<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 1996
REGISTRATION NO. 333-4507
- -----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TEAM RENTAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 7514 59-3227576
<S> <C> <C>
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
</TABLE>
125 BASIN STREET
SUITE 210
DAYTONA BEACH, FLORIDA 32114
(904) 238-7035
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SANFORD MILLER
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
TEAM RENTAL GROUP, INC.
125 BASIN STREET
SUITE 210
DAYTONA BEACH, FLORIDA 32114
(904) 238-7035
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPIES TO:
Jeffrey M. Stein B. Lynn Walsh
King & Spalding J. Stephen Hufford
191 Peachtree Street Hunton & Williams
Atlanta, Georgia 30303-1763 NationsBank Plaza -- Suite 4100
(404) 572-4600 600 Peachtree Street, N.E.
Atlanta, Georgia 30303-2216
(404) 888-4000
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION
BE REGISTERED (1)(2) PER UNIT (3) PRICE (3) FEE (2)(3)
- ------------------------------ --------------- ---------------- ------------------ --------------
<S> <C> <C> <C> <C>
Class A Common Stock, $.01 par 4,600,000
value per share .............. shares $15.75 $72,450,000 $23,164
- ------------------------------ --------------- ---------------- ------------------ --------------
</TABLE>
- -----------------------------------------------------------------------------
(1) Includes 4,223,636 shares of Class A Common Stock that were previously
registered on May 24, 1996. The Registration Fee of $21,119 for such
shares was paid at the date of filing. The Registrant is registering an
additional 376,364 shares of Class A Common Stock by this Amendment and
paying an additional registration fee of $2,045 herewith.
(2) Includes 600,000 shares of Class A Common Stock issuable upon exercise
of an over-allotment option granted by the Company to the Underwriters.
(3) Estimated solely for the purpose of calculating the registration fee
for the additional shares registered under this amendment based upon
the average between the high and low price of the Common Stock on the
Nasdaq National Market on June 7, 1996, pursuant to Rule 457(c).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
TEAM RENTAL GROUP, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION IN FORM S-1 LOCATION IN PROSPECTUS
- ------------------------------------------------- -----------------------------------------------
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus ............ Facing Page; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus ........................................ Inside Front Cover Page; Outside Back
Cover Page
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges ................ Prospectus Summary; Risk Factors; The Company
4. Use of Proceeds ................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price ................... Outside Front Cover Page; Underwriting
6. Dilution .......................................... Not Applicable
7. Selling Security Holders .......................... Principal and Selling Stockholders
8. Plan of Distribution .............................. Underwriting
9. Description of Securities to Be Registered ....... Description of Capital Stock
10. Interests of Named Experts and Counsel ........... Not Applicable
Outside Front Cover Page; Prospectus Summary; Risk
Factors; The Company; Use of Proceeds; Price Range
of Common Stock; Dividend Policy; Capitalization;
Pro Forma Consolidated Financial Statements;
Selected Financial Data; Management's Discussion
and Analysis of Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling Stockholders;
Description of Capital Stock; Shares Eligible for
11. Information with Respect to the Registrant ....... Future Sale
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities ... Not Applicable
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
SUBJECT TO COMPLETION, DATED JUNE 13, 1996
4,000,000 Shares
[TEAM RENTAL LOGO]
Team Rental Group, Inc.
Class A Common Stock
($.01 par value)
Of the shares of Class A Common Stock of Team Rental Group, Inc. (the
"Company" or "TEAM") offered hereby (the "Offering"), 3,167,273 shares are
being sold by the Company and 832,727 shares are being sold by the Selling
Stockholders named herein under "Principal and Selling Stockholders" (the
"Selling Stockholders"). The Company will not receive any proceeds from the
sale of shares by the Selling Stockholders. The Class A Common Stock is
listed on The Nasdaq Stock Market's National Market under the symbol "TBUD."
On June 12, 1996, the last reported sale price of the Class A Common Stock on
the Nasdaq National Market was $16.50 per share.
The Company has two classes of Common Stock, the Class A Common Stock, par
value $.01 per share (the "Class A Common Stock"), and the Class B Common
Stock, par value $.01 per share (the "Class B Common Stock"). Holders of the
Class A Common Stock are entitled to one vote per share and holders of the
Class B Common Stock are entitled to ten votes per share.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE CLASS A COMMON STOCK, SEE "RISK FACTORS" BEGINNING
ON PAGE 9 HEREIN.
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.
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS
----------- ----------------- --------------- ---------------
Per Share ..... $ $ $ $
Total(2) ...... $ $ $ $
- ------------
(1) Before deduction of expenses payable by the Company estimated at
$635,000.
(2) The Company has granted the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase a maximum of 600,000
additional shares of Class A Common Stock to cover over-allotments of
shares. If the option is exercised in full, the total Price to Public
will be $ , Underwriting Discounts and Commissions will be $ and
Proceeds to Company will be $ . See "Underwriting."
The shares are offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters and subject to their right to
reject orders in whole or in part. It is expected that the Class A Common
Stock will be ready for delivery on or about , 1996, against payment in
immediately available funds.
CS First Boston
The Chicago Corporation
McDonald & Company Securities, Inc.
The date of this Prospectus is , 1996.
<PAGE>
[MAP AND PHOTOS TO BE ADDED]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS AND THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE CLASS A COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
DURING THE OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING IN
THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE CLASS A COMMON STOCK PURSUANT TO EXEMPTIONS FROM
RULES 10b-6, 10b-7 AND 10b-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial
statements and notes thereto appearing elsewhere in this Prospectus. Unless
the context otherwise requires, references to the "Company" or "TEAM" in this
Prospectus include Team Rental Group, Inc. and its operating subsidiaries and
predecessors. The information set forth herein assumes no exercise of the
Underwriters' over-allotment option. "Common Stock," as used herein, refers
collectively and without distinction to the Class A Common Stock and the
Class B Common Stock.
THE COMPANY
Team Rental Group, Inc. is the largest Budget Rent a Car ("Budget")
franchisee worldwide and is one of the largest independent retailers of late
model automobiles in the United States. In 1994, TEAM embarked on a strategy
to significantly expand its Budget franchise base and to develop a branded
retail car sales operation within its Budget franchise territories. This
strategy both leverages management's experience and creates certain operating
efficiencies between these complementary businesses. Through its 159 vehicle
rental locations, TEAM had pro forma 1995 revenue of $202.9 million, and the
Company operates nine retail car sales facilities with monthly sales revenue
of $10.7 million for May 1996. The Company estimates it will purchase
approximately 40,000 vehicles over the next twelve months, consisting of new
automobiles and trucks for its Budget rental operations, late model
automobiles for its retail car sales operations and new passenger vans for
its van pooling operations.
STRATEGY
Since its initial public offering in August 1994, the Company has pursued
an aggressive growth strategy in both its vehicle rental and retail car sales
operations. TEAM has added nine Budget franchise territories with 136 current
locations to the four territories that it operated at the time of its initial
public offering, thereby enhancing the economies of scale in its operations,
balancing its geographic scope and reducing seasonal fluctuations.
Concurrently, the Company has developed or acquired its first nine retail car
sales facilities--all within its Budget territories.
The Company's strategy is to increase its revenues and improve its
profitability by:
o Significantly expanding its retail car sales operations;
o Acquiring additional Budget franchises; and
o Enhancing the scale and performance of its Budget Franchise Group.
Significantly Expand Retail Car Sales Operations. In recent years, there
has been increasing demand for low mileage, late model cars and several
companies have begun retailing such cars on a national or regional basis
under a single trade name. The Company's senior executive officers have
significant experience in acquiring and selling low mileage, late model cars
and the Company believes it will be able to obtain efficiencies by operating
retail car sales facilities in conjunction with certain of its Budget rental
facilities. The Company will seek to significantly expand its retail car
sales operations by adding facilities in (i) its seven existing car sales
markets, (ii) the Budget territories where it does not currently have retail
car sales operations and (iii) markets beyond its franchise territories.
Acquire Additional Budget Franchise Territories. TEAM will seek to
increase its revenues and profitability through additional opportunistic
acquisitions of Budget franchise territories, and believes that desirable
acquisition candidates will continue to exist within the Budget System. While
the Company would consider the acquisition of franchise territories in most
regions of the United States, there may be greater opportunities to achieve
additional operating efficiencies by acquiring franchise territories
contiguous to its existing territories. The Company believes that both TEAM
and BRAC have benefited from the improved results achieved by the franchises
acquired by the Company.
Enhance the Scale and Performance of its Budget Franchise Group. The
Company believes it will be able to enhance the profitability of its existing
Budget franchises and any additional Budget franchises
3
<PAGE>
that it may acquire by reducing the cost of operating those franchises and
increasing the rental revenues realized. The Company believes it will be able
to reduce costs through achieving further economies of scale, optimizing
fleet mix and utilization, and implementing standard cost management
practices in its newly acquired territories. The most significant elements of
achieving revenue growth include utilizing yield management models to
optimize pricing, adding additional locations in its existing and newly
acquired franchise territories (particularly by adding non-airport locations)
and placing an increased emphasis on the sale of ancillary products and
services.
GROWTH HISTORY
The following tables chronologically detail TEAM's acquisitions of Budget
franchises and the openings of its retail car sales facilities:
VEHICLE RENTAL--BUDGET FRANCHISE ACQUISITIONS
<TABLE>
<CAPTION>
1995
LOCATIONS AT FLEET SIZE AT REVENUES
FRANCHISE TERRITORY DATE ACQUIRED MAY 31, 1996 MAY 31, 1996 (MILLIONS)
- ------------------------- --------------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
Owned prior to August
1994
San Diego ................ April 1987 12 1,610 $ 18.6
Albany ................... August 1991 3 237 2.5
Rochester ................ November 1991 3 217 2.5
Richmond ................. December 1991 5 415 3.6
-------------- --------------- ----------
Total for franchises owned prior to
initial public offering .................. 23 2,479 27.2
--------------- ----------
Acquired since August 1994
Philadelphia ............. August 1994 22 2,019 21.0
Pittsburgh ............... August 1994 14 1,070 13.0
Cincinnati ............... August 1994 8 880 8.0
Fort Wayne ............... November 1994 3 187 1.7
Charlotte ................ January 1995 6 565 6.5
Dayton ................... January 1995 6 452 5.2
Hartford ................. March 1995 13 928 9.6
Los Angeles(1) ........... October 1995 41 5,355 63.4(2)
Phoenix .................. February 1996 23 2,953 47.3(2)
-------------- --------------- ----------
Total for franchises acquired since
initial public offering .................. 136 14,409 175.7
-------------- --------------- ----------
Total ..................................... 159 16,888 $202.9
============== =============== ==========
</TABLE>
- ------------
(1) Excludes the vehicle rental operations at Los Angeles International
Airport.
(2) Includes operations prior to their date of acquisition by the Company.
See the Unaudited Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1995 included under "Pro Forma Consolidated
Financial Statements."
RETAIL CAR SALES--FACILITIES OPENED
MAY 1996 SALES
DATE MAY 1996 REVENUE
METROPOLITAN AREA ACQUIRED/OPENED VEHICLES SOLD (THOUSANDS)
- ----------------- --------------- --------------- ---------------
San Diego--East . November 1994 61 $ 982
Dayton--North ... January 1995 34 518
San Diego--West . April 1995 100 1,843
Philadelphia ..... May 1995 91 1,712
Charlotte ........ September 1995 90 1,462
Richmond ......... October 1995 92 1,497
Ontario .......... October 1995 35 688
Cincinnati ....... April 1996 47 726
Dayton--South ... April 1996 80 1,305
--------------- ---------------
Total ............................ 630 $10,733
=============== ===============
In February 1996, the Company also acquired VPSI, Inc. ("Van Pool"), which
operates commuter van pooling services in 21 markets. Van Pool had a fleet of
approximately 3,250 vehicles at May 31, 1996.
4
<PAGE>
Sanford Miller (Chairman and Chief Executive Officer), John P. Kennedy
(President and Chief Operating Officer) and Jeffrey D. Congdon (Chief
Financial Officer and Secretary) (collectively, the "Principal Executive
Officers") have a combined 74 years of experience in the vehicle rental
business and have acquired and operated 54 Budget franchises over the past 15
years. In addition, Messrs. Miller and Congdon have a combined 25 years of
experience operating retail car sales facilities. These individuals will
remain the controlling stockholders of the Company after consummation of the
Offering.
The principal executive offices of the Company are located at 125 Basin
Street, Suite 210, Daytona Beach, Florida 32114, and its telephone number at
that location is (904) 238-7035.
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Class A Common Stock offered by:
The Company ...................................... 3,167,273 shares
Selling Stockholders ............................. 832,727 shares
4,000,000 shares
Common Stock to be outstanding
after the Offering(1) ........................... 8,660,449 shares of Class A
Common Stock 1,936,600
shares of Class B Common
Stock 10,597,049 shares of
Common Stock The proceeds to
the Company from the
Offering will be used to
reduce outstanding
indebtedness and for general
corporate purposes. The
Company will not receive any
proceeds from the sale of
shares by the
Use of Proceeds to the Company .................... Selling Stockholders.
