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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DECEMBER 24, 1996 (OCTOBER 17, 1996)
(Date of Report (date of earliest event reported))
HFS INCORPORATED
(Exact name of Registrant as specified in its charter)
DELAWARE 1-11402 22-3059335
(State or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification
incorporation or Number)
organization)
6 SYLVAN WAY
PARSIPPANY, NEW JERSEY 07054
(Address of principal (Zip Code)
executive office)
(201) 428-9700
(Registrant's telephone number, including area code)
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Item 5. Other Events
A. ACQUISITIONS
In October and November, 1996, HFS Incorporated
("HFS" or the Company") completed two significant
acquisitions, which are described below.
i) THE AVIS ACQUISITION
GENERAL
On October 17, 1996, the Company completed the
acquisition (the "Avis Acquisition") of all of the
outstanding capital stock of Avis, Inc. ("Avis"),
including payments under certain employee stock plans of
Avis and the redemption of certain series of preferred
stock of Avis, for approximately $800 million.
Avis, together with its subsidiaries, licensees and
affiliates, operates the Avis System, which the Company
believes to be the second largest car rental system in
the world. The Avis System consists of over
approximately 4,139 locations, including locations at
most major airports as well as downtown locations in
major cities in the United States and in approximately
149 countries and territories. Approximately 84% of the
Avis System rental revenues in the United States are
received from locations operated by Avis directly or
under agency arrangements, with the remainder being
received from locations operated by independent
licensees. Avis's international business is conducted by
a network of several wholly owned subsidiaries and joint
ventures along with a number of licensees and
sublicensees. The Avis System in Europe, Africa and the
Middle East is operated by Avis Europe, which is
approximately 9% owned by Avis. The Avis System in
Canada, Latin America, the Caribbean and Asia Pacific,
comprising some 65 countries and territories, is operated
by Avis subsidiaries, joint ventures and licensees.
During the peak summer season, the Avis System fleet
worldwide consists of more than approximately 386,548
vehicles representing the following allocations of
vehicles throughout the system: (i) 189,616 in the Avis
U.S. Corporate fleet; (ii) 44,000 vehicles in the Avis
International fleet; (iii) 50,932 in the Avis U.S.
Licensee fleet; and (iv) 102,000 in the Avis Europe
fleet.
In the United States, Avis's principal rental base
is business travelers who use the Avis System under
contractual arrangements between Avis and their
employers. Because business travel normally is heaviest
between Monday and Thursday of each week, Avis's
concentration on serving business travelers has led to
excess fleet capacity from Friday through Sunday of most
weeks.
Following the acquisition of Avis, the Company
currently intends to dispose of a majority interest in
the corporation which owns all company owned Avis car
rental locations (the "Operating Company") through an
initial public offering of the common stock of the
Operating Company during 1997. It is expected that the
Operating Company would operate under a license from Avis
pursuant to which the Operating Company would pay Avis a
royalty based upon the revenue of the Operating Company.
The Company expects that the acquisition of Avis will
also provide further opportunities to expand the
Company's preferred vendor program.
CAR RENTAL INDUSTRY OVERVIEW
The car rental industry provides car and truck
rentals to business and individual customers worldwide.
The industry has been composed of two principal segments:
general use (mainly at airport and downtown locations)
and local/replacement (mainly at downtown and suburban
locations). The car rental industry rents primarily from
on-airport, near-airport, downtown and suburban locations
to business and leisure travelers and to individuals who
have lost the use of their vehicles through accident,
theft or breakdown. In addition to revenue from vehicle
rentals, the industry derives significant revenue from
the sale of rental related products such as insurance,
refueling services and collision damage waivers.
The domestic car rental industry includes eight
major companies, Alamo Rent-A-Car, Inc., Avis, Budget
Rent a Car Corporation ("Budget"), Dollar Rent a Car
Systems, Inc. ("Dollar"), Enterprise Rent a Car, The
Hertz Corporation ("Hertz"), National Car Rental System,
Inc., and Thrifty Rent-A-Car Systems, Inc. ("Thrifty"),
and a large number of smaller and regional or local
firms, serving on-airport, near-airport and other
locations. Most of Avis's major competitors operate
through a combination of wholly owned and franchised
operations. Other smaller car rental companies operate
primarily through franchises.
The domestic car rental industry has experienced
significant growth over the last decade. The total
annual U.S. revenue for the car rental industry has been
estimated by industry sources at $13.5 billion in 1995,
an 11.8% compound annual growth rate from $4.4 billion in
1985, and the total number of rental vehicles in service
in the United States has been estimated by industry
sources at 1.5 million in 1995, a 7% compound annual
growth rate from 760,000 in 1985. The Company believes
that the factors driving this industry growth include
increases in airline passenger traffic due to lower
airfares, overcapacity in the hotel industry, the trend
toward shorter, more frequent vacations resulting from
the growth of the number of households with two wage
earners, the demographic trend toward older, more
affluent Americans who travel more frequently, and
increased business travel. The Company believes that
future growth of the car rental industry will be
determined by general economic conditions, developments
in the travel industry, and a variety of other factors,
including the car rental industry's relationship with
major vehicle manufacturers. Accordingly, the Company
cannot predict whether such growth will continue and, if
so, whether it will continue at rates comparable to those
of the recent past.
Car renters generally are (i) business travelers
renting under negotiated contractual arrangements between
specified rental companies and the travelers' employers,
(ii) business travelers who do not rent under negotiated
contractual arrangements (but who may receive discounts
through travel, professional or other organizations), and
(iii) leisure travelers, including renters who have lost
the use of their own vehicles through accident, theft or
breakdown. Contractual arrangements normally are the
result of negotiations between rental companies and large
corporations, based upon rates, billing and service
arrangements, and influenced by reliability and renter
convenience. Business travelers who are not parties to
negotiated contractual arrangements and leisure travelers
generally are influenced by advertising, renter
convenience and access to special rates because of
membership in travel, professional and other
organizations.
Many of Avis's major competitors are owned by, or
are affiliated with, the major automobile manufacturers,
and each of the major domestic car rental companies
maintains a close relationship with one or more United
States automobile manufacturers. At August 1, 1996, Ford
Motor Company owned Hertz and had an equity interest in
Budget; and Chrysler had equity interests in Dollar and
Thrifty. Automobile manufacturers often provide
financing for the purchase of vehicles and provide
payments to car rental companies in consideration of
advertising and promotional programs that benefit the
manufacturers. In addition, manufacturers provide fleet
assistance programs, including major vehicle
manufacturers' repurchase programs ("Repurchase Programs
") and similar arrangements, which protect rental
companies against loss on disposition of vehicles and
enable rental companies to adjust their fleet size to
take account of seasonal variations in demand.
