Termination for Cessation of Business.
WizCom shall have the right, in the event WizCom determines to
cease providing Services to all customers, to terminate this
Agreement at any time upon at least five (5) years prior
written notice to Avis.
14.3 Termination for Insolvency.
In the event that either Party hereto becomes or is declared insolvent
or bankrupt, is the subject of any proceedings relating to its
liquidation, insolvency or for the appointment of a receiver or similar
officer for it, makes an assignment for the benefit of all or
substantially all of its creditors, or enters into an agreement for the
composition, extension, or readjustment of all or substantially all of
its obligations, then the other Party hereto may, by giving written
notice thereof to such Party, terminate this Agreement as of a date
specified in such notice of termination.
14.4 Extension of Termination Effective Date.
Avis may extend at any time the effective date of a termination it has
exercised one or more times by giving notice of same, provided that the
total of all such extensions shall not exceed 180 days following the
original effective date of termination.
14.5 Termination Assistance.
(a) Commencing upon any notice of termination (including notice
based upon breach or default by Avis), and continuing through
the effective date of termination (as such date may be
extended pursuant to Article 14.4), WizCom shall provide to
Avis, or at Avis's request to Avis's designee, the termination
assistance set forth in Schedule I. All termination assistance
provided by WizCom shall be charged to Avis at WizCom's costs
therefor.
(b) This Article 14.5(b) shall survive termination of this
Agreement. Subject to Article 14.6(c), for a period of twelve
(12) months following the effective date of termination under
this Agreement, WizCom shall provide at Avis's request, to
Avis or Avis's designee, any or all of the Services being
performed by WizCom prior to such effective date, including
any of the Services under Schedule I. To the extent WizCom is
to perform Services under this Article
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15.5(b), the provisions of this Agreement shall be applicable
as such provisions would have been applicable to such Services
prior to the effective date of such termination, except that
the compensation to be paid by Avis to WizCom therefor shall
be as set forth in Schedule C.
(c) If this Agreement is terminated by WizCom for breach by, or insolvency
of, Avis, then as a condition to WizCom's obligation to provide termination
assistance before and/or after termination, Avis shall first pay to WizCom all
undisputed amounts then outstanding to WizCom and shall thereafter, on the first
day of each month, pay to WizCom an amount equal to WizCom's reasonable estimate
of the total amount payable to WizCom for termination assistance for that month,
which amount shall be communicated in writing by WizCom to Avis not later than
ten (10) days prior to the first day of the month. At the end of each month, the
amounts paid under such estimate shall be compared with the amounts due and
owing under this Agreement, and Avis shall be credited or invoiced for the
difference as appropriate.
14.6 Equitable Remedies.
WizCom acknowledges that, in the event it actually breaches (or
attempts or threatens to breach) any material obligation to provide
Avis termination assistance as provided in Article 14.5, Avis may be
irreparably harmed. In such a circumstance, Avis may, to the extent
permitted by Article 15.1(d), proceed directly to court upon prior
notice to WizCom without undertaking informal dispute resolution under
Articles 15.1(a) and (b). In any such proceeding, WizCom may challenge
any assertion by Avis (including the amount or extent of damage or
losses).
14.7 Unrecovered Allowable Costs.
Upon any termination of this Agreement by WizCom pursuant to Article
14.1(b), Avis shall be obligated to pay, in addition to all other
amounts otherwise payable by it at such time, all Unrecovered Allowable
Costs existing at the time of termination.
ARTICLE 15 DISPUTE RESOLUTION.
15.1 Dispute Resolution.
Any dispute, claim or controversy arising out of or relating to this
Agreement or the breach, termination or validity hereof ("Dispute")
shall be resolved as provided in this Article 15, with each Party
bearing its own costs.
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(a) Avis or WizCom (each a "Party") may commence proceedings hereunder by
delivering a written notice to the other Party providing a reasonable
description of the Dispute to the other (the "Demand").
(b) within ten (10) days following receipt by a Party of a Demand, the
Dispute shall be referred to representatives of the parties for resolution, each
party no direct operational responsibility for the matters contemplated by this
Agreement (the "Representatives"). The Representatives shall promptly meet in a
good faith effort to resolve the Dispute. If the Representatives do not agree
upon a resolution within thirty (30) calendar days after receipt by a Party of a
Demand, each of Avis and WizCom shall be free to exercise the remedies available
to them under Article 15.1(c).
(c) The Parties hereby agree to submit all Disputes not resolved by
negotiation pursuant to Article 15.1(b) for resolution by arbitration under the
terms hereof, which arbitration shall be final, conclusive and binding upon the
parties, their successors and assigns. Except as expressly provided otherwise
in this Agreement, the arbitration shall be conducted in New York, New York by
three arbitrators (the"Panel") in accordance with the JAMS/Endispute
Comprehensive Arbitration Rules and Procedures then in effect as amended
herein. The arbitration shall be governed by the United States Arbitration Act,
9 U.S.C., Article 1, et seq. Notwithstanding the foregoing (i) each Party shall
have the right to examine the books and records of the other Party that are
reasonably related to the Dispute; (ii) each Party shall provide to the other,
reasonably in advance of any hearing, copies of all documents which a Party
intends to present in such hearing; (iii) each party shall be allowed to
conduct reasonable discovery through written requests for information, document
requests, requests for stipulation of fact, and depositions, the nature and
extent of which discovery needs of the Parties and the desirability of making
discovery expeditious and cost effective. The Panel shall complete all hearings
not later than ninety (90) days after its appointment. The award shall be in
writing and shall specify the facts and law on which it is based. The
arbitrators shall not be empowered to award to any party any consequential
damages, lost profits or punitive damages in connection with any Dispute and
each party hereby irrevocably waives any right to recover such damages.
Judgment upon any award may be entered in any count having jurisdiction
thereof.
(d) In the case of a Dispute, prior drafts of this Agreement shall not be
used to interpret the provisions of this Agreement.
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15.2 Continued Performance.
Each Party agrees to continue performing its obligations under this
Agreement in good faith while any dispute is being resolved, without
prejudice to each Party's right to terminate this Agreement.
15.3 Governing Law; Jurisdiction.
This Agreement and performance under it shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflicts of laws.
ARTICLE 16 GENERAL.
16.1 Binding Nature; No Assignment.
This Agreement shall be binding on the Parties hereto and their
respective successors and assigns to the extent assignment is
permitted hereunder. Neither Party may, nor shall it have the
power to, assign this Agreement without the prior consent of the
other. Notwithstanding the foregoing, either Party may assign its
rights and obligations under this Agreement without the approval
of the other Party (i) to any entity which acquires all or
substantially all of the assets of such Party or (ii) to any
successor in a merger or acquisition of a Party which entity
assumes all of such Party's obligations or (iii) to any entity
which is an Affiliate of such Party, provided that such assignment
shall not relieve the Party of any of its obligations under this
Agreement.
16.2 Timeliness.
The Parties shall perform their obligations under this Agreement
in a timely manner, subject to the other provisions of this
Agreement.
16.3 Right to Perform Services for Others.
Avis recognizes that WizCom personnel providing Services to Avis
under this Agreement may perform services similar to the Services
from time to time for other customers; provided, however, that
such personnel shall remain bound by the confidentiality
provisions of this Agreement, and shall not disclose Avis
Confidential Information except as provided in this Agreement.
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16.4 Entire Agreement; Amendment.
This Agreement, including any Schedules referred to herein and
attached hereto, each of which is incorporated herein for all
purposes, constitutes the entire agreement between the Parties
with respect to the subject matter hereof and supersedes all prior
agreements, whether written or oral, with respect to the subject
matter contained in this Agreement. No change, waiver, or
discharge hereof shall be valid unless in writing and signed by an
authorized representative of the Party against which such charge,
waiver, or discharge is sought to be enforced.
16.5 Counterparts.
This Agreement may be executed in several counterparts, all of
which taken together shall constitute one single agreement between
the Parties. This Agreement will have no effect, and shall not be
binding upon either Party, until executed and delivered by both
and in the absence of such execution and delivery it shall not
constitute a preliminary agreement or commitment to agree.
16.6 Headings.
The article and section headings and the table of contents used
herein are for reference and convenience only and shall not enter
into the interpretation hereof.
16.7 Relationship of the Parties (Independent Contractor).
WizCom, in furnishing the Services to Avis, is acting as an
independent contractor, and WizCom has the sole right and
obligation to supervise, manage, contract, direct, procure,
perform or cause to be performed, all work to be performed by
WizCom under this Agreement. Neither Party is an agent of the
other and has no authority to represent the other as to any
matters, except as expressly authorized in this Agreement.
16.8 Equal Opportunity Employer.
Each Party agrees that it will not engage in any unlawful
discrimination as to race, creed, color, national origin, sex,
age, disability, marital status, citizenship status, sexual
orientation or affectional preference in all employment decisions
relating to this Agreement.
16.9 Non-Hiring.
Avis agrees that, during the term of this Agreement and for a
period of one (1) year thereafter, neither Avis nor any of its
affiliates will directly or indirectly
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solicit, encourage or request any employee of WizCom to work or
perform services for Avis or any of such affiliates or any
contractor for any of them (other than pursuant to this Agreement
and solely in such employee's capacity as an employee and on
behalf of WizCom) or to leave the employ of WizCom. Without
limiting any rights or remedies WizCom may have for breach of the
foregoing obligation, WizCom shall be entitled (without the
necessity of posting any bond or establishing the inadequacy of
damages as a remedy) to an injunction prohibiting such breach.
16.10 Notices.
All notices under this Agreement shall be in writing and shall be
deemed duly given (i) when delivered by hand, (ii) one (1) day
after being given to an express overnight courier with a reliable
system for tracking delivery, (iii) when sent by confirmed
facsimile with a copy sent by another means specified in this
Article 16.10, or (iv) six (6) days after the day of mailing, when
mailed by United States mail, registered or certified mail, return
receipt requested, postage prepaid, and addressed as follows:
In the case of WizCom:
WizCom International, Ltd.
900 Old Country Road
Garden City, New York, 11530
Attn: President
With a copy to:
HFS Incorporated
6 Sylvan Way
Parsippany, N.J. 07054
Attn: SVP & Corporate Counsel
In the case of Avis:
Avis Rent A Car System, Inc.
900 Old Country Road
Garden City, NY 11530
Attn: Executive Vice President & General Counsel
A Party may from time to time change its address or designee for
notification purposes by giving the other prior written notice of
the new address or designee and the date upon which it will become
effective, which in any event shall be no sooner than five days
from receipt of notice.
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<PAGE>
16.11 Severability.
In the event that any provision of this Agreement conflicts with
the law under which this Agreement is to be construed or if any
such provision is held invalid by a court with jurisdiction over
the Parties, such provision shall be deemed to be restated to
reflect as nearly as possible the original intentions of the
Parties in accordance with applicable law. The remainder of this
Agreement shall remain in full force and effect.
16.12 Consents and Approvals.
(a) Except where expressly provided as being in the sole discretion
of a Party, where agreement, approval, acceptance, consent, or
similar action by either Party is required under this Agreement,
such action shall not be unreasonably delayed or withheld.
(b) An approval or consent given by a Party under this Agreement shall
not relieve the other Party from responsibility for complying with
the requirements of this Agreement, nor shall it be construed as a
waiver of any rights under this Agreement, except as and to the
extent otherwise expressly provided in such approval or consent.
16.13 No Waiver of Default.
(a) A delay or omission by either Party hereto to exercise any right
or power under this Agreement shall not be construed to be a
waiver thereof. A waiver by either of the Parties of any of the
covenants to be performed by the other or any breach thereof
shall be in writing and shall not be construed to be a waiver of
any succeeding breach thereof or of any other covenant herein
contained.
(b) Except as expressly limited by this Agreement, all remedies
provided for in this Agreement shall be cumulative and in addition
to and not in lieu of any other remedies available to either Party
at law, in equity or otherwise.
16.14 Media Releases.
(a) All media releases and public announcements made by either Party
relating to this Agreement or the subject matter of this
Agreement, but excluding (i) technical or service type
announcements, (ii) system bulletins intended by a Party solely
for internal distribution, (iii) bulletins made solely within and
related to a vehicle rental system's operation and (iv) bulletins
designed to meet legal or regulatory requirements beyond the
reasonable control of the disclosing Party, shall be coordinated
with and approved by the other Party in
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<PAGE>
writing prior to any release.
(b) Notwithstanding the foregoing, WizCom may list Avis as a customer
and Avis may list WizCom as a service provider, and either Party
may describe in general terms in proposals or other marketing
materials the services provided under this Agreement that are
provided by WizCom to Avis through the Systems.
16.15 Survival.
The Parties agree that the provisions of this Agreement which by their
terms clearly contemplates continued performance after such termination
or expiration shall survive the termination or expiration of this
Agreement for any reason.
16.16 No Third Party Beneficiaries.
This Agreement shall be deemed to create rights solely in Avis and
WizCom. This Agreement shall not be deemed to create any rights in
third parties, including suppliers and customers of a Party, or Avis
Authorized Users, or to create any obligations of a Party hereunder to
any such third parties.
16.17 Compliance with Laws and Regulations.
Each Party shall perform its obligations under this Agreement in a
manner that complies with applicable laws, regulations, ordinances and
codes, including identifying and procuring required permits,
certificates, approvals and inspections. If a charge of non-compliance
by a Party with any such laws, regulations, ordinances or codes occurs,
such Party shall promptly notify the other Party of such charges in
writing.
16.18 Covenant of Good Faith.
Each Party agrees that, in its respective dealings with the other Party
under or in connection with this Agreement, it shall act in good faith.
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<PAGE>
IN WITNESS WHEREOF, Avis and WizCom have each caused this Agreement to
be signed and delivered by its duly authorized representative, all as of the
date first set forth above.
AVIS RENT A CAR SYSTEM, INC. WIZCOM INTERNATIONAL, LTD.
By: /s/ Kevin M. Sheehan By: /s/ David P. McNicholas
Name: Name:
Title: Title:
Dated: Dated:
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<PAGE>
SCHEDULE A1
DATA CENTER AND SYSTEM SERVICES
WizCom shall be responsible for managing, operating and maintaining the
Data Center in accordance with the terms of this Agreement. If in order to meet
Avis's business requirements, WizCom must support Avis Software not currently
supported by WizCom, the Parties will mutually agree upon a plan to transition
the support of Avis Software, including the recruitment and training of
personnel. WizCom shall operate the Data Center 24 hours per day, 7 days per
week, 365 days per year (subject to the other provisions of this Agreement).
WizCom's responsibilities with respect to the Data Center and System Services
shall include:
1. Data Center Facility.
WizCom shall manage, operate and maintain the Data Center facility so that the
Data Center (i) is adequately staffed with trained technicians, operators, and
supervisors including support staff, (ii) has facility-supporting equipment
(including UPS and fire suppression systems) and (iii) is adequately supplied.
As of the Effective Date, the Data Center is located in Garden City, New York.
Subject to Section 8.1 of this Agreement, WizCom may, as it reasonably
determines, change the location of the Data Center. WizCom shall consider Avis's
reasonable comments in preparing its plans for the move. Avis may participate in
the execution of the change in location to the extent reasonably requested by
Avis to safeguard the integrity of the Systems, Avis Software and Avis Data,
including conducting reasonable testing to monitor and verify such integrity.
2. File Service Activities.
WizCom shall manage files to maintain the integrity and availability of Avis
Data. Avis shall be responsible for the accuracy of Avis Data as provided by
Avis to WizCom.
WizCom's responsibilities shall include:
a. Update all files under WizCom's control with new information provided by
Avis or Avis authorized third parties so that it is available during
scheduled availability.
b. Use third party software tools as reasonably necessary to verify the
successful receipt of all incoming files and the successful transmission of
all outgoing files.
c. Develop, document, implement and maintain Avis data and Software file
backup, recovery and retention procedures as necessary to meet Avis's
reasonable business requirements.
<PAGE>
d. Provide a recovery procedure for restoring a data image to a previous
level within a mutually agreed amount of time.
e. Provide recommendations to Avis regarding backup and recovery
considerations, such as improved levels of protection, efficiencies and cost
reductions.
f. Conduct daily backups and weekly full backups and recovery procedures so
that systems are available during scheduled hours. Conduct other periodic
backups as mutually agreed.
g. Use commercially reasonable efforts to utilize disk storage resources in
an efficient and cost effective manner.
h. Use commercially reasonable efforts so that adequate file space is
available for processing.
i. Provide information to Avis relating to mainframe utilization as
reasonably requested.
3. Tape Management/Tape Library.
WizCom shall perform tape library management functions both at the Data Center
and off-site and provide tape security and appropriate safeguards to prevent
unauthorized access to Avis Data contained on such tapes. These functions shall
include:
a. Provide logging and tracking of all physical tapes in and out of the
Data Center. Provide tape security as reasonably necessary to prevent
unauthorized access to tapes containing Avis Data, including preventing access
through "bypass label processing."
b. Identify in the Procedures Manual WizCom's standard tape handling
procedures. Modify such procedures as necessary to meet Avis's reasonable tape
handling requirements. Include such procedure in the Disaster Recovery Plan and
applicable directives regarding off-site storage.
c. Maintain tapes on site at the Data Center in a physically and
environmentally protected area.
d. In accordance with the procedures described in Section 2(c) of this
Schedule A1, store backup tapes, Avis Data, documentation (including paper
documentation of the procedures described in Section 2(c), and related materials
at secure offsite storage facilities, as reasonably necessary to restore
<PAGE>
a secure Avis production environment in the event of an interruption of
Services at the Data Center. Appropriate arrangements shall be made for Avis to
have direct access to Avis Data maintained at such off-site storage facilities.
e. Establish a tape rotation schedule with the tape storage provider.
Monitor schedule for compliance and notify the tape storage provider when it is
time to return a tape if not received automatically.
f. Maintain an adequate inventory of media and tape supplies.
g. Retrieve archived tapes and restore required files and data sets within
reasonable time frames from the time that such archived tapes are required.
h. Report Avis's tape utilization needs and exceptions as part of a
periodic status report.
i. Obtain all tapes required for Avis processing. Such tape data sets shall
be the property of WizCom until they contain Avis Data. Thereafter all tape data
sets containing Avis Data will be the property of Avis until released back into
the scratch/reuse pool.
4. Information Security.
Avis Data will not be accessed by WizCom personnel without Avis's prior
authorization except for billing and technical support purposes and for approved
Applications development. The Procedures Manual shall describe the extent to
which, if any, WizCom requires access to Avis Data in order to perform the
Services, and shall establish a procedure for WizCom to obtain Avis's
authorization for such access.
5. Capacity Planning and Management.
WizCom shall provide capacity planning and management services, taking into
consideration Avis's reasonable input, for Data Center resources used to provide
the Services, including CPU resources, DASD and other storage requirements,
tapes, and input/output devices.
These functions shall include:
a. Monitor computing capacity availability so that sufficient capacity can
be planned to meet the Performance Standards.
b. Make computing capacity increases (or decreases) based on Avis's
reasonable change requests.
<PAGE>
c. Propose capacity planning models and methodologies to the customers, and
consider Avis's capacity planning recommendations regarding WizCom's planning
model.
d. Review capacity requirements of each customer as part of WizCom's normal
business planning cycle.
e. Provide Avis reasonable assistance in forecasting Avis's capacity needs
requirements and in Avis's monitoring and reviewing the capacity forecast vs.
actual utilization.
6. Physical Security at the Data Center.
WizCom shall maintain physical security functions at the Data Center pursuant to
procedures that shall be no less rigorous than those in effect at the Data
Center immediately prior to the Effective Date and as reasonably required to
safeguard Avis Data, the Systems and Avis Software from loss, damage or
unauthorized access. Physical security for the Data Center shall include
protecting against fire, flood, electrical failures and surges, and unauthorized
access. Such procedures shall include monitoring and controlling physical
access, investigating and reporting security violations, and taking appropriate
actions to prevent violations from recurring.
7. Change Management and Control.
WizCom shall perform change management functions as reasonably required to
control changes to Avis's processing environment. Such functions shall include:
a. Control changes to the Avis production environment and implement changes
in accordance with the change control procedures described in the Procedures
Manual so that continuity is maintained when changes are initiated. Perform
changes requiring system outages during scheduled maintenance periods.
b. Review, schedule and communicate proposed Applications and processing
environment changes that may affect Avis.
c. Conduct weekly change management meetings with Avis's participation.
Consider and respond to Avis's comments, and obtain Avis's approval when
required by the change control procedures described in the Procedures Manual.
Provide information to Avis on changes, including data on each attempted change
affecting Avis, such as the cause of any problems and the success of the
attempted change.
<PAGE>
d. Obtain Avis approval for changes to Avis's production processing
schedules. In the case of an emergency, WizCom may change production schedules
without first obtaining Avis approval to the extent required to correct the
emergency, provided that WizCom notifies Avis of the need for such changes as
soon as possible and in any event within one hour after identifying the need for
such changes.
8. Service Request Management.
WizCom shall implement a process for Avis to request products and functions
supplied by WizCom within the scope of this Agreement ("Service Requests"). The
Service Request process will be approved by Avis prior to the Effective Date and
include procedures for the following: logging of requests, evaluation,
estimation, required approvals, prioritization, implementation and status
reporting. These functions will be described fully in the Procedures Manual.
9. Business Resumption and Disaster Recovery.
WizCom shall take the steps reasonably required (i) to minimize disruption to
Avis's business related to the Services, (ii) to assist Avis in continuing to
conduct its business during periods in which any Services are unavailable, and
(iii) to resume normal operations as quickly as possible under the
circumstances. WizCom's responsibilities will be described in the disaster
recovery section of the Procedures Manual.
(a) Disaster Recovery Testing.
Once per year WizCom shall conduct a disaster recovery test to
determine compliance with the procedures in the Disaster
Recovery Plan. Avis may monitor and participate in such tests
to the extent reasonably required for Avis to verify the
adequacy of disaster recovery procedures for Avis processing.
WizCom shall provide Avis with a report and/or presentation of
the test results. WizCom shall use commercially reasonable
efforts to resolve identified problems and retest unsuccessful
test components in a timely manner.
(b) Disaster Recovery Contract.
WizCom has provided Avis with a copy of the current disaster
recovery Agreement. At Avis's request, WizCom shall provide
Avis with any changes made after the Effective Date to the
Agreement for Avis's inspection, or with a copy of the
disaster recovery Agreement then in effect. WizCom shall
maintain a disaster recovery Agreement in full force and
effect during the Term, either under the Agreement or a
substantially similar arrangement with another provider of
similar disaster recovery services.
<PAGE>
10. Systems Operations.
WizCom shall perform the systems processing operations functions as necessary to
operate the Systems in accordance with the terms and conditions of the
Agreement. Such functions shall include:
a. Provide the availability of, monitor, and process on-line and batch
Applications, including scheduled, unscheduled and on-request Applications
development/maintenance functions as well as Avis end-user initiated processing.
b. Provide support for test and production environments including
Applications program testing submitted by the Applications
development/maintenance personnel of WizCom.
c. Provide a secure computer room operations environment.
d. Provide appropriate information system tools (e.g., report generation)
to assist Avis in accessing Avis Data.
e. Maintain networking software. WizCom shall use such networking software
as is reasonably necessary to meet Avis's business requirements.
f. Operate the Systems and, subject to the other provisions of this
Agreement, Avis Software, as designated from time to time by Avis.
g. Schedule routine systems maintenance (currently approximately two to six
hours monthly) to accomplish such tasks as security table implementation and/or
hardware or software changes.
(1) WizCom shall publish, at least three months in advance, a
schedule of scheduled system outages. Routine systems
maintenance shall be scheduled for and performed on an
alternating basis every two weeks during the following
time periods: (i) commencing at 12:00 a.m. for a period of
two to three hours, or (ii) commencing at 3:00 a.m. for a
period of two to three hours on Sunday (Eastern Standard
Time). WizCom may deviate from this schedule with Avis's
prior approval.
(2) Additionally, WizCom shall give Avis notice as soon as
practicable, and where possible not less than 24 hours in
advance, of system outages that WizCom determines must
occur outside of the time frames described in item (1)
which outages shall, to the extent within WizCom's
reasonable control, be scheduled during hours that
minimize disruption to Avis's business.
<PAGE>
(3) No more than twice per year, WizCom may plan a system
outage of 24 hours duration to perform required
maintenance, backup and upgrade activities. WizCom shall
schedule such 24-hour outages at least two months in
advance, which schedule shall be set as mutually agreed by
the Parties. WizCom may deviate from such schedule with
Avis's approval.
h. Complete processing schedules in the appropriate sequence so that jobs
do not run until prior job dependencies have been successfully completed.
i. Subject to the capacity of resources at the Data Center and Avis's
payment of any charges therefore as provided in Schedule C, process all special
request activities consistent with equal treatment of the customers, including
ad hoc reporting, within time frames mutually agreed upon by the Parties.
j. Provide access to, and software compatibility with, external systems
(for example, credit card processing and airline interfaces) necessary for the
Services as such access and compatibility exist in the Systems as of the
Effective Date. All additional functions required by Avis will be Projects,
which will be subject to the provisions of Article 5 and the charges for
Projects set forth in Section IV of Schedule C.
k. Provide on-line access capability to query status of production jobs for
Avis.
l. Use commercially reasonable efforts to enhance the automated processing
capabilities and efficiencies through computer system tuning and other run time
improvements. Perform regular monitoring of utilization needs and efficiencies
of the Systems and Avis Software. Report on tuning initiatives and activities as
reasonably requested by Avis.
m. Subject to the terms and conditions of the Avis Third Party Software
license agreements, WizCom will operate the Software and coordinate maintenance
and support for Avis Third Party Software with the third party vendors thereof.
n. Employ a quality improvement process to identify efficiencies. Analyze
jobs for excessive use of computer resources. Give appropriate consideration to
rewriting code and other performance enhancing activities based upon a
cost-benefit analysis.
o. Subject to the capacity of resources at the Data Center, provide Avis
alternate automated processing capability at the Data Center to minimize the
duration of unscheduled System outages, if feasible and practicle.
<PAGE>
11. Production Control.
WizCom shall develop, control and maintain production schedules for the Systems
and Avis Software, and cooperate with Avis in responding to special processing
requests and processing requirements. Such functions shall include:
a. Prioritize and schedule batch jobs and report distribution systems in
accordance with mutually agreed upon schedule parameters.
b. Provide to Avis and obtain Avis's approval of production schedules prior
to implementation.
c. Review, coordinate and modify computer resource allocation schedules to
accommodate Avis special requests and priorities. Promptly notify Avis if
special requests will affect the timely completion of other tasks.
d. Respond promptly to requests from Avis for priority job execution.
e. Execute reruns of jobs as required to correct abnormal terminations and
other data processing errors, and otherwise as requested by Avis and obtain
Avis's approval if rerunning any jobs will impact scheduled on-line or batch
production processing.
12. Database Administration.
WizCom shall be responsible for database administration, including database
design, application support, tuning, backup and recovery, and standards and
support for databases run by WizCom for the Systems and Avis Software. Such
functions shall include:
a. Provide a test, acceptance testing, and production database subsystems
as reasonably required by Avis.
b. Support and control the data dictionary for the Systems.
c. Perform logical and physical database control functions to support
current systems and approved new systems (test, acceptance test and production).
d. Perform database tuning and reorganization functions as reasonably
required to maintain system performance requirements and in accordance with
Scheduled Uptime (as defined in Schedule B) and the change control procedures
described in the Procedures Manual.
e. Plan for changes in the size of databases due to business growth and
project implementation based on information provided by Avis, and review plans
on a regular basis with Avis.
<PAGE>
f. Implement physical database design, create indices and make
recommendations on methods to optimize application performance.
g. Maintain and upgrade the automated monitoring tools as reasonably
required to monitor database performance.
h. Monitor database performance and database space utilization. Review,
comment on, assess potential impacts from, and implement reasonable
modifications requested by Avis subject to equal treatment of the customers.
i. Maintain database definitions for the Systems and make such definitions
available to Avis upon request.
j. Implement database backup procedures as necessary to recover from a
database outage or a corrupt database.
k. Develop, test, document and maintain database standards as necessary to
meet Avis's reasonable business requirements.
l. Identify and suggest product and enhancement opportunities for improved
performance or functionality. Implement such solutions at Avis's reasonable
request. These opportunities will utilize WizCom's standard change control
methodology for investigation and implementation.
13. Technical Support.
WizCom shall be responsible for technical support of Systems Software as
necessary to provide the Services and meet the Performance Standards. Such
functions shall include:
a. Provide technical consulting and other reasonable assistance in support
of Avis's reasonable business requirements at levels no less than those provided
to other customers (e.g., assistance in file resolution, and debugging) unless
the Parties mutually agree otherwise.
b. Perform modifications, enhancements, or changes necessary to correct
errors and operational modifications (including Program Temporary Fixes
(PTF's)), such that each item of WizCom Systems Software operates substantially
in accordance with Avis's requirements and the software specifications.
c. Unless mutually agreed otherwise, install and upgrade System Software as
necessary to maintain vendor support for the installed version and as reasonably
requested by Avis to support its business requirements.
d. Make available as requested all of WizCom's technical documentation
describing the systems and processes used to support the Systems and Avis
<PAGE>
Software ("Technical Documentation"), including, to the extent developed by
WizCom: technical specifications, database definitions, system overviews and
flow charts showing relationships between systems, systems integration
documentation (including configurations, interfaces, and network topologies and
architectures), installation/configuration/maintenance information, and systems
software documentation. Update the Technical Documentation to reflect changes
made during the Term.
e. In consultation with Avis, when appropriate, evaluate, recommend,
acquire and install in WizCom's sole discretion, Third Party Systems Software,
and make reasonable changes to the operating environment necessary for
compatibility with existing systems.
f. Provide information to Avis about the functionality, architecture, data,
and other aspects of the Systems Software, as reasonably requested by Avis and
as permitted by the third party vendors thereof.
g. Provide Systems Software support as reasonably required by developers
performing work on the Systems and Avis Software.
h. Notify Avis in the event a third party ceases to support Third Party
Systems Software and work with Avis to develop a reasonable alternative to
continued use of such Systems Software.
i. Cooperate with Avis personnel and third parties performing development
and maintenance work on the Applications and Systems Software as permitted under
the Agreement. Provide such personnel and third parties with reasonable access
to the Services.
j. Develop, implement and maintain interfaces necessary for the Systems to
communicate with Avis Locations and with third party service providers (such as
GDS's).
k. Maintain system support coverage either through on-site coverage during
normal work hours or via "on call" support.
l. Perform regular monitoring of utilization needs and efficiencies and
perform and report on tuning initiatives on a regular basis.
m. Maintain required user exits to Third Party Software.
n. When necessary, participate in development teams as reasonably required
by developers in areas such as systems test and installation support.
<PAGE>
14. Equipment Management and Maintenance.
WizCom shall manage and maintain the Equipment as necessary to provide the
Services and meet the Performance Standards, including (i) keeping such
equipment sufficiently current to enable WizCom to perform the Services
supported by the Equipment in accordance with the other provisions of this
Agreement, and (ii) performing, or arranging for third parties to perform,
maintenance as necessary to keep such Equipment in good operating condition in
accordance with manufacturers' specifications.
<PAGE>
SCHEDULE A2
APPLICATIONS DEVELOPMENT SERVICES
1. Applications Development Services.
In the event Avis requests WizCom to provide Avis with Applications development
services under this Agreement, the respective responsibilities of the Parties
for Applications development, including the fees therefor, are described in
Article 5 and Schedule C hereof.
<PAGE>
SCHEDULE A3
DATA COMMUNICATIONS SERVICES
WizCom shall provide the Network Services to Avis, as described below:
1. WAN Network Services.
a. Network Description.
(1) Network Connections.
"Network Connection" shall mean the Network Access, Port and
Backbone (each a "Network Component") necessary to establish
and maintain data communications between (A) Avis Locations,
the Data Center, and distributed processing locations (e.g.
any WizCom Reservation Center, (B) the Data Center,
distributed processing locations, and third party service
providers (such as credit card processing and airlines
interfaces), (C) one Avis Location and another, and (D) such
other locations as the Parties may agree.
(2) WizCom-Managed Network.
WizCom shall perform the functions described in this Section
with respect to the Network Components managed by WizCom that
affect Avis Locations (the "WizCom-Managed Network"), so that
Avis Locations may receive and transmit data and make use of
the functions of the Systems and the Avis Software operated by
WizCom.
b. Network Access.
"Network Access" shall mean the communication lines, services and
equipment required to provide and maintain a connection between the
data terminal equipment or other end user device at an Avis Location
and a WizCom Network Node. Network Access for any given Avis Location
may be provided either (A) by WizCom, or (B) by Avis. Both Parties may
use third parties to provide the Network Access they are responsible
for.
c. WizCom-Provided Network Access.
(1) WizCom shall provide Backbone, Ports and, if requested by Avis,
Network Access according to the procedures and time frame
guidelines set forth in the Procedures Manual. WizCom shall use
commercially reasonable efforts to comply with Avis's scheduling
requirements. If so requested, WizCom shall design the Network
Access taking Avis's needs for the Network availability and
response time into consideration. WizCom shall provide Avis with
such
<PAGE>
information as Avis may reasonably request regarding (i) the
status of efforts to provide Network Access, and (ii) arrangements
made with telecommunications carriers.
(2) As part of WizCom's management of the Network Access, WizCom
shall, according to the procedures and time frame guidelines set
forth in Procedures Manual, remove equipment used for Network
Access and circuits no longer required by Avis at Avis's request.
For equipment required for Network Access owned or leased by Avis,
WizCom shall store, redeploy and dispose of such removed equipment
as Avis may request.
(3) When WizCom provides Network Access for Avis, WizCom shall manage
such Network Access, and the Performance Standards set forth in
Schedule B shall apply.
d. Avis-Provided Network Access.
(1) Avis may, at any time and from time to time during the Term,
establish and manage Network Access between any Avis Location and
a WizCom Node that is located at the Data Center, or Avis's
headquarters (currently in Garden City), or any WizCom Reservation
Center. Network Access established by Avis or third parties
selected by Avis shall be compatible with the Systems and the Port
and Backbone components that support such Network Access. All
Network Access must be approved by WizCom for compatibility and
operational support considerations. If there is a problem with
Network Access established and managed by Avis or third parties
selected by Avis, the Parties shall reasonably cooperate with each
other to resolve the problem. WizCom shall provide Avis with
access to Netview or similar mainframe-based network management
tools used by WizCom as necessary for Avis to monitor and manage
such Network Access, with the following understanding: (i) Avis
should consider access to such mainframe-based tools as a
supplement to the primary network management capability provided
by Avis's network equipment vendor; and (ii) WizCom will provide
Avis with access to such mainframe-based tools for control of Avis
resources only, Avis access to that tool will be limited or will
not be permitted.
(2) If Avis provides or uses a third party to provide Network Access,
Avis may request WizCom to manage such Network Access or third
party provided that Avis and/or the third party is using
equipment, circuits and a network design approved by WizCom. Upon
such request by Avis and an approval by WizCom, WizCom will manage
Network Access that has been established by Avis or is provided by
a third party. WizCom's management of the services of such third
party will be subject to agreement by such third party.
(3) Performance of Network Access that is provided by a third party
will be the responsibility of the third party. If WizCom manages
he services of a third
<PAGE>
party that is providing Network Access for Avis, WizCom will
report overall network performance to Avis. The Parties shall,
prior to entering into such management arrangements, determine
whether the third party's networking methods prohibit overall
(end-to-end) performance measurement, in which case performance
shall be measured as proposed by WizCom and approved by Avis.
e. Network Reports.
(1) WizCom shall report WizCom-Managed Network performance on a
monthly basis. The content of such reports will depend upon the
Network Access and Backbone configuration, and the use of third
party networks, but WizCom shall provide industry standard
measurements as reasonably requested by Avis.
f. Provision of Equipment.
Data terminal equipment used at Avis Locations to access the Systems
must be on the list of WizCom approved hardware or otherwise certified
as compatible with the Network.
g. Sharing of Network Components.
To the extent the Parties mutually agree, Avis may share with other
WizCom Customers the use of Network components on the WizCom-Managed
Network. Avis recognizes that data terminal equipment will be permitted
to coexist on the same Network Access line and Port with other WizCom
Customers provided that such equipment will not adversely impact Avis
or other customers.
h. Network Access Design.
If WizCom is to provide Network Access, WizCom shall design the Network
Access, subject to Avis's approval, which approval shall not be
unreasonably withheld. If the Network Access is to be shared with other
WizCom customers, WizCom shall consider any Avis comments on the
Network Access design, but WizCom shall have final decision on the
design of the Network Access. To the extent the WizCom-Managed Network
is shared with other WizCom customers, WizCom shall design such Network
based on the traffic patterns of the customer, with no preference for
any single customer.
i. Network Engineering and Management.
WizCom shall provide network engineering functions and support related
to the WizCom-Managed Network. Such functions shall include:
(1) providing network optimization, which shall consist of the same
network optimization services Wizcom provides to other Customers,
including (A)
<PAGE>
researching and evaluating means for optimizing the efficiency and
cost-effectiveness of the WizCom-Managed Network, (B) analyzing
rates and packages offered by telecommunications common carriers,
(C) making recommendations to Avis regarding how to make changes
to the WizCom- Managed Network to make it more efficient and
cost-effective for Avis (e.g., changing carriers, adding or
deleting bandwidth), (D) implementing changes to the
WizCom-Managed Network approved by Avis, and (E) programming,
monitoring and tuning the Network for efficiency and problem
prevention;
(2) providing configuration management, including (A) maintaining and
delivering Equipment inventories, circuit documentation, locations
lists, and other documentation and information relating to the
WizCom-Managed Network at such times as Avis may reasonably
request, and (B) managing the configuration of Equipment
supporting or otherwise connected to the WizCom- Managed Network
so that such Equipment can transmit and receive data as
appropriate;
(3) providing and maintaining, as reasonably requested by Avis,
host-to-host and special purpose circuits to meet Avis's remote
host application interface requirements and bulk data transfer
requirements;
(4) upgrading systems and Equipment for the WizCom-Managed Network as
requested by Avis to the extent Avis would be charged solely with
the costs therefore, if any;
(5) developing acceptance procedures for installations and changes to
the WizCom-Managed Network, and for verifying restoration Services
related to the WizCom-Managed Network following problems with
Equipment or circuits;
(6) performing moves, adds and deletes on the WizCom-Managed Network
as needed to provide the Services and in response to Avis's
requests for Services;
(7) managing the WizCom-Managed Network (including sizing new lines,
configuring requirements, and coordinating with vendors).
2. Network Capacity Planning and Management.
WizCom shall provide capacity planning and management for the WizCom-Managed
Network. Such functions shall include:
(1) WizCom shall generally monitor the utilization and performance
trends of Network components that are managed by WizCom. WizCom
shall use commercially reasonable efforts to upgrade network
components before utilization of those components reaches a level
which the Parties mutually
<PAGE>
agree to be unacceptable. The Parties recognize that such trends
and corresponding indicated changes may be due to deterioration,
over utilization or under utilization of Network components.
(2) When WizCom determines that a Network Backbone element or WizCom
provided shared Network Access requires an upgrade in capacity,
WizCom will describe the requirement to Avis if Avis Locations are
supported by the elements under consideration. WizCom will also
describe to Avis the specific upgrade actions that have been
planned and the estimated cost of the upgrade. WizCom will
consider and incorporate reasonable Avis recommendations that are
presented at that time. Final decision for such Network upgrades
will be WizCom's, which shall be made without prejudice or favor
to any customer.
(3) For WizCom provided Network access that is used solely by Avis,
WizCom will make recommendations for capacity upgrades to Avis as
required. Avis will determine if the estimated cost of the upgrade
is justified or if an alternative upgrade is preferred. Avis will
have the final decision in such circumstances, provided that
Avis's decision will not adversely impact WizCom's ability to
manage such Network Access.
3. Local Area Network (LAN) Services.
The Parties' responsibilities with respect to providing necessary LAN
facilities, equipment and support for Avis ("Avis LANs") shall be set forth in
the Procedures Manual.
<PAGE>
SCHEDULE A4
HELP DESK SERVICES
Avis shall elect a level of Help Desk Services appropriate to the service that
Avis desires, consistent with the Network Services selected. The service pricing
will be as set forth in Schedule C. The levels of Help Desk Services available
to Avis (which levels may be further detailed by mutual agreement in the
Procedures Manual) are:
Level 1: Full Help Desk Services support and management of End-User
Equipment, which level is available if WizCom provides Network Access for Avis
as described in Section 1(c) of Schedule A3 or if WizCom manages the Network
Access provided by Avis or third parties selected by Avis as described in
Section 1(d)(2) of Schedule A3. This level of services consist of first level
Help desk support, Network Management, Network Installation Coordination,
Terminal Installation Coordination and System Parameter Generation Coordination
which are described as follows:
Help Desk
WizCom first level Help Desk support includes: answering
incoming telephone calls on a first line basis form any Avis
source, initiating trouble tickets, performing diagnostic,
dispatching repair personnel for terminal problems, escalating
problems to Applications development or technical support
groups, managing problem resolution, and clearing trouble
tickets.
Network Management
The Network Management functions will include management of
Network Access, Ports and Backbone as follows: diagnosing
Network, circuit and communication problems; coordinating
carrier/vendor meetings to resolve problems, dispatching
carrier/communication equipment vendors; escalating
outstanding carrier/vendor problems to management; managing
problem resolution; maintaining and monitoring Network
performance for WizCom.
Network Installation Coordination
Each site requires a Network connection. The following tasks
are part of the Network Installation process:
o coordinating communications ordering with telephone
companies
o coordinating acquisition of modem equipment
o making certain communication line is installed and
operational as per Procedures Manual prior to
scheduled installation
<PAGE>
o having modem installed and performing communication
testing
o coordinating installation of dial backup equipment
o managing any internal wiring between the telephone
company demarcation point and WizCom-Managed Network
Equipment if such internal wiring is supplied and
supported by the telephone company
Terminal Installation Coordination
WizCom coordinates the installation process for each site
prior to sending an installation team to the site. Functions
performed in this process are as follows:
o complete equipment check list prior to delivery
o verify that equipment is on site
System Parameter Generation Coordination
The WizCom system requires the following setup/reconfiguration
for additions, deletions or modifications:
o system GENs
o station authorizations definition o assigning user IDs o
defining printer authorizations o creating "LTERM" and
"PTERM" addresses
Level 2: This level of service consists of Network Management and System
Parameter Generation Coordination as described above the Level 1 and second
level Help Desk support. WizCom second level Help Desk support includes
performing diagnostics, escalating problems to Applications development or
technical support groups, managing problem resolution and clearing trouble
tickets where first line calls have already been handled by Avis's help desk,
which initiated the trouble ticket. The Network Management functions include
management of Network Access, Ports and Backbone. Management of Network Access
is available if Network Access is provided by WizCom or if
<PAGE>
Network Access is provided by Avis with WizCom's prior approval as
described in Section 1(d)(2) of Schedule A3. Under Level 2, if WizCom provides
Network Access, it will also provide Network installation coordination as
described in Level 1.
Level 3: Help Desk administration services. This level of service consists
of Network Management as described above for Level 1, but only with respect to
Ports and Backbone (not Network Access); this service will provide a
second-level Help Desk. In addition, WizCom provides System Parameter Generation
Coordination and on-going interface support between the Avis-Managed Network
Access and WizCom's Ports as follows:
o Help Desk Services will assist in problem
determination for Avis equipment located on WizCom
premises (i.e.: DSU, multiplexor etc.)
o Help Desk Services will provide support to resolve
Avis equipment problems under the direction of Avis
staff
o Help Desk Services will coordinate with Avis vendors
when present at the Data Center, under Avis's
direction, for the repair of Avis equipment located
at WizCom's facilities
The rules under which these levels of Help Desk Services are
available are as follows:
o Avis must choose level 1, 2 or 3 for any given site.
o Level 1 or 2 is required if WizCom manages Network
Access.
o Level 3 is required for Avis-Managed Network Access.
<PAGE>
SCHEDULE B
PERFORMANCE STANDARDS
I. General.
The Performance Standards contained in this Schedule B shall apply in a
production environment to (i) the Systems, and (ii) to the extent mutually
agreed by the Parties, other Applications operated by WizCom for Avis under this
Agreement ("Additional Applications"). If the Parties do not agree to apply the
Performance Standards to an Additional Application, Avis may suggest different
Performance Standards for such Applications for WizCom's review and approval,
which approval will not be unreasonably withheld. Performance Standards for such
Additional Applications shall, to the extent reasonably practicable, be
comparable to the Performance Standards then in existence for the Systems, to
the extent similar in functionality.
II. Failure to Meet the Performance Standards.
If WizCom fails to meet the performance standards contained in this schedule the
following procedure will be followed.
a. Avis will notify WizCom of the failure to meet the performance
standard and request that WizCom identify the cause of the
failure.
b. WizCom will investigate the cause of the failure and report
back to Avis both the cause of the failure and the action
necessary to prevent a repeat of the failure. WizCom will
calculate any cost that will be incurred.
c. Avis and WizCom will use this information to mutually agree
what corrective action should be taken. The cost of this
corrective action and any cost of investigation will be borne
by Avis.
III. Performance Standards.
A. Performance Standard for On-Line Availability.
1. Scheduled Uptime.
a. A particular Subsystem shall be scheduled to be available for
use by Avis during periods reasonably designated by Avis after
consultation with, and agreement by, WizCom ("Scheduled
Uptime").
<PAGE>
b. As of the Effective Date, the Scheduled Uptime for the
Reservation and Rental Subsystems shall be, upon acceptance of
the Subsystems 24 hours per day, 7 days per week, less periods
of Excused Downtime as defined in Section III.A.3. below. The
Parties may subsequently agree that certain functions of the
Reservation and Rental Subsystems will be scheduled to be
available during shorter periods because of
mutually-established processing schedules.
2. On-Line Availability.
a. "On-Line Availability" shall mean the percentage of Scheduled
Uptime that the Systems are available for use by Avis Locations, as
determined in accordance with Section III.A.4 below.
b. During the first year of this agreement (the "Base Year"), the
Performance Standard for On-Line Availability shall be 97% for each month.
During the Base Year and each year thereafter, On-Line Availability for
each shall be calculated monthly in accordance with Section III.A.4 below
and WizCom shall determine the Systems' average On-Line Availability for
such year (the "Yearly Average "). During the year next following the Base
Year (herein "BY1"), the Performance Standard for On-Line Availability for
each month shall be the Yearly Average for the Base Year. During each year
thereafter, the Performance Standard for On-Line Availability for each
month shall be the Yearly Average for the prior year. However, in no event
shall the Performance Standard for On-Line Availability be less than the
greater of 97% or the Rolling Average for the Systems. "Rolling Average"
shall mean (i) for BY1, the Yearly Average for the Base Year, (ii) for the
year next following BY1 (herein "BY2"), the average of the Yearly Average
for the Base Year and the Yearly Average for BY1 and (iii) for any year
commencing after BY2, the average of the Yearly Averages for each of the
three prior years.
3. Excused Downtime.
Unavailability of the Systems shall be excused in the following
circumstances ("Excused Downtime"):
a. The unavailability results from scheduled outages as described in
Section 10(g) of Schedule A1; provided, however, that in the event of an
outage as described in Section 10(g)(2), unavailability shall be excused
only for the first three hours of such outage, and only to the extent (i)
Avis has received at least 24 hours prior notice, and (ii) the outage
occurs at a time of day designated by Avis to minimize disruption to its
business;
b. The unavailability results from events of force majeure as
described in Section 15.2 of this Agreement.
<PAGE>
4. Determining On-Line Availability.
a. On-line Availability for the Systems is determined by calculating
the aggregate minutes that the Systems were unavailable to Avis during the
month and dividing this number by the total minutes for the month. The
result is subtracted from 1 to give On-Line Availability for the month for
the Systems, which is expressed as a percentage and is compared to the
applicable Performance Standard.
b. For the purpose of calculating On-Line Availability, the Systems
shall be deemed to be unavailable for any period in which a majority of the
"Core Business Functions" (as defined in Section III.A.4.c below) of the
Systems in production is unavailable at the Data Center.
c. "Core Business Functions" shall mean the functions described in
Schedule F and G, which are part of the Systems, as such functions may be
modified, enhanced, supplemented or replaced during the Term.
d. Availability shall be measured using the measurement tools and
procedures in use by WizCom as of the Effective Date, as such tools and
procedures may be modified, enhanced, supplemented or replaced during the
Term, including the tracking of availability problems reported by Avis or
otherwise identified by WizCom. Where WizCom does not have as of the
Effective Date a measurement tool or procedure to continuously monitor the
availability of a Core Business Function, any unavailability shall be
measured based on problems reported by Avis or otherwise identified by
WizCom and using a reasonable mechanism for determining the duration of the
period of unavailability.
B. Performance Standards for Host Response Time.
1. Host Response Time.
"Host Response Time" shall mean the response time for a
transaction as measured from the time a transaction is received by
WizCom's computer processor until such transaction is transmitted
from WizCom's computer processor. WizCom is currently using IMS
PARS to measure Host Response Time.
2. Host Response Time for Key Transactions.
a. "Key Transactions" shall mean up to ten (10) transaction groups
reasonably identified by Avis from time to time during the Term as
representing important business functions of Avis.
b. During the first six (6) months that a Subsystem is in production,
WizCom shall establish a reasonable measurement procedure to monitor Host
<PAGE>
Response Time for Key Transactions using. Once a measurement is
established WizCom shall, for the month immediately following such six (6)
month period (the "Initial Month") and each month thereafter, measure the
Host Response Time for each applicable Key Transaction once an hour for ten
(10) minutes during the hours of 9 a.m. to 5 p.m. (Eastern Standard Time)
Monday through Friday (the Measurement Period). For each Key Transaction,
WizCom will compute (i) the average Host Response Time for all transactions
of the groups measured during each day in the Measurement Period (the
"Daily Sample") and (ii) the average of all Daily Samples during such month
(the "Monthly Sample").
c. The Performance Standard for Host Response Time for each Key
Transaction in a month shall be as follows: (i) for the first year
following the Initial Month (the "Benchmark Year"), the Monthly Sample
shall be no greater than 110% of the Monthly Sample for the Initial Month,
and (ii) for each year thereafter, the Monthly Sample shall be no greater
than 110% of the Monthly Sample for the same month in the prior year.
However, commencing with the second year following the Benchmark Year, in
no event shall the Performance Standard for Host Response Time for a Key
Transaction in a month be greater than the Host Response Time Rolling
Average for such month. Host Response Time Rolling Average shall mean for
the second year following the Benchmark Year and for any year thereafter,
the average of the Monthly Samples for the same month in each of the three
(3) prior years.
d. If the functionality of a Key Transaction changes due to an
application enhancement, then Avis shall be given the option of either
revising the response time average of the Key Transaction to the current
recognized response time or revising the application change, as a project,
to improve response time.
C. Performance Standard for Scheduled Batch Processing.
WizCom shall ensure that the scheduled batch jobs identified by Avis as
key jobs will be completed 95% of the time within the time frame
reasonably suggested by WizCom. These batch jobs will be measured and
reported monthly to Avis by WizCom and on-time performance statistics
will be compiled and reported to Avis annually commencing in January
1998. In order for this Performance Standard to apply, a key batch job
must have at least twelve (12) runs per year. For batch jobs with less
than twelve (12) runs per year, the parties will agree upon a numeric
standard rather than the percentage standard set forth in this
paragraph.
<PAGE>
IV. Subcontractor Service Levels.
In the event that WizCom subcontracts any of its obligations under this
Agreement, WizCom shall remain responsible for compliance with this Schedule B.
<PAGE>
Exhibit B1
Key Transactions
Transaction Group Description
Reservations:
RES01POT Create, modify, display and rate shop
reservations from TAFT
RES01PA1 Reservations from American Airlines
RES01PA3 Reservations from United Airlines
RES01P50 Reservations created at Rental Counters
Rental:
PXW01P10 Check-out transaction
PXW01P20 Check-in transaction
<PAGE>
SCHEDULE C
Fees for Computer Services
1. Overview.
WizCom will charge Avis the full cost of providing computer services each month.
The method of calculating costs chargeable to Avis will vary depending on the
service being provided. Where costs are fully attributable to Avis in their
entirety they will be passed directly to Avis. Where Avis is one of a number of
companies sharing services then the costs will be allocated to each company on
an equitable basis as determined by WizCom. In determining the method of
allocation WizCom will take due regard of the costs involved in calculating the
allocation.
The method of charging costs is based primarily on the WizCom accounting system
together with supporting information from operational systems as required. Cost
components and allocations of cost are subject to change due to changes in
technology or operating methods. Any changes to these cost categories will be
made in a manner that is consistent with WizCom's current accounting practices.
WizCom is currently providing four types of service to Avis:
Data center services
Applications development
Support services
Network Services
2. Data Center Services
The full cost of providing the services identified in Schedule A1 will be
charged to Avis on a monthly basis by WizCom.
2.1 Data Processing
The data center provides services to a number of different
companies. WizCom shall allocate cost to Avis based on
WizCom's calculation of the share of data center costs
attributable to Avis. In determining the method of allocation
WizCom will take due regard of the costs involved in
calculating the allocation.
The data center services comprise a number of different
functions. These functions include, but are not limited to,
the following:
Capacity and Performance Planning
Data Center Operations
Technical Services
<PAGE>
Print Room
Production Support
Data Entry
Database Support
Quality Assurance
Systems Architecture and Technology
Network Development
Distributed Systems Technology
Systems Software
Systems Maintenance and Efficiencies
A breakdown of the costs included in each of the above
functions is attached as exhibit C1.
2.1.a Allocation of cost
Costs that are incurred solely for Avis will be
charged to Avis in their entirety.
Cost will be allocated based on Avis's usage of the
data center. The method of measuring usage will vary
depending on the type of service involved. For
example, use of the CPU will be measured by reference
to the number of MIPS used by Avis at the peak
processing time. The peak processing time will be
defined by WizCom based on analysis of CPU usage. If
Avis uses 25% of the MIPS used at the peak processing
time then Avis will be responsible for 25% of the
cost of the CPU. Costs that are directly related to
the CPU and its operation will be allocated on the
same basis as use of the CPU. Costs that are not
directly related to the CPU and that cannot be
measured by usage, will be allocated by WizCom in an
equitable manner. An example of such a cost is rent.
When calculating data center costs, any one-time
costs incurred by WizCom or an affiliate of WizCom to
re-structure data center operations and provide
savings in future periods will be included in the
total costs.
