SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
AMENDMENT NO.1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
JULY 15, 1999
(Date of Report)
AVIS RENT A CAR, INC.
(Exact Name of Registrant As Specified In Its Charter)
DELAWARE 1-13315 11-3347585
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
900 Old Country Road 11530
Garden City, NY (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (516) 222-3000
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Not applicable
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable
ITEM 5. OTHER EVENTS.
Not applicable
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
The following document, which was originally filed as an exhibit to
Avis Rent A Car, Inc.'s Current Report on Form 8-K, dated July 15,
1999, is being refiled to include certain information inadvertently
omitted from such original filing.
Exhibit No. Exhibit Description
99.4 Certificate of Designation of Powers, Preferences and Special Rights of
Series A Cumulative Participating Redeemable Convertible Preferred
Stock and Qualifications, Limitations and Restrictions Thereof of Avis
Fleet Leasing and Management Corporation.
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
AVIS RENT A CAR, INC.
(Registrant)
By /s/ Kevin M. Sheehan
-----------------------------------------------
Kevin M. Sheehan
President -- Corporate and Business Affairs and
Chief Financial Officer
Date: 8/10/99
<PAGE>
Exhibit Index
Exhibit No. Exhibit Description
99.4 Certificate of Designation of Powers, Preferences and Special
Rights of Series A Cumulative Participating Redeemable Convertible
Preferred Stock and Qualifications, Limitations and Restrictions
Thereof of Avis Fleet Leasing and Management Corporation.
EXHIBIT 99.4
AVIS FLEET LEASING AND MANAGEMENT CORPORATION
CERTIFICATE OF DESIGNATION OF THE POWERS, PREFERENCES AND SPECIAL RIGHTS OF
SERIES A CUMULATIVE PARTICIPATING REDEEM ABLE CONVERTIBLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
Pursuant to the provisions of Article 2.13 of the Texas Business Corporation
Act,
Avis Fleet Leasing and Management Corporation, a Texas corporation
(the "Company"), does hereby certify that, pursuant to authority conferred upon
the board of directors of the Company (the "Board of Directors") by the
Company's Articles of Incorporation (the "Articles of Incorporation"), and
pursuant to the provisions of Article 2.13 of the Texas Business Corporation Act
(the "TBCA"), the Board of Directors is authorized to issue preferred stock, par
value $.01 per share ("Preferred Stock"), of the Company in one or more series
and the Board of Directors duly approved and adopted the following resolution on
June 29, 1999 (the "Resolution") and the Company certifies that such resolution
was duly adopted by all necessary action on the part of the Company:
RESOLVED that, pursuant to the authority vested in the Board of Directors
by the Company's Articles of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issuance of a series of
Preferred Stock which shall be designated as "Series A Cumulative
Participating Redeemable Convertible Preferred Stock", par value $.01 per
share, consisting of 7,200,000 shares, having the designation and the
powers, preferences, and special rights and the qualifications, limitations
and restrictions thereof that are set forth in the Articles of
Incorporation and in this Resolution as follows:
1. Designation. There is hereby created out of the authorized and unissued
shares of Preferred Stock a series of preferred stock designated as the "Series
A Cumulative Participating Redeemable Convertible Preferred Stock" (the "Series
A Preferred Stock"). The number of shares constituting the Series A Preferred
Stock shall be 7,200,000. The liquidation preference of the Series A Preferred
Stock shall be $50 per share (the "Series A Stated Amount"), plus any dividends
accrued but not paid on the Series A Preferred Stock pursuant to Section 3
hereof, whether or not earned or declared, to the date fixed for liquidation,
dissolution or winding up of the Company (collectively with the Series A Stated
Amount, the "Series A Liquidation Preference"). The date on which the Series A
Preferred Stock is first issued is referred to herein as the "Issue Date."
2. Rank. The Series A Preferred Stock shall rank, with respect to dividend
rights, redemption rights and rights upon liquidation, winding up or
dissolution, (a)(i) junior to the Series C Cumulative Redeemable Preferred
Stock, par value $.01 per share, of the Company (the "Series C Preferred
Stock"), (ii) pari passu to the Series B Cumulative PIK Preferred Stock, par
value $.01 per share, of the Company (the "Series B Preferred Stock" and,
collectively with the Series A Preferred Stock and Series C Preferred Stock, the
"Series Preferred Stock") and (iii) senior to the common stock, par value $.01
per share, of the Company (the "Common Stock").
3. Dividends.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive and, to the extent of funds legally available therefor, the
Board of Directors shall declare and the Company shall pay, cumulative dividends
(the "Series A Preferred Dividends") accruing from the Issue Date at the rate of
5% (as may be adjusted pursuant to this Section 3(a), the "Series A Preferred
Dividend Rate") of the Series A Stated Amount (or $2.50 per share of Series A
Preferred Stock) per annum, payable semi-annually in arrears on January 1 and
July 1 of each year, commencing January 1, 2000, or, if any such date is not a
Business Day (as defined herein), on the next succeeding Business Day (each, a
"Dividend Payment Date"), to the holders of record of shares of Series A
Preferred Stock as of the immediately preceding December 15 and June 15,
respectively (each, a "Record Date"). Series A Preferred Dividends shall be paid
in cash; provided, however, that, until the fifth anniversary of the Issue Date,
the Company may, at its election, pay any or all of the Series A Preferred
Dividends by the issuance of shares of Series B Preferred Stock having an
aggregate Series B Stated Amount (as defined in the Series B Certificate (as
defined herein)) equal to the amount of the cash dividend that otherwise would
have been required to be paid pursuant to this Section 3. Series A Preferred
Dividends shall be computed on the basis of a 360-day year of twelve 30-day
months and shall be deemed to accrue on a daily basis in any partial months in a
period. The Series A Dividend Rate shall automatically be increased to 12% if
the Stockholder Approval Condition (as defined herein) is not satisfied on or
prior to June 30, 2000, and any such increase shall be retroactive from the
Issue Date and the difference between (i) the 12% dividend that shall have
retroactively accumulated from the Issue Date through June 30, 2000 and (ii) the
5% dividend that shall have been paid with respect to the period from the Issue
Date through June 30, 2000 shall be payable to holders of Series A Preferred
Stock on or prior to July 31, 2000.
(b) In addition to the Series A Preferred Dividends, in the event that
the Annual Target (as defined herein) is satisfied by the Combined Business (as
defined herein) for a particular fiscal year in which shares of Series A
Preferred Stock are outstanding, the holders of shares of Series A Preferred
Stock shall be entitled to receive and, to the extent of funds legally available
therefor, the Board of Directors shall declare and the Company shall pay, an
additional annual dividend (the "Special Dividend") at a rate of 2% of the
Series A Stated Amount per annum of the shares of Series A Preferred Stock then
outstanding, payable in cash annually on March 15th of the immediately
succeeding year.
(c) Series A Preferred Dividends and, if the Annual Target is
satisfied, the Special Dividends shall accrue whether or not the Company has
earnings or profits, whether or not there are funds legally available for the
payment of such dividends and whether or not dividends are declared. Accumulated
but unpaid dividends shall accrue and cumulate, with respect to the Series A
Preferred Dividends, at the Series A Dividend Rate and, with respect to the
Special Dividends, as provided in subsection (b) above, and shall be paid, to
the extent permitted by the TBCA, on the earliest date on which funds become
legally available for the payment thereof.