AVIS CAR RENTAL OPERATIONS
THE AVIS SYSTEM
System-Wide Services. Avis provides the Avis System
with: (i) national promotion, advertising and public
relations services; (ii) reservations and information
systems; (iii) data processing support; (iv) marketing
programs with hotels and airlines; (v) a sales staff for
marketing to corporate customers and the travel
community; (vi) credit card services for commercial
customers; (vii) training in local marketing techniques;
and (viii) operation and training support. Avis's
on-line real-time data processing and information system,
known as the Wizard System, connects more than 2,000 Avis
locations in the United States, Canada, Europe and a
number of other countries.
The Wizard System. The Wizard System is a
telecommunications and computer processing system which
is used in the Avis System for reservations, rental
agreement processing, accounting, fleet control and a
variety of other purposes. It is operated by WizCom
International, Ltd. ("WizCom"), a wholly owned subsidiary
of Avis. In 1995, Budget entered into a computer
services agreement with WizCom that provides Budget with
certain reservation system computer services that are
similar to computer services provided to the Avis System.
WizCom has also entered into agreements with hotel and
other rental car companies to provide travel related
reservation and distribution system services. Avis uses
the Wizard System as a marketing tool and benefits from
the operating efficiencies obtained through the Wizard
System.
The Wizard System is operated by Avis, and is linked
to more than 12,000 terminals in more than 2,000 rental
locations through telephone lines and satellite
communications. Among the features of the Wizard System
which are not available on most competitors' systems are
(a) an advanced graphical interface reservation system;
(b) "Rapid Return," which permits customers who are
returning cars to obtain completed charge records from
radio-connected "Roving Rapid Return" agents who complete
and deliver the charge record at the car as it is being
returned; (c) "Wizard on Wheels," which enables Avis
locations to assign cars and complete rental agreements
while customers are being transported to the car; (d)
"Avis Link," which automatically identifies a customer
using American Express or other major credit card who is
entitled to special rental rates and conditions, and
therefore sharply reduces the number of instances in
which Avis inadvertently fails to honor the benefits of
negotiated rate arrangements to which they are entitled;
(e) interactive interfaces through the airline
computerized reservation systems described under
"Marketing"; (f) sophisticated fleet control and revenue
management programs which, among other things, enable
rental agents to ensure that a customer who rents a
particular type of vehicle will receive the available
vehicle of that type which has the lowest mileage
(benefitting the customer and Avis by more evenly
dispersing utilization among cars of a particular type);
and (g) a comprehensive control and reporting system that
enables Avis to adapt quickly to changes in customer
requirements. Avis also benefits from the low cost and
speed of billing available as a result of broad use of
the Wizard System and believes that the Wizard System
keeps its clerical and communications costs below those
of its competitors.
RENTAL OPERATIONS
Avis rents a wide variety of automobiles and
minivans, most of which consist of the current and
immediately preceding model years. Car rentals are
generally made on a daily, weekly or monthly basis.
Rental charges in the United States usually are computed
on the basis of the length of the rental or on the length
of the rental plus a mileage charge. Additional charges
are made for refueling service, loss damage waivers (a
waiver of Avis's right to make a renter pay for damage to
the rented car), personal accident insurance, personal
effects protection and, in some instances, additional
liability insurance. Rates vary at different locations
depending on the type of vehicle, the local market and
competitive and cost factors. Most rentals are made
utilizing rate plans under which the customer is
responsible for gasoline used during the rental. Avis
also generally offers its customers the convenience of
leaving a rented car at an Avis location in a city other
than the one in which it was rented under its "Rent it
Here -- Leave it There" program, although, consistent
with industry practices, a drop-off charge or special
intercity rate may be imposed.
North American Operations. Approximately 88% of
Avis's United States rental revenue is generated at 174
of the busiest airports in the United States. Avis's
rental revenue as a percentage of total rental revenues
at those airports for the five-year period ended February
29, 1996 approximated 26%; 23.7%; 24.1%; 22.3% and 23.8%,
respectively.
At August 1, 1996, Avis owned and operated
approximately 406 corporate car rental facilities at
airport, near-airport and downtown locations throughout
the United States and approximately 36 corporate car
rental facilities in Canada. Of these facilities,
approximately 191 primarily serve airport business and
approximately 251 are non-airport locations. By focusing
on travelers at the major airports, Avis has been able to
operate more vehicles from significantly fewer rental
sites than its competitors, yielding significant
economies of scale. Avis's emphasis on airport traffic
has resulted in a strong competitive position at the
major domestic rental-revenue airports.
Avis has 77 independent licensees which operate
locations in the United States. The two largest
licensees operate the Avis System in the Los Angeles and
Dallas area and account for approximately half of all
United States licensees' rentals. Certain licensees in
the United States pay Avis a fee equal to 5% of their
total time and mileage charges, less all customer
discounts, of which Avis is required to pay 40% for
corporate licensee-related programs, while six licensees
pay 8% of their gross revenue. Licensees outside the
United States normally pay higher fees. Most of Avis's
United States licensees currently pay 50 cents per rental
agreement for use of the Wizard System, and they are
charged for use of other aspects of the Wizard System.
Avis is in many cases one of five to seven vehicle
concessionaires at the airports at which it operates. In
general, concession fees for airport locations are based
on a percentage of total commissionable revenues (as
determined by each airport authority), subject to a
minimum guaranteed amount. Concessions are typically
awarded by airport authorities every three to five years
based upon competitive bids. Avis's concession
arrangements with the various airport authorities
generally include minimum requirements for vehicle age,
operating hours and employee conduct, and provide for
relocation in the event of future construction and
abatement of fees in the event of extended low passenger
volume.
International Operations. In addition to countries
served by Avis Europe and its affiliates and licensees,
Avis's subsidiaries, joint ventures and licensees operate
the Avis System internationally in approximately 65
countries and territories, with wholly owned subsidiaries
in Canada, Argentina, Australia, New Zealand, Puerto Rico
and the United States Virgin Islands, and joint ventures
in Jamaica, Singapore and Malaysia. The principal
business of Avis's foreign subsidiaries is car rentals.
Avis's international system (not including Avis
Europe) operates a combined peak rental and leasing fleet
of approximately 44,000 vehicles, of which approximately
23,000 are operated by subsidiaries, and the balance by
joint ventures and licensees. Revenues of the foreign
subsidiaries in the fiscal year ended February 29, 1996,
totaled approximately $212 million, without taking
account of revenues of joint ventures or licensees.