2.1.b Calculation method
The full costs of each of the above
functions are grouped together to form the
total data center cost (Exhibit C2). The
applicable share of each cost item will be
recorded for Avis and used to calculate
Avis' cost for each item. The total cost for
Avis is calculated by adding the cost
against each item (Exhibit C3). For ease of
billing Data Center charges will be
expressed as a charge per rental agreement.
The charge per rental
<PAGE>
agreement will be calculated for each
planning period by dividing Avis's share of
the total data center cost by the estimated
number of rental agreements to be processed
during such planning period, as provided by
Avis in accordance with Section 5.2(a)(1).
An example of the calculation is attached at
Exhibit C4.
As of the Effective Date the charge is
$0.778 per Rental Agreement processed.
2.2 Non-Mainframe Processing
The cost of processing performed on equipment other than the
main computer processing units will be excluded from the data
center and charged on a monthly basis. A breakdown of the
costs of Non-mainframe processing as of the effective date is
attached as Exhibit C1.
Non-mainframe processing is provided to a number of different
companies. WizCom will allocate costs to Avis based on
WizCom's calculation of the share of these costs attributable
to Avis. In determining the method of allocation WizCom will
take due regard of the costs involved in calculating the
allocation.
Costs that are incurred solely for Avis will be charged to
Avis in their entirety.
Cost will be allocated based on Avis's usage of the
non-mainframe resources. The method of measuring usage will
vary depending on the type of asset involved. For example use
of the storage devices will be measured by reference to the
number of volumes assigned to Avis. If Avis uses 25% of the
assigned volumes then Avis will be responsible for 25% of the
cost of storage devices. Costs that are directly related to
the storage devices and their operation will be allocated on
the same basis as the usage of storage devices. Costs that are
not directly related to the storage devices and that cannot be
measured by usage will be allocated by WizCom in an equitable
manner.
2.3 Additional Software
In the event that Avis requests that WizCom obtain and/or
operate software whose function is not related to the
operation of the Systems, and whose use is not shared with any
other company, then Avis will be responsible for the full cost
of acquiring and maintaining such software. If such software
is used by WizCom to service other WizCom customers, such
software shall become WizCom software and the cost of such
software shall be shared by Avis on an equitable basis.
<PAGE>
3. Applications Development
WizCom will charge Avis for application development projects, as defined in
Article 5, using an hourly rate intended to fully recover WizCom's costs. Avis
will be charged on a monthly basis for the work completed during that month for
each project. Consultants will be billed at a rate that includes the hourly rate
charged by the consultant and WizCom's applicable overhead costs.
Current hourly rates are as follows:
Level 3 $91
Level 2 $61
Level 1 $45
Overhead recovery $18
3.1 Hourly Rate Calculation
The Hourly Rate for application development and maintenance
shall be calculated in accordance with the following
methodology. Items of variable expense and overhead expense
are subject to change due to changes in technology or
operating methods. Any changes to these cost items shall be
made in a manner consistent with WizCom's current accounting
practices. Any extraordinary items of expense will be
separately identified and treated in a manner that is
consistent with WizCom's past practice and the other
provisions of this Agreement.
Calculation for Application Development and Maintenance Hourly Rate
Professional staff members are grouped by skill levels so that hourly costs may
appropriately reflect differences in expenses. Currently there are three levels
of cost being used to charge for WizCom staff services. WizCom will review the
skill levels used to charge for Applications Development and in its sole
judgment WizCom may expand or reduce the skill levels used in Applications
Development.
The Hourly Rate is composed of two components:
Variable rate
Overhead rate
3.3 Variable Rate
The estimated total variable costs incurred by WizCom for
application development and maintenance for the next fiscal
year are gathered and totaled by skill level. The variable
costs include salaries, payroll taxes, bonus and benefit
expenses. The number of billable hours at each skill level is
estimated
<PAGE>
based on analysis of the prior year billing records and input
from customers for the coming fiscal year. The variable rate
is calculated by dividing the estimated variable cost for each
skill level by the estimated billable hours for all customers
at each skill level. An example of the calculation for WizCom
personnel is given below at 3.5.a. For third party development
personnel the total variable costs shall consist of WizCom's
out-of-pocket expenses for such personnel.
Overhead Rate
The estimated total overhead costs incurred by WizCom for application
development and maintenance, including overhead costs for third party personnel,
for the next fiscal year are gathered and totaled. The overhead costs include
the following expenses:
Cost of providing employees with computer equipment.
(a) Facilities costs which include rent of the space occupied by
systems development staff and utilities.
(b) Training costs of employees.
(c) Telephone and fax costs.
(d) Travel expenses incurred by employees.
(e) Cost of technical and communications support provided to the
programming staff.
(f) Cost of management and administration of the systems develop-
ment department.
(g) Share of WizCom management expenses.
(h) Cost of providing Help Desk Services to the programming staff.
(i) Administration and office expenses.
(j) Recruitment expenses.
The number of billable hours is estimated based on analysis of the prior Fiscal
Year's billing records and the planned headcount for the coming Fiscal Year. The
estimated overhead rate is calculated by dividing the estimated annual overhead
costs by the total estimated billable hours of WizCom staff and third party
personnel. An example of the calculation is given below at 3.5.b.
<PAGE>
3.5 Calculation of Hourly Rate:
The hourly rate is calculated by adding the overhead rate to
the applicable variable rate as below:
===================================================================
Level Variable Overhead Hourly
Rate Rate Rate
- -------------------------------------------------------------------
3 $73 $18 $91
- -------------------------------------------------------------------
2 $43 $18 $61
- -------------------------------------------------------------------
1 $27 $18 $45
===================================================================
3.5.a Example of calculation of Variable Rate
- ------------------------------------------------------------------------
Level Average Benefits Variable Billable Hourly
Salary Cost Hours Rate
- ------------------------------------------------------------------------
3 $70,000 $15,000 $85,000 1,164 $73
- ------------------------------------------------------------------------
2 $55,000 $13,000 $68,000 1,581 $43
- ------------------------------------------------------------------------
1 $42,000 $ 8,000 $50,000 1,852 $27
========================================================================
3.5.b Example of calculation of Overhead Rate
==========================================================================
Overhead Costs Headcount Average Billable Hourly Rate
Hours Per Head
- --------------------------------------------------------------------------
All Levels $5,526,468 222 1,383 $18
==========================================================================
Support Services
4.1 Help Desk
Help Desk services, as defined in Schedule A4, will be charged
on the basis of a monthly fee per device connected to the
WizCom network. The charge is reviewed annually and is subject
to the level of service provided to Avis.
A breakdown of the costs of the help desk is attached as Exhibit C1.
<PAGE>
Current monthly charges are:
WHQ $15 per device
RAC Field $41 per device
Canada $38 per device
International $13 per device
4.1.a Allocation of cost
Help desk services are provided to a number of
different companies. WizCom shall allocate costs to
Avis based on WizCom's calculation of the share of
these costs attributable to Avis. In determining the
method of allocation WizCom will take due regard of
the costs involved in calculating the allocation.
Costs that are incurred solely for Avis will be
charged to Avis in their entirety.
4.1.b Calculation of monthly cost
When calls are received by the help desk, the caller
and the type of call are recorded. WizCom
periodically measures the length of time required to
handle each type of call.
The total time required to support a group of
customers is calculated by first multiplying the
number of calls of each type by the number of minutes
each type of call requires. The cost is then
calculated by multiplying the total number of minutes
by WizCom's cost per minute for help desk services.
For ease of billing the total charge for each
customer is converted into a monthly charge per
device. The total cost is divided by the number of
devices the customer has. The result is then divided
by twelve to arrive at the monthly charge.
4.2 Desktop Support
A number of different services are provided in support of
desktop computers. A breakdown of the costs of desktop support
is attached as Exhibit C1. In addition, the interest cost
involved in purchasing computer equipment and printers will be
included in the monthly equipment fee.
4.2.a Equipment Fees
A monthly fee will be charged to recover the full cost of computer
equipment provided to Avis. The fee will vary based on the type of
<PAGE>
equipment provided. Personal computers have been grouped into 6
categories. Printers have been grouped into 3 categories.
The current monthly charges are:
Basic PC $125
Advanced PC $180
Basic Laptop PC $145
Basic Laptop PC with Docking Station $175
Advanced Laptop PC $190
Advanced Laptop PC with Docking Station $220
Personal Printer $ 35
Group Printer (2-9 users) $ 65
Department Printer (>10 users) $120
4.2.a.(1) Calculation of monthly costs
The monthly cost for each equipment type is
calculated by grouping the full costs of providing
the equipment in each category and dividing the total
by the number of pieces of equipment in that
category. The result is then divided by twelve to
arrive at the monthly charge.
Equipment costs include depreciation, lease charges,
software, maintenance and interest.
4.2.b Support Services
A monthly fee will be charged commensurate with the
level of support provided to Avis.
The current charge for basic support is $90 per month
for each personal computer.
4.2.b.(1) Calculation of monthly costs
The monthly cost is calculated by grouping the full
costs of providing desktop support services and
dividing the total by the number of personal
computers that will be receiving support. The result
is then divided by twelve to arrive at the monthly
charge.
4.2.c Network Access
A monthly fee will be charged for each device
connected to the local area networks.
The current charge is $55 per month.
<PAGE>
4.2.c.(1) Calculation of monthly costs
The monthly cost is calculated by grouping the
full costs of establishing, maintaining and
supporting the local area networks and dividing
the total by the number of personal computers that
will be attached to the networks. The result is
then divided by twelve to arrive at the monthly
charge.
4.2.d Installations, moves,LAN connections and reconfigures
A fee will be charged for installing, moving and
reconfiguring computer equipment. A fee will also be
charged for connecting equipment to the WizCom
network.
The current charges are:
Move $110
LAN connection $110
Installation $350
Reconfigure $350
4.2.d.(1) Calculation of cost
The fees for the above services are calculated by
multiplying the estimated time required to perform
the service by WizCom's hourly cost for manpower. The
hourly cost and the time estimates are reviewed by
WizCom periodically.
5. Network Services
The full cost of providing the services identified in Schedule A3 will be
charged to Avis on a monthly basis by WizCom.
Cost incurred by WizCom for facilities of Facility Groups (e.g., backbone)
exclusively used by Avis shall be charged to Avis in their entirety.
Cost incurred by WizCom for facilities or Facility Groups shared by Avis with
other WizCom customers shall be charged to Avis based on its portion of such
facilities. This portion shall be determined solely by WizCom using its best
professional judgment to determine a fair and equitable allocation of cost to be
charged to Avis within the constraints of existing contracts with other WizCom
customers. Methods to determine Avis's portion may consider, alone or in
combination but not limited to, the following:
Measurement or estimation of Avis consumption.
Equal division by total number of customers/customer logical or physical
devices. Allocation of specific segments of facilities to Avis.
<PAGE>
Consumption at times of peak overall usage.
Data Center sharing.
Distance that data is transported.
The selection of a method may be influenced by the type of facility, measuring
tools available, cost and labor required to perform related measurements, and
technology limitations.
6. Annual review of computer fees charged.
Within forty-five (45) days after the end of each calendar year of the Term,
WizCom shall provide Avis with notice of the amount, if any, by which the actual
cost to WizCom of providing each type of service to Avis during such preceding
calendar year exceeded the aggregate amount paid by Avis for such service for
the preceding calendar year. Avis shall pay WizCom, within fifteen (15) days
after the date of such notice the amount of such deficiency.
In the event that during any calendar year Avis requests changes to the services
which will, in WizCom's reasonable judgment increase the cost of providing any
of the services by more than 5%, WizCom shall provide notice to Avis of such
determination and the reasons therefore, and effective with the monthly billing
which succeeds such notice by at least fifteen (15) days, WizCom shall bill Avis
at a rate which is calculated to eliminate such deficit.
<PAGE>
SCHEDULE D
WIZCOM THIRD PARTY SOFTWARE
VENDOR PRODUCT
APPLIED NCODE/DCODE
BMC DB2REORG+
BMC LOAD PLUS
BOOLE & BABBAGE CMF
BOOLE & BABBAGE MAINVIEW BASE
BOOLE & BABBAGE FULFILLMENT FOR MVS
BOOLE & BABBAGE FULFILLMENT FOR IMS
CA PANVALET
CA PANVALET TSO
CA PANVALET ISPF
CA PHOENIX CBT
CA EZT+
CA EZT + IMS
CA CA-1
CA CA-7
CA CA-11
CANDLE CL/SUPPRESSION
COMPUWARE ABEND-AID MVS
COMPUWARE ABEND-AID IMS
COMPUWARE TRANSRELATE BD2
COMPUWARE XPEDITER TSO
COMPUWARE XPEDITER IMS
FASTTECH T.E.S.S.
GLOBAL GILES
IBM VS FORTRAN
(Mainframe)
MAINWARE HOURGLASS
PALACE GUARD ADMIN-AID
SAS INSTITUTE SAS MVS
SAS INSTITUTE SAS OR
SAS INSTITUTE SAS STAT
SAS INSTITUTE SAS CONNECT
STERLING:SAMS COMPRESS
SUN FORTRAN 77
(Client Servers)
SYNCSORT SYNCSORT MVS
SYNCSORT SYNCSORT CMS
TRANS CENTURY CALENDAR ROUTINES
VISUAL NUMERICS FORTRAN 90
<PAGE>
SCHEDULE D
VENDOR PRODUCT
MKS MKS TOOLKIT
NETSCAPE ENTERPRISE SERVER
NOVELL, INC. NETWARE
NOVELL, INC. MANAGEWISE
NOVELL, INC. GROUPWISE
NOVELL, INC. NETWARE NFS
NOVELL, INC. NETWARE COMMUNICATION EXECUTIVE
NOVELL, INC. NETWARE HOSTPRINT
NOVELL, INC. NETWARE FOR SAA
NUMEGA BOUNDS CHECKER
ORCA SOFTWARE XI
POWERSOFT POWERBUILDER
POWERSOFT S-DESIGNER
PVCS VERSION MANAGER
SAS SAS
SUN SOLARIS
SUN TRIS
SUN SNAP2P
SUN SPARCWORKS C/C++
SUN SPARCWORKS FORTRAN
SUN SOLSTICE BACKUP
SUN SOLSTICE FIREWALL
SYBASE SQL SERVER
SYBASE OPEN SERVER
SYBASE OPEN CLIENT
SYMANTEC VISUAL CAFE PRO
SYMANTEC CORP. NORTON ANTIVIRUS
SYNERGISTIC APPLICATIONS MACFLOW
VISIO CORP. VISIO FOR WINDOWS V3.0A
XDB XDB
XVT XVT
<PAGE>
SCHEDULE D
VENDOR PRODUCT
ALDUS CORP. ALDUS PERSUASION 2L.1 (MACINTOSH)
APPLE ETO
ATTACHMATE CORP. EXTRA
BANNER BLUE, INC. ORGPLUS
BENDATA HEATFOR WINDOWS
BMC/DATATOOLS SQL BACKTRACK
BRIO TECHNOLOGIES BRIOQUERY
BRIXTON BRIXTON GATEWAY MANAGER LU6.2
CA XCOM
CA TELON
CLARIS CORP. FILEMAKER PRO
COREL CORP. WORDPERFECT
CPLEX CPLEX
DANTZ DEVEL. CORP. RETROSPECT
DATAWARE DATAWARE DW3300 CHANNEL GATEWAY
DIMENSIONAL INSIGHTS CROSS TARGET DIVER
FARALLON, INC. TIMBUKTU
IBM TIVOLI MANAGEMENT PLATFORM 10
IBM IBM ANTIVIRUS
INTERSOLVE PVCS
KAETRON CORP. TOPDOWN FLOWCHARTER
LANDMARK PERFORMANCE WORKS
LEGATO SYSTEMS NETWORKER
LOTUS DEVEL. CORP. LOTUS 1-2-3
MACONOMY MACONOMY
MCAFEE, INC. NETTOOLS FOR WINDOWS
MCAFEE, INC. VIRUSSCAN FOR WINDOWS
METROWERKS CODE WARRIOR
MICRO FOCUS MICRO FOCUS COBOL
MICROSOFT CORP. VISUAL C++
MICROSOFT CORP. MICROSOFT OFFICE
MICROSOFT CORP. MICROSOFT PROJECT
MICROSOFT CORP. MICROSOFT FOXPRO
MICROSOFT CORP. VISUAL BASIC
<PAGE>
SCHEDULE E
AVIS THIRD PARTY SOFTWARE
VENDOR PRODUCT NAME
ADP ELECTRONIC REPAIR ORDER
CA FINANCIAL PLANNER
CA RAMIS
CA XCOM 6.2
CA DBA XPERT
EDS EDS/ELITE
GROUP1 CODE 1
GROUP1 CONSUMER M/P
GROUP1 LIST CONVERSION
GROUP1 BUSINESS M/P
GROUP1 GEOGRAPHIC CODING
GROUP1 CANADIAN CODING
GROUP1 MAILSTREAM PLUS
INNOVATION FDR/CPK/DSF
MITCHELL SYSTEMS ELECTRONIC DAMAGE CONTROL
MOBIUS INFOPAC
MSP DATA MANAGER
NISSAN ORDER STATIS SYSTEM
RRI R+
REYOLDS AND REYOLDS WARRANTY SYSTEM
SDT AIRPRICE QUEUE FUNCTIONALITY
SDT AIRPRICE ALERT PROCESSING
SDT AIRPRICE DYNAMIC SCREEN GENERATION
SDT MARKET GROUP CALIBRATION LOGIC
SDT AVERAGE LENGTH OF RENTAL LOGIC
SPC SYSTEMS COBOL REPORT WRITER
STERLING DYL260
STERLING COMMERC TRACS
STERLING:VM DIRECTOR
STORAGE TECH HSC
STORAGE TECH PM2
STORAGE TECH POST
STORAGE TECH EXLM
TOYOTA FAN SYSTEM
<PAGE>
SCHEDULE F
WIZARD SYSTEM FUNCTIONS
RESERVATION SYSTEM:
Reservation Bookings
GDS Systems
Location, Rate Customer Rates & Exceptions, and Vehicle Availability Database
Individual, Corporate and Travel Agency Databases
Rate Shopper Database
Tulsa Advanced Functional Terminal (a.k.a. TAFT)
Reservations Delivery
Reservations Reports
Reservations Manifest
OAG Verification
Prepaid Reservations
Reservations Counts
Tour Operators
Internet Car Reservations
Coupon Processing
RENTAL SYSTEM:
Real-Time Check Out Transaction
Card Swipe Transaction
Ready Line
Preprint Rental Agreement Transaction
Delayed Check-Out and Check-In Transactions
Non-Revenue Ticket (NRT) Transaction
Vehicle Transfer Contract (VTC) Transaction
Rapid Movement Transaction
Additional Prepayment
Check-In Real Time and Delayed Transaction
Display and Modify Rental Agreement Transaction
Expedited Check Out Transaction
Vehicle Exchange Transaction
Station Cash/Voucher Display
Cash Deposit Balancing
Miscellaneous Cash Receipt Transaction
Risk Check VOID RA
Currency Exchange
Special Account Display
Message Service
Credit Files
Credit Authorization Link
OAG (Manifest, FAN/Rover)
<PAGE>
Availability Transaction (Reservations, Rentals, Vehicles)
Vehicle Display Transaction
License Plate Trace License Plate Inquiry Transaction
Document Logs
Off Airport Locations
Drivers License Verification
Full Vehicle Addition/Change Transaction
Vehicle Status Transaction
Vehicle Reporting System
Hand Held Terminal
Express Service/Prestige Card Processing
Reader Boards
Bus Terminals
RESERVATION SYSTEM:
Reservation Bookings
Provide a facility to book, modify, cancel and receive instant confirmation
of reservation input by a reservation center, location or airline system.
The Reservation System accesses WizCom's databases (e.g. location, rate,
vehicle, customer) to edit information.
GDS Systems
Provide the booking, modification and cancellation of reservations from
airline and travel industry systems. Airline system means the computer
reservation systems (CRS) currently connected to WizCom (e.g. Sabre,
Amadeus, Galileo, Apollo, Pars).
The interface will handle automated Type A (interactive) and Type B
(teletype) reservations. This interface will be offered subject to the
standard and requests of the travel agent or airline system involved.
System includes: Voucher printing, Rate return, Automated reject
processing, Automated availability to the GDS, Automated rate updating, and
Automated transmission of rate availability.
Location, Rate, Customer Rates & Exceptions and Vehicle Availability
Databases Provide a facility for the storage and/or retrieval of
information on location, rates, customer rates & exceptions, and vehicle
availability.
Individual, Corporate and Travel Agency Databases
Provide a facility to identify and return Individual, Corporate or Travel
Agency Customers information through the use of special numbers or
identifiers (e.g. IATA).
Rate Shopper Database
Provide a facility which selects the best rate that is eligible to be sold
to a particular customer inquiry.
Tulsa Advanced Functional Terminal (a.k.a. TAFT)
The TAFT system is a distributive implementation of the Reservation Screen
designed to take advantage of client server technology. It provides
Reservation processing with a graphical user interface (GUI) with the
associated capabilities of a GUI (i.e., Multiple
<PAGE>
Windows, Pull-Down Menus, Pop-Up Dialogue Boxes, List Boxes, etc.). The
distributive power will provide for local data bases that can be accessed
locally and enhance the local editing capability.
Reservations Delivery
Provide a facility to transmit reservation booking information to
non-automated locations via telex or fax on an immediate or delayed batch
basis.
Reservations Reports
Provide overnight reporting systems available either in report format or
on-line, of reservation booking activity by various factors (e.g. time,
location, agent, source, rate code).
Reservations Manifest
Provide a facility by which rental locations can display an on-line listing
of reservations for a specified period of time organized by optional
variables (e.g., arrival time, car group, special service requests).
OAG Verification
Provide a facility which electronically verifies the customer's expected
arrival time at an airport rental location against the Official Airlines
Guide flight schedule database.
Prepaid Reservations
Provide a facility by which customers can elect to pay the estimated rental
charge at the time of reservation, via an overnight billing process.
Reservations Counts
Provide an on-line facility for the display of "real-time" reservation
transaction counts (e.g., creates, modifications, cancels) by date broken
down by GDS and voice.
Tour Operators
The Tour Operator System processes reservations which are created, modified
or cancelled by specific tour operators (4) through PCs. These IMF
formatted reservations are released in batches once per day into the Wizard
reservation system. Wizard will then create a new reservation or modify or
cancel an existing one.
Internet Car Reservations
Provides an online reservation, and rate inquiry transaction via the
Internet.
Coupon Processing
The online validations and for coupons at reservation and rental time. It
also provides the maintenance functionality of these coupons.
RENTAL SYSTEM:
Real-Time Check Out Transaction
Enables the rental location to automatically prepare a rental agreement
from a reservation, customer number, credit card or walk-up customer. If
the customer had a
<PAGE>
reservation or a customer number stored, the associated information will be
displayed in the applicable fields.
Card Swipe Transaction
On any terminal equipped with a magnetic stripe reader, upon the rental
sales agent swiping the card, the system will attempt to locate the
associated reservation and if present, display the applicable fields
including credit identification and method of payment. If no reservation is
found, the system will auto fill the name, credit identification and method
of payment fields. If a customer number is associated to the charge card
swiped, the system will auto fill the information included in the
customer's file.
Ready Line
Enables the rental location to display and select vehicles in the class
requested during a real-time check-out transaction.
Preprint Rental Agreement Transaction
Enables the rental location to prepare a rental agreement one day in
advance of arrival for customers having a complete reservation and customer
number.
Delayed Check-Out and Check-In Transactions
Enables the rental location to enter information into the system from a
rental agreement that was manually prepared at an earlier time.
Non-Revenue Ticket (NRT) Transaction
Enables the rental location to check-out a vehicle for an authorized
movement which is non-revenue generating.
Vehicle Transfer Contract (VTC) Transaction
Enables the rental location to check-out a vehicle which is being shuttled.
Rapid Movement Transaction
Enables the rental location to perform VTC transactions for up to eight
vehicles at a time.
Additional Prepayment
Enables the rental location to update the rental agreement record when an
additional cash, check or travel voucher prepayment is received.
Check-In Real Time and Delayed Transaction
Enables the rental location to check-in a rental agreement, NRT or VTC
transaction that had previously been entered into the system as a
check-out.
Display and Modify Rental Agreement Transaction
Enables the rental location to extract and modify select information that
relates to a particular rental agreement prior to rental being moved to
history (currently 24-48 hours after check-in).
<PAGE>
Expedited Check Out Transaction
Provide a facility whereby the system performs an automated check-out
transaction for a customer with a completed reservation upon entry of the
customer identification number or via credit card swipe by the rental
agent.
Vehicle Exchange Transaction
Enables the rental location to perform a vehicle exchange on a real-time or
delayed basis.
Station Cash/Voucher Display
Enables the rental location to display a daily list of all cash or voucher
transactions at a particular location.
Cash Deposit Balancing
Enables the rental location to balance cash.
Miscellaneous Cash Receipt Transaction
Enables the rental location to enter information about miscellaneous cash
received.
Risk Check
Enables the rental location to verify a customer's credit against the
credit files without creating a rental agreement. A risk check can be
performed by customer name or credit card number.
VOID RA
Provides the facility to void a rental agreement when necessary.
Currency Exchange
Provide a facility to convert most currencies from/to other currencies.
Presently Citibank is contracted as the provider who supplies updated
currency data on a regular basis.
Special Account Display
Enables the rental location to display discount and rate information on a
special account based on the Credit Identification or Customer Discount
Number.
Message Service
Communicate to/from any terminal a free-form message.
Credit Files
Maintain a Credit Risk file (received from credit card issuers e.g. AMEX)
which will indicate which credit cards are not to be honored. Maintain a
Name Risk Database with the appropriate information, for credit risks
deemed unacceptable as defined by the Customer.
Credit Authorization Link
Provides an automated link to the major credit clubs to obtain credit
authorization.
OAG (Manifest, FAN/Rover)
There are two processes utilizing the OAG (Official Airline Guide):
<PAGE>
Rover
The handheld unit normally used for checking processing has the capability
to display airline flight information. This includes Terminal, Gate #,
Flight time and Status.
FAN (Flight Arrival Notification)
The online realtime FAN system will print the rental agreements, PSSR and
display information to monitors based on parameters set by each location.
This process is for Preferred and/or Express customers with valid flight
numbers. The system will confirm flights which are on an updated status
through the OAG and utilize a standard flight table for scheduled flights
(non-updated).
Availability Transaction (Reservations, Rentals, Vehicles)
Provides information on the number of cars that will be available at a
location based on cars recorded in the system as on-hand, due-in and
reserved.
Vehicle Display Transaction
Displays information stored in the system about a particular vehicle
including vehicle status.
License Plate Trace
Links rental agreement information for a particular date and time to a
particular license plate number if stored.
License Plate Inquiry Transaction
Provides a listing of vehicles associated to a particular license plate
number.
Document Logs
Provides a listing of all rentals created and all rentals checked in.
Off Airport Locations
Provides a list of locations associated with a specific airport.
Drivers License Verification
Provide a facility to interface with an outside vendor (i.e. TML) which
electronically verifies the status of a driver's license with the
appropriate state motor vehicle agency at the rental counter prior to
check-out. Specific eligibility rules will be defined by the Customer.
Full Vehicle Addition/Change Transaction
Enables the fleet owner to input information about a vehicle into the
system that is necessary for control of the vehicle.
Vehicle Status Transaction
Enables the vehicle owner to place a vehicle in multiple status's (e.g.
out of service).
Vehicle Reporting System
Provides the field location with vehicle reports. Status includes,
inactive, overdue, open movements, mileage discrepancies, due-ins, missing
and Marshaled vehicles.
<PAGE>
Hand Held Terminal (a.k.a. Rover)
Provides remote check-in process of customers via a portable unit hooked up
to a PC that communicates with the mainframe.
Express Service/Prestige Card Processing
Provides special recognition (e.g., special manifests) of selected renters
to assist the Customer in providing special services.
Reader Boards
Reader boards (display monitors) display Customer Names, Space Numbers and
Remarks to preferred customers whose contracts are prepared in advance
(future rentals). This allows renters to avoid counter delays and go
directly to their rental car.
Bus Terminals
Rental manifest are produced regularly throughout the day at major airports
and loaded to PC terminals on the bus with Radio Frequency technology
(Spread Spectrum). These new terminals eliminate paper manifests and allow
the bus driver to use "touch screen" technology to look up customer names,
initiate the checkout, and request customer space numbers.
<PAGE>
SCHEDULE G
AVIS COMPUTER SYSTEM FUNCTIONS
FLEET SYSTEM:
Fleet Accounting Transaction/System
Vehicle Sales Transaction
Turnback Transaction
Title Tracking System
Purchase of Vehicles
Order System for Cars
Parking Violations Bureau System
Registration Forms
Fleet Distribution Model
Fleet Planning System
Field Fleet Reporting System
Title Tracking Request
Electronic Repair Order
Fleet Receivables
Invoice System (BARS)
Fleet Reporting System
Make Model Database
Pre-Delivery Inspection/Warranty Processing
Vehicle On-Line Transaction System
Purchase Order Database
Vehicle Order Database
Vehicle Order Status
Department of Sanitation System
Fleet Reconciliation System
Group Rate Depreciation System
Harris County Tax System
Insurance System
Licensee Reporting System
Vehicle Damage Claims
SALES AND MARKETING SYSTEM:
Sales and Marketing Information System
Marketing Promotions
Frequent Traveler Program
Frequent Renter Program
Customer Tracking System
Account Management Reports System
Pricing Model
IRDB
Corporate Accounts Rebate Program
Telesales System
Rental Demographic System
<PAGE>
Coupon Reporting
Worldwide Prestige Issuance
Chairman's Tracking System
CEO Tracking System
Automated Fulfillment System
Brochure Request System
Wizard Credit Link
Account Segmentation System
EMP Sales Employee Database
STC Sales STC Database
Share of Market
Corporate Awards Program
FINANCIAL MANAGEMENT SYSTEM:
Revenue Distribution System
Credit Club Processing System
Receivables System
Referral Commission System
Customer Adjustment System
Commission Inquiry System
Licensee Composite
Accounts Payable (AP)
General Ledger (GL)
Money Management System (MMS)
Time and Attendance (TAA)
Rental Agreement Processing
Rental Number System
Balance Forward System
Register Miscellaneous Reporting
Open Item System
Travel Agency System
Cash Application System
Invoicing
Licensee Chargebacks
Country Company Database
Club Red
Preferred Supplier
AIM International Direct Sell
User Rental File
Europe File
Wizard Licensee Billing BIL
Travel Voucher Processing
Roll and Slide Reporting
Currency Data Base
Open Rental System
Bonus System
<PAGE>
Direct Billing System
Daily Business Reporting
YIELD MANAGEMENT SYSTEM:
Yield Management
Data Extraction and Conditioning
Product Forecasting
Revenue Optimization
Graphical User Interface
Supply and Demand
Availability by Length of Rental (AVLLOR)
Turndowns and Denials
Reservation and Rental History
Rate Opportunity System
Yield Management Price Elasticity System
Rateshop System
Business Mix
Global Distribution System Rate Maintenance
Rate Availability
MISCELLANEOUS SYSTEMS:
Insurance Claim System
Coupon Tracking System
Worldwide Reporting System
Counter Sales Incentive
Personal Liability and Property Damage Insurance Reserve
Operating Lease Commitment Reporting Facility
Treasury Debt Reporting Facility
Interactive Personnel System
Name Risk System
Credit Club Risk
Standard Interline Passenger Procedure (SIPP)
<PAGE>
SYSTEM FUNCTION DESCRIPTIONS
FLEET SYSTEM:
Fleet Accounting Transaction/System
Enables the vehicle owner to establish depreciation/interest rates
based on a group of vehicles. The system includes depreciation,
interest (YTD & MTD), book value (Cap Cost less depreciation and
interest) and vehicle status. This System also includes reports to
support funding reporting.
Vehicle Sales Transaction
Enables the fleet owner to input information on the sale of a vehicle.
Turnback Transaction
Enables the Customer to establish turnback criteria based on minimum
and maximum time periods and/or mileage.
Title Tracking System
Enables the fleet owner to track the status of the vehicle title.
Purchase of Vehicles
Provides a facility to create vehicle purchase orders.
Order System for Cars
Provides automated links to manufacturers supported by WizCom to
process purchase ordering of cars directly. These links are
accomplished using third party software and includes ordering,
modifications, feeds to status, delivery reporting, invoice processing
and MSO handling.
Parking Violations Bureau System
This system takes a feed from the New York Parking Violations Bureau on
parking tickets issued and passes back customer data that allows the
liability to be transferred to the customer.
Registration Forms
Provides a facility to interface with an outside vendor that has the
capability to produce Department of Motor Vehicle forms for vehicle
registration. This system provides an automated upload to reduce the
key entry required to add the vehicle to the Rental system.
Fleet Distribution Model
The Fleet Distribution Model (FDM) is a decision support system
providing management with analytical tools for formulating, evaluating,
and planning vehicle distribution strategies and projecting rental
demand. FDM is a mainframe online interactive system designed to
improve bottom line performance, fleet utilization, and customer
service.
<PAGE>
Fleet Planning System
The Fleet Planning System, including Operations Research Models, is a
comprehensive decision aid used by Fleet Operations/ Administration
personnel to develop Fleet Plans and Acquisition Schedules.
Acquisition, age, and cost reports based on the Fleet Plans and
Acquisition Schedules can also be viewed. The system maintains actual,
budget, forecast, and work versions of Fleet Plans and Acquisition
Schedules. These versions are used by Fleet Operations/Administration
personnel to assist in the budget and monthly forecast planning
process.
Field Fleet Reporting System
Reporting System used to track vehicle adds, deletes, and ownership
transfers. Primary usage to forecast operating fleet size.
Title Tracking Request
An automated procedure to request and track titles from Headquarters to
Field Operations through either on-line Wizard, Rover transactions or
operational inputs.
Electronic Repair Order
This is an outside vendor package we interface with which
electronically schedules, dispatches and distributes/processes service
repair work on the fleet in a completely paperless environment. ERO
also provides reporting to track productivity and cash received
associated with warranty work.
Fleet Receivables
A system to administer the collection of various receivables due from
the vehicle manufacturers.
Invoice System (BARS)
This system captures and retains invoices received from vehicle
manufacturers.
Fleet Reporting System
Reports on turnback eligible vehicles, transfers, and various stages of
titling.
Make Model Database
On-line system managing manufacturers' makes and models. It maintains
and supplies vehicle descriptions, car classes and funding methods for
use within Wizard.
Pre-Delivery Inspection
Creates and reports on vehicle pre-delivery inspections claims for
payment interfacing with different vehicle manufacturers via third
party software. System also reports on acknowledgement and credit
notices for warranty claims.
Vehicle On-Line Transaction System:
Purchase Order Database
A subset of VOLTS (Vehicle On-Line Transaction System) using the
Vehicle order database to provide a facility to create purchase orders
for vehicles.
<PAGE>
Vehicle Order Database
A subset of VOLTS (Vehicle On-Line Transaction System) interacting with
the purchase order creation providing the selection of different
vehicle makes, models, options and special manufacturer incentives.
Vehicle Order Status
An automated vehicle reporting system providing the status of vehicle
orders.
Department of Sanitation System
Provides adds/sales of all fleet inventory for the Northeast zone to
the Department of Sanitation.
Fleet Reconciliation System
A system used to reconcile any differences between the online inventory
add process and the accounting add process.
Group Rate Depreciation System
A system used to capture the vehicle inventory, purchases, sales and
adjustment information from the MVA and MVS system to produce month
Group Depreciation and Investment Credit Reports for select funding
types.
Harris County Tax System
A system designed to produce a file of vehicles under the ownership of
Harris County, Texas for tax purposes.
Insurance System
A system designed to review and evaluate accident reports and
supporting documents to estimate the monetary value of the company's
casualty exposure for each accident based on a determination of
coverage, liability, the jurisdiction in which the accident took place
and the injuries and/or damage incurred.
Licensee Reporting System
Provides our participating licensees a series of reports detailing all
their adds, changes and sales for the month.
Vehicle Damage Claims
A system responsible for tracking and recovery of damage done on
vehicles. This system interfaces with the AIMS system - an image system
built by an outside vendor.
SALES AND MARKETING SYSTEM:
Sales and Marketing Information System
The Sales and Marketing Information System serves as a repository for
data relating to rental activity which contained a Corporate Account
Number and/or ARC/IATA (Travel Agency Number). This data includes
information such as rentals, revenue, insurance's, method of payment,
reservation source, car class utilization, rates and top renting
locations. Furthermore, the system includes reporting on commericial
travel activity, special services and customer activity reports.
<PAGE>
Marketing Promotions
Provides a facility to accept, track and report on coupons entered into
the system.
Frequent Traveler Program
Provides a facility to capture frequent traveler club information as
currently supported by WizCom and pass on to the frequent travel
partner (e.g. American Advantage) for mileage awarding.
Frequent Renter Program
Provides daily tracking of select individual's rental history activity.
Enables on-line inquiry and adjustment capability as well as management
reports and activity statements.
Customer Tracking System
Provides a file to identify and track customer rental activity for
direct mailing.
Account Management Reports System
Provides activity reports on Corporate Account and Travel Agency.
It tracks Account and Sales Representative performance.
Pricing Model
The Pricing Model is a strategic tool which assists management in
determining profitability and setting pricing structure for corporate
accounts.
IRDB
An Individual Customer Database detailed by rental transactions that
can be assessed for parameter driven queries. The details are stored
for two years and segregated by country. This data is the source for
Direct Marketing events, studies and analyses.
Corporate Accounts Rebate Program
This is a monthly batch reporting system which calculates and reports
on Corporate Accounts for which rebates are applied. It provides:
rebate statements and check registers (output format needs to be
defined by the Customer); accumulation of revenue and transaction date
for corporate and travel agency accounts and enables on-line inquiry of
rental statistics.
Telesales System
This system maintains information about prospective corporate accounts.
The system provides the ability to: bulk load leads from outside
sources, code leads by source, automatically distributes leads to
agents, and generates fulfillment materials. When the account is sold
the system will automatically update the Customer Database and assign a
customer number.
Rental Demographic System
This provides an interface to an outside vendor PC-based software
package (i.e. Equifax) to geographically identify prospective
customers; conduct site analysis and profile existing customers.
Coupon Reporting
Provides a facility to track and report on coupons entered into the
system.
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Worldwide Prestige Issuance
Reissues all Prestige cardholders worldwide.
Chairman's Tracking System
Creates a monthly tracking report for the Chairman's program
CEO Tracking System
Creates a monthly tracking report for the CEO program.
Automated Fulfillment System
Provides a facility to request fulfillment information from outside
vendor for corporate accounts.
Brochure Request System
Provides a facility to request fulfillment information from outside
vendor for travel agents.
Wizard Credit Link
This system takes files provided by American Express, Visa, or Diners
Club and updates or creates those customer's Wizard numbers.
Account Segementation System
Provides activity reports by corporate and leisure business segements.
EMP Sales Employee Database
Serves as a repository for sales employee information to be used for
security and access to SAM and for incentive reporting.
STC Sales STC Database
Serves as a repository for sales territories and responsible sales
representative to be used for security access to SAM and for incentive
reporting.
Share of Market
Serves as a repository of Avis and competitor market share at airport
locations used for management reports.
Corporate Awards Program
Facility to capture activity of corporate accounts on program and
determine monthly awards to be filled by vendor.
FINANCIAL MANAGEMENT SYSTEM:
Revenue Distribution System
Provides ledger with the distribution of revenues, expenses, receivable
and payable due on a rental agreement. It also provides management
reports of these details. The receivable and intercompany data is
interfaced to the Receivable system daily.
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Credit Club Processing System
Provides the capability to accumulate rental charges on certain credit
cards and automatically generates billing to the appropriate credit
club organization on a daily basis.
Receivable System
Provides the capability to process receivable details for central
billing, direct billing, licensees and miscellaneous registers such as
unapplied cash, prepaid vouchers, refunds and credit club summary. The
system provides on-line control of billing, adjustments, cash payments
and collection. It also has a management reporting package.
Referral Commission System
Provides the capability to pay a travel agency on referral rentals. The
system provides statements and an accounts payable file bimonthly.
Customer Adjustment System
Provides the capability to adjust the amount of the billing to the
customer or travel agency and automatically issues the credits or
debits. The process recalculates the rental, prints a rental facsimile
and provides files to feed Accounts Payable and Credit Clubs. The
updates to the Accounts Receivable System are done on-line.
Commission Inquiry System
Provides the capability to inquire by reservation or rental number the
status of commission payment due to Travel Agencies on reservations
booked.
Licensee Composite
Provides the ability for the customer to generate a statement for
licensees.
Accounts Payable (AP)
The Accounts Payable system is a package with customization that is
used to pay the company's expenses. Data is processed via a batch
system and payments checks are generated, both via check and wire
transfers (via Treasury). The system provides account distribution to
GL, payment history, and cash requirements reporting. A check
reconciliation process is provided.
General Ledger (GL)
The General Ledger System is a package that has been customize for Avis
and is used for processing and reporting of financial and statistical
data. Input data is from the various corporate systems (AP, AR,
Payroll, etc.), as well as keyedit data from document input. The
financial reporting is done monthly. Edits of the data from the various
systems is accomplished through the month, as the data becomes
available.
Money Management System (MMS)
This system is used to summarize deposits made to local banks, based on
data from the Wizard reservation system. A daily file is created and
electronically transmitted to a concentration bank. This is used as
authorization for transferring the deposits on the local banks to the
concentrator bank. Various reports are generated for audit and control
purposes. Corrections are via a keyedit file, created from document
input.
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Time and Attendance (TAA)
This system is for the collection of time and attendance data using a
package and awarding and tracking of benefits, such as vacation and
sick time, for exempt as well as hourly personnel. Start and end time
for hourly personnel is captured via the use of a magnetic card swipe
reader and the employee ID card. A payroll record is created for each
hourly employee and the data is electronically transmitted to a Service
Bureau (ADP) for payroll check generation.
Rental Agreement Processing
Controls the daily processing of the rentals from Wizard daily to the
Financial Systems. Also creates the RA History Database which maintains
a history of all rentals for an average of six months. The currency and
commission calculations are updated in this process.
Rental Number System
Maintains the rental agreements by day, week and monthly for reporting.
The monthly files are kept indefinitely for audit.
Balance Forward System
This is a subsystem of Receivables which creates the reports and
statements for Canada's balance forward accounts.
Register Miscellaneous Reporting
This Receivable subsystem creates the register reports for the WBO
countries' miscellaneous accounts (ie. HDQ Refunds, Deposits, CCB).
Open Item System
Creates the statements for Australia and New Zealand in their required
format.
Travel Agency System
Maintains the database which encompasses the travel agency details for:
(a) information about the travel agency, eg. names, addresses, etc.
(b) information required to process commissions for vouchers and
referrals.
Cash Application System
Controlled application of cash to the Receivable system through
multiple functions. The system supplies management reports on-line.
Invoicing
Produces the invoices daily for the customer and the travel agency. The
system is multi-lingual. It also produces the corrected invoices from
adjustments.
Licensee Chargebacks
Provides reports to rental management for the chargebacks of Frequent
Flyer.
Country Company Database
Country/Company database which contains the parameters for the
processing of the WBO systems. Examples of the types of data are: rules
for accounting utilized by IAJ and RDS, credit club processing fees and
merchant information for both corporate and licensee, country system
participation.
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Club Red
Promotional Sales system for bonus payments to the US travel agencies
for selling weekend, weekly, monthly and mini lease packages to their
clients.
Preferred Supplier
Bonus payments to US Travel Agency consortiums for an increase of
revenue over last year.
AIM
Payment to independent marketing for selling packages to Travel
Agencies..
International Direct Sell
Is the system that provide the vouchers for prepaid vouchers. It also
supplies the billing record to Club Billing and the detail to
Receivables.
User Rental File
User file of the checking rental agreements which is created daily and
accumulated monthly for adhoc reporting.
Europe File
Complete download of the Europe rental agreement. This is completed
daily.
Wizard Licensee Billing
Formatted file of rental agreements and cash records provided to the
Licensee for processing through their backoffice systems.
BIL
US central billing system which provides cycle statementing and
reporting to all corporate and voucher accounts.
Travel Voucher Processing
A reporting subsystem of BIL containing the voucher required
information needed to bill selected US travel agencies.
Roll and Slide Reporting
Records the roll and slide number of the microfilming of checkout
rental agreements and vouchers. The information is stored on the RA
History database and a cross-reference microfiche copy.
Currency Database
Maintains the history of the currency conversion values for all the
countries. It is updated weekly via a file from Citibank.
Open Rental System
Captures all of the open rentals from Wizard each night. This is mainly
used by Yield management.
Bonus System
Creates the travel agency bonus details for countries.
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Direct Billing System
Batch US receivable system which creates the miscellaneous registers
and creates the dunning for Direct Bill. Keypunch supplies the input
data for journal entries which are needed by BIL and Composites. There
is also a feed to General Ledger.
Daily Business Reporting
US system which is used for miscellaneous rental input. It also creates
the US composite reports and balance forward.
YIELD MANAGEMENT SYSTEM:
Yield Management
Yield Management is a decision support tool which provides the facility
to predict and control product demand and availability on a daily
basis. The primary functions of the system are:
Data Extraction and Conditioning
Subsequent to overnight Wizard and back office processing, mainframe
Yield Management processes extract reservation, rental, and fleet data
and prepare it for use by the system.
Product Forecasting
Forecasting for designated Yield Locations is then performed resulting
in both location and product level forecasts.
Revenue Optimization
Following further data conditioning and application of previously
entered user updates, a revenue optimization is performed for each
Yield Unit. A linear programming model is used to calculate and
recommend the optimal mix of products to be sold over the planning
horizon given the current reservation, rental, and fleet information,
and the future forecasted demand.
Graphical User Interface
The system users view the results via a custom Graphical User Interface
(GUI) which provides data presentation and summarization across
multiple screens. The users have the capability via the GUI to modify
fleet availability and product forecasts, and to modify and implement
product suspend and shuttling recommendations. Once these modifications
are supplied to the system, the user can then rerun the model for the
Yield Unit under consideration so that a reoptimization is performed
using the most recent user inputs.
Supply and Demand
This facility prevents reservation failures by providing the real time
reservation system with supply figures generated by the Yield model.
Automated vehicle availability suspends will be generated when supply
has been exhausted. These suspends will also be reflected dynamically
in the Global Distribution Systems.
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Availability by Length of Rental (AVLLOR)
AVLLOR is a mechanism which controls vehicle availability for specific
lengths of rental (LORs) by station, date, and car class. The intent is
to maximize vehicle utilization during high demand periods based on
recommendations produced by the Yield model. As described above, these
suspend actions are implemented via the Yield GUI and transmitted to
the Wizard and GDS Systems. A facility also exists to enter them via a
mainframe screen.
Turndowns and Denials
The purpose of this function is to extract turndown and denial
transactions from the Reservation Transaction File (RTF). They are then
stored via a tape facility.
Reservation and Rental History
In order to support demand forecasting and other functionality,
reservation history is maintained for up to one year in the future and
historically for as much as two years past. Rental history for open and
closed rentals is also maintained for up to two years.
Rate Opportunity System
The Rate Opportunity System provides the user with the ability to
analyze competitor rates with respect to their own rates and to utilize
an alert mechanism which will notify the user of specific competitor
price changes. Via an interface to Galileo International, a Global
Distribution System (GDS) vendor and a supplier of competitor rate
information, WizCom receives daily rate information, rate rules, rate
availability, and car availability data for the Yield group and its
competitors. AROS includes a custom Graphical User Interface (GUI)
whereby the users can view rate information, organize alert criteria,
and view alert results. These price changes are transmitted to the
Wizard and GDS Systems. Includes a piece of proprietary software from
SDT.
Yield Management Price Elasticity System (YMPES)
The Yield Management Price Elasticity System (YMPES) will assist
management in determining the optimal prices for Leisure and
Association segment rental products on a day to day basis by analyzing
competitor's status and their own supply to demand ratio. These rate
status changes are transmitted to the Wizard and GDS Systems.
Includes a piece of proprietary software from SDT.
Rateshop System
The Rateshop System provides an automated interface to Sabre's Global
Distribution System (GDS). This interface allows volume querying of the
Sabre database for competitor rate information by batching multiple
queries which would otherwise require online entry on an individual
basis.
Business Mix Model
The Business Mix Model is a quantitative based strategic tool which
assists management in planning rental market segment mix as well as
further decision making relative to fleet, pricing, marketing/sales
programs, and financial planning strategies. The optimal rental
business mix over all market segments is determined through a linear
programming optimization which maximizes total marginal revenue.
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Global Distribution System Rate Maintenance
WizCom's links with various Global Distribution Systems (GDS) provide
for updating of rates and rate availability within these systems when
internal rates and availability are modified. GDS with which interfaces
are currently maintained are Sabre, Amadeus, Galileo, and Worldspan.
Rate Availability
Rate Availability is a mechanism which controls the availability of
selected products. Inventory limits can be controlled by rate products,
station, car grouping, and by expected rental dates. Inventory limits
are documented with reservation booking and incremented with
reservation cancellations. Reservations will not be taken once limits
are reached.
MISCELLANEOUS SYSTEMS:
Coupon Tracking System
A reporting system which tracks the redemption of coupons based on
completed rental transactions.
Worldwide Reporting System
Provides statistics pertinent to rental activity and revenue generated
Statistics include: Rental Activity, Vehicle Group Analysis, Rate
Analysis, Optional Service Acceptance Rate, and Vehicle Movement
Patterns.
Counter Sales Incentive
Provides automated tracking of rental sales agents productivity and
incentive payments.
Personal Liability and Property Damage Insurance Reserve
The Personal Liability and Property Damage (PL - PD) Insurance Reserve
provides various statistical and actuarial techniques that are used to
analyze the data contained in the Insurance Claims database to predict
the reserve requirements. WizCom coordinates with Insurance Department
management to refine the methods and to support the quarterly reserve
testing process.
Operating Lease Commitment Reporting Facility
The Operating Lease Commitment Reporting Facility is a tool used to
report on various operating leases and expresses all foreign lease
commitments at the current rates of exchange.
Treasury Debt Reporting Facility
The Treasury Debt Reporting Facility is a tool used to report and
manage debt. The system is an application that performs various
interest and principal calculations for various debt vehicles and
reporting structures.
Interactive Personnel System
A system used to capture non-exempt and union raise information, apply
wage increases for field personnel on scheduled raises, and produce PCN
detailing applied raise.
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Name Risk System
A system that tracks high risk individuals by name and driver license.
Credit Club Risk
A system that tracks high risk accounts by credit club.
Standard Interline Passenger Procedure (SIPP)
A system that utilizes the airline reservation system standards to
define our vehicles by similar equipment, car class, etc.
<PAGE>
SCHEDULE I
TERMINATION ASSISTANCE
1. Introduction.
In the event of termination of this Agreement, WizCom shall provide Avis with
"Termination Assistance," which shall mean such cooperation and assistance as is
necessary to allow the Services to continue without interruption or adverse
effect and to facilitate the orderly transfer of the applicable Services to Avis
or its designee (the "Successor"). Avis shall pay WizCom the charges set forth
in Schedule C for any Termination Assistance provided.
2. Assistance to Successor
The Termination Assistance shall consist primarily of the following:
a. Providing to the Successor the specific Termination Assistance
Services described in Exhibit 1 to this Schedule I.
b. Assisting the Successor in developing a plan for the
Termination of all requested and appropriate operations from
WizCom, which plan shall include performance of the specific
Termination Assistance Services reflected in Exhibit 1 to this
Schedule I.
c. Providing to appropriate personnel of the Successor training
in the performance of the Services that are to be transferred,
as the Successor may reasonably require.
d. Notifying the Successor of third party services obtained by
WizCom that are then dedicated to the performance of the
Services, and cooperating with the Successor in its efforts to
enter into arrangements with the providers of such third party
services (with consent of the provider of such third party
services, the Successor may assume WizCom's rights and
obligations with respect thereto).
e. Providing the Successor with other information regarding the
Services that is required to implement the Termination plan,
and providing such information regarding the Services as
necessary for the Successor to assume responsibility for
continued performance of the Services in an orderly manner, so
as to minimize disruption in the operations of Avis.
f. Providing to the Successor, if the Successor is not Avis,
master file and field descriptions and record layouts, in
respect of the Systems, along with run documentation an job
control listings, and other similar information necessary for
the Successor to provide services to Avis and Avis Authorized
Users, all to the extent maintained by WizCom.
Prior to providing any of the foregoing Termination Assistance, WizCom shall
receive from the Successor (if the Successor is not Avis) written assurances
that the Successor shall
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maintain the confidentiality of WizCom's Confidential Information (as provided
in Section 10.3 of this Agreement) disclosed or provided to the Successor in the
course of receiving the Termination Assistance.
3. Access to Resources.
In providing the Termination Assistance, WizCom shall provide the Successor
reasonable access to and use of Equipment, Software, personnel, third parties,
and other resources used by Wizcom to provide the Services (collectively
"Resources"), and provide to the Successor reasonable information concerning
such Resources.
<PAGE>
Exhibit I
Certain Termination Assistance Services
Specific Termination Assistance to be provided by WizCom under Schedule I shall
include the following:
1. Pre-Migration Services.
a. Provide to the Successor documentation used by WizCom to provide the
Services, including technical documentation.
b. Review and explain the Procedures Manual to the Successor's operations
staff.
c. Identify and record the release levels for System Software and control
such release levels as reasonably required by the Successor for Termination to
the Successor's processing environment.
d. Freeze all discretionary Software changes unless otherwise requested by
Avis, other than Maintenance necessary to address processing problems.
e. Provide Assistance to the Successor in notifying outside vendors of the
procedures to be followed during the migration.
f. Review test and production Software libraries with the Successor's
operations staff.
g. Assist the Successor in establishing naming conventions.
h. Assist the Successor in its analysis of the space required for Software
libraries.
i. Subject to the provisions of this Agreement relating to Avis's rights
and obligations with respect to Software:
(1) generate and provide a tape and computer listing for
the source code for the Systems, Avis Software (and
any Third Party Software if permitted) in a form
reasonably requested; and
(2) deliver source and object code, related work product
(as such work product has been maintained by WizCom),
technical specifications and materials and user
documentation for the Systems, Avis Software (and
Third Party software if permitted) to Avis.
j. Provide a reasonably number of copies of the Avis's DASD volumes as
requested by Successor.
k. Cooperate with the Successor in the preparation and conduct of migration
testing.
l. Provide reasonably access to WizCom personnel performing the Services.