(d) No dividend shall be declared or paid upon, or any sum set apart
for the payment of dividends upon, any outstanding shares of Series A Preferred
Stock or any other class or series of capital stock ranking pari passu as to
dividends with the Series A Preferred Stock ("Pari Passu Dividend Securities")
with respect to any dividend period unless all accrued Series A Preferred
Dividends and Special Dividends for all preceding dividend periods have been
declared and paid upon, or declared and a sufficient sum set apart for the
payment of such dividend upon, all outstanding shares of Series A Preferred
Stock. When dividends are not paid in full, as aforesaid, upon the Series A
Preferred Stock and any such Pari Passu Dividend Securities, all dividends
declared upon the Series A Preferred Stock and any Pari Passu Dividend
Securities shall be declared pro rata so that the amount of dividends declared
per share on the Series A Preferred Stock and such other Pari Passu Dividend
Securities shall in all cases bear to each other the same ratio that accrued and
unpaid dividends per share on the shares of the Series A Preferred Stock and
such other Pari Passu Dividend Securities bear to each other.
Unless all accrued Series A Preferred Dividends and Special Dividends on all
outstanding shares of Series A Preferred Stock due for all past dividend periods
shall have been declared and paid, or declared and a sufficient sum for the
payment thereof set apart, then: (i) no dividend shall be declared or paid upon,
or any sum set apart for the payment of dividends upon, any shares of Common
Stock or any shares of any other class or series of capital stock of the Company
ranking junior to Series A Preferred Stock as to dividends or as to rights upon
liquidation, dissolution or winding up of the Company (collectively, "Junior
Securities"); (ii) no other distribution shall be declared or made upon, or any
sum set apart for the payment of any distribution upon, any shares of Junior
Securities; (iii) no shares of Junior Securities shall be purchased, redeemed or
otherwise acquired or retired for value (excluding an exchange for shares of
other Junior Securities or a purchase, redemption or other acquisition from the
proceeds of a substantially concurrent sale of Junior Securities) by the Company
or any of its subsidiaries; and (iv) no monies shall be paid into or set apart
or made available for a sinking or other like fund for the purchase, redemption
or other acquisition or retirement for value of any shares of Junior Securities
or Pari Passu Dividend Securities or Pari Passu Liquidation Securities (as
hereinafter defined) by the Company or any of its subsidiaries.
(e) Holders of the Series A Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or stock, in excess of the
dividends as herein described.
(f) On or prior to March 15 of each year, Seller shall deliver to each
holder of Series A Preferred Stock (i) an unaudited balance sheet, statement of
operations and statement of cash flows of the Combined Business for the
immediately preceding fiscal year and (ii) a detailed schedule setting forth the
computation of the EBITDA of the Combined Business for the immediately preceding
fiscal year, in each case, certified by the Chief Financial Officer of Parent
(as hereinafter defined). Each of the financial statements delivered pursuant to
this Section 3(f) shall be prepared from the books and records of the Combined
Business in accordance with United States generally accepted accounting
principles and practices in effect from time to time, consistently applied, and
shall fairly present the financial position and results of operations and cash
flows of the Combined Business as of the date and for the period indicated.
(g) In the event that after the Issue Date any Material Assets (as
herein defined) are sold, transferred or otherwise disposed of by the Combined
Business (other than dispositions of fleet vehicles in the ordinary course of
business, including in connection with a securitization transaction) , in one
transaction or a series of transactions, in any fiscal year to any Person (as
herein defined) other than Parent or a Subsidiary of Parent, the Annual Target
for the year for which any such sale, transfer or disposition occurs and each
year thereafter, shall be decreased by an amount equal to the product of (i) the
respective Annual Target for such year multiplied by (ii) a fraction (A) the
numerator of which equals the EBITDA attributable to the Material Assets so
sold, transferred or disposed of for the immediately preceding fiscal year and
(B) the denominator of which equals the Annual Target for the immediately
preceding fiscal year.
(h) As used herein:
(i) "Business Day" means any day other than a Saturday, Sunday or
other day on which banks are authorized to be closed in New York, New York;
(ii) Subject to any adjustment required pursuant to Section 3(g)
hereof, the "Annual Target" shall be the following annual levels of EBITDA of
the Combined Business:
Fiscal Year EBITDA
----------- ------
1999 $215,900,000
2000 247,600,000
2001 288,200,000
2002 317,000,000
2003 348,700,000
2004 383,600,000
2005 422,000,000
2006 464,100,000
2007 510,600,000
2008 561,600,000
2009 617,800,000
(iii) "Combined Business" means (i) for the period prior to the
Issue Date, the worldwide vehicle leasing and management and fuel card
businesses of PHH Vehicle Management Services, LLC and the other Subsidiaries of
PHH Holdings Corporation principally engaged in such business and (ii) from and
after the Issue Date, the Company and its Subsidiaries on a consolidated basis,
combined with any other business entity, or division thereof, owned directly or
indirectly by Parent, that is principally engaged in any of such vehicle leasing
and management and/or fuel card businesses;
(iv) "EBITDA" means for any fiscal year, the net income of the
Combined Business for such fiscal year plus, to the extent deducted in
determining such net income, interest (other than interest arising out of or
relating to (i) liabilities used to fund leases of the Combined Business, (ii)
lease liabilities under management programs of the Combined Business or (iii)
carrying cost of receivables related to the fuel card businesses of the Combined
Business), taxes, depreciation (other than depreciation related to the vehicle
fleet) and amortization;
(v) "Material Assets" means (i) with respect to the adjustment
set forth in Section 3(g) hereof, assets of the Combined Business (including the
equity securities of any Person included in the Combined Business) to the extent
that the aggregate EBITDA that was attributable to such assets exceeded 10% of
EBITDA of the Combined Business for the immediately preceding fiscal year and
(ii) with respect to the adjustment set forth in Section 7(k) hereof, assets of
the Combined Business (including the equity securities of any Person included in
the Combined Business) to the extent that the aggregate EBITDA that was
attributable to such assets exceeded 3% of EBITDA of the Combined Business for
the immediately preceding twelve-month period;
(vi) "Parent" means Avis Rent A Car, Inc., a Delaware
corporation;
(vii) "Person" means an individual, partnership, limited
partnership, limited liability partnership, limited liability company, foreign
limited liability company, trust, estate, corporation, custodian, trustee,
executor, administrator, nominee or any other entity;
(viii) "Stockholder Approval Condition" means that all
stockholder approvals required under (i) the Amended and Restated Certificate of
Incorporation of Parent, (ii) the New York Stock Exchange Shareholder Approval
Policy and (iii) the Delaware General Corporation Law to authorize (x) the
creation of 15,000,000 shares of class B common stock ("Parent Class B Common
Stock"), par value $.01 per share, of Parent, having the terms set forth in the
proposed Amendment to the Amended and Restated Certificate of Incorporation of
Parent attached as Exhibit A to the Stockholders Agreement dated June 30, 1999
among Parent, the Company and PHH Corporation, and the issuance of such shares
to PHH Corporation and (y) the issuance to PHH Corporation of the shares of
Class A common stock, par value $.01 per share, of Parent ("Parent Voting Stock"
and, together with the Parent Class B Common Stock, the "Parent Common Stock")
that are issuable upon the exchange of the Parent Class B Common Stock have been
obtained, provided that the Stockholder Approval Condition shall be deemed
satisfied, whether or not all of the aforesaid stockholder approvals have been
obtained, if Parent has sought to obtain all such approvals at a meeting of its
stock holders and Cendant Car Rental, Inc. (or any transferee of shares of
Parent Voting Stock held by Cendant Car Rental, Inc.) failed to vote the shares
of Parent Voting Stock beneficially owned by it in favor of such proposal or
proposals; and
(ix) "Subsidiary" means, with respect to any Person, any
corporation, partnership, joint venture, business trust, limited liability
company or similar entity, in which such Person holds at least a 50% interest
with respect to the right to receive dividends and distributions and the right
to elect the governing body of such entity.
4. Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, after payment in full of the
liquidation preference (and, to the extent permitted by the TBCA, any accrued
and unpaid dividends) payable upon liquidation, dissolution or winding up of the
Company on the issued and outstanding shares of Series C Preferred Stock and any
other class or series of capital stock of the Company ranking senior to the
Series A Preferred Stock as to rights upon liquidation, dissolution or winding
up of the Company (collectively, the "Senior Securities"), each holder of shares
of Series A Preferred Stock shall be entitled to payment (out of the assets of
the Company available for distribution) of an amount per share of Series A
Preferred Stock held by such holder equal to the Series A Liquidation
Preference. After payment in full of the Series A Liquidation Preference, such
holders shall not be entitled to any further participation in any distribution
of assets of the Company. If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the assets available to be distributed
among the holders of preferred stock of the Company shall be insufficient to
permit the payment to such holders of the full preferential amount to which they
are entitled under the terms of such securities, then the assets of the Company
legally available for distribution shall be distributed (i) first, to the
holders of the Senior Securities until such holders receive the full
preferential amount and all accrued and unpaid dividends payable to them, (ii)
next, to the holders of the Series A Preferred Stock and to the holders of any
issued and outstanding shares of any class or series of capital stock of the
Company ranking pari passu with the Series A Preferred Stock as to rights upon
liquidation, dissolution or winding up of the Company ("Pari Passu Liquidation
Securities") pro rata, in accordance with the full Series A Liquidation
Preference and full liquidation preference of such Pari Passu Liquidation
Securities and all accrued and unpaid dividends that would be payable with
respect to shares of such Pari Passu Liquidation Securities if all amounts
payable thereon were paid in full and (iii) next, to the holders of any issued
and outstanding shares of any class or series of capital stock of the Company
ranking junior to the Series A Preferred Stock as to rights upon liquidation,
dissolution or winding up of the Company. If the assets of the Company available
for distribution to the holders of Series A Preferred Stock and the Pari Passu
Liquidation Securities shall be insufficient to permit payment in full to such
holders of the sums which such holders are entitled to receive in such case,
then all of the assets available for distribution to holders of the Series A
Preferred Stock and the Pari Passu Liquidation Securities shall be distributed
among and paid to such holders ratably in proportion to the amounts that would
be payable to such holders if such assets were sufficient to permit payment in
full and no amounts shall be paid to holders of any class or series of capital
stock of the Company ranking junior to the Series A Preferred Stock as to rights
upon liquidation, dissolution or winding up of the Company. Neither the
voluntary sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
or assets of the Company nor the consolidation or merger of the Company with or
into one or more entities shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Company, unless such sale,
conveyance, exchange, transfer, consolidation or merger shall be in connection
with a liquidation, dissolution or winding up of the Company.
5. Redemption.
(a) Redemption at the Option of the Company. The Series A Preferred
Stock may be redeemed at the option of the Company, in whole or in part, at any
time or from time to time on or after the fifth anniversary of the Issue Date.
The Company may redeem the Series A Preferred Stock by payment in cash, for each
share of Series A Preferred Stock to be redeemed, in an amount equal to the
Series A Liquidation Preference (the "Series A Redemption Price"), upon prior
written notice as specified below.
(b) Mandatory Redemption. As mandatory redemption for the retirement
of shares of Series A Preferred Stock, the Company shall redeem, out of legally
available funds, on the eleventh anniversary of the Issue Date (the "Mandatory
Redemption Date"), all of the shares of Series A Preferred Stock then
outstanding (if any) for payment in cash, for each share of Series A Preferred
Stock to be redeemed, in an amount equal to the Series A Redemption Price.
(c) Redemption at the Option of the Holder. Upon a Fundamental Change
(as defined herein), each holder of shares of Series A Preferred Stock shall
have the right to require the Company to redeem the shares of Series A Preferred
Stock held by such holder, in whole or in part, for payment of an amount in cash
equal to the Series A Redemption Price for each share of Series A Preferred
Stock to be redeemed (the "Cash Payment"); provided, however, that, upon any
Fundamental Change constituting a Change of Control (as defined herein) of
Parent, such holder may, at its option, elect to receive upon such redemption,
in lieu of the Cash Payment, the amount and kind of securities, cash or other
assets (the "Alternative Payment") which such holder would have been entitled to
receive upon consummation of such Change of Control of Parent if such holder had
exercised its Non-Compliance Conversion Right (as defined herein) immediately
prior to the effective date (or, if applicable, the record date) of such Change
of Control of Parent. The right of each holder to require the Company to redeem
shares of Series A Preferred Stock upon a Fundamental Change shall survive the
occurrence of any Fundamental Change and shall be enforceable against any Person
that is the survivor or successor of such Fundamental Change.
(d) Dividends; Rights as Holders. On and after any date fixed for
redemption (a "Redemption Date"), provided that the Company has made available
and set aside an amount of cash at least equal to the aggregate Series A
Redemption Price necessary to effect the redemption (or, if applicable, the
securities, cash or other assets referred to in subsection 5(c) above), Series A
Preferred Dividends and Special Dividends shall cease to accrue on the Series A
Preferred Stock called for redemption (except that, in the case of a Redemption
Date after a Record Date for the payment of dividends and prior to the related
dividend payment date, holders of Series A Preferred Stock on the Record Date
shall be entitled on such dividend payment date to receive the dividend payable
on such shares and the amount payable in respect of accrued and unpaid dividends
at the Redemption Date shall be reduced by such amount payable on such dividend
payment date), such shares shall no longer be deemed to be outstanding and all
rights of the holders of such shares as holders of Series A Preferred Stock
shall cease, except the right to receive the payment deliver able upon such
redemption, without interest from the Redemption Date.
(e) Pro Rata Redemption. In the event of a redemption pursuant to
subsection 5(a) of only a portion of the then outstanding shares of Series A
Preferred Stock, the Company shall effect such redemption on a pro rata basis.
(f) Notice of Company Redemption; Surrender of Certificates.
(i) In the event of any mandatory or optional redemption by the
Company of shares of Series A Preferred Stock, the Company shall send a written
notice of redemption by first class mail to each holder of shares of the Series
A Preferred Stock being redeemed, not fewer than twenty (20) days nor more than
sixty (60) days prior to the Redemption Date at such holder's registered address
(the "Company Redemption Notice"); provided, however, that no failure to give
such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Series A Preferred Stock to be
redeemed except as to the holder or holders to whom the Company has failed to
give said notice or except as to the holder or holders whose notice was
defective. The Company Redemption Notice shall state:
(A) the Series A Redemption Price;
(B) whether all or less than all of the outstanding shares
of the Series A Preferred Stock are to be redeemed and the total number of
shares of the Series A Preferred Stock being redeemed;
(C) the Redemption Date;
(D) the number of shares of Series A Preferred Stock held by
such holder that are being redeemed and that the holder is to surrender to the
Company, in the manner and at the place designated, the certificate or
certificates representing the shares of Series A Preferred Stock to be redeemed;
and
(E) that, in accordance with subsection 5(d), dividends on
the shares of the Series A Preferred Stock to be redeemed shall cease to
accumulate on such Redemption Date unless the Company defaults in the payment of
the Series A Redemption Price.