MARKETING
In the United States, approximately 70% of Avis's
fiscal 1996 rentals were generated by travelers who used
the Avis System under contractual arrangements negotiated
by Avis with either the travelers' corporate employers or
organizations such as American Association of Retired
Persons in which the travelers have memberships. The
remainder of the rental activity is from business
travelers who are not affiliated with corporations or
organizations with which Avis has contractual
arrangements, and from leisure renters. Avis's corporate
sales organization is the principal source of contractual
arrangements with corporate accounts. Unaffiliated
business travelers are solicited by direct mail,
telemarketing and advertising campaigns.
Avis solicits contractual arrangements with
corporate accounts by emphasizing the Wizard System's
advanced technology, customer service, pricing and a
worldwide rental network. The Wizard System plays a
significant part in securing business of this type
because the Wizard System enables Avis to offer a wide
variety of pricing combinations, special reports and
tracking techniques tailored to the particular needs of
each account, and to assure adherence to agreed-upon
rates.
Avis's presence in the United States leisure and
incidental business segment is substantially less
significant than its presence in the United States
commercial account segment. Leisure rental activity is
important in enabling Avis to balance the use of its
fleet. Typically, business renters use cars from Monday
through Thursday, while in most areas of the United
States leisure renters use cars primarily over weekends.
Avis maintains strong links to the air travel
industry. It has arrangements with American Airlines,
America West Airlines, Continental Airlines, Delta
Airlines, Trans World Airlines, United Airlines, USAir
and Northwest Airlines (collectively, the "Airlines")
under which participants in the Airlines' frequent flier
programs can earn mileage credits whenever they rent Avis
cars. Frequent flier programs (under which travelers can
earn reduced fares or free flights based upon miles flown
on particular airlines) are a significant sales incentive
to United States travelers, and the Company believes Avis
benefits significantly from its frequent flier
arrangements with the Airlines. All the other major car
rental companies also participate in one or more airline
frequent flier programs.
Car renters can make Avis reservations through all
four major United States based global distribution
systems and several international based systems. Users
of the United States based global distribution systems
can obtain access through these systems to the Avis
reservation system concerning among other things, rental
locations, vehicle availability, applicable rate
structures and gives them the ability to reserve and
confirm Avis vehicles directly through these systems.
Avis also maintains strong links to the hotel
industry. Avis has arrangements with Hilton Corporation,
the Hyatt Corporation and the Sheraton Marketing
Corporation frequent traveler programs, which provide
various incentives to all program participants.
RENTAL VEHICLE PURCHASES
Avis participates in a variety of vehicle purchase
programs with major domestic and foreign manufacturers,
although actual purchases are made directly through local
car dealers. The average price for automobiles purchased
by Avis in 1996 for its rental fleet was approximately
$16,250.00. On average during model year 1996, 82% of
the purchases were comprised of GM vehicles, 13% of
Chrysler vehicles and 5% of Nissan, Subaru, Hyundai,
Ford, Toyota and Land Rover vehicles. These percentages
vary among Avis's operations and will most likely change
from year to year. The vehicle purchase programs
sponsored by manufacturers sometimes provide Avis with
sales incentives for the purchase of certain models, and
most of these programs allow Avis to serve as a drop-ship
location for vehicles, thus enabling Avis to receive a
fee from the manufacturers for preparing newly purchased
vehicles for use. There can be no assurance that Avis
will continue to be able to benefit from sales incentives
in the future.
Most of Avis's cars in the United States are
purchased, owned and sold by Prime Vehicles Trust, a
trust created by Avis of which Avis is the sole
beneficiary, or by corporate nominees of Prime Vehicles
Trust. All decisions regarding Prime Vehicles Trust
purchases and sales of cars are made by Avis, and Prime
Vehicles Trust is combined with Avis for both financial
and tax accounting. The existence of Prime Vehicles
Trust has no effect on Avis's control of the cars in its
fleet. However, Avis believes the existence of Prime
Vehicles Trust has been useful in obtaining financing
secured by its cars. Avis expects to continue to take
advantage of Prime Vehicles Trust to finance future fleet
purchases.
FLEET UTILIZATION AND SEASONALITY
Avis's business is subject to seasonal variations in
customer demand, with the summer vacation period
representing the peak season for vehicle rentals. This
general seasonal variation in demand, along with more
localized changes in demand at each of Avis's operations,
causes Avis to vary its fleet size over the course of the
year. In fiscal year 1996, Avis's average monthly fleet
size ranged from a low of 127,000 vehicles in January to
a high of 149,000 vehicles in August. Fleet utilization,
which is based on the average number of days vehicles are
rented compared to the total number of days vehicles are
available for rental, ranged from 65% in December to 82%
in August and averaged 74% for all of fiscal year 1996.
RENTAL VEHICLE DISPOSITION
Avis's current operating strategy is to maintain its
fleet at an average age of 12 months or less.
Approximately 90% of the vehicles purchased by Avis in
model year 1996 were eligible for participation in
manufacturers' Repurchase Programs. These programs
currently require that Avis maintain vehicles that are
subject to the terms of manufacturers' Repurchase
Programs ("Program Vehicles") in its fleet for a minimum
of six months and impose numerous return conditions,
including those related to mileage and repair condition.
Less than 2.5% of the Program Vehicles purchased by Avis
and scheduled to be returned in 1995 were ineligible for
return. At the time of return to the manufacturer, Avis
receives the price guaranteed at the time of purchase and
is thus protected from fluctuations in the prices of
previously-owned vehicles in the wholesale market at the
time of disposition. The future percentage of Program
Vehicles in Avis's fleet will be dependent on the
availability and attractiveness of the manufacturers'
Repurchase Programs, over which Avis has no control.
In addition, Avis sells cars wholesale to dealers in
the United States either through informal arrangements or
at auction through standard consignment agreements.
AVIS CAR RENTAL FACILITIES
Avis leases almost all of its airport and
non-airport car rental facilities and currently operates
from 406 corporate rental locations. The airport
facilities are located on airport property owned by
airport authorities or located near the airport on
locations convenient for bus transport of customers to
the airport. One of Avis's airport facilities in each
Avis region serves as the administrative headquarters for
the region and, as a general rule, each airport facility
includes vehicle storage areas, a vehicle maintenance
facility, a car wash, a refueling station and rental and
return facilities. In all airport locations, the
facility leases are not co-terminus with the local
airport concession agreement. Avis's non-airport
facilities generally consist of a limited parking
facility and a rental and return desk and are generally
subject to long-term leases with renewal options.
Certain of these leases also have purchase options at the
end of their terms.
