<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AVIS RENT A CAR, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
AVIS RENT A CAR, INC.
[LOGO]
900 OLD COUNTRY ROAD
GARDEN CITY, NEW YORK 11530
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JUNE 2, 1999
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Avis Rent
A Car, Inc. (the "Company") will be held on Wednesday, June 2, 1999 at 10:00
a.m. Eastern Daylight Time at the Garden City Hotel, 45 Seventh Street, Garden
City, NY 11530 (the "Meeting") for the following purposes:
1. To elect ten directors for a one-year term and until their successors
are duly elected and qualified;
2. To ratify the appointment of Deloitte & Touche LLP as the auditors of
the Company's financial statements for the year ending December 31, 1999; and
3. To transact such other business as may properly come before the Meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on Tuesday, April 20,
1999 as the record date for the Meeting. Only stockholders of record at that
time are entitled to notice of, and to vote at, the Meeting and any adjournment
or postponement thereof. A list of stockholders entitled to vote at the Meeting
will be available for examination 10 days before the Meeting during ordinary
business hours at the offices of the Company, 900 Old Country Road, Garden City,
New York 11530.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the attached Proxy Statement for further information with
respect to the business to be transacted at the Meeting. The Board of Directors
urges you to date, sign and return the enclosed proxy promptly. A reply envelope
is enclosed for your convenience. You are cordially invited to attend the
Meeting in person. The return of the enclosed proxy will not affect your right
to vote if you attend the Meeting in person.
By Order of the Board of Directors
KAREN C. SCLAFANI
Secretary
Dated: April 28, 1999
<PAGE>
AVIS RENT A CAR, INC.
900 OLD COUNTRY ROAD
GARDEN CITY, NEW YORK 11530
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, JUNE 2, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Avis Rent A Car, Inc., a Delaware
corporation (the "Company"), to be voted at the 1999 Annual Meeting of
Stockholders, and any adjournment or postponement thereof (the "Meeting"), to be
held on the date, at the time and place, and for the purposes set forth in the
foregoing notice. This Proxy Statement, the accompanying notice and the enclosed
proxy card are first being mailed to stockholders on or about April 28, 1999.
The Board of Directors does not intend to bring any matter before the
Meeting except as specifically indicated in the notice, nor does the Board of
Directors know of any matters which anyone else proposes to present for action
at the Meeting. However, if any other matters properly come before the Meeting,
the persons named in the enclosed proxy, or their duly constituted substitutes
acting at the Meeting, will be authorized to vote or otherwise act thereon in
accordance with their judgment on such matters.
Shares of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), represented by proxies received by the Company, where the stockholder
has specified his or her choice with respect to the proposals described in this
Proxy Statement (including the election of directors), will be voted in
accordance with the specifications so made. In the absence of such
specifications, the shares will be voted "For" the election of all ten nominees
for the Board of Directors and "For" the ratification of the appointment of
Deloitte & Touche LLP as auditors of the Company's financial statements for the
fiscal year ending December 31, 1999.
Except as provided below, any proxy may be revoked at any time prior to its
exercise by notifying the Secretary in writing, by delivering a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.
The accompanying form of proxy is being solicited on behalf of the Board of
Directors of the Company. The expenses of solicitation of proxies for the
Meeting will be paid by the Company. In addition to the mailing of the proxy
material, such solicitation may be made in person or by telephone by directors,
officers and employees of the Company, who will receive no additional
compensation therefor. Upon request, the Company will reimburse brokers,
dealers, banks and trustees, or their nominees, for reasonable expenses incurred
by them in forwarding material to beneficial owners of shares of Common Stock.
A copy of the Annual Report on Form 10-K filed by the Company with the
Securities and Exchange Commission for its latest fiscal year is available
without charge to stockholders upon written request to the Corporate
Communications Department, Avis Rent A Car, Inc., 900 Old Country Road, Garden
City, New York 11530.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the Company's Common Stock at the close of
business on April 20, 1999 are entitled to notice of, and to vote at, the
Meeting. On that date, the Company had outstanding 31,346,492 shares of Common
Stock.
1
<PAGE>
The presence, in person or by proxy, of the holders of a majority of the
issued and outstanding shares of Common Stock entitled to vote at the Meeting
will constitute a quorum. On all matters voted upon at the Meeting and any
adjournment or postponement thereof, the holders of the Common Stock vote
together as a single class, with each record holder of Common Stock entitled to
one vote per share.
Directors shall be elected by a plurality of the votes cast in the election
of directors. Under applicable Delaware law, in tabulating the vote for the
election of directors, abstentions and broker non-votes will be disregarded and
will have no effect on the outcome of the vote.