(ii) Upon delivery of a Company Redemption Notice, each holder of
shares of Series A Preferred Stock being redeemed shall surrender the
certificate or certificates representing such shares of Series A Preferred
Stock, duly endorsed (or otherwise in proper form for transfer), in the manner
and at the place designated in the Company Redemption Notice, and on the
Redemption Date the full Series A Redemption Price for such shares in cash shall
be payable to the Person (as defined herein) whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.
(g) Notice of Fundamental Change; Shareholder Redemption; Surrender of
Certificates.
(i) The Company shall send written notice of a Fundamental Change
to each holder of Series A Preferred Stock, at such holder's registered address,
(A) on or prior to the tenth Business Day preceding the scheduled consummation
of any Change of Control of Parent or the Company and (B) immediately after any
Bankruptcy (as defined herein) of Parent. Any such notice shall set forth a
detailed description of the Change of Control or Bankruptcy, as the case may be,
including without limitation, in the case of a Change of Control, the amount and
kind of consideration to be delivered in connection with such Change of Control,
and additionally, in the case of a Change of Control of Parent, the amount and
kind of securities, cash or other assets which such holder would be entitled to
receive upon consummation of such Change of Control if such holder would
exercise its Non-Compliance Conversion Right immediately prior to the effective
date (or, if applicable, the record date) of such Change of Control.
(ii) At any time from and after a Fundamental Change, any holder
of Series A Preferred Stock may exercise its optional redemption right pursuant
to Section 5(c) by delivering a written notice of redemption (a "Shareholder
Redemption Notice") to the Company, at the Company's principal place of
business, setting forth:
(A) the name of the holder exercising the optional
redemption right;
(B) the number of shares of Series A Preferred Stock to be
redeemed; and
(C) if the shares of Series A Preferred Stock are being
redeemed as a result of a Change of Control of Parent, whether the holder is
electing to receive the Cash Payment or the Alternative Payment.
(iii) Any Shareholder Redemption Notice shall be accompanied by
the certificate or certificates representing the shares of Series A Preferred
Stock being redeemed, duly endorsed (or otherwise in proper form for transfer),
and promptly on receipt thereof, the Company shall pay the full Series A
Redemption Price for such shares in cash (or, if the holder elects to receive
the Alternative Payment, the securities, cash or other assets referred to in
subsection 5(c) above), to the Person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled and retired. In the event that less than all of the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(h) Prohibition on Redemption after Notice of Conversion. The Company
shall not have the right to redeem any shares of Series A Preferred Stock with
respect to which the holder thereof has given notice to the Company of its
intent to convert such shares into shares of Parent Class B Common Stock in
accordance with Section 7 hereof.
(i) Certain Definitions. As used herein:
(i) "Fundamental Change" means (A) a Change of Control of the
Company or Parent or (B) the Bankruptcy of Parent.
(ii) "Change of Control" with respect to Parent means (A) a
transaction or series of related transactions by which any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended ("Exchange Act")) other than Cendant Corporation, a
Delaware corporation ("Cendant"), or an affiliate or successor to Cendant, is or
becomes after the Issue Date 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
(1) 25% of the total voting power of all voting stock of Parent then outstanding
at any time Cendant controls 25% or more of such voting power and (2) 20% of the
total voting power of all voting stock of Parent then outstanding at any time
Cendant controls less than 25% of such voting power (the "Relevant Percentage");
(B)(1) another corporation merges into Parent or Parent consolidates with or
merges into any other corporation or (2) Parent 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 Parent and a wholly owned subsidiary of Parent, 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 Parent 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 of
related transactions; or (C) during any period of two consecutive years,
individuals who at the beginning of such period constituted Parent's Board of
Directors (together with any new directors whose election by Parent's Board of
Directors, or whose nomination for election by Parent's stockholders, was
approved by a vote of a majority of the Directors of Parent 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; provided, however that a
Change of Control shall not occur solely as a result of a sale or transfer by
Cendant and/or its affiliates of shares of capital stock of Parent that are held
by Cendant and/or its affiliates.
(iii) "Change of Control" with respect to the Company means (A) a
transaction or series of related transactions by which any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Securities Ex change
Act) other than Parent, a wholly owned subsidiary of Parent, or Cendant, or an
affiliate or successor to Cendant, is or becomes after the Issue Date 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; or (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 a conveyance, transfer or lease between the Company and a wholly
owned subsidiary of Parent, with the effect that a person or group, other than a
person or group which is the beneficial owner of more than 25% of the total
voting power of all voting stock of the Company immediately prior to such
transaction, becomes the beneficial owner of more than 25% of the total voting
power of all voting stock of the surviving or transferee corporation of such
transaction or series; provided, however that a Change of Control shall not
occur solely as a result of a sale or transfer by Cendant and/or its affiliates
of shares of capital stock of the Company that are held by Cendant and/or its
affiliates.
(iv) "Bankruptcy," with respect to any Person, shall mean (i) a
court or governmental agency having jurisdiction shall enter a decree or order
for relief in respect of such Person in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or ordering the winding up or liquidation
of its affairs; or (ii) there shall be commenced against such Person an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or any case, proceeding or other action for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of such Person or for the winding up or
liquidation of its affairs, and such involuntary case or other case, proceeding
or other action shall remain undismissed, undischarged or unbonded for a period
of sixty (60) consecutive days; or (iii) such Person shall commence a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or make any general assignment for the
benefit of creditors; or (iv) such Person shall be unable to, or shall admit in
writing its inability to, pay its debts generally as they become due.
6. Voting Rights
(a) Except as otherwise provided herein or required by the TBCA,
holders of outstanding shares of Series A Preferred Stock shall have no voting
rights. The holders of outstanding shares of Series A Preferred Stock shall be
entitled to notice, in accordance with the Company's bylaws, of all meetings of
shareholders of the Company.
(b) The Company shall not, without the affirmative vote or written
consent of the holders of at least a majority of the then outstanding shares of
Series A Preferred Stock, voting or consenting, as the case may be, as a single
class, (i) authorize, create (by way of reclassification or otherwise) or issue
any Senior Securities (other than the shares of Series C Preferred Stock issued
on or prior to the Issue Date) or Pari Passu Dividend Securities or Pari Passu
Liquidation Securities or any obligation or security convertible or exchangeable
into or evidencing the right to purchase shares of any class or series of Senior
Securities or Pari Passu Dividend Securities or Pari Passu Liquidation
Securities, (ii) amend or otherwise alter the Articles of Incorporation or this
Certificate of Designation in any manner that adversely affects the rights,
preferences, privileges or voting rights of holders of shares of Series A
Preferred Stock, (iii) authorize the issuance of any additional shares of Series
A Preferred Stock, or (iv) reincorporate the Company (through merger or
otherwise) in a jurisdiction other than Texas prior to the second anniversary of
the Issue Date.
(c) In any case in which the holders of shares of Series A Preferred
Stock shall be entitled to vote pursuant to subsection (b) above or pursuant to
the TBCA, each holder of shares of Series A Preferred Stock shall be entitled to
one vote for each share of Series A Preferred Stock held.
