<PAGE> 1
Pursuant to Rule 424(b)(5)
Registration No. 33-39145
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 3, 1994)
{HERTZ LOGO}
THE HERTZ CORPORATION
$150,000,000
6% Senior Notes due February 1, 2001
Interest payable February 1 and August 1
ISSUE PRICE: 99.134%
Interest on the 6% Senior Notes due February 1, 2001 (the "Notes") is payable
semiannually on February 1 and August 1 of each year, beginning August 1, 1994.
The Notes will not be redeemable prior to maturity and will not be subject to
any sinking fund. The Notes will be represented by a Global Note (as defined
herein) registered in the name of The Depository Trust Company (the
"Depository") or its nominee. Interests in the Global Note will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depository and its participants. Except as described herein, Notes in definitive
form will not be issued. See "Description of Notes."
Settlement for the Notes will be made in immediately available funds. So long as
the Notes are represented by the Global Note registered in the name of the
Depository or its nominee, the Notes will trade in the Depository's Same-Day
Funds Settlement System, and secondary market trading activity in the Notes will
therefore settle in immediately available funds. So long as the Notes are
represented by the Global Note, all payments of principal and interest will be
made by The Hertz Corporation (the "Corporation") in immediately available
funds. See "Description of Notes -- Same-Day Settlement and Payment" in this
Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) CORPORATION(1)(3)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note 99.134% .550% 98.584%
- ------------------------------------------------------------------------------------------------
Total $148,701,000 $825,000 $147,876,000
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from February 10, 1994.
(2) The Corporation has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Corporation.
The Notes are offered, subject to prior sale, when, as and if accepted by the
Underwriters, and subject to approval of certain legal matters by Brown & Wood,
counsel for the Underwriters. It is expected that delivery of the Notes will be
made in book-entry form only on or about February 10, 1994 through the
facilities of the Depository, against payment therefor in immediately available
funds.
J.P. MORGAN SECURITIES INC. CS FIRST BOSTON
February 3, 1994
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus Supplement or the Prospectus and, if given or made, such information
or representations must not be relied upon as having been authorized. This
Prospectus Supplement and the Prospectus do not constitute an offer to sell or
the solicitation of an offer to buy any securities other than the securities to
which they relate or any offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus Supplement or the Prospectus
nor any sale made hereunder or thereunder shall, under any circumstances, create
any implication that the information contained herein or therein is correct as
of any time subsequent to the date of such information.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Description of Notes............................................................ S-3
Underwriting.................................................................... S-5
PROSPECTUS
PAGE
-----------
Available Information........................................................... 2
Incorporation of Certain Documents by Reference................................. 2
The Corporation................................................................. 3
Use of Proceeds................................................................. 3
Selected Financial Data of the Corporation...................................... 4
Certain Relationships........................................................... 6
Description of Securities....................................................... 7
Plan of Distribution............................................................ 15
Legal Opinions.................................................................. 16
Experts......................................................................... 16
</TABLE>
S-2
<PAGE> 3
DESCRIPTION OF NOTES
GENERAL
The Notes are to be issued as a series of Senior Debt Securities under the
Indenture, dated as of April 1, 1986, as amended by a Supplemental Indenture
dated as of April 2, 1990 (the "Indenture") between the Corporation and Chemical
Bank, successor by merger to Manufacturers Hanover Trust Company (the
"Trustee"), which is more fully described in the accompanying Prospectus.
The Notes will bear interest at an annual rate of 6%. Interest on the Notes
will accrue from February 10, 1994 and will be payable semiannually on each
February 1 and August 1, commencing August 1, 1994, to the persons in whose
names the Notes are registered on the January 15 and July 15 next preceding such
February 1 and August 1, respectively. Principal and interest payable with
respect to certificated Notes, if any, will be payable at an office to be
maintained by the Corporation in The City of New York, except that, at the
option of the Corporation, interest payable with respect to such certificated
Notes may be paid by check mailed to the person entitled thereto.
The Notes will not be subject to redemption prior to maturity and are not
entitled to any sinking fund. Beneficial interests in the Notes may be acquired,
or subseqently transferred, only in denominations of $1,000 and integral
multiples thereof.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of a secondary market for the Notes.
BOOK-ENTRY
Upon issuance, all Notes will be represented by one or more fully
registered global securities (the "Global Notes"). Each such Global Note will be
deposited with, or on behalf of, The Depository Trust Company, as Depository
(the "Depository"), registered in the name of the Depository or a nominee
thereof. Unless and until it is exchanged in whole or in part for Notes in
definitive form, no Global Note may be transferred except as a whole by the
Depository to a nominee of such Depository or by a nominee of such Depository to
such Depository or another nominee of such Depository or by such Depository or
any such nominee to a successor of such Depository or a nominee of such
successor.
The Depository has advised the Corporation as follows: The Depository is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commerical Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. The Depository was created to hold securities
of its participants ("Participants") and to facilitate the clearance and
settlement of securities transactions among its Participants in such securities
through electronic book-entry changes in accounts of the Participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations, including the
Underwriters. The Depository is owned by a number of Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the Depository's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("Indirect Participants").
Purchases of Notes must be made by or through Participants, which will
receive a credit on the records of the Depository. The ownership interest of
each actual purchaser of each Note (the "Beneficial Owner") is in turn to be
recorded on the Participants' or Indirect Participants' records. Beneficial
Owners will not receive written confirmation from the Depository of their
purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Participant or Indirect Participant through which the
Beneficial Owner entered into the transaction. Ownership of beneficial interests
in Global Notes will be shown on, and the transfer of such ownership interests
will be effected only through, records maintained by the Depository (with
respect to interests of Participants) and on the records of Participants (with
respect to interests of persons held through Participants). The laws of some
states
S-3
<PAGE> 4
may require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the ability
to own, transfer or pledge beneficial interest in Global Notes.
So long as the Depository, or its nominee, is the registered owner of a
Global Note, the Depository or its nominee, as the case may be, will be
considered the sole owner or Holder of the Notes represented by such Global Note
for all purposes under the Indenture. Except as provided below, Beneficial
Owners of a Global Note will not be entitled to have the Notes represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of the Notes in definitive form and will not be
considered the owners or Holders thereof under the Indenture. Accordingly, each
Person owning a beneficial interest in a Global Note must rely on the procedures
of the Depository and, if such Person is not a Participant, on the procedures of
the Participant through which such Person owns its interest, to exercise any
rights of a holder under the Indenture. The Corporation understands that under
existing industry practices, in the event that the Corporation requests any
action of Holders or that an owner of a beneficial interest in such a Global
Note desires to give or take any action which a Holder is entitled to give or
take under the Indenture, the Depository would authorize the Participants
holding the relevant beneficial interests to give or take such action, and such
Participants would authorize Beneficial Owners owning through such Participants
to give or take such action or would otherwise act upon the instruction of
Beneficial Owners. Conveyance of notices and other communications by the
Depository to Participants, by Participants to Indirect Participants, and by
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Payment of principal of, and interest on, Global Notes registered in the
name of the Depository or its nominee will be made to the Depository or its
nominee, as the case may be, as the Holder of the Global Note or Notes
representing such Notes. None of the Corporation, the Trustee or any other agent
of the Corporation or agent of the Trustee will have any responsibility or
liability for any aspect of the payments made on account of or for records
relating to beneficial ownership interests or for supervising or reviewing any
records relating to such beneficial ownership interests. The Corporation expects
that the Depository, upon receipt of any payment of principal or interest in
respect of a Global Note, will credit the accounts of beneficial interest in
such Global Note as shown on the record of the Depository. The Corporation also
expects that payments by Participants to Beneficial Owners will be governed by
standing customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of such participants.