INSURANCE
Avis generally assumes the risk of liability to
third parties in the United States for up to $1 million
per occurrence. It has purchased significant excess
insurance coverage against risks which exceed $1 million
per occurrence. One of the benefits of Avis's retaining
the risk up to $1 million per occurrence is that Avis
maintains its own claims department, which controls the
disposition of most claims. The Company believes that
the maintenance by Avis of its own claims department in
recent years has helped contain Avis's cost of claims
paid.
Under its standard car rental contract, Avis
provides its renters liability coverage up to the minimum
financial responsibility limits required by applicable
law. Higher limits are provided by separate agreement to
some United States national corporate accounts and Avis
makes available to renters, for an additional daily
charge, participation in a group policy underwritten by a
major national insurer which increases renters' coverage
to one million dollars. Avis also offers renters, for
additional daily charges, "Personal Accident Insurance,"
which pays medical expenses and accidental death benefits
for accidents during the rental period, and "Personal
Effects Protection," which ensures against loss or damage
to the renters' personal belongings during the rental
period. Both these coverages are underwritten by major
national insurers.
REGULATORY AND ENVIRONMENTAL MATTERS
Avis is subject to federal, state and local laws and
regulations including those relating to taxing and
licensing of vehicles, franchising, consumer credit,
environmental protection, retail vehicle sales and labor
matters. The principal environmental regulatory
requirements applicable to Avis's operations relate to
the ownership or use of tanks for the storage of
petroleum products, such as gasoline, diesel fuel and
waste oils; the treatment or discharge of waste waters;
and the generation, storage, transportation and off-site
treatment or disposal of solid or liquid wastes. Avis
operates 232 domestic and international locations at
which petroleum products are stored in underground or
aboveground tanks. Avis has instituted an environmental
compliance program designed to ensure that these tanks
are in compliance with applicable technical and
operational requirements, including the replacement of
underground steel tanks and periodic integrity testing of
underground storage tanks. The Company believes that the
locations where Avis currently operates are in
compliance, in all material respects, with such
regulatory requirements.
Avis may also be subject to requirements related to
the remediation of, or the liability for remediation of,
substances that have been released to the environment at
properties owned or operated by Avis or at properties to
which Avis sends substances for treatment or disposal.
Such remediation requirements may be imposed without
regard to fault and liability for environmental
remediation can be substantial.
Avis may be eligible for reimbursement or payment of
remediation costs associated with future releases from
its regulated underground storage tanks. Certain of the
states in which Avis maintains underground storage tanks
have established funds to assist in the payment of
remediation costs for releases from certain registered
underground tanks. Subject to certain deductibles, the
availability of funds, compliance status of the tanks and
the nature of the release, these tank funds may be
available to Avis for use in remediating future releases
from its tank systems.
A traditional revenue source for the car rental
industry has been the sale of loss damage waivers, by
which car rental companies agree to relieve a customer
from financial responsibility arising from vehicle damage
to the rented car incurred during the rental period.
Approximately 3% of Avis's rental revenue during 1995 was
generated by the sale of loss damage waivers. The U.S.
House of Representatives has from time to time considered
legislation that would regulate the conditions under
which loss damage waivers may be sold by car rental
companies. House Bill H.R. 175, introduced in January
1995, seeks to prohibit the imposition of liability on
renters for loss of, or damage to, rented vehicles,
except in certain circumstances, and would prohibit the
sale of loss damage waivers. To date, no action has been
taken on this bill. In addition, approximately 40 states
have considered legislation affecting the sale of loss
damage waivers. To date, 24 states have enacted
legislation which regulates the sale of loss damage
waivers, most of which requires disclosure to each
customer at the time of rental that damage to the rented
vehicle may be covered by the customer's personal
automobile insurance and that loss damage waivers may not
be necessary. In addition, in the late 1980's, New York
and Illinois enacted legislation which eliminated Avis's
right to offer loss damage waivers for sale and limited
potential customer liability to $100 and $200,
respectively. Moreover, California, Nevada and Indiana
have capped rates that may be charged for collision
damage waivers to $9.00, $10.00 and $5.00 per day,
respectively. Texas requires that the rate charged for
loss damage waivers be reasonably related to the direct
cost of the repairs. Adoption of national or additional
state legislation eliminating or limiting the sale of
loss damage waivers could result in the loss or reduction
of this revenue source and additional limitations on
potential customers liability could increase Avis's
costs.
LEGAL MATTERS
From time to time, Avis is subject to routine
litigation incidental to its business. Avis maintains
insurance policies that cover most of the actions brought
against Avis. See "-- Insurance." Avis is currently not
involved in any legal proceeding which it believes would
have a material adverse effect upon its financial
condition or operations.
EMPLOYEES
Avis has more than 20,000 employees worldwide. Of
these, approximately 375 are employed in executive,
financial and administrative capacities, approximately
240 are engaged in marketing or sales capacities,
approximately 460 are involved in system design and
constant upgrading of the Wizard System, approximately
700 are engaged in clerical activities in connection with
the administration of Avis and the balance are engaged in
car rentals and car care at rental locations.
Approximately 20% of Avis's employees are represented by
65 various local unions under contracts expiring on a
variety of dates. No local union represents more than
2.5% of Avis's employees. Avis believes its
relationships with its employees are good.
PROPERTIES
Avis leases or has concessions relating to space at
707 locations in the United States and 117 locations
outside the United States for all of its operations. Of
those locations, 182 in the United States and 47 outside
the United States are at airports. Additionally, 38
locations in the United States are owned and three
locations outside the United States are owned.
Typically, an airport receives a percentage of car rental
revenues, with a guaranteed minimum. Because there is a
limit to the number of car rental locations in an
airport, car rental companies frequently bid for the
available locations, usually on the basis of the size of
the guaranteed minimums. Avis and other car rental firms
also rent parking space on or near airports and at their
other car rental locations.
Avis's principal offices are in a 405,000 square
foot complex in Garden City, New York, for which Avis
currently pays approximately $875,000 per year under a
lease which, by exercising renewal options, has been
extended to 2015. The Avis reservation system is run
from leased space in Tulsa, Oklahoma. Avis also
maintains terminal network facilities which it uses in
connection with the Wizard System in Garden City, Tulsa,
San Francisco, California and Bracknell, England. Avis
also owns a 166,000 square foot building in Virginia
Beach, Virginia which serves as a satellite
administrative and reservation facility.
CERTAIN PROVISIONS OF THE AVIS ACQUISITION AGREEMENTS
HFS has certain continuing obligations under the
Stock Purchase Agreement and the Merger Agreement (each
as defined below) entered into in connection with the
Avis Acquisition relating to potential post-closing
payments to be made under such agreements. The following
is a brief summary of those obligations, and does not
purport to be complete and is subject to, and qualified
in its entirety by reference to, such agreements, which
are exhibits hereto and are incorporated by reference
herein.