Nasdaq National Market symbol ..................... TBUD
</TABLE>
- ------------
(1) Does not include 285,000 shares of the Class A Common Stock reserved
for issuance under the Company's stock option plans, of which options
to purchase 217,600 shares have been granted, and 362,500 shares of the
Class A Common Stock reserved for issuance upon exercise of outstanding
stock purchase warrants. See "Management--Benefit Plans" and
"Description of Capital Stock-- Warrants."
5
<PAGE>
SUMMARY FINANCIAL DATA
Historical Data. The 1994 data include results of operations for the
Company's Philadelphia and Pittsburgh, Pennsylvania, Cincinnati, Ohio and Ft.
Wayne, Indiana operations from their respective acquisition dates. The 1995
data include results of operations for the Company's Hartford, Connecticut
and Los Angeles, California operations from their respective acquisition
dates. The data for the three months ended March 31, 1995 include results of
operations for the Company's Hartford, Connecticut operation from its
acquisition date. The data for the three months ended March 31, 1996 include
results of operations for the Company's Phoenix, Arizona operation and for
Van Pool from their respective acquisition dates. Each of the foregoing
acquisitions was accounted for using the purchase method of accounting. The
data for 1993 include the separate capital structures of corporations that
were acquired in August 1994 and are presented on a combined basis as
companies under common control and, therefore, do not provide a meaningful
basis for presentation of earnings per share data.
Pro Forma Data. The following tables also set forth certain unaudited pro
forma consolidated financial and operating data for the Company (i) for the
year ended December 31, 1995, giving effect to the following transactions as
if they had occurred on January 1, 1995: (a) the acquisition of the Los
Angeles, California Budget franchise (the "Los Angeles Acquisition"), which
was effective on October 1, 1995 and (b) the acquisition of the Phoenix,
Arizona Budget franchise (the "Phoenix Acquisition"), which was completed on
February 27, 1996 (the Los Angeles Acquisition and the Phoenix Acquisition
are referred to collectively as the "Acquisitions"), and (ii) for the three
months ended March 31, 1996, giving effect to the Phoenix Acquisition as if
it had occurred on January 1, 1995.
Pro Forma, As Adjusted Data. The unaudited pro forma consolidated
statements of operations, as adjusted, include adjustments for the
Acquisitions, as described above, and adjustments for the sale of 3,167,273
shares of the Class A Common Stock offered by the Company hereby with
estimated net proceeds of $48.8 million, as described under "Use of
Proceeds," and the repayment of certain of the Company's outstanding
indebtedness from the proceeds of the Offering. The unaudited pro forma
consolidated statement of operations data, as adjusted, for the year ended
December 31, 1995 and the three months ended March 31, 1996, give effect to
such transactions as if they had occurred on January 1, 1995.
6
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
PRO PRO FORMA,
FORMA AS ADJUSTED
HISTORICAL (UNAUDITED) (UNAUDITED)
-------------------------------- ----------- -------------
1993 1994 1995 1995 1995
--------- --------- ---------- ----------- -------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AND BUDGET RENTAL
DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues:
Vehicle rental revenues ..... $22,321 $38,642 $107,067 $203,525 $203,525
Retail car sales revenues ... -- -- 42,662 42,662 42,662
--------- --------- ---------- ----------- -------------
Total operating revenues ... 22,321 38,642 149,729 246,187 246,187
Vehicle depreciation expense 4,358 7,382 27,476 59,392 59,392
Operating income ............. 2,450 4,196 14,180 19,328 19,328
Vehicle interest expense . . 2,462 3,909 13,874 26,844 25,946
Non-vehicle interest
expense ..................... 401 531 632 3,502 913
Income (loss) from continuing
operations before income
taxes ....................... 610 426 1,022 (9,643) (6,156)
Net income (loss) ............ 428 250 337 (5,786) (3,694)
Weighted average common
shares outstanding (000s) -- 3,704 6,369 7,430 10,597
Earnings (loss) per common
share ....................... -- $0.07 $0.05 $(0.78) $(0.35)
OPERATING DATA:
Adjusted EBITDA(1) ........... $1,392 $1,632 $3,854 $(1,228) $4,593
BUDGET RENTAL DATA:
Locations in operation at
period end ................. 19 63 133 157
Number of useable vehicles
at period end(2) ........... 2,006 5,044 11,143 14,955
Rental transactions(3) ..... 163,000 276,000 689,000 1,276,000
Daily dollar average(4) .... $34.01 $37.32 $41.26 $38.75
Vehicle utilization(5) ..... 77.2% 80.06% 80.0% 81.4%
Average monthly revenue per
unit(6) .................... $791 $909 $1,007 $946
RETAIL CAR SALES DATA:
Locations in operation at
period end ................. -- -- 7 7
Average monthly vehicles
sold ....................... -- -- 351 351
Average monthly sales
revenue .................... -- -- $4,883 $4,883
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
------------------------------------------------
PRO FORMA,
PRO AS
HISTORICAL FORMA ADJUSTED
----------------------- --------- ------------
1995 1996 1996 1996
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues:
Vehicle rental revenues ..... $17,354 $44,697 $52,911 $52,911
Retail car sales revenues ... 4,916 21,097 21,097 21,097
------------ --------- --------- ------------
Total operating revenues ... 22,270 65,794 74,008 74,008
Vehicle depreciation expense 5,126 11,804 13,983 13,983
Operating income ............. 372 7,254 7,749 7,749
Vehicle interest expense ..... 2,616 5,621 6,612 6,399
Non-vehicle interest
expense ..................... 67 254 473 --
Income (loss) from continuing
operations before income
taxes ....................... (1,911) 2,128 1,413 2,099
Net income (loss) ............ (1,146) 1,277 848 1,260
Weighted average common
shares outstanding (000s) 6,037 7,256 7,430 10,597
Earnings (loss) per common
share ....................... $(0.19) $0.18 $0.11 $0.12
OPERATING DATA:
Adjusted EBITDA(1) ........... $(1,447) $3,432 $3,233 $3,446
BUDGET RENTAL DATA:
Locations in operation at
period end ................. 94 159 159
Number of useable vehicles
at period end(2) ........... 7,076 17,264 17,264
Rental transactions(3) ..... 120,700 237,700 279,000
Daily dollar average(4) .... $39.67 $40.87 $41.13
Vehicle utilization(5) ..... 77.8% 84.2% 83.0%
Average monthly revenue per
unit(6) ..................... $926 $1,030 $1,022
RETAIL CAR SALES DATA:
Locations in operation at
period end ................. 2 7 7
Average monthly vehicles
sold ....................... 99 411 411
Average monthly sales
revenue .................... $1,632 $6,476 $6,476
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
(UNAUDITED)
-------------------------
ACTUAL AS ADJUSTED
---------- -------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Revenue earning vehicles, net $314,591 $314,591
Retail car sales inventory .. 13,832 13,832
Total assets ................. 478,677 478,677
Fleet financing facilities .. 145,682 145,682
Other vehicle obligations ... 207,039 197,039
Notes payable ................ 47,508 14,508
Total debt ................... 400,968 357,968
Common stock warrant ......... 2,000 2,000
Stockholders' equity ......... 43,596 92,347
</TABLE>
7
<PAGE>
- ------------
(1) Adjusted EBITDA consists of income before income taxes plus (a)
non-vehicle depreciation and amortization expenses and (b) non-vehicle
interest expense. Adjusted EBITDA is not presented as an alternative
measure of operating results or cash flows from operations (as
determined in accordance with generally accepted accounting
principles), but is presented because it is a widely accepted financial
indicator of a company's ability to service unsecured debt.
(2) Vehicles available for rental.
(3) Rounded to the nearest thousand.
(4) Rental revenue divided by number of days that vehicles were actually
rented.
(5) Number of days vehicles were actually rented divided by number of days
vehicles were available for rent.
(6) Average monthly revenue divided by average monthly fleet.
8
APITAL PRINTING SYSTEMS]
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors in
addition to other information included in this Prospectus before purchasing
any of the shares of Class A Common Stock.
RISKS INHERENT IN GROWTH STRATEGY
The Company's growth strategy has placed and will continue to place
significant demands on the Company's resources. Since completing its initial
public offering in August 1994, the Company has increased its rental
operations from four Budget franchise territories with 19 locations to
thirteen territories with 159 locations, and increased the size of its fleet
from 2,715 vehicles to 16,888 vehicles. Certain of the franchises acquired by
the Company had either been unprofitable or had inconsistent profitability
prior to their acquisition by the Company, and the Company may acquire
under-performing franchises in the future. The inability of the Company to
improve the profitability of such acquired franchises or to successfully
integrate acquired franchises into its operations could have an adverse
effect on the Company's results of operations.
Since November 1994, the Company has developed or acquired its first nine
retail car sales facilities, which constitutes a new line of business for the
Company, and the Company plans to expand this line of business significantly.
The Company's retail car sales facilities have a limited operating history.
The successful growth of the Company's retail car sales operation will depend
on a number of factors, including the identification of suitable locations,
the negotiation of leases for those locations on acceptable terms, the
hiring, training and retention of skilled managers for each facility,
implementation of standard operating practices, site construction or
refurbishment and development of additional sources of cars for resale. A
number of these factors will be beyond the Company's control. As a result,
there can be no assurance that the Company will be able to continue to
develop or acquire new retail car sales facilities.
COMPETITION
The vehicle rental industry is characterized by intense competition,
particularly with respect to price and service. In any geographic market, the
Company may encounter competition from national, regional and local vehicle
rental companies. The Company's main competitors are The Hertz Corporation
("Hertz"), Avis, Inc. ("Avis"), Alamo Rent a Car Inc. ("Alamo"), National Car
Rental System, Inc. ("National"), Dollar Rent a Car Systems, Inc. ("Dollar")
and Enterprise Rent a Car ("Enterprise"). There have been occasions when the
major vehicle rental companies have been adversely affected by industry-wide
price cutting, and the Company has on such occasions lowered its prices in
response. The Company is generally not able to unilaterally raise its prices
or to maintain its prices in times of industry price cutting. See
"Business--Competition."
The retail car sales industry is characterized by intense competition,
consisting primarily of local new car dealerships selling new and late-model
cars. The Company believes that competition for the customer seeking to
purchase a late model car is based primarily on price and selection, while a
customer originally intending to purchase a new car may select a late-model
car based on perceived value. In addition to local dealerships, the Company
may face competition from retailers that compete on the basis of large
inventory size, no-haggle pricing and after-sale service.
REQUIREMENTS FOR CAPITAL; EFFECT OF CHANGES IN INTEREST RATES
The vehicle rental business is capital intensive and the Company has
sought to reduce the cost of financing its fleet of vehicles by arranging
more advantageous asset-backed note financings. Since its initial public
offering in August 1994, the Company has financed its rental vehicles
primarily through asset-backed note facilities and traditional bank credit
facilities. The Company currently has two asset-backed note facilities in
place to provide financing for rental vehicles eligible for repurchase by
specified automobile manufacturers at fixed prices on designated dates
pursuant to such manufacturers' vehicle repurchase programs ("Program
Vehicles"). Subsequent to the completion of the Offering, the Company intends
to enter into an additional asset-backed note facility (the "Third Fleet
Financing Facility" and together with the Company's two existing asset-backed
facilities, the "Fleet Financing
9
<PAGE>
Facilities") in order to provide financing for additional vehicles, which may
include rental vehicles that are not subject to manufacturers' repurchase
program. In May 1996, the Company entered into a Revolving Credit Facility in
order to provide additional financing for approximately 5,600 Program
Vehicles (the "Revolving Credit Facility"). In aggregate, the Fleet Financing
Facilities are expected to provide financing for approximately 19,000
vehicles, which the Company believes is sufficient, together with vehicles
financed under other vehicle obligations, to meet its base fleet requirements
as of May 31, 1996.
The Company anticipates that amounts available under the Fleet Financing
Facilities and the Revolving Credit Facility and under working capital lines
and lines of credit being paid down from the net proceeds of the Offering,
together with amounts provided by its traditional financing sources, will be
sufficient to meet its financing needs for the foreseeable future. Certain
events, such as a material increase in damage to vehicles, could reduce the
value of the collateral securing the Fleet Financing Facilities and cause the
acceleration of the repayment of a portion of the principal of the Fleet
Financing Facilities. The Company has financed its retail car sales inventory
with $25.7 million of short term secured lines of credit. The failure to
obtain sufficient fleet financing or car sales inventory financing on
satisfactory terms would materially adversely affect the Company's
operations.