If (x) the Depository is at any time unwilling or unable to continue as
Depository and a successor depository is not appointed by the Corporation within
60 days, or (y) the Corporation executes and delivers to the Trustee a Company
Order to the effect that the Global Notes shall be exchangeable, or (z) an Event
of Default has occurred and is continuing with respect to the Notes, the Global
Note or Notes will be exchangeable for Notes in definitive form of like tenor
and of an equal aggregate principal amount, in denominations of $1,000 and
integral multiples thereof. Such definitive Notes shall be registered in such
name or names as the Depository shall instruct the Trustee. It is expected that
such instructions may be based upon directions received by the Depository from
Participants with respect to ownership of beneficial interest in Global Notes.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Global Notes will be made by the Underwriters in
immediately available funds. All payments of principal and interest on the Notes
will be made by the Corporation in immediately available funds so long as the
Notes are maintained in book-entry form.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the Notes
will trade in the Depository's Same-Day Funds Settlement System and secondary
trading activity in the Notes will therefore be required by the Depository to
settle in immediately available funds. No assurance can be given as to the
effect, if any, of settlement in immediately available funds on trading activity
in the Notes.
S-4
<PAGE> 5
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated as of February 3, 1994 (the "Underwriting Agreement"), the
Corporation has agreed to sell to each of the underwriters named below (the
"Underwriters"), and each of the Underwriters have severally agreed to purchase,
the principal amount of the Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NAME OF UNDERWRITER OF NOTES
------------------- ----------------
<S> <C>
J.P. Morgan Securities Inc................................................. $ 75,000,000
CS First Boston Corporation................................................ 75,000,000
----------------
Total................................................................. $150,000,000
----------------
----------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are obligated to take and pay for all of the Notes if any are
taken.
The Underwriters initially propose to offer the Notes directly to the
public at the public offering price set forth on the cover page of this
Prospectus Supplement and to certain dealers at such price less a concession not
in excess of .350% of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a discount not in excess of .200% of the
principal amount of the Notes to certain other dealers. After the initial public
offering, the public offering price and such concessions may be changed.
The Corporation does not intend to apply for listing of the Notes on a
national securities exchange, but has been advised by the Underwriters that they
intend to make a market in the Notes. The Underwriters are not obligated,
however, to make a market in the Notes and may discontinue market making at any
time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have engaged and may in the future engage in
investment banking and/or commercial banking transactions with the Corporation
and its affiliates.
S-5
<PAGE> 6
PROSPECTUS {LOGO}
THE HERTZ CORPORATION
DEBT SECURITIES
---------------------
The Hertz Corporation (the "Corporation") may offer from time to time in
one or more series up to $300 million (or the equivalent denominated in foreign
currency or European Currency Units ("ECU")) in aggregate principal amount of
its unsecured debt securities (the "Securities"), which may be either senior
(the "Senior Securities") or senior subordinated (the "Senior Subordinated
Securities") in priority of payment and on terms to be determined at the time
the Securities are offered for sale. The Securities may be denominated in and
sold for U.S. dollars, foreign currency or ECU, and principal of and any
interest on the Securities may likewise be payable in U.S. dollars, foreign
currency or ECU. The currency for which the Securities may be purchased and the
currency in which principal of and any interest on the Securities may be payable
will be specifically designated by the Corporation. The specific designation,
priority of payment, aggregate principal amount, authorized denominations,
maturity, rate or method of calculation and time of payment of any interest,
purchase price, any redemption terms, other special terms, and any listing on a
securities exchange of the Securities in respect of which this Prospectus is
being delivered, and the net proceeds to the Corporation from the sale thereof,
shall be set forth in an accompanying Prospectus Supplement (the "Prospectus
Supplement").
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The Securities will be sold directly or through agents designated from time
to time or through underwriters or dealers or a group of underwriters. If agents
of the Corporation or underwriters are involved in the sale of the Securities in
respect of which this Prospectus is being delivered, the names of such agents or
underwriters and any applicable commissions or discounts shall be set forth in
the Prospectus Supplement with respect to such Securities.
February 3, 1994
<PAGE> 7
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports and other information with the Securities and Exchange Commission.
Reports and other information filed by the Corporation can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 5th Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621; and New York Regional Office, Seven World Trade Center, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 5th Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Copies of such materials may also be
inspected and copied at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Corporation's Annual Report on Form 10-K for the year ended December
31, 1992, as amended by Amendment No. 1 on Form 10-K/A (the "Amended Annual
Report on Form 10-K"), the Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1993, June 30, 1993 and September 30, 1993, and the Current Reports on
Form 8-K dated April 9, 1993, July 20, 1993, October 15, 1993 and February 3,
1994 are hereby incorporated by reference in this Prospectus.
All documents filed by the Corporation pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act prior to the termination of the offering of the
Securities shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus and the Prospectus Supplement to the extent that a statement
contained herein, therein or in any other subsequently filed document which also
is incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or the Prospectus Supplement.
The Corporation will provide without charge to each person to whom this
Prospectus is delivered, on written or oral request of such person, a copy
(without exhibits) of any or all documents incorporated by reference into this
Prospectus. Requests for such copies should be directed to The Hertz
Corporation, Attention: Investor Relations, at its mailing address or its
telephone number.
The mailing address of the Corporation's principal executive office is 225
Brae Boulevard, Park Ridge, New Jersey 07656-0713 and its telephone number is
(201) 307-2000.
2
<PAGE> 8
THE CORPORATION
The Corporation and its subsidiaries ("Hertz"), affiliates, independent
licensees and associates are engaged principally in the business of renting
automobiles and renting and leasing trucks, without drivers, to customers in the
United States and in approximately 130 foreign countries. Collectively, they
operate what the Corporation believes is the largest rent a car business in the
world and one of the largest one-way truck rental businesses in the United
States. In addition, through its wholly-owned subsidiary, Hertz Equipment Rental
Corporation ("HERC"), the Corporation operates what it believes to be the
largest rental, lease and sale of construction and materials handling equipment
business in the United States. Other activities of Hertz include the sale of its
used vehicles; the leasing of automobiles, primarily in Europe, Australia and
New Zealand; operating car dealerships in Belgium; and providing claim
management and telecommunication services in the United States.
The Corporation, which was incorporated in Delaware in 1967, is a successor
to corporations which were engaged in the automobile and truck leasing and
rental business since 1924. UAL Corporation ("UAL") (formerly Allegis
Corporation) purchased all of the Corporation's outstanding capital stock from
RCA Corporation ("RCA") on August 30, 1985. Park Ridge Corporation ("Park
Ridge") purchased all of the Corporation's outstanding capital stock from UAL on
December 30, 1987. On July 19, 1993, Park Ridge (which had no material assets
other than the Corporation) was merged with and into the Corporation, with the
prior stockholders of Park Ridge becoming the stockholders of the Corporation.
Currently, 49% of the outstanding common stock of the Corporation is owned
by Ford Motor Company ("Ford"), 20% is owned by the Park Ridge Limited
Partnership, whose General Partner is Frank A. Olson, Chief Executive Officer of
the Corporation, and whose limited partners are principally other key employees
of the Corporation, 26% is owned by AB Volvo ("Volvo") and 5% is owned by
Commerzbank Aktiengesellschaft. In addition, 76% of the outstanding preferred
stock of the Corporation is owned by Ford Motor Credit Company ("FMCC") and 24%
is owned by Volvo. The Notes will not be obligations of, or guaranteed by, any
stockholder of the Corporation.
USE OF PROCEEDS
The net proceeds from the sale of the Securities will be added to the
general funds of the Corporation. It is anticipated that the proceeds will be
used for general corporate purposes and to reduce short-term borrowings. The
Corporation expects to issue additional long-term and short-term debt, subject
to the covenants contained in its debt agreements, and the proportionate amounts
of each can be expected to vary from time to time as a result of business
requirements, market conditions and other factors.