In connection with the Avis Acquisition, General
Motors Corporation ("GM") received 1,340,898 shares (the
"GM Shares") of HFS common stock (the "HFS Common
Stock"). Pursuant to the Stock Purchase Agreement, dated
as of August 28, 1996, between HFS and GM as amended by
the letter agreement, dated December 13, 1996 (together,
the "Stock Purchase Agreement"), GM will be entitled to
receive cash equal to the amount by which $99,311,000
(the value attributable under the Stock Purchase
Agreement to the HFS Common Stock received by GM in the
Avis Acquisition) exceeds the proceeds realized upon the
subsequent sale of such HFS Common Stock (deeming all HFS
Common Stock received by GM and not sold prior to January
31, 1997 to have been sold on January 31, 1997). HFS
shall also pay to GM interest, on a pre-determined value
of $74.063 for each of the 1,067,398 shares of HFS Common
Stock held by GM on December 13, 1996, at a rate of LIBOR
plus 100 basis points, which interest shall accrue from
November 17, 1996 to, but not including, the date of sale
of such shares or January 31, 1997, in the case of any GM
Shares not sold prior to January 31, 1997. The payments
described above shall be made no later than February 7,
1997.
The letter agreement is attached hereto as Exhibit
99.3 and is incorporated herein by reference.
In connection with the Avis Acquisition, the Avis,
Inc. Employee Stock Ownership Plan (the "Avis ESOP")
received from HFS 3,187,421 shares of HFS Common Stock
(the "ESOP Shares"). Pursuant to the Agreement and Plan
of Merger, dated as of August 23, 1996, as amended, by
and among HFS, Avis Acquisition Corp., U.S. Trust Company
of California, N.A., as Trustee and Avis (the "Merger
Agreement"), the Avis ESOP will be entitled to receive
cash in an amount equal to the "Post-Closing
Consideration." The "Post-Closing Consideration" shall
equal $337 million, plus interest thereon at the rate
prescribed in the Merger Agreement, less the proceeds
received by the Avis ESOP upon any sale of ESOP Shares
and the value of the ESOP Shares based upon any deemed
sale of such shares as provided for in the Merger
Agreement, and less interest on such proceeds and deemed
sale proceeds at the rate prescribed in the Merger
Agreement; provided, that in no event shall the Post-
Closing Consideration exceed $370.7 million. Payment of
the Post-Closing Consideration, if any, will be made not
later than October 22, 1997.
ii) THE RCI ACQUISITION
GENERAL
On November 12, 1996, the Company completed the
acquisition of all the outstanding capital stock of RCI
and its affiliates for approximately $625 million,
comprised of $550 million in cash and $75 million in
Common Stock of the Company, plus future contingent
payments of up to $200 million over the next five years.
RCI, based in Indianapolis, Indiana and incorporated
as an Indiana corporation in 1974, is the world's largest
provider of timeshare exchange programs for approximately
two million timeshare owners and approximately 3,000
resorts around the world. The RCI Network enables a
member who owns a timeshare interest in a resort property
that is affiliated with the RCI Network to exchange such
timeshare interest for a timeshare interest of equivalent
value in another affiliated resort. RCI also is engaged
in publishing related to the timeshare industry and
provides other travel-related services, integrated
software systems and resort management and consulting
services. Exchange and travel-related revenue of RCI was
$158.6 million and $278.1 million for the six months
ended June 30, 1996 and the year ended December 31, 1995,
respectively.
The Company expects that the acquisition of RCI will
provide increased marketing opportunities between RCI
and the Company's lodging, car rental and real estate
brokerage products as well as further opportunities to
expand the Company's preferred vendor program. The
Company also expects that RCI will benefit from certain
economies of scale and other synergies resulting from
RCI's affiliation with the Company's lodging, car rental
and real estate brokerage franchisor operations.
TIMESHARE EXCHANGE INDUSTRY OVERVIEW
Timesharing for the resort industry is the shared
ownership and/or periodic use of property by a number of
users or owners for a defined period of years or in
perpetuity. An example of a simple form of timeshare is
a condominium unit that is owned by fifty-two persons,
with each person having the right to use the unit for one
week of every year. In the United States, industry
sources estimate that the average price of such a
timeshare is about $7,500 to $10,000, plus a yearly
maintenance fee of approximately $350. In 1995, sales of
timeshares exceeded $5 billion worldwide. Approximately
52% of all timeshare owners reside in the United States,
while approximately 21% reside in Europe. Industry
sources have estimated that the total number of owners of
timeshare interests is approximately 3.5 million, while
the total number of timeshare resorts worldwide has been
estimated to be approximately 4,500.
A timeshare exchange provides an owner of a
timeshare interest in a particular resort property with
the ability to exchange such interest for a timeshare
interest of equivalent value in another resort.
Timeshare exchange accounts for approximately two-fifths
of the timeshare holidays taken worldwide each year. Two
principal segments make up the timeshare exchange
industry: owners of timeshare interests and resort
properties. The timeshare exchange industry derives
revenue from annual membership fees paid by owners of
timeshare interests, affiliation fees paid by timeshare
resort properties, and exchange fees paid by such owners
for each exchange that is arranged by a timeshare
exchange company.
The global timeshare exchange industry consists of
two major companies, RCI and Interval International
("Interval"), a wholly-owned subsidiary of CUC
International, as well as a small number of smaller
firms. Approximately 95% of the 4,500 timeshare resorts
in the world are affiliated with either RCI or with
Interval. In addition, RCI has approximately 2.1 million
timeshare owners who are members while Interval has
almost 700,000 timeshare owners who are members.
The timeshare industry has experienced significant
growth over the past decade. The Company believes that
the factors driving this industry growth include the
demographic trend toward older, more affluent Americans
who travel more frequently, the entrance of major
hospitality and entertainment companies into timeshare
development, a worldwide acceptance of the concept, an
increasing focus on leisure activities, family health and
a desire for value, variety and flexibility in a vacation
experience. The Company believes that future growth of
the timeshare exchange industry will be determined by
general economic conditions both in the U.S. and
worldwide, the public image of the industry, improving
approaches to providing marketing and sales, a greater
variety of products and broadening the timeshare market
and a variety of other factors. Accordingly, the Company
cannot predict whether such growth will continue and, if
so, whether it will continue at rates comparable to those
of the recent past.