<PAGE>
m. Provide interim tapes of Avis Data, as reasonably requested.
2. Migration Services.
a. Unload all requested Avis Data files and other Confidential Information
from the Systems. Return (or, at Avis's request, destroy) all Avis Data and
other Confidential Information.
b. Deliver all reasonably number of copies of tapes of all requested Avis
Data files and printouts of a content listing of Avis Data files if available
and requested by Avis, and, to the extent requested but not available, provide
such content listing as a Project.
c. Provide reasonably assistance to the Successor in loading the data
files.
d. Provide reasonable assistance to the Successor with the turnover of
operational responsibility, including providing assistance and cooperation in
the execution of parallel operation and testing.
3. Post-Migration Services.
After the migration for the period set forth in Section 16.6(b), wizCom shall
provide additional assistance as reasonably requested by Avis to assure
continuity of operations. WizCom shall return to Avis or destroy, at Avis's
request, any remaining property of Avis in its possession or under its control,
including any remaining reports, Avis Data and other Confidential Information of
Avis.
<PAGE>
SCHEDULE J
SOFTWARE ESCROW AGREEMENT
This Software Escrow Agreement dated as of , 199 (hereinafter "Escrow
Agreement") among Avis Rent A Car System, Inc. ("Avis"), a Delaware corporation,
WizCom International, Ltd. ("WizCom"), a Delaware Corporation, and The Dime
Savings Bank of New York FSB (the "Escrow Agent").
W I T N E S S E T H
WHEREAS, WizCom and Avis have entered into a Computer Services
Agreement effective July 30, 1997 (the "Computer Services Agreement") whereby
WizCom will provide computer services to Avis and permit Avis to participate in
the Systems (as defined in the Computer Services Agreement); and
WHEREAS, to the extent that WizCom has licensed or in some other way
has ownership rights to source code of a particular system and/or Software,
WizCom has agreed to place a tape containing the source code corresponding to
the Software for the Systems in escrow to be released to Avis by Escrow Agent
upon the occurrence of certain events; and
WHEREAS, WizCom and Escrow Agent have entered into a lease for storage
of the Source Code corresponding to the Software at Escrow Agent's facility in
Carle Place, New York (the "Lease");
NOW, THEREFORE, the parties agree as follows:
1. Definitions. In this Agreement, unless otherwise defined below, all
terms shall have the meanings set forth in the Computer Services Agreement.
For purposes of this Agreement:
(a) "Depository" shall mean The Dime Savings Bank of New York FSB
under this Escrow Agreement or any other bank which enters into
an agreement with WizCom for storage of the Source Code upon
termination of the Lease.
(b) "Owners" shall mean WizCom, and any third party owners of portions
of the Software who have licensed WizCom to utilize such portions
of the Software.
(c) "Source Code" shall mean human-readable, computer programming
code and associated procedural code corresponding to the
Software.
2. Escrow Materials. WizCom hereby authorizes Escrow Agent to release the
copy of the Source Code and all corrections, improvements, updates or
enhancements of the Source Code
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made by the Owners of the Software (the "Escrow Materials") which Escrow Agent
stores for WizCom pursuant to this Escrow Agreement upon compliance with the
provisions of paragraph 7 hereof and as stated, in particular, in paragraphs 7.6
and 8 of this Agreement.
3. Location of Escrow Materials. Until the Escrow Materials are released to Avis
in accordance with the terms of this Agreement, Escrow Agent shall keep the
Escrow Materials in a safety deposit box or other durable container in a secure
place that is suitable for safekeeping. Escrow Agent shall not be responsible
for providing any special atmospheric conditions for the safekeeping of the
Escrow Materials; however, the container used for safekeeping the Escrow
Materials shall be securely locked when not in use, and only available to
authorized individuals who are (i) both employed by Escrow Agent on a full-time
basis and subject to the confidentiality obligations contained herein or (ii)
employed by WizCom and depositing updated Source Code pursuant to paragraph 4 of
this Agreement. Escrow Agent shall not be required to carry any specific
insurance for its facilities or the Escrow Materials.
4. Update and Maintenance of Source Code. During the term of this Agreement,
WizCom shall keep the Source Code stored by Escrow Agent pursuant to this Escrow
Agreement fully current by depositing all supporting documentation, if any, and
related materials for each update, correction or new release of the Software at
the same time as the same are incorporated into the Systems.
5. Verification of Source Code. Avis may appoint, at its expense, an independent
firm of certified public accountants of national reputation to inspect, review
and test the Escrow Materials (under obligations of confidentiality) at any time
during the term of this Agreement to verify that they contain true and accurate
versions of the Source Code. Escrow Agent shall permit such inspections, review
and testing shall be conducted at a location to be approved by WizCom, such
approval not to be unreasonably withheld or delayed.
6. Holding of Escrow Materials. Escrow Agent shall hold the Escrow
Materials in safekeeping and confidence and Escrow Agent agrees not to disclose
the Escrow Materials to any party except as specifically provided herein.
7. Release of Escrow Materials to Licensee.
7.1 The Escrow Materials shall be released to Avis only in accordance
with the terms of this Escrow Agreement. In the event the Escrow
Materials are so released, the receipt and use of the Escrow
Materials by Avis as provided in this Escrow Agreement shall be
non-transferable and non-exclusive, and only for the purpose
specified in the Computer Services Agreement. Escrow Agent and
Avis acknowledge that title to the Escrow Materials remains in the
Owners at all times and that the Escrow materials constitute the
Owners' proprietary trade secrets and confidential information
which are not to be disclosed, released, used or transferred in
any manner other than as specifically and expressly permitted by
this Agreement and the Computer Services Agreement.
<PAGE>
Furthermore, Avis acknowledges that the Software may be stored,
and the Escrow Materials duplicated, in a format which contains
libraries of third party software which WizCom does not have the
right to release ("Vendor Software") and which WizCom does not
authorize Avis to use. Therefore, Avis understands and agrees that
promptly after release of the Escrow Materials to Avis it will
isolate the Software from Vendor Software, and either destroy the
Vendor Software in its possession or obtain a license form any
such third party owner of the Vendor Software for use of same.
7.2 Release of the Escrow Materials to Avis shall occur in the event:
(a) A petition is presented against WizCom for its
liquidation and such petition is not dismissed within
one hundred eighty (180) days of receipt of notice of
the presentation of such petition.
(b) That a receiver, trustee, liquidator, or administra-
tor shall have been appointed for the business of
WizCom.
(c) That bankruptcy, reorganization, insolvency or
arrangements or proceedings under any other laws
relating to the relief of debtors shall be commenced
by or against WizCom and shall not be dismissed
within one hundred eighty (180) days of receipt of
notice of commencement of such proceedings.
(d) WizCom refuses to provide Avis with a copy of the
Software as required in the circumstances
specifically described in the Computer Services
Agreement.
7.3 Upon the occurrence of an event in paragraph 7.2, Avis must give a
written notice simultaneously to Escrow Agent and WizCom which
meets the following requirements:
(a) be clearly and conspicuously labeled "Notice to Release Software";
(b) specifically refer to this Agreement;
(c) specify the nature and circumstance of the event giving rise to such
notice;
(d) specifically identify the Escrow Materials; and
(e) demand delivery of the Escrow Materials to Avis as provided in this
Agreement.
7.4 Upon receipt of the Notice to Release, Escrow Agent shall send
immediately by fax transmission, a copy of the Notice to Release
to WizCom immediately by fax transmission.
7.5 If WizCom desires to dispute the contents of the Notice to
Release, WizCom shall deliver to Escrow Agent, within five (5)
business days after receipt of the
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Notice of Release as provided in Paragraph 7.4 an affidavit sworn
by the Chief Executive Officer of WizCom (hereinafter called
"Affidavit Challenging Release") stating the date of receipt by
WizCom of its copy of the Notice to Release from Escrow Agent,
that none of the events set forth in Paragraph 7.2 have occurred,
and WizCom's specific reasons of asserting that no such event has
occurred. Upon receipt by Escrow Agent of the Affidavit
Challenging Release within the period referred to above, the
provisions of Paragraph 8 shall apply and Escrow Agent shall
deliver the Affidavit Challenging Release to Avis immediately by
fax transmission.
7.6 If Escrow Agent does not receive from WizCom the Affidavit Challenging
Release within the period referred to in Paragraph 7.5, Escrow Agent shall and
is authorized hereby to deliver to Avis and WizCom a written notice evidencing
delivery of the Escrow Materials, specifying the original location of the Escrow
Materials and the expected date and method of delivery of the Escrow Materials
to Avis. Escrow Agent shall obtain from Avis a receipt for the Escrow Materials
upon their delivery to Avis, and shall promptly give WizCom a copy of that
receipt. Avis's use of the Escrow Materials shall be subject to the restrictions
in Paragraph 7.2 of this Agreement.
7.7 Avis may withdraw a Notice of Release which it has given Escrow Agent
at any time by written notice to such effect.
8. Disputes. In the event that Escrow Agent has received the Affidavit
Challenging Release referred to in Paragraph 7.5, Escrow Agent shall not release
the Escrow Materials. If the Parties are unable to resolve the dispute in a
satisfactory manner within ten (10) days, either WizCom or Avis may seek binding
arbitration of the dispute by notifying Escrow Agent whereupon the dispute
regarding the release of the Escrow Materials shall be submitted to binding
arbitration. The arbitration proceeding shall be conducted according to the then
current rules of the American Arbitration Association, by a single arbitrator
selected by Escrow Agent. The sole issue of arbitration shall be whether an
event under Paragraph 7.2 of this Agreement has occurred. If the arbitrator so
determines that an event under Paragraph 7.2 has occurred, the arbitrator shall
notify the parties and Escrow Agent shall immediately deliver the Escrow
Materials to Avis. The decision of the arbitrator shall be final and binding on
WizCom and Avis and may be entered and enforced in any state court of New York
by either party. Each party shall bear its own expenses of arbitration and all
proceedings related thereto shall be conducted in the City of Mineola, State of
New York.
9. Payment to Escrow Agent.
9.1 Avis shall pay the reasonable fees charged by Escrow Agent for
performance of services under this Agreement as specified on
Exhibit A.
9.2 In the event that Avis is in breach of the payment of fees and
such breach continues for at least thirty (30) days after Avis has
received from Escrow Agent a written notice of arrears addressed
as provided in Paragraph 13.5.2 (c) specifying the amount due and
stating that this Agreement will terminate unless payment is made
within thirty (30) days, then Escrow Agent promptly shall notify
WizCom of
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the breach of Avis and, upon receipt by Escrow Agent from WizCom
of payment of all fees due to Escrow Agent, this Agreement shall
be considered null and void.
10. Limitation on Obligation of Escrow Agent.
10.1 Escrow Agent shall not be required to inquire into the truth of
any statements or representations contained in any notices,
certificates or other documents provided under this Agreement, and
it shall be entitled to assume that the signatures on documents
are genuine and that the persons signing such documents are
authorized to execute the documents. Escrow Agent may require
WizCom and Avis to provide additional documents to it that it
deems necessary or desirable to assist it in performing
obligations under this Agreement.
10.2 WizCom and Avis, severally and jointly, hereby do release Escrow Agent
from any and all liability for losses, damages and expenses (including attorney
fees) that may be incurred on account of any action taken or not taken by Escrow
Agent in good faith pursuant to this Agreement, and such parties do hereby
severally and jointly indemnify Escrow Agent and undertake to hold harmless
Escrow Agent from and against any and all claims, demands, or actions arising
out of or resulting from such performance by Escrow Agent under this Agreement.
11. Confidentiality and Use of Escrow Materials.
11.1 The Escrow Materials released to Avis under this Agreement shall
be used by Avis solely for the purposes set forth in the Computer
Services Agreement. Avis shall treat and preserve the Escrow
Materials as a trade secret of the Owners in accordance with the
same practices employed by Avis to safeguard its own trade secrets
and confidential information against unauthorized use and
disclosure.
11.2 The obligations of this Paragraph 11 shall survive the termination
of this Agreement for any reason and shall continue for as long as
the Escrow Materials continue to embody trade secrets of the
Owners.
12. Term of Agreement.
12.1 The term of this Agreement shall commence on the date set forth
above and shall continue until the Escrow Materials shall be
transferred to Avis pursuant to the terms of this Agreement, or,
if such transfer shall not have so occurred, the Agreement shall
terminate at the end of the Computer Services Agreement.
12.2 If the Lease is terminated, the parties agree to execute a new
software escrow agreement on substantially the same terms as this
Agreement with a new Depository as escrow agent.
<PAGE>
13. General.
13.1 Amendment. This Agreement can only be amended by a written
amendment signed in advance by authorized representatives of
WizCom, Avis and Escrow Agent.
13.2 Assignment. No party to this agreement may assign its rights or
delegate its obligations under this Agreement without the prior written
consent of all other parties. Any attempt or purported assignment or
delegation in violation hereof shall be null and void. Notwithstanding the
above, any party may assign company with which it merges or consolidates,
or to which it sells all or substantially all of its business assets,
provided that such assignee agrees in writing to be bound by this
Agreement. Furthermore, Avis may assign this Agreement under the
circumstances contemplated in the Computer Services Agreement.
13.3 Entire Agreement. This Agreement, together with the applicable
terms of the Computer Services Agreement, contains the entire
agreement among the parties with respect to its subject matter and
all prior and contemporaneous statements, promises, warranties,
and representations not contained in this Escrow Agreement are
hereby excluded and cancelled.
13.4 Exhibits. The terms and conditions of the Exhibit attached to this
Agreement are incorporated by this reference and made a part of
this Agreement.
13.5 Notices.
13.5.1 All notices required or permitted under this Agreement shall bein in
writing and shall be sent and deemed given: (i) if delivered by hand with
receipt obtained, on the date of delivery, of (ii) if sent by certified or
registered mail, postage pre-paid return receipt requested, on the date of
receipt, or (iii) if sent by facsimile transmission, on the date of receipt,
provided that the sender obtains oral confirmation from the recipient that the
transmission is complete and has been received in legible form.
13.5.2 Notices shall be sent to the following addresses:
a. To WizCom:
HFS Incorporated
6 Sylvan Way Parsippany, NJ 07054
Attn: Jeanne M. Murphy,Esq. Sr. Vice President
Fax: (516) 222-4381
b. To Escrow Agent:
The Dime Savings Bank of New York FSB
400 Old Country Road
<PAGE>
Carle Place, NY 11514
Attn: Bank Manager
Fax: (516) 334-1807
c. To Avis:
Avis Rent A Car System, Inc.
900 Old Country Road
Garden City, NY 11530
Attn: Sr. Vice President & General Counsel
Fax: 516-222-3751
13.6 Governing Law. The law governing the interpretation and enforcement of
this Agreement shall be the laws of the State of New York.
13.7 Severability. If any term or condition of this Agreement shall be
held to be invalid or unenforceable, then that term or condition
shall be severed from the other terms and conditions and shall not
affect their validity.
13.8 Waiver. No term or condition of this Agreement shall be waived and
no breach excused unless the waiver or consent is in writing
signed by the party to be charged therewith.
INTENTIONALLY LEFT BLANK BY BOTH PARTIES
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed by their respective duly authorized representatives as
of the date first above written.
THE DIME SAVINGS BANK AVIS RENT A CAR SYSTEM, INC.
OF NEW YORK, FSB
By: By:
Name: Name:
Title: Title:
Date: Date:
WIZCOM INTERNATIONAL, LTD.
By:
Name:
Title:
Date:
<PAGE>
EXHIBIT A
TO
SOFTWARE ESCROW AGREEMENT
$135 per year, which fee is subject to change per the Escrow Agent's safe
deposit fee schedule
<PAGE>
SCHEDULE K
EXCLUSIVE SYSTEMS
Fleet System:
Fleet Distribution Model
Field Fleet Reporting System
Vehicle On-Line Transaction System
Purchase Order Database
Vehicle Order Database
Insurance System
Vehicle Damage Claims
Sales and Marketing System:
Sales and Marketing System
Marketing Promotions
Frequent Renter Program
Customer Tracking System
Account Management Reports System
Pricing Model
IRDB
Corporate Accounts Rebate Program Telesales System Rental Demographic
System Coupon Reporting Worldwide Prestige Issuance Chairman's Tracking
System CEO Tracking System Automated Fulfillment System Brochure Request
System Wizard Credit Link CAW Corporate Awards System PSI (for Preferred
Supplier Agreements) Sales Incentive System
EMP Sales Employee Database
STC Sales STC Database
Financial Management System:
Travel Agency System (not including that portion which maintains travel
agency details)
Club Red
User Rental File
Bonus System
<PAGE>
Yield Management System:
Yield Management
Data Extraction and Conditioning
Product Forecasting
Revenue Optimization
Graphical User Interface
Supply and Demand
Availability by Length of Rental (AVLLOR)
Turndowns and Denials
Reservation and Rental History
Rateshop System
Business Mix
Miscellaneous System:
Insurance Claim System
Coupon Tracking System
Worldwide Reporting System
Personal Liability and Property Damage Insurance Reserve
<PAGE>
RESERVATION SERVICES AGREEMENT
THIS RESERVATION SERVICES AGREEMENT ("Agreement"), dated as of July
___, 1997 (the "Effective Date"), is between HFS INCORPORATED, a Delaware
corporation ("HFS"), and AVIS RENT A CAR SYSTEM, INC. ("ARAC"). The definitions
of all other capitalized terms are found in Appendix A.
In consideration of the following mutual promises, HFS and ARAC agree
as follows:
Section 1. Reservation System. (a) HFS's Obligations. HFS will operate
and maintain (directly or by subcontracting with affiliates or one or more third
parties) a computerized Reservation System consistent with the system and
services provided by HFS to ARAC as of the Effective Date, subject to HFS's
right to institute such technological substitute(s) as HFS determines, in its
discretion from time to time. HFS will be responsible for the acquisition,
development, support, equipping, maintenance, improvement and operation of the
Reservation System. HFS shall use reasonable efforts to operate the Reservation
System and provide the Service efficiently. ARAC will participate in the
Reservation System during the Term. HFS shall have the right to provide
reservation services to other car rental operations or to other parties. HFS
will not offer callers to the toll free reservation telephone number(s)
established for ARAC the opportunity to make reservations for other car rental
operations.
(b) ARAC's Obligations. (i) ARAC will obtain and maintain at the
Locations the computer equipment and communications equipment and service
required to participate in the Reservation System. HFS shall not be obligated to
provide support to any Location where the computer equipment or the
communications equipment and service do not comply with HFS specifications. ARAC
will comply with HFS's rules and standards for participation, and will honor
reservations and commitments to renters and travel industry participants, all as
set forth from time to time in the Procedures Manual. ARAC further undertakes
and agrees that it will use its best efforts to, and to cause any U.S. Licensee
to, assure that all information entered into the Reservation System, including
but not limited to rate and fleet availability information, is current and
complete during the Term, consistent with procedures and policies in effect as
of the Effective Date or as may be specified in the Procedures Manual from time
to time during the Term.
(ii) Notwithstanding anything to the contrary contained in
this Agreement, so long as WizCom International, Ltd. ("WizCom") provides the
End User Equipment Services (as defined in the Computer Services Agreement
between WizCom and ARAC dated as of the date hereof), ARAC shall be deemed to be
in compliance with all requirements of this Agreement relating to Hardware.
Section 2. Recurring Fees, Taxes and Interest. (a) Recurring Fees. ARAC
will pay HFS certain "Recurring Fees" in U.S. dollars as set forth in Appendix B
attached hereto and made a part hereof. ARAC will also pay directly, or
reimburse HFS to the extent not paid directly by ARAC, travel agent and general
sales agent commissions payable for certain reservations and any fees levied by
third parties for reservations, including but not limited to reservations
originated or processed through the GDS Systems or Internet booking services.
<PAGE>
HFS may charge a reasonable service fee for processing such charges, which
charge shall reflect the actual cost of providing such service.
(b) Taxes. ARAC will pay to HFS taxes equal to any federal, state or
local sales, gross receipts, use, value added, excise or similar taxes assessed
against HFS on the Recurring Fees by jurisdictions assessing such taxes, but not
including any income tax, franchise or other tax for the privilege of doing
business by HFS in any such jurisdiction. ARAC will pay taxes to HFS when due.
(c) Interest. Interest is payable when ARAC receives its invoice on any
past due amount payable to HFS under this Agreement at the per annum rate of the
Prime Rate plus 3% or the maximum rate permitted by applicable law, whichever is
less, accruing from the due date until the amount is paid.
Section 3. Term. The Term of this Agreement shall commence on the Effective
Date and shall terminate upon the termination of the License Agreement, unless
earlier terminated in accordance with the terms hereof.
Section 4. Delivery & Installation of Software. The following
provisions shall apply to the installation and delivery of Software on new or
replacement Hardware obtained by ARAC from time to time during the Term for new
or existing Locations:
(a) Hardware. Hardware obtained from an Approved Vendor will be
presumed to meet HFS's configuration requirements as set forth in specified by
HFS from time to time. ARAC may obtain from any other source ARAC's computer
hardware and related operating system software. If ARAC obtains hardware from
any source other than an Approved Vendor, HFS must certify that ARAC's hardware
meets its configuration requirements and HFS shall have the right to charge a
reasonable certification fee for such services, which charge shall reflect the
actual cost of providing such service. HFS may modify its configuration
requirements from time to time and Appendix C shall be deemed to be revised upon
written notice by HFS to ARAC of any such change.
(b) Delivery. If ARAC buys the Hardware from an Approved Vendor, HFS
will authorize the Approved Vendor to install the Software. If ARAC obtains
ARAC's hardware from another source, the Software will either be delivered to
the applicable Location or such other address as ARAC specifies in writing, or
to ARAC's hardware vendor to be installed on the hardware by ARAC's vendor. HFS
will not ship ARAC the Software unless and until ARAC's hardware meets the
configuration requirements as provided in Section 4(c).
(c) Certification and Installation Service. If ARAC does not obtain
ARAC's hardware from an Approved Vendor, ARAC must either (1) ship ARAC's
hardware to HFS for testing and installation of the Software after HFS has
certified that the hardware meets the configuration requirements, or (2) contact
HFS for evaluation of ARAC's hardware purchase by telephone and certification
that ARAC's hardware meets HFS's configuration requirements.
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<PAGE>
HFS's certification of compliance with configuration requirements shall not be
unreasonably withheld. If the hardware sent to HFS does not meet the
configuration requirements, HFS will ship the hardware back to ARAC without
installing the Software. ARAC shall pay the cost of freight for the shipping of
the hardware to HFS and to ARAC F.O.B. its Garden City, New York facility. ARAC
should also obtain insurance for the shipments as ARAC will bear the risk of
loss while the hardware is in transit.
(d) Limited Installation Warranty. If the Hardware is certified and HFS
installs the Software, HFS warrants to ARAC for a period of one year after
installation that the Software is properly installed in ARAC's Hardware. If any
Software failure is the result of improper installation of the Software, HFS
will reinstall the Software properly at its expense and pay the cost of shipping
(freight and insurance) the hardware to and from its Garden City, New York
facility. This is ARAC's exclusive remedy in the event this installation
warranty is breached. This warranty is in lieu of all other express and implied
warranties for this service. This warranty will be rendered null and void if the
Hardware is subjected to abuse, misuse, improper installation at the Location or
maintenance by unqualified service personnel, or if the Software is altered
without HFS's consent or direction, used for a purpose not authorized under this
Agreement or subjected to a violation of Section 7.
Section 5. License of Software and Training Materials. HFS grants to
ARAC a non-exclusive License to use the Software and any Training Materials,
subject to the conditions and limitations in this Agreement, so that ARAC can
participate in the Reservation System, effective during the term described in
Section 2. HFS will provide and ARAC will use, the standard versions of the
Software and the Training Materials HFS is then releasing at the time of
installation, as such may be modified, updated or replaced from the versions in
use at the time this Agreement is executed. The Software and Training Materials
may be used only in conjunction with the Hardware at ARAC's Locations and for
the sole purpose of obtaining the Service. If the Hardware malfunctions, the
Software and Training Materials may be used on other substantially identical
hardware approved by HFS on a temporary basis while the malfunction continues.
Section 6. Title to Software and Training Materials. Title to and
ownership of the Software and Training Materials shall remain with HFS or those
entities that have authorized HFS to sublicense and use them, free from any
claim or right of ARAC's or the holder of any security interest, lien or
encumbrance on any Location or any of ARAC's other property. ARAC will take such
steps as may be necessary to prevent any person from acquiring any rights in the
Software or Training Materials superior to HFS's rights. If any person attempts
to establish any legal right in the Software or Training Materials, ARAC shall
promptly notify HFS in writing.
Section 7. Software and Training Materials Proprietary; Confidential
Information. (a) Proprietary Information. The Software and Training Materials
are proprietary to HFS and/or its licensor, if any. Neither ARAC nor any other
person will transfer, sublicense, modify, decompile, copy or, except to ARAC's
employees as needed for the purposes of this
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<PAGE>
License, disclose the Software or Training Materials to any other person or
entity, without HFS's prior written consent. The Software and Training Materials
are Confidential Information and are subject to the provisions set forth in
subparagraph (b) of this Section 7.
(b) Confidential Information. ARAC will take all appropriate actions to
preserve the confidentiality of all Confidential Information. Access to
Confidential Information should be limited to persons who need the Confidential
Information to perform their jobs and are subject to ARAC's general policy on
maintaining confidentiality as a condition of employment or who have first
signed a confidentiality agreement. ARAC will not permit copying of Confidential
Information (including, as to any computer software including the Software, any
translation, decompiling, decoding, modification or other alteration of the
source code of such software). ARAC will use Confidential Information only for
its car rental operations and to perform under this Agreement. Upon termination
(or earlier, as HFS may request), ARAC shall return to HFS all originals and
copies of the Software, Training Materials, Procedures Manuals, policy
statements and other Confidential Information "fixed in any tangible medium of
expression," within the meaning of the U.S. Copyright Act, as amended. ARAC's
obligations under this subsection commence when ARAC signs this Agreement and
continue for trade secrets as long as they remain secret and for other
Confidential Information for as long as HFS continues to use the information in
confidence, even if edited or revised, plus three (3) years. HFS will respond
promptly and in good faith to ARAC's inquiry about continued protection of any
Confidential Information.
Section 8. Software Enhancements and Modifications; Hardware Changes.
HFS may modify, enhance and rewrite the Software from time to time. So long as
ARAC is not in default under this Agreement or the License Agreement, HFS will
provide the modified Software to ARAC when, as and if any such modification is
implemented. HFS may offer certain modifications, features, and enhancements for
additional license fees, installation and training charges, maintenance fees and
other terms as HFS may establish. ARAC will comply with HFS's installation, use
and maintenance instructions regarding non-optional enhancements and
modifications. HFS may change the configuration requirements from time to time,
and ARAC must obtain any additional or replacement Hardware required to run
enhanced or modified versions of the Software.
Section 9. Instructions and Manuals. HFS will furnish ARAC with
instructions and manuals, generally included in the Procedures Manual, outlining
procedures ARAC is to follow to install and use the Software. Use and
maintenance of the Software in other than the prescribed manner is a breach of
this Agreement. HFS may audit ARAC's records and may at reasonable times enter
the Locations to verify conformance with prescribed procedures. HFS reserves the
right to modify the Procedures Manual from time to time during the Term in its
discretion, for reasons including but not limited to reflecting changes in the
Reservation System or the Service, instituting improvements in efficiency of
operation of the Reservation System or the Service or establishing uniform
procedures to be followed by users of the Service. The Procedures Manual shall
contain stated policies regarding rate information updating, and shall
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<PAGE>
specify default practices for continuing rates in effect if no new rates are
specified after expiration thereof.
Section 10. Maintenance. (a) Hardware. ARAC will obtain all
maintenance, repairs or adjustments of Hardware from the manufacturer of the
Hardware or its authorized service providers. ARAC will perform all
user-required maintenance procedures specified by the manufacturer of the
Hardware as and when recommended or required, and will obtain required
maintenance from authorized service providers at recommended or required
intervals. Except where HFS has supplied Hardware to ARAC, in which case the
obligations of HFS shall be governed solely by the terms of the agreement
between HFS and ARAC pursuant to which such Hardware was supplied, HFS has no
obligation to maintain the Software unless and until ARAC complies with this
paragraph.
(b) Software. So long as ARAC is not in default under this Agreement or
the License Agreement, HFS will cause the Software to function in accordance
with HFS's documentation to enable direct communication with the Reservation
System according to the standards, procedures and protocols HFS prescribes from
time to time.
(c) Hardware Failure. HFS will provide a toll-free telephone number for
reporting Software problems. In the event that ARAC is unable to interface with
the Reservation System because of hardware malfunction, and ARAC is not in
default of this Agreement or the License Agreement, HFS will make good faith
efforts to place reservations for ARAC through the use of other means and/or
facilities.
Section 11. Indemnification. ARAC will indemnify and hold harmless HFS,
its affiliates, successors and assigns and each of the respective directors,
officers and employees associated with them against all claims of employees,
agents, renters, and all other persons and entities, arising out of the
operation, use or non-use of the Software. HFS shall not be liable to ARAC or
any other person or entity for personal injury or property loss, including but
not limited to, damage to the Locations, as a result of the operation, use or
non-use of the Software.
Section 12.Software Warranties. HFS makes the following warranties for the
Software:
(a) HFS warrants that the Software will perform the functions and
operations HFS specifies on the Hardware (but no other hardware), provided ARAC
follows HFS's written instructions, installs updates and modifications and makes
corrections as directed, and is not in default under this Agreement or the
License Agreement. HFS's sole obligation under this warranty shall be to remedy
any nonperformance of the Software within a reasonable time after ARAC reports
it to HFS. HFS DOES NOT WARRANT IN ANY WAY THE PERFORMANCE OR FUNCTIONING OF THE
SOFTWARE UNLESS IT IS UTILIZED AS PART OF HARDWARE CERTIFIED BY HFS OR AN
APPROVED VENDOR. ALL WARRANTIES UNDER THIS SUBSECTION ARE CONTINGENT UPON PROPER
USE OF THE SOFTWARE AND TRAINING MATERIALS AND SHALL NOT APPLY IF ARAC OR
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<PAGE>
ARAC'S HARDWARE VENDOR WHO IS NOT AN APPROVED VENDOR FAILS TO COMPLY WITH THE
PROVIDED INSTALLATION AND OPERATING INSTRUCTIONS, MAKES OR PERMITS THE
UNAUTHORIZED ALTERATION OR REPAIR OF THE HARDWARE OR SOFTWARE, OR FAILS TO
IMPLEMENT ALL UPDATES OR CORRECTIONS TO THE SOFTWARE HFS MAKES AVAILABLE TO
ARAC.
(b) HFS has the right to license the Software to ARAC under this
Agreement and, to the best of its knowledge, the Software does not infringe any
Intellectual Property Rights of any third party.
Section 13. No Liability for Information. HFS WILL NOT BE LIABLE FOR ANY
CLAIMS OR DAMAGES RESULTING FROM ANY INCORRECT INFORMATION GIVEN TO HFS OR INPUT
INTO THE RESERVATION SYSTEM BY ANY PERSON OTHER THAN HFS. IN ADDITION, IF HFS
PERMITS ARAC TO UTILIZE THE HARDWARE AND/OR RESERVATION SYSTEM TO COMMUNICATE
WITH ANY PERSON BESIDES HFS, AN AFFILIATE OF HFS, OR OTHER LICENSEES OF THE AVIS
SYSTEM, HFS SHALL NOT BE LIABLE FOR THE INPUT, FORMAT, TRANSMISSION OR
MANIPULATION OF ANY INFORMATION SO COMMUNICATED, UNLESS IT IS AFFECTED DUE TO
HFS'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
Section 14. No Other Warranties. HFS MAKES NO OTHER WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY ABOUT THE DESIGN
OR CONDITION OF THE SOFTWARE, ITS MERCHANTABILITY, ITS FITNESS FOR ANY
PARTICULAR PURPOSE, OR ITS CONFORMANCE TO THE PROVISIONS AND SPECIFICATIONS OF
ANY ORDER OR DOCUMENTATION RELATING THERETO.
Section 15. Damage Limitation. NOTWITHSTANDING ANYTHING TO THE CONTRARY
IN THIS AGREEMENT, IN NO EVENT SHALL HFS OR ANY RELATED PARTY BE LIABLE FOR
SPECIAL, INDIRECT, CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING, BUT NOT
LIMITED TO, LOST PROFITS OR REVENUES; AND FURTHERMORE, HFS'S LIABILITY FOR
DAMAGES HEREUNDER SHALL IN NO EVENT EXCEED THE AMOUNTS PREVIOUSLY PAID BY ARAC
TO HFS FOR THE LICENSE UNDER THIS AGREEMENT.
Section 16. ARAC's Default. If any one of these events occurs, then HFS
shall have the right to exercise any one or more of the remedies set forth below
and/or suspend the Service and related software maintenance service as described
in Section 17 below: (a) ARAC fails to make any payment when due under this
Agreement or the License Agreement; (b) ARAC breaches any other covenant,
warranty or agreement under this Agreement or the License Agreement and the time
to cure the breach expires; (c) the Software becomes inoperable by ARAC's act or
omission; or (d) ARAC assigns or transfers, or attempts to assign or transfer
the Software without HFS's consent, except as permitted under the License
Agreement.
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<PAGE>
Section 17. Termination and Remedies. (a) Rights to Terminate. HFS
shall be entitled to terminate this Agreement, including the License and the
Service, immediately: (a) if ARAC violates or attempts to violate Section 7 of
this Agreement; (b) if ARAC defaults in a payment required pursuant to this
Agreement and such payment default continues uncured for a period of thirty (30)
days after the due date for such payment or ARAC fails to make any payment under
any other agreement between ARAC and HFS or an affiliate of HFS, and such
failure continues after the expiration of the applicable cure period under such
agreement; (c) if ARAC defaults under any other obligation under this Agreement,
and the default continues uncured for a period of ninety (90) days after HFS
gives ARAC written notice of default; (d) if the Software is rendered obsolete
in HFS's sole judgment based upon technological advances or improvements,
changes in the Service or any other reason and no reasonable substitute for
providing the Service is undertaken by HFS, or if HFS, in its sole discretion,
decides to exit the business of providing the Service, provided that in either
such case HFS must give ARAC not less than five (5) years prior written notice
of such termination; or (e) if the license granted under the License Agreement
terminates for any reason and is not immediately replaced by an express written
agreement between ARAC and HFS Car Rental, Inc. for a license to continue
operation of ARAC's car rental operations as part of the Avis System. ARAC shall
have the right to terminate this Agreement immediately (A) if HFS defaults under
any obligation under this Agreement, and the default continues uncured for a
period of ninety (90) days after ARAC gives HFS written notice of such default
or (B) HFS is subject to any voluntary or involuntary bankruptcy, liquidation,
dissolution, receivership, assignment, reorganization, moratorium, composition
or a similar action or proceeding that is not dismissed within 60 days after its
filing.
(b) Obligations Upon Termination. If this Agreement terminates, ARAC
will immediately return the originals and all copies of the Software and
Training Materials unencumbered to HFS. ARAC will certify to HFS in writing that
the original and all copies have been returned or destroyed. ARAC EXPRESSLY
WAIVES ANY RIGHT TO NOTICE OF OR A HEARING WITH RESPECT TO REPOSSESSION AND
CONSENT TO ENTRY INTO ANY LOCATION BY HFS'S AGENTS OR REPRESENTATIVES OR ANY
PREMISES WHERE THE SOFTWARE AND TRAINING MATERIALS MAY BE LOCATED AND REMOVING
THEM WITHOUT JUDICIAL PROCESS. If ARAC fails or refuses to permit the peaceable
entry by HFS's agents to take possession of any Software and Training Materials
HFS owns, ARAC will be liable for rental of the Software and Training Materials
at the rate of $1,000.00 per week per Location from the date that HFS first
attempts to retake it. Notwithstanding anything contained herein to the
contrary, ARAC will honor any advance reservations made for ARAC prior to
termination at the rates and on the terms established when the reservations are
made and pay when due all related travel agent commissions and other third party
charges associated with such reservations.
(c) Other Remedies. HFS may suspend ARAC from the Reservation System
for any default or failure to pay or perform under this Agreement and
discontinue Reservation System referrals to ARAC for the duration of such
suspension. Reservation service will be restored after ARAC has fully cured any
and all defaults and failures to pay and perform. ARAC recognizes that any use
of the Reservation System not in accord with this Agreement will
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<PAGE>
cause HFS irreparable harm for which there is no adequate remedy at law,
entitling HFS to injunctive and other relief. HFS may litigate to collect
amounts due under this Agreement without first issuing a default or termination
notice.
(d) Liquidated Damages. If HFS terminates the License under Section
17(b), or ARAC terminates this Agreement (except pursuant to the last sentence
of subparagraph (a) above), ARAC will pay HFS within thirty (30) days following
the date of termination, as Liquidated Damages, an amount equal to the sum of
accrued Recurring Fees during the immediately preceding twenty-four (24) full
calendar months (or the number of months remaining in the unexpired Term at the
date of termination, whichever is less). If the elapsed portion of the Term as
of the date of termination is less than twenty-four (24) months, then the amount
shall be the average monthly Recurring Fees since the Effective Date multiplied
by 24. ARAC will also pay any applicable Taxes assessed on such payment.
Liquidated Damages are paid in place of HFS's claims for lost future Recurring
Fees under this Agreement. HFS's right to receive other amounts due under this
Agreement is not affected by this provision.
Section 18. Costs and Expenses. The non-prevailing party will pay the
costs and expenses incurred, including reasonable attorneys' fees and the
expenses of retaking the Software and Training Materials, incurred by the
prevailing party to enforce this Agreement.
Section 19. Other Relief. HFS may obtain the remedy of injunctive
relief without the posting of a bond if ARAC violates ARAC's obligations
regarding confidentiality, non-disclosure, transfer or limitations on Software
use under this Agreement.
Section 20. Force Majeure. If performance by ARAC or HFS is delayed or
prevented because of strikes, inability to procure labor or materials, defaults
of suppliers or subcontractors, delays or shortages of transportation, failure
of power or telephone transmissions, restrictive governmental laws or
regulations, weather conditions, or other reasons beyond the reasonable control
of the party, then performance of such acts will be excused and the period for
performance will be extended for a period equivalent to the period of such
delay. Delays or failures to pay resulting from lack of funds will not be deemed
delays beyond ARAC's reasonable control.
Section 21. Notices. Notices will be effective if reduced to writing
and delivered, by next day delivery service, with proof of delivery, by
facsimile transmission immediately followed by first class mailing of the
original material, or mailed by certified or registered mail, return receipt
requested, to the appropriate party at its address specified below or to such
party at such address as may be designated by notice in accordance with this
Section. Notices will be deemed given on the date delivered or date of attempted
delivery, if service is refused.
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<PAGE>
If to HFS: If to ARAC:
HFS Incorporated Avis Rent A Car System, Inc.
6 Sylvan Way 900 Old Country Road
Parsippany, New Jersey 07054 Garden City, New York 11530
Attn.: Douglas Patterson Attn.: General Counsel
Fax: (201) 359-7702 Fax: 516-222-4700
HFS Incorporated
6 Sylvan Way
Parsippany, New Jersey 07054
Attn.: Senior Vice President
and Corporate Counsel
Fax: (201) 359-5331
Section 22. Oral Modifications. This Agreement may not be amended, modified
or rescinded except in writing, signed by both parties and any attempt to do so
shall be void and of no effect.
Section 23. Governing Law; Venue. This Agreement is to be governed by
and construed in accordance with the laws of the State of New York. Each party
consents to the non-exclusive personal jurisdiction of the New York state courts
situated in Nassau County, New York and the United States District Court for the
Eastern District of New York. Each party waives objection to venue in any such
courts.
Section 24. Waiver. If either ARAC or HFS fail to exercise any right or
option at any time under this Agreement, such failure will not be deemed a
waiver of the exercise of such right or option at any other time or the waiver
of a different right or option. Termination of this Agreement by either HFS or
ARAC will not waive ARAC's obligation to make any payments to HFS under this
Agreement.
Section 25. Severability. If any provision of this Agreement is determined
to be void or unenforceable, the provision shall be deemed severed from the
Agreement and the remainder of this Agreement shall continue in full force and
effect.
Section 26. Entire Agreement. This Agreement supersedes all prior oral and
written agreements and understandings and constitutes the entire Agreement
between the parties with respect to the subject matter hereof.
Section 27. No Third Party Beneficiary. This Agreement is intended for
the sole benefit and protection of the named parties, and no other persons or
entities shall have any cause of action or right to payments made or received
under this Agreement except for any owners of the Software who have licensed or
authorized HFS to sublicense the same to ARAC. Notwithstanding the foregoing,
the parties acknowledge that certain rights and obligations inure
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to ARAC pursuant to the License Agreement with respect to its obligations to
provide services to the U.S. Licensees as set forth in the License Agreement.
All such rights and obligations of ARAC requiring the use of the Software and
Training Materials or any other rights granted ARAC under this Agreement are
hereby acknowledged by HFS, provided however, that such acknowledgement and
permission does not create any new rights in the U.S. Licensees other than those
existing under any agreements between HFS, HFS Car Rental, Inc. or any affiliate
of Avis, Inc. and the U.S. Licensees relating to the Reservation System.
Section 28. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties, their successors and permitted
assigns. Notwithstanding the above, ARAC may not assign this Agreement without
HFS's express written consent, except as permitted under the License Agreement.
HFS may assign this Agreement at any time in connection with an assignment of
the Reservation System, provided that the assignee executes a written assumption
of the obligations of HFS hereunder.
Section 29. Waiver of Jury Trial. The parties waive the right to a jury
trial relating to this Agreement or the relationship between HFS, ARAC and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date set forth in the preamble to this Agreement,
HFS INCORPORATED
ATTEST: /s/ Jeanne M. Murphy BY: /s/ James E. Buckman
--------------------------- ---------------------------
(Assistant) Secretary (Vice) President
AVIS RENT A CAR SYSTEM, INC.
ATTEST: /s/ Karen C. Sclafani BY: /s/ Kevin M. Sheehan
--------------------------- ---------------------------
(Assistant) Secretary (Vice) President
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APPENDIX A
Definitions
"Agreement" means this Reservation Services Agreement between HFS and ARAC.
"Approved Vendor" means a vendor of computer hardware that HFS identifies as an
Approved Vendor before ARAC's purchase of hardware.
"ARAC" means Avis Rent A Car System, Inc. and its successors and assigns,
as permitted in the License Agreement.
"Avis System" means the "System" as defined in the License Agreement.
"Confidential Information" means any trade secrets HFS owns or protects and
other proprietary information not generally known to the car rental industry
including the Software and documentation related thereto and confidential
portions of the Training Materials and the Procedures Manual or information HFS
otherwise imparts to ARAC and ARAC's representatives in confidence.
"GDS Systems" means the global distribution systems operated by the airlines and
may include other third party reservation systems and networks charging fees for
processing reservations.
"Hardware" means the computer hardware, including the operating system software,
ARAC obtains and dedicates to operation of the Software installed at ARAC's
Locations that conforms to HFS's configuration requirements.
"Intellectual Property Rights" means any patents, copyrights, trade secrets or
similar property rights owned by any person or entity in the Software.
"License" means the non-transferable, non-exclusive right to use the Software
and Training Materials granted to ARAC under this Agreement.
"License Agreement" means the Master License Agreement between ARAC and HFS
Car Rental, Inc. granting to ARAC the non-exclusive right to operate its car
rental operations under the Avis System.
"Liquidated Damages" means the amounts payable under Section 17(d), set by the
parties because actual damages will be difficult or impossible to ascertain on
the Effective Date and the amount is a reasonable estimate of the damages that
will be incurred and is not a penalty.
"Location" means any one of the sites at which ARAC operates a car rental
operation.
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"Prime Rate" means the rate of interest per annum publicly announced from time
to time by The Chase Manhattan Bank as its prime rate in effect at its principal
office in New York City; each change in the Prime Rate shall be effective from
and including the date such change is publicly announced as being effective.
"Procedures Manual" means the Procedures Manual and any other manual HFS
publishes or distributes specifying the procedures and standards for operation
of and participation in the Reservation System from time to time during the
Term, including, but not limited to the Technology Standards.
"Recurring Fees" means fees paid to HFS as stated in Section 2 and Appendix B.
"Reservation System" means the computerized central reservation system that HFS
maintains (directly or by subcontracting with an affiliate or one or more third
parties), pursuant to which the Service is provided to ARAC; and shall include
the Wizard System (as such term is defined in the License Agreement) and any
substitute therefor or replacement thereof.
"Service" means the basic service provided by the Reservation System for placing
and receiving car rental reservations, as well as such other services as HFS may
develop and provide in the future, upon conditions including fees which HFS, in
its sole discretion, may place in effect under this Agreement.
"Software" means the computer programs in object code form for HFS's proprietary
applications delivered to the hardware vendor or to ARAC from time to time, and
any substituted, modified, updated and enhanced versions, releases and additions
to previously delivered software pursuant to this Agreement that function to
connect the Locations with the Reservation System and that may perform
additional functions.
"Technology Standards" means standards specified in the Procedures Manual for
local and long distance telephone communications services, telephone, telecopy
and other communications systems, point of sale terminals and computer hardware
and software for various applications constituting part of or interfacing with
the Reservation System.
"Term" means the period of time during which this Agreement shall be in effect,
as stated in Section 3.
"Training Materials" means the various training modules, written materials and
audio and video tapes, as enhanced from time to time, which are provided to
instruct ARAC and ARAC's personnel in the utilization of the Software.
"U.S. Licensees" means the other licensees of the Avis System operating in
the United States, to which ARAC is obligated to provide services on behalf of
Avis, Inc. under the License Agreement.
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<PAGE>
APPENDIX B
Recurring Fees
Section 1. Recurring Fees. Recurring Fees shall consist of "Voice Fees",
"GDS Fees", "Internet Fees" and "Other Fees" as described below:
(a) Base Year Fees.
(i) Voice Fees. A per call charge of $0.66 ("Base Year Voice Fee" and,
generally as hereinafter provided, "Voice Fees") shall be charged for each call
received in the call centers operated by HFS for the Avis System, for manually
entered transactions and for any other transactions which are not included in
"GDS Transactions", "Internet Transactions" or "Other Transactions" as defined
below ("Voice Transactions").
(ii) GDS Fees. A per booking charge of $0.25 ("Base Year GDS Fee") for
every booking made through direct electronic interface with the GDS Systems for
the Avis System ("GDS Transactions").
(iii) Internet Fees. A per booking charge of $1.76 ("Base Year Internet
Fee" and, generally as hereinafter provided, "Internet Fees") for every booking
made through an Internet connection for the Avis System ("Internet
Transactions").
(iv) Other Fees. Other Fees shall consist of fees charged for any
transactions not contemplated by the definitions above, and shall be determined
by agreement of the parties at the time any such type of transaction is
instituted during the Term.
Base Year Voice Fees, Base Year GDS Fees, Base Year Internet Fees and
Base Year Other Fees are herein collectively referred to as "Base Year Fees";
Internet Fees, GDS Fees, Voice Fees and Other Fees are herein collectively
referred to as "Recurring Fees"; and GDS Transactions, Voice Transactions,
Internet Transactions and Other Transactions are herein collectively referred to
as "Transactions".
(b) Annual Adjustments to Fees. For each calendar year of the Term the
Recurring Fees will be adjusted in accordance with the following procedure:
(i) Setting Base Year Costs. Within forty-five days after the end of
each calendar year in the Term, for each of the Voice Transactions, the GDS
Transactions, the Internet Transactions and the Other Transactions, a Prior Year
Cost per Transaction will be determined for each type of transaction based on
the cost for such transactions for such calendar year (the "Prior Year"). In
order to determine such Prior Year costs, the Voice Prior Year Cost shall
include the telecommunications, computer processing and space costs incurred and
any other costs incurred by HFS to provide the Voice Transactions for the Avis
System during the Prior Year. The GDS Prior Year Cost shall consist of the
computer processing and space costs
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<PAGE>
incurred and any other costs incurred by HFS to provide the GDS Transactions for
the Avis System during the Prior Year. The Internet Prior Year Cost shall
consist of the computer processing and space costs incurred and any other costs
incurred by HFS to provide the Internet Transactions for the Avis System during
the Prior Year. The Other Transactions Prior Year cost shall be established by
agreement of the parties.
(ii) Year-End Adjustment. Within forty-five (45) days after the end of
each calendar year of the Term, HFS shall provide ARAC with notice of the
amount, if any, by which the actual cost to HFS of providing each type of
Transaction to ARAC during such calendar year exceeded the aggregate amount paid
by ARAC for such type of Transaction for the preceding calendar year, supported
by documentation satisfactory to both parties of such cost. ARAC shall pay HFS,
within fifteen (15) days after the date of such notice the amount of such
deficiency.
(iii) Adjustment of Prior Year Fees. For each calendar year after 1997
(each a "Year of Determination"), the cost (the "Determination Year Cost") for
each type of Transaction shall be estimated for such year, using the estimated
cost in such year for the same cost items included in the applicable Prior Year
Cost. The applicable Transaction Fee to be charged in the calendar year next
succeeding the Year of Determination for each type of Transaction shall be equal
to the Recurring Fee charged for such type of Transaction in such prior year
increased by the positive percentage increase, if any, of the applicable
Determination Year Cost for such type of Transaction for the Year of
Determination over the applicable Prior Year Cost.
(c) Interim Adjustments. In the event that during any calendar year (i)
ARAC requests changes to the Service which will, in HFS's reasonable judgment
increase the cost of providing any type of Transaction by more than five percent
(5%) or (ii) HFS reasonably believes that the Transaction Fee established for
any type of Transaction for such calendar year will result in payments which are
more than five percent (5%) less than HFS's actual cost for providing such type
of Transactions to ARAC in such calendar year, HFS shall provide notice to ARAC
of such determination and the reasons therefor, and effective with the monthly
billing which succeeds such notice by at least fifteen (15) days, HFS shall bill
ARAC at a rate for such type of Transaction which is calculated to eliminate
such deficit.
Section 2. Billing. Within forty five (45) days after the end of each
calendar month of the Term (each a "Billing Period"), HFS shall provide ARAC
with an invoice detailing the quantity of each type of Transaction occurring
during such Billing Period and the Fees associated therewith. ARAC shall pay
such Fees within fifteen (15) days after the date of such invoice.
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<PAGE>
FIRST AMENDMENT TO
RESERVATION SERVICES AGREEMENT
THIS FIRST AMENDMENT TO RESERVATION SERVICES AGREEMENT (the "First
Amendment") dated as of August 22, 1997 amends that certain Reservation
Services Agreement dated as of July 30, 1997 (the "Original Agreement"),
between HFS INCORPORATED, a Delaware corporation ("HFS"), and AVIS RENT A CAR
SYSTEM, INC. ("ARAC"). The definitions of all capitalized terms used and not
defined herein shall have the same meaning as ascribed to such terms in the
Original Agreement.
WHEREAS, the parties desire to amend the Original Agreement as herein
provided.
NOW, THEREFORE, in consideration of the following mutual promises, HFS
and ARAC agree as follows:
Section 1. Schedule B to the Original Agreement is hereby amended by
adding a new Section 3, to read as follows:
"Section 3. Other Reservation Locations. If and to the
extent HFS provides ARAC reservation services in locations other than
the existing reservation centers located in Drumright and Tulsa,
Oklahoma and Virginia Beach, Virginia, the cost per transaction shall
be determined for each such location and type of transaction using the
following methodology: (i) if the location at which such reservation
services are being provided is dedicated solely to ARAC reservations
business, all costs associated with such location shall be reimbursed
to HFS by ARAC; (ii) if the location at which such reservation
services are being provided is used to service other customers or
affiliates of HFS as well as ARAC, costs incurred directly to provide
reservation services to ARAC (such as labor, computer processing and
telecommunications costs) shall be charged directly to ARAC and costs
which are incurred for operation of such facility as a whole (such as
space-related and administration costs) shall be allocated to the
customers and affiliates using such facility, including ARAC, on an
equitable basis, based on usage and transaction volume, as agreed by
ARAC and HFS."
Section 2. Except as expressly provided herein, the Original Agreement
is hereby ratified and affirmed in all respects.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date set forth in the preamble to this Agreement.
HFS INCORPORATED
ATTEST: /s/ Jeanne M. Murphy BY: /s/ Doug Patterson
---------------------------- ----------------------------
Secretary (Vice) President
AVIS RENT A CAR SYSTEM, INC.
ATTEST: BY: /s/ Kevin M. Sheehan
---------------------------- ----------------------------
(Assistant) Secretary (Vice) President
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TAX DISAFFILIATION AGREEMENT
Dated as of September [29], 1997
between
HFS Incorporated
and
Avis Rent A Car, Inc.
<PAGE>
TAX DISAFFILIATION AGREEMENT
This Tax Disaffiliation Agreement (the "Agreement") is made and
entered into as of September [29], 1997 by and among HFS Incorporated, a
Delaware corporation ("HFS") and Avis Rent A Car, Inc., a Delaware corporation
("Spinco").
WHEREAS, HFS is the common parent of an affiliated group ("Affiliated
Group") of corporations within the meaning of Section 1504(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
WHEREAS, on or prior to October 16, 1997, HFS Car Rental Inc.
(formerly, Avis, Inc.), a Delaware corporation ("Avis") was the common parent
of an Affiliated Group of corporations whose members included, among others,
Wizard Co., Inc., a Delaware corporation ("Wizard"), Reserve Claims Management
Co., a Delaware corporations ("Claims Management"), Wizcom International, Ltd.,
a Delaware corporation ("Wizcom") and its wholly-owned subsidiary Preferred
Holidays, Inc., a Delaware corporation ("Preferred Holidays"), Avis Rent A Car
System, Inc., a Delaware corporation ("ARACS") and certain of their respective
Subsidiaries (as defined herein);
WHEREAS, Spinco, the beneficial owner of ARACS, Claims Management,
Avis International, Ltd, a Delaware corporation ("International"), Avis
Enterprises, Inc., a Delaware corporation ("Enterprises"), Pathfinder Insurance
Company, a Colorado domiciled stock insurance company ("Pathfinder"), Global
Excess and Reinsurance Ltd., a Bermuda domiciled insurer ("Global Excess") and
PF Claims Mgt. Ltd., a New York corporation ("PF Claims"), intends to issue
approximately 75 percent of the vote and value of its common stock to the
public in an initial public offering ("IPO");
WHEREAS, immediately after the date of the initial public offering,
HFS intends to file consolidated federal income tax returns on behalf of itself
and each Member (as defined herein) of the Post-IPO HFS Group (as defined
herein), and Spinco intends to file consolidated federal income tax returns on
behalf of itself and each Member of the Post-IPO Spinco Group (as defined
herein); and
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<PAGE>
WHEREAS, HFS and Spinco desire on behalf of themselves, their
Subsidiaries (as defined herein) and their successors to set forth their rights
and obligations with respect to Taxes (as defined herein) relating to taxable
periods before and after the date of the IPO;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the Parties (as defined herein) hereto, intending to be
legally bound hereby, agree as follows.