3
<PAGE> 9
SELECTED FINANCIAL DATA OF THE CORPORATION
(IN MILLIONS OF DOLLARS)
On July 19, 1993, Park Ridge was merged with and into the Corporation. The
merger has been recorded as a "pooling of interests." Under this method of
accounting, when the entities before and after a merger are under common control
with the same management, the operations are combined at historical cost.
Consequently, the selected consolidated financial information of the Corporation
set forth in the following table has been restated for all periods prior to the
effective date of the merger, and is identical to the consolidated financial
information of Park Ridge for such periods. This selected consolidated financial
information of the Corporation, as restated, has been extracted from the
unaudited financial statements for the year ended December 31, 1993 and from the
Park Ridge audited financial statements for the years ended December 31, 1992,
1991, 1990 and 1989. The information in the table and the notes thereto should
be read in conjunction with the financial statements and the related notes
thereto contained in the Corporation's Current Reports on Form 8-K dated October
15, 1993 and July 20, 1993, Quarterly Reports on Form 10-Q for the quarter ended
September 30, 1993, for the quarter ended June 30, 1993 and for the quarter
ended March 31, 1993, and Amended Annual Report on Form 10-K for the year ended
December 31, 1992, which are incorporated by reference in this Prospectus. See
"Incorporation of Certain Documents by Reference" above.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
REVENUES...................................................... $2,855 $2,816 $2,626 $2,667 $2,253
------ ------ ------ ------ ------
EXPENSES (h):
Direct operating............................................ 1,647 1,627 1,486 1,470 1,239
Depreciation of revenue earning equipment................... 524(a) 497(b) 493 526 463
Selling, general and administrative......................... 336 353 339 348 290
Interest, net of interest income of $11, $4, $10, $25 and
$20....................................................... 246 307 304 300 253
------ ------ ------ ------ ------
2,753 2,784 2,622 2,644 2,245
------ ------ ------ ------ ------
INCOME BEFORE INCOME TAXES.................................... 102 32 4(b) 23 8
PROVISION (BENEFIT) FOR TAXES ON INCOME (h)................... 49(a) 22(b) (1)(b) (11)(c) (1)
------ ------ ------ ------ ------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES.................................................. 53 10 5 34 9
CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGES IN METHOD OF
ACCOUNTING FOR --
Postretirement Benefits (d)................................. -- (4) -- -- --
Vehicle Warranties (e)...................................... -- -- (4) -- --
Income Taxes (f)............................................ -- -- -- -- (2)
------ ------ ------ ------ ------
NET INCOME.................................................... $ 53 $ 6 $ 1 $ 34 $ 7
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of Earnings to Fixed Charges (g)........................ 1.3 1.1 1.0 1.1 1.0
Balance Sheet Data at End of Period:
Total Assets................................................ $4,688 $4,222 $4,294 $4,334 $4,152
Total Debt.................................................. 2,940 2,550 2,702 2,798 2,716
Shareholders' Equity........................................ 617 580 599 600 542
Ratio of Total Debt to Shareholders' Equity................. 4.8 4.4 4.5 4.7 5.0
</TABLE>
- ---------------
(a) Depreciation of revenue earning equipment for the year 1993 includes net
credits of $28.1 million as compared to net credits of $16.9 million in
1992, primarily attributable to higher proceeds received in 1993 on
disposal of the equipment. The tax provision for the year 1993 includes a
$1.1 million charge relating to the increase in net deferred tax
liabilities as of January 1, 1993 due to changes in the tax laws enacted in
August 1993, and a $2.0 million credit resulting from adjustments made to
tax accruals in connection with tax audit evaluations and the effects of
prior years' tax sharing arrangements between its former parent companies,
UAL and RCA.
Effective January 1, 1993, the Corporation adopted the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which did not have a material effect on the Corporation's
consolidated financial position, results of operations or cash flows.
4
<PAGE> 10
(b) Depreciation of revenue earning equipment for the year 1992 includes net
credits of $16.9 million as compared to net charges of $5.4 million in
1991, primarily attributable to higher proceeds received in 1992 on
disposal of the equipment and the elimination of losses incurred in 1991
due to the increase in 1992 of "non-risk" vehicles acquired which are
returned to the vehicle manufacturers at pre-established prices.
The tax provision includes credits of $9.8 million, $16.7 million, and
$38.8 million for the years 1992, 1991 and 1990, respectively, resulting
from adjustments made to tax accruals in connection with tax audit
evaluations and the effects of prior years' tax sharing arrangements
between the Corporation and its former parent companies, UAL and RCA, and
the reversal of tax accruals no longer required and benefits realized
relating to certain foreign operations. The tax provision for the year 1991
also includes benefits of $5.4 million related to the close down and sale
of certain unprofitable foreign operations.
The decrease in income before income taxes for the year ended December 31,
1991, as compared to the prior year, was due to provisions made in 1991 of
approximately $20 million primarily incurred to close down certain
unprofitable foreign operations and depreciation adjustments made to
residual values of certain vehicles, $15 million of lower interest income
in 1991 primarily relating to refunds of prior years' income taxes, and the
adverse effects of the decrease in travel due to the war in the Persian
Gulf and a slowdown in the economy. The decrease was partly offset by net
credits of $8.9 million relating to the sale and disposition of certain
properties.
(c) The tax provision for the year 1990 includes credit adjustments of $38.8
million, resulting from adjustments made to tax accruals in connection with
tax audit evaluations and the effects of prior years' tax sharing
arrangements between the Corporation and its former parent companies, UAL
and RCA.
(d) Effective January 1, 1992, the Corporation adopted the provisions of
Statement of Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other than Pensions ("FAS No. 106"), which
requires that postretirement health care and other non-pension benefits be
accrued during the years the employee renders the necessary service. Prior
to 1992, the Corporation accrued for such benefits on a pay-as-you-go
basis. As of January 1, 1992, the Corporation recorded a cumulative
decrease in net income of $4.3 million (net of $2.7 million tax benefit) as
a result of implementing FAS No. 106.
(e) Effective January 1, 1991, the Corporation adopted the provisions of FASB
Technical Bulletin No. 90-1, Accounting for Separately Priced Extended
Warranty and Product Maintenance Contracts ("FAS No. 90-1"), which requires
that proceeds received from warranty contracts should be deferred and
recognized in income on a straight line basis over the contract period, and
costs of services performed under the contract should be charged to expense
as incurred. Prior to 1991, when vehicles were sold under an extended
warranty contract, the proceeds received by the Corporation under such
contract, net of estimated costs to be incurred in fulfilling obligations
under those contracts, were recorded in income when the sale occurred. As
of January 1, 1991, the Corporation recorded a cumulative decrease in net
income of $3.5 million (net of $2.2 million tax benefit) as a result of
implementing FAS No. 90-1.
(f) Effective January 1, 1989, the Corporation adopted the provisions of
Statement of Financial Accounting Standards No. 96, Accounting for Income
Taxes ("FAS No. 96"), which requires the use of the liability method in
accounting for income taxes. Deferred tax assets and liabilities are
recorded based on the differences between the financial statement and tax
bases of assets and liabilities and the tax rates in effect when these
differences are expected to reverse. In addition, deferred tax amounts are
recorded with respect to assets and liabilities acquired in business
combinations prior to adoption, when prior years' financial statements are
not restated to reflect adoption of FAS No. 96. The cumulative decrease in
net income as a result of implementing FAS No. 96 was $2 million.