Approval of the proposal relating to the ratification of the appointment of
auditors of the Company's financial statements requires the affirmative vote of
the holders of a majority of the shares of Common Stock present at the Meeting,
in person or by proxy, and entitled to vote. Under applicable Delaware law, in
determining whether such proposal has received the requisite number of
affirmative votes, abstentions and broker non-votes will be counted and will
have the same effect as a vote against this proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth on the following table is furnished as of March
20, 1999 with respect to any person (including any "group" as that term is used
in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) who is known to the Company to be the beneficial owner of more
than 5% of any class of the Company's voting securities, and as to those shares
of the Company's equity securities beneficially owned by each of its directors
and nominees for director, its named executive officers, and all of its
executive officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OWNERSHIP CLASS
- - ----------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS
Cendant Corporation ("Cendant") (1) ..................................................... 6,200,000 19.8%
6 Sylvan Way
Parsippany, NJ 07054
T. Rowe Price Associates, Inc. (2) ...................................................... 2,993,000 9.6%
100 E. Pratt Street
Baltimore, MD 21202
DIRECTORS AND EXECUTIVE OFFICERS(3)
Thomas J. Byrnes......................................................................... 0 *
Kevin P. Carey........................................................................... 38,540 *
W. Alun Cathcart......................................................................... 10,000 *
Leonard S. Coleman, Jr................................................................... 10,000 *
Alfonse M. D'Amato....................................................................... 0 *
Martin L. Edelman........................................................................ 10,000 *
Deborah L. Harmon........................................................................ 10,000 *
R. Craig Hoenshell....................................................................... 233,380 *
Stephen P. Holmes........................................................................ 11,000 *
Michael J. Kennedy....................................................................... 10,000 *
Michael P. Monaco........................................................................ 11,000 *
F. Robert Salerno........................................................................ 113,640 *
Kevin M. Sheehan......................................................................... 75,100 *
Michael L. Tarnopol...................................................................... 10,000 *
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (19 persons)................................. 546,020 1.7%
</TABLE>
2
<PAGE>
- - ------------------------
* Less than 1%
(1) Cendant beneficially owns 6,200,000 shares of Common Stock after giving
effect to the Company's repurchase of 1,300,000 shares of Common Stock on
January 15, 1999, which shares are held of record by its indirect
wholly-owned subsidiary, Cendant Car Rental Holdings, Inc.
(2) Based upon the information contained in a Schedule 13G dated February 12,
1999 by T. Rowe Price Associates, Inc. ("T. Rowe"). T. Rowe beneficially
owns 2,993,000 shares of Common Stock with sole voting or investment power
with respect to only 400 shares of Common Stock. These securities are owned
by various individuals and institutional investors for which T. Rowe serves
as investment adviser with power to direct investments and/or sole power to
vote the securities. For purposes of the reporting requirements of the
Exchange Act, T. Rowe is deemed to be a beneficial owner of such securities;
however, T. Rowe expressly disclaims that it is, in fact, the beneficial
owner of such securities.
(3) Includes shares which could be acquired within 60 days of March 20, 1999
through the exercise of options to purchase Common Stock of the Company
under the Company's 1997 Stock Option Plan as follows: Messrs. Cathcart,
Coleman, Edelman, Holmes, Kennedy, Monaco and Tarnopol and Ms.
Harmon--10,000 each; Mr. Carey--35,540; Mr. Hoenshell--213,280; Mr.
Salerno--106,640; Mr. Sheehan--71,100 and all directors and executive
officers as a group--511,120.
3
<PAGE>
ELECTION OF DIRECTORS
[PROPOSAL 1]
GENERAL
The Board of Directors presently consists of ten members. The Board of
Directors has nominated ten candidates to be elected at the Meeting to serve as
directors for a one-year term ending at the 2000 Annual Meeting of Stockholders
and when their successors are duly elected and qualified. Each nominee is
currently serving as a director of the Company except for Kevin M. Sheehan,
Executive Vice President and CFO of the Company, and Sen. Alfonse M. D'Amato.
Each nominee has consented to being named in the Proxy Statement and to
serve if elected. If prior to the Meeting any nominee should become unavailable
to serve, the shares of Common Stock represented by a properly executed and
returned proxy will be voted for such additional person as shall be designated
by the Boards of Directors, unless the Board determines to reduce the number of
directors in accordance with the Charter and the By-Laws.
Certain information regarding each nominee is set forth below, including
such individual's age and principal occupation, a brief account of such
individual's business experience during the last five years and other
directorships currently held by such nominee.
INFORMATION REGARDING DIRECTORS AND NOMINEES STANDING FOR ELECTION
<TABLE>
<S> <C>
W. Alun Cathcart Stephen P. Holmes
Leonard S. Coleman, Jr. Michael J. Kennedy
Alfonse D'Amato Michael P. Monaco
Martin L. Edelman F. Robert Salerno
Deborah L. Harmon Kevin M. Sheehan
</TABLE>
MR. CATHCART, age 55, has been a Director of the Company since September
1997. Mr. Cathcart has been non-Executive Chairman of Avis Europe plc since
April 1, 1999. From January 1, 1999 until April 1, 1999 Mr. Cathcart served as
Executive Chairman of Avis Europe plc. and for more than five years prior
thereto Mr. Cathcart was Chairman and Chief Executive of Avis Europe plc.
MR. COLEMAN, age 50, has been a Director of the Company since September
1997. 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
is a director of the following corporations which file reports pursuant to the
Exchange Act: Cendant, H.J. Heinz Company, New Jersey Resources, The Omnicom
Group and Owens Corning.
SEN. D'AMATO, age 61, has been Managing Director of Park Strategies, a
business consulting firm in New York City, since its formation in January, 1999.
From January 1981 until January 4, 1999, Sen. D'Amato served in the United
States Senate representing the State of New York where he was Chairman of the
Committee on Banking, Housing and Urban Affairs from 1995 until he left office.