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
1.1 "Acquisition Date" shall mean October 16, 1996.
1.2 "Affiliated Group" shall have the meaning set forth in the
Recitals.
1.3 "Agreement" shall have the meaning set forth in the Recitals.
1.4 "ARACS" shall have the meaning set forth in the Recitals.
1.5 "Avis" shall have the meaning set forth in the Recitals.
1.6 "Claims Management" shall have the meaning set forth in the
Recitals.
1.7 "Code" shall have the meaning set forth in the Recitals.
1.8 "Due Date" shall mean, with respect to any Tax Return or payment
of any Taxes with respect to a Tax Return, the date on which such Tax Return is
due to be filed with or such payment is due to be made to the appropriate Tax
Authority pursuant to applicable law,
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<PAGE>
giving effect to any applicable extensions of the time for such filing or
payment.
1.9 "Enterprises" shall have the meaning set forth in the Recitals.
1.10 "Final Determination" shall mean (1) the entry of a decision of a
court of competent jurisdiction at such time as an appeal may no longer be
taken from such decision or (2) the execution of a closing agreement or its
equivalent between the particular taxpayer and the relevant Tax Authority.
1.11 "Global Excess" shall have the meaning set forth in the Recitals.
1.12 "Indemnifiable Loss" shall mean, with respect to any claim by an
Indemnified Party for indemnification pursuant to Article IV hereof, any and
all losses, claims, damages, obligations, payments, costs and expenses
(including, without limitation, the costs and expenses of any and all actions,
demands, assessments, judgements, settlements, and compromises relating thereto
and reasonable attorneys' and accountants' fees and expenses in connection
therewith) suffered by such Indemnified Party with respect to such claim.
1.13 "Indemnifiable Party" shall mean any Party entitled to receive
indemnification from another Party pursuant to Article IV hereof.
1.14 "Interim HFS Group" shall mean, for any Interim Period, the then
Affiliated Group of corporations of which HFS was the common parent and which
joined in filing consolidated U.S. federal income Tax Returns.
1.15 "Interim Period" shall mean any taxable year or period that
begins on or after the day following the Acquisition Date and ends on or prior
to the IPO Date and, (i) in the case of a Straddle Period that begins on or
before, and ends after, the Acquisition Date, that portion of such Straddle
Periods that begins on the date immediately following the Acquisition Date, or
(ii) in the case of a Straddle Period that begins on or before, and ends after,
the IPO Date, that portion of such Straddle Period that ends on the IPO Date.
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1.16 "Interim Spinco Group" shall mean, for any Interim Period, Spinco
and its then Subsidiaries. Notwithstanding the foregoing, the Subsidiaries of
Spinco shall be deemed to include, for the entire Interim Period, PF Claims,
Global Excess, Pathfinder, Avis Enterprises, International, ARACS, Claims
Management and each of their respective Subsidiaries.
1.17 "International" shall have the meaning set forth in the Recitals.
1.18 "IPO Date" shall mean the last day on which Spinco and its then
Subsidiaries could be considered members of the Affiliated Group of
corporations of which HFS is the common parent and which join in filing
consolidated U.S. federal income Tax Returns.
1.19 "Member" shall mean (i) a member of a particular Affiliated Group
of corporations which join in filing consolidated U.S. federal income Tax
Returns or (ii) a member of a particular group defined in this Agreement.
1.20 "Party" shall mean HFS or Spinco.
1.21 "Pathfinder" shall have the meaning set forth in the Recitals.
1.22 "Paying Party" shall have the meaning set forth in Section 4.4
hereof.
1.23 "PF Claims" shall have the meaning set forth in the Recitals.
1.24 "Post-IPO HFS Group" shall mean, for any Post-IPO Period, the
Affiliated Group of corporations of which HFS is the common parent and which
join in filing consolidated U.S. Federal income Tax Returns.
1.25 "Post-IPO Period" shall mean any taxable period beginning the day
after the IPO Date and, in the case of any Straddle Period that begins on or
before, and ends after, the IPO Date, that portion of such Straddle Period that
begins on the day after the IPO Date.
1.26 "Post-IPO Spinco Group" shall mean, for any Post-IPO Period, (i)
the Affiliated Group of corporations of which Spinco is the common parent and
which join in
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filing consolidated U.S. Federal income Tax Returns and (ii) Spinco and/or any
of its Subsidiaries.
1.27 "Post-IPO Stub Period" shall mean any taxable year or period
after the IPO Date and ending on or before December 31, 1997.
1.28 "Pre-Acquisition Avis Group" shall mean, for any Pre-Acquisition
Period, (i) the then Affiliated Group of corporations of which Avis was the
common parent and which joined in filing consolidated U.S. Federal income Tax
Returns and (ii) Avis and/or any of its then Subsidiaries.
1.29 "Pre-Acquisition HFS Group" shall mean, for any Pre-Acquisition
Period, the then Affiliated Group of corporations of which HFS was the common
parent and which joined in filing consolidated U.S. Federal income Tax Returns.
1.30 "Pre-Acquisition Period" shall mean any taxable period or portion
thereof that ends on or before the Acquisition Date and, in the case of any
Straddle Period that begins on or before, and ends after, the Acquisition Date,
that portion of such Straddle Period that ends on the Acquisition Date.
1.31 "Preferred Holidays" shall have the meaning set forth in the
Recitals.
1.32 "Refund" shall have the meaning set forth in Article V.
1.33 "Spinco" shall have the meaning set forth in the Recitals.
1.34 "Straddle Period" shall mean any taxable period that (i) begins
on or before, and ends after, the Acquisition Date or (ii) begins on or before,
and ends after, the IPO Date.
1.35 "Subsidiary" shall mean, with respect to any Party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such Party or any other Subsidiary of such Party is a general partner
(excluding partnerships, the general partnership interests of which held by
such Party or any Subsidiary
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of such Party do not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Party or by one or more of its Subsidiaries, or by such Party and one
or more of its Subsidiaries.
1.36 "Tax Attribute" shall mean any net operating loss, investment tax
credit, foreign tax credit, or other credit, deduction or tax attribute
(including basis).
1.37 "Tax Authority" shall mean the Internal Revenue Service and any
other state, local, foreign or other governmental authority responsible for the
administration of Taxes.
1.38 "Tax Claim" shall mean a notice of deficiency, proposed
adjustment, assessment, audit, examination or other administrative or court
proceeding, suit, dispute or other claim with respect to Taxes or a Tax Return.
1.39 "Taxes" shall mean all taxes, charges, fees, levies, imposts,
duties and other assessments, including, without limitation, income, gross
receipts, excise, alternative minimum, personal property, real property, sales,
ad valorem, value-added, withholding, social security, occupation, use,
service, service use, leasing, leasing use, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by any Tax Authority,
whether computed on a separate, consolidated, unitary, combined or any other
basis, together with any interest, fines, penalties and additional amounts
attributable to, imposed on, or with respect to, any such taxes, charges, fees,
levies, imposts, duties or other assessments, and interest thereon.
1.40 "Tax Returns" shall mean all returns, reports, declarations,
information, estimates, schedules, filings or documents (including any related
or supporting information) filed or required by any Tax Authority to be filed
with respect to Taxes, including, without limitation, all information returns,
claims for refund, amended returns, declarations of estimated Tax, and requests
for
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<PAGE>
extensions of time to file any item described in this paragraph.
1.41 "Transfer Tax" shall mean all sales, use, transfer (including
real property transfer and gains), stamp, documentary, filing, recordation and
other similar Taxes and fees which may be imposed or assessed as a result of
the IPO and the transactions contemplated thereby, together with any interest,
additions or penalties with respect thereto and any interest in respect of such
additions or penalties.
1.42 "Treasury Regulations" shall mean the United States income Tax
regulations promulgated by the Treasury Department under the Code, as the same
may be amended hereafter from time to time.
1.43 "Underpayment Rate" shall mean the interest rate specified under
Section 6621(a)(2) of the Code.
1.44 "Wizard" shall have the meaning set forth in the Recitals.
1.45 "Wizcom" shall have the meaning set forth in the Recitals.
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
2.1 Preparation and Filing of Pre-Acquisition Period Tax Returns.
(a) HFS shall prepare and timely file or cause to be prepared and
timely filed (in each case, at its own cost and expense and in a manner
consistent with past practice) all Tax Returns of the Pre-Acquisition HFS Group
and any Member thereof for any Pre-Acquisition Period.
(b) To the extent not filed prior to the IPO Date, Spinco shall
prepare or cause to be prepared (in each case, at its own cost and expense and
in a manner consistent with past practice) all consolidated Federal and
consolidated, combined, unitary and similar state and local income Tax Returns
of the Pre-Acquisition
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<PAGE>
Avis Group and any Member thereof for any Pre-Acquisition Period. For purposes
of this Section 2.1(b), Spinco shall prepare or cause to be prepared a combined
income tax return for New York State. At least 30 days prior to the Due Date of
any Tax Return which Spinco is required to prepare (or cause to be prepared)
pursuant to this Section 2.1(b), Spinco shall deliver such Tax Returns to HFS.
Upon its consent, HFS shall timely file (or cause to be timely filed) such Tax
Returns.
(c) Spinco shall prepare and timely file or cause to be prepared
and timely filed (in each case, at its own cost and expense and in a manner
consistent with past practice) all Tax Returns not described in Section 2.1(b)
of this Agreement required to be filed by the Pre-Acquisition Avis Group or any
Member thereof for any Pre-Acquisition Period, provided, however, that with
respect to any Tax Return of Avis, Wizard, Wizcom or Preferred Holidays
relating to a Straddle Period beginning on or before the Acquisition Date and
ending after the Acquisition Date with respect to which HFS is liable for any
amount of Tax shown to be due thereon pursuant to this Agreement, Spinco shall
prepare or cause to be prepared (in each case, at its own cost and expense and
in a manner consistent with past practice) such Tax Return and, at least 30
days prior to the Due Date thereof, shall deliver or cause to be delivered such
Tax Return to HFS for its review, together with a statement showing in
reasonable detail Spinco's calculation of any Taxes attributable to such
Straddle Period for which HFS is liable. Any disputes regarding such
calculations shall be resolved in accordance with Article IX of this Agreement.
HFS shall timely file or cause to be timely filed such Tax Returns.
2.2 Preparation and Filing of Interim Period Tax Returns and Other
Information.
(a) Except for those Tax Returns that Spinco is required to
prepare and timely file or cause to be prepared and timely filed pursuant to
Section 2.2(b) of this Agreement, HFS shall prepare and timely file or cause to
be prepared and timely filed (in each case, at its own cost and expense and in
a manner consistent with past practice) all Tax Returns of the Interim HFS
Group and any Member thereof for any Interim Period. As promptly as practicable
but in no event later than 90
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days before the Due Date of any such Tax Return, Spinco shall prepare or cause
to be prepared (in each case, at its own cost and expense and in a manner
consistent with past practice) pro forma statements for all Members of the
Pre-Acquisition Avis Group that, after the Acquisition Date, are Members of the
Interim HFS Group, for any Interim Period.
(b) Spinco shall prepare and timely file or cause to be prepared
and timely filed (in each case, at its own cost and expense and in a manner
consistent with past practice) all Tax Returns of the Interim Spinco Group and
any Member thereof.
2.3 Preparation and Filing of Post-IPO Period Tax Returns.
(a) HFS shall prepare and timely file or cause to be prepared and
timely filed (in each case, at its own cost and expense and in a manner
consistent with past practice) all Tax Returns of the Post-IPO HFS Group or any
Member thereof for any Post-IPO Period. As promptly as practicable but in no
event later than 90 days before the Due Date of any such Tax Return, Spinco
shall prepare pro forma statements for each of Avis, Wizard, Wizcom and
Preferred Holidays for any Post-IPO Stub Period.
(b) Spinco shall prepare and timely file or cause to be prepared
and timely filed (in each case, at its own cost and expense and in a manner
consistent with past practice) all Tax Returns of the Spinco Group and any
Member thereof for any Post-IPO Period.
2.4 Consistent Positions on Tax Returns; No Amendments.
(a) The Parties agree that, subject to any Final Determination
requiring a position to the contrary (of which the Party to which such Final
Determination relates shall give notice to the other), with respect to any Tax
Returns filed pursuant to this Agreement, the parties shall file and shall
cause their affiliates to file all such Tax Returns (or any position reflected
on a pro forma statement attributable to a Tax Return) consistently with one
another.
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(b) Spinco shall not (and shall cause each of its Subsidiaries
not to) file or amend any Tax Return of the Pre-Acquisition Avis Group or any
Member thereof or the Interim Spinco Group or any Member thereof for any
Pre-Acquisition Period or Interim Period, respectively, without the consent of
HFS or unless a Final Determination has occurred.
ARTICLE III
PAYMENTS WITH RESPECT TO TAXES
3.1 Payments of Taxes By Spinco.
(a) Spinco shall pay (or cause to be paid) all Taxes of, or
attributable to, (i) the PreAcquisition Avis Group and any Member thereof for
any Pre-Acquisition Period, (ii) the Interim Spinco Group and any Member
thereof for any Interim Period and (iii) the Spinco Group and any Member
thereof for any Post-IPO Period.
(b) With respect to any consolidated Federal or state
consolidated, unitary, combined or other similar income Tax Return of the
Interim HFS Group or any Member thereof that the Interim HFS Group or any such
Member is required to timely file pursuant to Article II of this Agreement,
Spinco shall pay or cause to be paid to HFS its portion of the Taxes shown to
be due on such Tax Return, as determined under this Agreement, at least 10 days
prior to the Due Date for such Tax Return. With respect to any Tax Return of
Avis, Wizard, Wizcom or Preferred Holidays relating to a Straddle Period
beginning on or before the Acquisition Date and ending after the Acquisition
Date that HFS is required to timely file or cause to be timely filed pursuant
to Article II of this Agreement, Spinco shall pay or cause to be paid to HFS
(or Avis, Wizard, Wizcom or Preferred Holidays, as directed by HFS), Spinco's
portion of the Taxes shown to be due on such Tax Return, as determined under
this Agreement, at least 10 days prior to the Due Date for such Tax Return.
3.2 Payment of Taxes by HFS. HFS shall pay all Taxes of, or
attributable to, (i) the Pre-Acquisition HFS Group and any Member thereof for
any Pre-Acquisition
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Period, (ii) the Interim HFS Group and any Member thereof for any Interim
Period (other than Taxes for which Spinco is obligated to pay pursuant to
Section 3.1(a)(ii) of this Agreement) and (iii) the Post-IPO HFS Group and any
Member thereof for any Post-IPO Period.
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification by Spinco. Spinco shall pay, and shall indemnify,
defend and hold harmless HFS and any Member of the Post-IPO HFS Group from and
against all Indemnifiable Losses arising out of or resulting from, directly or
indirectly, (i) Taxes of, or attributable to, the Pre-Acquisition Avis Group or
any Member thereof for any Pre-Acquisition Period, (ii) Taxes incurred pursuant
to Treasury Regulations Section 1.1502-6 (or similar provisions under state,
local or foreign law imposing several liability upon members of a consolidated,
combined, affiliated or unitary group) as a result of Avis, Wizard, Wizcom,
Preferred Holidays or any other Member of the Pre-Acquisition Avis Group having
been a member of another Affiliated Group (other than the Interim HFS Group) or
combined, consolidated, affiliated or unitary group, (iii) Taxes of, or
attributable to, the Interim Spinco Group for any Interim Period, (iv) Transfer
Taxes for which Spinco is liable pursuant to Section 11.1 of this Agreement and
(v) Taxes of, or attributable to, the Post-IPO Spinco Group or any Member
thereof for any Post-IPO Period.
4.2 Indemnification By HFS. HFS shall pay, and shall indemnify, defend
and hold harmless Spinco and any Member of the Post-IPO Spinco Group from and
against all Indemnifiable Losses arising out of or resulting from, directly or
indirectly, (i) Taxes of, or attributable to, the Pre-Acquisition HFS Group or
any Member thereof for any Pre-Acquisition Period, (ii) Taxes of, or
attributable to, the Interim HFS Group or any Member thereof (other than the
Interim Spinco Group or any Member thereof) for any Interim Period, (iii) Taxes
of, or attributable to, the Post-IPO HFS Group or any Member thereof, for any
Post-IPO Period.
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4.3 Computation of Taxes Relating To Straddle Periods. For purposes of
determining the amount of Taxes which relate to a Straddle Period, the
Acquisition Date (or the IPO Date) shall be treated as the last day of a
taxable period, and the portion of any such Tax that is allocable to the
taxable period that is so deemed to end on and include the Acquisition Date (or
the IPO Date): (i) in the case of Taxes that are either (x) based upon or
related to income or receipts (and corresponding losses and deductions) or (y)
imposed in connection with the sale, exchange, transfer, assignment or
distribution of property (real or personal, tangible or intangible) (and
corresponding losses and deductions), shall be deemed equal to the amount which
would be payable if the period for which Tax is assessed ended on and included
the Acquisition Date (or the IPO Date), and (ii) in the case of Taxes other
than Taxes described in clause (i) hereof, shall be computed on a per diem
basis.
4.4 Payments. To the extent that a Party (a "Paying Party") owes money
to an Indemnified Party pursuant to this Article IV, the Paying Party shall pay
the Indemnified Party, no later than 10 business days prior to the Due Date of
the relevant Tax Return or 5 business days after the Paying Party receives the
Indemnified Party's calculations, whichever is later, the amount for which the
Paying Party is required to indemnify the Indemnified Party under this Article
IV. The Indemnified Party shall submit the Indemnified Party's calculations of
the amount required to be paid pursuant to this Article IV, showing such
calculations in sufficient detail so as to permit the Paying Party to
understand the calculations. Any dispute regarding such calculations shall be
resolved in accordance with Article IX of this Agreement.
ARTICLE V
REFUNDS
HFS shall be entitled to all refunds of Taxes ("Refunds") that are
attributable to (i) Members of the HFS Group for any Pre-Acquisition Period,
(ii) Members of the Interim HFS Group (other than the Interim Spinco Group) for
any Interim Period and (iii) Members of the Post-IPO HFS Group for any Post-IPO
Period. Spinco shall be entitled to all Refunds of Taxes that are attributable
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to (i) Members of the Pre-Acquisition Avis Group for any Pre-Acquisition Period
(ii) Members of the Interim Spinco Group for any Interim Period, and (iii)
Members of the Post-IPO Spinco Group for any Post-IPO Period. Notwithstanding
the foregoing, HFS shall be entitled to all Refunds of Taxes of Avis, Wizard,
Wizcom and Preferred Holidays for any Pre-Acquisition period which results from
the carryback of a loss, credit or other Tax Attribute from a Interim Period or
Post-IPO Period. Refunds relating to Straddle Periods shall be equitably
apportioned between HFS and Spinco in accordance with the provisions of this
Agreement governing Straddle Periods. A Party receiving a Refund to which the
other Party is entitled pursuant to this Agreement shall pay the amount to
which such other party is entitled within 10 days after the receipt of such
Refund.
ARTICLE VI
CARRYBACKS; NET OPERATING LOSSES
6.1 Carrybacks. In the event of a realization of any loss or credit
for tax purposes by a Party or any of its Subsidiaries for any taxable period
beginning on or after the IPO Date, the Party (or any of its Subsidiaries)
realizing such loss or credit may, in its sole discretion, to the extent
permitted under applicable law, elect not to carry back such loss or credit.
6.2 Net Operating Losses.
(a) Determination of Federal Income Tax Net Operating Losses
Attributable to Members of Pre-Acquisition Avis Group. With respect to the
amount of net operating loss carryovers attributable to the Pre-Acquisition
Avis Group (and each Member thereof) as of the Acquisition Date, the Parties
hereby agree that for Federal income tax purposes the net operating loss
carryforwards of the Pre-Acquisition Avis Group (and each Member thereof) as of
the Acquisition Date is as set forth on Schedule A, attached hereto. HFS and
Spinco shall not take any position contrary to Schedule A on any applicable Tax
Return, in any proceeding before any taxing authority or otherwise, unless
consent of the other Party is obtained or a Final Determination has occurred.
In the event that any of the losses set forth
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on Schedule A is disputed by any taxing authority, the Party receiving notice
of the dispute shall promptly notify the other party hereto concerning
resolution of the dispute (control of which shall be governed by Article VII of
this Agreement).
(b) No Indemnification for Utilization of Net Operating Losses
and Other Tax Attributes of Pre-Acquisition Avis Group. Notwithstanding
anything to the contrary contained in this Agreement, no Party to this
Agreement shall be entitled to any payment, indemnification or compensation for
the utilization (prior to or after the IPO Date) of the net operating losses,
tax credits and other tax attributes of the Pre-Acquisition Avis Group (or any
Member thereof) or the Interim Spinco Group (or any Member thereof).
(c) Determination of State and Local Income Tax Net Operating
Losses Attributable to Members of Pre-Acquisition Avis Group. HFS and Spinco
shall cooperate with each other and shall act together in good faith to
determine and agree upon, for state and local income tax purposes, the net
operating loss carryforwards of the Pre-Acquisition Avis Group (and each Member
thereof) and any state or local combined, unitary, consolidated or similar
group (as may be determined by the Parties) which includes Members of the
Pre-Acquisition Avis Group. HFS and Spinco shall be bound by such
determinations for purposes of determining any Taxes and shall not take any
position contrary to such determinations on any applicable Tax Return, in any
proceeding before any taxing authority or otherwise, unless consent of the
other Party is obtained or a Final Determination has occurred. In the event
that any of such determinations is disputed by any taxing authority, the Party
receiving notice of the dispute shall promptly notify the other party hereto
concerning resolution of the dispute (control of which shall be governed by
Article VII of this Agreement).
(d) Net Operating Loss Carryovers to Consolidated Return and
Separate Return Years. For Federal income tax purposes, with respect to the
Federal net operating losses of Members of the Pre-Acquisition Avis Group, the
consolidated net operating loss of the Pre-Acquisition Avis Group, and the
carryovers of such net operating losses to consolidated return and separate
return years, the Parties shall follow and consistently
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apply the rules of Temporary Treasury Regulations Section 1.1502-21T, including
for all tax years ending on or after January 29, 1991 that were open as of
January 1, 1997. Similar principles shall apply with respect to other tax
attributes. Unless otherwise required by state or local law, consistent rules
shall apply for state or local income tax purposes.
(e) Apportionment of Consolidated Section 382 Limitation. With
respect to the apportionment of the Federal "consolidated Section 382
limitation" (as determined by HFS in its sole discretion under Temporary
Treasury Regulations Section 1.1502-93T) caused as a result of the acquisition
of Avis by a Subsidiary of HFS, the Parties shall follow the rules of Temporary
Treasury Regulations Section 1.1502-95T(c). Accordingly, the Parties hereby
agree that HFS will cause Avis to allocate to Spinco the sum of (i) no less
than the lesser of (A) $20 million of the "value element" (as defined in
Temporary Treasury Regulations Section 1.1502-95T(c)(2)(i)) (the "Annual Value
Element") of the consolidated Section 382 limitation, as determined by HFS in
its sole discretion or (B) 50 percent of the Annual Value Element of the
consolidated Section 382 limitation, as determined by HFS in its sole
discretion, and (ii) no less than the lesser of (A) $50 million of the
"adjustment element" (as defined in Temporary Treasury Regulations Section
1.1502-95T(c)(2)(ii)) (the "Adjustment Element") of the consolidated Section
382 limitation, as determined by HFS in its sole discretion or (B) 15 percent
of the Adjustment Element of the consolidated Section 382 limitation, as
determined by HFS in its sole discretion. To the extent any apportionment of
any state or local net operating loss limitation is required to or may be made,
HFS shall determine such allocation in its sole discretion consistent with
applicable state or local law.
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ARTICLE VII
TAX CLAIMS
7.1 Notification of Tax Claims. If a Tax Claim shall be delivered,
sent, commenced, or initiated to or against either HFS or any Member of the
Post-IPO HFS Group or Spinco or any Member of the Post-IPO Spinco Group by any
Tax Authority with respect to Taxes for which one Party to this Agreement may
be entitled to indemnification from the other Party, HFS or Spinco, as the case
may be, shall promptly notify the other Party in writing of such Tax Claim.
7.2 Control of Tax Claims.
(a) Except as provided in Section 7.2(b) of this Agreement, HFS
shall control (at its own expense and with counsel of its own choice) all Tax
Claims relating to Taxes for which one Party may be entitled to indemnification
from the other Party pursuant to this Agreement. With respect to any Tax Claim
that HFS is entitled to control pursuant to this Section 7.2(a), HFS may permit
Spinco (at its own cost and expense and with counsel of its choice) to control
any such Tax Claim, provided, that Spinco shall (i) keep HFS informed of all
material developments and events relating to such Tax Claim, (iii) consult with
HFS with respect to any such Tax Claim, (iii) act in good faith and (iv) use
all reasonable efforts to preserve any net operating losses or other Tax
Attributes; provided, further, that Spinco shall not be entitled to settle or
otherwise compromise, either administratively or after commencement of
litigation, any such Tax Claim without the prior written consent of HFS.
(b) Spinco shall assume and control the defense of any Tax Claim
that solely relates or is attributable to the Pre-Acquisition Avis Group or any
Member thereof, the Interim Spinco Group or any Member thereof or the Post-IPO
Spinco Group or any Member thereof, provided, however, that the provisions of
Section 7.2(a) shall apply if any Tax Claim has the potential of reducing the
Federal income tax net operating loss carryforwards of the Pre-Acquisition Avis
Group.
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ARTICLE VIII
COOPERATION; MAINTENANCE OF BOOKS AND RECORDS
8.1 Cooperation. HFS and Spinco agree that, after the IPO Date,:
(a) Each Party shall assist (and cause its Subsidiaries and
affiliates to assist) the other in preparing any Tax Returns which the other
Party is responsible for preparing and filing;
(b) the Parties shall cooperate fully in preparing for any audits
of, or disputes with taxing authorities regarding, any Tax Returns and payments
in respect thereof;
(c) the Parties shall make available to each other and to any
taxing authority as reasonably requested all relevant books and records
relating to Taxes;
(d) the Parties shall provide timely notice to the other in
writing of any pending or proposed audits or assessments with respect to Taxes
for which the other may have an indemnification obligation under this
Agreement;
(e) the Parties shall furnish each other with copies of all
relevant correspondence received from any Tax authority in connection with any
audit or information request with respect to any Taxes referred to in
subsection (d) above; and
(f) except as otherwise provided herein, the Party requesting
assistance or cooperation shall bear the other's out-of-pocket expenses in
complying with such request to the extent that those expenses are attributable
to fees and other costs of unaffiliated third-party service providers other
than attorney's fees.
8.2 Maintenance of Books and Records. HFS and Spinco shall (and shall
cause each of their respective Subsidiaries after the IPO Date to) (a) until
the expiration of the relevant statutes of limitations (giving effect to any
applicable extensions or waivers), retain records, documents, accounting data
and other information
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(including computer data) necessary for the preparation and filing of all Tax
Returns in respect of Taxes of any group (as defined in this Agreement) or
Member thereof or for a Tax Claim by a Tax Authority relating to such Tax
Returns; and (b) give to the other group reasonable access to such records,
documents, accounting data and other information (including computer data) and
to its personnel (ensuring their cooperation) and premises, for the purpose of
the review or audit of such Tax Returns to the extent relevant to an obligation
or liability of any Party under this Agreement. Prior to destroying any
records, documents, data or other information described in this Article VIII,
the Party (or its affiliate) wishing to destroy such items shall give the other
Party (or its affiliate) a reasonable opportunity to obtain such items (at such
other Party's (or its affiliate's) expense.
ARTICLE IX
DISPUTES
If the Parties disagree as to the calculation of any Tax or the amount
of any payment to be made under, or any other matter arising out of, this
Agreement, the Parties shall cooperate in good faith to resolve any such
dispute, and any agreed-upon amount shall be paid to the appropriate Party. If
the Parties are unable to resolve any such dispute within 30 days thereafter,
such dispute shall be resolved by a mutually agreeable nationally recognized
accounting firm (other than any such accounting firm generally retained by HFS
or Spinco) (the "Independent Accountants"). If and to the extent that the
dispute presents legal issues, the Independent Accountants shall have the
authority to consult a nationally recognized independent law firm (other than
any law firm generally retained by HFS or Spinco) (the "Independent Lawyers").
The Independent Accountants on the advice, if applicable, of the Independent
Lawyers, shall make their determination as promptly as practicable and such
determination shall be final and binding on the Parties and shall be deemed a
final arbitration award that is enforceable pursuant to all terms of the
Federal Arbitration Act, 9 U.S.C. ss.ss. 1 et. seq. The fees and expenses
relating to the engagement of the Independent Accountants and the Independent
Lawyers shall be shared by HFS and Spinco in accordance with the final
allocation of the Tax
19
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liability in dispute. Following the decision of the Independent Accountants
and, if applicable, the Independent Lawyers, the Parties shall each take (or
cause to be taken) any action that is necessary or appropriate to implement
such decision, including, without limitation, the filing of amended Tax Returns
and the prompt payment of underpayments or overpayment, with interest
calculated on such underpayments or overpayments at the Underpayment Rate from
the date such underpayment or overpayment is paid or refunded.
ARTICLE X
SURVIVAL
Notwithstanding any other provision in this Agreement to the contrary,
the rights and obligations provided for in this Agreement shall survive
indefinitely.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Transfer Taxes. Spinco shall prepare (or cause to be prepared)
and timely file (or cause to be timely filed) with the appropriate Tax
Authority all Tax Returns required to be filed in respect of Transfer Taxes
imposed with respect to the IPO. Spinco shall pay (or cause to be paid) all
Transfer Taxes attributable to the IPO.
11.2 Effective Date of Agreement; Termination of Existing Tax Sharing
Agreements. This Agreement shall take effect as of the IPO Date and any and all
existing Tax Sharing Agreements and arrangements, written or unwritten (other
than those provided by this Agreement) between or among any Member or Members
of the Post-IPO HFS Group and any Members or Members of the Post-IPO Spinco
Group shall be terminated as of the IPO Date and any and all rights or
obligations existing thereunder shall be fully and finally settled without any
payment by any party thereto.
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11.3 Interest on Late Payments. Any payment required by this Agreement
which is not made on or before the date required to be made hereunder shall
bear interest after such date at the Underpayment Rate. All payments made
pursuant to this Agreement shall be made in immediately available funds.
11.4 Determination and Characterization of Payments. (a) All
indemnification payments under this Agreement shall be determined on a pre-Tax
basis, i.e., without regard to the Tax consequences to the indemnified Party of
making a payment that is indemnified by another Party under this Agreement or
of receiving a payment under this Agreement as indemnification therefor.
(b) The payments made pursuant to this Agreement shall be treated as
occurring immediately before the IPO, and no Member of the Post-IPO HFS Group
or the Post-IPO Spinco Group and none of the Subsidiaries of any such Member
shall take any position inconsistent with such treatment before any Tax
Authority, except to the extent that a Final Determination with respect to the
recipient Party causes any such payment to not be so treated.
11.5 Notices. All notices and written communications under this
Agreement shall be in writing and any communication or delivery hereunder shall
be deemed to have been duly given when received addressed as follows:
If to HFS,
HFS Car Rental, Inc.
c/o HFS Incorporated
6 Sylvan Way
Parsippany, NJ 07054
Attn: General Counsel
Telecopy Number: (201) 428-6057
If to Spinco,
Avis Rent A Car, Inc.
900 Old Country Road
Garden City, NJ 11530
Attn: General Counsel
Telecopy Number: (516) 222-3751
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Any Party may, by written notice so delivered to the other Party,
change the address to which delivery of any notice shall thereafter be made.
11.6 Governing Law. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of New York, without regard to the
conflicts of law rules of such state.
11.7 Amendments. This Agreement may not be amended except by an
agreement in writing, signed by the Parties.
11.8 Parties in Interest. None of the Parties may assign its rights or
delegate any of its duties under this Agreement without the prior written
consent of the other Party, except that HFS may assign its rights and delegate
its duties hereunder to CUC International Inc. ("CUC") or an entity controlled
by CUC in connection with the proposed merger of HFS and CUC. This Agreement
shall be binding on, and shall inure to the benefit of, the parties and the
respective successors, assigns, and persons controlling any of the corporations
bound hereby. HFS, on the one hand, and Spinco, on the other hand, hereby
guarantee the performance of all actions, agreements and obligations provided
for under this Agreement of HFS's Subsidiaries and Spinco's Subsidiaries,
respectively. No person (including, without limitation, any employee of a Party
or any stockholder of a Party) shall be, or shall be deemed to be, a third
party beneficiary of this Agreement.
11.9 Entire Agreement. This Agreement constitutes the entire agreement
of the parties concerning the subject matter hereof and supersedes all prior
agreements, whether or not written, concerning such subject matter.
11.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute together the same document.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
HFS INCORPORATED
By
---------------------------
Name:
Title:
AVIS RENT A CAR INC.
By
---------------------------
Name:
Title:
23
LEASE AGREEMENT DATED SEPTEMBER __, 1997
BETWEEN WIZCOM INTERNATIONAL, LTD., a Delaware corporation, having an
office at 6 Sylvan Way, Parsippany, New Jersey 07054 ("Landlord"), and AVIS
RENT A CAR SYSTEM, INC., a Delaware corporation ("Tenant"), having an address
at 900 Old Country Road, Garden City, New York 11530.
PREAMBLE
BASIC LEASE PROVISIONS AND DEFINITIONS.
In addition to other terms elsewhere defined in this Lease, the following
terms whenever used in this Lease should have only the meanings set forth in
this Preamble, unless such meanings are expressly modified, limited or expanded
elsewhere herein.
I. Demised Premises: The Demised Premises are as depicted by
cross-hatching on the floor plans annexed hereto and made a part hereof as
Exhibit "A", consisting of approximately _________ (______) square feet of
rentable area of office space located in that certain office building
containing approximately one hundred fifty seven thousand five hundred eighty
four (157,584) square feet of rentable area (the "Building") situated on the
Land (as defined in Paragraph l(a) of this Lease) at the location commonly
identified as 300 Centre Point Drive, Virginia Beach, Virginia, as shown on the
site plan attached hereto as Exhibit "B". Landlord and Tenant agree that Tenant
may from time to time effect changes to the size and location of the Demised
Premises subject to the following conditions and procedures: (i) Tenant may not
increase or decrease the Demised Premises by more than an aggregate of ten
percent (10%) of the existing square footage of the Demised Premises, (ii)
Tenant shall provide Landlord with not less than ten (10) days prior written
notice of its intent to change the Demised Premises, which notice shall specify
the location, size and (in the case of adding new space) the proposed use of
the space, and the date on which such change shall be effective, (iii) Landlord
may in its sole discretion reject a proposed change within ten (10) days of its
receipt, and (iv) no portion of the Building shall be eligible for addition to
the Demised Premises under this provision unless such space is (x) unoccupied
and not subject to any existing lease by Landlord, and (y) adjacent to the
existing Demised Premises. Except as expressly set forth herein-above, no
change in the actual occupancy or use of portions of the Building or the Land
by Tenant shall effect a change in the Demised Premises or in the number or
location of the parking spaces in the Parking Area designated for Tenant's
exclusive use hereunder, unless the parties execute an appropriate amendment to
this Lease within twelve (12) months after such change in occupancy or use.
II. Term: Eighteen (18) years.
III. Expiration Date: Upon the earlier to occur of (i) midnight on the
last day of the calendar month occurring eighteen (18) years after the
Commencement Date or (ii) the termination of the Master License Agreement dated
as of July 30, 1997 among HFS Car Rental, Inc., Tenant and Wizard Co., Inc.
IV. Permitted Use: General office use and such other uses as would be
customarily ancillary to a general office use in an office building as
permitted by law and for no other purpose.
V. Base Rent: _______ Dollars ($____) per month from the Commencement Date
through the last day of the calendar month during which the sixth (6th)
anniversary of the Commencement Date occurs; and _____ Dollars ($____) per
month from the first day of the calendar month following the sixth (6th)
anniversary of the Commencement Date through the last day of the calendar month
in
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which occurs the twelfth (12th) anniversary of the Commencement Date; and
______ Dollars ($______) per month from the first day of the calendar month
following the twelfth (l2th) anniversary of the Commencement Date through the
Expiration Date.
VI. Late Charge: Four percent (4%) of the amount of the payment due.
VII. Tenant's Proportionate Share: Shall consist of each of the following:
(i) the square footage of the Demised Premises plus fifty percent (50%) of the
total Common Areas and unoccupied space in the Building, expressed as a
percentage of the sum of the total square footage of the Building, and (ii) the
number of parking spaces designated for Tenant's exclusive use plus the product
of the Tenant's Proportionate Share under clause (i) above and the total number
of non-exclusive parking spaces in the Parking Area expressed as a percentage
of the total number of parking spaces in the Parking Area. The Tenant's
Proportionate Share under clause (ii) above shall apply only with respect to
the portion of Operating Expenses which are separately identified in the
Expense Projection (defined herein), or if not projected, at the time of review
by the Committee (defined herein), as relating to the maintenance and operation
of the Parking Area.
VIII. Parking Area: All of the improved parking spaces on the Land,
comprising approximately 820 parking spaces.
IX. Prime Rate: The prime commercial lending rate on ninety (90) day loans
announced by Citibank, N.A., or its successor.
X. Building Holidays: Building Holidays shall be: Memorial Day;
Independence Day; Labor Day; Thanksgiving Day and the day after; Christmas Day
and New Year's Day; the Monday before or the Friday after if Christmas Day or
Independence Day fall on Tuesday or Thursday; and the Monday after or the
Friday before if Christmas Day or Independence Day fall on Saturday or Sunday.
The parties hereby agree to the following terms and conditions: 1. Demised
Premises, Term and Purposes.
(a) Landlord does hereby lease to Tenant, and Tenant does hereby lease
from Landlord, the Demised Premises located in the Building, together with all
other Common Areas, as defined in Paragraph l(d), for the Term commencing on
the Commencement Date, as defined in subparagraph (b) of this Paragraph 1, and
ending on the Expiration Date, or such earlier date upon which the Term may
expire, or be terminated pursuant to the provisions of this Lease or pursuant
to law. The parcel of land on which the Building is located (hereinafter called
the "Land") being the same land conveyed by Tenant to Landlord by Deed dated
October 15, 1996 and recorded with the clerk of the Virginia Beach Circuit
Court on October 21, 1996.
(b) For purposes of this Lease the "Commencement Date" shall be
September __, 1997, subject to the provisions of Paragraph 3(b).
(c) The Demised Premises shall be used by Tenant for the Permitted Use
and for no other use or purpose. Tenant shall not use or occupy the Demised
Premises or any part thereof for any purpose deemed unlawful, disreputable, or
extra-hazardous on account of fire or other casualty, or for any purposes which
shall impair the character of the Building. Tenant, at its sole cost and
expense shall obtain any consents, licenses, permits or approvals required or
obtainable in normal course to conduct its business at the Demised Premises.
Tenant shall have access to
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the Demised Premises twenty-four (24) hours a day, seven (7) days a week.
(d) The "Common Areas" shall be those parts of the Building and other
improvements designated by Landlord for the common use of both Landlord and
Tenant, including among others, halls, lobbies, delivery passages, drinking
fountains, public toilets, cafeterias, vending areas, parking facilities, and
the like, or similar improvements operated, owned by Landlord with respect to
the Building. The Common Areas shall be operated and maintained by Landlord for
the benefit of Landlord and Tenant in a first class manner. Tenant's use of the
Common Areas shall be in common with Landlord, and their respective visitors
and invitees. Landlord shall not diminish the Common Areas in any way that has
a materially adverse impact on Tenant's use or enjoyment of, access to, or
ability to conduct its business at the Demised Premises.
(e) For purposes of this Lease the term "Improvements" shall mean and
include all, whether existing now or in the future, buildings, including the
Building, and/or appurtenant structures or improvements of any kind on the
Land, whether above, on, or below the Land surface, including, without
limitation, outbuildings, loading areas, canopies, walls, waterlines, sewer,
electrical and gas distribution facilities, parking facilities, walkways,
streets, curbs, roads, rights of way, fences, hedges, exterior plantings,
poles, and signs. For the purposes of this Lease the term "Property" shall mean
the Land together with the Improvements.
2. Rent.
(a) The rent reserved under this Lease for the Term hereof (the
"Rent") shall be and consist of: (i) the Base Rent payable in equal monthly
installments in advance, on the first day of each and every calendar month
during the Term; plus (ii) such additional rent ("Additional Rent") in an
amount equal to (x) Tenant's Proportionate Share of Expenses (as such terms are
defined in Paragraph 3 of this Lease) and all charges for services and
utilities pursuant to Paragraph 14 hereof, and (y) any other charges as shall
become due and payable hereunder, including, without limitation, the reasonable
expenses incurred by Landlord in the enforcement of any of the agreements,
covenants and obligations under this Lease, and including reasonable legal fees
that may accrue in the event suit for rent or dispossess proceedings are
necessary to obtain the possession of the Demised Premises or to collect the
Rent; which Additional Rent shall be payable as hereinafter provided. All Rent
shall be paid to Landlord at its office stated above, or such other place as
Landlord may designate by notice given in accordance with Paragraph 17 hereof,
in lawful money of the United States of America; provided, however, that if the
Commencement Date shall occur on a date other than the first calendar day of a
month, the Rent for the partial month commencing on the Commencement Date shall
be appropriately pro-rated on the basis of the monthly Rent payable during the
first year of the Term.
(b) Tenant does hereby covenant and agree promptly to pay the Base
Rent, Additional Rent and any other charges herein reserved as and when the same
shall become due and payable, without demand therefor and, except as otherwise
expressly provided herein, without any set-off, recoupment or deduction
whatsoever. All Additional Rent and other charges payable hereunder, which are
not due and payable on a monthly basis during the Term, unless otherwise
specified herein, shall be due and payable within twenty (20) days of delivery
by Landlord to Tenant of notice to pay the same.
(c) In the event that any payment of Base Rent, Additional Rent or any
other charges shall be paid after the due
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date for same provided herein, Tenant shall pay, together with payment, the
Late Charge and a like additional Late Charge for every thirty (30) days or
portion thereof that such payment shall remain unpaid.
3. Operating Expenses.
(a) For purposes of this paragraph, the following definitions shall
apply:
"Lease Year" shall mean the calendar year 1998 and each calendar
year subsequent thereto during the Term.
"Real Estate Taxes" shall mean all real property taxes and
assessments now or hereafter imposed upon the Building and the Land. Tenant's
share of the Real Estate Taxes shall be a fraction, the numerator of which
shall be the number of square feet of rentable area of the Demised Premises and
the denominator of which shall be the total number of square feet of rentable
area of the Building. Real Estate Taxes shall not include any inheritance,
estate, succession, transfer, gift, franchise, corporation, net income, rent or
profit tax that may be imposed upon Landlord; provided, however, that if, due
to a change in the method of taxation or assessment, any franchise, income,
profit or other tax, however designated, shall be substituted by the applicable
taxing authority, in whole or in part, for the Real Estate Taxes now or
hereafter imposed on the Land and the Improvements or any other real property
included in the Land, such franchise, income, profit or other tax shall be
deemed to be included in the term "Real Estate Taxes."
"Expenses" shall mean: (i) Real Estate Taxes and (ii) the total
of all the costs and expenses paid or incurred by Landlord, or by Tenant on
Landlord's behalf in accordance with the provisions hereof, with respect to the
management, operation, maintenance, and repair of the Land, the Building (which
includes the Demised Premises), including, but not limited to, the costs and
expenses incurred for and with respect to: all utilities, including without
limitation, water, electricity, gas, lighting, sewer and waste disposal; air
conditioning, ventilation and heating; lobby maintenance and cleaning;
maintenance of elevators; protection and security; lobby plantings and interior
landscape maintenance which are appropriate for the continued operation of the
Building; maintenance and painting of non-tenant areas; fire, all-risk, boiler
and machinery, sprinkler, apparatus, public liability and property damage, rent
and plate glass insurance; supplies; wages, salaries, disability benefits,
pensions, hospitalization, retirement plans, group insurance, workmen's
compensation insurance, payroll, social security, unemployment and other
similar taxes with respect to employees of Landlord; uniform and workers
clothes for such employees and the cleaning thereof and other similar employees
benefits and expenses imposed on Landlord pursuant to law or to any collective
bargaining agreement with respect to such employees but only to the extent and
in such proportion that the services of such employees are dedicated to the
operation of the Building, up to and including the Building manager; the cost
for a bookkeeper and for an accountant and any other professional and
consulting fees, including reasonable legal and auditing fees to the extent and
in such proportion that the services of such professional and consultants are
dedicated to the operation of the Building; association fees or dues; the
expenses, including reasonable payments to attorneys and appraisers incurred by
Landlord in connection with any application or proceeding wherein Landlord
obtains or seeks to obtain reduction or refund of the Real Estate Taxes payable
or paid; management fees of the Building; and any other expenses of any other
kind whatsoever reasonably incurred in managing, operating, maintaining and
repairing the Building, the Land and any other of the Improvements.
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Landlord agrees that with respect to all maintenance, repair,
replacement and improvement expenses referred to in the immediately preceding
paragraph involving contracts or individual expenditures exceeding Twenty-five
Thousand Dollars ($25,000.00), other than emergency repairs, Landlord shall
obtain at least two (2) competitive bids and shall utilize the lowest
responsible bidder for such work.
It is agreed, however, that the foregoing Expenses shall
exclude or have deducted from them:
i) expenditures for capital improvements, except those which
under generally accepted accounting principles consistently applied ("GAAP")
are expensed and except for capital expenses required by any law enacted after
the date of this Lease, in any of which cases the costs thereof shall be
included in Expenses for the calendar year in which the costs are incurred and
subsequent calendar years on a straight line basis amortized over an
appropriate period not exceeding ten (10) years with an interest factor equal
to the Prime Rate at the time of Landlord's having actually incurred said
expenditure, provided, however, that nothing herein shall relieve Tenant of the
responsibility for payments for capital improvements charged to Tenant pursuant
to Paragraph 6(b) hereof;
ii) as a deduction, amounts received by Landlord through
proceeds of insurance to the extent the proceeds are compensation for expenses
which were previously included as Expenses hereunder;
and
iii) without limitation of clause (ii), the cost of repairs or
replacements incurred by reasons of fire or other casualty or caused by the
exercise of the right of eminent domain or compensable to Landlord by virtue of
Landlord's insurance.
If Landlord and/or others shall purchase any item of capital
equipment or make any capital expenditures designed to result in savings or
reductions in Expenses, then the costs for same shall be included in Expenses,
but only to the extent of savings or reductions actually resulting therefrom as
reasonably estimated by Landlord's qualified professional consultant. The costs
of such capital equipment or capital expenditures are to be included in
Expenses for the calendar year in which the costs are incurred and subsequent
calendar years on a straight line basis amortized over such period of time as
reasonably can be estimated as the time in which such savings or reductions in
Expenses are expected to equal Landlord's costs for such capital equipment or
capital expenditure with an interest factor equal to the Prime Rate at the time
of Landlord's having actually incurred said costs. If Landlord and/or others
shall lease any such item of capital equipment designed to result in saving or
reductions in Expenses, then the rentals and other costs paid pursuant to such
leasing shall be included in Expense for the calendar year in which they were
incurred, but only to the extent of savings or reductions actually resulting
therefrom as reasonably estimated by Landlord's qualified professional
consultant.
(b) In the event (i) that the Commencement Date shall occur on
other than the first day of a calendar year, or (ii) that the Expiration Date
or other termination of this Lease shall be a day other than the last day of a
calendar year, or (iii) of any abatement of the Base Rent payable hereunder
pursuant to any provision of this Lease for any period of time not equal to a
full calendar year, or (iv) of any increase or decrease in the rentable area of
the Demised Premises or any increase in the rentable area of the Building, then
in each such event in applying the provisions of this Article 3 with respect to
such calendar year in which such events have occurred,
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appropriate adjustments shall be made to Tenant's Proportionate Share of
Expenses payable pursuant to Paragraph 3(c) so as to apportion such payment on
the basis of (i) the pro rata portion of the calendar year during which such
payment is to be made and/or (ii) the increase or decrease in Tenant's
Proportionate Share of Expenses by virtue of the changes in any such rentable
area.
(c) Tenant shall be responsible for and shall pay to Landlord in
accordance with this Paragraph 3 Tenant's Proportionate Share of Expenses paid
or incurred by Landlord in each Lease Year during the Term, as hereinafter
provided.
i) During each Lease Year Tenant shall pay to Landlord in monthly
installments, on the first day of each calendar month, as Additional Rent,
Tenant's Proportionate Share of Expenses to be paid by Landlord in such Lease
Year.
ii) By the first day of each October of the Term, Tenant shall
deliver to Landlord a proposed calculation of the square footage of the Common
Areas, unoccupied space and space occupied by Landlord and its tenants other
than Tenant in the Building, and the Demised Premises, and the number of
parking spaces in the Parking Area designated for exclusive use by any party
(which calculation shall note the date and extent of any changes in the
occupancy of such square footage and number of parking spaces designated for
exclusive use during the preceding twelve (12) month period), together with
copies of all service and maintenance contracts and records detailing Expenses
incurred during the previous twelve (12) month period, and such other
information as may be required by Landlord for the purpose of calculating
Tenant's Proportionate Share and preparing the projection of expenses for the
upcoming Lease Year (the "Expense Projection"). By the first day of each
November of the Term, Landlord shall deliver to Tenant the proposed Tenant's
Proportionate Share and Expense Projection, which shall include a calculation
of the square footage of the Demised Premises and the number of parking spaces
in the Parking Area designated for exclusive use by any party. The proposed
Expense Projection shall separately identify those Expenses which relate to the
operation and maintenance of the Parking Area. Tenant shall have ten (10) days
from delivery of the proposed Tenant's Proportionate Share and Expense
Projection to object to the calculation of the Tenant's Proportionate Share and
to any item(s) contained in the proposed Expense Projection. Landlord shall
have ten (10) days from delivery of Tenant's objections to accept or reject
such objections. If Landlord shall reject such objections, a committee (the
"Committee") comprised of one Landlord representative and one Tenant
representative shall meet and agree upon the Tenant's Proportionate Share and
the Expense Projection within ten (10) days of Landlord's rejection. If the
Committee is unable to resolve such issue within such time period, the matter
shall be submitted to the General Counsel of each of Landlord and Tenant as
provided in subparagraph (g) below. Tenant's Proportionate Share of such
estimated Expenses shall be paid in equal monthly installments (rounded to the
nearest whole dollar) in advance on the first day of each month by Tenant as
Additional Rent, commencing January 1st of the applicable Lease Year.
iii) If during the course of any Lease Year, Landlord shall have
reason to believe that the Expenses shall be higher than that upon which the
aforesaid Expense Projection was originally based, as set forth in subparagraph
(c)(ii) above, then the Committee shall be entitled to adjust the Expense
Projection by a lump sum invoice, accompanied by a lump sum statement in
reasonable detail, for the months of the Lease Year which precede the revised
Expense Projection and Tenant shall be bound by such readjusted Expense
Projection. The amount of such lump sum invoice shall be paid in full within
twenty (20) days of receipt.
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iv) On the last day of July and the last day of January of each
calendar year of the Term, the Committee shall send to Landlord and to Tenant a
statement of the actual Expenses incurred for the prior six (6) month period of
the Lease Year showing Tenant's Proportionate Share of the Expenses due from
Tenant. In the event that the amount prepaid by Tenant exceeds the amount that
was actually due based upon actual year end cost, the Landlord shall pay to
Tenant an amount equal to the over-charge. In the event that Landlord as
undercharged Tenant, then Landlord shall provide Tenant with an invoice stating
the additional amount due, which amount shall be paid in full by Tenant within
twenty (20) days of receipt. Landlord and Tenant agree that the percentage
square footage and exclusive parking space allocations effective as of the
commencement of the Term of this Lease are as set forth on Exhibit "I" attached
hereto.
(d) Each and every of the aforesaid Expense Projection amounts,
whether requiring lump sum payment or constituting projected monthly amounts
added to the Base Rent, shall for all purposes be treated and considered as
Additional Rent and the failure of Tenant to pay the same as and when due
without demand shall have the same effect as a failure to pay any installment
of the Base Rent and shall afford Landlord all of the remedies provided in this
Lease therefor, including, without limitation, the Late Charge as provided in
Paragraph 2(c) of this Lease.
(e) Tenant acknowledges and agrees that Landlord shall have the right
to change the period of the Lease Year, either before or during the Term, to any
other fiscal year or twelve month period. In the event that Landlord makes such
a change, then the same shall be effective upon written notice to Tenant and,
in such event, Tenant shall pay Tenant's Proportionate Share of Expenses paid
or incurred by Landlord over the Expenses paid or incurred by Landlord for the
period from the end of the initially designated Lease Year, as last billed, to
the beginning of the newly designated Lease Year, prorated for such period,
within twenty (20) days of the rendering by Landlord of the bill for such
interim period.
(f) Landlord and Tenant agree that the demised Premises shall include
the approximately ______ square foot area located in the Building which is used
by Landlord and Tenant for printing, copying, binding and reproducing documents
(the "Print Shop") and the approximately ____ square foot area located in the
Building which is used by Landlord and Tenant for receiving, sending and
sorting mail (the "Mailroom"). Tenant agrees to allow Landlord to utilize the
Mailroom and the Print Shop subject to the conditions and covenants of this
paragraph. Tenant hereby covenants to cause its employees in the Mailroom and
Print Shop to keep accurate records of all services and supplies used by
Landlord. On or before the fifth (5th) day of each month during the Term of
this Lease, Tenant shall deliver to Landlord an accounting of Landlord's use of
the Mailroom and the Print Shop for the previous month. Such accounting shall
enumerate the charges for the services and supplies used by Landlord, including
without limitation, postage, printing and copying costs. Landlord may object to
any item(s) contained in such accounting within ten (10) days of its receipt.