RCI TIMESHARE EXCHANGE OPERATIONS
MEMBERSHIP
The RCI Network provides a network for approximately
2.1 million members who own timeshare interests in a
resort that is affiliated with the RCI Network which
enables such members to exchange their timeshare interest
for a timeshare interest of equivalent value in another
affiliated resort. Approximately 1,100,000 members of
the RCI Network reside outside of the United States,
which account for 52% of the total members of the RCI
Network. RCI's membership volume has grown at a compound
annual rate for the last five years of approximately 10%,
while exchange volumes have grown at a compound annual
rate of approximately 12% for the same time period.
RCI provides members of the RCI Network with access
to both domestic international timeshare resorts,
publications regarding timeshare exchange opportunities,
and other travel-related services, including discounted
purchasing programs. See "--Publications" and "--Other
Services Provided by RCI." In the United States, members
pay an average annual membership fee of $67 as well as an
average exchange fee of $100 for every exchange arranged
by RCI. In 1995, membership and exchange fees amounted
to approximately $230 million. RCI arranged
approximately 1.6 million exchanges in 1995.
Developers of resorts affiliated with the RCI
Network typically pay the first year membership fee for
new members upon the sale of the timeshare interest. See
"--Affiliated Timeshare Resorts and Developers." In the
United States more than 75% of such owners renew their
membership in their second year and more than 90% renew
each year thereafter.
OTHER SERVICES PROVIDED BY RCI
Travel Services. RCI provides travel services to
U.S. members of the RCI Network through its affiliate,
RCI Travel, Inc. ("RCIT"). On a global basis, RCI
provides travel services through entities operating in
local jurisdictions (hereinafter, RCIT and local entities
referred to as "Travel Agencies"). Travel Agencies
provide airline reservations and airline ticket sales
services to members in conjunction with the arrangement
of their timeshare exchanges, as well as providing other
types of travel services including hotel accommodations,
car rentals, cruises and tours. Travel Agencies also
from time to time offer travel packages utilizing resort
developers' unsold inventory to provide both revenue and
prospective timeshare purchasers to the resort.
Advertising. RCI provides its affiliated resorts
with advertising opportunities in its member and
developer focused publications, as well as through its
site on the Internet Worldwide Web at http:\\www.rci.com.
Sales and Marketing Supporting. RCI provides a wide
variety of sales and marketing materials to assist its
affiliated resorts in their timeshare sales process.
These include a video explaining the concept of vacation
ownership and exchange, posters, wall tours customized
for the resort, a wide variety of promotional brochures
and the Endless Vacation Special Resort Edition
Directory. Interactive multi-media sales tools are also
under development. In addition, RCI uses
state-of-the-art database marketing techniques to
identify highly qualified sales prospects for its resort
affiliates.
Timeshare Consulting. RCI provides worldwide
timeshare consulting services through its affiliate, RCI
Consulting, Inc. These services include comprehensive
market research, site selection, strategic planning,
community economic impact studies, resort concept
evaluation, financial feasibility assessments, on-site
studies of existing resort developments, and tailored
sales and marketing plans.
Resort Management Software. RCI provides computer
software systems to timeshare resorts and developers
through its affiliate, Resort Computer Corporation
("RCC"). RCC provides software that integrates resort
functions such as sales, accounting, inventory,
maintenance, dues and reservations.
Property Management. RCI provides resort property
management services through its affiliate, RCI
Management, Inc. ("RCIM"). RCIM is a single source for
any and all resort management services, and offers a menu
including hospitality services, a centralized
reservations service center, advanced reservations
technology, human resources expertise and owner's
association administration.
AFFILIATED TIMESHARE RESORTS AND DEVELOPERS
Approximately 3,000 timeshare resorts are affiliated
with the RCI Network, of which approximately 1,250
resorts are located in the United States and Canada;
1,100 are in Europe and Africa, 400 are in Mexico and
Latin America, and 250 are in the Asia-Pacific region.
The terms of RCI's affiliation agreement with its resorts
generally require that the developer enroll each new
timeshare purchaser at the resort as a member of RCI,
license the affiliated resort to use the RCI name and
marks, set forth the materials and services RCI will
provide to the affiliate and generally describe RCI's
expectations of the resort's management, representation
of the exchange program, minimum enrollment requirements
and treatment of exchange guests. Affiliation agreements
are typically for a term of five or six years and
automatically renew for like terms thereafter unless
either party takes affirmative action to terminate the
relationship. RCI makes available a wide variety of
goods and services to its affiliated developers,
including publications, advertising, sales and marketing
materials, timeshare consulting services, resort
management software, travel packaging and property
management services. See "--Other Services Provided by
RCI."
Developers of affiliated resorts typically pay the
first year membership fee for new members upon the sale
of the timeshare interest. Vistana Development, Orange
Lake Country Club and Fairfield Communities have provided
the greatest number of members currently enrolled in the
RCI Network.
PUBLICATIONS
RCI publishes numerous magazines and periodicals,
often in several languages, relating to the vacation and
timeshare industry. The Endless Vacation Special Resort
Edition, and its counterpart in various countries, is
RCI's premier publication and contains full color, photo
listings of RCI resorts. Endless Vacation, Holiday, and
Vacacciones Sin Fin are magazines directed at subscribing
members in North America and Singapore, Europe and
Africa, and Latin America, respectively. Perspective,
Review, Timeshare Business Quarterly and Intercambio are
magazines or newsletters directed at resort affiliates,
developers, homeowners associations and industry
personnel in North America, Europe, Asia-Pacific and
Latin America, respectively. RCI's approximately 2.1
million members are subscribers to its magazines.
Developer periodicals are made available to resorts and
others in the industry at no charge.
REGULATORY AND ENVIRONMENTAL MATTERS
RCI is subject to federal, state and local laws and
regulations including those relating to taxing, consumer
credit, environmental protection and labor matters. In
addition, RCI is subject to state statutes in those
states regulating timeshare exchange services, and must
prepare and file annually with regulators in states which
require it, the RCI Disclosure Guide to Vacation
Exchange. RCI is not subject to those state statutes
governing the development of timeshare condominium units
and the sale of timeshare interests, but such statutes
directly affect the members and resorts that participate
in the RCI Network and therefor the statutes indirectly
impact RCI.
The Company believes that RCI is in substantial
compliance with all of the regulatory requirements of the
various jurisdictions in which RCI operates.
LEGAL MATTERS
From time to time, RCI is subject to routine
litigation incidental to its business. RCI maintains
insurance policies that cover most of the actions brought
against RCI. RCI is not involved in any legal proceeding
which it believes would have a material adverse effect
upon its financial condition or operations.