The Company had $401.0 million of indebtedness outstanding at March 31,
1996, substantially all of which bears interest at a floating rate based on
either 30-day LIBOR or the prime rate of interest. Accordingly, any increase
in prevailing interest rates would result in an increase in interest expense
incurred by the Company, which could have an adverse effect on the Company's
results of operations. Certain of the agreements under which the Company has
borrowings outstanding include significant covenants that, among other
things, restrict the ability of the Company to incur additional indebtedness,
repay or refinance other indebtedness or amend other debt instruments, pay
dividends, create liens on assets, engage in mergers or consolidations or
acquire other businesses and otherwise restrict corporate activities. In
addition, the Company is required to comply with specified financial tests
and ratios. The Company is currently in compliance with the restrictions and
covenants contained in its debt agreements, however, its ability to continue
to comply could be affected by events beyond its control, including
prevailing economic and industry conditions.
There can be no assurance that the sources of financing utilized by the
Company or alternative financing will remain or become available to the
Company or on terms acceptable to the Company. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
POTENTIAL CHANGES IN MANUFACTURERS' REPURCHASE PROGRAMS
At March 31, 1996, approximately 85% of the vehicles in the Company's
rental car fleet were Program Vehicles. The availability of Program Vehicles
limits the Company's risk of a decline in residual value at the time of
disposition and enables the Company to fix its depreciation expense in
advance. Vehicle depreciation is the largest cost factor in the Company's
operations. The Company believes that manufacturers' repurchase programs
enable the manufacturers to stimulate fleet sales in times of weak consumer
demand for new automobiles. In response to strong U.S. consumer demand for
passenger vehicles in 1993 and 1994, the major U.S. automobile manufacturers
reduced the number of vehicles subject to repurchase programs and the
financial incentives associated with these programs. U.S. consumer demand for
passenger vehicles began to weaken during the second quarter of 1995, and
this weakness has continued to date in 1996. In response to these market
conditions, there was an increase in the availability of repurchase programs
with respect to 1996 model year vehicles, particularly repurchase programs
for imported vehicles and these programs are expected to continue for 1997
model year vehicles. However, the Company could be adversly effected if
automobile manufacturers reduce the availability of Program Vehicles or
related incentives.
The Company could be at a competitive disadvantage if U.S. automobile
manufacturers selectively restrict eligibility to participate in their
repurchase programs. Over the past decade, U.S. automobile manufacturers have
acquired direct or indirect equity stakes in most of the major car rental
systems. General Motors Corporation ("GM") has an equity interest in Avis;
Ford Motor Company ("Ford") owns Hertz and has an equity interest in Budget
Rent a Car Corporation ("BRAC"); and Chrysler Corporation
10
<PAGE>
("Chrysler") has equity interests in Dollar and Thrifty Rent-A-Car Systems,
Inc. ("Thrifty"). For the 1996 model year, the Company purchased
substantially all of its vehicles pursuant to programs sponsored by Ford
(including its affiliate Mazda Motor of America, Inc. ("Mazda")) and
Chrysler. Any effort by GM or Chrysler to restrict eligibility to participate
in repurchase programs to rental systems within their corporate families
could adversely affect the Company's ability to compete with those of its
competitors that have continued access to such programs. Similarly, any
effort by Ford or Mazda to restrict the eligibility of Budget franchise
operations (as opposed to Budget operations owned by BRAC) to participate in
their repurchase programs could have a material adverse effect on the
Company's competitive position. The Company is not aware of any plans by the
manufacturers to selectively restrict its eligibility to participate in their
repurchase programs.
FRANCHISEE STATUS; DEPENDENCE ON BUDGET SYSTEM
The Company's subsidiaries that operate its vehicle rental business are
franchisees of BRAC or, in the case of (i) its Los Angeles and San Diego
operations, sub-franchisees of Budget Rent a Car of Southern California
("SoCal"), and (ii) its Los Angeles truck rental operations, the
sub-franchisee of an unaffiliated third party. Significant matters relating
to the Company's growth and operational strategies must be coordinated with,
and approved by, the Company's franchisors. Each of the Company's franchise
agreements provides that the franchisor has the right to terminate the
franchise granted thereunder if the Company is in violation of the terms of
such franchise agreement or the Budget operating manual. Any such termination
could have a material adverse effect on the Company. Pursuant to each
franchise agreement, the Company must meet certain guidelines relating to the
number of rental offices in a franchised territory, the number of vehicles
maintained for rental and the amount of advertising and promotion
expenditures. See "Business--Franchise Agreements" and "Certain
Transactions."
Due to the nature of franchising and the Company's franchise agreements,
the success of the Company is, to a large extent, dependent upon the overall
success of Budget's worldwide system (the "Budget System"), including the
performance of other Budget franchisees. In particular, the Company relies on
BRAC for national promotion, advertising and marketing programs and the BRAC
computerized reservation system. The Company believes that BRAC has depended
in the past on the financial support of Ford and may in the future continue
to rely on such support. Thus, any material adverse change in the financial
condition, management or marketing efforts of BRAC or the Budget System,
including any material reduction of Ford's financial support of BRAC, could
have an adverse effect on the Company's results of operations and financial
condition. In addition, as a sub-franchisee in Los Angeles and San Diego, the
Company is dependent, in part, on the financial condition and performance of
the primary licensees of the underlying Budget franchise agreements with
BRAC. See "Business--Vehicle Rental Operations--The Budget System."
Pursuant to its standard franchise agreements, BRAC generally has a right
of first refusal with respect to the sale or transfer of Budget franchises
and, even if it does not exercise such right, must consent to the transfer of
a Budget franchise. The consent of BRAC is generally required for the sale,
assignment or transfer of 33.3% or more of the equity ownership or voting
control of a Budget franchisee, and BRAC has the right to approve any
transfer of shares by Messrs. Miller, Kennedy and Congdon that would reduce
the combined voting power of the shares of Common Stock which they own to
less than 50.1%. See "Principal and Selling Stockholders." Messrs. Miller and
Congdon, the Company's Chief Executive Officer and Chief Financial Officer,
respectively, are currently bound by an agreement with BRAC that limits their
ability to acquire additional Budget franchises outside of Southern
California prior to May 14, 1999 without the consent of BRAC. Although BRAC
has consented to the Company's previous acquisitions, there can be no
assurance that BRAC will decline to exercise its right of first refusal or
will consent to additional acquisitions by the Company in the future.
SEASONALITY
The Company's third quarter, during the peak summer travel months, has
historically been the strongest quarter of the year. As a result, any
occurrence that disrupts travel patterns during the summer period could have
a material adverse effect on the Company's annual performance. The Company
has
11
<PAGE>
sought to reduce this seasonal effect by acquiring franchise territories that
are winter travel destinations, and the Company believes that its recent
acquisitions of the Los Angeles and the Phoenix operations have reduced and
will continue to reduce these seasonal effects. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Seasonality."
REGULATION OF LOSS DAMAGE WAIVERS
A traditional revenue source for the vehicle rental industry has been the
sale of loss damage waivers, by which rental companies agree to relieve a
customer from financial responsibility arising from vehicle damage incurred
during the rental period. Approximately 6% of the Company'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
vehicle rental companies. House Bill H.R. 175, introduced in January 1995,
seeks to prohibit the imposition of liability on renters for loss of, or
damage to, rented vehicles, except in certain circumstances, and would
prohibit the sale of loss damage waivers. In addition, New York State has
enacted legislation which eliminated the right of vehicle rental companies to
offer for sale loss damage waivers, and California has capped the rates which
can be charged for this protection at $9.00 per day. To date, 21 states have
enacted legislation which requires disclosure to each customer at the time of
rental that damage to the rented vehicle may be covered by the customer's
personal automobile insurance. Adoption of national or additional state
legislation affecting or limiting the sale of loss damage waivers could
result in the loss of this revenue source.
ENVIRONMENTAL RISKS INHERENT IN ON-SITE PETROLEUM STORAGE
Twenty-nine of the Company's facilities contain tanks for the storage of
petroleum products, such as gasoline, diesel fuel and waste oils. At 27 of
the Company's locations, one or more of these tanks are located underground.
The Company maintains an environmental compliance program that includes the
implementation of required technical and operational procedures designed to
minimize the potential for leaks and spills, maintenance of records and the
regular testing of tank systems for tightness. However, there can be no
assurance that these tank systems will at all times remain free from leaks or
that the use of these tanks will not result in spills. Any leak or spill,
depending on such factors as the material involved, quantity and
environmental setting, could result in interruptions to the Company's
operations and expenditures that could have a material adverse effect on the
Company's results of operations and financial condition.
There can be no assurance that future environmental legislation and
regulations will not require material expenditures by the Company or
otherwise have a material adverse effect on the Company's operations. See
"Business--Regulation and Environmental Matters."
RISK OF NON-RENEWAL OF AIRPORT CONCESSIONS
The Company conducts rental operations at 29 airports, with each of these
operations conducted pursuant to a concession agreement granted by the local
airport authority. In general, these concession agreements are subject to
competitive bidding at the time of renewal. The terms of the Company's
airport concession agreements are varied and include month-to-month terms at
certain locations and fixed terms of various durations at other locations.
The Company is at risk of losing its ability to operate at an airport if it
is not a successful bidder at the time its concession agreement is subject to
renewal.
DEPENDENCE ON PRINCIPAL EXECUTIVE OFFICERS
The Company's existing operations and continued future development are
dependent in part on the active participation of the Company's Principal
Executive Officers. The loss of the services of one or more of these
individuals could have a material adverse effect on the Company. See
"Management."
SHARES ELIGIBLE FOR FUTURE SALE
A substantial number of shares of Common Stock currently outstanding, or
issuable upon exercise of stock options and stock purchase warrants, are or
will become eligible for future sale in the public
12
<PAGE>
market at prescribed times pursuant to applicable regulations and
registration rights of certain security holders. The Company, its executive
officers and directors and the Selling Stockholders have agreed that, for a
period of 90 days after the date of this Prospectus, they will not sell or
otherwise dispose of any shares of Common Stock without the prior written
consent of CS First Boston Corporation. Significant sales of the Class A
Common Stock in the public market following the Offering could adversely
affect prevailing market prices. See "Shares Eligible for Future Sale."
VOTING CONTROL BY PRINCIPAL EXECUTIVE OFFICERS
The Company has two classes of Common Stock: Class A Common Stock, which
is entitled to one vote per share, and Class B Common Stock, which is
entitled to ten votes per share. The Principal Executive Officers own all of
the outstanding shares of Class B Common Stock, which, following the
Offering, will represent approximately 69.1% of the combined voting power of
both classes of Common Stock. As a result, the Principal Executive Officers
will continue to be able to elect all of the Company's Board of Directors,
thereby ensuring that members elected by them will continue to direct the
business, policies and management of the Company. See "Principal and Selling
Stockholders."
POTENTIAL ANTI-TAKEOVER EFFECTS OF CHARTER AND BYLAW PROVISIONS; POSSIBLE
ISSUANCES OF PREFERRED STOCK
Certain provisions of Delaware law, the Company's Amended and Restated
Certificate of Incorporation (in particular, the voting rights of the Class B
Common Stock) and the Company's Bylaws could delay or impede the removal of
incumbent directors and could make it more difficult for a third party to
acquire, or could discourage a third party from attempting to acquire,
control of the Company. Such provisions could limit the price that certain
investors might be willing to pay in the future for shares of the Class A
Common Stock. In addition, shares of preferred stock may be issued by the
Board of Directors without stockholder approval on such terms and conditions,
and having such rights, privileges and preferences, as the Board of Directors
may determine. The rights of the holders of the Class A Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of
any preferred stock that may be issued in the future. The Company has no
current plans to issue any shares of preferred stock. See "Description of
Capital Stock--Preferred Stock" and "Description of Capital Stock--Section
203."
13
<PAGE>
THE COMPANY
Team Rental Group, Inc. is the largest Budget franchisee worldwide and is
one of the largest independent retailers of late model automobiles in the
United States. In 1994, TEAM embarked on a strategy to significantly expand
its Budget franchise base and to develop a branded retail car sales operation
within its Budget franchise territories. This strategy leverages management's
experience and creates certain operating efficiencies between these
complementary businesses. Through its 159 vehicle rental locations, TEAM had
pro forma 1995 revenue of $202.9 million, and the Company operates nine
retail car sales facilities with monthly sales revenue of $10.7 million for
May 1996. The Company estimates it will purchase approximately 40,000
vehicles over the next twelve months, consisting of new automobiles and
trucks for its Budget rental operations, late model automobiles for its
retail car sales operations and new passenger vans for its van pooling
operations.
The following chart illustrates the functional organization of the Company
and the operating territories of each business.