If Landlord and Tenant are not able to agree on the accounting within ten (10)
days of Landlord's objection, the dispute shall be referred to the Committee.
If the Committee is unable to resolve such issue within ten (10) days, the
matter shall be submitted to the General Counsel of each of Landlord and Tenant
as provided in subparagraph (g) below.
(g) For the protection of the Tenant, Landlord shall maintain books of
account, which shall be open to Tenant and its representatives so that Tenant,
at its sole cost and expense, may audit such books of account to determine that
any
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Expenses have, in fact, been paid or incurred, said audit to be subject to the
following conditions:
i) Such audit shall be conducted only during such period as
Tenant is no longer operating and maintaining the Property pursuant to
Paragraph 4 hereof, and must be conducted during regular business hours at the
office where Landlord maintains said books of account;
ii) Tenant shall provide to Landlord fourteen (14) days' prior
written notice;
iii) Tenant is not in default of any of the terms and provisions
of the Lease from the time Tenant provides Landlord with notice through the time
such audit is conducted;
iv) If Tenant wishes to dispute any charges or items of Expense,
Tenant shall deliver to the Landlord a copy of the results of such audit within
fifteen (15) days of its receipt by Tenant; and
v) Tenant shall not request such audit more than two times each
Lease Year.
If, as a result of the audit, any disagreement with respect to any one
or more of the charges or items of Expense exists and is not satisfactorily
settled between Landlord and Tenant, either member of the Committee may submit
a notice of such disagreement to the General Counsel of each of Tenant and
Landlord. Within ten (10) days of Landlord's and Tenant's receipt of such
notice, a senior officer from each of Landlord and Tenant shall meet to resolve
the issues that the Committee was unable to agree upon. If such senior officers
are unable to resolve the issues within thirty (30) days, the matter shall be
referred by either party to an independent certified public accountant to be
mutually agreed upon, and if such an accountant cannot be agreed upon,
JAMS/Endispute may be asked by either party to select an arbitrator whose
decision shall be final and binding upon both parties, who shall jointly share
any cost of such arbitration. Pending resolution of said dispute, Tenant shall
pay to Landlord the sum so billed by Landlord, subject to the ultimate
resolution as described above. Notwithstanding anything herein to the contrary,
once Landlord shall have finally determined the Expenses at the expiration of
each Lease Year as described in Paragraph 3(c)(iv) above, then Tenant shall be
entitled to audit and dispute any charge or item of Expense so established for
a period of one (1) year after such charge is finally established, and Tenant
specifically waives any right to dispute or audit any such charge or item of
Expense at the expiration of said one (1) year period (provided that such
limitation shall not affect pending disputes which were timely initiated within
the limitation period). Tenant shall not be entitled to any such audit right
during any period in which Tenant operates and maintains the Property pursuant
to Paragraph 4 hereof.
(h) With respect to the period commencing on the Commencement Date and
ending on December 31, 1997, Landlord and Tenant hereby agree that the monthly
Tenant's Proportionate Share of the Expenses is $___________. On or prior to
January 15, 1998, the Committee shall review the actual Expenses incurred for
the period commencing on the date hereof to December 31, 1997. If Tenant paid
more than the Tenant's Proportionate Share of the actual Expenses for such
period, Landlord shall refund such difference to Tenant with ten (10) days.
However, if the Tenant's Proportionate Share of actual Expenses for such period
exceeds the amount Tenant paid to Landlord pursuant to this subparagraph (h),
Tenant shall pay to Landlord such difference within ten (10) days.
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4. Operation of Property. Tenant acknowledges that this Lease is made on
the express condition that Tenant agree to perform all services required in
connection with the operation of the Property, on behalf of, as agent for and
at the expense of (subject to Tenant's additional rent obligations hereunder)
Landlord, subject at all times to Landlord's general supervision and control
and to the terms and conditions set forth below.
(a) During the term of this Lease it shall be the duty and
responsibility of Tenant:
(1) To comply with the reporting requirements set forth in
Paragraph 3(c). Except as otherwise provided in this Lease, Tenant shall incur
no expense in connection with the Property that are not provided for in the
Expense Projection without the prior written consent of the Landlord.
(2) To make or cause to be made all necessary repairs to the
Improvements, to purchase all necessary supplies and materials, and to do all
other things necessary to maintain the Property in a clean, safe and orderly
condition and to ensure compliance with all federal, state and local statutes,
ordinances, rules and regulations applicable to the operation of the Property.
Unless otherwise provided for in the Expense Projection for the then current
year, the expense to be incurred for any single repair or purchase shall not
exceed the sum of $3,000.00 without prior authorization by Landlord, except in
the case of emergency, in which case Tenant shall promptly notify Landlord of
the repair or purchase. Tenant shall use its best efforts to make all repairs
and to obtain all materials, supplies and services at the lowest available
cost (best economic price) and shall remit to Landlord any rebate, commission,
or discount allowed in connection therewith.
(3) To contract for such services as shall be necessary and
advisable for the proper operation of the Property, provided, however, that
Tenant shall not contract for any services with respect to which an existing
contract does not exist or for which the estimated cost would exceed the cost
specified therefor in the Expense Projection without in each instance
Landlord's prior written consent thereto. Landlord specifically consents to the
contracts listed on Exhibit H.
(4) To perform all other services reasonably necessary for the
care, protection, maintenance and operation of the Property and the prevention
of waste, damage, or injury thereto. Tenant agrees that consistent with past
practice Tenant shall not contract out those services which Tenant's employees
have been performing at the Property, but shall continue to perform such
services during the term of this Lease. Any subcontracting of such services
shall be void.
(5) To hire, discharge and supervise all persons employed to
carry out Tenant's duties hereunder. It is expressly understood and agreed that
all such employees shall be employees of Tenant and not employees of Landlord.
(6) To establish and maintain complete and orderly files
containing correspondence, payroll records, insurance policies, receipts,
unpaid bills, vouchers and all other documents and papers pertaining to the
Property and the operation and maintenance thereof, all of which shall be and
remain the property of Landlord and shall be available to Landlord and its
representatives for inspection any time during regular business hours.
(7) To promptly investigate and make a full report within 72
hours as to all accidents or claims for damages
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relating to the operation and maintenance of the Property, including any damage
or destruction to the Property and the estimated cost of repair. In addition,
the Tenant shall cooperate and make any and all reports required by an
insurance company in connection therewith with a copy of such reports to be
delivered to the Landlord.
(8) To supervise the moving in and out of tenants and subtenants
and arrange the date thereof so that there shall be a minimum of disturbance to
the operation of the Property and of inconvenience to other tenants and
subtenants.
(9) To cause to be prepared and filed all necessary forms
relating to the maintenance and operation of the Property required by any
federal, state, county, or municipal authority having jurisdiction therefore.
(10) To cooperate with the Landlord's accountants and auditors
in regard to the annual audit or any periodic audits of the books of account of
the Landlord. The Landlord may also conduct an external audit of the Tenant,
provided that the cost of same is paid by the Landlord to said independent
auditor. The Tenant agrees to cooperate with the Landlord's independent
auditor.
(11) To cooperate with Landlord's accountants in regard to the
preparation and filing on behalf of the Landlord's federal, state, city, and
any other income and other filings required by any governmental authority.
(12) To establish and maintain, in accordance with generally
accepted accounting principles, consistently applied, accurate and complete
books of account with proper entries of all receipts, income and disbursements
pertaining to the Property, which books of account shall be and remain the
property of Landlord and shall be available to Landlord and its representative
for inspection at any time during regular business hours.
(13) To review all bills and statements received for services,
work, supplies and other expenditures incurred by or on behalf of Landlord in
connection with the maintenance and operation of the Property and to pay or
cause to be paid in a timely fashion all expenses specified in the Expense
Projection and all other expenses approved by Landlord.
(14) To review periodically all hazard, liability and other
insurance carried for the account of Landlord in connection with the Property
and to maintain in force and effect such insurance coverage with such carriers
as Landlord may designate and approve. (15) To prepare and furnish such
financial reports and statements as may be reasonably requested by
Landlord.
(16) To generally do all things reasonably deemed necessary or
desirable for the proper operation and maintenance of the Property.
(17) To perform, for the Landlord's account and on its behalf,
any lawful act and everything lawful and necessary or desirable in order to
carry out the Tenant's agreements contained in this Paragraph 4(a).
(b) Advances by Tenant. Payments to be made by Tenant at Landlord's
expense shall be advanced by Tenant out of Tenant's own funds to the extent
that such advances do not exceed the amount of Tenant's next monthly
installment of Rent due hereunder, and provided further that Tenant has been
fully
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reimbursed for all advances made prior to the current month. Except as provided
in the previous sentence, Tenant shall not be obligated to make any advance to
or for the account of Landlord or to pay any amount except out of funds held
for or provided by Landlord. If Tenant voluntarily advances funds for
Landlord's account in excess of Tenant's next monthly installment of Rent due
hereunder and any funds held for or provided by Landlord which are for the
payment of any expense not requiring Landlord's prior approval, Landlord shall
reimburse Tenant therefor on demand. Not less than ten (10) business days prior
to Tenant's payment of the monthly installment of Rent due hereunder, Tenant
shall deliver to Landlord an invoice detailing all payments made by Tenant on
Landlord's behalf in accordance with this paragraph and including a calculation
of the Tenant's Proportionate Share of such amount. Provided that Landlord does
not object to such invoice and calculation within five (5) business days after
receipt by Landlord, Tenant shall be entitled to offset the Tenant's
Proportionate Share of the amount of such invoice against Tenant's next
installment of Rent due hereunder. If Landlord and Tenant are not able to agree
on the proper Rent offset amount within ten (10) days of Landlord's objection,
the dispute shall be referred to the Committee. If the Committee is unable to
resolve such issue within ten (10) days, the matter shall be submitted to the
General Counsel of each of Landlord and Tenant as provided in Paragraph 3(g).
(c) Tenant's Overhead. Landlord shall not be responsible for the
payment of Tenant's general overhead or administrative expenses.
(d) Tenant's Compensation. Tenant acknowledges that Tenant's
responsibilities to operate the Property hereunder are in consideration of this
Lease and that Tenant shall not be entitled to any management fee or other
separate consideration.
(e) Termination of Agency. Landlord reserves the right to terminate
the agency created under this Paragraph 4, without cause, upon thirty (30) days
written notice to Tenant, upon which termination the rights and obligations of
the parties under this Paragraph 4, including but not limited to Tenant's Rent
offset rights, shall be of no further force and effect. Within thirty (30) days
of termination of the rights and obligations of the parties under this
Paragraph 4, the parties shall account to each other with respect to all
uncompleted business, and the Tenant shall deliver to the Landlord all leases,
subleases, corporate files, service agreements, books and records, and other
instruments relating to the Property and the Landlord that may be in possession
of the Tenant.
5. Covenants as to Condition of Demised Premises and Compliance with Laws.
(a) In the event that the Building or any of the equipment affixed
thereto or stored therein should be damaged as a result of any act of Tenant,
its agents, servants, employees, invitees or contractors, Tenant shall, upon
demand, pay to Landlord the cost of all required repairs, including structural
repairs. Tenant shall commit no act of waste and shall take good care of the
Demised Premises and the equipment affixed thereto and stored therein, shall
maintain the Demised Premises in good condition and state of repair and, upon
the Expiration Date or other termination of this Lease, shall deliver up the
Demised Premises in good order and condition, wear and tear from a reasonable
use thereof and the effects of casualty and condemnation excepted. Landlord
shall perform, or cause to be performed, all such maintenance and repairs and
Tenant shall pay to Landlord the costs incurred therefor as Additional Rent
within twenty (20) days of receipt of an invoice for such work.
(b) Tenant, at Tenant's expense, shall promptly
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comply with all laws, rules, regulations and ordinances, of all governmental
authorities or agencies having jurisdiction over the Demised Premises, and of
all insurance bodies (including, without limitation, the Board of Fire
Underwriters), at any time duly issued or in force, applicable to the Demised
Premises or any part thereof or to Tenant's use thereof, including, without
limitation the Americans with Disabilities Act ("Laws" or, as the context
requires, "laws"). Nothing contained herein shall obligate Tenant to make any
structural repairs or modifications to the Demised Premises, or repairs or
modifications to any portions within the Demised Premises of the Building,
HVAC, fire safety (including without limitation, sprinklers), electrical,
plumbing or other systems, unless as a result of any Law applicable to Tenant's
particular manner of use of the Demised Premises as opposed to Laws applicable
to the Building or business offices generally. In no event shall the Demised
Premises be construed to include any Common Areas for purposes of this
Paragraph 5(b).
(c) Landlord shall perform all maintenance and make all repairs to the
Common Areas in accordance with standards of Class A office buildings in the
Virginia Beach, Virginia area. In addition, Landlord shall perform all
maintenance and make all repairs to the Common Areas that are necessary to
comply with any applicable laws, the costs of which shall be shared with Tenant
as an Expense.
(d) Landlord has made no representations or warranties whatsoever
with respect to the Property, other than those expressly set forth in this
Lease. The Demised Premises shall be delivered to Tenant "as-is" and Landlord
shall have no obligation to perform any work at the Property, or provide any
work allowances or tenant funds to prepare the Demised Premises for Tenant's
use. Without limiting the generality of the foregoing, Tenant acknowledges that
Landlord shall not be required to erect demising walls around the Demised
Premises. Tenant acknowledges that Tenant is Landlord's predecessor-in-interest
to the Property, and as such, has made its own independent investigations and
inquiries as it has deemed appropriate with respect to the condition and
current occupancy of the Property the status of title thereto, and that in
making its decision to enter into this Lease Tenant is not relying upon nor has
Landlord made any representations or warranties with respect to any such
matters.
6. Tenant Alterations.
(a) All fixtures, equipment, improvements, alterations, installations
which are attached to the Demised Premises; any additions and appurtenances
made by Tenant to the Demised Premises; and any Tenant Improvements (excluding
Tenant's trade fixtures, business equipment, movable partitions, and personal
property), shall become the property of Landlord upon installation. Not later
than the last day of the Term, Tenant shall, at its expense, remove from the
Demised Premises all of Tenant's trade fixtures, business equipment, movable
partitions, personal property, and any Alterations made by Tenant after
Landlord has notified Tenant of its approval of the same on the condition that
such Alteration must be removed prior to the last day of the Term pursuant to
this Paragraph 6. Tenant, at its sole cost and expense, shall repair injury
done by or in connection with the installation or removal of its property or
Alterations required to be removed in accordance herewith. Any equipment,
fixtures, goods or other property of Tenant not removed by Tenant upon the
termination of this Lease, or upon any quitting, vacating, or abandonment of
the Demised Premises, shall be considered as abandoned, and Landlord shall have
the right, without any notice to Tenant, to sell or otherwise dispose of the
same, at the expense of Tenant, and shall not be accountable to Tenant for any
part of the proceeds of such sale, if any.
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Landlord may have any such property stored at Tenant's sole risk and expense.
(b) Tenant, without Landlord's prior consent, shall have the right to
make non-structural alterations, installations, additions or improvements in or
to the Demised Premises that (i) involve a total cost of not more than Ten
Thousand Dollars ($10,000.00), (ii) do not require a building permit to be
issued by any governmental authority to legally make same, (iii) do not affect
any existing Building systems outside the Demised Premises and do not impair or
adversely affect any existing Building systems within the Demised Premises, and
(iv) do not result in a violation of the Permitted Use of the Demised Premises.
No other alterations, installations, additions or improvements (structural or
non-structural) shall be made by Tenant without Landlord's express prior
written approval. Landlord agrees that approval of such other alterations,
installations and improvements shall not be unreasonably withheld, conditioned
or delayed. Tenant shall give Landlord prior written notice of any proposed
alterations, installations, additions or improvements ("Alterations") which
require Landlord's approval with copies of proposed plans. Tenant shall supply
Landlord with as-built plans upon completion of the Alterations. Landlord shall
have the right to require as a condition of its approval that Tenant remove any
Alteration made to the Demised Premises prior to the expiration of the Lease
and to restore the Demised Premises to the condition existing prior to said
Alteration, provided that Landlord notifies Tenant of such condition at the
time of Landlord's approval. All such Alterations shall be done at Tenant's
sole expense and the making thereof shall not interfere with the use of the
Building by other Landlord. Tenant agrees to indemnify, defend and hold
harmless Landlord from any and all costs, expenses, claims, causes of action,
damages and liabilities of any type or nature whatsoever (including, but not
limited to, reasonable attorneys fees and costs of litigation) arising out of
or relating to the making of the Alterations by Tenant. Nothing herein
contained shall be construed as constituting the permission of Landlord for a
contractor, subcontractor or mechanic to file a construction lien claim against
the Demised Premises or the Building and Tenant agrees to secure the removal of
any such lien which a contractor, subcontractor or mechanic purports to file
against the Demised Premises or the Building by payment, bonding or otherwise
pursuant to law. All such Alterations shall be effected in compliance with all
applicable laws, ordinances, rules and regulations of government bodies having
or asserting jurisdiction over the Demised Premises and/or the Building.
7. Various Negative Covenants by Tenant. Tenant agrees that it shall not,
without Landlord's prior written consent, which consent may be withheld in
Landlord's sole discretion:
(a) do anything in or near the Building which will increase the rate
of fire insurance on the Building;
(b) permit the accumulation of waste or refuse matter in or near the
Demised Premises, except in containers provided therefor;
(c) mortgage, hypothecate, pledge or encumber this Lease in whole or
in part;
(d) except as expressly permitted herein, allow any signs, lettering
or advertising matter to be erected or attached to the Demised Premises which is
visible from outside of the Demised Premises; or
(e) encumber or obstruct the Common Areas surrounding the Demised
Premises, nor cause same to be encumbered
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or obstructed, nor encumber or obstruct any access ways to the Demised
Premises, nor cause same to be encumbered or obstructed.
8. Various Affirmative Covenants of Tenant. Tenant covenants and agrees
that Tenant will:
(a) At any time and from time to time execute, acknowledge and deliver
to Landlord, or to any existing or prospective mortgagee, purchaser or ground
lessor of the Building Landlord shall designate, within ten (10) days of
receipt of request therefor, a tenant estoppel certificate in form reasonably
acceptable to the party requesting the same relating to matters customarily
included in tenant estoppel certificates.
(b) Faithfully observe and comply with the rules and regulations
annexed hereto and made a part hereof as Exhibit "D" and such additional
reasonable rules and regulations as Landlord may hereafter at any time or from
time to time communicate in writing to Tenant, and which, in the reasonable
judgment of Landlord, shall be necessary or desirable for the reputation,
safety, care or appearance of the Building, or the preservation of good order
therein, or the operation or maintenance of the Building, or the equipment
thereof, or the comfort of occupants in the Building; provided, however, that
in the case of any conflict between the provisions of this Lease and any rules
and regulations, the provisions of this Lease shall control. Landlord shall not
be liable to Tenant for violation of any rule or regulation by its employees,
agents, visitors, invitees, subtenants or licensees.
9. Casualty and Insurance.
(a) In the event of partial or total destruction of the Building or
the Demised Premises by reason of fire or any other cause, Tenant shall
immediately notify Landlord of same and, subject to the provisions of this
Paragraph 9(a), Landlord shall promptly restore and rebuild the Building and/or
the Demised Premises at Landlord's expense (but only to the extent of the
insurance proceeds covering such damage actually received by Landlord) unless
Landlord elects by notice to Tenant within ninety (90) days of said destruction
not to restore and rebuild the Building and/or Demised Premises, and, in such
case, upon a date specified in said notice by Landlord, this Lease shall
terminate. If Landlord elects to restore and rebuild the Demised Premises, then
during the period of restoration of any such area, if any portion of the
Demised Premises are rendered untenantable by said damage, Tenant shall be
relieved of the obligation to pay that portion of the rent herein reserved
which relates to said untenantable area.
(b) Tenant may request copies of any insurance policies affecting the
Building and/or the Demised Premises. Landlord shall provide such copies within
ten (10) business days. Landlord and Tenant waive all rights of recovery
against each other and the additional insureds for any loss, damages, or injury
of any nature whatsoever to property or persons for which the waiving party is
insured.
(c) During the Term, each party shall maintain in effect in each
insurance policy required under this Lease a waiver of subrogation in favor of
the other party and the additional insureds from its then-current insurance
carriers, and shall upon request of the other party (made not more frequently
than quarterly) furnish evidence of such currently effective waiver. Such
waiver shall be in customary form and, without limitation, shall provide that
no cancellation or lapse thereof or change therein shall be effective until
after thirty (30) days' written notice to the parties at the addresses
specified in Paragraph 17 of this Lease.
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(d) Landlord shall maintain or cause to be maintained: (i) commercial
general public liability insurance in respect of the Building(which for the
purposes of this Paragraph 9(d) includes the Demised Premises) with limits of
not less than _____ Million Dollars ($__,000,000) combined single limit for
bodily injury or death and property damage in any one occurrence, including
water damage and sprinkler leakage legal liability; and (ii) fire and extended
coverage insurance (including, without limitation, rent insurance) in respect
of the Building for the benefit of Landlord and Tenant. The fire and extended
coverage insurance with respect to the Building shall be in the amount of full
replacement value. Landlord shall have the right to provide any insurance
maintained or caused to be maintained by it under blanket policies. All
insurance premiums are hereby deemed to be included in the definition of
"Expenses," and Tenant shall pay its pro rate shares of all such insurance
premiums.
(e) Tenant understands that Landlord will not carry insurance of any
kind on Tenant's personal property and that Tenant shall be obligated to repair
any damage thereto or replace same. Tenant shall throughout the Term hereof, at
its own expense, provide or cause to be provided and kept in force, commercial
general liability insurance against claims of personal injury or death and
property damage caused by an occurrence upon, in or about the Demised Premises,
or the Parking Area, which shall afford protection to limits of not less than
the amount of $3,000,000 in respect of personal injury or death to any one
person and in respect of injury of death to any number of persons arising out
of any one accident, and against property damage in respect of any instance of
property damage. Tenant shall include Landlord as an additional insured under
its liability insurance policies. Tenant shall furnish to Landlord as
reasonably requested, certificates of insurance evidencing the existence of
insurance as required by this paragraph. All such policies shall be issued by
companies of recognized responsibility licensed to do business in the state in
which the Property is located.
10. Indemnification.
Tenant shall indemnify and hold Landlord harmless from and against all
claims, liability, costs and expense (including reasonable attorneys' fees and
disbursements) arising out of or in connection with (i) Tenant's use or
occupancy of the Demised Premises, (ii) any accident, injury or damage
occurring in or about the Property caused by the negligence of Tenant, its
agents, servants, contractors or employees in connection with Tenant's
provision of maintenance and other services in its capacity as Landlord's agent
in operating and maintaining the Property, (iii) any accident, injury or damage
occurring in or about the Demised Premises during the Term of this Lease, and
not caused by the negligence of Landlord, its agents (other than Tenant),
servants, contractors or employees and (iv) any breach, violation or
non-performance by Tenant of any term, condition or provision of this Lease.
Landlord shall indemnify and hold Tenant harmless from against all claims,
liability, costs and expense (including reasonable attorneys' fees and
disbursements) arising out of or in connection with (i) Landlord's use and
occupancy of the Property other than the Demised Premises, (ii) any accident,
injury or damage occurring in or about the Property other than the Demised
Premises, and not caused by the negligence or willful misconduct of Tenant,
its agents, servants, contractors or employees, or acts taken outside the scope
of Tenant's agency hereunder, and (iii) any breach, violation or
non-performance by Landlord of any term, condition or provision of this Lease.
The indemnities set forth in this Paragraph 10 shall survive the Expiration
Date or sooner termination of this Lease.
11. Non-Liability of Landlord. Landlord shall not be liable for (and
Tenant shall make no claim for) any property
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damage or personal injury which may be sustained by Tenant or any other person
as a consequence of the failure, breakage, leakage, inadequacy, defect or
obstruction of the water, plumbing, steam, sewer, waste or soil pipes, roof
drains, leaders, gutters, valleys, downspouts, or the like or of the
electrical, gas, power, conveyor, refrigeration, sprinkler, air conditioning or
heating systems, elevators or hoisting equipment; or Tenant's agents,
employees, guests, licensees, invitees, subtenants, assignees or successors; or
attributable to any interference with, interruption or failure of any services
or utilities to be furnished or supplied by Landlord. Tenant shall give
Landlord prompt written notice of the occurrence of any events set forth in
this Paragraph 11.
12. Remedies and Termination Upon Tenant Default.
(a) In the event that:
(1) any Base Rent, or any Additional Rent or other charge payable
hereunder on a monthly basis by Tenant to Landlord, on any date upon which the
same becomes due, and such default shall continue for five (5) days after the
same becomes due; or
(2) Tenant shall default in payment of any Additional Rent or any
other charge payable hereunder which is not due and payable hereunder on a
monthly basis, on any date upon which the same becomes due, and such default
shall continue for five (5) days after Landlord shall have given to Tenant a
written notice specifying such default; or
(3) Tenant shall default in the due keeping, observing or
performing of any covenant, agreement, term, provision or condition of
Paragraph l(c) of this Lease on the part of Tenant to be kept, observed or
performed and if such default shall continue and shall not be remedied by
Tenant within one (1) business day after Landlord shall have given to Tenant a
written notice specifying the same; or
(4) Tenant shall default in the due keeping, observing or
performing of any covenant, agreement, term, provision or condition of this
Lease on the part of Tenant to be kept, observed or performed (other than a
default of the character referred to in clauses (1), (2), or (3) of this
Paragraph 12(a), and if such default shall continue and Tenant has not cured
such default within thirty (30) days after Landlord shall have given to Tenant
a written notice specifying the same; then, Landlord may, in addition to any
other remedies herein contained, as may be permitted by law, without being
liable for prosecution therefor, or for damages, reenter the Demised Premises
and have and again possess and enjoy the same; and as agent for Tenant or
otherwise, re-let the Demised Premises and receive the rents therefor and
apply the same first to the payment of such expenses, reasonable attorney fees
and costs, as Landlord may have been put to in re-entering and repossessing the
same and in making such repairs and alterations as may be necessary and second
to the payment of the rents due hereunder. Tenant shall remain liable for such
rents as may be in arrears and also the rents as may accrue subsequent to the
re-entry by Landlord to the extent of the difference between the rents reserved
hereunder and the rents, if any, received by Landlord during the remainder of
the unexpired Term hereof, after deducting the aforementioned expenses, fees
and costs; the same to be paid as such deficiencies arise and are ascertained
each month. Landlord, at its option, may require Tenant to pay in a single
lump sum payment, at the time of such termination or reentry, as the case may
be, a sum which represents the present value (using a discount rate of six
percent (6%) per annum of the excess of the aggregate of the Base Rent which
would have been
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payable by Tenant for the period commencing with such termination or re-entry,
as the case may be, and ending on the originally fixed Expiration Date of the
Term, over the aggregate rental value of the Demised Premises for the same
period. Nothing herein shall impose upon Landlord the duty to mitigate its
damages in the event of a default by Tenant, and the parties hereto agree that
Landlord shall not be obligated to do so.
(b) Upon the occurrence and continuance beyond the applicable notice
and cure period of any of the events set forth in the preceding subparagraph
(a) of this Paragraph 12, or should Tenant be adjudicated a bankrupt or
insolvent, or placed in receivership, or should proceedings be instituted by or
against Tenant for bankruptcy, insolvency, receivership, agreement of
composition, or assignment for the benefit of creditors (which proceedings
against Tenant are not dismissed within ninety (90) days after the same are
instituted), or if this Lease or the estate of Tenant hereunder shall pass to
another by virtue of any court proceedings, writ of execution, levy, sale, or
by operation of law, Landlord may, if Landlord so elects, at any time
thereafter, terminate this Lease and the Term hereof upon giving to Tenant or
to any trustee, receiver, assignee or other person in charge of or acting as
custodian of the assets or property of Tenant, five (5) days' notice in writing
of Landlord's intention so to do. Upon the giving of such notice, this Lease
and the Term hereof shall end on the date fixed in such notice as if the same
date was the Expiration Date; and Landlord shall have the right to remove all
persons, goods, fixtures and chattels therefrom by any lawful means without
liability for damages.
13. Remedies Cumulative: Non-Waiver By Landlord. The various rights,
remedies, options and elections of Landlord expressed herein are cumulative and
the failure of Landlord to enforce strict performance by Tenant of the
conditions and covenants of this Lease, to exercise any election or option, or
to resort or have recourse to any remedy herein conferred, or the acceptance by
Landlord of any installment of rent after any breach by Tenant, in any one or
more instances, shall not be construed or deemed to be a waiver or a
relinquishment for the future by Landlord of any such conditions and covenants,
options, elections or remedies, but the same shall continue in full force and
effect.
14. Services: Electric Energy.
(a) Landlord shall (i) supply heating, ventilation, and air
conditioning to the Demised Premises in accordance with the HVAC Specifications
attached hereto as Exhibit "E"; (ii) provide snow and ice removal for the
parking area, sidewalks and driveways in a reasonably expeditious manner; and
(iii) provide refuse removal from a dumpster to be provided on site to be used
for normal paper waste attendant to an office building; (iv) supply hot and
cold running water to the Demised Premises; and (v) provide elevator service.
"Business Hours" as used in this Lease, means the generally customary daytime
business hours of Tenant but not before 8:00 A.M. or after 6:00 P.M. on
weekdays and 8:00 A.M. to 1:00 P.M. on Saturdays, and not including Sundays and
Building Holidays. Tenant agrees at all times to cooperate fully with Landlord
and to abide by all the regulations and requirements which Landlord may
reasonably prescribe for the proper functioning and protection of such HVAC
system. Landlord shall clean the Demised Premises in accordance with the
cleaning schedule annexed hereto as Exhibit "F". The cost of the services and
utilities provided pursuant to this Paragraph 14(a) is included in Expenses as
defined in Paragraph 3(a). So long as Landlord is providing the services listed
in this subparagraph (a), in the event of a failure of one of the same, Tenant
shall provide Landlord with notice of the same. Upon receipt of such notice,
Landlord agrees promptly, diligently
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and with continuity to take all reasonable steps to remedy such failure. If the
failure of any one of those services continues for more than five (5)
consecutive business days after Tenant has provided such notice to Landlord and
renders all or a portion of the Demised Premises untenantable, Landlord agrees
that Tenant shall be entitled to a proportionate abatement of Base Rent and
Additional Rent with respect to the portion of the Demised Premises so affected
for the full period of such failure until the affected portion of the Demised
Premises is again tenantable, and Tenant acknowledges that this abatement shall
be the Tenant's sole remedy in the event of the foregoing event.
(b) Provided Tenant is not then in default of this Lease beyond the
expiration of any applicable notice and cure period, Landlord shall provide to
Tenant overtime services and utilities when and to the extent reasonably
requested by Tenant. Tenant shall pay to Landlord, as Additional Rent, a charge
for such additional service and utilities determined in accordance with the
schedule attached hereto as Exhibit "G", which charge shall cover the actual
cost of Landlord in providing such overtime services and the applicable cost of
the depreciation of the HVAC equipment, including, without limitation, the cost
of the utility usage, the cost of maintenance, repairs and inspections of
Building systems, and employee and administrative costs related to such
services. Such charge shall constitute a direct charge to Tenant and not an
Expense as defined in Paragraph 3.
(c) Landlord reserves the right, without liability to Tenant and
without constituting any claim of constructive eviction, to stop or interrupt
temporarily any heating, lighting, ventilating, air conditioning, gas, steam,
power, electricity, water or other service and to stop or interrupt temporarily
the use of the Building facilities at such times and for as long as is
necessitated by reason of accidents, strikes, or the making of repairs,
alterations or improvements, or inability to secure a proper supply of fuel,
gas, steam, water, electricity, labor or supplies, or by reason of any other
similar or dissimilar cause beyond the reasonable control of Landlord. Except
as specifically provided in Paragraph 14(a) hereof, no such stoppage or
interruption shall entitle Tenant to any diminution or abatement of rent or
other compensation nor shall this Lease or any of the obligations of Tenant be
affected or reduced by reason of any such stoppage or interruption.
(d) Landlord shall furnish to Tenant, through the transmission
facilities installed in the Demised Premises, electric energy to be used by
Tenant, at Tenant's expense as provided for in this Paragraph 14, in the
Demised Premises in such reasonable quantity as shall be sufficient to meet
Tenant's ordinary business needs for lighting and the operation of its business
machines, including, without limitation, photocopy equipment and computer and
data processing equipment, provided that Landlord shall not be obligated to
provide such electrical energy in any amount in excess of an average connected
load of six (6) watts of electric consumption for all purposes per square foot
of rentable area.
(e) Landlord shall charge Tenant for such electrical usage at
Landlord's actual cost therefor (based upon the average kilowatt hour cost of
each invoice) without mark-up and Tenant shall pay such amount to Landlord
as Additional Rent hereunder within thirty (30) days of Landlord's giving
Tenant notice of the amount then due.
(f) In the event that Tenant shall require electric energy for use in
the Demised Premises in excess of the quantity to be initially furnished as
herein provided and if, in Landlord's judgment, such excess requirements cannot
be furnished unless additional risers, conduits, feeders, switchboards and/or
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appurtenances are installed in the Building, Landlord, upon written request of
Tenant, shall proceed with reasonable diligence to install such additional
risers, conduits, feeders, switchboards and/or appurtenances, provided the same
and the use thereof shall not cause permanent damage or injury to the Building
or the Demised Premises, or cause or create a dangerous or hazardous condition,
or entail excessive or unreasonable alterations or repairs, or interfere with
or disrupt other occupants of the Building, and Tenant agrees to pay all costs
and expenses incurred by Landlord in connection with such installation.
(g) Landlord shall in no way be liable or responsible to Tenant for
any loss or damage or expense which Tenant may sustain or incur by reason of any
failure, inadequacy or defect in the character, quantity or supply of
electrical energy furnished to the Demised Premises except for actual damage
other than property damage suffered by Tenant by reason of any negligence or
intentional misconduct of Landlord or its agents, employees or contractors.
15. Subordination. Subject to the last sentence of this Paragraph 15, this
Lease shall be subject and subordinate in all respects to all mortgages which
may now or hereafter be placed on the Land, the Building or the Demised
Premises, and also to all renewals, modifications, consolidations and
extensions of such mortgages. Although no instrument or action on the part of
Tenant shall be necessary to effectuate such subordination, Tenant shall,
nevertheless, execute and deliver such further instruments confirming such
subordination as may be desired by the holder of any such mortgage. Subject to
the last sentence of this Paragraph 15, if any mortgage to which this Lease is
subordinate is foreclosed, Tenant shall, on timely request, attorn to the
mortgagee in possession. If Landlord shall notify Tenant that the Demised
Premises or the Building is encumbered by a mortgage, giving in such notice the
name and address of the mortgagee, then notwithstanding anything in this Lease
to the contrary, no notice intended for Landlord shall be deemed properly given
unless a copy thereof is simultaneously sent to such mortgagee in the manner
provided for in Paragraph 17. Notwithstanding anything herein to the contrary,
the aforesaid subordination of this Lease shall be conditioned on Tenant's
receiving, and Landlord agrees to obtain on behalf of Tenant, a subordination,
nondisturbance, and attornment agreement from any existing or future holder(s)
of any mortgages, which agreement shall be in a form satisfactory to such
holder(s) in its sole discretion; however, any charges assessed by the
holder(s) of the aforesaid mortgages in connection with the obtaining of such
agreement shall be paid by Tenant.
16. Curing Tenant's Defaults. If Tenant shall fail or refuse to comply
with and perform any conditions and covenants of this Lease beyond the
expiration of any applicable notice and cure period, Landlord may, if Landlord
so elects, carry out and perform such conditions and covenants, at the cost and
expense of Tenant, and the said cost and expense shall be payable on demand,
or, at the option of Landlord, shall be added to the installment of Base Rent
due immediately thereafter but in no case later than one month after such
demand, whichever occurs sooner, and shall be due and payable as such. This
remedy shall be in addition to such other remedies that Landlord may have
hereunder by reason of the breach of Tenant of any of the covenants and
conditions in this Lease contained.
17. Notices. Any notice, demand, statement or other communication which
under the terms of this Lease or under any statute or law must or may be given
shall be given by hand delivery, or by registered or certified mail, return
receipt requested, or by reputable private overnight delivery service providing
a receipt of delivery or refusal, delivered or
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addressed to the respective parties at the following address:
To Landlord: WizCom International, Ltd.
6 Sylvan Way
Parsippany, New Jersey 07054
Attn: Senior Vice-President - Corporate
Counsel
To Tenant: Avis Rent A Car System, Inc.
900 Old Country Road
Garden City, New York 11530
Attn: General Counsel
Any such notice, demand, statement or other communication shall be deemed to
have been given or made (i) upon delivery if hand delivered, (ii) on the date
of first attempted delivery if mailed postage paid, certified or registered
mail, and (iii) on the next business day if delivered charges prepaid or
charged to sender, to a reputable private overnight delivery service. Any of
the above addresses may be changed at any time by notice given as provided
above. Legal counsel for the respective parties may provide the requisite
notice(s) hereunder on behalf of their respective clients.
18. Quiet Enjoyment. Landlord covenants that Tenant upon keeping and
performing each and every covenant, agreement, term, provision and condition
herein contained on the part and on behalf of Tenant to be kept and performed,
shall quietly enjoy the Demised Premises without hindrance or molestation by
Landlord or by any other person lawfully claiming by, through or under the
same, subject to the covenants, agreements, terms, provisions and conditions of
this Lease and the effects of the application of same. The foregoing covenant
is and shall be, in addition to and not in derogation of Tenant's implied right
to quiet enjoyment.
19. Inspection and Entry by Landlord.
(a) Tenant agrees to permit Landlord and Landlord's agents, employees
or other representatives to show the Demised Premises to any mortgagee or any
persons wishing to rent or purchase the Building or during the last twelve (12)
months of the Term, to prospective tenants or purchasers.
(b) Tenant agrees that, Landlord and Landlord's agents, employees or
other representatives, shall have the right to enter into and upon the Demised
Premises or any part thereof, at all reasonable hours, for the purpose of
inspecting the same, or performing maintenance, or making such repairs or
alterations therein as may be necessary for the safety and preservation
thereof. This clause shall not be deemed to be a covenant by Landlord nor be
construed to create an obligation on the part of Landlord to make any
inspection or repairs which Landlord is not otherwise obligated to make
pursuant to the express provisions of this Lease.
20. Parking. Subject to the rules and regulations imposed by Landlord
hereunder, Tenant shall have the right under this Lease to the exclusive use of
_______ (___) spaces in the Parking Area, as depicted on the parking plan
attached hereto as Exhibit "C", and the nonexclusive use of the remaining
parking spaces in the Parking Area, subject to common use by Landlord, other
tenants of the Building and its and their guests, employees, invitees and
licensees, provided, however, Landlord shall have the right to designate
parking spaces for the exclusive use by Landlord and/or other tenants of the
Building so long as the number of parking spaces available for common use is
not less than seventy percent of the total number of parking spaces not
designated for Tenant's exclusive use.
21. Landlord's Inability to Perform. Except as
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expressly provided herein, this Lease and the obligation of Tenant to pay the
rent hereunder and to comply with the covenants and conditions hereof shall not
be affected, curtailed, impaired or excused because of the Landlord's inability
to supply any service or material called for herein, by reason of any rule,
order, regulation or preemption by any governmental entity, authority,
department, agency or subdivision or for any delay which may arise by reason of
negotiations for the adjustment of any fire or casualty loss or because of
strikes or other labor trouble beyond Landlord's control or for any other
reason constituting Force Majeure. "Force Majeure" shall mean and include those
situations beyond either party's control, including by way of example and not
limitation, acts of God, accidents, strikes, shortages of labor, supplies, or
materials, inclement weather, scheduling of planning board meetings or other
municipal action affects any issuance of construction permits and/or approvals,
or, where applicable, the passage of time while waiting for an adjustment of
insurance proceeds.
22. Condemnation.
(a) In the event that the whole of the Demised Premises shall be
lawfully condemned or taken in any manner for any public or quasi-public use or
purpose or is transferred, under threat of condemnation, by Landlord to any
party having the right of condemnation (any of such acts are referred to herein
as "eminent domain"), this Lease and the Term and estate hereby granted shall
forthwith cease and terminate as of the date of vesting of title (hereinafter
referred to as the "date of taking"), and Tenant shall have no claim against
Landlord for, or make any claim for the value of, any unexpired term of this
Lease, and the Base Rent and Additional Rent shall be apportioned as of such
date.
(b) In the event that any part of the Demised Premises shall be so
condemned or taken, this Lease shall be and remain unaffected by such
condemnation or taking, except that the Base Rent and Additional Rent allocable
to the part so taken shall be apportioned as of the date of taking, and Tenant
shall have no claim against Landlord for, or make any claim for the value of,
the portion of the unexpired Term of this Lease allocable to the part so taken,
provided, however, that the Landlord may elect to cancel this Lease in the
event more than twenty-five percent (25%) of the Demised Premises should be so
condemned or taken, provided such notice of election is given by Landlord to
Tenant not later than sixty (60) days after the date when title shall vest in
the condemning authority. Upon the giving of such notice, this Lease shall
terminate on the thirtieth (30th) day following the date of such notice, and
the Base Rent and Additional Rent shall be apportioned as of such termination
date, and Tenant shall have no claim against Landlord for, or make any claim
for the value of, the unexpired Term of this Lease. Upon such partial taking
and this Lease continuing in force as to any part of the Demised Premises, the
Base Rent and Additional Rent shall be diminished by an amount deemed by
Landlord, in its sole but reasonable judgment, to represent the part of the
Base Rent and Additional Rent properly applicable to the portion or portions of
the Demised Premises which may be so condemned. If, as a result of the partial
taking (and this Lease continuing in force as to the part of the Demised
Premises not so taken), any part of the Demised Premises not taken is damaged,
Landlord agrees with reasonable promptness to commence the work necessary to
restore the damaged portion to substantially the same condition and
tenantability existing immediately prior to the taking.
(c) Nothing herein provided shall preclude Tenant from appearing,
claiming, proving and receiving in the condemnation proceeding Tenant's moving
expenses and the value of trade fixtures and any leasehold improvements paid
for by Tenant,
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provided such claim shall be separate from and shall not adversely affect
Landlord's award.
(d) Subject to the provisions of Paragraph 22(c), the entire award for
any act of eminent domain shall be paid to Landlord, and, in the event of a
partial taking, if this Lease is not canceled pursuant to the provisions of
this Paragraph 22, Landlord, at Landlord's own expense, shall restore the
unaffected part of the Demised Premises to substantially the same condition and
tenantability as existed prior to the taking. Until said unaffected portion is
restored, Tenant shall be entitled to a proportionate abatement of Base Rent
and Additional Rent of that portion of the Demised Premises which is being
restored and is not usable until the completion of the restoration or until the
said portion of the Demised Premises is used by Tenant, whichever occurs
sooner. Said unaffected portion shall be restored within a reasonable time,
provided, however, if Landlord is delayed by Force Majeure, the time for
completion shall be extended for a period equivalent to the delay. If such
partial taking shall occur in the last year of the Term, then, notwithstanding
anything to the contrary set forth in this Lease, either party, irrespective of
the area of the space remaining, may elect to cancel this Lease and the Term
hereby granted, provided such party shall, within sixty (60) days after such
taking, give notice to that effect, and upon the giving of such notice, the
Base Rent and Additional Rent shall be apportioned and paid to the date of
expiration of the term specified, which date shall be not more than thirty (30)
days after the date of such notice, and this Lease and the Term hereby granted
shall cease, expire and come to an end upon the expiration of the period
specified in said notice. If either party shall so elect to end this Lease and
the Term hereby granted, Landlord need not restore any part of the Demised
Premises.
(e) If the temporary use or occupancy of all or any part of the
Demised Premises shall be so taken, (i) the Term shall not be reduced or
affected in any way except as provided in (iv) below, (ii) Tenant shall
continue to be responsible for all of its obligations hereunder and shall
continue to pay all Base Rent and Additional Rent when due, (iii) Tenant shall
be entitled to receive that portion of the award which represents reimbursement
for the cost of restoration of the Demised Premises, compensation for the use
and occupancy of the Demised Premises and for any taking of Tenant's property,
except that, if the temporary period of taking shall extend beyond the
expiration of the Term, the portion of the award representing compensation for
the use and occupancy of the Demised Premises shall be apportioned between
Landlord and Tenant as of the Expiration Date, and Landlord shall receive that
portion of the award which represents reimbursements for the cost of
restoration of the Demised Premises, and (iv) if the date of taking shall occur
during the last year of the Term, and shall exceed twenty-five (25%) of the
Demised Premises, Tenant may elect to cancel this Lease by notice of election
given by Tenant to Landlord not later than sixty (60) days after the date when
title shall vest in the condemning authority. Upon the giving of such notice,
this Lease shall terminate on the thirtieth (30th) day following the date of
such notice, and the Base Rent and Additional Rent shall be apportioned as of
such termination date, with Landlord, and not Tenant, to receive the portion of
the award which represents reimbursement for the cost of restoration of the
Demised Premises and the portion of the award representing compensation for the
use and occupancy of the Demised Premises for the time subsequent to the
cancellation date.
23. Assignment and Subletting. Tenant may not assign or sublease any
portion of the Demised Premises to any other party for the remainder of the
Term, without the prior written consent of the Landlord. Any assignment,
sublease, sale or other transfer, whether voluntary or involuntary, by
operation of law
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or otherwise (including, without limitation, by consolidation, merger or
reorganization), of a majority of the voting stock of Tenant, if Tenant is a
corporation, or a majority of the partnership interests in Tenant, if Tenant is
a partnership, shall be an assignment for purposes of this Paragraph 23 whether
such transfer is accomplished in one (1) transaction or a series of
transactions.
24. Environmental Laws.
(a) Tenant agrees to comply with all applicable environmental laws,
rules and regulations, whether federal, state or local.
(b) Tenant shall not generate, store, manufacture, refine, transport,
treat, dispose of, or otherwise permit to be present on or about the Demised
Premises, any Hazardous Substances with the exception of de minimus quantities
of Hazardous Substances commonly used in the cleaning and maintenance of
general business offices in quantities appropriate to such use, in accordance
with industry standards and in compliance with all applicable environmental
laws, rules and regulations. As used herein, "Hazardous Substance" shall be
defined as any "hazardous chemical", "hazardous substance", "hazardous waste",
or similar term as defined in the Comprehensive Environmental Responsibility
Compensation and Liability Act, as amended (42 U.S.C. 9601, et seq.) or in any
other present or future applicable federal, state or local law, dealing with
environmental protection.
(c) Tenant agrees to indemnify and hold harmless Landlord and each
mortgagee of the Demised Premises from and against any and all liabilities,
damages, claims, losses, judgments, causes of action, costs and expenses
(including the reasonable fees and expenses of counsel) which may be incurred
by Landlord or any such mortgagee or threatened against the Landlord or such
mortgagee, relating to or arising out of any breach by Tenant of this Paragraph
24, which indemnification shall survive the expiration or sooner termination of
this lease.
25. Parties Bound. The covenants, agreements, terms, provisions and
conditions of this Lease shall bind and benefit the respective successors,
assigns and legal representatives of the parties hereto with the same effect as
if mentioned in each instance.
26. Miscellaneous.
(a) This Lease, together with the Exhibits attached hereto, contains
the entire contract between the parties concerning the subject matter hereof.
No representative, agent or employee of Landlord has been authorized to make
any representations or promises with reference to the leasing of the Demised
Premises or to vary, alter or modify the terms hereof, except as stated herein.
No additions, changes or modifications hereof, shall be binding unless reduced
to writing and signed by Landlord and Tenant.
(b) If any clause or provision herein contained be adjudged to be
invalid or unenforceable by a court of competent jurisdiction or by operation
of any applicable law, it shall not affect the validity of any other clause or
provision herein but such other clauses or provisions shall remain in full
force and effect.
(c) The paragraph headings in this Lease are for convenience only and
are not to be considered in construing the same.
(d) This Lease shall be governed by and construed
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in accordance with the laws of the State of Virginia. Each party waives trial
by jury in any action or proceeding arising out of this Lease.
(e) Tenant shall not consent to or permit the imposition of a
construction lien against the Demised Premises, the Building or the Land. If
any construction lien is filed against the Demised Premises, the Building or
the Land as a result of any additions, alterations, repairs, installations,
improvements or any other work or act of Tenant, Tenant shall discharge or bond
same within thirty (30) days from the date of notice of the filing of the lien.
If Tenant shall fall to discharge or bond the lien within such thirty (30) day
period, Landlord may bond or satisfy such lien for the account of Tenant
without inquiring into the validity of the lien or claim and Tenant shall
reimburse Landlord upon demand.
(f) Tenant represents that the undersigned officer(s) have been duly
authorized to enter into this Lease and that the execution and consummation of
this Lease by Tenant does not and shall not violate any provision of any
by-laws, certificate of incorporation, agreement, order, judgment, governmental
regulation or any other obligations to which Tenant is a party or is subject.
Upon execution hereof, Tenant shall deliver a Secretary's certificate
evidencing its authority to execute this Lease. Landlord represents that the
undersigned officer(s) of Landlord have been duly authorized to enter into this
Lease on behalf of Landlord and that the execution and consummation of this
Lease by Landlord does not and shall not violate any provision of any by-laws,
certificate of incorporation, agreement, order, judgment, governmental
regulation or any other obligations to which Landlord is a party or is subject.
(g) This Lease may be signed in counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.
27. Hold Over Tenancy. If Tenant shall hold over after the expiration
of the term of this Lease or any extensions hereof, Tenant shall be deemed to
be occupying the Demised Premises as a holdover tenant without the consent or
permission of Landlord. Tenant acknowledges that holding over beyond the term
of this Lease may cause Landlord damages that are impossible to estimate or
quantify for purposes of this Lease. Therefore, during such tenancy, Landlord
and Tenant agree that Tenant shall pay to Landlord two hundred percent (200%)
of the Base Rent in effect on the Expiration Date plus all other sums due
hereunder, making such payment in accordance with this Lease and Virginia law.
Tenant shall be otherwise bound by all of the terms, covenants and conditions
contained in this Lease.
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IN WITNESS WHEREOF Landlord and Tenant have caused this Lease to be
executed as of the date first above written.
WITNESS: WIZCOM INTERNATIONAL, LTD.
____________________ By:_____________________________
Name:
Title:
ATTEST:
AVIS RENT A CAR SYSTEM, INC.
____________________ By:_____________________________
Name:
Title:
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EXHIBIT A
Description of Demised Premises
26
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EXHIBIT B
Description of Property
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EXHIBIT C
Tenant's Exclusive Parking Spaces
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EXHIBIT D
RULES AND REGULATIONS
1. No sign, placard, picture, advertisement, name or notice
shall be installed or displayed on any part of the exterior
or interior Common Areas of the Building without the prior
written consent of Landlord, which consent Landlord may
withhold using its sole discretion. Landlord shall have the
right to remove, at Tenant's expense and without notice, any
sign installed or displayed in violation of this rule. All
approved signs or lettering on doors and walls shall be
printed, painted, affixed or inscribed at the expense of
Tenant by a person chosen by Landlord.
2. No awning shall be permitted on any part of the Demised Premises.
Tenant shall not place anything against or near glass partitions or
doors or windows which may appear unsightly from outside the Demised
Premises.
3. Landlord shall retain the right to control and prevent
access to the Building of all persons whose presence in the
judgment of Landlord would be prejudicial to the safety,
character, reputation and interests of the Building and its
tenants; provided that nothing herein contained shall be
construed to prevent such access to persons with whom any
tenant normally deals in the ordinary course of its
business, unless such persons are engaged in illegal
activities. No tenant and no employee or invites of any
tenant shall go upon the roof of the Building.
4. All cleaning and janitorial services for the Building and
the Demised Premises shall be provided exclusively through
Landlord and, except with the written consent of Landlord,
no person or persons other than those approved by Landlord
shall be employed by Tenant or permitted to enter the
Building for the purpose of cleaning the same. Tenant shall
not cause any unnecessary labor by carelessness or
indifference to the good order and cleanliness of the
Demised Premises.
5. Landlord will furnish Tenant, free of charge, a reasonable
number of access cards to the Building and the Demised
Premises. Landlord may charge a reasonable amount for any
additional cards requested by Tenant. Tenant shall not
alter any lock or install a new additional lock or bolt on
any door of its Demised Premises. Tenant, upon the
termination of its tenancy, shall deliver to Landlord any
cards which have been furnished to Tenant, and in the event
of loss of any cards so furnished, shall pay Landlord -
therefor.
6. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, any comply with, Landlord's
instructions in their installation.
7. Any freight elevator shall be available for use by all
tenants in the Building, subject to such reasonable
scheduling as Landlord, in its discretion, shall deem
appropriate. No equipment, materials, furniture, packages,
supplies, merchandise or other property will be received in
the Building or carried in the elevators except between such
hours and in such elevators as may be designated by
Landlord.
8. Tenant shall not place a load down upon any floor of the Demised
Premises which exceeds the load per square foot which such floor was
designed to carry and which is allowed by law. Landlord shall have the
right to prescribe the weight, size and position of all equipment,
materials,
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furniture or other property brought into the Building. Heavy objects
shall, if considered necessary by Landlord, stand on such platforms as
determined by Landlord to be necessary to properly distribute the
belonging to Tenant which cause noise or vibration that may be
transmitted to the structure of the Building or to any tenants in the
Building shall be placed and maintained by Tenant, at Tenant's
expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration. The persons employed to move such
equipment in or out of the Building must be acceptable to Landlord.
Landlord shall not be responsible for loss of, or damage to, any such
equipment or other property from any cause, and all damage done to the
Building by maintaining or moving such equipment or other property
shall be repaired at the expense of Tenant.
9. Tenant shall not use or keep in the Demised Premises any
kerosene, gasoline or inflammable or combustible fluid or
material other than those limited quantities necessary for
the operation or maintenance of office equipment. Tenant
shall not use or permit to be used in the Demised Premises
any foul or noxious gas or substance, or permit or allow the
Demised Premises to be occupied or used in a manner
offensive or objectionable to Landlord or other occupants of
the Building by reason of noise, odors or vibrations, nor
shall Tenant bring into or keep in or about the Demised
Premises any birds or animals.