(d) Notwithstanding the foregoing, pursuant to Section 2.30-1 of the
TBCA, the shareholders of the Company agree as follows:
(i) except as otherwise provided herein, the holders of shares of
Series A Preferred Stock shall not be entitled to vote upon, nor shall the
affirmative vote of any holders of shares of Series A Preferred Stock be
required to authorize or approve, any (A) sale, lease, exchange or other
disposition of all or substantially all of the property and assets of the
Company, with or without the goodwill of the Company, and whether or not in the
usual and regular course of the Company's business or (B) merger (as defined in
Section 1.02 of the TBCA), consolidation or other business combination, or any
provision thereof, to which the Company is a party or as a result of which the
Company's business or assets are affected;
(ii) the provisions of this subsection 6(d) shall be valid and
effective for the entire term of existence of the Company;
(iii) the provisions of this subsection 6(d) may be amended by,
and only by, the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Common Stock, voting as a class, and the holders of at
least two-thirds of the outstanding shares of each series of Series Preferred
Stock outstanding, each such series voting separately as a single class;
(iv) the shareholders of the Company intend and agree that,
pursuant to Section 2.30-1 of the TBCA, the agreements among the shareholders of
the Company as stated in this subsection 6(d) shall be effective among the
Company and all present and future shareholders of the Company even though such
agreements are inconsistent with one or more provisions of the TBCA, including,
but not limited to, Section 4.03 of the TBCA; and
(v) Each share of Series A Preferred Stock shall be endorsed with
a legend substantially in the following form:
"THE CERTIFICATE OF DESIGNATION COVERING THE TERMS OF THIS SECURITY
ELIMINATES CERTAIN VOTING RIGHTS OF HOLDERS OF SERIES A PREFERRED STOCK OF
THE CORPORATION THAT MIGHT OTHERWISE BE AVAILABLE TO SUCH HOLDERS UNDER THE
TEXAS BUSINESS CORPORATION ACT."
7. Conversion Rights
(a) Optional Conversion
(i) Subject to the terms and conditions hereof, holders of shares
of Series A Preferred Stock shall have the right (the "Performance Conversion
Right") to convert any or all of the shares of Series A Preferred Stock into
that whole number of fully paid and nonassessable shares of Parent Class B
Common Stock as is equal to the product of the number of shares of Series A
Preferred Stock being so converted multiplied by the Performance Conversion Rate
(as defined herein) then in effect, at any time and from time to time upon and
after the date on which the applicable EBITDA Threshold (as defined herein)
shall have been satisfied for the preceding year, provided that, at any time
prior to the time of such conversion, the Market Price (as defined herein) of
the Parent Voting Stock on any Trading Day (as defined herein) shall have
equaled or exceeded $50.
(ii) Subject to the terms and conditions hereof, holders of
shares of Series A Preferred Stock shall have the right (the "Non-Compliance
Conversion Right") to convert any or all of the shares of Series A Preferred
Stock held by such holder into that whole number of fully paid and nonassessable
shares of Parent Class B Common Stock as is equal to the product of the number
of shares of Series A Preferred Stock being so converted multiplied by the
Market Conversion Rate (as defined herein) then in effect, at any time and from
time to time, upon and after:
(x) any failure by the Company to make any redemption
payment with respect to (A) the Series A Preferred Stock when due in accordance
with Section 5 hereof or (B) the Series B Preferred Stock when due in accordance
with Section 5 of the Certificate of Designation of the Series B Preferred Stock
(the "Series B Certificate of Designation"); or
(y) a breach of, or failure by the Company to perform or
observe, its obligations hereunder with respect to (A) the payment of the Series
A Preferred Dividends or Special Dividends or the payment of any dividends with
respect to the Series B Preferred Stock or any Junior Securities, or (B) the
taking of any action requiring the approval or consent of the holders of (1) the
Series A Preferred Stock pursuant to Section 6 hereof or the TBCA or (2) the
Series B Preferred Stock pursuant to Section 6 of the Series B Certificate of
Designation or the TBCA, without the requisite approval or consent; or
(z) the issuance of additional shares of Series A Preferred
Stock or Series B Preferred Stock or the reissuance of any shares of Series A
Preferred Stock or Series B Preferred Stock after reacquisition by the Company
in violation of Section 9 hereof or comparable provision of the Series B
Certificate of Designation.
(iii) Subject to the terms and conditions hereof, from and after
the fifth anniversary of the Issue Date, the Company shall have the right (the
"Call Right") to convert (the "Mandatory Conversion") all (but not less than
all) of the shares of Series A Preferred Stock into that whole number of fully
paid and nonassessable shares of Parent Class B Common Stock as is equal to the
product of the number of shares of Series A Preferred Stock being so converted,
multiplied by the Performance Conversion Rate then in effect, provided that the
Market Price of Parent Voting Stock shall have exceeded $55 (the "Mandatory
Conversion Minimum Price") (subject to adjustment as provided in subsection (n)
below) for at least twenty (20) Trading Days within a period of thirty (30)
consecutive Trading Days ending within five (5) Trading Days of the date on
which the Mandatory Conversion Notice (as defined below) is delivered to holders
of the Series A Preferred Stock.
(b) Automatic Conversion. All outstanding shares of Series A Preferred
Stock shall automatically convert (the "Automatic Conversion") into that whole
number of fully paid and nonassessable shares of Parent Class B Stock as is
equal to the product of the number of shares of Series A Preferred Stock being
so converted multiplied by the Market Conversion Rate then in effect upon the
Bankruptcy of the Company or any Subsidiary of the Company that is a Significant
Subsidiary (as defined in Rule 1-02(w) of Regulation S-X, or any successor rule
thereto) of Parent or a group of Subsidiaries of the Company that taken together
(as of the latest audited consolidated statement of Parent) would constitute a
Significant Subsidiary of Parent (a "Conversion Event").
(c) Subject to and upon compliance with the provisions of this Section
7, holders of shares of Series A Preferred Stock shall exercise a Performance
Conversion Right or Non-Compliance Conversion Right by surrender of such shares
of Series A Preferred Stock to be converted to the Secretary of the Company,
such surrender to be made in the manner provided in paragraph (d) of this
Section 7; provided, however that the right to convert shares called for
redemption pursuant to Section 5 shall terminate at 5:00 p.m. (New York time) on
the date that is five Business Days prior to the date fixed for such redemption,
unless the Company shall default in making payment of the Series A Redemption
Price.
(d) Exercise of Conversion Right; Surrender of Certificates. In order
to exercise the Performance Conversion Right or the Non-Compliance Conversion
Right pursuant to Section 7(a), and upon any (i) Mandatory Conversion pursuant
to Section 7(a) or (ii) Automatic Conversion pursuant to Section 7(b), a holder
of shares of Series A Preferred Stock (a "Converting Holder") shall surrender
the certificate or certificates representing the shares of Series A Preferred
Stock to be converted, duly endorsed in blank, to the Secretary of the Company,
accompanied by written notice addressed to the Company specifying the number (in
whole shares) of such Converting Holder's shares of Series A Preferred Stock
evidenced by such certificate or certificates to be converted and the name or
names in which such Converting Holder wishes the certificate or certificates for
Parent Class B Common Stock to be issued; in case such notice shall specify that
Parent Class B Common Stock be issued in a name or names other than that of such
Converting Holder, such notice shall be accompanied by a duly executed
instrument of transfer reasonably satisfactory to the Secretary of the Company
and payment of all transfer or similar taxes (or evidence reasonably
satisfactory to the Company demonstrating that such taxes have been paid or are
not payable) payable upon the issuance of Parent Class B Common Stock in such
name or names. As promptly as practicable after the surrender of such shares of
Series A Preferred Stock as aforesaid, but in any event not later than the third
Business Day after such surrender, the Company shall deliver or cause to be
delivered to any Converting Holder, or such other Person upon the written order
of such Converting Holder, a certificate or certificates for the number of whole
shares of Parent Class B Common Stock issuable upon the conversion of such
shares of Series A Preferred Stock in accordance with the provisions hereof and
any cash payment in lieu of any fractional shares of Parent Class B Common
Stock, as provided in paragraph (e) below. The Company shall issue certificates
for the balance of any remaining shares of Series A Preferred Stock in any case
in which fewer than all of the shares of Series A Preferred Stock represented by
a certificate are converted.