GRAPHIC TO COME
VEHICLE RENTAL DIVISION
BUDGET FRANCHISE GROUP
(159 LOCATIONS)
Albany (3)
Charlotte (6)
Cincinnati (8)
Dayton (6)
Fort Wayne (3)
Hartford (13)
Los Angeles (41)
Philadelphia (22)
Phoenix (23)
Pittsburgh (14)
Richmond (5)
Rochester (3)
San Diego (12)
VAN POOL GROUP
(21 MARKETS)
Atlanta
Austin
Boston
Chicago
Cincinnati
Dallas/Ft. Worth
Danbury
Detroit
Honolulu
Houston
Los Angeles
Melbourne
Newark
New Orleans
Orlando
Pittsburgh
Richmond
San Francisco
St. Paul
Tampa
Washington, DC
RETAIL CAR SALES
GROUP
(9 FACILITIES)
Charlotte
Cincinnati
Dayton--North
Dayton--South
Ontario
Philadelphia
Richmond
San Diego--East
San Diego--West
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be
approximately $48.8 million (approximately $58.1 million if the Underwriters'
over-allotment option is exercised in full). The Company will not receive any
proceeds from the sale of shares by the Selling Stockholders.
The Company intends to use the net proceeds from the Offering to repay
outstanding indebtedness as follows: (i) approximately $17.0 million will be
used to repay amounts under a note payable to NationsBank, National
Association (South), $7.0 million of which was incurred to finance the
Phoenix Acquisition and $10.0 million of which was incurred to repay
borrowings incurred in connection with the Los Angeles Acquisition, which
indebtedness matures June 28, 1996 and bears interest at a rate of prime plus
3.0% (currently 11.25%), (ii) approximately $13.0 million will be used to
repay amounts outstanding under a working capital line with NBD Bank, N.A.,
which is due November 1996 and bears interest at a rate of LIBOR plus 1.85%
(currently approximately 7.7%), (iii) approximately $3.0 million will be used
to repay amounts due under a note payable to Spectrum Investment that was
assumed in connection with the Los Angeles Acquisition, which matures in
August 1999 and bears interest at 8.0%, and (iv) approximately $10.0 million
will be used to repay amounts outstanding under a line of credit with World
Omni Financial Corp. which are due during the period from June 1996 to
October 1996 and bear interest at prime plus 0.25% (currently 8.50%). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Certain Transactions." The
remaining balance of the net proceeds, and any net proceeds from the exercise
of the Underwriters' over-allotment option, will be used for general
corporate purposes.
PRICE RANGE OF COMMON STOCK
The Class A Common Stock is listed on the Nasdaq National Market under the
symbol "TBUD." The following table sets forth the high and low sale prices
per share for the Class A Common Stock as reported to the Company by the
Nasdaq National Market for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
-------- -------
<S> <C> <C>
1994
Third Quarter (commencing August 18, 1994) $12.50 $9.31
Fourth Quarter ............................. 11.50 9.00
1995
First Quarter .............................. 9.75 8.00
Second Quarter ............................. 9.00 7.25
Third Quarter .............................. 11.38 6.50
Fourth Quarter ............................. 10.75 8.13
1996
First Quarter .............................. 10.50 8.25
Second Quarter (through June 12, 1996) .... 17.50 9.25
</TABLE>
On June 12, 1996, the last sale price of the Common Stock as reported on
the Nasdaq National Market was $16.50 per share. As of June 12, 1996, there
were approximately 78 holders of record of the Class A Common Stock.
DIVIDEND POLICY
The Company has never declared or paid dividends on its Common Stock, and
anticipates that all earnings will be retained for use in its business. The
declaration and payment of any future dividends is at the discretion of the
Board of Directors of the Company. However, the Company is party to a number
of loan agreements which restrict its ability to pay cash dividends.
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1996 (i) on an actual basis and (ii) as adjusted to give effect to
sale of the shares of the Class A Common Stock offered by the Company hereby
(at an assumed offering price of $16.50 per share) and the application of the
estimated net proceeds therefrom. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
(UNAUDITED)
-------------------------
ACTUAL AS ADJUSTED
---------- -------------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Fleet Financing Facilities:
First Fleet Financing Facility .................................... $105,682 $105,682
Second Fleet Financing Facility ................................... 40,000 40,000
Other vehicle obligations .......................................... 207,039 197,039
Notes payable ...................................................... 47,508 14,508
Capital lease obligations .......................................... 739 739
---------- -------------
Total debt ........................................................ 400,968 357,968
---------- -------------
Common stock warrant ................................................ 2,000 2,000
---------- -------------
Stockholders' equity:
Class A Common Stock, $.01 par value, one vote per share,
17,500,000 shares authorized; 5,529,843 shares issued and
5,493,176 shares outstanding; 8,697,116 shares and 8,660,449
shares outstanding
(pro forma, as adjusted)(1) ....................................... 54 86
Class B Common Stock, $.01 par value, ten votes per share,
2,500,000 shares authorized, 1,936,600 shares issued and
outstanding ........................................................ 20 20
Additional paid-in capital .......................................... 44,709 93,428
Accumulated deficit ................................................. (857) (857)
Treasury stock (at cost) ............................................ (330) (330)
---------- -------------
Total stockholders' equity ....................................... 43,596 92,347
---------- -------------
Total capitalization ............................................. $446,564 $452,315
========== =============
</TABLE>
- ------------
(1) Does not include 285,000 shares of the Class A Common Stock reserved
for issuance under the Company's stock option plans (of which options
to purchase 217,600 shares have been granted) and 362,500 shares of the
Class A Common Stock reserved for issuance under outstanding warrants.
See "Management--Benefit Plans" and "Description of Capital
Stock--Warrants."
16
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated statements of operations
for the year ended December 31, 1995 give effect to the following
transactions as if they had occurred on January 1, 1995: (i) the Los Angeles
Acquisition, which was effective on October 1, 1995, and the Phoenix
Acquisition, which was completed on February 27, 1996 and, (ii) the Offering
and the repayment of certain of the Company's outstanding indebtedness from
the proceeds thereof. The following unaudited pro forma consolidated
statements of operations for the three months ended March 31, 1996 give
effect to the following transactions as if they occurred on January 1, 1995:
(i) the Phoenix Acquisition and (ii) the Offering and the repayment of
certain of the Company's outstanding indebtedness from the proceeds thereof.
The Acquisitions have been accounted for using the purchase method of
accounting.
These unaudited pro forma consolidated financial statements may not be
indicative of the results that actually would have occurred if the
transactions referred to above had been in effect on the dates indicated or
the results that may be obtained in the future. These statements are
qualified in their entirety by, and should be read in conjunction with, the
audited financial statements of the Company, BRAC-OPCO, Inc. (Los Angeles),
and Arizona Rent-A-Car Systems, Inc. (Phoenix) and the notes thereto included
elsewhere in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Unaudited pro forma earnings (loss) per common share data, as adjusted,
are calculated using 10,597,049 shares of Common Stock outstanding subsequent
to the sale of the Class A Common Stock offered hereby.
17
<PAGE>
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL(A) LOS ANGELES(B) PHOENIX(C)
------------- -------------- ----------
<S> <C> <C> <C>
Operating revenues ............ $149,729 $49,121 $47,337
Operating expenses:
Cost of retail car sales .... 38,021 -- --
Direct vehicle and operating 13,704 4,949 10,770
Depreciation-vehicles ........ 27,476 18,123 13,888
Depreciation-non-vehicle .... 1,341 545 1,362
Advertising, promotion and
selling ..................... 11,826 3,988 4,189
Facilities ................... 11,121 4,885 4,257
Personnel .................... 24,515 10,209 9,486
General and administrative .. 6,686 1,539 2,744
Amortization ................. 859 251 11
------------- -------------- ----------
Total operating expenses ... 135,549 44,489 46,707
------------- -------------- ----------
Operating income .............. 14,180 4,632 630
Other (income) and expense:
Vehicle interest ............. 13,874 7,589 5,381
Other interest ............... 632 640 138
Interest income .............. (1,348) (27) --
------------- -------------- ----------
Total other expense, net ... 13,158 8,202 5,519
------------- -------------- ----------
Income (loss) before income
taxes, cumulative effect of
accounting change and loss
from discontinued operations 1,022 (3,570) (4,889)
Provision (benefit) for income
taxes ........................ 685 -- (1,880)
------------- -------------- ----------
Income (loss) before
cumulative effect of
accounting change and loss
from discontinued operations
(d) .......................... $337 $(3,570) $(3,009)
============== ==========
Weighted average common shares
outstanding .................. 6,369 -- --
============== ==========
Earnings (loss) per common
share ........................ $0.05 -- --
============= ============== ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA FOR
THE
ADJUSTMENTS PRO FORMA FOR ACQUISITIONS
FOR THE THE ADJUSTMENTS FOR AND THE
ACQUISITIONS ACQUISITIONS THE OFFERING OFFERING
-------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Operating revenues ............ -- $ 246,187 -- $ 246,187
Operating expenses:
Cost of retail car sales .... -- 38,021 -- 38,021
Direct vehicle and operating $2,084 (1) 31,507 -- 31,507
Depreciation-vehicles ........ (95)(2) 59,392 -- 59,392
Depreciation-non-vehicle .... 3,248 -- 3,248
Advertising, promotion and
selling ..................... (165)(3) 19,838 -- 19,838
Facilities ................... (326)(4) 19,937 -- 19,937
Personnel .................... (1,927)(5) 42,283 -- 42,283
General and administrative .. -- 10,969 -- 10,969
Amortization ................. 543 (6) 1,664 -- 1,664
-------------- -------------- ---------------- --------------
Total operating expenses ... 114 226,859 -- 226,859
-------------- -------------- ---------------- --------------
Operating income .............. (114) 19,328 -- 19,328
Other (income) and expense:
Vehicle interest ............. -- 26,844 $(898)(8) 25,946
Other interest ............... 2,092 (7) 3,502 (2,589)(9) 913
Interest income .............. -- (1,375) -- (1,375)
-------------- -------------- ---------------- --------------
Total other expense, net ... 2,092 28,971 (3,487) 25,484
-------------- -------------- ---------------- --------------
Income (loss) before income
taxes, cumulative effect of
accounting change and loss
from discontinued operations (2,206) (9,643) 3,487 (6,156)
Provision (benefit) for income
taxes ........................ (2,662)(10) (3,857) 1,395(10) (2,462)
-------------- -------------- ---------------- --------------
Income (loss) before
cumulative effect of
accounting change and loss
from discontinued operations
(d) .......................... $456 $(5,786) $2,092 $(3,694)
============== ============== ================ ==============
Weighted average common shares
outstanding .................. 1,061 7,430 3,167 10,597
============== ============== ================ ==============
Earnings (loss) per common
share ........................ -- $(0.78) -- $(0.35)
============== ============== ================ ==============
</TABLE>
- ------------
(a) Includes results of operation of the Los Angeles Budget franchise from
October 1, 1995.
(b) Reflects operations of the Los Angeles Budget franchise for the period
from January 1, 1995 through September 30, 1995.
(c) Reflects operations of the Phoenix Budget franchise for the period from
March 1, 1995 through February 29, 1996. Prior to the Phoenix
Acquisition, the fiscal year of the Phoenix Budget franchise ended on
the last day of February.
(d) Accounting change and loss from discontinued operations were incurred
by the Phoenix Budget franchise prior to its acquisition by the
Company.
See Notes to Unaudited Pro Forma Consolidated Statements of Operations.
18
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
(1)To reflect the addition of royalty payments to SoCal, the former
owner of the Los Angeles Budget franchise (representing 5% of
concessionable revenues), which was a condition of the purchase.
(2)To reflect a reduction in the fleet depreciation expense for cars
allocated to the managers of the Los Angeles Budget franchise.
(3)To reflect a reduction in credit card merchant processing fees based
on the utilization of the Company's current credit card rate.
(4)To reflect the elimination of a write-off on assets not acquired by
the Company.
(5)To reflect (a) a $865,045 reduction in wages, bonuses and benefits
resulting from a reduction in the number of employees for the
acquired operations, (b) a $742,000 reduction relating to salaries
previously paid to officers of the acquired operations terminated
concurrent with the acquisitions, (c) a $267,000 reduction relating
to termination charges relating to medical benefits and (d) a $53,000
reduction resulting from the elimination of retirement plans.
(6)To reflect (a) a $187,000 increase in franchise rights amortization
expense related to the Los Angeles Acquisition and (b) a $356,000
increase in franchise rights amortization expense relating to the
Phoenix Acquisition, in each case based on a full year amortization
period.
(7)To reflect additional interest expense that would have been incurred
on borrowings of $20.2 million to effect the Acquisitions.
(8)To reflect the elimination of interest expense on vehicle debt to be
paid with proceeds of the Offering.
(9)To reflect the elimination of interest expense on non-vehicle debt to
be paid with the proceeds of the Offering.
(10)To adjust income taxes for an effective tax rate of 40%.