(g) Earnings have been calculated by adding interest expense and the portion of
rentals estimated to represent the interest factor to income before income
taxes. Fixed charges include interest
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<PAGE> 11
charges (including capitalized interest) and the portion of rentals
estimated to represent the interest factor.
(h) The expenses of Park Ridge (parent company only prior to the merger) and
other related items included in the consolidated financial statements of
the Corporation are as follows (in millions):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1992 1991 1990 1989
---- ---- ---- ----
<S> <C> <C> <C> <C>
Direct operating (i)............................................ $12 $13 $20 $ 25
Depreciation of revenue earning equipment (ii).................. (3) (4) (5) (12)
Selling, general & administrative............................... -- -- 1 --
Interest, net of interest income (iii).......................... 53 57 62 67
---- ---- ---- ----
Total...................................................... $62 $66 $78 $ 80
---- ---- ---- ----
---- ---- ---- ----
Income tax benefit (iv)......................................... $17 $19 $22 $ 24
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
(i) Direct operating expenses include $12.5 million in each of the four
years ended December 31, 1992, representing amortization by Park Ridge of
the excess of the purchase price over the consolidated equity of the
Corporation at the time of its acquisition by Park Ridge. This cost was
being amortized by Park Ridge and will continue to be amortized by the
Corporation over 40 years. The unamortized amount of such costs at
December 31, 1993 was $437.3 million.
Direct operating expenses also include, in the years 1989 through 1991,
the net amortization of expenses which arise from valuing certain
pre-acquisition assets and liabilities on a net of tax basis.
(ii) Depreciation of revenue earning equipment includes a reduction which
occurs when revenue earning vehicles and equipment are sold; this
reduction arises because pre-acquisition assets have been recorded on a
net of tax basis.
(iii) Interest expense includes interest incurred on the Park Ridge
borrowings and related swap agreements, the amortization of expenses
relating to such borrowings, and the net amortization which arises from
valuing long-term debt and certain liabilities based on estimated market
rates of interest at December 30, 1987.
(iv) Represents the income tax effect of the expenses referred to above,
where applicable.
CERTAIN RELATIONSHIPS
Hertz is a party to a cooperative advertising agreement with Ford (see
"Item 1 -- Business -- Advertising" in the Corporation's Amended Annual Report
on Form 10-K for the year ended December 31, 1992). In addition, for each of the
five years ended December 31, 1992, Hertz' domestic revenue earning vehicles
consisted of approximately 70% Ford products and 2% Volvo products. In its
foreign operations, Hertz utilizes vehicles manufactured abroad by subsidiaries
of Ford (which for the five years ended December 31, 1992 represented in the
aggregate approximately 40% of Hertz' fleet) and by other manufacturers. Ford
products are acquired from dealers who are independent from Ford. The
percentages of Ford and Volvo products acquired by Hertz are expected to
continue at approximately this level in the future, pursuant to long-term supply
contracts between the Corporation and Ford and the Corporation and Volvo. Hertz
will purchase or lease the vehicles from Ford dealers and Volvo.
In 1992, the Corporation entered into a lease agreement with a third party
lessor providing for the lease of vehicles purchased by the third party lessor
under a repurchase program offered by Ford. Under the lease, which is accounted
for as an operating lease, the Corporation makes payments equal to the monthly
depreciation and all expenses (including interest) of the third party lessor and
is responsible for the remaining net cost on any vehicles that become ineligible
under the repurchase program. At December 31, 1993, the net cost of the vehicles
leased under this agreement was approximately $407 million.
In May 1990, FMCC loaned $150 million in the form of subordinated debt to
Park Ridge (the "FMCC Note") which was assumed by the Corporation upon the
Merger and is subordinated in right
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<PAGE> 12
of payment to all "Superior Indebtedness" (as defined for purposes of the FMCC
Note). The FMCC Note bears interest at a floating rate and matures on May 17,
2000. In addition, upon the first to occur of certain events, the Corporation
will be required to accrue additional interest ("Contingent Interest") on the
FMCC Note as a payable due on maturity of the FMCC Note and ranking pari passu
with the FMCC Note. In the event of a sale by the Corporation of the stock or
assets of either (a) Hertz Equipment Rental Corporation and its subsidiaries and
certain affiliates ("HERC", as defined for purposes of the FMCC Note) or 20% or
more of the net assets of HERC or (b) certain subsidiaries and certain licenses
of Hertz International, Ltd. ("Hertz Europe", as defined for purposes of the
FMCC Note) or 20% or more of the stockholder's equity of Hertz Europe, the
Corporation will be obligated to pay Contingent Interest equal to 50% of the
amount by which the selling price thereof exceeds a base price thereof
determined as of December 31, 1989 and adjusted thereafter to reflect changes in
the net assets of HERC or changes in the stockholder's equity of Hertz Europe,
respectively (computed on a pro rata basis if less than 100% is sold). In the
case of the first such sale (whether relating to HERC or Hertz Europe), however,
if the excess of the selling price over the adjusted base price of the entity
being sold is less than the excess of the value of the entity not being sold
(determined pursuant to an appraisal procedure) over its adjusted base price,
then such sale shall not constitute an "event" for purposes of the preceding
sentence. In the event of (x) the closing of an initial public offering of
common stock issued by the Corporation in accordance with the Stockholders
Agreement among the Corporation and its stockholders or (y) the FMCC Note
becoming due and payable by reason of maturity, notice of prepayment or
otherwise, the Corporation will be obligated to pay Contingent Interest equal to
50% of the greater of (i) the amount by which the value of HERC (determined
pursuant to an appraisal procedure) exceeds the adjusted base price thereof and
(ii) the amount by which the value of Hertz Europe (determined pursuant to an
appraisal procedure) exceeds the adjusted base price thereof, except that if
HERC or Hertz Europe or a portion thereof was sold prior to the event referred
to in (x) or (y) and such sale did not result in the determination of Contingent
Interest, then Contingent Interest shall be determined with respect to the
entity so sold.
DESCRIPTION OF SECURITIES
The Senior Securities are to be issued under an Indenture, dated as of
April 1, 1986, between the Corporation and Chemical Bank, as successor trustee
to Manufacturers Hanover Trust Company, as Trustee (the "Senior Trustee"), as
amended by the First Supplemental Indenture dated as of April 2, 1990, between
the Corporation and the Senior Trustee (such indenture, as amended, the "Senior
Indenture"). The Senior Subordinated Securities are to be issued under an
indenture, dated as of June 1, 1989 (the "Senior Subordinated Indenture")
between the Corporation and The Bank of New York, as Trustee (the "Senior
Subordinated Trustee").
A copy of the Senior Indenture and the Senior Subordinated Indenture are
exhibits to the Registration Statement of which this Prospectus forms a part.
The Senior Indenture and the Senior Subordinated Indenture are sometimes
referred to collectively as the "Indentures" and the Senior Trustee and the
Senior Subordinated Trustee are sometimes referred to collectively as the
"Trustees."
The following summaries of certain provisions of the Indentures do not
purport to be complete and are subject to and are qualified in their entirety by
reference to all the provisions of the Indentures, including the definitions
therein of certain terms. Wherever particular Sections or defined terms of the
Indentures are referred to, it is intended that such Sections or defined terms
shall be incorporated herein by reference. References to Sections are applicable
to both Indentures except for "Subordination" which is applicable to the Senior
Subordinated Indenture only. The following sets forth certain general terms and
provisions of the Senior Securities and the Senior Subordinated Securities
offered hereby. Further terms of the Securities shall be set forth in any
Prospectus Supplement.
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<PAGE> 13
GENERAL
The Securities to be offered by this Prospectus are limited to $300 million
in aggregate principal amount. However, the Indentures do not limit the amount
of Securities which can be issued thereunder and provide that additional
securities may be issued thereunder up to the aggregate principal amount which
may be authorized from time to time by the Corporation.