(e) Notice.
(i) In the event the Company exercises its Call Right, the
Company shall send by first class mail to each holder of Series A Preferred
Stock by first class mail, at such holder's registered address, a written notice
that states that it is exercising its Call Right (the "Mandatory Conversion
Notice") and sets forth:
(A) The Performance Conversion Rate then in effect;
(B) The number of shares of Parent Class B Common Stock that
each share of Series A Preferred Stock is convertible into and that the holder
is to surrender to the Company, in accordance with Section 7(d) hereof, the
certificate or certificates representing all of the shares of Series A Preferred
Stock owned by such holder; and
(C) The (20) Trading Day period and Market Price of Parent
Voting Stock used to determine that the condition based upon the Market Price of
Parent Voting Stock set forth in subparagraph 7(a)(iii) is satisfied.
(ii) Upon the occurrence of a Conversion Event, the Company shall
immediately send a written notice thereof to each holder of Series A Preferred
Stock, at such holder's registered address, immediately after any Conversion
Event.
(f) Fractional Shares. No fractional shares of Parent Class B Common
Stock or securities representing fractional shares of Parent Class B Common
Stock shall be issued upon conversion of the Series A Preferred Stock. Instead
of any fractional shares of Parent Class B Common Stock which would otherwise be
deliverable upon the conversion of a share of Series A Preferred Stock, the
Company shall pay to the Person or Persons to whom any such share is to be
delivered a cash adjustment in respect of such fractional interest in an amount
(computed to the nearest cent) equal to the value of such fractional shares of
Parent Class B Common Stock based upon the Parent Average Price, provided that,
for purposes of this clause (f), all Series A Preferred Stock beneficially owned
by a Person and all affiliates of such Person shall be treated as beneficially
owned, and converted, by a single Person.
(g) Time of Conversion. Each conversion of Series A Preferred Stock
shall be deemed to have been effected (i) with respect to an exercise of either
the Performance Conversion Right or the Non-Compliance Conversion Right,
immediately prior to the close of business on the date on which the certificates
for shares of Series A Preferred Stock shall have been surrendered for
conversion to the Secretary of the Company in accordance with the terms of this
Certificate of Designation, (ii) with respect to a Mandatory Conversion,
immediately prior to the close of business on the date the Mandatory Conversion
Notice is delivered, and (iii) with respect to an Automatic Conversion, at the
close of business on the date immediately prior to the effective date of such
Conversion Event. The Person or Persons in whose name or names any certificate
or certificates for Parent Class B Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of the
Parent Class B Common Stock represented thereby at such time on such date and,
except as provided herein, all rights with respect to the Series A Preferred
Stock surrendered, or required to be surrendered but not yet surrendered at the
time of conversion, shall forthwith terminate except the right to receive Parent
Class B Common Stock or other securities or property issuable or deliverable in
respect of such conversion.
(h) Dividends. A holder of shares of Series A Preferred Stock on a
Record Date shall be entitled to receive the Series A Preferred Dividend or
Special Dividend, as the case may be, payable on such Series A Preferred Stock
on the corresponding dividend payment date notwithstanding the subsequent
conversion thereof or the Company's default in payment of such dividend due on
the dividend payment date. Upon the conversion of any shares of Series A
Preferred Stock are converted, all dividends declared and unpaid on the shares
of Series A Preferred Stock so converted to the date of conversion shall be
immediately due and payable; and, to the extent the Company has legally
available funds therefor, payment by the Company of such declared and unpaid
dividends shall accompany the shares of Parent Voting Stock issued upon such
conversion.
(i) As used herein, "Market Price" shall mean, as of the date of
determination, (A) the closing price per share of Parent Voting Stock on such
date published in The Wall Street Journal or, if no such closing price on such
date is published in The Wall Street Journal, the average of the closing bid and
asked prices on such date, as officially reported on the principal national
securities exchange (including, without limitation, The Nasdaq Stock Market,
Inc.) on which the Parent Voting Stock is then listed or admitted to trading; or
(B) if the Parent Voting Stock is not then listed or admitted to trading on any
national securities exchange but is designated as a national market system
security by the National Association of Securities Dealers, Inc., the last
trading price of the Parent Voting Stock on such date; or (C) if there shall
have been no trading on such date or if the Parent Voting Stock is not so
designated, the average of the reported closing bid and asked prices of the
Parent Voting Stock on such date as shown by the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotations System and
reported by any member firm of the New York Stock Exchange selected by the
Corporation; or (D) if none of (A), (B) or (C) is applicable, a market price per
share determined at the Company's expense by an appraiser chosen by mutual
agreement of the Company and the holders of a majority of the shares of Series A
Preferred Stock. Any determination of the Market Price by an appraiser shall be
based on a valuation of the Parent as an entirety without regard to any discount
for minority interests or disparate voting rights among classes of capital stock
of Parent.
(j) As used herein, "Trading Day" shall mean (i) if the Parent Voting
Stock is listed or admitted for trading on the New York Stock Exchange or
another national security exchange, a day on which the New York Stock exchange
or that other national security exchange is open for business or (ii) if the
Parent Voting Stock is quoted on the Nasdaq National Market, a day on which
trades may be made thereon or (iii) if the applicable security is not so listed,
admitted for trading or quoted, any Business Day.
(k) As used herein, the "EBITDA Threshold" shall be the following
levels of EBITDA of the Combined Business (measured monthly on a rolling
twelve-month basis): (i) $250,000,000, if the twelve-month period which is being
measured ends in 1999; (ii) $260,000,000, if the twelve-month period which is
being measured ends in 2000; and (iii) $150,000,000, if the twelve-month period
which is being measured ends in 2001 or any year thereafter. In the event that
after the Issue Date any Material Assets are sold, transferred or otherwise
disposed of by the Combined Business (other than dispositions of fleet vehicles
in the ordinary course of business, including in connection with a
securitization transaction), in one transaction or a series of transactions, in
any twelve-month period to any Person other than Parent or a Subsidiary of
Parent, the EBITDA Threshold for such twelve-month period in which any such
sale, transfer or disposition occurs and each twelve-month period thereafter,
shall be decreased by an amount equal to the product of (i) the respective
EBITDA Threshold for such period multiplied by (ii) a fraction (A) the numerator
of which equals the EBITDA attributable to the Material Assets so sold,
transferred or disposed of for the immediately preceding twelve-month period
ending on the month immediately preceding the month such sale, transfer or
disposition occurs and (B) the denominator of which equals the EBITDA Threshold
for the immediately preceding twelve-month period ending on the month
immediately preceding the month such sale, transfer or disposition occurs.