19
<PAGE>
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS FOR
THE PHOENIX
HISTORICAL(A) PHOENIX(B) ACQUISITION
------------- ---------- ---------------
<S> <C> <C> <C>
Operating revenues ............. $65,794 $8,214 --
Operating expenses:
Cost of retail car sales ..... 17,840 -- --
Direct vehicle and operating . 5,959 1,479 --
Depreciation-vehicles ......... 11,804 2,179 --
Depreciation-non-vehicle ..... 536 229 --
Advertising, promotion and
selling ...................... 4,600 915 --
Facilities .................... 4,328 838 --
Personnel ..................... 10,689 1,912 $(337)(1)
General and administrative ... 2,270 436 --
Amortization .................. 514 8 60 (2)
------------- ---------- ---------------
Total operating expenses .... 58,540 7,996 (277)
------------- ---------- ---------------
Operating income ............... 7,254 218 277
Other (income) and expense:
Vehicle interest .............. 5,621 991 --
Other interest ................ 254 2 217 (3)
Interest income ............... (749) -- --
------------- ---------- ---------------
Total other expense, net .... 5,126 993 217
------------- ---------- ---------------
Income (loss) before income
taxes, cumulative effect of
accounting change and loss
from discontinued operations . 2,128 (775) 60
Provision (benefit) for income
taxes ......................... 851 (310) 24
------------- ---------- ---------------
Income (loss) before cumulative
effect of accounting change
and loss from discontinued
operations .................... $1,277 $ (465) $36
============= ========== ===============
Weighted average common shares
outstanding ................... 7,256 -- 174
========== ===============
Earnings per common share ..... $0.18 -- --
============= ========== ===============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA FOR
PRO FORMA FOR THE PHOENIX
THE PHOENIX ADJUSTMENTS FOR ACQUISITION AND
ACQUISITION THE OFFERING THE OFFERING
------------- ---------------- ---------------
<S> <C> <C> <C>
Operating revenues ............. $74,008 -- $74,008
Operating expenses:
Cost of retail car sales ..... 17,840 -- 17,840
Direct vehicle and operating . 7,438 -- 7,438
Depreciation-vehicles ......... 13,983 -- 13,983
Depreciation-non-vehicle ..... 765 -- 765
Advertising, promotion and
selling ...................... 5,515 -- 5,515
Facilities .................... 5,166 -- 5,166
Personnel ..................... 12,264 -- 12,264
General and administrative ... 2,706 -- 2,706
Amortization .................. 582 -- 582
------------- ---------------- ---------------
Total operating expenses .... 66,259 -- 66,259
------------- ---------------- ---------------
Operating income ............... 7,749 -- 7,749
Other (income) and expense:
Vehicle interest .............. 6,612 $(213)(4) 6,399
Other interest ................ 473 (473)(5) --
Interest income ............... (749) (749)
------------- ---------------- ---------------
Total other expense, net .... 6,336 (686) 5,650
------------- ---------------- ---------------
Income (loss) before income
taxes, cumulative effect of
accounting change and loss
from discontinued operations . 1,413 686 2,099
Provision (benefit) for income
taxes ......................... 565 274 839
------------- ---------------- ---------------
Income (loss) before cumulative
effect of accounting change
and loss from discontinued
operations .................... $848 $412 $1,260
============= ================ ===============
Weighted average common shares
outstanding ................... 7,430 3,167 10,597
============= ================ ===============
Earnings per common share ..... $0.11 -- $0.12
============= ================ ===============
</TABLE>
- ------------
(a) Includes results of operations of the Phoenix Budget franchise from
March 1, 1996.
(b) Reflects operations of the Phoenix Budget franchise for the period from
January 1, 1996 through February 29, 1996.
See Notes to Unaudited Pro Forma Consolidated Statements of Operations.
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996
(1) To reflect (a) a $312,000 reduction relating to salaries and bonuses
previously paid to officers of the Phoenix Budget franchise and (b) a
$25,000 reduction resulting from the elimination of a retirement
plan.
(2) To reflect an increase in franchise rights amortization expense.
(3) To reflect additional interest expense that would have been incurred
on borrowings of $15.0 million to effect the Phoenix Acquisition.
(4) To reflect the elimination of interest expense on vehicle debt to be
paid with the proceeds of the Offering.
(5) To reflect the elimination of interest expense on non-vehicle debt to
be paid with the proceeds of the Offering.
21
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected consolidated statement of
operations data and selected consolidated balance sheet data of the Company
for the five years ended December 31, 1995. Such data were derived from the
audited consolidated financial statements of the Company. The audited
consolidated financial statements and notes thereto of the Company for each
of the three years in the period ended December 31, 1995 are included
elsewhere in this Prospectus. The following table also sets forth selected
consolidated statement of operations data and selected consolidated balance
sheet data of the Company for the three months ended March 31, 1995 and March
31, 1996. Such data were derived from the unaudited consolidated financial
statements of the Company included elsewhere in this Prospectus, which
unaudited consolidated financial statements, in the opinion of the Company's
management, include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the financial position and
results of operations for such periods. The results of operations for the
three months ended March 31, 1996 are not necessarily indicative of results
that may be expected for the entire year. The selected consolidated financial
data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and notes thereto of the Company
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995
---------- --------- --------- --------- ----------
(statement of operations data in
thousands,except per share data)
STATEMENT OF OPERATIONS DATA:
Operating revenues:
Vehicle rental revenues ............ $15,105 $21,968 $22,321 $38,642 $107,067
Retail car sales revenues .......... -- -- -- -- 42,662
---------- --------- --------- --------- ----------
Total operating revenues ......... 15,105 21,968 22,321 38,642 149,729
Operating costs and expenses:
Direct vehicle and operating ...... 3,903 5,989 5,452 9,439 13,704
Depreciation--vehicles ............. 1,939 2,832 4,358 7,382 27,476
Depreciation--non-vehicles ......... 227 212 229 446 1,341
Cost of car sales .................. -- -- -- -- 38,021
Advertising, promotion and selling 1,066 1,477 1,658 3,090 11,826
Facilities ......................... 2,020 2,662 2,695 4,398 11,121
Personnel .......................... 3,741 4,292 4,537 7,947 24,515
General and administrative expenses 935 736 790 1,515 6,686
Amortization of franchise rights .. 170 151 152 229 859
---------- --------- --------- --------- ----------
Total operating costs and
expenses ........................ 14,001 18,351 19,871 34,446 135,549
Operating income ................... 1,104 3,617 2,450 4,196 14,180
Other (income) expense:
Vehicle interest expense .......... 1,867 2,440 2,462 3,909 13,874
Non-vehicle interest expense
(income), net .................... 503 619 401 (139) (716)
Nonrecurring income ............... -- -- (1,023) -- --
---------- --------- --------- --------- ----------
Income (loss) before provision for
income taxes ...................... (1,266) 558 610 426 1,022
Net income (loss) .................. $(1,266) $ 558 $ 428 $ 250 $ 337
========= ========= ========= ==========
Weighted average common shares
outstanding ....................... -- -- -- 3,704 6,369
Earnings (loss) per common share .. -- -- -- $ 0.07 $ 0.05
========= ========= ========= ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
----------------------------
<S> <C> <C>
1995 1996
---------- ---------
(statement of operations data in
thousands,except per share data)
STATEMENT OF OPERATIONS DATA:
Operating revenues:
Vehicle rental revenues ............ $17,354 $44,697
Retail car sales revenues .......... 4,916 21,097
---------- ---------
Total operating revenues ......... 22,270 65,794
Operating costs and expenses:
Direct vehicle and operating ...... 2,625 5,959
Depreciation--vehicles ............. 5,126 11,804
Depreciation--non-vehicles ......... 285 536
Cost of car sales .................. 4,258 17,840
Advertising, promotion and selling 2,036 4,600
Facilities ......................... 2,076 4,328
Personnel .......................... 4,494 10,689
General and administrative expenses 886 2,270
Amortization of franchise rights .. 112 514
---------- ---------
Total operating costs and
expenses ........................ 21,898 58,540
Operating income ................... 372 7,254
Other (income) expense:
Vehicle interest expense .......... 2,616 5,621
Non-vehicle interest expense
(income), net .................... (333) (495)
Nonrecurring income ............... -- --
---------- ---------
Income (loss) before provision for
income taxes ...................... (1,911) 2,128
Net income (loss) .................. $(1,146) $ 1,277
========== =========
Weighted average common shares
outstanding ....................... 6,037 7,256
Earnings (loss) per common share .. $ (0.19) $ 0.18
========== =========
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
YEAR ENDED DECEMBER 31, (UNAUDITED)
------------------------------- ---------------------
1993 1994 1995 1995 1996
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Adjusted EBITDA(1) (in thousands) ............ $1,392 $1,632 $3,854 $(1,447) $3,432
VEHICLE RENTAL DATA:
Locations in operation at period end ....... 19 63 133 94 159
Number of useable vehicles at period end(2) 2,006 5,044 11,143 7,076 17,264
Rental transactions(3) ...................... 163,000 276,000 689,000 120,700 237,700
Daily dollar average(4) ..................... $34.01 $37.32 $41.26 $39.67 $40.89
Vehicle utilization(5) ...................... 77.2% 80.6% 80.0% 77.8% 84.2%
Average monthly revenue per unit(6) ........ $791 $909 1,007 $926 $1,030
RETAIL CAR SALES DATA:
Locations in operation at period end ....... -- -- 7 2 7
Average monthly vehicles sold ............... -- -- 351 99 411
Average monthly sales revenue (in thousands) -- -- $4,883 $1,632 $6,476
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31, 1996
----------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 (UNAUDITED)
--------- --------- --------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Revenue earning vehicles, net $26,870 $23,343 $23,577 $ 97,127 $219,927 $314,591
Retail car sales inventory ... -- -- -- 943 8,938 13,832
Total assets .................. 36,800 32,027 33,325 162,991 386,323 478,677
Fleet financing facilities ... -- -- -- 105,682 145,682 145,682
Other vehicle obligations .... 28,380 23,890 23,857 18,097 149,965 207,039
Notes payable ................. 5,924 3,795 1,824 2,785 22,586 47,508
Total debt .................... 34,531 27,880 28,533 127,187 319,017 400,968
Redeemable preferred stock ... -- 2,747 2,747 -- -- --
Common stock warrant .......... -- -- -- 2,000 2,000 2,000
Stockholders' equity (deficit) (1,737) (1,344) (1,251) 26,748 39,592 43,596
</TABLE>
- ------------
(1) Adjusted EBITDA consists of income before provision for income taxes
plus (a) non-vehicle depreciation and amortization expenses and (b)
non-vehicle interest expense. Adjusted EBITDA is not presented as an
alternative measure of operating results or cash flows from operations
(as determined in accordance with generally accepted accounting
principles), but is presented because it is a widely accepted financial
indicator of a company's ability to service unsecured debt.
(2) Vehicles available for rental.
(3) Rounded to the nearest thousand.
(4) Rental revenue divided by number of days that vehicles were actually
rented.
(5) Number of days vehicles were actually rented divided by number of days
vehicles were available for rent.
(6) Average monthly revenue divided by average monthly fleet.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Team Rental Group, Inc. is the largest Budget Rent a Car franchisee
worldwide and is one of the largest independent retailers of late model
automobiles in the United States. In 1994, TEAM embarked on a strategy to
significantly expand its Budget franchise base and to develop a branded
retail car sales operation within its Budget franchise territories. This
strategy both leverages management's experience and creates certain operating
efficiencies between these complementary businesses. Through its 159 vehicle
rental locations, TEAM had pro forma 1995 revenues of $202.9 million, and the
Company operates nine retail car sales facilities with monthly sales revenue
of $10.7 million for May 1996. The Company estimates it will purchase
approximately 40,000 vehicles over the next twelve months, consisting of new
automobiles and trucks for its Budget rental operations, late model
automobiles for its retail car sales operations and new passenger vans for
its van pooling operations.