10. Tenant shall not use any method of heating or
airconditioning other than that supplied by Landlord.
11. Tenant shall cooperate fully with Landlord to assure the
most effective operation of the Building's heating and
airconditioning and to comply with any governmental
energysaving rules, laws or regulations of which Tenant has
actual notice, and shall refrain from attempting to adjust
controls other than room thermostats installed for Tenant's
use. Tenant shall keep corridor doors closed and shall
close window coverings at the end of each business day.
12. Landlord reserves the right, exercisable without notice and
without liability to Tenant, to change the name and street
address of the Building.
13. Landlord reserves the right to exclude from the Building,
between the hours of 6 p.m. and 8 a.m. the following day,
or such other hours as may be established from time to time
by Landlord, and on Sundays and legal holidays, any person
unless that person is known to the person or employee in
charge of the Building and has a pass or is properly
identified. Tenant shall be responsible for all persons for
whom it requests passes and shall be liable to Landlord for
all acts of such persons. Landlord shall not be liable for
damages for any error in regard to the admission to or
exclusion from the Building of any person. Landlord
reserves the right to prevent access to the Building In case
of invasion, mob, riot, public excitement or other commotion
by closing the doors or by other appropriate action.
14. Tenant shall close and lock the doors of the Demised Premises and
entirely shut off all water faucets or other water apparatus and
electricity, gas or air outlets before Tenant and its employees leave
the Demised Premises. Tenant shall be responsible for any damage or
injuries sustained by other tenants or occupants of the Building or by
Landlord for noncompliance with this rule.
15. Tenant shall not obtain for use on the Demised Premises ice,
drinking water, food, beverage, towel or other similar
services, or accept barbering or bootblacking services upon
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the Demised Premises, except at such hours and under such regulations
as may be fixed by Landlord.
16. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed
and no foreign substance of any kind whatsoever shall be thrown into
same. The expense of any breakage, stoppage or damage resulting from
the violation of this rule shall be borne by the tenant who, or whose
employees or invitees shall have, caused it.
17. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets or any other goods or
merchandise to the general public in or on the Demised Premises.
Tenant shall not make any room-to-room solicitation of business from
other tenants in the Building.
18. Tenant shall not install any radio or television antenna, loudspeaker
or other device on the roof or exterior walls of the Building. Tenant
shall not interfere with radio or television broadcasting or reception
from or in the Building or elsewhere.
19. Tenant shall not mark, drive nails, screw or drill into the
partitions, woodwork or plaster or in way deface the Demised
Premises or any part thereof. Landlord reserves the right
to direct electricians as to where and how telephone and
telegraph wires are to be introduced to the Demised
Premises. Tenant shall not cut or bore holes for wires.
Tenant shall not affix any floor covering to the floor of
the Demised Premises in any manner except as approved by
Landlord. Tenant shall repair any damage resulting from
noncompliance with this rule.
20. Tenant shall not install, maintain or operate upon the Demised
Premises any vending machine without the written consent of Landlord,
which Landlord shall not unreasonably withhold, condition, or delay.
21. Canvassing, soliciting and distribution of handbills or any other
written material, and peddling in the Building are prohibited, and
each tenant shall cooperate to prevent same.
22. Landlord reserves the right to exclude or expel from the Building any
person who, in Landlord's judgment, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the
Rules and Regulations of the Building.
23. Tenant shall store all of its trash and garbage within the
Demised Premises. Tenant shall not place in any trash box
or receptacle any material which cannot be disposed of in
the ordinary an customary manner of trash and garbage
disposal or which does not originate from materials utilized
by Tenant at the Demised Premises. All garbage and refuse
disposal shall be made in accordance with directions issued
from time to time by Landlord.
24. The Demised Premises shall not be used for the storage of
merchandise held for sale to the general public, or for
lodging or for manufacturing of any kind, nor shall the
Demised premises be used for any improper, immoral or
objectionable purpose. No cooking shall be done or
permitted by any tenant on the Demised Premises, except that
use by Tenant of Underwriters' Laboratory-approved equipment
for brewing coffee, tea, hot chocolate and similar beverages
shall be permitted, provided that such equipment and use is
in accordance with all applicable federal, state, county and
city laws, codes, ordinances, rules and regulations.
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25. Tenant shall not use in any space or in the public halls of the
Building any hand trucks except those equipped with rubber tires and
side guards or such other material-handling equipment as Landlord may
approve. Tenant shall not bring any other vehicles of any kind into
the Building.
26. Without the written consent of Landlord, which Landlord shall not
unreasonably withhold, condition, or delay, Tenant shall not use the
name of the Building in connection with or in promoting or advertising
the business of Tenant except as Tenant's address.
27. Tenant shall comply with all safety, fire protection and
evacuation procedures and regulations established by
Landlord or any governmental agency.
28. Tenant assumes any and all responsibility for protecting the
Demised Premises from theft, robbery and pilferage.
29. The requirements of Tenant will be attended to only upon
written application to the office of the Building Manager by
an authorized individual.
30. Tenant shall not park its vehicles in any parking areas designated by
Landlord as areas for parking by visitors to the Building. Tenant
shall not leave vehicles in the Building parking areas overnight.
31. Landlord may waive any one or more of these Rules and Regulations for
the benefit of Tenant or any other tenant, but no such waiver by
Landlord shall be construed as a waiver of such Rules and Regulations
in favor of Tenant or any other tenant, nor prevent Landlord from
thereafter enforcing any such Rules and Regulations against any or all
of the tenants of the Building.
32. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the
terms, covenants, agreements and conditions of any lease of premises
in the Building. In the event of conflict between the provisions
contained in this Lease and these Rules and Regulations the provisions
of this lease shall prevail.
33. Landlord reserves the right to make such other and reasonable Rules
and Regulations as, in its judgment, may from time to time be needed
for safety and security, for care and cleanliness of the Building and
the complex and for the preservation of good order therein. Tenant
agrees to abide by all such Rules and Regulations hereinabove stated
and any additional rules and regulations which are adopted.
34. Tenant shall be responsible for the observance of all of the
foregoing rules by Tenant's employees, agents, clients,
customers, invitees and guests.
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EXHIBIT E
HVAC OPERATING SPECIFICATIONS
The design criteria for the HVAC system are as follows:
1. Outside design conditions:
Summer: 91 degrees dry bulb/76 degrees wet bulb
Winter: 14 degrees dry bulb
2. Inside design conditions:
Summer: 75 degrees dry bulb
Winter: 70 degrees dry bulb
3. Interior heat gains
Lights: 2.5 watts/sq. ft.
Density of people: 1 per 200 sq. ft.
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EXHIBIT F
CLEANING SERVICES
1. General Cleaning:
a. Empty and clean all waste receptacles,
removing waste to a designated central
location for disposal. Landlord is to
provide for disposal of waste.
b. Empty and clean all ash trays and
receptacles.
c. Remove all fingerprints, smudges and other
marks from metal partitions, doors and other
surfaces.
d. With respect to a kitchen area (if applicable), rinse out
coffee pots, turn off burners to coffee pots, spot clean
walls for coffee spillage, clean sink, and clean tables and
chairs in such area.
Weekly
e. Hand dust and clean all office furniture that has been
cleared of papers, boxes, and/or personal items, ledges,
chair rails, baseboards and window sills.
2. Floors
Group A - Granite, ceramic tile, marble, terrazzo
Group B - Linotile, asphalt, koroseal, plastic
vinyl, wood, rubber, or other composition
floors and base.
Nightly
a. All floors in Group A to be swept, wet mopped
and rinsed.
b. All floors in Group s to be dry mopped.
Weekly
c. All floors in Group B to be damp mopped.
Every six (6) months
d. All floors to be scrubbed and buffed.
3. Vacuuming
Nightly
a. Vacuum or carpet sweep all rugs and carpeted
areas.
Monthly
b. Brush or dust by hand carpet edges
inaccessible to high pressure vacuum
attachments.
4. High Dusting
Every six (6) months
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a. Dust all clothes closet shelving, pictures,
charts, graphs, etc.
b. Dust clean all vertical surfaces such as
walls, partitions, door bucks and other
surfaces.
c. Dust all venetian blinds.
Special service
Records and General Storage Area
Floors are to be broom cleaned weekly. Files and exposed open
shelves dusted once every three (3) months.
6. Other Services
a. Landlord shall supply all soap, towels, and toilet tissue in
both men's and women's rooms and sanitary napkins in coin
dispensers in the women's rooms.
b. Landlord shall supply all coin operated
dispensers and shall be responsible for the
servicing of same and for the collection of
money from the machine.
c. During the term of this Lease the dispenser price for
sanitary napkins shall not exceed a price equal to 150` of
the wholesale price paid by Landlord.
7. Carpeting
In addition to the aforementioned nightly and weekly
vacuuming, Landlord shall do the following:
Weekly
All carpeting is to be spot cleaned removing all stains,
smudges, and unsightly appearances.
8. Glass
Monthly
a. Clean all partitions and furniture
glass.
Annually
b. clean all perimeter windows, both
inside and out.
9. Kitchen Areas
Nightly
a. Clean all tables, chairs, counters
and sinks.
b. Spot cleaning of walls.
c. Cleaning of coffee pots.
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10. General
a. All lights are to be extinguished
and the doors as specified by
Tenant are to be locked after
cleaning is completed.
b. All personnel are to be uniformed
and clean in appearance during
business hours.
c. Cleaning of all private bathrooms
shall be subject to additional
charges shall be determined on a
case-by-case basis.
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EXHIBIT G
Schedule of Charges for Overtime Services and Utilities
37
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EXHIBIT H
Service Contracts
38
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EXHIBIT I
Initial Building Square Footage
and Parking Space Percentage Allocations
A. Building Square Footage Percentage Allocations
Landlord or Other Tenants
Tenant (includes Mailroom and Print
Shop)
Common Areas (other than Mailroom
and Print Shop)
Unoccupied
TOTAL BUILDING SQUARE FOOTAGE 157,584
Initial Tenant's Proportionate Share
B. Parking Space Percentage Allocations
Exclusively Landlord or Other
Subtenants
Exclusively Tenant
TOTAL PARKING SPACES 820
Initial Tenant's Proportionate Share
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TABLE OF CONTENTS
1. Definitions......................................................1
2. Sublease and Description of the Premises.........................3
3. Term.............................................................3
4. Use..............................................................3
5. Rent.............................................................4
6. No Landlord Obligations..........................................6
7. Holding Over.....................................................6
8. End of Term......................................................7
9. Assumption Agreement and Covenants...............................7
10. Right of Entry...................................................8
11. Alterations, Additions and Improvements..........................9
13. Indemnity.......................................................10
14. Environmental Covenant..........................................10
15. Licenses and/or Permits.........................................11
16. Notices.........................................................11
17. Compliance with Law.............................................11
18. Default.........................................................11
19. General.........................................................14
20. Committee Findings..............................................17
21. Binding Arbitration.............................................17
EXHIBIT A Description of the Premises............................20
EXHIBIT B Description of the Subleased Premises..................21
EXHIBIT C Square Footage Percentage Allocations..................22
EXHIBIT D Tenant's Exclusive Parking Spaces......................23
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SUBLEASE AGREEMENT (this "Agreement"), made as of this __ day of
September, 1997, between WIZCOM INTERNATIONAL, LTD., a Delaware corporation,
having an office at 900 Old Country Road, Garden City, New York ("Landlord"),
and AVIS RENT A CAR SYSTEM, INC., a Delaware corporation, having an office at
900 Old Country Road, Garden City, New York ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord is the tenant under that certain Lease Agreement
between OXY USA, Inc., as landlord, and Tenant, as tenant, dated October 24,
1990, as amended by letter dated March 6, 1992, and as assigned from Tenant to
Landlord pursuant to Absolute Assignment and Assumption of Sublease dated
October 17, 1996, for premises located at 4500 South 129th East Avenue, Tulsa
Oklahoma (the "Prime Lease"); and
WHEREAS, Tenant wishes to sublease from Landlord and Landlord wishes
to sublease to Tenant a portion of the premises demised under the Prime Lease
subject to the terms of this Sublease Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings.
(a) Annual Operating Budget: Shall mean the annual operating budget
determined by the Committee for the Premises based on estimated Operating
Expenses.
(b) Base Rent: As defined in paragraph 5(a) hereof.
(c) Building Costs. Shall have the meaning prescribed for such term as
set forth in the Prime Lease.
(d) Committee: Shall mean a two person committee, consisting of one
Landlord employee and one Tenant employee.
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(e) Event of Default: As defined in paragraph 18(a) hereof.
(f) Exterior Common Areas: Shall have the meaning prescribed for such
term as set forth in the Prime Lease.
(g) Master License Agreement: Shall mean the Master License Agreement
dated as of July 30, 1997 among HFS Car Rental, Inc., Tenant and Wizard Co.,
Inc.
(h) Premises: Shall mean the premises demised under the Prime Lease,
which includes office space in two (2) buildings, as more particularly
described on Exhibit A attached hereto and made a part hereof.
(i) Prime Landlord: Shall mean the holder of the Landlord's interest
in the Prime Lease.
(j) Prime Lease: As defined in the recitals hereof.
(k) Project Common Areas. Shall have the meaning prescribed for such
term in the Prime Lease.
(l) Operating Expenses: Shall mean with respect to any calendar year,
any and all expenses actually incurred by the Landlord during such year, other
than charges due to the Prime Landlord under the Prime Lease, which expenses
are either (A) made pursuant to the approved Annual Operating Budget, (B)
approved additional expenditures, including without limitation, (i) all capital
and operating expenditures, (ii) the cost of supplies, utilities, maintenance,
insurance, governmental fees and assessments, and real estate taxes, and (iii)
all other operating expenses as are reasonably necessary for the proper and
efficient operation of the Premises. Operating Expenses shall in no event
include Building Costs.
(m) Partial Year: Shall mean the period commencing on the date of
this Agreement and ending on December 31, 1997.
(n) Rent: Shall mean the sum, payable monthly from Tenant to Landlord,
of the Base Rent and the Tenant Share of Operating Expenses.
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(o) Subleased Premises: As defined in paragraph 2 hereof.
(p) Tenant Share: As defined in paragraph 2(c) hereof.
(q) Tenant Costs: Shall have the meaning prescribed for such term as
set forth in the Prime Lease.
(r) Term: As defined in paragraph 3 hereof.
2. Sublease and Description of the Premises.
(a) Landlord hereby subleases to Tenant, and Tenant hereby subleases
from Landlord, on and subject to the terms, conditions and covenants
hereinafter set forth, the portions of the Premises which have been
cross-hatched on Exhibit B attached hereto (hereinafter called the "Subleased
Premises").
(b) Landlord hereby grants to Tenant the non-exclusive right of access
to and use of the Project Common Areas and Exterior Common Areas which have not
been designated for Landlord's exclusive use upon the same terms and conditions
as Landlord is entitled to use the same under the Prime Lease. Notwithstanding
the foregoing, Tenant shall have the exclusive use of ______ (______) parking
spaces as designated on Exhibit D hereto, subject to and upon the same terms
and conditions as Landlord is entitled to use same under the Prime Lease.
(c) The following shall be known as the "Tenant Share": the square
footage of the Subleased Premises expressed as a percentage of the sum of the
total square footage of the Premises.
3. Term. This Agreement shall expire upon the earlier to occur of (i)
the expiration of the Prime Lease or (ii) the termination of the Master License
Agreement.
4. Use. Tenant shall use the Subleased Premises as general and
executive offices and uses incidental thereto, and for no other purpose.
Tenant will not do or suffer any waste, damage, disfigurement or injury to the
Subleased Premises or any other part of
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the Premises, nor shall Tenant use or allow the Subleased Premises, or any
other part of the Premises, to be used or occupied for any unlawful purpose or
in any manner which violates the terms of any applicable law or any term of the
Prime Lease.
5. Rent. For and during the Term, Tenant shall pay monthly to
Landlord, all Rent due and payable:
(a) Tenant shall pay as base rent for the Subleased Premises ("Base
Rent"), Tenant's pro rata percentage of the rent and all other payments or
other amounts provided for in the Prime Lease due to the Prime Landlord,
including but not limited to Tenant Costs, as determined according to the
Tenant Share of the Subleased Premises. Notwithstanding the foregoing, Tenant
shall pay one hundred percent (100%) of the $40,000 annual base rental
component set forth in Section 5(c)(iv) of the Prime Lease. The parties agree
that Building Costs which are directly attributable to Landlord's or Tenant's
use or occupancy shall be the sole responsibility of such party.
(b) Tenant shall also pay as additional rent the Tenant Share of
Operating Expenses. The parties agree, however, that to the extent reasonably
practicable, the parties shall operate their respective portions of the
Premises independent of one another without shared facilities, services or
costs. Operating Expenses shall be calculated as follows:
By the first day of each October of the Term, Tenant shall deliver to
Landlord such information as may be required by Landlord for the purpose of
preparing the Annual Operating Budget. By the first day of each November of the
Term, Landlord shall deliver to Tenant the proposed Annual Operating Budget for
the Premises. Tenant shall have ten (10) days from delivery of the proposed
Annual Operating Budget to object to any item(s) contained in the proposed
Annual Operating Budget. Landlord shall have ten (10) days from delivery of
Tenant's objections to accept or reject such objections. If Landlord shall
reject such objections, the Committee shall meet and agree upon the Annual
Operating Budget for the Premises within ten (10) days of Landlord's rejection.
If the Committee is unable to resolve such issue within such time period, the
matter shall be sub-
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mitted to the General Counsel of each of Landlord and Tenant as provided in
paragraph 20 hereof.
On the last day of July and the last day of January of each calendar
year of the Term, the Committee shall review the actual Operating Expenses
incurred at the Premises, including any Operating Expense(s) incurred in the
immediately preceding six (6) month period which was not included in the Annual
Operating Budget. If Tenant paid more than the Tenant Share of the actual
Operating Expenses of the Premises or the Base Rent for each such six month
period, Landlord shall refund such difference to Tenant within ten (10) days.
However, if the Tenant Share of actual Operating Expenses of the Premises or
Base Rent exceeds the amount Tenant paid to Landlord pursuant to the Annual
Operating Budget, Tenant shall pay to Landlord such difference within ten (10)
days. Landlord and Tenant agree that the percentage square footage allocations
are as set forth on Exhibit C attached hereto.
(c) The Rent shall be payable in advance on the first day of each
month commencing as of October 1, 1997, at the office of Landlord or such other
place as Landlord may designate, without any set-off, offset, abatement or
deduction whatsoever, except as otherwise specifically provided herein.
Landlord shall submit the entire rent due under the Prime Lease to the Prime
Landlord. If Tenant fails to deliver the Rent on the first of each month of the
Term, Landlord shall advance the Rent to Prime Landlord, but Tenant shall be
liable for interest on the Rent due from the date advanced by Landlord until
the date reimbursement is made to Landlord by Tenant at the lesser of the
highest rate permitted by law or the rate of eighteen percent (18%) per annum.
(d) With respect to the Rent due to Landlord for the Partial Year,
Landlord and Tenant hereby agree that the monthly Base Rent due is $_____ and
that the monthly Tenant Share of the Operating Expenses is $_____. On or prior
to January 15, 1998, the Committee shall review the actual Operating Expenses
incurred at the Premises for the period commencing on the date hereof to
December 31, 1997. If Tenant paid more than the Tenant Share of the actual
Operating Expenses of the Premises for the Partial Year, Landlord shall refund
such difference to Tenant within ten (10) days. Howev-
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er, if the Tenant Share of actual Operating Expenses of the Premises for the
Partial Year exceeds the amount Tenant paid to Landlord pursuant to this
paragraph 5(d), Tenant shall pay to Landlord such difference within ten (10)
days.
(e) With respect to any partial month during the Term, the monthly
Rent and any other sums due under this Agreement attributable to such partial
month shall be prorated according to the number of days in such month which are
included in the Term and Tenant shall be obligated to pay such prorated rent
and other sums due within three (3) days after the Commencement Date, in the
case of the first partial month of the Term or at the time such payment is
otherwise due with respect to a partial month at the end of the Term.
6. No Landlord Obligations. Landlord has made no representations or
warranties whatsoever with respect to the Premises, other than those expressly
set forth in this Agreement. The Subleased Premises shall be delivered to
Tenant "as-is" and Landlord shall have no obligation to perform any work in the
Premises, or provide any work allowances or tenant funds to prepare the
Subleased Premises for Tenant's use. Without limiting the generality of the
foregoing, Tenant acknowledges that Landlord shall not be required to erect
demising walls around the Subleased Premises. Tenant acknowledges that Tenant
is Landlord's predecessor-in-interest to the Prime Lease, and as such, has made
its own independent investigations and inquiries as it has deemed appropriate
with respect to the nature and status of the leasehold estate created by and
the premises demised under the Prime Lease and the title thereto, and that in
making its decision to enter into this Sublease Tenant is not relying upon nor
has Landlord made any representations or warranties with respect to any such
matters.
7. Holding Over. Tenant hereby agrees that time shall be of the
essence with respect to its obligation to vacate and surrender possession of
the Subleased Premises upon the expiration of the term of this Agreement. In
the event that Tenant shall fail to vacate and surrender possession of the
Subleased Premises in accordance herewith, Tenant shall pay to Landlord an
amount equal to twice the Rent for each month or portion thereof, after the
expiration or termination of the term of
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this Agreement during which Tenant fails to vacate or surrender possession of
the Subleased Premises; provided however, that nothing herein contained shall
be deemed to permit Tenant to continue to remain in possession of the Subleased
Premises beyond the expiration or termination of the term of this Agreement.
8. End of Term. On the expiration of this Agreement, the Tenant shall
quit and surrender to Landlord the Subleased Premises, broom clean, in the same
order and condition which existed on the commencement date of this Agreement,
normal wear and tear and damage by casualty not caused by the Tenant or its
employees, agents, invitees, licensees excepted, free of all of Tenant's
personal property. The provisions of this Paragraph 8 shall survive the
expiration or earlier termination of this Agreement.
9. Assumption Agreement and Covenants.
(a) Tenant hereby agrees to be bound by and comply with all of the
provisions of the Prime Lease which are to be observed or performed during the
Term hereof by Landlord as tenant thereunder. All provisions contained in the
Prime Lease, are expressly agreed to and shall be binding upon Tenant herein as
though Tenant were the tenant thereunder.
(b) If for any reason other than Landlord's default under the Prime
Lease, the Prime Lease terminates prior to the expiration or any earlier
termination of the Term of this Agreement, Tenant shall not have any claim
whatsoever against Landlord arising or resulting from such termination of the
Prime Lease.
(c) In the event of cancellation or termination of the Prime Lease
prior to the expiration thereof or any extensions or renewals thereof, or in
the event of the surrender thereof, whether voluntary, involuntary or by
operation of law, prior to the expiration of the Term of this Agreement, if
requested by the Prime Landlord under the Prime Lease, Tenant shall make full
and complete attornment to the Prime Landlord for the balance of the Term of
this Agreement, upon the same covenants and conditions as are contained in this
Agreement so as to establish direct privity of estate and contract between the
Prime Landlord and the Tenant and
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with the same force and effect as though this Agreement were originally made
directly from the Prime Landlord to Tenant. Tenant shall make all rent payments
thereafter directly to the Prime Landlord. Notwithstanding the foregoing, in
lieu of any voluntary surrender, cancellation or termination of the Prime Lease
by Landlord prior to the expiration of the term thereof, Landlord agrees,
subject to receipt of the Prime Landlord's consent if required, to assign to
Tenant all of its right, title and interest in, to and under the Prime Lease,
without recourse, representation or warranty, and Tenant agrees that Tenant
shall, upon ten (10) days written notice from Landlord, accept such assignment
and assume, and indemnify and save Landlord from and against any claims with
respect to, the obligations and liabilities of the Tenant under the Prime Lease
arising on and after the date of such assignment.
(d) To the extent the provisions of the Prime Lease do not
conflict with specific provisions herein contained, such provisions are hereby
incorporated into this Agreement as fully as if completely rewritten herein,
and Tenant agrees to be bound to Landlord by all of the terms of the Prime
Lease, and to assume and perform all of the obligations and responsibilities
that Landlord has under the Prime Lease with respect to the Subleased Premises.
The relationship between Landlord and Tenant hereunder shall be the same as
that between Prime Landlord and Landlord under the Prime Lease.
(e) TENANT FURTHER AGREES TO INDEMNIFY, DEFEND AND HOLD
HARMLESS LANDLORD FROM AND AGAINST ANY AND ALL CLAIMS OR LIABILITIES THAT MAY
BE ASSESSED AGAINST LANDLORD WITH RESPECT TO THE PRIME LEASE FOR THE SUBLEASED
PREMISES OR TENANT'S ACCESS TO AND USE OF THE SUBLEASED PREMISES DURING THE
TERM.
10. Right of Entry. Landlord or its authorized agents shall have the
right to enter the Subleased Premises at any time (a) in the case of an
emergency, or (b) to (i) inspect the Subleased Premises, (ii) show the
Subleased Premises to prospective tenants, purchasers or lenders and (iii) make
repairs or other alterations and additions thereto or to any other portion of
the Premises. In the case of clause (b) hereof, Landlord and its authorized
agents shall have the right to enter only during normal business hours.
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11. Alterations, Additions and Improvements.
(a) Tenant shall not make any alterations or improvements
to the Subleased Premises without the prior written consent of Prime Landlord,
if so required under the Prime Lease. Tenant shall make no electrical
installations, alterations, additions or changes to electrical equipment or
appliances without the prior written consent of Prime Landlord in each
instance, if so required under the Prime Lease.
(b) Tenant shall at all times comply with the rules,
regulations, terms and conditions applicable to service, equipment, wiring and
requirements of the public utility supplying electricity to the Premises.
Tenant's use of electric current shall not exceed the capacity of existing
feeders to the Premises or the risers or wiring installations serving the
Subleased Premises and Tenant shall not use any electrical equipment which, in
Landlord's sole reasonable judgment, will overload such installations or
interfere with the use thereof by other tenants of the Premises.
12. Insurance.
(a) Tenant understands that Landlord will not carry insurance
of any kind on Tenant's personal property and that Tenant shall be obligated to
repair any damage thereto or replace same.
(b) Tenant shall throughout the Term hereof, at its own
expense, provide or cause to be provided and kept in force, commercial general
liability insurance against claims of personal injury or death and property
damage caused by an occurrence upon, in or about the Subleased Premises, which
shall afford protection to limits of not less than the amount of $3,000,000 in
respect of personal injury or death to any one person and in respect of injury
of death to any number of persons arising out of any one accident, and against
property damage in respect of any instance of property damage. Tenant shall
include Landlord and Prime Landlord as additional insureds under its liability
insurance policies. All policies of insurance maintained by Tenant hereunder
shall include a waiver by the insurer of all rights of subrogation against
Landlord and Prime Landlord in connection with any loss, damage or claims
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thereby insured against and shall require at least thirty (30) days advance
notice to Landlord and Prime Landlord before any termination or cancellation of
such insurance will be effective. Tenant shall furnish to Landlord as
reasonably requested, certificates of insurance evidencing the existence of
insurance as required by this paragraph. All such policies shall be issued by
companies of recognized responsibility licensed to do business in the state in
which the Premises are located.
(c) If Tenant shall request copies of any insurance policies
carried by Landlord affecting the Premises and/or the Subleased Premises,
Landlord shall supply Tenant with such copies within ten (10) business days.
13. Indemnity. Tenant shall indemnify and hold Landlord harmless from
and against all claims, liability, costs and expense (including reasonable
attorneys' fees and disbursements) arising out of or in connection with (i)
Tenant's use or occupancy of the Subleased Premises, (ii) any accident, injury
or damage occurring in or about the Subleased Premises during the Term of this
Agreement, and not caused by the negligence of Landlord, its agents, servants,
contractors or employees and (iii) any breach, violation or non-performance
by Tenant of any term, condition or provision of this Agreement. The provisions
of this paragraph 13 shall survive the expiration or earlier termination of
this Agreement.
14. Environmental Covenant. Tenant shall not use the Premises for any
activity that would violate any environmental law or regulation of any
governmental body or agency having jurisdiction over the Subleased Premises
(collectively, "Environmental Laws"). Specifically, other than small quantities
of cleaning and janitorial supplies used in the ordinary course of business, in
accordance with industry standards and in compliance with all Environmental
Laws, Tenant shall not knowingly bring on the Premises any solid waste,
petroleum, petroleum products, hydrocarbons, "hazardous substances", "hazardous
materials", or "toxic substances", as defined in the Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Hazardous
Materials Transportation Act, and the Resources Conservation and Recovery Act,
each as amended.
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15. Licenses and/or Permits. Tenant shall obtain, at Tenant's sole
cost and expenses, all necessary certificates, licenses or permits to occupy
and do business in the Premises, which may be required with respect to Tenant
by any governmental authority.
16. Notices. All notices and other communication to be given hereunder
shall be given in writing and shall be sent by courier, or postage prepaid,
certified or registered mail, return receipt requested, addressed to the
applicable party at the Premises. All notices delivered in accordance with the
terms hereunder shall be deemed to be delivered on the earlier of actual
receipt or three (3) business days following the postmark date thereof. The
attorney for each party hereto shall have the right to deliver any notices on
behalf of its client.
17. Compliance with Law. Tenant, at its sole cost and expense, shall
comply with all laws and governmental regulations applicable to the Subleased
Premises, except to the extent that any such laws or governmental regulations
require structural alterations or improvements to the Subleased Premises or the
Premises. Tenant shall not do or permit to be done any act or thing upon the
Premises which will invalidate or be in conflict with any insurance policies
covering the Premises and fixtures and property therein; and shall not do, or
permit anything to be done in or upon the Premises, or bring or keep anything
therein which shall increase the rate of fire insurance on the Premises or on
property located therein.
18. Default.
(a) Each of the following events shall be an "Event of
Default" hereunder:
(1) failure or refusal of Tenant to make timely
payment of any sum, including Rent, due and payable under this Agreement within
five (5) days after the same shall become due and payable;
(2) if Tenant shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due;
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(3) if Tenant shall commence or institute any case,
proceeding or other action (A) seeking relief on its behalf as debtor or to
adjudicate it a bankrupt or insolvent or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property;
(4) if Tenant shall make a general assignment for
the benefit of creditors;
(5) if any case, proceeding or other action shall be
commenced or instituted against Tenant (A) seeking to have an order for relief
entered against it as debtor or to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts under
any existing or future law of any jurisdiction, domestic or foreign, relating
to debtors or (B) seeking appointment of a receiver trustee, custodian or other
similar official for it or for all or any substantial part of its property,
which either (i) results in any such entry of an order for relief, adjudication
of bankruptcy or insolvency or such an appointment or the issuance of entry of
any other order having a similar effect or (ii) remains undismissed for a
period of thirty (30) days;
(6) if any case proceeding or other action shall be
commenced or instituted against Tenant seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its property which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within thirty (30) days from the entry thereof;
(7) if Tenant shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clauses (2), (3), (4), (5) or (6) above;
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(8) if a trustee, receiver or other custodian is
appointed for any substantial part of the assets of Tenant which appointment is
not vacated or effectively stayed within seven (7) business days;
(9) if Tenant shall default in the observance or
performance of any term, covenant or condition of this Agreement on Tenant's
part to be observed or performed and Tenant shall fail to remedy such default
within ten (10) days after notice by Landlord to Tenant of such default, or if
such default is of such a nature that it cannot be completely remedied within
said period of ten (10) days and Tenant shall not commence within said period
of ten (10) days, or shall not thereafter diligently prosecute to completion,
all steps necessary to remedy such default; or
(10) failure or refusal by Tenant to perform or
comply with any of the agreements, terms, covenants or conditions provided in
the Prime Lease.
(b) Upon the expiration or earlier termination of this
Agreement, Landlord may reenter the Subleased Premises with or without process
of law using such force as may be reasonably necessary and remove all persons
and property therefrom, and Landlord shall not be liable for damages or
otherwise by reason of reentry or termination of the terms of this Agreement.
Notwithstanding such termination by Landlord, the liability of Tenant for the
rents and charges provided for herein shall not be relinquished, diminished, or
extinguished for the balance of the term of this Agreement. It is further
understood that Tenant will pay in addition to the rent and other sums agreed
to be paid hereunder, all of the reasonable costs and expenses (including
attorneys' fees) in enforcement of the terms of this Agreement and collection
of all amounts due hereunder.
(c) In the event of any Event of Default by Tenant under the
terms, provisions, conditions or covenants of the Prime Lease or this
Agreement, Landlord may, subject to the terms of the Prime Lease, immediately
or at any time thereafter take repossession of the Subleased Premises and cure
such breach for the account and at the expense of Tenant. In addition to the
foregoing, upon the occurrence of an Event of Default, Landlord shall be
entitled to: (i) all of the rights and
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remedies reserved by or granted to Prime Landlord in the Prime Lease after an
Event of Default; (ii) cure such Event of Default in which event Tenant shall
reimburse Landlord on demand for all costs and expenses reasonably expended or
incurred by Landlord in curing such default together with interest thereon from
the date that such costs or expenses were expended or incurred by Landlord
until the date that reimbursement is made to Landlord by Tenant at the lesser
of the highest rate permitted by law or the rate of eighteen percent (18%) per
annum; (iii) exercise any and all rights and remedies provided by law; and/or
(iv) immediately terminate this Agreement. If Landlord at any time by reason of
Tenant's default is compelled or elects (i) to pay any sum of money, or (ii) to
do any act which will require the payment of any sum of money, or (iii) to
incur any expense, including reasonable attorneys' fees, in instituting or
prosecuting any action or proceeding to enforce Landlord's rights hereunder,
the sum or sums so paid by Landlord with interest thereon at the lesser of the
highest rate permitted by law or the rate of eighteen percent (18%) per annum,
from the date of payment thereof shall be deemed to be additional rent
hereunder and shall be due from Tenant to Landlord on the first day of the
month following the payment of such respective sums or expenses.
(d) All rights and remedies of Landlord herein enumerated
shall be cumulative and none shall exclude any other right or remedy allowed by
law or the Prime Lease and said rights and remedies may be exercised and
enforced concurrently and whenever and as often as occasion therefor arises.
19. General.
(a) Paragraph Headings. The article and/or paragraph headings
in this Agreement are intended for convenience only and shall not be taken into
consideration in any construction or interpretation of this Agreement or any of
its provisions.
(b) Severability. If any term or provision of this
Agreement or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, there shall be deemed to be made such
minimal changes as are necessary to make it valid and
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enforceable, and the remainder of this Agreement or the application of such
term or provision to persons or circumstances other than those as to which it
is held invalid or unenforceable shall not be affected thereby.
(c) Assignment and Subletting. Tenant may not assign Tenant's
rights under this Agreement or sublet all or portions of the Subleased Premises
without obtaining Prime Landlord's, when necessary, and Landlord's prior
written consent to each such assignment or subletting, which consent may be
unreasonably withheld by such parties. Any assignment or subletting shall be
expressly subject to all the terms and conditions of the Prime Lease and this
Agreement. No assignment or subletting shall relieve or release Tenant from
Tenant's duties, obligations and liabilities under this Agreement. Tenant shall
not assign Tenant's rights hereunder without first obtaining and delivering to
Landlord a written agreement from each such assignee whereby each such assignee
agrees to be bound by the terms and conditions of this Agreement. No such
assignment or subletting shall constitute a novation. In the event of the
occurrence of an Event of Default while the Subleased Premises are assigned or
sublet, Landlord, in addition to any other remedies provided herein or by law,
may, at Landlord's option, collect directly from such assignee or subtenant all
payments becoming due under such assignment or subletting and apply such
payments against any sums due to Landlord hereunder. No direct collection by
Landlord from any such assignee or sublessee shall relieve or release Tenant
from the payment or performance of Tenant's duties and obligations hereunder.
(d) Successors and Assigns. Subject to the foregoing
restrictions on subletting and assignment, this Agreement is binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(e) Complete Agreement and Amendment. This Agreement sets
forth the complete agreement between Landlord and Tenant with respect to the
subject matter hereof, and this Agreement may not be terminated, amended or
modified in any respect except by agreement in writing executed by both
Landlord and Tenant.
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(f) Survival. All duties and obligations of Tenant under
this Agreement which are unpaid or unperformed shall survive the expiration or
any earlier termination of the Term of this Agreement until paid or performed.
(g) Jurisdiction and Venue. This Agreement shall be
construed and governed in accordance with the laws of the State in which the
Subleased Premises are located. Additionally, the parties submit to the
nonexclusive jurisdiction of the courts of the State of New York and the United
States District Court located in Nassau County, New York and appellate courts
from any thereof, and waive any objection to the laying of venue of any
proceeding sought in any such court.
(h) Non-Waiver. Failure on the part of a party hereto in any
one or more instances to enforce any of its rights which arise in connection
with this Agreement, or to insist upon the strict performance of any of the
terms, conditions or covenants of this Agreement, shall not be construed as a
waiver or relinquishment for the future of any such rights, terms, conditions
or covenants. No waiver of any condition of this Agreement shall be valid
unless it is in writing, and executed by the party against whom such waiver is
sought to be enforced.
(i) Subordinate to Prime Lease. This Agreement is subject and
subordinate to all of the terms, covenants and conditions of the Prime Lease
and to all of the rights of Landlord under the Prime Lease and to any existing
subleases of the Premises; provided, however, if there is any conflict between
the terms, covenants and conditions contained in the Prime Lease and this
Agreement, the terms, covenants and conditions contained in this Agreement
shall control as between Landlord and Tenant.
(j) Time of the Essence. Time shall be of the essence for all
purposes under this Agreement.
(k) Multiple Counterparts. This Agreement may be executed
in multiple counterparts each of which shall be deemed an original, and all of
which together shall constitute but one and the same agreement.
16
<PAGE>
20. Committee Findings. Any findings of the Committee for which it has
been authorized to determine pursuant to paragraph 5 of this Agreement,
including but not limited to, the Annual Operating Budget, the Subleased
Premises, and Tenant Share, shall be binding upon Landlord and Tenant, absent
manifest error. If the Committee is unable to agree upon the terms of any issue
under its review, or it disagrees as to the interpretation of such terms,
either member of the Committee may submit a notice of disagreement to the
General Counsel of each of Tenant and Landlord. Within ten (10) days of
Landlord's and Tenant's receipt of such notice, a senior officer from each of
Landlord and Tenant shall meet to resolve the issues that the Committee was
unable to agree upon. If such senior officers are unable to resolve the issues
within thirty (30) days, the matter shall be submitted to binding arbitration,
as provided below.
21. Binding Arbitration.
(a) Any dispute arising from this Agreement is to be
resolved pursuant to arbitration, to be conducted in Nassau County, New York,
in accordance with the provisions of this Section, and judgment upon the award
rendered may be entered in any court having jurisdiction thereof.
(b) The party hereto desiring to arbitrate a dispute
pursuant to this Section shall give notice (a "Dispute Notice") to that effect
to the other party. Within five (5) days after such Dispute Notice has been
delivered, Landlord and Tenant shall each designate one (1) arbiter and the two
(2) arbiters so chosen shall appoint a third arbiter (the "Arbiters") within
two (2) days thereafter. Each Arbiter appointed shall be competent, qualified
by training and experience and an individual having not less than ten (10)
years experience relating to commercial real estate in the state of New York.
(c) The arbitration shall be conducted in accordance with the
then prevailing commercial arbitration rules of the JAMS/Endispute
Comprehensive Arbitration Rules and Procedure ("JAMS"), except that to the
extent that the New York State Civil Practice and Law Rules, or any successor
statute, imposes requirements
17
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different from JAMS in order for the decision of the Arbiters to be enforceable
in the courts of the State of New York, such requirements shall be complied
with in the arbitration. Within ten (10) days after the Dispute Notice has been
delivered, both parties shall make whatever presentations they wish to the
Arbiters. Immediately thereafter, the Arbiters shall attempt to cause Landlord
and Tenant to agree on a resolution to the dispute and failing that, the
Arbiters shall immediately make their decision. The Arbiters' decision may be
made orally provided the Arbiters confirm such decision in writing within two
(2) business days thereafter. Copies of the Arbiters' decision shall be sent to
Landlord and to Tenant and shall be binding on both. Any costs incurred by or
payable to the Arbiters in any such proceeding shall be shared equally by
Landlord and Tenant unless otherwise provided herein or otherwise agreed, and
each party shall bear the costs of its own attorneys and other experts. The
Arbiters shall have no power to vary or modify any of the provisions of this
Agreement, and its powers and jurisdiction are hereby limited accordingly.
During the consideration of any issue by the Arbiters pursuant to this Section,
Landlord and Tenant shall observe and perform each and every one of its
obligations hereunder, including, without limitation, the obligation to pay
timely all Rent, including but not limited to Base Rent and the Tenant Share of
Operating Expenses, that may be or become due or payable hereunder.
18
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Agreement as of the day and year first above written.
LANDLORD:
WIZCOM INTERNATIONAL, LTD., a Dela-
ware corporation
By: ___________________________
Name:
Title:
TENANT:
AVIS RENT A CAR SYSTEM, INC., a
Delaware corporation
By: ______________________________
Name:
Title:
19
<PAGE>
EXHIBIT A
Description of the Premises
<PAGE>
EXHIBIT B
Description of the Subleased Premises
<PAGE>
EXHIBIT C
Square Footage Percentage Allocations
Landlord or Other Subtenants of Landlord 77.62%
Tenant 22.38%
Tenant Share 22.38%
22
<PAGE>
EXHIBIT D
Tenant's Exclusive Parking Spaces
23
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions........................................... 2
2. Sublease and Description of the Premises.............. 4
3. Term.................................................. 6
4. Use................................................... 6
5. Rent.................................................. 6
6. Operation of Premises................................. 9
7. No Landlord Obligations............................... 14
8. Holding Over.......................................... 14
9. End of Term........................................... 15
10. Assumption Agreement and Covenants.................... 15
11. Right of Entry........................................ 16
12. Alterations, Additions and Improvements............... 17
13. Insurance............................................. 18
14. Indemnity............................................. 19
15. Environmental Covenant................................ 19
16. Licenses and/or Permits............................... 20
17. Notices............................................... 20
18. Compliance with Law................................... 20
19. Default............................................... 21
20. General............................................... 24
21. Committee Findings.................................... 26
22. Binding Arbitration................................... 26
EXHIBIT A Description of the Premises
EXHIBIT B Description of the Subleased Premises
EXHIBIT C Service and Maintenance Contracts Affecting the
Premises
EXHIBIT D Tenant's Exclusive Parking Area
EXHIBIT E Initial Building Square Footage and Parking Space
Percentage Allocations
<PAGE>
SUBLEASE AGREEMENT (this "Agreement"), made as of this __ day
of September, 1997, between WIZCOM INTERNATIONAL, LTD., a Delaware corporation,
having an office at 900 Old Country Road, Garden City, New York ("Landlord"),
and AVIS RENT A CAR SYSTEM, INC., a Delaware corporation, having an office at
900 Old Country Road, Garden City, New York ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord is the tenant under the following two (2)
certain sublease agreements (collectively, the "Prime Lease"):
A. Indenture of Sublease dated August 9, 1966 between
American Bosch Arma Corporation and Tenant (900 Old Country Road, Garden City,
New York); Supplemental Letter Agreement to Sublease dated August 31, 1966;
Letter Agreement dated December 8, 1966; Supplemental Agreement dated July 21,
1971 between Marine Midland Bank-New York and Tenant (850 Old Country Road,
Garden City, New York); Supplemental Agreement dated August 17, 1977 between
Marine Midland Bank and Tenant; Supplemental Letter Agreement dated April 7,
1993, between Corporate Property Investors and Tenant; as assigned from Tenant
to Landlord pursuant to Absolute Assignment and Assumption of Sublease dated
October 17, 1996, for premises located at 900 Old Country Road, Garden City,
New York and 850 Old Country Road, Garden City, New York and any and all
modifications and amendments relating thereto.
B. Sublease Agreement dated August 17, 1977, by and between
Marine Midland Bank and Tenant; Supplemental Letter Agreement dated October 24,
1979, between Marine Midland Bank and Tenant; Supplemental Letter Agreement
dated April 22, 1982, between Marine Midland Bank and Tenant; Supplemental
Letter Agreement dated April 7, 1993, between Corporate Property Investors and
Tenant; as assigned from Tenant to Landlord pursuant to Absolute Assignment and
Assumption of Sublease dated October 17, 1996, for premises located at 860 East
Gate Boulevard, Garden City, New York and any and all modifications and
amendments relating thereto; and
WHEREAS, Tenant wishes to sublease from Landlord and Landlord
wishes to sublease to Tenant a portion
<PAGE>
of the premises demised under the Prime Lease subject to the terms of this
Sublease Agreement.
NOW, THEREFORE, in consideration of the mutual promises
contained herein, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the following meanings.
(a) Annual Operating Budget: Shall mean the annual operating
budget determined by the Committee for the Premises based on estimated
Operating Expenses.
(b) Base Rent: As defined in paragraph 5(a) hereof.
(c) Building: As defined in paragraph 1(m) hereof.
(d) Bull Pen Spaces: Shall mean fenced-off portion of the
Parking Area comprising approximately one hundred and fifty (150) parking
spaces and identified on Exhibit D as "Bull Pen Spaces."
(e) Capital Improvement: As defined in paragraph 12(c)
hereof.
(f) Common Space: Shall mean space used by both Landlord and
Tenant which includes, without limitation, the cafeteria, hallways, lavatories,
fan rooms, chiller room, switch gear room, stairwells, electrical equipment
room, maintenance room, loading docks, and outdoor plazas as well as space
occupied by departments used by both Landlord and Tenant, such as the telephone
equipment and switchboard area.
(g) Committee: Shall mean a two person committee,
consisting of one Landlord employee and one Tenant employee.
(h) Computer Room: Shall mean the approximately 25,000
square foot area located in the Building which is hereby deemed to be solely
for the use and benefit of Landlord (other than the telephone switching
equipment room).
2
<PAGE>
(i) Event of Default: As defined in paragraph
19(a) hereof.
(j) Mailroom: Shall mean the approximately 2,088 square foot
area located in the Building which is used by Landlord and Tenant for
receiving, sending and sorting mail.
(k) Master License Agreement: Shall mean the Master License
Agreement dated as of July 30, 1997 among HFS Car Rental, Inc., Tenant and
Wizard Co., Inc.
(l) Parking Area: Shall mean all of the improved parking
spaces on the Premises, comprising approximately 1,198 parking spaces.
(m) Premises: Shall mean the premises demised under the Prime
Lease, which includes adjacent office buildings (collectively, the "Building")
and the Parking Area, as more particularly described on Exhibit A attached
hereto and made a part hereof.
(n) Prime Landlord: Shall mean the holder of the Landlord's
interest in the Prime Lease.
(o) Prime Lease: As defined in the recitals hereof.
(p) Print Shop: Shall mean the approximately 2,720 square
foot area located in the Building which is used by Landlord and Tenant for
printing, copying, binding and reproducing documents.
(q) Operating Expenses: Shall mean with respect to any
calendar year, any and all expenses actually incurred by the Landlord, or by
the Tenant on Landlord's behalf in accordance with Section 6 hereof, during
such year, which expenses are either (A) made pursuant to the approved Annual
Operating Budget, (B) ap proved additional expenditures, including without
limitation, (i) all capital and operating expenditures, (ii) the cost of
supplies, utilities, maintenance, insurance, governmental fees and assessments,
and real estate taxes, and (iii) all other operating expenses as are reasonably
necessary for the proper and efficient operation of the Premises. Without
limiting the generality of the foregoing, "Operating Expenses" shall
specifically in-
3
<PAGE>
clude the costs of the service and maintenance contracts listed on Exhibit C
attached hereto and made a part hereof (or any contracts executed to replace
any of the contracts listed on Exhibit C).
(r) Partial Year: Shall mean the period commencing on the
date of this Agreement and ending on December 31, 1997.
(s) Rent: Shall mean the sum, payable monthly from Tenant to
Landlord, of the Base Rent and the Tenant Share of Operating Expenses.
(t) Rental Station Spaces: Shall mean the forty-three (43)
parking spaces identified on Exhibit A as "Rental Station Spaces" within the
portion of the Parking Area located on the most northerly portion of the
Premises.
(u) Subleased Premises: As defined in paragraph 2 hereof.
(v) Tenant Share: As defined in paragraph 2(d) hereof.
(w) Term: As defined in paragraph 3 hereof.
(x) Unauthorized Expenditure: As defined in Paragraph 12(c)
hereof.
2. Sublease and Description of the Premises.
(a) Landlord hereby subleases to Tenant, and Tenant hereby
subleases from Landlord, on and subject to the terms, conditions and covenants
hereinafter set forth, the portions of the Building which have been
cross-hatched on Exhibit B attached hereto (hereinafter called the "Subleased
Premises").
(b) Landlord hereby grants to Tenant a license during the
Term hereof for the exclusive use of the Bull Pen Spaces and the Rental Station
Spaces and the non-exclusive use, subject to common use by Landlord, Prime
Landlord, other tenants and subtenants of the Premises and their guests,
employees, invitees and licensees of the remaining parking spaces in the
Parking Area currently comprising approximately 1,012 parking
4
<PAGE>
spaces, provided, however, Landlord shall have the right to designate parking
spaces for the exclusive use by Landlord and/or other subtenants of Landlord so
long as the number of parking spaces available for common use is not less than
seventy percent (70%) of the total number of parking spaces not designated for
Tenant's exclusive use.
(c) Landlord and Tenant agree that Tenant may from time to
time effect changes to the size and location of the Subleased Premises subject
to the following conditions and procedures: (i) Tenant may not increase or
decrease the Subleased Premises by more than an aggregate of ten percent (10%)
of the existing square footage of the Sublease Premises, (ii) Tenant shall
provide Landlord with not less than ten (10) days prior written notice of its
intent to change the Subleased Premises, which notice shall specify the
location, size and (in the case of adding new space) the proposed use of the
space, and the date on which such change shall be effective, (iii) Landlord may
in its sole discretion reject a proposed change within ten (10) days of its
receipt, and (iv) no portion of the Premises shall be eligible for addition to
the Subleased Premises under this provision unless such space is (x) unoccupied
and not subject to any existing sublease by Landlord, and (y) adjacent to the
existing Subleased Premises. Except as expressly set forth herein-above, no
change in the actual occupancy or use of portions of the Premises by Tenant
shall effect a change in the Subleased Premises or in the number or location of
the parking spaces in the Parking Area designated for Tenant's exclusive use
hereunder, unless the parties execute an amendment to this Agreement within
twelve (12) months after such change in occupancy or use which modifies Exhibit
B or Exhibit D, as applicable.
(d) Each of the following shall be known as the "Tenant
Share": (i) the square footage of the Subleased Premises plus fifty percent
(50%) of the total Common Space and unoccupied space in the Building, expressed
as a percentage of the sum of the total square footage of the Building, and
(ii) the number of parking spaces designated for Tenant's exclusive use plus
the product of the Tenant Share under clause (i) above and the total number of
non-exclusive parking spaces in the Parking Area expressed as a percentage of
the total
5
<PAGE>
number of parking spaces in the Parking Area. The Tenant Share under clause
(ii) above shall apply only with respect to the portion of Operating Expenses
which are separately identified in the Annual Operating Budget, or if not
budgeted, at the time of Committee review, as relating to the maintenance and
operation of the Parking Area.
3. Term. This Agreement shall expire upon the earlier to
occur of (i) the expiration of the Prime Lease or (ii) the termination of the
Master License Agreement.
4. Use. Tenant shall use the Subleased Premises as general
and executive offices and as an automobile rental facility and uses incidental
thereto, including the washing of rental automobiles (but specifically
excluding the refueling of automobiles and any other activities relating to the
maintenance or upkeep of automobiles), and for no other purpose. Tenant will
not do or suffer any waste, damage, disfigurement or injury to the Subleased
Premises or any other part of the Premises, nor shall Tenant use or allow the
Subleased Premises, or any other part of the Premises, to be used or occupied
for any unlawful purpose or in any manner which violates the terms of any
applicable law or any term of the Prime Lease.
5. Rent. For and during the Term, Tenant shall pay monthly to
Landlord, all Rent due and payable:
(a) Tenant shall pay as base rent for the Subleased Premises
("Base Rent"), Tenant's pro rata percentage of the rent and all other payments
or other amounts provided for in the Prime Lease due to the Prime Landlord, as
determined according to the Tenant Share of the Subleased Premises.
(b) Tenant shall also pay as additional rent the Tenant Share
of Operating Expenses. Subject to any recalculation that may need to be made
pursuant to paragraph 12(c) hereof, the Operating Expenses shall be calculated
as follows:
By the first day of each October of the
Term, Tenant shall deliver to Landlord a proposed calculation of the square
footage of the Common Space, unoc-
6
<PAGE>
cupied space, space occupied by Landlord or its subtenants other than Tenant,
and the Subleased Premises, and the number of parking spaces in the Parking
Area designated for exclusive use by any party (which calculation shall note
the date and extent of any changes in the occupancy of such square footage and
number of parking spaces designated for exclusive use during the preceding
twelve (12) month period), together with copies of all service and maintenance
contracts and records detailing Operating Expenses incurred during the previous
twelve (12) month period, and such other information as may be required by
Landlord for the purpose of calculating the Tenant Share and preparing the
Annual Operating Budget. By the first day of each November of the Term,
Landlord shall deliver to Tenant the proposed Tenant Share and Annual Operating
Budget for the Premises, which shall include a calculation of the square
footage of the Subleased Premises and the number of parking spaces in the
Parking Area designated for exclusive use by any party. The proposed Annual
Operating Budget shall separately identify those Operating Expenses which
relate to the operation and maintenance of the Parking Area. Tenant shall have
ten (10) days from delivery of the proposed Tenant Share and Annual Operating
Budget to object to the calculation of the Tenant Share and to any item(s)
contained in the proposed Annual Operating Budget. Landlord shall have ten (10)
days from delivery of Tenant's objections to accept or reject such objections.
If Landlord shall reject such objections, the Committee shall meet and agree
upon the Tenant Share and the Annual Operating Budget for the Premises within
ten (10) days of Landlord's rejection. If the Committee is unable to resolve
such issue within such time period, the matter shall be submitted to the
General Counsel of each of Landlord and Tenant as provided in paragraph 21
hereof.
On the last day of July and the last day
of January of each calendar year of the Term, the Committee shall review (i)
the actual Operating Expenses incurred at the Premises, including any Operating
Expense(s) incurred in the immediately preceding six (6) month period which was
not included in the Annual Operating Budget, and (ii) the actual Tenant Share.