MR. EDELMAN, age 57, has been Interim Chairman of the Board since December
1998 and a Director of the Company since September 1997. From January 1996 to
March 1998, Mr. Edelman served as President and a director of Chartwell Leisure,
Inc. He was a partner with Battle Fowler, a New York City law firm, from 1972
through 1993 and since January 1, 1994 has been 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. Mr. Edelman also serves as a director of the following
corporations which file reports pursuant to the Exchange Act: Arcadia Realty and
Capital Trust, each a real estate investment trust, and Cendant.
MS. HARMON, age 39, has been a Director of the Company since September 1997.
Ms. Harmon has been a Principal in the Office of the President at JER Real
Estate Partners, L.P., an institutional, private equity
4
<PAGE>
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. HOLMES, age 42, has been a Director of the Company since October 1996.
Mr. Holmes was appointed a Vice Chairman of Cendant in December 1997 and from
September 1996 through December 1997 Mr. Holmes served as Vice Chairman of HFS
Incorporated ("HFS"), the predecessor company of Cendant. 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 of Avis
Europe plc and as a director of the following corporations which file reports
pursuant to the Exchange Act: Cendant and PHH Corporation.
MR. KENNEDY, age 61, has been a Director of the Company since September
1997. Mr. Kennedy has been an attorney with his own law firm since 1976.
MR. MONACO, age 51, has been a Director of the Company since May 1997. Mr.
Monaco has been a Vice Chairman of Cendant since December 1997 and Chief
Executive Officer of the Alliance Marketing Division of Cendant since November
1998. From December 1997 until November 1998, Mr. Monaco was Chief Financial
Officer of Cendant and from October 1996 to December 1997, Mr. Monaco served as
Vice Chairman and Chief Financial Officer 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. Monaco is a director of Cendant, which files
reports pursuant to the Exchange Act.
MR. SALERNO, age 47, has been President and Chief Operating Officer of the
Company and its car rental subsidiary, Avis Rent A Car System, Inc. ("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 Avis, Inc., the predecessor of the Company, and ARACS. From
July 1990 to September, 1995, Mr. Salerno was Senior Vice President and General
Manager Rent A Car of Avis, Inc. and ARACS.
MR. SHEEHAN, age 45, 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 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.
COMMITTEES, MEETINGS AND COMPENSATION OF THE BOARD OF DIRECTORS
The Board of Directors held five meetings during 1998. All incumbent
directors attended at least 75% of the aggregate number of meetings of the Board
and of the committees of the Board on which they served.
The Executive Committee of the Board of Directors, which was designated by
the Board in September 1997, is composed currently of Messrs. Hoenshell, Edelman
and Holmes. The Executive Committee is authorized to exercise all powers and
authority of the Board of Directors in the management of the business and
affairs of the Company except those powers reserved, by law or resolution, to
the Board of Directors. The Executive Committee met twice in 1998.
The Board of Directors has designated an Audit Committee composed currently
of Messrs. Edelman and Tarnopol, who were appointed to the Committee in
September 1997. The Audit Committee reviews and evaluates the Company's internal
accounting and auditing procedures; recommends to the Board of Directors the
firm to be appointed as independent accountants to audit the Company's financial
statements; reviews with management and the independent accountants the
Company's year-end operating results; reviews the scope and results of the audit
with the independent accountants; reviews with
5
<PAGE>
management the Company's interim operating results; and reviews the non-audit
services to be performed by the firm of independent accountants and considers
the effect of such performance on the accountants' independence. The Audit
Committee met two times in 1998.
The Board of Directors has designated a Compensation Committee composed of
Ms. Harmon and Mr. Kennedy, who were appointed to the Committee in September
1997. The Compensation Committee determines compensation arrangements for
executives, reviews and makes recommendations to the full Board regarding the
adoption or amendment of employee benefit plans, and administers the Company's
1997 Stock Option Plan (the "Plan"). The Compensation Committee met three times
in 1998.
The Policy Committee of the Board of Directors, which was designated by the
Board in September 1997, is composed of Ms. Harmon and Mr. Coleman. The Policy
Committee establishes and implements corporate policy with respect to the
business operations of the Company, including its code of conduct. The Policy
Committee met twice in 1998.
The Company has no standing nominating committee. The Board of Directors
makes nominations for the Board. In accordance with Delaware law, stockholders
may make nominations for the Board of Directors in advance of or at the Meeting.
Non-employee directors receive an annual retainer of $30,000, plus $4,000
for chairing a committee and $2,000 for serving as a member of a committee other
than Chair. Non-employee directors also are paid $1,000 for each Board meeting
attended and $500 ($1,000 for committee chair) for each Board committee meeting
if held on the same day as a Board meeting and $1,000 ($2,000 for committee
chair) for each Board committee meeting attended on a day on which there is no
Board meeting. Non-employee directors are reimbursed for expenses incurred in
attending meetings of the Board of Directors and committees.
Under the Plan, each non-employee director is granted options to purchase
50,000 shares of Common Stock on the date of his or her initial election to the
Board of Directors. Such options have an exercise price of the fair market value
on the date of grant, vest over a five-year period from the date of grant at the
rate of 20% per year, and have other terms which are the same as all other
options granted under the Plan.