The results of operations for 1993 reported herein reflect the
consolidated accounts of the San Diego, California, Richmond, Virginia and
Albany and Rochester, New York Budget franchises (collectively, the "1993
Operations"), which had been operated as separate businesses, but were
affiliated through common ownership and control. The 1994 results of
operations reported herein include the 1993 Operations and the acquired
operations of the Pittsburgh and Philadelphia, Pennsylvania, Cincinnati, Ohio
and Fort Wayne, Indiana Budget franchises from their respective acquisition
dates through December 31, 1994. The 1995 results of operations reported
herein include the consolidated operations of the entities comprising the
Company at December 31, 1994 and the acquired operations of the Dayton, Ohio,
Charlotte, North Carolina, Hartford, Connecticut, and Los Angeles, California
Budget franchises from their respective acquisition dates through December
31, 1995. Results of operations for the three months ended March 31, 1995
reported herein include the acquired operations of the Budget franchises for
Dayton, Ohio, Charlotte, North Carolina and Hartford, Connecticut from their
respective acquisition dates through March 31, 1995. Results of operations
for the three months ended March 31, 1996 reported herein include the
acquired operations of the Budget franchise for Phoenix, Arizona and of Van
Pool from their respective acquisition dates through March 31, 1996.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
operating revenues represented by certain items in the Company's consolidated
statements of operations.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Vehicle rental revenues ................... 100% 100% 71.5%
Retail car sales revenues ................. -- -- 28.5
------- ------- -------
Total operating revenues ................ 100 100 100
Direct vehicle and operating expenses .... 24.5 24.4 9.2
Cost of car sales ......................... -- -- 25.4
Vehicle depreciation expense .............. 19.5 19.1 18.4
Non-vehicle depreciation expense .......... 1.0 1.2 0.9
Advertising, promotion and selling ....... 7.4 8.0 7.9
Facilities ................................ 12.1 11.4 7.4
Personnel ................................. 20.3 20.6 16.3
General and administrative expenses ...... 3.6 3.9 4.5
Amortization of franchise rights .......... 0.7 0.6 0.5
------- ------- -------
Operating income .......................... 10.9 10.8 9.5
Vehicle interest expense .................. 11.0 10.1 9.3
Non-vehicle interest expense (income), net 1.8 (0.4) (0.5)
Nonrecurring income ....................... (4.6) -- --
------- ------- -------
Income (loss) before income taxes ........ 2.7 1.1 0.7
Provision (benefit) for income taxes ..... 0.8 0.5 0.5
------- ------- -------
Net income (loss) ......................... 1.9% 0.6% 0.2%
======= ======= =======
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------
1995 1996
-------- -------
<S> <C> <C>
Vehicle rental revenues ................... 78.0% 67.9%
Retail car sales revenues ................. 22.0 32.1
-------- -------
Total operating revenues ................ 100 100
Direct vehicle and operating expenses .... 11.8 9.1
Cost of car sales ......................... 19.1 27.1
Vehicle depreciation expense .............. 23.0 17.9
Non-vehicle depreciation expense .......... 1.3 0.8
Advertising, promotion and selling ....... 9.1 7.0
Facilities ................................ 9.3 6.6
Personnel ................................. 20.2 16.3
General and administrative expenses ...... 4.0 3.4
Amortization of franchise rights .......... 0.5 0.8
-------- -------
Operating income .......................... 1.7 11.0
Vehicle interest expense .................. 11.7 8.5
Non-vehicle interest expense (income), net 1.5 (0.7)
Nonrecurring income ....................... -- --
-------- -------
Income (loss) before income taxes ........ (8.5) 3.2
Provision (benefit) for income taxes ..... (3.4) 1.3
-------- -------
Net income (loss) ......................... (5.1)% 1.9%
======== =======
</TABLE>
24
<PAGE>
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995.
General Operating Results. Net income of $0.18 per share for the first
quarter of 1996 represented a $0.37 per share increase from the net loss of
$0.19 per share experienced in the first quarter of 1995. Income before
income taxes increased $4.0 million from a $1.9 million loss in the first
quarter of 1995 to $2.1 million of income in the first quarter of 1996. This
increase was due to the Company's February 1996 acquisitions of the Budget
franchise for Phoenix and of Van Pool and the October 1995 acquisition of the
Budget franchise for Los Angeles, which contributed combined pre-tax income
of $2.9 million, and decreased vehicle depreciation of $1.1 million resulting
from incentives received from car manufacturers. Operating income increased
to $7.3 million in the first three months of 1996 as compared to $0.4 million
in the corresponding period of 1995. The increase in operating income was
somewhat offset by an increase in interest expense of $2.8 million, or 125%,
due primarily to an increase in the vehicle fleet resulting from the
acquisitions of the Phoenix and Los Angeles Budget franchises and Van Pool,
and an increase in the provision for income taxes of $1.6 million due to the
enhanced profitability of the Company in 1996.
Operating Revenues. Vehicle rental revenues increased $27.3 million, or
158%, to $44.7 million in the first three months of 1996 as compared to $17.4
million in the corresponding period of 1995. The increase in rental revenues
is due primarily to the increase in the size of the Company from operating 85
rental locations in eight franchise areas at March 31, 1995 to operating 157
locations in 13 franchise territories at March 31, 1996 and to the
acquisition of Van Pool in February 1996. This increased size resulted in an
increase in the number of rental revenue days from approximately 438,000 in
the first quarter of 1995 to approximately 955,000 in the first quarter of
1996. The daily average rental rate increased 3.1% from $39.67 in the first
quarter of 1995 to $40.89 for the first quarter of 1996. The average rental
term increased from 3.63 days in the first three months of 1995 to 4.02 days
in the comparable period of 1996. Vehicle rental revenues also increased in
the first quarter of 1996 due to the inclusion of $5.7 million of revenues
earned by Van Pool since its acquisition. Revenues from the Company's retail
car sales operations increased $16.2 million from $4.9 million in 1995 to
$21.1 million in 1996, due to the expansion of the Company's retail car sales
facilities from two locations at March 31, 1995 to seven locations at March
31, 1996.
Operating Expenses. Operating expenses increased approximately $36.6
million, or 167%, to $58.5 million for the three months ended March 31, 1996
as compared to $21.9 million for the same period in 1995. The growth of the
Company's vehicle rental operations through the acquisitions discussed above
and the addition of six additional retail car sales facilities were the
principal causes of all of the increases to the Company's operating expenses.
Vehicle depreciation increased approximately $6.7 million, or 130%, due to an
increase in fleet of 6,300 vehicles which increased vehicle depreciation by
approximately $7.7 million, net of a reduction in vehicle depreciation of
approximately $1.0 million resulting from incentives received from car
manufacturers. Personnel costs increased approximately 138% in the first
quarter of 1996 as compared to the corresponding period of 1995 due to an
increase of approximately 900 employees since March 31, 1995. Advertising
expenses increased from $2.0 million to $4.3 million due to the increase in
the size of the vehicle rental operations and due to the growth of the retail
car sales operations from two markets at March 31, 1995 to six markets at
March 31, 1996. The retail car sales business typically incurs greater
advertising expense than the car rental business. Facilities expense
increased $2.3 million, or 108%, due to the addition of 72 locations since
March 31, 1995. Other operating expense increases were due to the increased
volume of vehicle rental business resulting from the 1995 and 1996
acquisitions. Cost of car sales increased $13.6 million from $4.2 million at
March 31, 1995 to $17.8 million at March 31, 1996 due to an increase in the
number of car sales facilities from two to seven during that period.
Other Income and Expense. Vehicle interest expense, net, increased
approximately $3.0 million in the first quarter of 1996 due to the increase
in the size of the Company's rental fleet from approximately 6,300 vehicles
at March 31, 1995 to approximately 12,600 vehicles at March 31, 1996. The
Company's cost of funds decreased approximately 0.6% per annum in the first
quarter of 1996 as compared to the first quarter of 1995, due primarily to
the decrease in LIBOR, upon which most of the Company's debt is based. Other
interest income, net of interest expense, increased from approximately
$333,000 in the first quarter of 1995 to $495,000 in 1996 due primarily to
increased interest income earned on restricted cash
25
<PAGE>
during the first quarter of 1996. This was partially offset by an increase in
interest expense due to an increase in the Company's borrowings under its
working capital facilities from $7.0 million at March 31, 1995 to $20.0
million at March 31, 1996, due primarily to borrowings to fund the Los
Angeles Acquisition and the Phoenix Acquisition.
Provision for income taxes. The provision for income taxes increased $1.6
million from a $765,000 benefit for the first quarter of 1995 to a provision
of $851,000 for the first quarter of 1995. The $1.6 million change represents
a 40% tax provision resulting from the enhanced profitability of the Company.
Year Ended December 31, 1995 Compared to the Year Ended December 31, 1994.
General Operating Results. Net income for 1995 increased $87,000, or
34.8%, to $337,000 from $250,000 in 1994. Income before income taxes more
than doubled to $1.0 million in 1995 from $426,000 in 1994. The increase in
pre-tax income was due to an increase in operating income of $10.0 million
resulting from the growth of the Company's retail car sales operations from
one facility at December 31, 1994 to seven facilities at December 31, 1995
and the acquisition of four additional Budget vehicle rental operations,
which was offset by increases in interest expense of $9.4 million, due
primarily to the increased size of the fleet throughout 1995 as a result of
the acquisitions occurring between August 1994 and October 1995 described
above. The provision for income taxes increased from $176,000 in 1994 to
$685,000 in 1995 due to the enhanced profitability of the Company,
nondeductible amortization expense, and state income taxes.
Operating Revenues. Operating revenues increased 287% for the year ended
December 31, 1995 to $149.7 million from $38.6 million in the prior year.
This increase was primarily due to the acquisitions discussed above and to an
increased volume of vehicle rental business in 1995, resulting in an increase
in the number of rental revenue days to 2,590,000 in 1995 from 1,027,000 in
1994. The daily average rental rate increased 11% from $37.32 in 1994 to
$41.26 in 1995; the average rental term experienced a slight decrease from
3.82 days in 1994 to 3.76 days in 1995.
Operating Expenses. Operating expenses increased approximately $101.1
million, or 294%, for the year ended December 31, 1995 as compared to 1994.
This increase was due in large measure to the growth of the Company's retail
car sales operations, which included $38.0 million of cost of sales for which
there was no significant comparable expense in 1994, as well as to increases
resulting from the increase in fleet and personnel due to the four
acquisitions occurring during 1995. Direct vehicle and operating expense
increased $4.3 million or 45.2% to $13.7 million from $9.4 million, due to
the increase in the size of the fleet from 5,044 vehicles at December 31,
1994 to 11,143 vehicles at December 31, 1995. The increased costs for vehicle
maintenance recorded to direct vehicle and operating expenses were partially
offset by a decrease in the number of leased vehicles during the period, as
expenses for owned vehicles are charged to both vehicle depreciation and
interest expense, whereas leased vehicles are charged to direct vehicle and
operating expense. Vehicle depreciation expense increased $20.1 million or
272% to $27.5 million due to an increase in fleet size of 121% to 11,143
vehicles at December 31, 1995. Personnel expenses increased 208% to $24.5
million due to the 226% increase in the employee base from 525 employees at
December 31, 1994 to 1,709 employees at December 31, 1995. The number of
locations from which the Company rented vehicles increased from 63 locations
at December 31, 1994 to 133 locations at December 31, 1995.
Other Income and Expense. Other expense-net increased approximately $9.4
million, or 249%, in 1995 due primarily to interest expense on the increased
vehicle fleet operated by the Company in 1995. Vehicle interest increased
$10.0 million due to the increased size of the vehicle fleet throughout 1995.
This increase was offset by an increase in interest income earned on cash
restricted for acquiring vehicles under the Fleet Financing Facilities of
$0.7 million.
Provision for Income Taxes. The provision for income taxes increased 289%
to $685,000 in 1995 from $176,000 in 1994. The Company's effective tax rate
increased from 41.3% in 1994 to 67.0% in 1995. The increase in the tax
provision was due to the enhanced profitability of the Company in 1995,
certain amortization expense that was not deductible for income taxes
purposes, and state income taxes.
26
<PAGE>
Year Ended December 31, 1994 Compared to the Year Ended December 31, 1993.
General Operating Results. Income before income taxes increased to
$426,000 in 1994 from a loss of $413,000, exclusive of the $1.0 million in
nonrecurring income from a vehicle manufacturer in 1993. The 1994
acquisitions and the Company's strategy to reduce financing costs through the
First Fleet Financing Facility had a favorable impact on income before income
taxes for the year ended December 31, 1994. Operating income for 1994
increased $1.7 million due to the 1994 acquisitions. Interest expense, net of
interest income, increased in 1994 by $907,000 due to the larger fleet
relative to 1993. This increase was offset in part by lower effective
interest rates from the First Fleet Financing Facility.
Operating Revenues. Operating revenues increased 73.1% for the year ended
December 31, 1994 to $38.6 million from $22.3 million in the prior year.
These increases were primarily due to the acquisitions in August and November
1994 discussed above and an increased volume of rental business in 1994,
resulting in an increase in the number of rental revenue days to 1,027,000 in
1994 from 656,000 in 1993. The daily average rental rate increased from
$34.02 in 1993 to $35.01 in 1994, which was partially offset by a decrease in
the average rental term from 4.02 days in 1993 to 3.82 days in 1994.
Operating Expenses. Operating expenses increased approximately $14.6
million, or 73.3%, for the year ended December 31, 1994 as compared to 1993.
This increase was primarily due to the 1994 acquisitions. Direct vehicle and
operating expense increased $4.0 million or 73.1% to $9.4 million from $5.5
million due to an increase in the volume of business from the 1994
acquisitions and an increase in the number of leased vehicles during the
year. Expenses for owned vehicles are charged to both vehicle depreciation
and interest expense, whereas leased vehicles are charged to direct vehicle
and operating expense. Vehicle depreciation expense increased $3.0 million or
69.4% to $7.4 million due to an increase in fleet size of 151.4% from 2,006
vehicles at December 31, 1993 to 5,044 vehicles at December 31, 1994.
Personnel expenses increased 75.2% to $7.9 million due to the 232% increase
in rental car locations from 19 locations at December 31, 1993 to 63
locations at December 31, 1994.