While the covenants contained in each Indenture may provide limited
protection to debt holders in the event of a highly leveraged transaction
involving the Corporation, neither Indenture prohibits the incurrence of
additional Senior or Senior Subordinated Debt. Subject to certain exceptions
described below under "Limitations on Secured Debt," outstanding Securities and
other qualified indebtedness shall be secured equally and ratably with any
additional Secured Debt incurred by the Corporation. Unless otherwise indicated
in the applicable Prospectus Supplement, the Securities will not have the
benefit of any covenant requiring redemption or repurchase of the Securities by
the Corporation, or adjustment to any terms of the Securities, upon any change
in control or recapitalization of the Corporation.
Reference is made to the applicable Prospectus Supplement for the following
terms of the particular series of Securities being offered thereby: (i) the
designation and any limitation on the aggregate principal amount of the series;
(ii) whether the securities are Senior Securities or Senior Subordinated
Securities; (iii) the currency or currencies for which Securities may be
purchased and currency or currencies in which principal of and any interest may
be payable; (iv) if the currency for which Securities may be purchased or in
which principal of and any interest may be payable is at the purchaser's
election, the manner in which such an election may be made; (v) the percentage
of principal amount at which the series will be issued; (vi) the date or dates
on which the principal of the series will be payable; (vii) the rate or rates
per annum, if any, at which the series will bear interest or the method of
calculation thereof; (viii) the date or dates from which any interest will
accrue and the times at which any interest will be payable; (ix) the place or
places where the principal of and interest, if any, on Securities of the series
shall be payable; (x) the terms, if any, on which Securities of the series may
be redeemed at the option of the Corporation; (xi) the obligation, if any, of
the Corporation to redeem, purchase or repay Securities of the series; (xii) the
minimum denomination in which Securities of the series will be issued; (xiii) if
other than the principal amount, the portion of the principal amount of the
Securities of the series that will be payable upon a declaration of acceleration
of the maturity thereof; and (xiv) any other special terms.
Securities may be issued as discounted Securities (bearing no interest or
interest at a rate which at the time of issuance is below market rates) to be
sold at a substantial discount below their stated principal amount. Federal
income tax consequences and other special considerations applicable to any such
discounted Securities will be described in the applicable Prospectus Supplement
relating thereto.
The Securities will be issued only in registered form without coupons and
will be unsecured obligations of the Corporation. The Senior Securities will
rank on a parity with other senior securities of the Corporation. The Senior
Subordinated Securities will rank on a parity with other senior subordinated
securities and be subordinated in right of payment to the prior payment in full
of Senior Indebtedness of the Corporation as described below under
"Subordination." Unless otherwise provided in the applicable Prospectus
Supplement relating to a particular series of Securities being offered thereby,
principal, premium, if any, and interest, if any, will be payable at an office
or agency to be maintained by the Corporation in such place or places described
in the applicable Prospectus Supplement, which place is currently contemplated
to be in New York City, except that, at the option of the Corporation, interest
may be paid by check mailed to the person entitled thereto. The Securities may
be presented to the corporate trust office of the Trustee for registration of
transfer or exchange. Securities of a particular series may be exchanged for a
like aggregate amount of Securities of such series of other authorized
denominations without service charge, except for any tax or other governmental
charge that may be imposed (Sections 301, 302, 305 and 1002).
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<PAGE> 14
SUBORDINATION
Payment of the principal of, premium, if any, and interest on the Senior
Subordinated Securities is expressly subordinated in right of payment, as set
forth in the Senior Subordinated Indenture, to payment when due of all Senior
Indebtedness of the Corporation (Section 1401). "Senior Indebtedness" is defined
as (a) certain outstanding indebtedness of the Corporation listed on Schedule A
attached to the Senior Subordinated Indenture, (b) any promissory notes (other
than any referred to in the foregoing clause (a)) issued by the Corporation
pursuant to any agreement between the Corporation and any bank or banks and any
commercial paper issued by the Corporation, (c) all indebtedness incurred by the
Corporation after the date of the Senior Subordinated Indenture for money
borrowed which is, in the discretion of the Corporation, specifically designated
by the Corporation as superior to subordinated debt (senior debt) of the
Corporation in the instruments evidencing said indebtedness at the time of the
issuance thereof, (d) all indebtedness previously incurred by the Corporation
outstanding at the date of the Senior Subordinated Indenture for money borrowed
which is, in the discretion of the Corporation, specifically designated by the
Corporation as Senior Indebtedness for the purposes of the Senior Subordinated
Indenture at the date of the Senior Subordinated Indenture (all of such
indebtedness is set forth on Schedule B attached to the Senior Subordinated
Indenture), (e) indebtedness of the Corporation for money borrowed from or
guaranteed to persons, firms or corporations which engage in lending money,
including, without limitation, banks, trust companies, insurance companies and
other financing institutions and charitable trusts, pension trusts and other
investing organizations, evidenced by notes or similar obligations, unless such
indebtedness shall, in the instrument evidencing the same, be specifically
designated as not being superior to the Senior Subordinated Securities and (f)
any amendments, modifications, supplements, deferrals, renewals or extensions of
any such Senior Indebtedness. Senior Indebtedness will not include, and the
Senior Subordinated Securities will rank pari passu in right of payment to, the
Company's 8 3/4% Senior Subordinated Promissory Notes due October 1, 1997,
9 1/8% Senior Subordinated Notes due August 1, 1996, 10 1/8% Senior Subordinated
Notes due March 1, 1997 and 9 1/2% Senior Subordinated Notes due May 15, 1998
(Section 101).
No payment on account of principal, premium, if any, sinking fund, or
interest on the Senior Subordinated Securities may be made, nor may any property
or assets of the Corporation be applied to the purchase or other acquisition or
retirement of the Senior Subordinated Securities, unless full payment of amounts
then due for principal, premium, if any, sinking fund, and interest on Senior
Indebtedness has been made or duly provided for in money or money's worth. No
payment by the Corporation on account of principal, premium, if any, sinking
fund, or interest on the Senior Subordinated Securities may be made, nor may any
property or assets of the Corporation be applied to the purchase or other
acquisition or retirement of the Senior Subordinated Securities, if, at the time
of such payment or application or immediately after giving effect thereto, (i)
there exists under the Senior Indebtedness referred to in clause (a) of the
immediately preceding paragraph or any agreement pursuant to which any such
Senior Indebtedness is issued any default or any condition, event or act, which
with notice or lapse of time, or both, would constitute a default or (ii) there
exists under any other Senior Indebtedness or any agreement pursuant to which
such other Senior Indebtedness is issued any event of default permitting the
holders of such other Senior Indebtedness (or a trustee on behalf of such
holders) to accelerate the maturity thereof; provided, however, that in the case
of such an event of default under this clause (ii) (other than in payment of
such other Senior Indebtedness when due) the foregoing provisions of this clause
(ii) will not prevent any such payment or application for a period longer than
90 days after the date on which the holders of such Senior Indebtedness (or such
trustee) shall have first obtained written notice of such event of default from
the Corporation or the holder of any Senior Subordinated Securities, if the
maturity of such other Senior Indebtedness is not so accelerated within such 90
day period (Section 1402).
Subject to the foregoing, if there shall have occurred any Event of Default
on the Senior Subordinated Securities as described below under "Events of
Default and Notice Thereof ", other than with respect to certain events of
bankruptcy, insolvency or reorganization, then unless and until either
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<PAGE> 15
such Event of Default shall have been cured or waived or shall have ceased to
exist or the principal of, premium, if any, and interest on all Senior
Indebtedness shall have been paid in full in money or money's worth, no payment
shall be made by the Corporation on account of the principal of, premium, if
any, or interest on the Senior Subordinated Securities or on account of the
purchase or other acquisition of Senior Subordinated Securities, except (a)
payments at the expressed maturity of the Senior Subordinated Securities
(subject to the next paragraph), (b) current interest payments as provided in
the Senior Subordinated Securities, (c) payments for the purpose of curing any
such Event of Default, and (d) payments pursuant to the required sinking fund
for the Senior Subordinated Securities.