(l) As used herein, the "Market Conversion Rate" shall be equal to the
quotient obtained by dividing: (i) the per share Series A Stated Amount by (ii)
the average trading price (the "Parent Average Price") per share of Parent
Voting Stock for the thirty (30) Trading Days immediately preceding the close of
business on the date of the Conversion Event or, with respect to the exercise of
the Non-Compliance Conversion Right, the date of the holder's conversion notice,
as the case may be; provided, however, that such Market Conversion Rate shall be
adjusted and readjusted from time to time as provided in subsection (n) below
and, as so adjusted and readjusted, shall remain in effect until a further
adjustment or readjustment thereof is required by subsection (n) below.
(m) As used herein, the "Performance Conversion Rate" shall be equal
to the quotient obtained by dividing: (i) the per share Series A Stated Amount
by (ii) $50; provided, however, that such Performance Conversion Rate shall be
adjusted and readjusted from time to time as provided in subsection (n) below
and, as so adjusted and readjusted, shall remain in effect until a further
adjustment or readjustment thereof is required by subsection (n) below.
(n) The Performance Conversion Rate and the Market Conversion Rate
(together, the "Conversion Rate") and the number and type of securities to be
received upon conversion of the Series A Preferred Stock shall be subject to
adjustment from time to time after the Issue Date as follows:
(i) If Parent shall, after the Issue Date and prior to conversion
of the Series A Preferred Stock: (A) declare a dividend on the Parent Common
Stock payable in shares of Parent Common Stock; (B) split or subdivide the
outstanding Parent Common Stock into a greater number of shares; (C) combine the
outstanding Parent Common Stock into a smaller number of shares; or (D) issue
any Parent Common Stock by reclassification of Parent Common Stock (each, an
"Adjustment Event"), then, in any such event, (1) the Performance Conversion
Rate in effect at the time of the effective date of such Adjustment Event shall
be proportionately adjusted so that the holder of any shares of Series A
Preferred Stock surrendered for conversion after such time shall thereafter be
entitled to receive the aggregate number of shares of Parent Class B Common
Stock which such holder would have owned or been entitled to receive immediately
following any Adjustment Event had such shares of Series A Preferred Stock been
converted into Parent Class B Common Stock immediately prior to the effective
date of such Adjustment Event or, if applicable, any record date with respect
thereto and the resulting Parent Class B Common Stock had been subject to such
Adjustment Event, and (2) the Mandatory Conversion Minimum Price and Optional
Conversion Minimum Price shall be appropriately adjusted. An adjustment made
pursuant to this subsection (n) shall become effective as of the effective date
of such Adjustment Event.
(ii) If after the Issue Date and prior to the conversion of the
Series A Preferred Stock, an Adjustment Event shall occur, then in any such
event the Market Price for each Trading Day, if any, included in determining the
Market Conversion Rate for any subsequent exercise of the Non-Compliance
Conversion Right or for any Conversion Event, to the extent such Market Price
does not give effect to such Adjustment Event (it being agreed that the Market
Price for shares of Parent Voting Stock traded "ex-dividend" will be deemed to
give effect to such Adjustment Event), will be modified, using the principles
set forth in clause (n)(i) above, to give effect to such Adjustment Event.
(iii) In case of any capital reorganization or reclassification
of the outstanding Parent Common Stock, or in case of any consolidation or
merger of Parent with or into another corporation, or in the case of a sale of
all or substantially all of Parent's assets or capital stock to another Person
(each of the foregoing being referred to as a "Transaction"), each share of
Series A Preferred Stock then outstanding shall thereafter be convertible into,
in lieu of the Parent Class B Common Stock issuable upon such conversion prior
to the consummation of such Transaction, the kind and amount of shares of stock
and other securities and property (including cash) receivable upon the
consummation of such Transaction by a holder of that number of shares of Parent
Class B Common Stock into which one share of Series A Preferred Stock was
convertible immediately prior to such Transaction (including, on a pro rata
basis, the cash, securities or property received by holders of Parent Common
Stock in any tender or exchange offer that is a step in such Transaction),
provided that in any Transaction in which (i) Parent is the surviving
corporation and the holders of Parent Voting Stock immediately prior to the
consummation of such Transaction continue, after giving effect to such
Transaction, to own the same percentages of the Parent Voting Stock or (ii)
Parent is not the surviving corporation but the holders of Parent Voting Stock
immediately prior to the consummation of such Transaction continue to own the
same percentages of the voting common stock of the surviving corporation, after
giving effect to such Transaction, no adjustment shall be required under this
clause (iii) except, in the case where Parent is not the surviving corporation,
that the Class A Preferred Stock shall become convertible into shares of
non-voting common stock of the surviving corporation which in all respects shall
be identical in rights (including, without limitation, conversion rights),
preferences and powers of the Parent Class B Common Stock and the voting common
stock of the surviving corporation shall be identical in rights, preferences and
voting powers of the Parent Voting Stock. In any such case, if necessary,
appropriate adjustment (as determined in good faith by the Board of Directors of
Parent) shall be made in the application of the provisions set forth in this
paragraph (iii) with respect to rights and interests thereafter of the holders
of Series A Preferred Stock to the end that the provisions set forth herein for
the protection of the conversion rights of the holders of Series A Preferred
Stock shall thereafter be applicable, as nearly as reasonably may be, to any
such other shares of stock and other securities and property deliverable upon
conversion of shares of Series A Preferred Stock remaining outstanding. In case
securities or property other than Parent Class B Common Stock shall be issuable
or deliverable upon conversion as aforesaid, then all references in this
paragraph (iii) shall be deemed to apply, so far as appropriate and as nearly as
may be, to such other securities or property.
Notwithstanding anything contained herein to the contrary, Parent
shall not effect any Transaction unless, prior to, or at the time of, the
consummation thereof, the successor corporation (if other than Parent) shall
assume, by written instrument mailed to each record holder of Series A Preferred
Stock at the addresses of each as shown on the books of the Company maintained
by the Secretary of the Company, the obligation to deliver to such holder such
cash and such securities to which, in accordance with the foregoing provisions,
such holder is entitled and such successor entity shall have mailed to each
record holder of Series A Preferred Stock at the addresses of each as shown on
the books of the Company maintained by the Secretary of the Company, an opinion
of independent counsel for such successor entity stating that such assumption
agreement is a valid, binding and enforceable agreement of such successor entity
(subject to customary exceptions).
(iv) In the event that, at any time as a result of an
adjustment made pursuant to (iii) above, any holder of shares of Series A
Preferred Stock thereafter converted shall become entitled to receive any share
of capital stock of Parent other than shares of Parent Class B Common Stock,
thereafter the number of such other shares so receivable upon conversion of any
share of Series A Preferred Stock shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to those with
respect to the Parent Class B Common Stock.