Directors shall be elected by a plurality of the votes cast in the election
of directors. Pursuant to applicable Delaware law, in tabulating the vote for
the election of directors, abstentions and broker non-votes will be disregarded
and will have no effect on the outcome of the vote.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of the Company:
<TABLE>
<CAPTION>
NAME OFFICE OR POSITION HELD
- - --------------------------------------- ------------------------------------------------------------------------
<S> <C>
F. Robert Salerno...................... President, Chief Operating Officer and Director
Kevin M. Sheehan....................... Executive Vice President and Chief Financial Officer
Thomas J. Byrnes....................... Senior Vice President--Sales
Maria M. Miller........................ Senior Vice President--Marketing
Michael P. Collins..................... Vice President--International
Richard S. Jacobson.................... Vice President--Tax
Gerard J. Kennell...................... Vice President and Treasurer
James A. Keyes......................... Vice President--HR, Staffing and Diversity
Karen C. Sclafani...................... Vice President, General Counsel and Secretary
Timothy M. Shanley..................... Vice President and Controller
</TABLE>
For biographical information concerning Messrs. Salerno and Sheehan see
"Election of Directors".
MR. BYRNES, age 54, has been Senior Vice President--Sales of the Company and
ARACS since February 1998 and Vice President--Sales North America for the
Company or its predecessor and ARACS since 1987.
MS. MILLER, age 42, has been Senior Vice President--Marketing of the Company
since February 1998. From January 1997 to February 1998, Ms. Miller was the
principal in her own consulting firm, which
6
<PAGE>
provided marketing consulting services to small and mid-sized businesses and
nonprofit organizations. From 1987 to 1995, Ms. Miller held various positions
with American Express Company including Vice President, Platinum Card Operations
from September 1993 to October 1995 and Vice President, Small Business Services
Marketing from December 1990 to August 1993.
MR. JACOBSON, age 55, has been Vice President-Tax of the Company and ARACS
since September 1998. From November 1997 until August 1998, Mr. Jacobson was
Staff Vice President of ARACS and for more than five years prior thereto he was
employed by ARACS as Director of Corporate Tax.
MR. COLLINS, age 51, has been Vice President--International of the Company
or its predecessor and ARACS, and General Manager of their international
operations, since 1987.
MR. KENNELL, age 54, has been Vice President and Treasurer of the Company or
its predecessor and ARACS since February 1987.
MR. KEYES, age 53, has been Vice President-HR, Staffing and Diversity of the
Company since March 1999 and of ARACS since January 1999. From July 1997 until
December 1998, Mr. Keyes was Vice President--Staffing, Diversity & Management
Development of ARACS. From June 1993 until December 1996, Mr. Keyes was
Corporate Director of Human Relations at The Dun and Bradstreet Corporation.
MS. SCLAFANI, age 47, has been Vice President, General Counsel and Secretary
of the Company and ARACS since August 1998. From April 1990 until March 1997,
Ms. Sclafani was Vice President, Deputy General Counsel and Assistant Secretary
of Avis, Inc. and ARACS. In March 1997, Ms. Sclafani was elected Vice President
and Secretary of the Company.
MR. SHANLEY, age 50, 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 Avis, Inc. and ARACS.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the 1996, 1997 and 1998 cash and non-cash
compensation awarded to or earned by the Chief Executive Officer of the Company
and the four other most highly compensated executive officers of the Company:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ----------------------------------
SECURITIES
------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(1) COMPENSATION($)(2)
- - -------------------------------------------------- --------- ----------- ----------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
R. Craig Hoenshell(3)............................. 1997 468,462 568,800 639,840 $ 18,536
Chairman & Chief Executive Officer 1998 623,845 812,501 74,000 37,090
F. Robert Salerno................................. 1996 244,288 103,825 -- 13,947
President & Chief Operating Officer 1997 336,346 351,752 533,200 6,197
1998 356,730 420,000 392,500 11,844
Kevin M. Sheehan.................................. 1997 264,413 289,330 355,500 4,155
Executive Vice President & Chief Financial Officer 1998 279,950 302,501 265,000 12,011
Kevin P. Carey(3)................................. 1997 169,711 132,000 106,620 9,151
Senior Vice President-Human Resources 1998 212,786 210,000 12,000 13,829
Thomas J. Byrnes.................................. 1996 145,509 37,665 -- 7,041
Senior Vice President-Sales 1997 162,692 108,331 71,100 7,738
1998 196,769 170,176 10,000 10,917
</TABLE>
- - ------------------------
(1) Amounts listed represent options to acquire the Company's Common Stock.
(2) Includes the value of group term life insurance and the Company matching
contribution to 401(k) or deferred compensation plans.
(3) Mr. Hoenshell resigned from his office as Chairman and Chief Executive
Officer of the Company effective December 31, 1998 but remains a director of
the Company until the Meeting and a Senior Advisor to the Company until
October 6, 2000. Mr. Carey ceased to be employed by the Company on December
31, 1998. Securities shown are net of options forfeited upon such
resignation and cessation of employment.