Upon any payment or distribution of assets of the Corporation to creditors
upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Corporation or similar proceeding relating to the
Corporation or its property, whether voluntary or involuntary and whether or not
the Corporation is a party thereto, or in bankruptcy, insolvency, receivership
or other proceedings, all principal, premium, if any, and interest due upon all
Senior Indebtedness must be paid in full before the holders of the Senior
Subordinated Securities are entitled to receive or retain any assets so paid or
distributed. Subject to the payment in full of all Senior Indebtedness, the
holders of the Senior Subordinated Securities are to be subrogated to the rights
of holders of Senior Indebtedness to receive payments or distributions of assets
of the Company or other payments applicable to Senior Indebtedness to the extent
of the application to Senior Indebtedness of moneys or other assets which would
have been received by the holders of the Senior Subordinated Securities but for
the subordination provisions contained in the Senior Subordinated Indenture
until the Senior Subordinated Securities are paid in full (Sections 1403, 1404
and 1405).
At December 31, 1993, the outstanding principal amount of Senior
Indebtedness aggregated approximately $1,571 million and Senior Subordinated
debt aggregated approximately $250.7 million. The Corporation expects to issue
from time to time additional indebtedness constituting Senior Indebtedness (see
"Use of Proceeds"). None of the Indentures prohibits or limits the incurrence of
additional Senior Indebtedness. At December 31, 1993, the Corporation was
permitted to issue up to an additional $2,065 million of senior debt under the
most restrictive covenants contained in its existing financing agreements.
By reason of the subordination provisions contained in the Senior
Subordinated Indenture, in the event of insolvency, creditors of the Corporation
who are holders of Senior Indebtedness, as well as certain general creditors of
the Corporation, may recover more, ratably, than the holders of the Senior
Subordinated Securities.
CERTAIN COVENANTS
Dividend Restrictions. Each Indenture provides that the Corporation may not
(a) declare or pay any dividend or make any other distribution (other than
dividends or distributions made in capital stock of the Corporation) on or in
respect of any capital stock of the Corporation, (b) purchase, redeem or
otherwise acquire for value any shares of the capital stock of the Corporation,
except shares acquired upon the conversion thereof into other shares of capital
stock of the Corporation, or (c) permit any Restricted Subsidiary to purchase,
redeem or otherwise acquire for value any shares of capital stock of the
Corporation; if immediately thereafter the aggregate amount of all such
dividends, distributions, purchases, redemptions, acquisitions or payments
(other than dividends or distributions payable in shares of capital stock of the
Corporation) during the period from and after December 31, 1985, plus the amount
of total investments in Unrestricted Subsidiaries made during such period, would
exceed the sum of (1) $185,000,000 plus (or minus in the case of a deficit), (2)
the consolidated net income (or net loss) of the Corporation and its Restricted
Subsidiaries earned subsequent to December 31, 1985, plus (3) the aggregate net
proceeds received by the Corporation in respect of the issue, sale or exchange
after December 31, 1985, of (i) any shares of capital stock of the Corporation
and any rights or warrants entitling the holders to purchase or subscribe for
shares of such capital stock, or (ii) any indebtedness of the Corporation which
is converted into shares of its capital stock after December 31, 1985 (Section
1007).
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<PAGE> 16
The foregoing will not prohibit the Corporation from paying any management,
administrative, general overhead or similar charge to any controlling
stockholder or other Affiliate of the Corporation, or paying to any member of
the same consolidated group for tax purposes any amounts in lieu of taxes
(Section 1007).
Merger or Sale of Assets. The Indentures provide that the Corporation may
not consolidate with, merge into, or sell, convey or transfer its properties and
assets substantially as an entirety to, another Person, if, as a result thereof,
any property owned by the Corporation or a Restricted Subsidiary immediately
prior thereto would become subject to any Security Interest, unless (i) the
Senior Subordinated Securities (equally and ratably with any other indebtedness
of the Corporation then entitled thereto) shall be secured equally and ratably
with (or prior to) the debt secured by such Security Interest in the case of the
Senior Subordinated Indenture or, the Senior Securities (equally and ratably
with any other indebtedness of the Corporation then entitled thereto) shall be
secured by a prior lien on such property in the case of the Senior Indenture or
(ii) such Security Interest would otherwise be permitted under the Indentures
(Section 803) (see "Limitations on Secured Debt").
Limitations on Certain Loans and Advances. Each Indenture provides that the
Corporation may not, and may not permit any Restricted Subsidiary to, make any
loan or advance to any Person owning more than 50% of the outstanding voting
stock of the Corporation or to any Affiliate of such Person (other than the
Corporation or a Restricted Subsidiary) if the aggregate outstanding amount of
Senior Debt of the Corporation and its Restricted Subsidiaries exceeds 400% of
Consolidated Net Worth and Subordinated Debt, as defined in the applicable
Indenture (Section 1005). The term Senior Debt as used herein shall mean Senior
Indebtedness when referring to the Senior Subordinated Indenture.
Limitations on Secured Debt. Each Indenture provides that the Corporation
will not at any time create, incur, assume or guarantee, and will not cause,
suffer or permit a Restricted Subsidiary to create, incur, assume or guarantee,
any Secured Debt without making effective provision whereby the Securities then
outstanding and any other indebtedness of or guaranteed by the Corporation or
such Restricted Subsidiary then entitled thereto, shall be secured by the
Security Interest securing such Secured Debt equally and ratably with any and
all other obligations and indebtedness thereby secured (subject, however, to
applicable priorities of payment) so long as such Secured Debt remains
outstanding; provided, however, that the foregoing prohibition shall not be
applicable to (a) any Security Interest in favor of the Corporation or a
Restricted Subsidiary; (b) Security Interests existing on April 1, 1986 in the
case of Senior Securities, and Security Interests existing on June 1, 1989 in
the case of Senior Subordinated Securities; (c) Security Interests existing on
property at the time it is acquired by the Corporation or a Restricted
Subsidiary, provided such Security Interest is limited to all or part of the
property so acquired; (d)(i) any Security Interest existing on the property of
or on the outstanding shares or indebtedness of a corporation at the time such
corporation shall become a Restricted Subsidiary, or (ii) subject to the
provisions referred to above under "Merger or Sale of Assets," any Security
Interest on property of a corporation existing at the time such corporation is
merged into or consolidated with the Corporation or a Restricted Subsidiary or
at the time of a sale, lease or other disposition of the properties of a
corporation as an entirety or substantially as an entirety to the Corporation or
a Restricted Subsidiary, provided, in each such case, that such Security
Interest does not extend to any property owned prior to such transaction by the
Corporation or any Restricted Subsidiary which was a Restricted Subsidiary prior
to such transaction; (e) mechanics', materialmen's, carriers' or other like
liens, arising in the ordinary course of business; (f) certain tax liens or
assessments, and certain judgment liens; (g) certain Security Interests in favor
of the United States of America or any state or any agency thereof; (h) Security
Interests on Business Equipment; (i) in the case of property (other than Rental
Equipment) acquired after April 1, 1986, as it pertains to Senior Securities,
and after June 1, 1989, as it pertains to Senior Subordinated Securities, by the
Corporation or any Restricted Subsidiary, any Security Interest which secures an
amount not in excess of the purchase price or fair value of such property at the
time of acquisition; whichever, in the opinion of the Corporation, shall be
less, provided that such Security Interest is limited to the property so
acquired; (j) Security Interests on properties financed through tax-exempt
municipal obligations,
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<PAGE> 17
provided that such Security Interest is limited to the property so financed; and
(k) any refunding, renewal, extension or replacement (or successive refundings,
renewals, extensions, or replacements), in whole or in part, of any Security
Interest referred to in the foregoing clauses (a) through (j), provided that the
principal amount of indebtedness secured in such refunding, renewal, extension
or replacement does not exceed that secured at the time by such Security
Interest and that such Security Interest is limited to all or part of the same
property subject to the Security Interest being refunded, renewed, extended or
replaced.