EMPLOYEES
RCI has approximately 4,200 employees worldwide. Of
these, approximately 1,500 are employed in executive,
financial and administrative capacities, approximately
1,800 are engaged in marketing or sales capacities,
approximately 325 are involved in the travel services
business, approximately 70 are involved in the resort
software business, and approximately 500 are involved in
the resort-management business. None of RCI's employees
are represented by unions or collective bargaining
agreements. RCI believes that its relationships with its
employees are good.
PROPERTIES
RCI leases space at 18 locations in the United
States and 32 locations outside of the United States for
all of its operations. Additionally, one location in the
United States is owned and four locations outside of the
United States are owned. RCI has offices in 33
countries.
RCI's principal offices are in a 108,000 square foot
complex known as the Woodview Trace building, located in
Indianapolis, Indiana. RCI leases the land and building
from a limited liability company controlled by a director
of HFS. The lease provides for an initial five year term
expiring December 31, 2001 and contains ten renewal
options each for a term of five additional years. The
rent is approximately $1,600,000 per year for the
original term of the lease, and is subject to adjustment
to reflect changes in the cost of living upon the
exercise of each renewal option.
B. OTHER
On November 26, 1996, Amre Inc. ("Amre") reached an
agreement in principle with the Company to defer $9.6
million of Amre's 1996 royalty obligation to the Company
and modify the $11 million 1997 royalty payment to the
Company so that such royalty is based on the cash flow of
Amre. The Company and Amre also agreed to restructure
the terms of future royalty payments.
The Company will record an allowance in the fourth
quarter of 1996 on the $9.6 million receivable from Amre.
The allowance will be offset in large part by a $9.5
million fee from Chartwell Leisure Inc. ("Chartwell")
related to a termination of a services contract by
Chartwell.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(c) Exhibits
99.1 Stock Purchase Agreement (incorporated by
reference to Exhibit 2.2 to the Company's
Registration Statement on Form S-3 (Reg.
No. 333-11029), filed with the Securities
and Exchange Commission on August 29,
1996).
99.2 Merger Agreement (incorporated by
reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-3 (Reg.
No. 333-11029), filed with the Securities
and Exchange Commission on August 29,
1996).
99.3 Letter Agreement, dated December 13, 1996,
between the Company and GM.
99.4 Agreement, dated as of September 11, 1996,
by and among the Company, Avis Acquisition
Corp., U.S. Trust Company of California,
N.A. and Avis.
99.5 Agreement, dated as of September 19, 1996,
by and among the Company, Avis Acquisition
Corp., U.S. Trust Company of California,
N.A. and Avis.
99.6 News Release, dated November 26, 1996.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
HFS INCORPORATED
By: /s/ James E. Buckman
--------------------------
James E. Buckman
Executive Vice President
and General Counsel
Date: December 24, 1996
EXHIBIT INDEX
99.1 Stock Purchase Agreement (incorporated by
reference to Exhibit 2.2 to the Company's
Registration Statement on Form S-3 (Reg.
No. 333-11029), filed with the Securities
and Exchange Commission on August 29,
1996).
99.2 Merger Agreement (incorporated by
reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-3 (Reg.
No. 333-11029), filed with the Securities
and Exchange Commission on August 29,
1996).
99.3 Letter Agreement, dated December 13, 1996,
between the Company and GM.
99.4 Agreement, dated as of September 11, 1996,
by and among the Company, Avis Acquisition
Corp., U.S. Trust Company of California,
N.A. and Avis.
99.5 Agreement, dated as of September 19, 1996,
by and among the Company, Avis Acquisition
Corp., U.S. Trust Company of California,
N.A. and Avis.
99.6 News Release, dated November 26, 1996.
Exhibit 99.3
HFS INCORPORATED
6 Sylvan Way
Parsippany, New Jersey 07054
December 13, 1996
General Motors Corporation
767 Fifth Avenue
New York, New York 10153
Facsimile: (212) 418-3695
Attention: Treasurer
Gentlemen:
Reference is made to the Stock Purchase Agreement
(the "Agreement"), dated as of August 28, 1996, by and
between HFS Incorporated ("HFS") and General Motors
Corporation ("GM"). Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them
in the Agreement.
HFS hereby extends the Directed Sale Date to the
close of business on January 31, 1997; provided, that GM
shall not sell any of the 1,067,398 shares of HFS common
stock held by it as of the date hereof (the "Remaining
Shares") prior to the close of business on the tenth
business day prior to the Directed Sale Date unless directed
to do so by HFS. Any Remaining Shares not sold as of the
close of business on the Directed Sale Date shall be valued
at the closing price of HFS common stock on the New York
Stock Exchange on the Directed Sale Date.
HFS agrees to pay to GM interest on the value of
each of the Remaining Shares at a rate of LIBOR plus 100
basis points. With respect to a Remaining Share, interest
shall be calculated from and including November 17, 1996 to
but not including the date of sale of such Remaining Share.
HFS shall deliver to GM cash in the amount equal to the
aggregate interest owed on the Remaining Shares at the time
HFS is, or would be, required to pay the Post-Closing
Adjustment, if any. For purposes of calculating interest
pursuant to this paragraph: (i) each of the Remaining
Shares shall be valued at $74.063; and (ii) LIBOR shall mean
the one month London Interbank Offered Rate as published in
the Wall Street Journal.
In addition, HFS shall deliver to GM not later
than five business days after the date hereof, one or more
letters of credit in the amount of $30 million (the "Letter
of Credit") in order to secure payment by HFS to GM of the
Post-Closing Adjustment. The Letter of Credit shall be in
form and substance, and issued by one or more banking
institutions, satisfactory to GM. GM shall be entitled to
draw down on the Letter of Credit on the third business day
after the day HFS was required to deliver to GM the Post-
Closing Adjustment, if any, and failed to do so; provided
that GM delivers to HFS advance notice of its intent to draw
down on the Letter of Credit and GM has otherwise complied
with the terms hereof. The Letter of Credit shall expire on
February 14, 1997.
If on any day between the date hereof and January
20, 1997, GM delivers written notice to HFS that an estimate
of the Post-Closing Adjustment (the "Estimated Post-Closing
Adjustment") equals or exceeds $25 million on each of three
consecutive trading days during the period between the date
hereof and January 17, 1997, had the Remaining Shares not
yet sold been sold at the closing prices of a share HFS
common stock on the New York Stock Exchange on each of such
three days, then HFS shall, within five business days of
receipt of such notice, deliver to GM one or more additional
letters of credit in such amounts that such letters of
credit, together with the Letter of Credit, shall equal an
amount which is at least 120% of the highest Estimated Post-
Closing Adjustment of such three trading days. Such
additional letters of credit shall be in form and substance,
and issued by one or more banking institutions, satisfactory
to GM. Any additional letters of credit issued shall be
subject to the same terms and conditions as the Letter of
Credit. No subsequent notice delivered by GM shall include
a trading day which is within five trading days of trading
day used in a prior notice.