OPTION GRANTS TABLE
The following table describes the options to acquire shares of Common Stock
of the Company granted to the Chief Executive Officer and certain other
executive officers of the Company in the last fiscal year:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------
<S> <C> <C> <C> <C> <C>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE OR
UNDERLYING GRANTED BASE PRICE GRANT DATE
OPTIONS TO EMPLOYEES PER EXPIRATION PRESENT
NAME GRANTED IN FISCAL YEAR SHARE($)(1) DATE VALUE ($)(2)
- - -------------------------------------------- ----------- --------------- -------------- ----------- ------------
R. Craig Hoenshell(3)....................... 74,000 6.0% 24.00 6/4/08 905,249
F. Robert Salerno........................... 300,000 24.2% 21.375 12/16/08 3,268,530
92,500 7.5% 24.00 6/4/08 1,131,562
Kevin M. Sheehan............................ 200,000 16.1% 21.375 12/16/08 2,179,020
65,000 5.2% 24.00 6/4/08 795,152
Kevin P. Carey(3)........................... 12,000 1.0% 24.00 6/4/08 146,797
Thomas J. Byrnes............................ 10,000 0.8% 24.00 6/4/08 122,331
</TABLE>
- - ------------------------
(1) Options granted at $24.00 per share vest 20% per year beginning June 4,
1999. Options granted at $21.375 per share vest 50% on June 30, 2000 and 50%
on December 31, 2001.
8
<PAGE>
(2) The amount shown in this column represents the Grant Date Present Value
using the "Black-Scholes" valuation method.
(3) Securities shown are net of options forfeited upon resignation from office
or cessation of employment with the Company.
YEAR END OPTION VALUE TABLES
The following table describes the value of unexercised in-the-money options
to acquire Common Stock of the Company held by the Chief Executive Officer and
certain other executive officers of the Company at December 31, 1998:
<TABLE>
<CAPTION>
FY-END OPTION VALUES(1)
-----------------------------------------
<S> <C> <C>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT FY-
NAME OPTIONS AT FY-END(#) END($)
- - ----------------------------------------------------------------------- --------------------- ------------------
R. Craig Hoenshell..................................................... 713,840 4,614,510
F. Robert Salerno...................................................... 925,700 4,694,283
Kevin M. Sheehan....................................................... 620,500 3,130,395
Kevin P. Carey......................................................... 118,620 768,878
Thomas J. Byrnes....................................................... 81,100 513,109
</TABLE>
- - ------------------------
(1) None of the options shown in the table were exercised during 1998.
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 are non-union, full time employees hired prior to December 31, 1983
who were age 25 or above on January 1, 1985. The plan was amended to curtail all
benefit accruals and to add two years of credited service to the accrued benefit
of each participant employed by the Company on December 31, 1998. The Company
will recognize a gain as a result of this curtailment during the first quarter
of the Company's fiscal year ending December 31, 1999.
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. 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. In
light of the curtailment of benefit accruals under the Company's defined benefit
plan, no additional employees will be designated as participants in this
retirement equalization benefit plan.
The following table shows the estimated annual pension benefit payable under
the plans under normal retirement in 1999 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 1999
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.
9
<PAGE>
PENSION PLAN TABLE
ESTIMATED ANNUAL PENSION BENEFIT(1)
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ANNUAL PAY 15 20 25 30 35
- - ----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
$200,000............................................. $ 39,194 $ 52,258 $ 65,323 $ 78,387 $ 91,452
250,000............................................. 49,881 66,508 83,135 99,762 116,390
300,000............................................. 60,569 80,758 100,948 121,137 141,327
350,000............................................. 71,256 95,008 118,760 142,512 166,265
400,000............................................. 81,944 109,258 136,573 163,887 191,202
450,000............................................. 92,631 123,508 154,385 185,262 216,140
500,000............................................. 103,919 137,758 172,198 206,637 241,077
</TABLE>
- - ------------------------
(1) 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.
As of December 31, 1998, the specified named executives had the following
years of service under the defined benefit plan: Mr. Salerno, eighteen years,
seven months; Mr. Byrnes, thirty-two years, eleven months.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERALL POLICY. The Compensation Committee of the Board of Directors, which
was established in September 1997 and the members of which are non-employee
directors, is responsible for administering the Company's executive compensation
policies and programs.
The Compensation Committee's goal is to attract and retain the best possible
executive talent, to motivate these executives to achieve the goals inherent in
the Company's business strategy and to link executive and stockholder interests
through equity-based compensation plans.
The key elements of the Company's executive compensation program include
base salary, annual bonus and stock options. Each executive's compensation
package is designed to condition a significant portion of the executive's
overall anticipated compensation on the Company's success in achieving specified
performance targets or on appreciation in the value of the Common Stock or both.
BASE SALARIES. The 1998 base salaries for Messrs. Hoenshell, Salerno and
Byrnes are set forth in their respective employment agreements.
ANNUAL BONUS. In 1998 the executive officers were eligible to earn bonuses
equal to a percentage of base salary based upon the degree of achievement of
target levels of earnings per share (EPS) and attainment of strategic goals of
customer and employee loyalty. The percentages of base salary for the executive
officers ranged from 30%, if the budgeted profit plan level of earnings was
achieved, to a maximum of 130%, if the highest level of profit plan earnings was
achieved and the strategic goals were met. The 1998 bonuses for the named
executive officers are set forth in the Summary Compensation Table.