Notwithstanding the foregoing provisions, the Corporation and any one or
more Restricted Subsidiaries may issue, assume, or guarantee Secured Debt which
would otherwise be subject to the foregoing restrictions in an aggregate amount
which, together with all other Secured Debt of the Corporation and its
Restricted Subsidiaries which would otherwise be subject to the foregoing
restrictions (not including Secured Debt permitted to be secured under
subparagraphs (a) through (k) above), and the aggregate value of the Sale and
Leaseback Transactions in existence at such time (not including Sale and
Leaseback Transactions the proceeds of which have been or will be applied in
accordance with subsection (b) under "Limitations on Sales and Leasebacks"
below), do not at the time of incurrence exceed 10% of Consolidated Net Worth
and Subordinated Debt (Section 1004).
Limitations on Sales and Leasebacks. Each Indenture provides that the
Corporation may not, and may not permit any Restricted Subsidiary to, engage in
any Sale and Leaseback Transaction unless (a) the Corporation or such Restricted
Subsidiary would be entitled to incur Secured Debt in an amount equal to the
amount realized or to be realized upon the sale or transfer involved in such
Sale and Leaseback Transaction, secured by a Security Interest on the property
to be leased without equally and ratably securing the Securities as provided
under "Limitations on Secured Debt," or (b) the Corporation or a Restricted
Subsidiary shall apply, within 120 days after such sale or transfer, an amount
equal to the fair value of the property so leased (as determined by the Board of
Directors of the Corporation) to the repayment of Senior Debt of the Corporation
or of any Restricted Subsidiary (other than Senior Debt owed to the Corporation
or any Restricted Subsidiary) then prepayable, on a pro rata basis, according to
the respective principal amounts of Senior Debt then held by the various holders
thereof (Section 1006). The term Senior Debt as used herein shall mean Senior
Indebtedness when referring to the Senior Subordinated Indenture.
CERTAIN DEFINITIONS
"Business Equipment" shall mean all motor vehicles, tractors and trailers,
construction equipment, factory, commercial and office equipment and other
revenue-earning personalty owned, financed or otherwise held by or for the
Corporation or any of its Restricted Subsidiaries for rental, lease, sale or
disposition in the ordinary course of the business of the Corporation and its
Restricted Subsidiaries, other than Rental Equipment. "Rental Equipment" shall
mean all automobiles owned, financed or otherwise held by the Corporation or any
of its Restricted Subsidiaries which, in the ordinary course of business, are
offered for rental within the United States of America for periods of less than
30 days. "Consolidated Net Worth and Subordinated Debt" shall mean the aggregate
of (i) the capital and surplus accounts of the Corporation and its Restricted
Subsidiaries, as shown in the most recent consolidated balance sheet of the
Corporation and its Restricted Subsidiaries, prepared in accordance with
generally accepted accounting principles, plus (ii) the aggregate outstanding
principal amount of Subordinated Debt of the Corporation and its Restricted
Subsidiaries, as reflected on the same consolidated balance sheet. "Principal
Property" shall mean any building, structure or other facility (including land
or fixtures) owned by the Corporation or any Restricted Subsidiary having a
gross book value in excess of 2% of Consolidated Net Worth and Subordinated
Debt, other than any such building, structure or other facility which, in the
opinion of the Board of Directors of the Corporation, is not of material
importance to the total business conducted by the Corporation and its
subsidiaries as an entirety. "Restricted Subsidiary" shall mean certain
identified Subsidiaries of the Corporation, and any other Subsidiaries
designated after the date of the Indentures as a Restricted Subsidiary by the
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<PAGE> 18
Board of Directors of the Corporation, subject to redesignation by the Board of
Directors and to certain other restrictions. "Sale and Leaseback Transaction"
shall mean any sale or transfer by the Corporation or one or more Restricted
Subsidiaries (except a sale or transfer to the Corporation or one or more
Restricted Subsidiaries) of any Principal Property, made more than 180 days
after the later of the acquisition of such Principal Property or the completion
of construction or full commencement of operations thereof, if such sale or
transfer is made with the intention of, or as part of an arrangement involving,
the lease of such Principal Property to the Corporation or a Restricted
Subsidiary (with certain exceptions). "Secured Debt" shall mean all indebtedness
for borrowed money of the Corporation or a Restricted Subsidiary which is
secured by a Security Interest upon any assets of the Corporation or any
Restricted Subsidiary, including any capital stock or indebtedness of any
Restricted Subsidiary. "Security Interest" shall mean any mortgage, pledge,
lien, encumbrance, conditional sales contract, title retention agreement or
other similar arrangement which secures payment or performance of an obligation
(Section 101).
MODIFICATION OF THE INDENTURES
Subject to certain exceptions, each Indenture contains provisions
permitting the Corporation and the Trustee, with the consent of the Holders of
not less than a majority in principal amount of all securities at the time
outstanding, or of the Holders of the then outstanding Securities of each series
to be affected thereby, to modify the Indentures or any supplemental Indentures
or the rights of the Holders of all Securities, or of the Securities of a
particular series, as the case may be; provided that no such modification shall
(i) change the fixed maturity of the principal of, or any installment of
principal or interest on, any Security, or reduce the principal amount thereof
or the rate of interest, if any, thereon, or change the currency in which any
Security or the interest, if any, thereon is payable, without the consent of the
Holder of each Security affected, or (ii) reduce the aforesaid percentage of
Securities, the consent of the Holders of which is required for any such
modification, without the consent of the Holder of each Security affected
(Section 902).
EVENTS OF DEFAULT AND NOTICE THEREOF
The following events are defined in each Indenture as Events of Default
with respect to the Securities of a particular series: failure for 30 days to
pay interest on any Securities of such series when due; failure to pay principal
of any Securities of such series when due at maturity, upon redemption, or by
declaration; the acceleration of any other indebtedness in excess of $10 million
of the Corporation, including another series of Securities, under its terms, if
such acceleration is not rescinded or annulled within 10 days after written
notice thereof to the Corporation; failure to perform any other covenant in the
Securities of such series or in the applicable Indenture within 60 days after
written notice thereof to the Corporation specifying the failure and requiring
its remedy; certain events of bankruptcy, insolvency or reorganization and any
other Event of Default provided with respect to the Securities of such series
(Section 501). The Corporation is required to file with each Trustee annually an
officer's certificate as to the absence of certain defaults under the terms of
the applicable Indenture (Section 1008).
Upon any Event of Default with respect to Securities of a particular
series, the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Securities of such series then outstanding may declare the
principal of all the Securities of such series (or, in the case of any series of
discounted Securities, such lesser principal amount as may be provided for in
such series of discounted Securities) to be due and payable (Section 502).
Each Indenture provides that the Holders of not less than a majority in
principal amount of the Securities of any series may on behalf of the Holders of
all of the Securities of such series waive any past default under such Indenture
with respect to such series and its consequences, except a default (i) in the
payment of the principal of or interest, if any, on any of the Securities of
such series or (ii) in respect of a covenant or provision of such Indenture
which, under the terms of such Indenture, cannot
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be modified or amended without the consent of the Holders of all of the
Securities of such series affected thereby (Section 513).