Other Income and Expense. Other expense-net increased approximately $1.9
million for the year ended December 31, 1994 due to the absence of $1.0
million of nonrecurring income in 1994 as discussed above and the additional
fleet financing costs from the increased number of vehicles in the fleet. The
increases were offset in part by the decreased interest costs under the First
Fleet Financing Facility and the repayment in August 1994 of all notes
outstanding to certain related parties. The interest savings under the First
Fleet Financing Facility resulted in increased vehicle interest costs, net of
interest income on restricted cash, of only 31.6% in 1994 as compared to
1993, significantly less than the 69.4% increase in vehicle depreciation
expense that resulted from the same fleet acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's operations have been funded by cash provided
from operating activities and by financing provided under asset-backed notes
issued under the First and Second Fleet Financing Facilities and by banks,
automobile manufacturers' captive finance companies and leasing companies.
The Company intends to continue to fund its operations through these sources
and other similar sources and from the proceeds of the Offering.
Fleet Financing Facilities. At March 31, 1996, amounts outstanding under
the Fleet Financing Facilities were comprised of $105.7 million of
asset-backed notes issued by the Company's special purpose finance
subsidiary, TFFC, in August 1994 (the "First Fleet Financing Facility") and
$40.0 million of asset-backed notes assumed by the Company in connection with
the Los Angeles Acquisition in October 1995 (the "Second Fleet Financing
Facility"). These facilities have been utilized to finance Program Vehicles.
Proceeds from these facilities that are temporarily unutilized for vehicle
financing are maintained in restricted cash accounts with the trustee and are
not available for other purposes. The notes issued under these facilities are
collateralized by the financed vehicles and the restricted cash accounts,
with the vehicles being leased to the Company's operating subsidiaries.
The First Fleet Financing Facility is comprised of senior notes requiring
monthly interest payments at average LIBOR, as defined, plus 0.75% (6.2% at
March 31, 1996). Monthly principal payments of $16,667,000 commence in June
1999 with the last payment due in November 1999. The subordinated notes
27
<PAGE>
require monthly interest payments at average LIBOR, as defined, plus 1.30%
per annum (6.7% at March 31, 1996) and are payable in full in December 1999.
The Second Fleet Financing Facility is comprised of senior notes requiring
monthly interest payments at an average LIBOR, as defined, plus 0.60% (6.0%
at March 31, 1996). Monthly principal payments of $4,812,000 commence in
November 1997 with the last payment due in June 1998. The subordinated notes
require monthly interest payments at average LIBOR, as defined, plus 1.0% per
annum (6.4% at March 31, 1996) and are payable in full in July 1998.
Subsequent to the completion of the Offering, TFFC expects to enter into
the Third Fleet Financing Facility. The Third Fleet Financing Facility is
expected to consist of up to approximately $160 million of asset-backed
notes. The net proceeds of the Third Fleet Financing Facility would be used
to repay outstanding vehicle obligations and to fund future fleet purchases.
Vehicle obligations. Vehicle obligations consist of outstanding lines of
credit to purchase rental vehicles and retail car sales inventory. At March
31, 1996, amounts outstanding under these lines of credit consisted of $200.0
million for rental vehicles and $25.7 million for retail car sales inventory,
with maturity dates ranging from June 1996 to June 1997. Vehicle obligations
are collateralized by rental vehicles financed under these credit facilities
and proceeds from the sale, lease or rental of vehicles and retail car sales
inventory.
Vehicle obligations relating to the rental fleet are generally amortized
over 5 to 15 months with monthly principal payments ranging from 2% to 3% of
the capitalized vehicle cost. When rental vehicles are sold, the related
unpaid obligation is due. Interest payments for rental fleet facilities are
due monthly at annual interest rates ranging from 6.80% to 15.25% at March
31, 1996. Management expects vehicle obligations will generally be repaid
within one year with proceeds received from either the repurchase of the
vehicles by the manufacturers in accordance with the terms of the
manufacturers' rental fleet programs or from the sale of the vehicles.
In May 1996, Team Fleet Services Corporation ("TFSC"), a wholly owned
subsidiary of the Company, entered into a Revolving Credit Agreement with
NationsBank, National Association (South), as Agent (the "Agent") for the
lenders party thereto, providing for up to $100.0 million financing for the
acquisition of Program Vehicles (the "Revolving Credit Facility"). The
Revolving Credit Facility provides for funding in two tranches. The first
tranche, in the amount of $15.0 million, was funded on June 5, 1996 and up to
the remaining $85.0 million will be funded within 30 days thereafter, subject
to the satisfaction of certain conditions. The Revolving Credit Facility is
guaranteed by the Company and certain of its subsidiaries and secured by the
Program Vehicles acquired with the proceeds of loans under the facility. The
interest rates of loans under the Revolving Credit Facility are, at the
option of TFSC and up to certain amounts, based on the Agent's prime rate,
LIBOR or the negotiable certificates of deposit rate.
Monthly payments of interest only on obligations relating to retail car
sales inventory are required at the prime rate (8.25% at March 31, 1996).
Retail car sales inventory obligations are paid when the inventory is sold
but in no event later than 120 days after the date of purchase.
Working capital facilities. At March 31, 1996, the Company utilized
working capital facilities of $20.0 million for the purchase of retail car
sales inventory and other working capital requirements, which require monthly
interest payments on the outstanding balance at LIBOR plus 1.85% (7.2% at
March 31, 1996). The amount utilized under these facilities had increased to
$30.0 million at April 30, 1996, with the additional $10.0 million utilized
to repay other outstanding notes (as described below). An outstanding
facility of $17.0 million is due on June 28, 1996; the remaining balance
expires November 1996. The facilities are collateralized by accounts
receivable, inventory, equipment, general intangibles, investments and all
other personal property of the Company and guarantees of certain of the
Company's subsidiaries. Under the terms of one of the agreements, the Company
is required to pay commitment fees quarterly equal to 0.125% per annum on the
maximum amount of credit available under the credit facility and an annual
agent fee of $50,000 as long as the facility has an outstanding balance. The
agreements are subject to certain covenants, the most restrictive of which
requires the Company to maintain certain financial
28
<PAGE>
ratios and minimum tangible net worth and prohibits the payment of cash
dividends. At March 31, 1996, the Company was not in compliance with certain
covenants under these facilities. In April 1996, certain covenants were
amended and the Company is in compliance with the amended terms of the
agreements.
Other notes payable. Other notes payable at March 31, 1996 consisted
primarily of a $3.0 million secured promissory note that bears interest at 8%
per annum payable in annual installments of $750,000, due August 1999,
collateralized by personal guarantees from the previous owners of the Los
Angeles operations; a $0.6 million business credit note due November 1996
bearing interest at prime (8.25% at March 31, 1996) collateralized by real
property and secured by personal guarantees of certain stockholders of the
Company; a $0.7 million collateralized promissory note that bears interest at
8% per annum, payable in monthly installments of $7,000 plus interest, due
September 2010, collateralized by real property and personal guarantees of
certain stockholders of the Company; a $2.0 million mortgage note bearing
interest at 9.10% per annum, payable in monthly installments ranging from
$5,400 to $7,800 plus interest, due September 2000 with an option to extend
to September 2005, collateralized by real property; and a $0.6 million
mortgage note bearing interest at 7.5% per annum, payable in monthly
installments of $8,300 plus interest, due June 1998, collateralized by real
property.
INFLATION
The increased acquisition cost of vehicles is the primary inflationary
factor affecting the Company's operations. Many of the Company's other
operating expenses are inflation sensitive, with increases in inflation
generally resulting in increased costs of operations. The effect of
inflation-driven cost increases on the Company's overall operating costs is
not expected to be greater for the Company than for its competitors.
SEASONALITY
Generally, in the vehicle rental industry, revenues decrease in the winter
months (with the exception of resort destinations) due to the overall
decrease in business and leisure travel during this season. The Company
increases the size of its fleet and work force in the spring and summer to
accommodate increased rental activity during these periods and decreases its
fleet and work force in the fall and winter. However, many of the Company's
operating expenses such as rent, insurance and administrative personnel are
fixed and cannot be reduced during the fall and winter. The Company has
sought to reduce this seasonal effect by acquiring franchise territories that
are winter travel destinations, and the Company believes that its
acquisitions of the Los Angeles operation in October 1995 and the Phoenix
operation in February 1996 have reduced and will continue to reduce these
seasonal characteristics. The retail car sales business is subject to
seasonal effects, with lower sales during the winter months.
QUARTERLY RESULTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
Vehicle rental revenue ............ $5,525 $5,854 $11,634 $15,457
Vehicle sales revenue ............. -- -- -- 172
Operating income .................. 268 599 1,341 1,988
Income (loss) before income taxes (282) 55 268 385
Net income (loss) ................. (282) 55 268 209
Earnings (loss) per common share . (0.11) 0.02 0.06 0.04
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
THREE
------------------------------------------ MONTHS
FIRST SECOND THIRD FOURTH ENDED
QUARTER QUARTER QUARTER QUARTER MARCH 31, 1996
--------- --------- --------- --------- ----------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Vehicle rental revenue ............ $17,354 $23,788 $29,677 $36,248 $44,697
Vehicle sales revenue ............. 4,916 8,534 12,706 16,506 21,097
Operating income .................. 372 4,034 8,402 1,372 7,254
Income (loss) before income taxes (1,911) 1,241 4,788 (3,096) 2,128
Net income (loss) ................. (1,146) 743 3,981 (3,241) 1,277
Earnings (loss) per common share . (0.19) 0.12 0.65 (0.42) 0.18
</TABLE>
29
<PAGE>
BUSINESS
Team Rental Group, Inc. is the largest Budget franchisee worldwide and is
one of the largest independent retailers of late model automobiles in the
United States. In 1994, TEAM embarked on a strategy to significantly expand
its Budget franchise base and to develop a branded retail car sales operation
within its Budget franchise territories. This strategy both leverages
management's experience and creates certain operating efficiencies between
these complementary businesses. Through its 159 vehicle rental locations,
TEAM had pro forma 1995 revenues of $202.9 million, and the Company operates
nine retail car sales facilities with monthly sales revenue of $10.7 million
for May 1996. The Company estimates it will purchase approximately 40,000
vehicles over the next twelve months, consisting of new automobiles and
trucks for its Budget rental operations, late model automobiles for its
retail car sales operations and new passenger vans for its van pooling
operations.
Since its initial public offering in August 1994, the Company has pursued
an aggressive growth strategy in both its vehicle rental and retail car sales
operations. TEAM has added nine Budget franchise territories with 136 current
locations to the four territories that it operated at the time of its initial
public offering, thereby enhancing the economies of scale in its operations,
balancing its geographic scope and reducing seasonal fluctuations in its
performance. Concurrently, the Company has developed or acquired its first
nine retail car sales facilities--all within its Budget territories.
The following tables chronologically detail TEAM's acquisitions of Budget
franchises and the openings of its retail car sales facilities:
VEHICLE RENTAL -- BUDGET FRANCHISE ACQUISITIONS
<TABLE>
<CAPTION>
1995
LOCATIONS AT FLEET SIZE AT REVENUES
FRANCHISE TERRITORY DATE ACQUIRED MAY 31, 1996 MAY 31, 1996 (MILLIONS)
- ------------------------- --------------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
Owned prior to August
1994
San Diego ................ April 1987 12 1,610 $ 18.6
Albany ................... August 1991 3 237 2.5
Rochester ................ November 1991 3 217 2.5
Richmond ................. December 1991 5 415 3.6
---- ------- -------
Total for franchises owned prior to
initial public offering ................. 23 2,479 27.2
---- ------- --------
Acquired since August
1994
Philadelphia ............. August 1994 22 2,019 21.0
Pittsburgh ............... August 1994 14 1,070 13.0
Cincinnati ............... August 1994 8 880 8.0
Fort Wayne ............... November 1994 3 187 1.7
Charlotte ................ January 1995 6 565 6.5
Dayton ................... January 1995 6 452 5.2
Hartford ................. March 1995 13 928 9.6
Los Angeles(1) ........... October 1995 41 5,355 63.4
Phoenix .................. February 1996 23 2,953 47.3
---- ------- -------
Total for franchises acquired since
initial public offering ................. 136 14,409 175.7
---- ------- -------
Total ..................................... 159 16,888 $202.9
==== ======= =======
</TABLE>
- ------------
(1) Excludes the vehicle rental operations at Los Angeles International
Airport.
30
<PAGE>
RETAIL CAR SALES -- FACILITIES OPENED
<TABLE>
<CAPTION>
MAY 1996 SALES
DATE MAY 1996 REVENUE
METROPOLITAN AREA ACQUIRED/OPENED VEHICLES SOLD (THOUSANDS)
- ----------------- --------------- --------------- ---------------
<S> <C> <C> <C>
San Diego--East . November 1994 61 $ 982
Dayton--North ... January 1995 34 518
San Diego--West . April 1995 100 1,843
Philadelphia ..... May 1995 91 1,712
Charlotte ........ September 1995 90 1,462
Richmond ......... October 1995 92 1,497
Ontario .......... October 1995 35 688
Cincinnati ....... April 1996 47 726
Dayton--South ... April 1996 80 1,305
--------------- ---------------
Total ............. ............. 630 $10,733
=============== ===============
</TABLE>
STRATEGY
The Company's strategy is to increase its revenues and improve
profitability by:
o Significantly expanding its retail car sales operations;
o Acquiring additional Budget franchises; and
o Enhancing the scale and performance of its Budget Franchise Group.