STOCK OPTIONS. On September 23, 1997, the Plan was approved by the Board of
Directors and stock options have been granted to the Company's executive
officers pursuant thereto. Information with respect to option grants to the
named executive officers is set forth in the "Option Grants Table". The stock
option awards for the named executive officers, which were approved at the time
of grant by the Compensation Committee of the Board of Directors, are intended
to provide a long term incentive to such executives.
CEO COMPENSATION. Mr. Hoenshell was elected Chairman of the Board and Chief
Executive Officer of the Company in March 1997. At that time his compensation
package was determined by Cendant and the Compensation Committee of the Board of
Directors of Cendant in accordance with their executive compensation guidelines.
10
<PAGE>
DEDUCTIBILITY OF COMPENSATION. Due to recent changes in tax law, the
deductibility for corporate tax purposes of compensation paid to individual
executive officers of the Company in excess of $1 million in any year commencing
with 1994 may be restricted. However, where it is deemed necessary, in the best
interests of the Company, to continue to attract and retain the best possible
executive talent, and to motivate such executives to achieve the goals inherent
in the Company's business strategy, the Compensation Committee will recommend,
and the Company is expected to pay, compensation to executive officers which may
exceed the limits of deductibility.
THE COMPENSATION COMMITTEE
Michael J. Kennedy, Chair
Deborah L. Harmon
PERFORMANCE GRAPH
Set forth below is a line graph comparing percentage change in the
cumulative total return of the Common Stock, the Standard & Poor's 400 Index,
the Russell 2000 Index and the Company's Peer Group for the period from
September 1, 1997 (September 24, 1997 for the Company) through December 31,
1998.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVIS RENT A CAR S&P 400 RUSSELL 2000 PEER GROUP
<S> <C> <C> <C> <C>
9/97 $100.00 $100.00 $100.00 $100.00
12/31/1997 $187.87 $100.83 $97.78 $81.02
12/31/1998 $142.28 $115.38 $95.59 $62.04
DOLLARS
</TABLE>
<TABLE>
<CAPTION>
9/97* 12/31/98
<S> <C> <C>
Avis Rent A Car, Inc. $ 100 $ 142
Standard and Poor's 400 Index $ 100 $ 115
Russell 2000 Index $ 100 $ 86
Peer Group $ 100 $ 62
</TABLE>
* Assumes $100.00 invested on September 1, 1997 for the Standard & Poor's
400 Index, the Russell 2000 Index and the Company's Peer Group and September 24,
1997 for the Company (the first day of trading in the Common Stock).
11
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE OF CONTROL
ARRANGEMENTS
Three named executive officers of the Company have written employment
agreements.
Mr. Hoenshell resigned from his office as Chairman and Chief Executive
Officer of the Company effective December 31, 1998. However, he remains employed
by the Company as a Senior Advisor under an employment agreement which expires
on October 6, 2000 and entitles him to a salary of $625,000 during his period of
employment and lump sum payments of $325,000 each on January 1, 1999 and October
6, 2000 as a retention incentive. If Mr. Hoenshell's employment is terminated by
the Company other than as a result of death, disability or cause, or by the
executive due to the Company's material breach, he is entitled to receive in a
lump sum the remainder of his salary and the remaining $325,000 incentive
payment within 30 days following his termination.
Mr. Salerno and Mr. Byrnes have employment agreements with a predecessor
company of the Company which terminate on February 8, 2001 and September 20,
1999, respectively. Under the terms of their agreements, Mr. Salerno and Mr.
Byrnes are entitled to receive an annual base salary of not less than $356,730
and $196,769, respectively, which salary may be increased by the Board of
Directors during the term of their agreements. If the employment of Mr. Salerno
is terminated by the Company for reasons other than "just cause" or if Mr.
Salerno 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 his agreement. However, if the
employment of Mr. Salerno is terminated by the Company on or after a
change-in-control, he is entitled to receive his remaining salary, full bonus
and certain perquisites under the agreement in a single lump sum within 30 days
following his termination. If the employment of Mr. Byrnes is terminated by the
Company as a result of his death, his estate is entitled to receive his salary
for a period of one year as a death benefit. If the employment of Mr. Byrnes is
terminated without "just cause" (as defined in the agreement), he is entitled to
receive his salary for a period of one year and a pro rated share of his bonus
for the year in which his termination occurred.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH CENDANT
Cendant, which beneficially owns 19.8% of the Company's outstanding Common
Stock, was formed through the merger of HFS and CUC International Inc. in
December 1997. Cendant is one of the world's foremost providers of consumer and
business services. Cendant operates in four principal divisions: Travel
Services, Real Estate Services, Alliance Marketing and Other Consumer and
Business Services. In Travel Services, Cendant is the leading franchisor of
hotels and rental car agencies worldwide, the largest provider of vacation
exchange services, a leading fleet management company, the UK's largest private
car park operator, and a leading motorist assistance group in the UK. In Real
Estate Services, Cendant is the world's largest franchisor of residential real
estate brokerage offices, a major provider of mortgage services to consumers and
a global leader in corporate employee relocation. In Alliance Marketing, Cendant
provides access to insurance, travel, shopping, auto, and other services,
primarily through direct marketing to customers of its affinity partners.