Each Indenture provides that the Trustee may withhold notice to the Holders
of the Securities of any default (except a default in the payment of principal
or interest) if it determines that the withholding of such notice is in the
interest of the Holders of the Securities (Section 602).
Subject to provisions of each Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under such
Indenture at the request of any of the Holders of the Securities issued
thereunder, unless they shall have offered to the Trustee reasonable indemnity
(Sections 601(a) and 603(e)). Subject to such provisions for the indemnification
of the Trustee and to certain other limitations, the Holders of a majority in
principal amount of the Securities of a particular series at the time
outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Securities of
such series (Section 512).
DEFEASANCE OF THE SENIOR INDENTURE AND SENIOR SECURITIES
If the Corporation, at its option, deposits or causes to be deposited with
the Senior Trustee as trust funds, for the purpose hereinafter stated, an
amount, in money or the equivalent in securities of the government which issued
the currency in which the Senior Securities of any then outstanding series are
denominated or securities issued by government agencies backed by the full faith
and credit of such government, sufficient to pay and discharge the principal and
premium, if any, at maturity of and interest, if any, to the date or dates of
maturity of the Senior Securities of such series, and if the Corporation has
paid or caused to be paid all other sums payable by it under the Senior
Indenture with respect to such series, then the Senior Indenture will cease to
be of further effect with respect to such series (except as to the Corporation's
obligations to compensate, reimburse and indemnify the Senior Trustee pursuant
to the Senior Indenture with respect to such series), and the Corporation will
be deemed to have satisfied and discharged the Senior Indenture with respect to
such series (Section 401). In the event of any such defeasance, holders of such
Senior Securities would be able to look only to such trust funds for payment of
principal and premium, if any, and interest, if any, on their Senior Securities.
If securities have been deposited with the Senior Trustee as trust funds,
the Corporation, in order to exercise its option, is required to deliver to the
Senior Trustee an opinion of counsel to the effect that the deposit and related
defeasance (a) will not cause the holders of the Senior Securities of such
series to recognize income, gain or loss for federal income tax purposes and (b)
will not result in the delisting of the Senior Securities of such series from
any nationally-recognized exchange on which they are listed, if any.
DEFEASANCE OF THE SENIOR SUBORDINATED INDENTURE AND SENIOR SUBORDINATED
SECURITIES
Unless the Prospectus Supplement relating to the applicable Senior
Subordinated Securities provides otherwise, the Corporation at its option (a)
will be discharged from any and all obligations in respect of such Senior
Subordinated Securities (except for certain obligations to register the transfer
or exchange of Senior Subordinated Securities, replace stolen, lost or mutilated
Senior Subordinated Securities, maintain paying agencies and hold moneys for
payment in trust) or (b) need not comply with certain restrictive covenants of
the Senior Subordinated Indenture (including those described above under
"Certain Covenants"), if there is deposited with the Senior Subordinated
Trustee, in the case of Senior Subordinated Securities denominated in U.S.
dollars, U.S. Government Obligations or, in the case of Senior Subordinated
Securities denominated in a foreign currency, Foreign Government Securities,
which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money or a combination of money, and
U.S. Government Obligations or Foreign Government Securities, as the case may
be, in an amount sufficient to pay in the currency,
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currencies or currency unit or units in which such Senior Subordinated
Securities are payable all the principal of, and interest on, such Senior
Subordinated Securities on the dates such payments are due in accordance with
the terms of such Senior Subordinated Securities. Among the conditions to the
Corporation exercising any such option, the Corporation is required to deliver
to the Senior Subordinated Trustee an opinion of counsel to the effect that the
deposit and related defeasance would not cause the holders of such Senior
Subordinated Securities to recognize income, gain or loss for United States
Federal income tax purposes and that the holders will be subject to United
States Federal income tax in the same amounts, in the same manner and at the
same times as would have been the case if such deposit and related defeasance
had not occurred (Sections 401 and 403).
THE TRUSTEES
Chemical Bank, as successor by merger to Manufacturers Hanover Trust
Company, in addition to acting as Senior Trustee under the Senior Indenture, is
trustee under an indenture dated as of May 1, 1983 pursuant to which
approximately $2.7 million aggregate principal amount of the Corporation's
Senior Debt Securities remained outstanding at December 31, 1993. The Bank of
New York is the Senior Subordinated Trustee under the Senior Subordinated
Indenture. Each Trustee may, from time to time, act as depository for funds of,
provide lines of credit to and perform other services for, the Corporation and
its subsidiaries in the normal course of business.
PLAN OF DISTRIBUTION
The Corporation may sell the Securities in any of four ways: (i) through
underwriters or dealers, (ii) directly to a limited number of institutional
purchasers or to a single institutional purchaser, (iii) through agents or (iv)
through a combination of any such methods of sale. The Prospectus Supplement
with respect to the Securities of a particular series sets forth the terms of
the offering of such Securities, including the name or names of any underwriters
or agents, the purchase price of such Securities and the proceeds to the
Corporation from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price, any
discounts or concessions allowed or reallowed or paid to dealers and any
securities exchanges on which such Securities may be listed.
If underwriters are used in the sale of Securities of a particular series,
such Securities will be acquired by the underwriters for their own account and
may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The Securities of a particular series may be
offered to the public through underwriting syndicates represented by managing
underwriters.
If so indicated in any Prospectus Supplement, the Corporation will
authorize the underwriters and agents to solicit offers by certain institutions
to purchase the Securities described in such Prospectus Supplement from the
Corporation at the public offering price set forth therein pursuant to Delayed
Delivery Contracts ("Contracts"), which will provide for payment and delivery on
the date stated in such Prospectus Supplement. Each of the Contracts will be for
an amount not less than, and unless the Corporation otherwise agrees the
aggregate principal amount of Securities sold pursuant to Contracts shall be not
more than, the respective amounts stated in such Prospectus Supplement.
The underwriters, dealers and agents may be entitled, under agreements
which may be entered into with the Corporation, to indemnification by the
Corporation against certain civil liabilities, including liabilities under the
Securities Act of 1933, or to contribution to payments that the underwriters,
dealers and agents may be required to make in respect thereof.
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LEGAL OPINIONS
Certain legal matters in connection with the Securities will be passed upon
for the Corporation by Paul M. Tschirhart, Esq., 225 Brae Boulevard, Park Ridge,
New Jersey, Senior Vice President and General Counsel of the Corporation, and
for any underwriters or agents by Brown & Wood, One World Trade Center, New
York, New York. Mr. Tschirhart is a limited partner of the Partnership, which
owns 20% of the Corporation's outstanding common stock.
EXPERTS
The (i) consolidated financial statements and suppporting schedules of the
Corporation included in the Corporation's 1992 Amended Annual Report on Form
10-K, incorporated by reference in this Prospectus and the Registration
Statement of which this Prospectus forms a part, and (ii) the consolidated
financial statements of Park Ridge included in the Corporation's Current Report
on Form 8-K dated October 15, 1993, incorporated by reference in this
Prospectus, have been audited by Arthur Andersen & Co., independent public
accountants, at December 31, 1992 and 1991 and for each of the three years in
the period ended December 31, 1992, as indicated in their reports incorporated
by reference herein. Reference is made to said reports, which include
explanatory paragraphs with respect to the changes in the methods of accounting
for postretirement benefits other than pensions in 1992 and warranty contracts
in 1991, as discussed in Note 1 to each of such consolidated financial
statements. The consolidated financial statements and supporting schedules
referred to above have been incorporated by reference herein in reliance upon
the authority of said firm as experts in giving said reports.
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