If Tenant paid more than the Tenant Share of the actual Operating Expenses of
the Premises or the Base Rent for each such six month period, Landlord shall
refund such difference to Tenant within ten (10) days. However, if
7
<PAGE>
the Tenant Share of actual Operating Expenses of the Premises or Base Rent
exceeds the amount Tenant paid to Landlord pursuant to the Annual Operating
Budget, Tenant shall pay to Landlord such difference within ten (10) days. The
actual Tenant Share for each six (6) month period shall be based upon the
average number of parking spaces in the Parking Area designated for exclusive
use and the average square footage of the Subleased Premises, Common Space, and
unoccupied space and space occupied by Landlord for such period. Landlord and
Tenant agree that the percentage square footage and exclusive parking space
allocations effective as of the commencement of the Term of this Agreement are
as set forth on Exhibit E attached hereto.
(c) Notwithstanding any of the foregoing, Landlord hereby
agrees that all electrical costs arising from the use of the Computer Room, as
evidenced by the separate meter servicing the Computer Room, shall be deemed
solely the responsibility of the Landlord; however, all other costs associated
with the Computer Room shall be borne by Tenant according to the Tenant Share.
(d) Landlord and Tenant agree that the Subleased Premises
shall include the Mailroom and the Print Shop. Tenant agrees to allow Landlord
to utilize the Mailroom and the Print Shop subject to the conditions and
covenants of this paragraph. Tenant hereby covenants to cause its employees in
the Mailroom and Print Shop to keep accurate records of all services and
supplies used by Landlord. On or before the fifth (5th) day of each month
during the Term of this Agreement, Tenant shall deliver to Landlord an
accounting of Landlord's use of the Mailroom and the Print Shop for the
previous month. Such accounting shall enumerate the charges for the services
and supplies used by Landlord, including without limitation, postage, printing
and copying costs. Landlord may object to any item(s) contained in such
accounting within ten (10) days of its receipt. If Landlord and Tenant are not
able to agree on the accounting within ten (10) days of Landlord's objection,
the dispute shall be referred to the Committee. If the Committee is unable to
resolve such issue within ten (10) days, the matter shall be submitted to the
General Counsel of each of Landlord and Tenant as provided in paragraph 21
hereof.
8
<PAGE>
(e) The Rent shall be payable in advance on the first day of
each month commencing as of October 1, 1997, at the office of Landlord or such
other place as Landlord may designate, without any set-off, offset, abatement
or deduction whatsoever, except as otherwise specifically provided herein.
Landlord shall submit the entire rent due under the Prime Lease to the Prime
Landlord. If Tenant fails to deliver the Rent on the first of each month of the
Term, Landlord shall advance the Rent to Prime Landlord, but Tenant shall be
liable for interest on the Rent due from the date advanced by Landlord until
the date reimbursement is made to Landlord by Tenant at the lesser of the
highest rate permitted by law or the rate of eighteen percent (18%) per annum.
(f) With respect to the Rent due to Landlord for the Partial
Year, Landlord and Tenant hereby agree that the monthly Base Rent due is $_____
and that the monthly Tenant Share of the Operating Expenses is $_____. On or
prior to January 15, 1998, the Committee shall review the actual Operating
Expenses incurred at the Premises for the period commencing on the date hereof
to December 31, 1997. If Tenant paid more than the Tenant Share of the actual
Operating Expenses of the Premises for the Partial Year, Landlord shall refund
such difference to Tenant within ten (10) days. However, if the Tenant Share of
actual Operating Expenses of the Premises for the Partial Year exceeds the
amount Tenant paid to Landlord pursuant to this paragraph 5(f), Tenant shall
pay to Landlord such difference within ten (10) days.
(g) With respect to any partial month during the Term, the
monthly Rent and any other sums due under this Agreement attributable to such
partial month shall be prorated according to the number of days in such month
which are included in the Term and Tenant shall be obligated to pay such
prorated rent and other sums due within three (3) days after the Commencement
Date, in the case of the first partial month of the Term or at the time such
payment is otherwise due with respect to a partial month at the end of the
Term.
6. Operation of Premises. Tenant acknowledges that this
Agreement is made on the express condition that Tenant agree to perform all
services required in connection with the operation of the Premises, on
9
<PAGE>
behalf of, as agent for and at the expense of (subject to Tenant's additional
rent obligations hereunder) Landlord, subject at all times to Landlord's
general supervision and control and to the terms and conditions set forth
below.
(a) During the term of this Agreement it shall be the duty and
responsibility of Tenant:
(1) To comply with the reporting requirements set forth in
Section 5(b). Except as otherwise provided in this Agreement, Tenant shall
incur no expense in connection with the Premises that are not provided for in
the Annual Operating Budget without the prior written consent of the Landlord.
(2) To make or cause to be made all necessary repairs to the
Premises, to purchase all necessary supplies and materials, and to do all other
things necessary to maintain the Premises in a clean, safe and orderly
condition and to ensure compliance with all federal, state and local statutes,
ordinances, rules and regulations applicable to the operation of the Premises.
Unless otherwise provided for in the Annual Operating Budget for the then
current year, the expense to be incurred for any single repair or purchase
shall not exceed the sum of $3,000.00 without prior authorization by Landlord,
except in the case of emergency, in which case Tenant shall promptly notify
Landlord of the repair or purchase. Tenant shall use its best efforts to make
all repairs and to obtain all materials, supplies and services at the lowest
available cost (best economic price) and shall remit to Landlord any rebate,
commission, or discount allowed in connection therewith.
(3) To contract for such services as shall be necessary and
advisable for the proper operation of the Premises, provided, however, that
Tenant shall not contract for any services with respect to which an existing
contract does not exist or for which the estimated cost would exceed the cost
specified therefor in the Annual Operating Budget without in each instance
Landlord's prior written consent thereto. Landlord specifically consents to the
contracts listed on Exhibit C.
(4) To perform all other services reasonably necessary for
the care, protection, maintenance and
10
<PAGE>
operation of the Premises and the prevention of waste, damage, or injury
thereto. Tenant agrees that consistent with past practice Tenant shall not
contract out those services which Tenant's employees have been performing at
the Premises, but shall continue to perform such services during the term of
this Agreement. Any subcontracting of such services shall be void.
(5) To hire, discharge and supervise all persons employed to
carry out Tenant's duties hereunder. It is expressly understood and agreed that
all such employees shall be employees of Tenant and not employees of Landlord.
(6) To establish and maintain complete and orderly files
containing correspondence, payroll records, insurance policies, receipts,
unpaid bills, vouchers and all other documents and papers pertaining to the
Premises and the operation and maintenance thereof, all of which shall be and
remain the property of Landlord and shall be available to Landlord and its
representatives for inspection any time during regular business hours.
(7) To promptly investigate and make a full report within 72
hours as to all accidents or claims for damages relating to the operation and
maintenance of the Premises, including any damage or destruction to the
Premises and the estimated cost of repair. In addition, the Tenant shall
cooperate and make any and all reports required by an insurance company in
connection therewith with a copy of such reports to be delivered to the
Landlord.
(8) To supervise the moving in and out of tenants and
subtenants and arrange the date thereof so that there shall be a minimum of
disturbance to the operation of the Premises and of inconvenience to other
tenants and subtenants.
(9) To cause to be prepared and filed all necessary forms
relating to the maintenance and operation of the Premises required by any
federal, state, county, or municipal authority having jurisdiction therefore.
11
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(10) To cooperate with the Landlord's accountants and
auditors in regard to the annual audit or any periodic audits of the books of
account of the Landlord. The Landlord may also conduct an external audit of the
Tenant, provided that the cost of same is paid by the Landlord to said
independent auditor. The Tenant agrees to cooperate with the Landlord's
independent auditor.
(11) To cooperate with Landlord's accountants in regard to
the preparation and filing on behalf of the Landlord's federal, state, city,
and any other income and other filings required by any governmental authority.
(12) To establish and maintain, in accordance with generally
accepted accounting principles, consistently applied, accurate and complete
books of account with proper entries of all receipts, income and disbursements
pertaining to the Premises, which books of account shall be and remain the
property of Landlord and shall be available to Landlord and its representative
for inspection at any time during regular business hours.
(13) To review all bills and statements received for
services, work, supplies and other expenditures incurred by or on behalf of
Landlord in connection with the maintenance and operation of the Premises and
to pay or cause to be paid in a timely fashion all expenses specified in the
Annual Operating Budget and all other expenses approved by Landlord.
(14) To review periodically all hazard, liability and other
insurance carried for the account of Landlord in connection with Premises and
to maintain in force and effect such insurance coverage with such carriers as
Landlord may designate and approve.
(15) To prepare and furnish such financial reports and
statements as may be reasonably requested by Landlord.
(16) To generally do all things reasonably deemed necessary
or desirable for the proper operation and maintenance of the Premises.
12
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(17) To perform, for the Landlord's account and on its
behalf, any lawful act and everything lawful and necessary or desirable in
order to carry out the Tenant's agreements contained in this Section 6(a).
(b) Advances by Tenant. Payments to be made by Tenant at Landlord's
expense shall be advanced by Tenant out of Tenant's own funds to the extent
that such advances do not exceed the amount of Tenant's next monthly
installment of Rent due hereunder, and provided further that Tenant has been
fully reimbursed for all advances made prior to the current month. Except as
provided in the previous sentence, Tenant shall not be obligated to make any
advance to or for the account of Landlord or to pay any amount except out of
funds held for or provided by Landlord. If Tenant voluntarily advances funds
for Landlord's account in excess of Tenant's next monthly installment of Rent
due hereunder and any funds held for or provided by Landlord which are for the
payment of any expense not requiring Landlord's prior approval, Landlord shall
reimburse Tenant therefor on demand. Not less than ten (10) business days prior
to Tenant's payment of the monthly installment of Rent due hereunder, Tenant
shall deliver to Landlord an invoice detailing all payments made by Tenant on
Landlord's behalf in accordance with this Section and including a calculation
of the Tenant Share of such amount. Provided that Landlord does not object to
such invoice and calculation within five (5) business days after receipt by
Landlord, Tenant shall be entitled to offset the Tenant Share of the amount of
such invoice against Tenant's next installment of Rent due hereunder. If
Landlord and Tenant are not able to agree on the proper Rent offset amount
within ten (10) days of Landlord's objection, the dispute shall be referred to
the Committee. If the Committee is unable to resolve such issue within ten (10)
days, the matter shall be submitted to the General Counsel of each of Landlord
and Tenant as provided in paragraph 21 hereof.
(c) Tenant's Overhead. Landlord shall not be responsible for the
payment of Tenant's general overhead or administrative expenses.
(d) Tenant's Compensation. Tenant acknowledges that Tenant's
responsibilities to operate the Premises hereunder are in consideration of this
Agreement and
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<PAGE>
that Tenant shall not be entitled to any management fee or other separate
consideration.
(e) Termination of Agency. Landlord reserves the right to terminate
the agency created under this Section, without cause, upon thirty (30) days
written notice to Tenant, upon which termination the rights and obligations of
the parties under this Section 6, including but not limited to Tenant's Rent
offset rights, shall be of no further force and effect. Within thirty (30) days
of termination of the rights and obligations of the parties under this Section
6, the parties shall account to each other with respect to all uncompleted
business, and the Tenant shall deliver to the Landlord all leases, subleases,
corporate files, service agreements, books and records, and other instruments
relating to the Premises and the Landlord that may be in possession of the
Tenant.
7. No Landlord Obligations. Landlord has made no
representations or warranties whatsoever with respect to the Premises, other
than those expressly set forth in this Agreement. The Subleased Premises shall
be delivered to Tenant "as-is" and Landlord shall have no obligation to perform
any work in the Premises, or provide any work allowances or tenant funds to
prepare the Subleased Premises for Tenant's use. Without limiting the
generality of the foregoing, Tenant acknowledges that Landlord shall not be
required to erect demising walls around the Subleased Premises. Tenant
acknowledges that Tenant is Landlord's predecessor-in-interest to the Prime
Lease, and as such, has made its own independent investigations and inquiries
as it has deemed appropriate with respect to the nature and status of the
leasehold estate created by and the premises demised under the Prime Lease and
the title thereto, and that in making its decision to enter into this Sublease
Tenant is not relying upon nor has Landlord made any representations or
warranties with respect to any such matters.
8. Holding Over. Tenant hereby agrees that time shall be of
the essence with respect to its obligation to vacate and surrender possession
of the Subleased Premises upon the expiration of the term of this Agreement. In
the event that Tenant shall fail to vacate and surrender possession of the
Subleased Premises in accordance herewith, Tenant shall pay to Landlord an
amount
14
<PAGE>
equal to twice the Rent for each month or portion thereof, after the expiration
or termination of the term of this Agreement during which Tenant fails to
vacate or surrender possession of the Subleased Premises; provided however,
that nothing herein contained shall be deemed to permit Tenant to continue to
remain in possession of the Subleased Premises beyond the expiration or
termination of the term of this Agreement.
9. End of Term. On the expiration of this Agreement, the
Tenant shall quit and surrender to Landlord the Subleased Premises, broom
clean, in the same order and condition which existed on the commencement date
of this Agreement, normal wear and tear and damage by casualty not caused by
the Tenant or its employees, agents, invitees, licensees excepted, free of all
of Tenant's personal property. The provisions of this Paragraph 9 shall survive
the expiration or earlier termination of this Agreement.
10. Assumption Agreement and Covenants.
(a) Tenant hereby agrees to be bound by and comply
with all of the provisions of the Prime Lease which are to be observed or
performed during the Term hereof by Landlord as tenant thereunder. All
provisions contained in the Prime Lease, are expressly agreed to and shall be
binding upon Tenant herein as though Tenant were the tenant thereunder.
(b) If for any reason other than Landlord's default
under the Prime Lease, the Prime Lease terminates prior to the expiration or
any earlier termination of the Term of this Agreement, Tenant shall not have
any claim whatsoever against Landlord arising or resulting from such
termination of the Prime Lease.
(c) In the event of cancellation or termination of
the Prime Lease prior to the expiration thereof or any extensions or renewals
thereof, or in the event of the surrender thereof, whether voluntary,
involuntary or by operation of law, prior to the expiration of the Term of this
Agreement, if requested by the Prime Landlord under the Prime Lease, Tenant
shall make full and complete attornment to the Prime Landlord for the balance
of the Term of this Agreement, upon the same covenants and conditions as are
contained in this Agree-
15
<PAGE>
ment so as to establish direct privity of estate and contract between the Prime
Landlord and the Tenant and with the same force and effect as though this
Agreement were originally made directly from the Prime Landlord to Tenant.
Tenant shall make all rent payments thereafter directly to the Prime Landlord.
Notwithstanding the foregoing, in lieu of any voluntary surrender, cancellation
or termination of the Prime Lease by Landlord prior to the expiration of the
term thereof, Landlord agrees, subject to receipt of the Prime Landlord's
consent if required, to assign to Tenant all of its right, title and interest
in, to and under the Prime Lease, without recourse, representation or warranty,
and Tenant agrees that Tenant shall, upon ten (10) days written notice from
Landlord, accept such assignment and assume, and indemnify and save Landlord
from and against any claims with respect to, the obligations and liabilities of
the Tenant under the Prime Lease arising on and after the date of such
assignment.
(d) To the extent the provisions of the Prime Lease
do not conflict with specific provisions herein contained, such provisions are
hereby incorporated into this Agreement as fully as if completely rewritten
herein, and Tenant agrees to be bound to Landlord by all of the terms of the
Prime Lease, and to assume and perform all of the obligations and
responsibilities that Landlord has under the Prime Lease with respect to the
Subleased Premises. The relationship between Landlord and Tenant hereunder
shall be the same as that between Prime Landlord and Landlord under the Prime
Lease.
(e) TENANT FURTHER AGREES TO INDEMNIFY, DEFEND AND
HOLD HARMLESS LANDLORD FROM AND AGAINST ANY AND ALL CLAIMS OR LIABILITIES THAT
MAY BE ASSESSED AGAINST LANDLORD WITH RESPECT TO THE PRIME LEASE FOR THE
SUBLEASED PREMISES OR TENANT'S ACCESS TO AND USE OF THE SUBLEASED PREMISES
DURING THE TERM.
11. Right of Entry. Landlord or its authorized agents shall
have the right to enter the Subleased Premises at any time (a) in the case of
an emergency, or (b) to (i) inspect the Subleased Premises, (ii) show the
Subleased Premises to prospective tenants, purchasers or lenders and (iii) make
repairs or other alterations and additions thereto or to any other portion of
the Premises. In the case of clause (b) hereof, Landlord and its
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<PAGE>
authorized agents shall have the right to enter only during normal business
hours.
12. Alterations, Additions and Improvements.
(a) Tenant shall not make any alterations or
improvements to the Subleased Premises or the Parking Area without the prior
written consent of Prime Landlord, if so required under the Prime Lease. Tenant
shall make no electrical installations, alterations, additions or changes to
electrical equipment or appliances without the prior written consent of Prime
Landlord in each instance, if so required under the Prime Lease.
(b) Tenant shall at all times comply with the rules,
regulations, terms and conditions applicable to service, equipment, wiring and
requirements of the public utility supplying electricity to the Premises.
Tenant's use of electric current shall not exceed the capacity of existing
feeders to the Premises or the risers or wiring installations serving the
Subleased Premises and Tenant shall not use any electrical equipment which, in
Landlord's sole reasonable judgment, will overload such installations or
interfere with the use thereof by other tenants of the Premises.
(c) Subject to the limitations set forth above with
respect to Tenant's right to make alterations, if either Tenant or Landlord
wishes to make any capital improvement (as determined in accordance with
generally accepted accounting principles) (in each instance, a "Capital
Improvement") or an expenditure which is not set forth in the Annual Operating
Budget (in each instance, an "Unauthorized Expenditure"), which the other party
does not approve (other than as specified below in this paragraph (c)), the
party desiring to make such Capital Improvement or Unauthorized Expenditure may
proceed therewith but shall be required to pay for the Capital Improvement or
Unauthorized Expenditure at its sole cost and expense and the same shall not be
included in calculation of Operating Expenses. Notwithstanding the foregoing,
if any Capital Improvement or Unauthorized Expenditure (A) is required by
applicable law, (B) is immediately necessary to protect any part of the
Premises from harm or to prevent harm to any person or any property located on
the Premises or (C) is agreed
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<PAGE>
upon by the Landlord and Tenant, as applicable, then the cost of such Capital
Improvement or the amount of such Unauthorized Expenditure, as applicable,
shall constitute Operating Expenses hereunder. Landlord or Tenant, as
applicable, shall deliver to the other party copies of all bills and statements
received in connection with any such Capital Improvement or Unauthorized
Expenditure. Tenant shall pay the Tenant Share of all amounts due and payable
in connection with such Capital Improvement or Unauthorized Expenditure at
least ten (10) days prior to the date specified on such bill or statement.
Landlord shall remit all payments to third parties. The party making a Capital
Improvement shall take reasonable steps to avoid interfering with the other
party's quiet enjoyment of its occupied portion of the Premises.
13. Insurance.
(a) Tenant understands that Landlord will not carry
insurance of any kind on Tenant's personal property and that Tenant shall be
obligated to repair any damage thereto or replace same.
(b) Tenant shall throughout the Term hereof, at its
own expense, provide or cause to be provided and kept in force, commercial
general liability insurance against claims of personal injury or death and
property damage caused by an occurrence upon, in or about the Subleased
Premises, or the Parking Area, which shall afford protection to limits of not
less than the amount of $3,000,000 in respect of personal injury or death to
any one person and in respect of injury of death to any number of persons
arising out of any one accident, and against property damage in respect of any
instance of property damage. Tenant shall include Landlord and Prime Landlord
as additional insureds under its liability insurance policies. All policies of
insurance maintained by Tenant hereunder shall include a waiver by the insurer
of all rights of subrogation against Landlord and Prime Landlord in connection
with any loss, damage or claims thereby insured against and shall require at
least thirty (30) days advance notice to Landlord and Prime Landlord before any
termination or cancellation of such insurance will be effective. Tenant shall
furnish to Landlord as reasonably requested, certificates of insurance
evidencing the existence of insurance as required by this paragraph. All such
poli-
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<PAGE>
cies shall be issued by companies of recognized responsibility licensed to do
business in the state in which the Premises are located.
(c) If Tenant shall request copies of any insurance
policies carried by Landlord affecting the Premises and/or the Subleased
Premises, Landlord shall supply Tenant with such copies within ten (10)
business days.
14. Indemnity. Tenant shall indemnify and hold Landlord
harmless from and against all claims, liability, costs and expense (including
reasonable attorneys' fees and disbursements) arising out of or in connection
with (i) Tenant's use or occupancy of the Subleased Premises, (ii) any
accident, injury or damage occurring in or about the Premises caused by the
negligence of Tenant, its agents, servants, contractors or employees in
connection with Tenant's provision of maintenance and other services in its
capacity as Landlord's agent in operating and maintaining the Premises, (iii)
any accident, injury or damage occurring in or about the Subleased Premises
during the Term of this Agreement, and not caused by the negligence of
Landlord, its agents (other than Tenant), servants, contractors or employees
and (iv) any breach, violation or non-performance by Tenant of any term,
condition or provision of this Agreement. Landlord shall indemnify and hold
Tenant harmless from against all claims, liability, costs and expense
(including reasonable attorneys' fees and disbursements) arising out of or in
connection with (i) Landlord's use and occupancy of the Premises other than the
Subleased Premises, (ii) any accident, injury or damage occurring in or about
the Premises other than the Subleased Premises, and not caused by the
negligence or willful misconduct of Tenant, its agents, servants, contractors
or employees, or acts taken outside the scope of Tenant's agency hereunder, and
(iii) any breach, violation or non-performance by Landlord of any term,
condition or provision of this Agreement. The provisions of this paragraph 14
shall survive the expiration or earlier termination of this Agreement.
15. Environmental Covenant. Tenant shall not use the Premises
for any activity that would violate any environmental law or regulation of any
governmental body or agency having jurisdiction over the Subleased Premis-
19
<PAGE>
es (collectively, "Environmental Laws"). Specifically, other than chemicals
used in connection with the operation of the Print Shop and the Mailroom and
the washing of rental automobiles, and small quantities of cleaning and
janitorial supplies, all used in the ordinary course of business, in accordance
with industry standards and in compliance with all Environmental Laws, Tenant
shall not knowingly bring on the Premises any solid waste, petroleum, petroleum
products, hydrocarbons, "hazardous substances", "hazardous materials", or
"toxic substances", as defined in the Comprehensive Environmental Response
Compensation and Liability Act of 1980, the Hazardous Materials Transportation
Act, and the Resources Conservation and Recovery Act, each as amended.
16. Licenses and/or Permits. Tenant shall obtain, at Tenant's
sole cost and expenses, all necessary certificates, licenses or permits to
occupy and do business in the Premises, which may be required with respect to
Tenant by any governmental authority.
17. Notices. All notices and other communication to be given
hereunder shall be given in writing and shall be sent by courier, or postage
prepaid, certified or registered mail, return receipt requested, addressed to
the applicable party at the Premises. All notices delivered in accordance with
the terms hereunder shall be deemed to be delivered on the earlier of actual
receipt or three (3) business days following the postmark date thereof. The
attorney for each party hereto shall have the right to deliver any notices on
behalf of its client.
18. Compliance with Law. Tenant, at its sole cost and
expense, shall comply with all laws and governmental regulations applicable to
the Subleased Premises, except to the extent that any such laws or governmental
regulations require structural alterations or improvements to the Subleased
Premises or the Premises. Tenant shall not do or permit to be done any act or
thing upon the Premises which will invalidate or be in conflict with any
insurance policies covering the Premises and fixtures and property therein; and
shall not do, or permit anything to be done in or upon the Premises, or bring
or keep anything therein which shall increase the rate of fire insurance on the
Premises or on property located therein.
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<PAGE>
19. Default.
(a) Each of the following events shall be an "Event of
Default" hereunder:
(1) failure or refusal of Tenant to make timely
payment of any sum, including Rent, due and payable under this Agreement within
five (5) days after the same shall become due and payable;
(2) if Tenant shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due;
(3) if Tenant shall commence or institute any case,
proceeding or other action (A) seeking relief on its behalf as debtor or to
adjudicate it a bankrupt or insolvent or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property;
(4) if Tenant shall make a general assignment for
the benefit of creditors;
(5) if any case, proceeding or other action shall be
commenced or instituted against Tenant (A) seeking to have an order for relief
entered against it as debtor or to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts under
any existing or future law of any jurisdiction, domestic or foreign, relating
to debtors or (B) seeking appointment of a receiver trustee, custodian or other
similar official for it or for all or any substantial part of its property,
which either (i) results in any such entry of an order for relief, adjudication
of bankruptcy or insolvency or such an appointment or the issuance of entry of
any other order having a similar effect or (ii) remains undismissed for a
period of thirty (30) days;
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<PAGE>
(6) if any case proceeding or other action shall be
commenced or instituted against Tenant seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its property which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within thirty (30) days from the entry thereof;
(7) if Tenant shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clauses (2), (3), (4), (5) or (6) above;
(8) if a trustee, receiver or other custodian is
appointed for any substantial part of the assets of Tenant which appointment is
not vacated or effectively stayed within seven (7) business days;
(9) if Tenant shall default in the observance or
performance of any term, covenant or condition of this Agreement on Tenant's
part to be observed or performed and Tenant shall fail to remedy such default
within ten (10) days after notice by Landlord to Tenant of such default, or if
such default is of such a nature that it cannot be completely remedied within
said period of ten (10) days and Tenant shall not commence within said period
of ten (10) days, or shall not thereafter diligently prosecute to completion,
all steps necessary to remedy such default; or
(10) failure or refusal by Tenant to perform or
comply with any of the agreements, terms, covenants or conditions provided in
the Prime Lease.
(b) Upon the expiration or earlier termination of this
Agreement, Landlord may reenter the Subleased Premises with or without process
of law using such force as may be reasonably necessary and remove all persons
and property therefrom, and Landlord shall not be liable for damages or
otherwise by reason of reentry or termination of the terms of this Agreement.
Notwithstanding such termination by Landlord, the liability of Tenant for the
rents and charges provided for herein shall not be relinquished, diminished, or
extinguished for the balance of the term of this Agreement. It is further
understood that Tenant will pay in addition to
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<PAGE>
the rent and other sums agreed to be paid hereunder, all of the reasonable
costs and expenses (including attorneys' fees) in enforcement of the terms of
this Agreement and collection of all amounts due hereunder.
(c) In the event of any Event of Default by Tenant under the
terms, provisions, conditions or covenants of the Prime Lease or this
Agreement, Landlord may, subject to the terms of the Prime Lease, immediately
or at any time thereafter take repossession of the Subleased Premises and cure
such breach for the account and at the expense of Tenant. In addition to the
foregoing, upon the occurrence of an Event of Default, Landlord shall be
entitled to: (i) all of the rights and remedies reserved by or granted to Prime
Landlord in the Prime Lease after an Event of Default; (ii) cure such Event of
Default in which event Tenant shall reimburse Landlord on demand for all costs
and expenses reasonably expended or incurred by Landlord in curing such default
together with interest thereon from the date that such costs or expenses were
expended or incurred by Landlord until the date that reimbursement is made to
Landlord by Tenant at the lesser of the highest rate permitted by law or the
rate of eighteen percent (18%) per annum; (iii) exercise any and all rights and
remedies provided by law; and/or (iv) immediately terminate this Agreement. If
Landlord at any time by reason of Tenant's default is compelled or elects (i)
to pay any sum of money, or (ii) to do any act which will require the payment
of any sum of money, or (iii) to incur any expense, including reasonable
attorneys' fees, in instituting or prosecuting any action or proceeding to
enforce Landlord's rights hereunder, the sum or sums so paid by Landlord with
interest thereon at the lesser of the highest rate permitted by law or the rate
of eighteen percent (18%) per annum, from the date of payment thereof shall be
deemed to be additional rent hereunder and shall be due from Tenant to Landlord
on the first day of the month following the payment of such respective sums or
expenses.
(d) All rights and remedies of Landlord herein enumerated
shall be cumulative and none shall exclude any other right or remedy allowed by
law or the Prime Lease and said rights and remedies may be exercised and
enforced concurrently and whenever and as often as occasion therefor arises.
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20. General.
(a) Paragraph Headings. The article and/or paragraph headings
in this Agreement are intended for convenience only and shall not be taken into
consideration in any construction or interpretation of this Agreement or any of
its provisions.
(b) Severability. If any term or provision of this
Agreement or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, there shall be deemed to be made such
minimal changes as are necessary to make it valid and enforceable, and the
remainder of this Agreement or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby.
(c) Assignment and Subletting. Tenant may not assign Tenant's
rights under this Agreement or sublet all or portions of the Subleased Premises
without obtaining Prime Landlord's, when necessary, and Landlord's prior
written consent to each such assignment or subletting, which consent may be
unreasonably withheld by such parties. Any assignment or subletting shall be
expressly subject to all the terms and conditions of the Prime Lease and this
Agreement. No assignment or subletting shall relieve or release Tenant from
Tenant's duties, obligations and liabilities under this Agreement. Tenant shall
not assign Tenant's rights hereunder without first obtaining and delivering to
Landlord a written agreement from each such assignee whereby each such assignee
agrees to be bound by the terms and conditions of this Agreement. No such
assignment or subletting shall constitute a novation. In the event of the
occurrence of an Event of Default while the Subleased Premises are assigned or
sublet, Landlord, in addition to any other remedies provided herein or by law,
may, at Landlord's option, collect directly from such assignee or subtenant all
payments becoming due under such assignment or subletting and apply such
payments against any sums due to Landlord hereunder. No direct collection by
Landlord from any such assignee or sublessee shall relieve or release Tenant
from the payment or performance of Tenant's duties and obligations hereunder.
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<PAGE>
(d) Successors and Assigns. Subject to the foregoing
restrictions on subletting and assignment, this Agreement is binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(e) Complete Agreement and Amendment. This Agreement sets
forth the complete agreement between Landlord and Tenant with respect to the
subject matter hereof, and this Agreement may not be terminated, amended or
modified in any respect except by agreement in writing executed by both
Landlord and Tenant.
(f) Survival. All duties and obligations of Tenant under
this Agreement which are unpaid or unperformed shall survive the expiration or
any earlier termination of the Term of this Agreement until paid or performed.
(g) Jurisdiction and Venue. This Agreement shall be
construed and governed in accordance with the laws of the State in which the
Subleased Premises are located. Additionally, the parties submit to the
nonexclusive jurisdiction of the courts of the State of New York and the United
Sates District Court located in Nassau County, New York and appellate courts
from any thereof, and waive any objection to the laying of venue of any
proceeding sought in any such court.
(h) Non-Waiver. Failure on the part of a party hereto in any
one or more instances to enforce any of its rights which arise in connection
with this Agreement, or to insist upon the strict performance of any of the
terms, conditions or covenants of this Agreement, shall not be construed as a
waiver or relinquishment for the future of any such rights, terms, conditions
or covenants. No waiver of any condition of this Agreement shall be valid
unless it is in writing, and executed by the party against whom such waiver is
sought to be enforced.
(i) Subordinate to Prime Lease. This Agreement is subject and
subordinate to all of the terms, covenants and conditions of the Prime Lease
and to all of the rights of Landlord under the Prime Lease and to any existing
subleases of the Premises; provided, however, if there is any conflict between
the terms,
25
<PAGE>
covenants and conditions contained in the Prime Lease and this Agreement, the
terms, covenants and conditions contained in this Agreement shall control as
between Landlord and Tenant.
(j) Time of the Essence. Time shall be of the essence for all
purposes under this Agreement.
(k) Multiple Counterparts. This Agreement may be executed
in multiple counterparts each of which shall be deemed an original, and all of
which together shall constitute but one and the same agreement.
21. Committee Findings. Any findings of the Committee for which it has
been authorized to determine pursuant to paragraph 5 of this Agreement,
including but not limited to, the Annual Operating Budget, the Subleased
Premises, the portions of the Parking Area designated for Tenant's exclusive
use, and Tenant Share, shall be binding upon Landlord and Tenant, absent
manifest error. If the Committee is unable to agree upon the terms of any issue
under its review, or it disagrees as to the interpretation of such terms,
either member of the Committee may submit a notice of disagreement to the
General Counsel of each of Tenant and Landlord. Within ten (10) days of
Landlord's and Tenant's receipt of such notice, a senior officer from each of
Landlord and Tenant shall meet to resolve the issues that the Committee was
unable to agree upon. If such senior officers are unable to resolve the issues
within thirty (30) days, the matter shall be submitted to binding arbitration,
as provided below.
22. Binding Arbitration.
(a) Any dispute arising from this Agreement is to be
resolved pursuant to arbitration, to be conducted in Nassau County, New York,
in accordance with the provisions of this Section, and judgment upon the award
rendered may be entered in any court having jurisdiction thereof.
(b) The party hereto desiring to arbitrate a dispute
pursuant to this Section shall give notice (a "Dispute Notice") to that effect
to the other party. Within five (5) days after such Dispute Notice
26
<PAGE>
has been delivered, Landlord and Tenant shall each designate one (1) arbiter
and the two (2) arbiters so chosen shall appoint a third arbiter (the
"Arbiters") within two (2) days thereafter. Each Arbiter appointed shall be
competent, qualified by training and experience and an individual having not
less than ten (10) years experience relating to commercial real estate in the
state of New York.
(c) The arbitration shall be conducted in accordance with the
then prevailing commercial arbitration rules of the JAMS/Endispute
Comprehensive Arbitration Rules and Procedure ("JAMS"), except that to the
extent that the New York State Civil Practice and Law Rules, or any successor
statute, imposes requirements different from JAMS in order for the decision of
the Arbiters to be enforceable in the courts of the State of New York, such
requirements shall be complied with in the arbitration. Within ten (10) days
after the Dispute Notice has been delivered, both parties shall make whatever
presentations they wish to the Arbiters. Immediately thereafter, the Arbiters
shall attempt to cause Landlord and Tenant to agree on a resolution to the
dispute and failing that, the Arbiters shall immediately make their decision.
The Arbiters' decision may be made orally provided the Arbiters confirm such
decision in writing within two (2) business days thereafter. Copies of the
Arbiters' decision shall be sent to Landlord and to Tenant and shall be binding
on both. Any costs incurred by or payable to the Arbiters in any such
proceeding shall be shared equally by Landlord and Tenant unless otherwise
provided herein or otherwise agreed, and each party shall bear the costs of its
own attorneys and other experts. The Arbiters shall have no power to vary or
modify any of the provisions of this Agreement, and its powers and jurisdiction
are hereby limited accordingly. During the consideration of any issue by the
Arbiters pursuant to this Section, Landlord and Tenant shall observe and
perform each and every one of its obligations hereunder, including, without
limitation, the obligation to pay timely all Rent, including but not limited to
Base Rent and the Tenant Share of Operating Expenses, that may be or become due
or payable hereunder.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this
Agreement as of the day and year first above written.
LANDLORD:
WIZCOM INTERNATIONAL, LTD., a Dela-
ware corporation
By: ___________________________
Name:
Title:
TENANT:
AVIS RENT A CAR SYSTEM, INC., a
Delaware corporation
By: ______________________________
Name:
Title:
28
<PAGE>
EXHIBIT A
Description of the Premises
<PAGE>
EXHIBIT B
Description of the Subleased Premises
<PAGE>
EXHIBIT C
Services and Maintenance Contracts Affecting the Premises
ARAC BUILDING MAINTENANCE CONTRACTS
o Award (carpet cleaning)
o Dynamic Fire (fire alarm/detector maintenance)
o Evergreen Land, Inc. (landscape contractors)
o Fleet Bank (on-site ATM)
o FT Vending Service (vending machines)
o Planet Waste Management (refuse removal)
o Professional Services (cleaning services)
o Terminex International (termite protection)
o Ogden/Allied/Unicco (security services)
o International Union of Operating Engineers (building mainte-
nance
o Visiak Security Systems (closed circuit television mainte-
nance)
o Wood Dining Services (food service)
<PAGE>
EXHIBIT D
Tenant's Exclusive Parking Area
<PAGE>
EXHIBIT E
Initial Building Square Footage
and Parking Space Percentage Allocations
A. Building Square Footage Percentage Allocations
Landlord or Other Subtenants 31.811%
Tenant (includes Mailroom and Print 50.648%
Shop)
Common Space (other than Mailroom 10.638%
and Print Shop)
Unoccupied 6.903%
Initial Tenant Share 59.418%
B. Parking Space Percentage Allocations
Exclusively Landlord or Other 0.00%
Subtenants
Exclusively Tenant 16.110%
Initial Tenant Share 65.956%
<PAGE>
WIZARD NOTE ASSUMPTION AND RELEASE AGREEMENT
This Wizard Note Assumption and Release Agreement is made as
of the 30th day of July, 1997 by and between Wizard Co., Inc., a Delaware
Corporation ("Wizard"), Avis Rent A Car System, Inc., a Delaware Corporation
("ARACS") and Reserve Claims Management Co., a Delaware Corporation ("Reserve
Claims Management"). Capitalized terms used but not otherwise defined herein
shall have the meaning assigned to such terms in the Separation Agreement
dated as of the date hereof by and between HFS Car Rental, Inc. and Avis Rent
A Car, Inc.(the "Separation Agreement").
WHEREAS, Wizard is the payor under the Wizard Note, a copy
of which is attached hereto as Exhibit A;
WHEREAS, in connection with the Separation and pursuant to
the Separation Agreement, ARACS has agreed to assume the liabilities and
obligations of Wizard under the Wizard Note; and
WHEREAS, Reserve Claims Management, as the payee under the
Wizard Note, has consented to the assumption by ARACS of the obligations under
the Wizard Note and has agreed to release Wizard from its liabilities and
obligations thereunder.
NOW, THEREFORE, intending to be legally bound, the parties
hereto agree as follows:
1. Assumption. Effective as of the date hereof, ARACS
hereby assumes the Wizard Note and agrees to perform and discharge
all liabilities and obligations of Wizard under the Wizard Note and
agrees to be bound by and comply with all terms and conditions of
the Wizard Note as if ARACS was an original signatory thereto such
<PAGE>
that all references in the Wizard Note to the term "Wizard Co., Inc." shall be
deemed to refer to ARACS and not Wizard.
2. Consideration. Subject to Section 5.1 of the
Separation Agreement, Wizard agrees to pay ARACS $205,038,000 upon
execution hereof in consideration for ARACS's assumption of the
liabilities and obligations under the Wizard Note pursuant to
Section 1 above.
3. Release. Reserve Claims Management hereby consents
to the assumption of the Wizard Note as described in Section 1
above and agrees to release Wizard from any and all liabilities and
obligations under the Wizard Note.
4. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
5. Binding Agreement. This Agreement shall be binding
upon, and shall inure to the benefit of, the successors and assigns
of the parties hereto.
6. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when taken together shall
constitute one and the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and
delivered this Agreement as of the date first written above.
AVIS RENT A CAR SYSTEM, INC.
By: /s/ Kevin M. Sheehan
--------------------------------
Name:
Title:
RESERVE CLAIMS MANAGEMENT, INC.
By: /s/ Gerard J. Kennell
--------------------------------
Name:
Title:
WIZARD CO., INC.
By:/s/ David M. McNicholas
--------------------------------
Name:
Title:
-3-
<PAGE>
EXHIBIT A
WIZARD CO., INC.
$194,100,000 October 1, 1996
WIZARD CO., INC., a Delaware corporation (the "Company"), hereby
promises to pay AVIS, INC., or its assigns, the principal amount of
$194,100,000 on October 1, 2006, with interest (computed on the basis of the
actual number of days elapsed over a 360 day year) on the unpaid balance of
such principal amount at a rate per annum equal to 7.13%, from the date hereof,
payable annually on each anniversary of the date of this Note, commencing on
October 1, 1997, until the principal hereof shall have become due and payable
(whether at maturity or at a date fixed for prepayment or by declaration or
otherwise) and with interest on any overdue principal (including any overdue
prepayment principal) and (to the extent permitted by applicable law) on any
overdue installment of interest, at a rate per annum equal to 9.13% or, at the
option of the holder hereof, such interest shall be payable on demand;
provided, that each installment of interest may be payable, at the sole
discretion of the Company, either in cash or by the issuance of promissory
notes of the Company substantially in the form of this Note; provided further,
that in no event shall the amount payable by the Company as interest on this
Note exceed the highest lawful rate permissible under any law applicable
hereto. Payments shall be overdue for purposes hereof if not made on the
originally scheduled date of payment therefor, without giving effect to any
applicable grace period. Payments of principal and interest hereon, to the
extent payable in cash, shall be made in lawful money of the United States of
America. All payments on this Note shall be made to the address for such
purpose specified in Schedule 1 attached hereto or to such other address as
the holder of this Note may designate in writing to the Company, without
requiring any presentation or surrender of this Note, except that if this Note
is paid or prepaid in full it shall be promptly surrendered to the Company and
canceled.
<PAGE>
Section 1: Prepayment of Note
At any time, or from time to time, the Company may, at its option, prepay all
or any part (in an integral multiple of $1,000,000 or such lesser amount as
shall then be outstanding) of this Note.
Section 2: Events of Default; Remedies
Each of the following shall be an Event of Default under this Note:
(a) the Company defaults in the due and punctual payment of all or
any part of the principal of this Note when and as the same shall become due
and payable, whether at the stated maturity thereof, by notice of or demand
for prepayment, or otherwise;
(b) the Company defaults in the due and punctual payment of any
interest on this Note when and as such interest shall become due and payable
and such default shall have continued for a period of five consecutive days;
(c) the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for the Company or any
substantial part of its assets, or shall consent to any such relief or to the
appointment or taking possession by any such official in any involuntary case
or other proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing; and
(d) an involuntary case or other proceeding shall be commenced
against the Company seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official for the Company or
any substantial part of its assets, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 30
consecutive days.
2
<PAGE>
If an Event of Default specified in clauses (c) and (d) of this Section 2
shall occur, this Note shall automatically become immediately due and payable
together with interest accrued thereon, without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived.
If an Event of Default other than those specified in clauses (c) and (d) shall
occur, the holder of this Note may exercise any right, power or remedy
permitted to such holder by applicable law, and shall have, in particular,
without limiting the generality of the foregoing, the right to declare the
entire unpaid principal of, and interest accrued on, this Note then
outstanding to be, and this Note shall thereupon become, forthwith due and
payable, without any presentment, demand, protest, or other notice of any
kind, all of which are hereby expressly waived, and the Company shall
forthwith pay to the holder of this Note the entire unpaid principal of, and
interest accrued on, this Note.
No course of dealing on the part of the holder of this Note nor any delay or
failure on the part of the holder of this Note to exercise any rights shall
operate as a waiver of such right or otherwise prejudice the holder's rights,
powers and remedies. If the Company fails to comply with any provision of this
Note, the Company shall pay to the holder, to the extent permitted by
applicable law, such further amounts as shall be sufficient to cover the costs
and expenses, including but not limited to reasonable attorneys' fees,
incurred by the holder in collecting any sums due on this Note or in otherwise
assessing, analyzing or enforcing any rights or remedies that are or may be
available to the holder.
Section 3: Notices
The Company's address for all communications related to this Note shall be as
follows:
Wizard Co., Inc.
900 Old Country Road
Garden City, NY 11530
Attention: General Counsel
or shall be otherwise as the Company may designate to the holder of this Note
in writing. The holder's address for all communications related to this Note
shall be as set forth on Schedule 1 attached hereto or shall be otherwise as
such holder or any subsequent holder of this Note may designate to the Company
in writing.
3
<PAGE>
Section 4: Successors and Assigns
This Note shall inure to the benefit of and be binding upon the successors and
assigns of the holder and the Company. The provisions hereof are intended to
be for the benefit of any holder, from time to time, of this Note, and shall
be enforceable by any such holder, whether or not an express assignment to such
holder of such rights hereunder shall have been made by the holder or any
successor or assign.
Section 5: Governing Law
This Note shall be construed in accordance with and governed by the domestic
substantive laws of New York without giving effect to any choice of law or
conflicts of law provision or rule that would cause the application of the
domestic substantive laws of any other jurisdiction.
WIZARD CO., INC.
/s/ Joseph V. Vittoria
--------------------------------
Name: Joseph V. Vittoria
Title: President and CEO
4
<PAGE>
SCHEDULE 1
Avis, Inc.
900 Old Country Road
Garden City, NY 11530
Attention: General Counsel
<PAGE>
TERMINATION SERVICES AGREEMENT
------------------------------
THIS TERMINATION SERVICES AGREEMENT (the "Agreement") is made
and entered into as of July 30, 1997, among HARRIS TRUST AND SAVINGS BANK, an
Illinois banking corporation, as trustee (the "Trustee") under the Base
Indenture (as defined below), having an office at 311 West Monroe Street, 12th
Floor, Chicago, Illinois 60606, AESOP FUNDING II L.L.C., a special purpose
limited liability company established under the laws of the State of Delaware,
having an office at Two Wall Street, New York, New York 10055 ("AFC-II"), AVIS
RENT A CAR SYSTEM, INC., a Delaware corporation, having an office at 900 Old
Country Road, Garden City, New York 11530 ("ARAC"), and WIZCOM INTERNATIONAL,
LTD., a Delaware corporation, having an office at 6 Sylvan Way, Parsippany, New
Jersey 07054 (the "Company"). Capitalized terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the Definitions List
attached as Schedule I to the Base Indenture.
WHEREAS, ARAC and the Company have entered into a Computer
Services Agreement dated as of the date hereof (the "Computer Services
Agreement") under which the Company will provide certain rental and reservation
processing systems and services and other information systems and services for
ARAC's business operations;
WHEREAS, the Trustee and AFC-II are parties to the Amended
and Restated Base Indenture dated as of the date hereof (the "Base Indenture")
pursuant to which AFC-II will issue Notes from time to time, the proceeds of
which will be used to make Loans to finance the purchase of Vehicles for
leasing by AESOP Leasing and AESOP Leasing II to ARAC and certain other
Eligible Rental Car Companies for use in their respective daily rental car
businesses;
WHEREAS, AFC-II has requested that the Company continue to
provide certain vehicle tracking services listed on Schedule 1 hereto (the
"Vehicle Tracking Services") to AFC-II and the Trustee in the event the
Computer Services Agreement is terminated under the circumstances described
herein;
NOW, THEREFORE, in consideration of the premises, the mutual
promises set forth below, and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged by each of the parties, the
parties agree as follows:
1. The Computer Services Agreement is in full force and effect, and
there are no outstanding defaults of the Company or
<PAGE>
ARAC, and no uncured notices of default issued to ARAC by the Company, or by
ARAC to the Company, under the Computer Services Agreement on the date of this
Agreement. Neither ARAC nor the Company is aware of any event which, with the
passage of time, the giving of notice or both, would constitute an event of
default under the Computer Services Agreement. The Trustee shall not be
responsible for the accuracy of the statements in the preceding two sentences
and has made no independent investigation thereof.
2. In the event the Company elects to terminate the Computer Services
Agreement pursuant to Section 14.1(b) or 14.2(b) thereof, the Company will
notify the Trustee, each Enhancement Provider and AFC-II of such event by
sending the Trustee and AFC-II a copy of the notice of termination sent to
ARAC, as and when sent, or by separate written notice. To the extent not
precluded by applicable law, including, without limitation, Title 11 of the
Bankruptcy Code, the Company agrees to provide AFC-II with Vehicle Tracking
Services for up to eighteen (18) months following the effective date of any
such termination of the Computer Services Agreement. In consideration for such
Vehicle Tracking Services, ARAC will be obligated to pay the Company $250,000
per calendar month, payable in advance on each Payment Date during such
eighteen-month (or shorter) period. It is agreed and understood that the
Vehicle Tracking Services consist of the services identified in Schedule 1
hereto which will be provided on a stand-alone basis and do not include any
other services provided to ARAC under the Computer Services Agreement,
including, without limitation, the services identified on Schedules F and G
thereto.
3. Pursuant to the Administration Agreement, ARAC has agreed to
deposit $2,000,000 into the Termination Services Account for the benefit of the
Trustee on behalf of the Secured Parties to secure ARAC's obligations to the
Trustee and AFC-II hereunder and under the Administration Agreement. In the
event that ARAC fails to make any payment required pursuant to paragraph 2
above, the Trustee shall have the right to withdraw the Termination Services
Draw Amount from the Termination Services Account and pay such amount to the
Company on behalf of ARAC, in accordance with Section 3.7 of the Indenture. The
Company shall accept any such payment made by the Trustee with the same effect
as though it were made by ARAC. ARAC shall reimburse any such withdrawal from
the Termination Services Reserve Account within two Business Days of the date
thereof in accordance with Section 3 of the Administration Agreement.
4. This Agreement terminates automatically upon the earliest of (i)
the termination of the Indenture and the Loan Agreements in accordance with
their respective terms and the payment in full of all obligations owing
thereunder, (ii) eighteen (18) months after the effective date of any
termination of the
2
<PAGE>
Computer Services Agreement pursuant to Section 14.1(b) or 14.2(b) thereof,
(iii) default in the payment when due of amounts required to be paid pursuant
to paragraph 2 above and the continuance thereof for five (5) days after the
occurrence thereof or (iv) after the effective date of any termination of the
Computer Services Agreement pursuant to Section 14.1(b) or 14.2 thereof, the
appointment by AFC-II and the Trustee of a qualified successor provider of
Vehicle Tracking Services and the satisfaction of the Rating Agency Consent
Condition in connection therewith. Upon termination of this Agreement, the
Company shall cooperate with AFC-II and the Trustee and take all reasonable
steps requested to assist AFC-II and the Trustee in making an orderly transfer
of the duties of the Company, including, without limitation, delivering to
AFC-II and the Trustee or a successor provider of Vehicle Tracking Services a
copy of all data with respect to the Vehicles then in the custody of the
Company on computer disk or on such other image storage or electronic media as
the Company shall maintain in accordance with its customary practices.
5. All notices sent by any party hereto will be sent to the addresses
referenced in the preamble above, unless a party gives the other parties
written notice that notices to it should be sent to a different address.
Notices may be given by facsimile transmission with the original mailed via
first class mail, postage prepaid, by overnight or courier service with
receipted delivery, or by certified or registered first class mail, postage
prepaid, return receipt requested.
6. The provisions of this Agreement shall be binding upon the parties
hereto and their respective successors and assigns and shall inure to the
benefit of such parties and their respective successors and assigns.
7. This Agreement shall be governed by the laws of the
State of New York.
8. This Agreement may be executed in one or more counterparts, each of
which, when together, shall constitute same original.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly signed and
executed this Agreement as of the day and year first above written.
WIZCOM INTERNATIONAL LTD.
By: /s/ David P. McNicholas
------------------------------------
Name:
Title:
AVIS RENT A CAR SYSTEM, INC.
By: /s/ Kevin M. Sheehan
------------------------------------
Name:
Title:
AESOP FUNDING II L.L.C.
By: /s/ Frank B. Bilotta
------------------------------------
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
As Trustee
By: /s/ Robert D. Foltz
------------------------------------
Name:
Title:
<PAGE>
SCHEDULE 1
VEHICLE TRACKING SERVICES
Fleet Accounting Transaction
Title Tracking System
Fleet Receivables
Invoice System (BARS)
Department of Sanitation System
Fleet Reporting System
Vehicle Reporting System
5
<PAGE>
SYSTEM FUNCTION DESCRIPTIONS
Fleet Accounting Transaction
- ----------------------------
Enables the vehicle owner to establish depreciation/interest rates based on a
group of vehicles. The system includes depreciation, interest (YTD & MTD), book
value (Cap Cost less depreciation and interest) and vehicle status.
Title Tracking System
- ---------------------
Enables the fleet owner to track the status of the vehicle title.
Fleet Receivables
- -----------------
A system to administer the collection of various receivables due from the
vehicle manufacturers.
Invoice System (BARS)
- ---------------------
This system capturers and retains invoices received from vehicle manufacturers.
Department of Sanitation System
- -------------------------------
Provides adds/sales of all fleet inventory for the Northeast zone to the
Department of Sanitation.
Fleet Reporting System
- ----------------------
Reports on turnback of eligible vehicles, transfers, and various stages of
titling.
Vehicle Reporting System
- ------------------------
Provides the field location with vehicle reports. Status includes inactive,
overdue, open movements, mileage discrepancies, due-ins, missing and marshalled
vehicles.
6
<PAGE>
Exhibit 10.18
AVIS RENT A CAR, INC.
1997 STOCK OPTION PLAN
1. Purpose. The purpose of the Plan is to provide additional incentive
to those officers, key employees, independent contractors and Non-Employee
Directors of the Company and its Subsidiaries whose substantial contributions
are essential to the continued growth and success of the Company's business in
order to strengthen their commitment to the Company and its Subsidiaries, and
to attract and retain competent and dedicated individuals whose efforts will
result in the long-term growth and profitability of the Company and to further
align the interests of such officers, key employees, independent contractors
and Non-Employee Directors with the interests of stockholders of the Company.
To accomplish such purposes, the Plan provides that the Company may grant
Incentive Stock Options or Nonqualified Stock Options.
2. Definitions. For purposes of this Plan:
(a) "Agreement" means the written agreement between the Company
and an Optionee evidencing the grant of an Option, and setting forth the terms
and conditions thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means (i) the willful failure by the Optionee
substantially to perform his duties as an employee of the Company or a
Subsidiary (other than any such failure resulting from the Optionee's
incapacity due to physical or mental illness); (ii) any act of fraud,
misappropriation, dishonesty, embezzlement or similar conduct against the
Company or a Subsidiary; (iii) conviction of a felony or any crime involving
moral turpitude (which conviction, due to the passage of time or otherwise, is
not subject to further appeal) or (iv) gross negligence by the Optionee in the
performance of his duties. The Optionee's employment shall not be deemed to
have been terminated for Cause unless the Company or a
<PAGE>
Subsidiary shall have given or delivered to the Optionee a notice of
termination stating that in the good faith opinion of not less than a majority
of the entire membership of the Board or the Subsidiary's board of directors,
the Optionee was guilty of the conduct set forth in clauses (i), (ii) or (iv)
of the preceding definition of Cause.
(d) "Change in Capitalization" means any increase, reduction, or
change or exchange of Shares for a different number or kind of shares or other
securities of the Company by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, issuance of warrants or rights, dividend
or other distribution (whether in the form of cash, stock or other property),
stock split or reverse stock split, spin-off, combination or exchange of
shares, repurchase of shares, change in corporate structure or otherwise.