Please confirm that the foregoing is acceptable to
GM by signing the enclosed copy of this letter in the space
provided below and returning the same to me at your earliest
convenience.
Very truly yours,
HFS INCORPORATED
By: /s/ James E. Buckman
------------------------
Name: James E. Buckman
Title: Executive Vice
President and
General Counsel
Agreed to and Accepted
as of the date first above
written:
GENERAL MOTORS CORPORATION
By: /s/ E. Follin Smith
-----------------------
Name: E. Follin Smith
Title: Assistant Treasurer
cc: General Counsel
General Motors Corporation
3044 West Grant Boulevard
Detroit, Michigan 48232
(313) 974-0209
Exhibit 99.4
AGREEMENT
Agreement dated as of September 11, 1996 by and
among HFS Incorporated, a Delaware corporation, Avis
Acquisition Corp., a Delaware corporation and a wholly owned
indirect subsidiary of Parent, U.S. Trust Company of
California, N.A., solely in its capacity as trustee of, and
on behalf of, the trust forming a part of the Avis, Inc.
Employee Stock Ownership Plan, and Avis, Inc., a Delaware
corporation. Capitalized terms used and not otherwise
defined herein shall have the meaning ascribed to them in
the Merger Agreement (as defined below).
WHEREAS, the parties hereto have entered into an
Agreement and Plan of Merger dated as of August 23, 1996
(the "Merger Agreement"); and
WHEREAS, the parties hereto desire to amend the
Merger Agreement;
NOW, THEREFORE, the parties hereto agree as
follows:
Section 8.3(f) AND 8.4(c) of the Merger Agreement
shall be amended by adding the words "(excluding
any ESOP Shares allocated to the accounts of ESOP
Participants after September 10, 1996)" after the
words "the ESOP Shares".
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed on their behalf by their
respective officers hereunder duly authorized all as of the
date first written above.
HFS INCORPORATED
By:/s/ James E. Buckman
---------------------------
Name: James E. Buckman
Title: Executive Vice
President and
General Counsel
AVIS ACQUISITION CORP.
By:/s/ James E. Buckman
----------------------------
Name: James E. Buckman
Title: Vice President
AVIS, INC.
By: /s/ Joseph V. Vittoria
----------------------------
Name: Joseph V. Vittoria
Title:
U.S. TRUST COMPANY OF
CALIFORNIA, N.A., solely in
its capacity as trustee of,
and on behalf of, the trust
forming a part of the Avis,
Inc. Employee Stock Ownership
Plan
By:/s/ Norman P. Goldberg
---------------------------
Name: Norman P. Goldberg
Title: Managing Director
Exhibit 99.5
AGREEMENT
Agreement dated as of September 19, 1996 by and
among HFS Incorporated, a Delaware corporation, Avis
Acquisition Corp., a Delaware corporation and a wholly owned
indirect subsidiary of Parent, U.S. Trust Company of
California, N.A., solely in its capacity as trustee of, and
on behalf of, the trust forming a part of the Avis, Inc.
Employee Stock Ownership Plan, and Avis, Inc., a Delaware
corporation. Capitalized terms used and not otherwise
defined herein shall have the meaning ascribed to them in
the Merger Agreement (as defined below).
WHEREAS, the parties hereto have entered into an
Agreement and Plan of Merger dated as of August 23, 1996, as
heretofore amended (the "Merger Agreement"); and
WHEREAS, the parties hereto desire to amend the
Merger Agreement;
WHEREAS, with respect to item 2 below, such
amendment is to reflect the original intentions of the
parties;
NOW, THEREFORE, the parties hereto agree as
follows:
1. Introduction. The word "indirect" in the
introduction to the Merger Agreement shall be deleted.
2. Section 2.10(d). The phrase "and, in the case
of a Deemed Sale, interest at the Applicable Rate on the
value of such Parent Shares from and including the date of
the Deemed Sale to but not including the Payment Date" shall
be added after the phrase "as the case may be," at the end
of clause (ii) of Section 2.10(d) of the Merger Agreement
3. Section 3.4(b). The phrase "mail or" shall be
added after the "," after the parenthetical ending on the
fourth line of Section 3.4(b) of the Merger Agreement.
4. Section 6.9. The word "indirect" in Section
6.9 of the Merger Agreement shall be deleted.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed on their behalf by their
respective officers hereunder duly authorized all as of the
date first written above.
HFS INCORPORATED
By:/s/ James E. Buckman
--------------------------
Name: James E. Buckman
Title: Executive Vice
President and
General Counsel
AVIS ACQUISITION CORP.
By:/s/ James E. Buckman
--------------------------
Name: James E. Buckman
Title: Vice President
AVIS, INC.
By: /s/ Joseph V. Vittoria
--------------------------
Name: Joseph V. Vittoria
Title:
U.S. TRUST COMPANY OF
CALIFORNIA, N.A., solely in
its capacity as trustee of,
and on behalf of, the trust
forming a part of the Avis,
Inc. Employee Stock Ownership
Plan
By:/s/ Norman P. Goldberg
--------------------------
Name: Norman P. Goldberg
Title: Managing Director
Exhibit 99.6
NEWS RELEASE Contact: Michael H. Wargotz
FOR IMMEDIATE RELEASE (201) 359-5110
November 26, 1996
HFS INCORPORATED ESTABLISHES
RESERVE RELATED TO AMRE, INC.
PARSIPPANY, NJ -- HFS Incorporated (NYSE: HFS)
announced today that it has fully reserved in the current
quarter its $9.6 million receivable from Amre, Inc. (NYSE:
AMM) related to the 1996 license fee for use of the Century
21 Home Improvement name.
The Company recently agreed to a $9.5 million payment
from Chartwell Leisure Inc. (NASDAQ: CHRT) related to a
contract termination. Recognition of this income will
offset the reserve recognition related to the AMM
receivable.
HFS Incorporated is a global consumer services
company. The Company is the largest franchisor of hotels
and residential real estate brokerage offices, owns Avis,
Inc., the world's second largest rental car system, and also
owns Resort Condominiums International, Inc., the largest
provider of vacation timeshare.
On November 11, 1996, the Company announced a
merger agreement with PHH Corporation (NYSE: PHH). Through
its three business segments, PHH delivers cost-efficient
outsourcing alternatives in the areas of vehicle leasing and
maintenance, fuel purchases and management, relocation, real
estate, mortgage banking and insurance services, to
corporations, government agencies, affinity membership
organizations and financial institutions in North America,
the United Kingdom and continental Europe.
###