Cendant's Other Consumer and Business Services include the tax preparation
service franchise, information technology services, car park and vehicle
emergency support and rescue services in the UK, Cendant information services,
financial products and other consumer related services. Four of the Company's
directors, Messrs. Coleman, Edelman, Holmes and Monaco, are directors of Cendant
and Messrs. Holmes and Monaco are also executive officers of Cendant.
In connection with the Company's stock repurchase program, on January 15,
1999 the Company repurchased 1.3 million shares of its Common Stock from Cendant
at a cost of $31.5 million.
The Company, or its subsidiary, ARACS, is party to various agreements with
Cendant and its subsidiaries that were entered into when Cendant beneficially
owned all of the outstanding Common Stock
12
<PAGE>
of the Company. The agreements summarized below set forth the on-going
responsibilities of the Company to Cendant and its subsidiaries.
SEPARATION AGREEMENT
In connection with the Company's initial public offering on September 24,
1997 (the "IPO"), the Company and Cendant Car Rental, Inc. (formerly HFS Car
Rental, Inc.) (the "Franchisor"), a wholly-owned subsidiary of Cendant, entered
into a Separation Agreement which provides for, among other things, 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 IPO, and the allocation between the Company and the
Franchisor of certain other liabilities and certain indemnification obligations
of the Company and the Franchisor.
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 IPO. 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.
MASTER LICENSE AGREEMENT
The Company's status as an Avis System franchisee is governed by an
agreement (the "Master License Agreement") among ARACS, the Franchisor and
Wizard Co., Inc. ("Wizard Co."), a wholly-owned subsidiary of the Franchisor,
which grants to ARACS 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, through 2047.
Pursuant to the Master License Agreement, ARACS has agreed to pay the
Franchisor a monthly base royalty of 3.0% of ARACS's gross revenue. In addition,
ARACS 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 on July 30,
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 ARACS since January 1,
1997. Until July 30, 2002 the Supplemental Fee, or a portion thereof, may be
deferred if ARACS does not attain certain financial targets. Any Supplemental
Fees that are deferred will bear interest at a market rate until paid and will
be expressly subordinated to indebtedness of ARACS. The royalties charged to
ARACS for the twelve months ended December 31, 1998 amounted to $91.9 million
and resulted in a reduction in net income of approximately $56.1 million.
ARACS 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 ARACS purchases from existing franchisees
that have exclusivity. ARACS 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 ARACS has a non-exclusive right to open new franchises, ARACS
will have a right of first refusal to develop such area prior to the
Franchisor's granting a license to a third party. In the event Cendant acquires
another car rental company, ARACS 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 ARACS operates.
13
<PAGE>
The Master License Agreement provides the Franchisor with significant rights
regarding the business and operations of ARACS. ARACS 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
promotional expenditures. In general, the Master License Agreement provides that
ARACS may 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, ARACS agreed not to use any
of the licensed trademarks other than in its vehicle rental business without the
Franchisor's consent.
The Master License Agreement will terminate without offering ARACS an
opportunity to cure its default, if (i) certain bankruptcy and insolvency events
occur, (ii) ARACS purports to transfer any rights and obligations under the
Master License Agreement without compliance with the terms of the Master License
Agreement, (iii) ARACS competes with the Franchisor in violation of the Master
License Agreement, (iv) ARACS discloses the confidential information of the
Franchisor in violation of the Master License Agreement, (v) ARACS challenges
Wizard Co.'s rights to the licensed proprietary marks, (vi) upon a Change of
Control Event (as defined) or (vii) ARACS 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 must give ARACS 30 days notice of such Non-Curable Default. The
Franchisor may also terminate the Master License Agreement if ARACS (i) fails,
refuses or neglects to promptly pay monies owing to the Franchisor or Cendant
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 ARACS will 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
ARACS has commenced to cure such default within 30 days and is diligently
prosecuting such cure to completion, ARACS will have up to an additional 60 days
to cure such default. In the event of a termination of the agreement, the
Franchisor has the option to acquire ARACS'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 Cendant or an affiliate
or successor to Cendant, 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 Cendant controls 25% 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 of 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 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
14
<PAGE>
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
In connection with the IPO, the Company entered into the Registration Rights
Agreement, pursuant to which Cendant and certain transferees of Common Stock
held by the Franchisor (the "Holders") 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 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. Cendant has advised the Company that it does not
have any present intention to request any such registration. In addition, the
Holders 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, together with the
associated back office and accounting systems, are owned and operated by Cendant
at a computer center in Garden City, New York. ARACS 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 Cendant in connection with the IPO. The Computer Services
Agreement provides ARACS with access to all functions of the Wizard System.
ARACS 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 ARACS. Cendant will charge
ARACS the full cost of providing computer services each month. The method of
calculating costs chargeable to ARACS will vary depending on the service being
provided. The Computer Services Agreement is coterminous with the Master License
Agreement. However, Cendant 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
In connection with the IPO, the Company entered into a Reservation Services
Agreement with Cendant, pursuant to which Cendant 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 agreed to pay
Cendant (i) a per call charge for each call received in the call centers
operated by Cendant for 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 will terminate upon
the termination of the Master License Agreement, unless earlier terminated in
accordance with the terms thereof.
15
<PAGE>
PURCHASING SERVICES AGREEMENT
In connection with the IPO, Cendant and ARACS entered into a Purchasing
Services Agreement pursuant to which Cendant 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
will be shared by the parties.