(e) "Change-of-Control Transaction" means any transaction or
series of transactions pursuant to or as a result of which (i) during any
period of not more than 24 months, individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a third party who has entered into an agreement to effect a
transaction described in clause (ii), (iii) or (iv) of this paragraph (e))
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors
then still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved (other
than approval given in connection with an actual or threatened proxy or
election contest), cease for any reason to constitute at least a majority of
the members of the Board, (ii) beneficial ownership of 50% or more of the
Shares (or other securities having generally the right to vote for election of
the Board) of the Company shall be sold, assigned or otherwise transferred,
directly or indirectly, other than pursuant to a public offering, to a third
party, whether by sale or issuance of Shares or other securities or otherwise,
(iii) the Company or any Subsidiary shall sell, assign or otherwise transfer,
directly or indirectly, assets (including stock or other securities of
Subsidiaries) having a fair market or book value or earning power of 50% or
more of the assets or earning power of the Company and its Subsidiar-
2
<PAGE>
ies (taken as a whole) to any third party, other than the Company or a
wholly-owned Subsidiary thereof, or (iv) control of 50% or more of the business
of the Company shall be sold, assigned or otherwise transferred directly or
indirectly to any third party.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the Compensation Committee of the Board of
Directors of the Company, or such other committee appointed by the Board to
administer the Plan and to perform the functions set forth herein.
(h) "Company" means Avis Rent A Car, Inc., a Delaware
corporation.
(i) "Disability" means the inability, due to illness or injury,
to engage in any gainful occupation to which the individual is suited by
education, training or experience, which condition continues for at least six
(6) months.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(k) "Fair Market Value" means the fair market value of the Shares
as determined by the Committee in its sole discretion; provided, however, that
(A) if the Shares are admitted to trading on a national securities exchange,
Fair Market Value on any date shall be the last sale price reported for the
Shares on such exchange on such date or on the last date preceding such date on
which a sale was reported, (B) if the Shares are admitted to quotation on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ") or other comparable quotation system and have been designated as a
National Market System ("NMS") security, Fair Market Value on any date shall be
the last sale price reported for the Shares on such system on such date or on
the last day preceding such date on which a sale was reported, or (C) if the
Shares are admitted to quotation on NASDAQ and have not been designated a NMS
security, Fair Market Value on any date shall be the average of the highest bid
and lowest asked prices of the Shares on such system on such date.
3
<PAGE>
(l) "Incentive Stock Option" means an Option within the meaning
of Section 422 of the Code.
(m) "IPO Date" means the date of closing of the initial public
offering of the Company's common stock.
(n) "Non-Employee Director" means a member of the Board who is
not also an employee of the Company or its Subsidiaries.
(o) "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
(p) "Option" means an Incentive Stock Option, a Nonqualified
Stock Option, or either or both of them, as the context requires.
(q) "Optionee" means a person to whom an Option has been granted
under the Plan.
(r) "Parent" means any corporation in an unbroken chain of
corporations ending with the Company, if each of the corporations other than
the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock of one of the other corporations in such chain.
(s) "Participant" means any officer, key employee or independent
contractor of the Company or a Subsidiary designated by the Committee as
eligible to receive Options subject to the conditions set forth herein, and
shall also mean any Non-Employee Director.
(t) "Plan" means the Avis Rent A Car, Inc. 1997 Stock Option
Plan, as amended from time to time.
(u) "Section 162(m)" means Section 162(m) of the Code and the
regulations issued thereunder.
(v) "Securities Act" means the Securities Act of 1933, as
amended.
(w) "Shares" means the common stock, par value $.01 per share, of
the Company (including any new, additional or different stock or securities
resulting from a Change in Capitalization).
4
<PAGE>
(x) "Subsidiary" means any corporation in an unbroken chain of
corporations, beginning with the Company, if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
(y) "Ten-Percent Stockholder" means a Participant, who, at the
time an Incentive Stock Option is to be granted to such Participant, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, a Parent or a Subsidiary within the meaning of Sections
422(e) and 422(0, respectively, of the Code.
3. Administration.
(a) The Plan shall be administered by the Committee which shall
hold meetings at such times as may be necessary for the proper administration
of the Plan. The Committee shall comply with the provisions of Section 16(b)(3)
of the Exchange Act as amended from time to time. The Committee shall keep
minutes of its meetings. A majority of the Committee shall constitute a quorum
and a majority of a quorum may authorize any action. Any decision reduced to
writing and signed by a majority of the members of the Committee shall be fully
effective as if it has been made at a meeting duly held. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or Options, and all
members of the Committee shall be fully indemnified by the Company with respect
to any such action, determination or interpretation. The Company shall pay all
expenses incurred in the administration of the Plan.
(b) Subject to the express terms and conditions set forth herein,
the Committee shall have the power from time to time:
(i) to determine, with respect to Participants who are not
Non-Employee Directors, those Participants to whom Options shall be granted
under the Plan and the number of Nonqualified Options and/or Incentive Stock
Options to be granted to each Participant and to pre-
5
<PAGE>
scribe the terms and conditions (which need not be identical) of each Option,
including the purchase price per share of each Option;
(ii) to construe and interpret the Plan and the Options
granted hereunder and to establish, amend and revoke rules and regulations for
the administration of the Plan, including, but not limited to, correcting any
defect or supplying any omission, or reconciling any inconsistency in the Plan
or in any Agreement, in the manner and to the extent it shall deem necessary or
advisable to make the Plan fully effective, and all decisions and
determinations by the Committee in the exercise of this power shall be final
and binding upon the Company or a Subsidiary, and the Optionees, as the case
may be.
(iii) to determine the duration and purposes for leaves of
absence which may be granted to an Optionee without constituting a termination
of employment or service for purposes of the Plan; and
(iv) generally, to exercise such powers and to perform such
acts as are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan.
4. Stock Subject to Plan.
(a) The maximum number of Shares that may be issued or
transferred pursuant to Options is 13% of the total outstanding Shares as of
the IPO Date (or the number and kind of shares of stock or other securities
which are substituted for those Shares or to which those Shares are adjusted
upon a Change in Capitalization), and the Company shall reserve for the
purposes of the Plan, out of its authorized but unissued Shares or out of
Shares held in the Company's treasury, or partly out of each, such number of
Shares as shall be determined by the Board.
(b) No Participant may receive Options relating to Shares which
in the aggregate exceed more than 50% of the Shares reserved for issuance
pursuant to Section 4(a) above over the life of the Plan.
6
<PAGE>
(c) Whenever any outstanding Option or portion thereof expires,
is cancelled or is otherwise terminated (other than by exercise of the Option),
the Shares allocable to the unexercised portion of such Option may again be the
subject of Options hereunder.
5. Eligibility. Subject to the provisions of the Plan and with respect
to Participants who are not Non-Employee Directors, the Committee shall have
full and final authority to select those Participants who will receive Options;
provided, however, that no such Participant shall receive any Incentive Stock
Options unless such Participant is an employee of the Company or a Subsidiary
at the time the Incentive Stock Option is granted. Non-Employee Directors shall
be eligible for Options in accordance with Section 7 hereof.
6. Options. The Committee, pursuant to this Section 6, may grant
Options to Participants who are not Non-Employee Directors, the terms and
conditions of which shall be set forth in an Agreement. Each Option and
Agreement shall be subject to the following conditions:
(a) Purchase Price. The purchase price or the manner in which the
purchase price is to be determined for Shares under each Option shall be set
forth in the Agreement, provided that the purchase price per Share under each
Option shall not be less than 100% of the Fair Market Value of a Share at the
time the Option is granted (110% in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder).
(b) Duration. Options granted hereunder shall be for a ten (10)
year term or for such term as the Committee shall determine, provided that no
Option shall be exercisable after the expiration of ten (10) years from the
date it is granted (five (5) years in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder). The Committee may, subsequent to the
granting of any Option, extend the term thereof but in no event shall the term
as so extended exceed the maximum term provided for in the preceding sentence.
(c) Non-transferability. No Option granted hereunder shall be
transferable by the Optionee to whom granted otherwise than by will or the laws
of descent and distribution, and an Option may be exercised during the
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<PAGE>
lifetime of such Optionee only by the Optionee or such Optionee's guardian or
legal representative, except that, to the extent the option agreement so
provides, and subject to such conditions as the Committee may prescribe, an
Optionee may, upon providing written notice to the General Counsel of the
Company, elect to transfer the options granted to such Optionee pursuant to
such agreement, without consideration therefor, to members of his or her
immediate family, including, without limitation, to children, grandchildren and
spouse or to trusts for the benefit of such family members or to partnerships
in which such family members are the only partners. The terms of such Option
shall be binding upon the beneficiaries, executors, administrators, heirs and
successors of the Optionee.
(d) Vesting. Subject to Section 6(c) hereof, unless otherwise set
forth in the Agreement, each Option shall become exercisable as to 20 percent
of the Shares covered by the Option on the first anniversary of the date the
Option was granted and as to an additional 20 percent of the Shares covered by
the Option on each of the following four (4) anniversaries of such date of
grant. To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, at any time after becoming exercisable, but
not later than the date the Option expires. The Committee may accelerate the
exercisability of any Option or portion thereof at any time. Any portion of an
Option not exercisable upon termination of employment or cessation of service
shall be forfeited unless set forth herein or in an Optionee's Agreement.
(e) Accelerated Vesting. Notwithstanding the provisions of
subsection (d) above, each Option granted to an Optionee shall become
immediately exercisable in full upon a Change-of-Control Transaction.
(f) Duration. The option shall be exercisable (to the extent
vested) in whole or in part from time to time during the term of the Option,
but shall, unless the Committee determines otherwise, terminate upon the
following date if earlier than the term of the Option:
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<PAGE>
(i) the second anniversary of the termination of the Optionee's
employment by the Company or a Subsidiary (or service as an independent
contractor) as a result of the Optionee's death, Disability or retirement; or
(ii) the first anniversary of the termination of the Optionee's
employment by the Company or a Subsidiary (or service as an independent
contractor) for any reason (other than death, Disability or retirement).
Notwithstanding the foregoing, the Committee may provide, either at
the time an Option is granted or thereafter, that the Option may be exercised
after the periods provided for in this Section 6(f), but in no event beyond ten
(10) years from the date of grant.
(g) Method of Exercise. The exercise of an Option shall be made only
by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal executive office, specifying the number of
Shares to be purchased and accompanied by payment therefor and otherwise in
accordance with the Agreement pursuant to which the Option was granted. The
purchase price for any Shares purchased pursuant to the exercise of an Option
shall be paid in full upon such exercise in cash, by check, or, at the
discretion of the Committee and upon such terms and conditions as the Committee
shall approve in Shares (whether previously owned by the Optionee or issuable
upon the exercise of such Option) to the Company or by a cashless exercise
procedure. Any Shares transferred to the Company as payment of the purchase
price under an Option shall be valued at their Fair Market Value on the day
preceding the date of exercise of such Option. If requested by the Committee,
the Optionee shall deliver the Agreement evidencing the Option to the Secretary
of the Company who shall endorse thereon a notation of such exercise and return
such Agreement, to the Optionee. Not less than 100 Shares may be purchased at
any time upon the exercise of an Option unless the number of Shares so
purchased constitutes the total number of Shares then purchasable under the
Option.
(h) Rights of Optionees. No Optionee shall be deemed for any purpose
to be the owner of any Shares subject to any Option unless and until (i) the
Option
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<PAGE>
shall have been exercised pursuant to the terms thereof, (ii) the Company shall
have issued and delivered the Shares to the Optionee, and (iii) the Optionee's
name shall have been entered as a stockholder of record on the books of the
Company. Thereupon, the Optionee shall have full voting, dividend and other
ownership rights with respect to such Shares. Notwithstanding anything in this
Plan to the contrary, the Agreement evidencing the Option may contain such
restrictions on the transfer of Shares received by an Optionee pursuant to any
exercise of such Option (or received in respect of Shares so purchased) as may
be determined by the Committee.
7. Non-Employee Directors Formula Options.
The provisions of this Section 7 shall apply only to grants of Options
to Non-Employee Directors. The provisions of Section 6 shall also apply to
grants of Options to Non-Employee Directors to the extent not inconsistent with
this Section 7. For purposes of interpreting this Section 7 of the Plan, a
Non-Employee Director's service as a member of the Board shall be deemed to be
employment with the Company.
(a) General. Non-Employee Directors shall receive Nonqualified
Stock Options under the Plan. The exercise price per share of Stock purchasable
under Options granted to Non-Employee Directors shall be the Fair Market Value
of a Share on the date of grant. An Option granted to a Non-Employee Director
shall become fully vested and exercisable upon a Change-of-Control Transaction
as defined in Section 2(f) hereof. The Board or the Committee shall have the
authority, in its sole discretion, to accelerate the exercisability of any
Option or portion thereof granted to a Non-Employee Director.
(b) Initial Grants to Non-Employee Directors. Each Non-Employee
Director shall be granted automatically an option to purchase 25,000 shares on
the date such Non-Employee Director is elected or appointed to the Board of
Directors of the Company; provided however, that Non-Employee Directors serving
as such on and prior to the IPO Date shall be granted such option automatically
as of the IPO Date.
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(c) Exercisability. Each Option granted under this Section 7
shall be exercisable as to 20 percent of the Shares covered by the Option on
each of the first, second, third, fourth and fifth anniversaries of the date
the Option is granted. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, at any time after becoming
exercisable, but not later than the date the Option expires.
8. Adjustment Upon Changes in Capitalization. In the event of a Change
in Capitalization, the Committee shall conclusively determine the appropriate
adjustments, if any, to the maximum number and class of shares of stock with
respect to which Options may be granted under the Plan, the number and class of
shares of stock as to which Options have been granted under the Plan, and the
purchase price therefor, if applicable.
9. Release of Financial Information. A copy of the Company's annual
report to stockholders shall be delivered to each Optionee at the time such
report is distributed to the Company's stockholders. Upon request by any
Optionee, the Company shall furnish to such Optionee a copy of its most recent
annual report and each quarterly report and current report filed under the
Exchange Act, since the end of the Company's prior fiscal year.
10. Termination and Amendment of the Plan. The Plan shall terminate on
September 1, 2007, except with respect to Options outstanding on such date, and
no Options may be granted thereafter. The Board may sooner terminate or amend
the Plan at any time, and from time to time; provided, however, that, except as
provided in Section 8 hereof, and as otherwise determined by the Board no
amendment shall be effective unless approved by the stockholders of the
Company, where stockholder approval of such amendment is required to comply
with Section 162(m) or to comply with any other law, regulation or stock
exchange rule.
Except as provided in Section 8 hereof, rights and obligations under
any Option granted before any amendment of the Plan shall not be adversely
altered or impaired by such amendment, except with the consent of the Optionee.
11. Non-Exclusivity of the Plan. The adoption of the Plan by the Board
shall not be construed as amending,
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<PAGE>
modifying or rescinding any previously approved incentive arrangement or as
creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options otherwise than under the plan, and such
arrangements may be either applicable generally or only in special cases.
12. Limitation of Liability. As illustrative of the limitations of liability of
the Company, but not intended to be exhaustive thereof, nothing in the Plan
shall be construed to:
(a) give any person any right to be granted an Option other than
at the sole discretion of the Committee;
(b) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;
(c) limit in any way the right of the Company or its Subsidiaries
to terminate the employment of any person at any time; or
(d) be evidence of any agreement or understanding, expressed or
implied, that the Company or its Subsidiaries will employ any person in any
particular position, at any particular rate of compensation or for any
particular period of time.
13. Regulations and Other Approvals; Governing Law.
(a) This Plan and the rights of all persons claiming hereunder
shall be construed and determined in accordance with the laws of the State of
Delaware without giving effect to the choice of law principles thereof, except
to the extent that such law is preempted by Federal law.
(b) The obligation of the Company to sell or deliver Shares with
respect to Options granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable Federal and state
securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
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<PAGE>
(c) This Plan is intended to comply with the provisions of
Section 162(m) and, unless otherwise determined by the Board, all provisions
hereof shall be construed in a manner to so comply.
(d) Except as otherwise provided in Section 10, the Board may
make such changes as may be necessary or appropriate to comply with the rules
and regulations of any government authority or to obtain for Optionees granted
Incentive Stock Options, the tax benefits under the applicable provisions of
the Code and regulations promulgated thereunder.
(e) Each Option is subject to the requirement that, if at any
time the Committee determines, in its absolute discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any state or Federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
the issuance of Shares, no Options shall be granted or payment made or Shares
issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions as
acceptable to the Committee.
(f) In the event that the disposition of Shares acquired pursuant
to the Plan is not covered by a then current registration statement under the
Securities Act and is not otherwise exempt from such registration, such Shares
shall be restricted against transfer to the extent required by the Securities
Act or regulations thereunder, and the Committee may require an Optionee
receiving Shares pursuant to the Plan, as a condition precedent to receipt of
such Shares, to represent to the Company in writing that the Shares acquired by
such Optionee are acquired for investment only and not with a view to
distribution.
14. Miscellaneous.
(a) Multiple Agreements. With respect to Participants who are
not also Non-Employee Directors, the terms of each Option may differ from other
Options granted under the Plan at the same time, or at any other time. With
respect to Participants who are not also
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<PAGE>
Non-Employee Directors, the Committee may grant more than one Option to a given
Optionee during the term of the Plan, either in addition to, or in substitution
for, one or more Options previously granted to that Optionee. The grant of
multiple Options may be evidenced by a single Agreement or multiple Agreements,
as determined by the Committee.
(b) Withholding of Taxes. The Company shall have the right to
deduct from any payment of cash to any Optionee an amount equal to the Federal,
state and local income taxes and other amounts required by law to be withheld
with respect to any Option. Notwithstanding anything to the contrary contained
herein, if an Optionee is entitled to receive Shares upon exercise of an
Option, the Company shall have the right to require such Optionee, prior to the
delivery of such Shares, to pay to the Company the amount of any Federal, state
or local income taxes and other amounts which the Company is required by law to
withhold. To the extent provided in the applicable Agreement, such payment may
be made in cash, or in Shares (whether previously owned by the Optionee or
issuable upon the exercise of such Option) having a Fair Market Value equal to
such taxes, or in a combination of cash and Shares. The Agreement evidencing
any Incentive Stock Options granted under this Plan shall provide that if the
Optionee makes a disposition, within the meaning of Section 424(c) of the Code
and regulations promulgated thereunder, of any Share or Shares issued to such
Optionee pursuant to such Optionee's exercise of the Incentive Stock Option,
and such disposition occurs within the two-year period commencing on the day
after the date of grant of such Option or within the one-year period commencing
on the day after the date of transfer of the Share or Shares to the Optionee
pursuant to the exercise of such Option, such Optionee shall, within ten (10)
days of such disposition, notify the Company thereof and thereafter immediately
deliver to the Company any amount of Federal, state or local income taxes and
other amounts which the Company informs the Optionee the Company is required to
withhold.
(c) Designation of Beneficiary. Each Optionee may, with the
consent of the Committee, designate a person or persons to receive in the event
of such Optionee's death, any Option or any amount of Shares payable pursuant
thereto, to which such Optionee would
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<PAGE>
then be entitled. Such designation will be made upon forms supplied by and
delivered to the Company and may be revoked or changed in writing. In the event
of the death of an Optionee and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such Optionee's death,
the Company shall deliver such Options, and/or amounts payable to the executor
or administrator of the estate of the Optionee, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such Options and/or amounts payable to
the spouse or to any one or more dependents or relatives of the Optionee, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
15. Effective Date. The effective date of the Plan be
September 1, 1997.
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EMPLOYEE BENEFITS AND OTHER EMPLOYMENT MATTERS
ALLOCATION AGREEMENT
DATED AS OF SEPTEMBER , 1997
BY AND BETWEEN
HFS CAR RENTAL, INC.,
A DELAWARE CORPORATION,
AVIS RENT A CAR SYSTEM, INC.,
A DELAWARE CORPORATION
AND
HFS INCORPORATED,
A DELAWARE CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS................................ 2
Section 1.1 General................................................ 2
Section 1.2 Schedules, Etc......................................... 5
Section 1.3 Certain Constructions.................................. 5
ARTICLE II
EMPLOYEE BENEFITS; LABOR MATTERS....................... 5
Section 2.1 General........................................... 5
Section 2.2 Avis Voluntary Savings
Plan.............................................. 6
Section 2.3 Avis, Inc. Employee
Stock Ownership Plan.............................. 8
Section 2.4 Retirement Plan for
Employees as of June
30, 1985 of Avis Rent
A Car System, Inc................................. 9
Section 2.5 Pension Plan for Bargaining Hourly Employees...... 13
Section 2.6 Welfare Plans..................................... 13
Section 2.7 Severance Pay..................................... 16
Section 2.8 ARAC Miscellaneous
Plans............................................. 16
Section 2.9 Collective Bargaining
Agreements........................................ 17
Section 2.10 Employment Agreements............................. 18
Section 2.11 Other Balance Sheet
Adjustments....................................... 18
Section 2.12 Preservation of Rights
To Amend or Terminate
Plans............................................. 19
Section 2.13 Reimbursement; Indemnification.................... 19
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Page
ARTICLE III
MISCELLANEOUS............................... 21
Section 3.1 Complete Agreement;
Construction...................................... 21
Section 3.2 Governing Law..................................... 21
Section 3.3 Notices........................................... 21
Section 3.4 Amendments........................................ 22
Section 3.5 Successors and Assigns............................ 23
Section 3.6 Termination....................................... 23
Section 3.7 No Third Party Beneficiaries...................... 23
Section 3.8 Titles and Headings............................... 23
Section 3.9 Schedules......................................... 24
Section 3.10 Legal Enforceability.............................. 24
ii
<PAGE>
EMPLOYEE BENEFITS and OTHER EMPLOYMENT MATTERS
ALLOCATION AGREEMENT
Employee Benefits and Other Employment Matters Allocation
Agreement (the "Agreement"), dated as of September , 1997, by and between HFS
Car Rental, Inc. (formerly, Avis, Inc.), a Delaware corporation ("Car Rental"),
Avis Rent A Car System, Inc., a Delaware corporation and a wholly owned
subsidiary of Car Rental ("ARAC") and HFS Incorporated, a Delaware corporation
("HFS").
WHEREAS, the Board of Directors of Car Rental and the Board
of Directors of ARAC has entered into the Separation Agreement (the "Separation
Agreement") dated as of July 31, 1997, by and between Car Rental and ARAC,
pursuant to which, among other things, it is contemplated that Car Rental will
conduct a public offering of approximately 70% of the common stock of ARAC
(the "Separation"); and
WHEREAS, in connection with the Separation, Car Rental, ARAC
and HFS desire to provide for the allocation of assets and liabilities and
other matters relating to employee benefit arrangements and other employment
matters.
<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.1 General. As used in this Agreement, the following
terms shall have the following meanings. Capitalized terms used herein but not
defined shall have the meanings set forth in the Separation Agreement:
ARAC Employee: any individual who is, following the
Separation, intended to be employed by ARAC or an ARAC Subsidiary on an ongoing
basis.
ARAC Individual: any individual who (i) is an ARAC Employee
as of the Separation, (ii) is, as of the Separation, a former or retired
employee of Car Rental, a HFS/Car Rental Subsidiary, ARAC or an ARAC
Subsidiary, or (iii) is a beneficiary of any individual specified in clause (i)
or (ii).
ARAC Subsidiary: any direct or indirect subsidiary of ARAC
that, effective as of the Separation or otherwise in connection with the
Separation, will be, or is contemplated by the Separation Agreement to be, a
di-
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<PAGE>
rect or indirect subsidiary of ARAC, and any other subsidiary of ARAC which
may be organized or acquired on or after the Separation.
Car Rental Employee: any individual who is, as of the
Separation, intended to be employed by Car Rental or any Car Rental/HFS
Subsidiary on an ongoing basis.
Car Rental Individual: any individual who is a Car Rental
Employee as of the Separation or any beneficiary thereof.
Car Rental/HFS Subsidiary: as of and following the Separation
Date, WIZCOM, any direct or indirect subsidiary of WIZCOM (including without
limitation Preferred Holidays) or any direct or indirect subsidiary of Car
Rental other than ARAC or any ARAC Subsidiary.
Code: the Internal Revenue Code of 1986, as
amended.
Collective Bargaining Agreement: any collective bargaining
and other labor agreement to which ARAC or any of its subsidiaries is a party.
Current Plan Year: the plan year or fiscal year, to the
extent applicable with respect to any Plan, during which the Separation occurs.
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<PAGE>
ERISA: the Employee Retirement Income Security Act of 1974,
as amended.
Plan: any plan, program, policy or arrangement or contract or
agreement providing benefits for ARAC Individuals or Car Rental Individuals,
whether formal or informal or written or unwritten and whether or not legally
binding, and including, without limitation, any means, whether or not legally
required, pursuant to which any benefit is provided by an employer to any
employee or former employee or the beneficiary or beneficiaries of any such
employee or former employee.
Separation: the public offering by Car Rental of
approximately 70% of the Common Stock of ARAC, or such other transaction or
series of integrated transactions contemplated by the Separation Agreement.
Transition Period: the period beginning with the Separation
and ending on December 31, 1997.
Welfare Plan: any Plan, each of which is listed on Schedule
A, which provides medical, health, disability, accident, life insurance, death,
dental or any other welfare benefit, including, without limitation, any
post-employment or post-retirement benefit.
Section 1.2 Schedules, Etc. References to a "Schedule" are,
unless otherwise specified, to one of the
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<PAGE>
Schedules attached to this Agreement, and references to a "Section" are, unless
otherwise specified, to one of the Sections of this Agreement.
Section 1.3 Certain Constructions. References to the singular
in this Agreement shall refer to the plural and vice-versa and references to
the disjunctive shall refer to the conjunctive and vice-versa and references
to the masculine shall refer to the feminine and vice-versa.
ARTICLE II
EMPLOYEE BENEFITS; LABOR MATTERS
Section 2.1 General. Except as otherwise set forth in this
Agreement, effective as of and following the Separation (i) ARAC shall provide
the ARAC Employees with employee benefits which it deems appropriate and (ii)
HFS shall provide the Car Rental Employees with employee benefits which it
deems appropriate.
5
<PAGE>
Section 2.2 Avis Voluntary Savings Plan.
(a) Effective as of the Separation, ARAC shall amend the Avis
Voluntary Savings Plan (the "Savings Plan") and take such other action as may
be necessary and appropriate to provide that, during the Transition Period,
(i) each Car Rental Employee shall be deemed not to have terminated employment
with ARAC and its subsidiaries for purposes of the Savings Plan by virtue of
the Separation so long as such employee remains employed with Car Rental, any
Car Rental/HFS Subsidiary or HFS, (ii) each Car Rental Employee shall accrue
service credit for purposes of eligibility to participate and vesting under
the Savings Plan for all service as an employee with Car Rental, any Car
Rental/HFS Subsidiary or HFS and (iii) the compensation received by each Car
Rental Employee from Car Rental, any Car Rental/HFS Subsidiary or HFS, to the
extent applicable, shall be used as the Compensatio] (as defined in the Savings
Plan) of such employee. In consideration for the benefits to be provided under
the Savings Plan to Car Rental Employees in accordance with this Section 2.2,
HFS shall pay to ARAC an amount equal to all contributions (other than
payroll-deduction contributions) made to the Savings Plan on behalf of Car
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<PAGE>
Rental Employees during the Transition Period, as well as ARAC's reasonable
costs and expenses for administering the Savings Plan with respect to Car
Rental Employees during the Transition Period.
(b) Effective as of the Separation (subject to the provisions
of paragraph (a) of this Section 2.2), the parties hereto shall take all action
necessary and appropriate to cause ARAC to (i) maintain and become the sole
sponsor of the Savings Plan and (ii) assume and be solely responsible for all
assets, liabilities and obligations whatsoever under the Savings Plan,
including the obligation to make contributions thereto, regardless of whether
such obligation to contribute relates to services before or after the
Separation.
(c) Effective as of the close of the Transition Period, HFS
shall take all action necessary and appropriate to (i) cause each of the Car
Rental Employees to become eligible to participate in the HFS Incorporated
Employee Savings Plan (the "HFS Savings Plan") and (ii) to provide that such
Car Rental Employees shall receive service credit for all purposes under the
HFS Savings Plan for all periods of service with Car Rental and its
subsidiaries prior to the Separation to the same extent
7
<PAGE>
any such service was recognized under the Savings Plan as of the effective
date of the Separation.
(d) Effective as of the close of the Transition Period, Car
Rental Employees shall not be eligible to make any contributions, or have ARAC
or the ARAC Subsidiaries make any contributions on their behalf, to the Savings
Plan. As soon as practicable following the close of the Transition Period, ARAC
and HFS shall take any and all action necessary and appropriate to execute a
direct plan-to-plan transfer to the HFS Savings Plan of all of the account
balances of each of the Car Rental Employees (including, if applicable, any
outstanding participant loans to the extent that the transfer of such loan will
not cause a taxable distribution to the Car Rental Employee, subject to each
such Car Rental Employee executing a loan agreement with the HFS Savings Plan,
the form of which agreement shall be reasonably satisfactory to HFS, for the
balance of such loan).
Section 2.3 Avis, Inc. Employee Stock Ownership Plan.
Effective as of the Separation, the parties hereto shall take all action
necessary and appropriate to cause ARAC to become the sole sponsor of the Avis,
Inc. Employee Stock Ownership Plan (the "ESOP") and ARAC shall assume and be
solely responsible for all liabilities and
8
<PAGE>
obligations whatsoever under the ESOP, including such liabilities and
obligations arising in respect of Car Rental Individuals. Each participant of
the ESOP (whether such participant is an ARAC Individual or a Car Rental
Individual) shall be treated in accordance with the terms of the ESOP.
Section 2.4 Retirement Plan for Employees as of June 30, 1985
of Avis Rent A Car System, Inc.
(a) Effective as of the Separation (subject to the provisions
of paragraph (a) of this Section 2.4), the parties hereto shall take all action
necessary and appropriate to cause ARAC to (i) become the sole sponsor of the
Retirement Plan for Employees as of June 30, 1985 of Avis Rent A Car System,
Inc. (the "ARAC Retirement Plan") and (ii) assume and be solely responsible for
all assets, liabilities and obligations whatsoever under the ARAC Retirement
Plan, including such liabilities and obligations arising in respect of Car
Rental Individuals.
(b) Effective as of the Separation, ARAC shall amend the ARAC
Retirement Plan and take such other action necessary and appropriate to provide
that, for a period (the "ARAC Retirement Plan Transition Period") beginning on
the date of the Separation and ending on December 31, 1998 or such earlier date
as HFS shall determine (i) each
9
<PAGE>
Car Rental Employee shall be deemed not to have terminated employment with
ARAC and its subsidiaries for purposes of the ARAC Retirement Plan by virtue of
the Separation so long as such employee remains employed with Car Rental, any
Car Rental/HFS Subsidiary or HFS, (ii) each Car Rental Employee shall accrue
additional service credit for all purposes under the ARAC Retirement Plan for
all service as an employee with Car Rental, any Car Rental/HFS Subsidiary or
HFS and (iii) the compensation received by each Car Rental Employee from Car
Rental, any Car Rental/HFS Subsidiary or HFS, to the extent applicable, shall
be used in determining the Final Average Pay (as defined in the ARAC Retirement
Plan) of such employee.
(c) In consideration for the benefits to be provided under
the ARAC Retirement Plan to Car Rental Employees in accordance with Section
2.4(b) above, HFS shall pay to ARAC an amount (the "HFS Amount") equal to the
excess, if any, of (i) the present value of the accrued benefit that each Car
Rental Employee would be entitled to under the ARAC Retirement Plan (as in
effect on the date hereof) upon reaching normal retirement age assuming that
such employee terminated employment with Car Rental and its subsidiaries
immediately following the
10
<PAGE>
ARAC Retirement Plan Transition Period or, if earlier, on the date such Car
Rental Employee actually terminates employment with Car Rental, any Car
Rental/HFS Subsidiary or HFS, determined as of the last day of the ARAC Retire-
ment Plan Transition Period and after giving effect to Section 2.4(b) above
over (ii) the present value of the accrued benefit that each Car Rental
Employee would be entitled to under the ARAC Retirement Plan (as in effect on
the date hereof) upon reaching normal retirement age assuming that such
employee terminated employment with Car Rental and its subsidiaries immediately
prior to the Separation (and, accordingly, assuming that such employee would
not accrue additional service credit or be credited with any increase in Final
Average Pay after such termination). The HFS Amount shall (i) be calculated by
an enrolled actuary selected by HFS (the "HFS Actuary") in connection with the
first regular actuarial valuation of the ARAC Retirement Plan following the end
of the ARAC Retirement Plan Transition Period, and (ii) be calculated using the
same actuarial assumptions applied to such annual actuarial valuation, which
assumptions shall be substantially consistent with the assumptions used in
previous valuations of the ARAC Retirement Plan. Upon the receipt by HFS of a
report
11
<PAGE>
from the HFS Actuary indicating the HFS Amount and detailing the method
of valuation and the assumptions used, HFS shall pay to ARAC, within 30 days
after such receipt, the HFS Amount.
(d) The HFS Actuary shall deliver its report detailing the
calculation of the HFS Amount to HFS, Car Rental and ARAC as soon as reasonably
practicable. If ARAC shall disagree with the determination of the HFS Amount
made by the HFS Actuary, ARAC shall have the right within 30 days after receipt
of notice of such determination and back-up work papers to notify HFS that its
enrolled actuary (the "ARAC Actuary")(whose fees and expenses shall be paid by
ARAC) disagrees with the determination made by the HFS Actuary. If such
actuaries cannot agree on the HFS Amount within 30 days of the date of the
notice from ARAC to HFS, such amount shall be finally determined by another
enrolled actuary selected by agreement between the HFS Actuary and the ARAC
actuary, whose fees and expenses shall be borne solely by ARAC. HFS shall pay
the HFS Amount to ARAC no later than 5 business days following the final
determination of the HFS Amount. Upon the payment of the HFS Amount, neither
HFS, Car Rental nor any of their respective subsidiaries
12
<PAGE>
shall have any further obligations whatsoever under or with respect to the ARAC
Retirement Plan.
Section 2.5 Pension Plan for Bargaining Hourly Employees.
Effective as of the Separation, the parties hereto shall take
all action necessary and appropriate to cause ARAC to (i) become the sole
sponsor of the Avis Rent A Car System, Inc. Pension Plan for Bargaining Hourly
Employees (the "Hourly Pension Plan") and (ii) assume and be solely responsible
for all assets, liabilities and obligations whatsoever under the Hourly
Pension Plan.
Section 2.6 Welfare Plans.
(a) As of the Separation (i) ARAC shall assume or retain and
shall be solely responsible for, or cause its insurance carriers to be
responsible for (A) all liabilities and obligations whatsoever that relate to
claims of ARAC Individuals, whether or not incurred prior to the Separation, in
connection with all claims under any Welfare Plan (including any Welfare Plan
providing for post-retirement benefits) and (B) all liabilities and obligations
whatsoever that relate to claims of Car Rental Individuals, but only to the
extent such claims were incurred prior to the Separation (whether or not a
13
<PAGE>
claim was filed prior to the Separation) in connection with all claims under
any Welfare Plan (including any Welfare Plan providing for post-retirement
benefits), and (ii) Car Rental shall assume or retain and shall be solely
responsible for, or cause its insurance carriers to be responsible for, all
liabilities and obligations whatsoever that relate to claims of Car Rental
Employees, but only to the extent such claims are incurred after the
Separation, in connection with all claims under any Welfare Plan (including any
Welfare Plan providing for post-retirement benefits).
(b) Effective as of the Separation, ARAC shall amend the
Welfare Plans and take such other action necessary and appropriate to provide
that, during the Transition Period, each Car Rental Employee shall be deemed
not to have terminated employment with ARAC and its subsidiaries for purposes
of the Welfare Plans by virtue of the Separation so long as such employee
remains employed with Car Rental, any Car Rental/HFS Subsidiary or HFS. In
consideration for the benefits to be provided under the Welfare Plans to Car
Rental Employees in accordance with this Section 2.6, HFS shall pay to ARAC an
amount equal to all claims or premiums, as applicable, paid under the Welfare
Plans on behalf of Car Rental Employees during
14
<PAGE>
the Transition Period, as well as ARAC's reasonable costs and expenses for
administering the Welfare Plans with respect to Car Rental Employees during the
Transition Period.
(c) Effective as of (i) the Separation Period, ARAC shall
take all action necessary and appropriate to assume each existing Welfare Plan
and (ii) the close of the Transition Period, Car Rental and HFS shall take all
action necessary and appropriate to either establish new welfare plans, or
provide existing welfare plans maintained by HFS or any of its subsidiaries,
to the Car Rental Employees. HFS shall take such further actions necessary and
appropriate to provide that under the terms of such welfare plans provided to
Car Rental Employees (whether such welfare plans are provided by HFS, Car
Rental or any of their respective subsidiaries), each Car Rental Employee shall
receive service credit for all past service with Car Rental, ARAC and their
respective subsidiaries as if such service had been rendered to Car Rental and
shall credit such Car Rental Employees with respect to deductibles, copayments,
out-of-pocket maximums and the like with amounts credited to such Car Rental
Employees under the corresponding Welfare Plan as of the close of the
Transition Period. In connection
15
<PAGE>
with the foregoing, ARAC agrees to provide HFS or its designated insurance
representative with such information as may be reasonably requested by HFS and
necessary for HFS to establish any such welfare plan and to enroll such Car
Rental Employees.
Section 2.7 Severance Pay. Effective as of the Separation,
the parties hereto shall take all action necessary and appropriate to provide
that, effective as of the Separation (i) ARAC shall assume and become the sole
sponsor of the Avis Separation Allowance Plan and all other severance plans and
policies maintained by Car Rental, ARAC and any of their respective
subsidiaries (the "Severance Plans") and (ii) with respect to Car Rental
Employees, any cessation of employment with ARAC or any ARAC Subsidiary shall
not be deemed a termination of employment from ARAC for purposes of the
Severance Plans.
Section 2.8 ARAC Miscellaneous Plans. Except as otherwise
provided in this Agreement, effective as of the Separation, ARAC shall assume
each and every Plan sponsored or maintained by Car Rental, ARAC and their
respective subsidiaries and in effect as of the Separation (the "Miscellaneous
Plans"). Except as otherwise provided in this Agreement, effective as of the
Separa-
16
<PAGE>
tion, ARAC shall be solely responsible for the payment of all liabilities and
obligations whatsoever under each Miscellaneous Plan, whether or not such
liabilities and obligations relate to ARAC Individuals and whether accrued
before or after the Separation; provided, however, that no Car Rental Employee
shall be entitled to accrue benefits under such Miscellaneous Plans after the
Separation.
Section 2.9 Collective Bargaining Agreements. Effective as of
the Separation, ARAC shall retain or assume, and shall discharge all of the
liabilities and obligations of ARAC and its subsidiaries relating to any
Collective Bargaining Agreement, and shall be bound by any and all provisions
of such Collective Bargaining Agreements as if ARAC were the signatory
employer. The liabilities and obligations referred to in the preceding sentence
shall include, without limitation, all obligations to contribute to, and
participate in, any pension or welfare benefit plan referred to or contemplated
by such Collective Bargaining Agreements (the "CBA Plans"). Car Rental and ARAC
shall take any and all action necessary and appropriate to assure that the
foregoing provisions of this Agreement and the transactions contemplated by
the Separation Agreement shall not cause, or be deemed
17
<PAGE>
to cause, Car Rental, ARAC or any of their respective subsidiaries to withdraw
(including any full or partial withdrawal, in each case within the meaning of
Sections 4203 and 4205 of ERISA) from any CBA Plan which is a "multiemployer
plan" (within the meaning of Section 3(37) ERISA). The provisions of this
Section 2.9 are, to the extent applicable, governed by and subject to the Labor
Management Relations Act, as amended.
Section 2.10 Employment Agreements. Effective as of the
Separation, the parties hereto shall take all action necessary and appropriate
to cause (i) Car Rental to assume each employment, severance and similar
agreement entered into by any Car Rental Individual with any of Car Rental,
ARAC or any of their respective subsidiaries and (ii) ARAC to assume each
employment, severance and similar agreement entered into by any ARAC Individual
with any of Car Rental, ARAC or any of their respective subsidiaries.
Section 2.11 Other Balance Sheet Adjustments. To the extent
not otherwise provided in this Agreement, ARAC and Car Rental shall take such
action as is necessary and appropriate to effect an adjustment to the books of
ARAC and Car Rental so that, as of the Separation, the prepaid expense balances
and accrued liabilities with re-
18
<PAGE>
spect to any employee liability or obligation assumed or retained as of the
Separation by ARAC, on the one hand, and Car Rental on the other hand, are
appropriately reflected on the respective consolidated balance sheets as of
the Separation, respectively, of ARAC and Car Rental.
Section 2.12 Preservation of Rights To Amend or Terminate
Plans. No provisions of this Agreement shall be construed as a limitation on
the right of ARAC or Car Rental to amend any Plan or terminate its
participation therein which ARAC or Car Rental would otherwise have under the
terms of such Plan or otherwise, and no provision of this Agreement shall be
construed to create a right in any employee or former employee or beneficiary
of such employee or former employee under a Plan which such employee or former
employee or beneficiary would not otherwise have under the terms of the Plan
itself.
Section 2.13 Reimbursement; Indemnification. The parties
hereto acknowledge that ARAC, on the one hand, and Car Rental, on the other
hand, may incur costs and expenses (including, but not limited to,
contributions to Plans and the payment of insurance premiums) arising from or
related to any of the Plans which are, as set forth in this Agreement, the
responsibility of the other party hereto. Accordingly, ARAC (and any ARAC Sub-
19
<PAGE>
sidiary responsible therefor) and Car Rental (and any Car Rental/HFS Subsidiary
responsible therefor) agree to reimburse each other, as soon as practicable but
in any event within 30 days of receipt from the other party of appropriate
verification, for all such costs and expenses reduced by the amount of any tax
reduction or recovery of tax benefit realized by ARAC or Car Rental, as the
case may be, in respect of the corresponding payment made by it. All
liabilities and obligations retained, assumed or indemnified by ARAC or any
ARAC Subsidiary pursuant to this Agreement, in each case, shall be deemed to be
ARAC Liabilities, as defined in the Separation Agreement, and all liabilities
retained, assumed or indemnified by Car Rental or any Car Rental/HFS Subsidiary
pursuant to this Agreement, shall be deemed to be Car Rental Liabilities, as
defined in the Separation Agreement, and, in each case, shall be subject to the
indemnification provisions set forth in Article IV thereof. Notwithstanding
anything to the contrary contained herein, ARAC shall be solely responsible for
legal and other fees, costs and expenses related to the amendment of any Plans
maintained by ARAC ("Amendment Costs") and shall reimburse HFS and Car Rental
for any Amendment Costs incurred by either of them.
20
<PAGE>
ARTICLE III
MISCELLANEOUS
Section 3.1 Complete Agreement; Construction. This Agreement,
including the Schedules hereto and the agreements and documents referred to
shall constitute the entire agreement between the parties with respect to the
subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter. Notwithstanding
any other provisions in this Agreement or the Separation Agreement to the
contrary, in the event and to the extent that there shall be a conflict between
the provisions of the Separation Agreement and this Agreement, the provisions
of this Agreement shall control.
Section 3.2 Governing Law. Subject to applicable federal
law, this Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the principles of conflicts of
laws thereof.
Section 3.3 Notices. All notices and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
registered or certified
21
<PAGE>
mail (return receipt requested) to the parties at the following addresses (or
at such other addresses for a party as shall be specified by like notice) and
shall be deemed given on the date on which such notice is received:
To ARAC:
Avis Rent A Car System, Inc.
900 Old Country Road
Garden City, NY 11530
Attention: General Counsel
Telecopy Number: (516) 222-3751
To Car Rental:
HFS Car Rental, Inc.
6 Sylvan Way
Parsippany, NJ 07054
Attention: Senior Vice President and
Corporate Counsel
Telecopy Number: (201) 359-5331
To HFS:
HFS Incorporated
6 Sylvan Way
Parsippany, NJ 07054
Attention: Senior Vice President and
Corporate Counsel
Telecopy Number: (201) 359-5331
Section 3.4 Amendments. This Agreement may not be modified or
amended except by an agreement in writing signed by the parties.
Section 3.5 Successors and Assigns. This Agreement and all of
the provisions hereof shall be
22
<PAGE>
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns.
Section 3.6 Termination. This Agreement shall terminate in
the event that the Separation Agreement is terminated and the Separation
abandoned prior to the Separation Date. In the event of such termination,
neither party shall have any liability of any kind to the other party.
Section 3.7 No Third Party Beneficiaries. This Agreement is
solely for the benefit of the parties hereto and their respective subsidiaries
and shall not be deemed to confer upon third parties (including without
limitation any Car Rental Individual or ARAC Individual) any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.
Section 3.8 Titles and Headings. Titles and headings to
sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning of or interpretation of this
Agreement.
Section 3.9 Schedules. The Schedules shall be construed with
and as an integral part of this Agreement
23
<PAGE>
to the same extent as if the same had been set forth verbatim herein.
Section 3.10 Legal Enforceability. Any provision of this
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. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
24
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
AVIS Rent A Car System, INC.
By
---------------------------
Title:
HFS CAR RENTAL, INC.
By
---------------------------
Title:
HFS INCORPORATED
By
---------------------------
Title:
25
<PAGE>
Exhibit 10.20
EMPLOYEE MANAGEMENT AGREEMENT
EMPLOYEE MANAGEMENT AGREEMENT, dated as of ________ 1997, (this
"Agreement"), among Avis Rent A Car System, Inc., a Delaware Corporation
("ARACS") and HFS Incorporated, a Delaware corporation ("HFS").
WHEREAS, HFS and ARACS have entered into a Reservation Services
Agreement dated as of the date hereof (the "Services Agreement") pursuant to
which HFS will provide certain services (as described in the Services
Agreement) to ARACS, on the terms and subject to the conditions set forth in
the Services Agreement;
WHEREAS, HFS and ARACS share certain computer and reservation
facilities in Tulsa, Oklahoma and Virginia Beach, Virginia (the "Facilities")
pursuant to certain lease arrangements;
WHEREAS, HFS and ARACS have determined that it would be in their best
interest and in the interest of the employees at such facilities to provide the
flexibility for such employees to provide services to HFS; and
WHEREAS, HFS and ARACS have determined the positions of the employees
that will be under the management of, and provide services to HFS pursuant to
the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
Section 1. General. Schedule A hereto identifies the positions of
those employees at the Facilities who, in accordance with the provisions of
this Agreement, shall be managed by, and under the direction of, HFS (the "HFS
Managed Employees").
Section 2. Management Period.
(a) Employee Management. During the period commencing on the
date hereof and ending on a day which is three (3) months after the date on
which HFS gives ARACS notice of its intent to terminate this Agreement (the
"Management Period"), each HFS Managed Employee shall, unless otherwise
directed by HFS, remain an employee of ARACS. During the Management Period, or
until such earlier time as any such HFS Managed Employee ceases to be an
employee of ARACS, such HFS Managed Employee shall be managed by, and under the
direction of, HFS.
(b) Treatment of HFS Managed Employee Expenses. ARACS shall,
within 15 days following the end of each month that ends within the Management
Period, furnish to HFS a written summary of all compensation, benefit and other
costs and expenses incurred by ARACS in connection with its retention of the
HFS Managed
<PAGE>
Employees as employees during such month (or portion thereof) (including the
costs of providing severance, if any, and continuation coverage under Section
4980B of the Internal Revenue Code of 1986, as amended, with respect to any HFS
Managed Employee who becomes eligible therefor during the Management Period).
ARACS, at HFS's request, will make available all documentation reasonably
requested by HFS to substantiate the amount of such charges. The parties agree
that the aggregate of such costs and expenses incurred by ARACS for services
performed on behalf of ARACS or pursuant to the Services Agreement by the HFS
Managed Employees shall be considered part of the cost of receiving the
services pursuant to the Services Agreement and that no amount shall be
required to be reimbursed to ARACS by HFS in respect of any such costs and
expenses incurred in respect of the HFS Managed Employee during the Management
Period.
Section 3. Hiring Option. HFS shall have the right to hire the
Managed Employee(s) upon (i) three (3) months notice to ARACS or (ii)
termination of Services Agreement. If HFS hires any HFS Managed Employee
pursuant to the foregoing sentence, ARACS shall not be permitted to solicit for
employment or employ any HFS Managed Employee for a period of one (1) year
thereafter.
Section 4. Indemnity. HFS agrees to indemnify ARACS against, and
agrees to hold it harmless from, any and all claims, losses, damages, costs and
expenses (including, without limitation, reasonable attorney's fees) and other
liabilities and obligations incurred or suffered as a result of any claim by a
HFS Managed Employee that arises under federal, state or local statute(s)
(including, without limitation, Title VII of the Civil Rights Act, as amended,
the Age Discrimination in Employment Act, as amended, the Equal Pay Act, as
amended, the Americans With Disabilities Act, as amended, and all other
statutes regarding the terms and conditions of employment), regulation(s) or
ordinance(s), under the common law or equity (including any claims for wrongful
discharge or otherwise), or under any policy, agreement, understanding or
promise, written or oral, formal or informal, between HFS and the HFS Managed
Employees, relating in any manner whatsoever to actions, events or omissions
that occurred relating to the selection of the HFS Managed Employees by HFS or
the services performed by the HFS Managed Employees for HFS.
ARACS agrees to indemnify HFS against, and agrees to hold it harmless
from, any and all claims, losses, damages, costs and expenses (including,
without limitation, reasonable attorney's fees) and other liabilities and
obligations incurred or suffered as a result of any claim by a HFS Managed
Employee that is based on acts or omissions of ARACS and arises under federal,
state, or local statute(s) (including, without limitation, Title VII of the
Civil Rights Act, as amended, the Age Discrimination in Employment Act, as
amended, the Equal Pay Act, as amended, the Americans with Disabilities Act, as
amended, and all other statutes regarding the
2
<PAGE>
terms and conditions of employment), regulation(s) or ordinance(s), under the
common law or equity (including any claims for wrongful discharge or
otherwise), or under any policy, agreement, understanding or promise, written
or oral, formal or informal, between ARACS and the HFS Managed Employees,
relating in any manner whatsoever to actions, events or omissions that occurred
relating to the acts or omissions of ARACS in connection with the selection of
the HFS Managed Employees by HFS or the acts or omissions of ARACS in conection
with the services performed by the HFS Managed Employees for HFS.
Section 5. Assignment. None of the parties hereto shall assign or
transfer or permit the assignment or transfer of this Agreement without the
prior written consent of the other, which consent shall not be unreasonably
withheld, except that HFS may assign its rights and delegate its duties to the
entity formed in the proposed merger of HFS and CUC International Inc. or an
entity controlled by such entity.
Section 6. Amendments and Waivers. This Agreement may not be
amended, and none of its provisions may be modified, except expressly by an
instrument signed by the parties hereto. No failure or delay of a party 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 discontiuance of steps to enforce such a right or power,
preclude any other or further exercise thereof. No failure or delay of a party
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. No waiver by a party or any departure therefrom shall in any
event be effective unless the same shall be in writing and signed by such
party, and then such waive or consent shall be effective only in the specific
instance and for the purpose for which given.
Section 7. Entire Agreement. Except for applicable provisions the
Services Agreement, this Agreement constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other
prior negotiations, commitments, agreements and understandings, both written
and oral, between the parties or any of them with respect to the subject matter
hereof.
Section 8. Governing Law. This Agreement shall be governed by and
construed in accordance wih the laws of the State of New York (regardless of
the laws that might otherwise govern under applicable principles of conflicts
law) as to all matters, including, without limitation, matters of validity,
construction, effect, performance and remedies.
3
<PAGE>
Section 9. Notices. All written notices required under this
Agreement shall be given in writing and shall be deemed to have been give upon
(i) transmitter's confirmation of a receipt of a facsimile transmission, (ii)
confirmed delivery by a standard overnight carrier or when delivery by hand or
(iii) the expiration of five business days afer the day when mailed by
certified or registered mail, postage prepaid, addressed at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(A) if to ARACS, to:
Avis Rent A Car System, Inc.
900 Old County Road
Garden City, New York
Attn: General Counsel
(B) if to HFS, to:
HFS Incorporated
6 Sylvan Way
Parsippany, NJ 07030
Attn: Senior Vice President and Corporate Counsel
Section 10. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute one and the same
instrument.
Section 11. Interpretation. The descriptive headings herein are
inserted for convenience or reference only and are not intended to be part of
or to affect the meaning or interpretion of this Agreement.
Section 12. Legal Enforceability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to which
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
Section 13. Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of a breach of this Agreement, each
non-breaching party would be irreparably and immediately harmed and could not
be made whole by monetary damages. It is accordingly agreed that the parties
hereto (i) will waive, in
4
<PAGE>
any action for specific performance, the defense of adequacy of a remedy at law
and (ii) shall be entitled, in addition to any other remedy to which they may
be entitled at law or in equity, to compel specific performance of this
Agreement in any action instituted in any state or federal court sitting in New
York, New York.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
AVIS RENT A CAR SYSTEM, INC.
By
-----------------------------
Name:
Title:
HFS INCORPORATED
By
-----------------------------
Name:
Title:
5
<PAGE>
SCHEDULE A
[TO BE REVISED]
Tulsa Location
- --------------
Employees performing the following functions:
(i) Reservations
(ii) Global Distribution Systems Operations personnel
(iii) Internet Operations personnel
(iv) Training staff
(v) Human Resources
Virginia Beach Location
- -----------------------
Employees performing the following functions:
(i) Reservations
6
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 5 to the Registration Statement
No. 333-28609 of Avis Rent A Car, Inc. on Form S-1 of our report dated May
12, 1997 (August 20, 1997 as to Note 15), appearing in the Prospectus, which
is part of this Registration Statement and of our report dated May 12, 1997
(August 20, 1997 as to Note 15) relating to the financial statement schedule
appearing elsewhere in this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
Deloitte & Touche LLP
New York, New York
September 22, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated November 22, 1996, with respect to the financial
statements of The First Gray Line Corporation included in the Registration
Statement (Form S-1 No. 333-28609) and related Prospectus of Avis Rent A Car,
Inc. dated September 22, 1997.
Ernst & Young LLP
Los Angeles, California
September 22, 1997