(v) In case at any time or from time to time, Parent shall
make any distribution to the holders of Parent Common Stock, or shall offer for
subscription pro rata to the holders of Parent Common Stock any additional
shares of stock of any class or any other right, or there shall be any capital
reorganization or reclassification of Parent Common Stock or consolidation or
merger of Parent with or into another corporation, or any sale or conveyance to
another corporation of the property of Parent as an entirety or substantially as
an entirety, or there shall be a voluntary or involuntary dissolution,
liquidation or winding up of Parent, then, in any one or more of said cases,
Parent shall give at least fourteen (14) calendar days' prior written notice
(the time of mailing of such notice shall be deemed to be the time of giving
thereof) to the record holders of the Series A Preferred Stock at the addresses
of each as shown on the books of the Company maintained by the Secretary of the
Company of the date on which (a) the books of Parent shall close or a record
shall be taken for such distribution or subscription rights or (b) such
reorganization, reclassification, consolidation, merger, sale or conveyance,
dissolution, liquidation or winding up shall take place, as the case may be,
provided, that in the case of any Transaction to which subsection (iii) applies,
Parent shall give at least thirty (30) calendar days' prior written notice as
aforesaid. Such notice shall also specify the date as of which the holders of
Parent Common Stock and of the Series A Preferred Stock shall participate in
said distribution or subscription rights or shall be entitled to exchange their
shares of Parent Common Stock or Series A Preferred Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale or conveyance.
(vi) In case any event shall occur as to which the provisions
of this subsection (n) are not strictly applicable but the failure to make any
adjustment would not fairly protect the holders of Series A Preferred Stock in
accordance with the essential intent and principles of this subsection (n),
then, in each such case, Parent shall appoint a firm of independent certified
public accountants of recognized standing, which shall give their opinion upon
the adjustment, if any, on a basis consistent with the essential intent and
principles established in this subsection (n) necessary to preserve the rights
of the holders of Series A Preferred Stock. Upon receipt of such opinion and
approval of such opinion by a majority of the Board of Directors of Parent,
Parent shall promptly mail a copy thereof to the then holders of Series A
Preferred Stock and shall make the adjustments described therein.
(vii) Upon any adjustment of the Conversion Rate then in
effect and any related increase or decrease in the number of shares of Parent
Class B Common Stock issuable upon the operation of the conversion set forth in
this Section 7, then, and in each such case, Parent shall promptly deliver to
the Secretary of the Company a certificate signed by an officer of Parent
setting forth the event requiring the adjustment or conversion and the method by
which such adjustment or conversion was calculated and specifying the
Performance Conversion Rate then in effect following such adjustment and the
related increased or decreased number of shares of Parent Class B Common Stock
issuable upon conversion, if applicable. Parent shall also promptly after the
making of such adjustment or the determination of such conversion give written
notice to the record holders of the Series A Preferred Stock at the address of
each holder as shown on the books of the Company maintained by the Secretary of
the Company, which notice shall state the Performance Conversion Rate then in
effect, as adjusted, and the related increased or decreased number of shares of
Parent Class B Common Stock issuable upon the exercise of the right of
conversion granted by this Section 7 or the determination of such conversion,
and shall set forth in reasonable detail the method of calculation of each and a
brief statement of the facts requiring such adjustment or conversion. Where
appropriate, such notice to record holders of the Series A Preferred Stock may
be given in advance and included as part of the notice required under the
provisions of subsection (v).
(viii) All calculations under this subsection (n) shall be
made to the nearest cent or to the nearest one-hundredth of shares of Parent
Class B Common Stock, as the case may be. Notwithstanding any other provision of
this subsection (n), Parent shall not be required to make any adjustment to the
Conversion Rate unless such adjustment would require an increase or decrease of
at least 1.0% of the Conversion Rate. Any lesser adjustment shall be carried
forward and, in such event, shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least 1.0% in the
Conversion Rate. Any adjustments under this subsection (n) shall be made
successively whenever an event requiring such an adjustment occurs.
8. Merger, Consolidation or Combination. The Company shall not be a party
to a Change of Control prior to the second anniversary of the Issue Date unless
such Change of Control is pursuant to a merger in which (a) the Company shall
survive and shall thereafter remain a Texas corporation and (b) the Series A
Preferred Stock shall continue to be outstanding following the effectiveness of
such merger and the rights, powers, preferences and qualifications of the Series
A Preferred Stock, as set forth in this Certificate of Designation, shall be
unaffected by such merger. If the Company is a party to a Change of Control
following the second anniversary of the Issue Date and Parent does not own
directly or indirectly all of the issued and outstanding Common Stock, each
holder of the Series A Preferred Stock shall have the option to elect to
receive, upon the consummation of such transaction, cash consideration in an
amount no less than the amount of the Series A Redemption Price.
9. No Reissuance of Series A Preferred Stock. Shares of Series A Preferred
Stock that have been surrendered for conversion, redeemed or reacquired in any
manner shall be retired and shall not be reissued as shares of Series A
Preferred Stock and shall (upon compliance with any applicable provisions of the
TBCA) have the status of authorized and unissued shares of Preferred Stock
undesignated as to series and may be redesignated and reissued as part of any
other series of Preferred Stock; provided, however, that so long as any shares
of Series A Preferred Stock are outstanding, any issuance of shares of such
other series of preferred stock shall be in compliance with the terms hereof.
10. Transferability. Shares of Series A Preferred Stock shall be free from
any and all restrictions on transfer, except as otherwise required by applicable
federal and state securities laws.
11. Business Day. If any payment, redemption or exchange shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
12. Financial Information; Notices.
(a) For so long as any share of Series A Preferred Stock is
outstanding, the Company shall provide to the holders of the Series A Preferred
Stock, (i) not later than the 120th day after the end of each fiscal year of the
Company, a consolidated balance sheet of the Company and its Subsidiaries as of
the end of such fiscal year and the related consolidated statement of income for
such fiscal year, prepared in conformity with generally accepted accounting
principles ("GAAP") in all material respects (but without the statement of cash
flows and complete financial statement footnotes required by GAAP), setting
forth in each case in comparable form the figures for the previous fiscal year
and (ii) not later than the 60th day following the end of each of the first
three fiscal quarters of each fiscal year of the Company, a consolidated balance
sheet of the Company and its Subsidiaries as of the end of such quarter and the
related consolidated statement of income for such quarter and for the portion of
the Company's fiscal year ended at the end of such quarter, in each case
prepared in accordance with GAAP in all material respects (but without the
statement of cash flows and complete financial statement footnotes required by
GAAP).
(b) The above financial information, and all notices required to be
delivered to the holders of the Series A Preferred Stock shall be delivered
initially to the following addresses or to such other addresses specified in
writing by the holders of the Series A Preferred Stock:
PHH Corporation
6 Sylvan Way
Parsippany, New Jersey 07054
Attention: General Counsel
With a copies to:
Cendant Corporation
9 West 57th Street
37th Floor
New York, New York 10019
Attention: General Counsel
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, Avis Fleet Leasing and Management Corporation has
caused this Certificate of Designation to be signed by Kevin M. Sheehan, its
Executive Vice President and Gerard J. Kennell, its Vice President, this 29th
day of June, 1999.
AVIS FLEET LEASING AND
MANAGEMENT CORPORATION
By: /s/ Kevin M. Sheehan
--------------------------------
Name: Kevin M. Sheehan
Title: Executive Vice President
By: /s/ Gerard J. Kennell
--------------------------------
Name: Gerard J. Kennell
Title: Vice President
By the execution set forth below, Avis Rent A Car, Inc., as the holder
of all of the shares of Common Stock of Avis Fleet Leasing and Management
Corporation, hereby evidences its approval of and agreement with the provisions
of Section 6(d) of this Certificate of Designation.
AVIS RENT A CAR, INC.
By: /s/ Kevin M. Sheehan
--------------------------------
Name: Kevin M. Sheehan
Title: Executive VicePresident
By: /s/ Gerard J. Kennell
-------------------------------
Name: Gerard J. Kennell
Title: Vice President