CALL TRANSFER AGREEMENT
ARACS and Cendant are parties to a Call Transfer Agreement (the "Call
Agreement") pursuant to which Cendant 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 Cendant a fee of $1.75 per call
transferred to ARACS by Cendant. Further, ARACS has agreed to pay to Cendant a
fee of $8.00 for each car rental that results from a call transferred by
Cendant. ARACS has guaranteed that it will pay Cendant 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. ARACS recorded $2.6 million in fees payable to
Cendant for the fiscal year ended December 31, 1998.
TAX DISAFFILIATION AGREEMENT
In connection with the IPO, Cendant and the Company entered into a tax
disaffiliation agreement (the "Tax Disaffiliation Agreement") that sets 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 IPO 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 17, 1996 (the "Acquisition Date"), the 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 agreed to indemnify Cendant 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 IPO.
LEASE AGREEMENTS
The Company and Cendant currently share three facilities which are located
in (i) Virginia Beach, Virginia, (ii) Tulsa, Oklahoma and (iii) Garden City, New
York. The Virginia Beach property is owned by Cendant. 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 Cendant and are
leased by Cendant.
In connection with the IPO, ARACS and Cendant entered into a lease or a
sublease agreement with respect to each property, as applicable. Cendant leases
space at its Virginia Beach property to ARACS pursuant to a lease agreement. The
lease agreement has a term of 17 years and requires ARACS to pay Cendant its
proportionate share, based on allocated space, of the cost of operating such
facility. In addition, Cendant subleases space at its Tulsa and Garden City
properties to ARACS pursuant to sublease agreements for each respective
property. The sublease agreements have a term of 17 years, which is
16
<PAGE>
coterminous with the terms under Cendant's existing lease agreements, and
require ARACS to reimburse Cendant for its proportionate share, based on
allocated space, of the rent and other charges required under Cendant's existing
leases relating to such properties, together with its proportionate share, based
on allocated space, of the cost of operating such facilities.
RELATIONSHIP WITH BEAR, STEARNS
Bear, Stearns & Co. Inc ("Bear Stearns") was the lead underwriter for the
Company in connection with the IPO and the Company's offering of Common Stock
completed on March 23, 1998. Bear Stearns has also brokered several stock
repurchase transactions for the Company in 1998 in connection with the Company's
stock repurchase program. Mr. Tarnopol, who is Vice Chairman and Senior Managing
Director of Bear, Stearns & Co. Inc., is not standing for re-election to the
Company's Board of Directors.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission and
the New York Stock Exchange. Officers, directors and greater than ten percent
owners are required to furnish the Company with copies of all Forms 3, 4 and 5
they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons, the Company
believes that all of its officers, directors, and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during 1998.
17
<PAGE>
RATIFICATION OF APPOINTMENT OF AUDITORS
[PROPOSAL 2]
Deloitte & Touche LLP has been appointed by the Board of Directors as the
auditors for the Company's financial statements for the fiscal year ending
December 31, 1999. A representative of Deloitte & Touche LLP is expected to be
present at the Meeting and will have the opportunity to make a statement if he
desires to do so and will be available to respond to appropriate questions from
stockholders.
Pursuant to applicable Delaware law, the ratification of the appointment of
auditors of the Company requires the affirmative vote of the holders of a
majority of the shares of Common Stock present at the Meeting, in person or by
proxy, and entitled to vote. Abstentions and broker non-votes will be counted
and will have the same effect as a vote against this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THIS PROPOSAL.
STOCKHOLDER PROPOSALS
Any proposal of a stockholder intended to be presented at the Company's 2000
annual meeting of stockholders must be received by the Company for inclusion in
the proxy statement and form of proxy for that meeting no later than December
28, 1999.
By Order of the Board of Directors
KAREN C. SCLAFANI
SECRETARY
Dated: April 28, 1999
18
<PAGE>
AVIS RENT A CAR, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS, JUNE 2, 1999
The undersigned stockholder of AVIS RENT A CAR, INC., a Delaware
corporation, hereby appoints Kevin M. Sheehan or Karen C. Sclafani or either of
them voting singly in the absence of the other, attorneys and proxies with full
power of substitution and revocation, to vote all shares of Common Stock of Avis
Rent A Car, Inc. which the undersigned is entitled to vote at the Annual Meeting
of Stockholders of said Corporation to be held at the Garden City Hotel, 45
Seventh Street, Garden City, New York, on June 2, 1999, at 10:00 A.M. (local
time), or any adjournment thereof, in accordance with the following
instructions.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. This proxy, when properly
executed, will be voted in the manner directed herein by the undersigned
stockholder. If no direction is made, the proxy will be voted "FOR" all nominees
in Proposal No. 1 and "FOR" Proposal No. 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES AND A VOTE "FOR"
PROPOSAL NO. 2.
1. ELECTION OF DIRECTORS: W. Alun Cathcart, Leonard S. Coleman, Jr.,
Alfonse M. D'Amato, Martin L. Edelman, Deborah L.
Harmon, Stephen P. Holmes, Michael J. Kennedy,
Michael P. Monaco, F. Robert Salerno and
Kevin M. Sheehan.
2. APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS.