Significantly Expand Retail Car Sales Operations
The increased cost of new cars and the improved reliability of
low-mileage, late model cars have contributed to greater market demand for
late model cars in recent years. Notwithstanding this growth, the retail car
sales market remains highly fragmented, with most late model cars being sold
through the used car operations of local or regional new car dealerships. The
Company believes that the market for late model cars is currently undergoing
significant changes, with the emergence of companies retailing late model
cars on a national or regional basis and utilizing nationally or regionally
recognized tradenames. Such entities source cars on a nationwide basis and
provide customers with a large selection of attractively priced, late model
cars.
The Company believes that operating retail car sales facilities in its
Budget franchise territories and using the Budget tradename presents it with
a significant growth opportunity. The Company's senior executive officers
have significant experience in acquiring and selling low-mileage, late model
cars, and the Company believes that the Budget tradename is of significant
value in its targeted consumer market. The Company believes that it will be
able to obtain efficiencies by operating retail car sales facilities in
conjunction with certain of its Budget rental facilities, including the
sharing of service facilities and administrative offices. The Company also
believes that operating retail car sales facilities complements certain
aspects of its vehicle rental business, particularly by providing a channel
through which it will be able to sell its vehicles not subject to
manufacturers' repurchase programs directly into the retail market at the end
of the rental cycle. By developing this channel, the Company believes that it
will be less dependent on the availability of Program Vehicles.
Since November 1994, the Company has developed or acquired its first nine
retail car sales facilities, and the Company will seek to continue to improve
the operating performance of each of those facilities. Rather than pursuing a
"superstore" strategy, the Company expects to have multiple sales facilities
in each of its markets and to add facilities within its franchise
territories. This approach will provide more convenient locations for
customers, while allowing the Company to achieve certain operating
efficiencies and to benefit from marketing and advertising programs conducted
for its vehicle rental business. The Company also expects to add facilities
in markets where it does not currently have vehicle rental operations.
31
<PAGE>
Acquire Additional Budget Franchises
Since the formation of the Company, the acquisition of Budget franchises
has been an important component of the Company's growth strategy. The Company
believes that through the franchise acquisitions completed since its initial
public offering, it has achieved a sufficient critical mass to realize
operating efficiencies, provided better geographic balance and reduced
seasonal fluctuations in its operating performance. The Company will seek to
increase its revenues and profitability through additional opportunistic
acquisitions and believes that desirable acquisition candidates will continue
to exist within the Budget System. Individual franchise owners may seek to
diversify their financial investment or to retire from active management,
particularly as they encounter greater cost pressures as well as other
competitive pressures in their operations. While the Company would consider
the acquisition of franchise territories in most regions of the United
States, there may be greater opportunities to achieve additional operating
efficiencies by acquiring franchise territories adjacent to or near its
existing territories. For example, the Company may be able to achieve better
fleet utilization in the operation of contiguous franchise territories.
Prior to being acquired by TEAM, a number of the Company's franchises had
either been unprofitable or experienced inconsistent profitability. It is in
the best interests of BRAC for its franchises to be operated profitably and
in a manner that will result in increased franchise fees to BRAC. The
transfer of any Budget franchise requires the prior approval of BRAC, and
BRAC may itself acquire franchise operations and convert them to wholly-owned
operations. See "Risk Factors--Risks Inherent in Growth Strategy." The
Company believes that it has been successful in acquiring and operating these
"turn around" franchises and that both the Company and BRAC have benefited
from the improved results achieved by the franchises acquired by the Company.
Enhance the Scale and Performance of its Budget Franchise Group
The Company believes that it will be able to enhance the profitability of
its current Budget franchises and any additional Budget franchises that it
may acquire by reducing the costs of operating those franchises and
increasing the rental revenues realized in those operations.
Cost Reduction Strategies
o Achieve Economies of Scale. The Company believes that by increasing the
scope of its vehicle rental operations, it has significantly improved its
fleet purchasing flexibility and lowered the cost of financing and insuring
its fleet. Through centralizing certain corporate functions, such as credit
card and warranty processing, the Company is also able to reduce the costs of
operating its Budget franchises. The Company believes that the benefits of
such measures are particularly significant following the acquisition of
franchises that have been underperforming prior to their acquisition by the
Company, although certain economies of scale may be extended to any operation
that the Company acquires.
o Optimize Fleet Mix and Utilization. The Company believes that it has
been able to reduce the cost of its rental operations by extending its fleet
management practices to newly-acquired franchise territories. The Company
believes that it will continue to improve its fleet utilization and per unit
cost versus yield. In addition, the Company believes it has improved the
timing and processing of its fleet deliveries and dispositions, reduced fleet
downtime and improved fleet make/model composition to better match customer
demand.
o Implement Cost Management Practices. The Company seeks to implement
standard cost management practices in each of its franchised territories.
Historically, following the acquisition of a territory, the Company has
successfully reduced overall personnel cost, lowered vehicle maintenance and
damage repair costs and increased the effectiveness of its servicing
procedures.
Revenue Growth Strategies
o Optimize Yield Management. TEAM utilizes various yield management models
designed to optimize pricing based upon such factors as office location,
fleet availability by car category and forecast demand patterns. These models
also enable TEAM to better optimize fleet utilization by tracking demand
patterns and allowing local managers to shift fleet inventory accordingly.
32
<PAGE>
o Add New Locations. In 1995, on a pro forma basis, approximately half of
the Company's vehicle rental revenues were generated at airport locations and
approximately half at non-airport locations. The Company believes that it
will be able to improve its performance by adding additional locations in its
existing and newly-acquired franchise territories (particularly by adding
non-airport locations), and that additional revenues may be generated with
relatively small increases in administrative overhead. Non-airport locations
are particularly attractive to the Company, as such locations typically have
less intense rate competition and fewer corporate customers utilizing
negotiated rate structures and are typically less affected by economic
downturns.
o Increase the Sale of Ancillary Products/Truck Revenues. The Company
seeks to increase vehicle rental revenues in its Budget franchise territories
through the sale of ancillary products and services, including loss damage
waivers, other insurance products and gasoline purchase options. The Company
intends to continue to market more diverse car products at additional
locations. The Company believes that it can also increase its revenues in
local markets by placing an increased emphasis on truck rentals, which also
include rentals of miscellaneous moving equipment and sales of moving
supplies.
VEHICLE RENTAL OPERATIONS
The Budget System
General. The Budget System consists of over 3,200 BRAC-owned and
franchised locations in approximately 115 countries and territories.
Approximately one-third of the Budget System's U.S. fleet is operated by
franchisees. BRAC was established in 1960 as a franchisor of vehicle rental
operations serving the downtown and suburban areas of cities in the United
States and Canada. The first major airport location of the Budget System was
established in 1967. Since 1989, Ford has held a preferred stock interest in
the holding company that owns BRAC and has provided significant financial
support to BRAC. In 1995, the Budget System's combined revenue for both
BRAC-owned and franchised locations in the U.S. was approximately $2.0
billion. An industry source has indicated that Budget was the fourth largest
U.S. vehicle rental system in 1995 based on revenue and the fifth largest
based on fleet size.
System-Wide Services. BRAC provides the Budget System with: (i) national
promotion, advertising and public relations; (ii) reservations and
information systems; (iii) data processing support; (iv) marketing programs
with hotels and airlines; (v) Sears Car and Truck rental concessions; (vi) a
sales staff for marketing to corporate customers and the travel community;
(vii) credit card services for commercial customers; (viii) training in local
marketing techniques; and (ix) operation and training support. In general,
pursuant to its agreements with its franchisees, BRAC is required to expend a
certain percentage of franchise royalties that it receives on national
advertising and promotion. In addition, BRAC negotiates with automobile
manufacturers to develop vehicle acquisition and disposition programs that
are available to franchisees as well as to BRAC-owned locations.
BRAC facilitates one-way car rentals between approximately 735 selected
BRAC-owned and franchised locations in the United States. This one-way
program is also in place for truck rentals at approximately 325 locations. A
limited fleet of vehicles owned by BRAC is dedicated to supplement the
one-way vehicle rental capacity of the participating locations, including the
Company's franchise operations. This program enables the Budget System to
operate more fully as an integrated network of locations.
Reservations. BRAC, in conjunction with its 50%-owned subsidiary, Compass
Computer Services, Inc. ("Compass"), operates a computerized reservation
system. Budget's main reservation facility is located in the Dallas
metropolitan area and has over 400 employees. Auxiliary centers are located
in Toronto, Canada, the United Kingdom, Australia and New Zealand. These
centers are linked with the major airline and travel industry reservation
systems through the worldwide Budget reservation network. The main
reservation facility accepts inquiries and reservations for Budget System
locations worldwide on a 24-hour basis, 365 days a year. The reservation
centers utilize an extensive database maintained by Compass on rates and
vehicles available for nearly all Budget System locations, a special file of
pertinent information on frequent renters and other information that
facilitates the Budget System's business.
33
<PAGE>
Sears Car and Truck Rental. In 1970, BRAC established a contractual
relationship with Sears, Roebuck and Co. which allows Budget operating
locations to provide car and truck rental under the Sears name for a
concession fee based on rental revenue. Sears Car and Truck Rental customers
may use their Sears charge card for payment of rental charges. Sears Car and
Truck Rental is available at Budget locations in the United States and
Canada.
TEAM's Vehicle Rental Operations
Management Structure. The Company maintains decentralized management of
day-to-day rental operations. Many costs incurred by the Company are
dependent on local market conditions, including real property rents,
collision and damage repair costs and labor costs. The Company believes that
decentralized management can manage these costs better than corporate
headquarter staff. Decentralization also allows local managers to continue to
identify potential customer bases in their territories, to respond to
competitive situations within their territories in a flexible way and to
adjust fleet size as appropriate to local market conditions. Consequently,
the Company relies substantially on the quality and initiative of its local
management. Each of the Company's territories is under the direction of a
general manager, who is an owner of shares of Class A Common Stock and/or a
participant in the Company's 1994 Incentive Stock Option Plan (the "1994
Option Plan"). See "Management--Benefit Plans--1994 Option Plan." The general
managers employed by the Company typically have significant experience in the
vehicle rental business.
The Company coordinates vehicle purchases among its franchised territories
to enable it to benefit from volume purchases of vehicles. The Company
handles billing and collection on a decentralized basis, but employs
centralized cash management to permit optimal use of its financial resources.
The Company's corporate staff manages the acquisition and financing of new
franchises and general managers develop local vehicle rental markets.
Rental Vehicle Purchasing. The Company participates in a variety of
vehicle purchase programs with major domestic and foreign manufacturers,
although actual purchases are made directly through local dealers. The
average price for automobiles purchased by the Company in 1995 for its rental
fleet was approximately $17,700. On average during 1995, 42% of the purchases
were comprised of Ford vehicles, 15% of Chrysler vehicles and 21% of Mazda
vehicles. These percentages vary among the Company's operations and will most
likely change from year to year. The vehicle purchase programs sponsored by
manufacturers sometimes provide the Company with sales incentives for the
purchase of certain models, and most of these programs allow the Company to
serve as a drop-ship location for vehicles, thus enabling the Company to
receive a fee from the manufacturers for preparing newly purchased vehicles
for use. There can be no assurance that the Company will continue to be able
to benefit from sales incentives in the future.
The Company financed its rental vehicle purchases in 1995 primarily
through the First Fleet Facility, manufacturers' finance subsidiaries and,
during the peak rental season, bank lines of credit. Approximately 24% of the
Company's fleet cost was financed through the First Fleet Facility at
December 31, 1995. The Company expects to continue to take advantage of
asset-backed note facilities, which have more attractive interest rates than
traditional financing sources, to finance future fleet purchases. The Los
Angeles franchise financed fleet purchases through the Second Fleet Facility,
which was acquired by TEAM together with the franchise. In addition, the
Company will seek to continue its arrangements with the finance subsidiaries
of major vehicle manufacturers and other traditional sources of credit. See
"Risk Factors--Potential Changes in Manufacturers' Repurchase Programs" and
"Risk Factors--Requirements for Capital; Effect of Changes in Interest
Rates."
Fleet Utilization and Seasonality. The Company's business is subject to
seasonal variations in customer demand, with the summer vacation period
representing the peak season for vehicle rentals. This general seasonal
variation in demand, along with more localized changes in demand at each of
the Company's operations, causes the Company to vary its fleet size over the
course of the year. In 1995, on a pro forma basis (excluding the Phoenix
Budget franchise and Van Pool), the Company's average monthly fleet size
ranged from a low of 12,316 vehicles in January to a high of 16,450 vehicles
in July. Fleet utilization, which is based on the average number of days
vehicles are rented compared to the total
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number of days vehicles are available for rental, ranged from 70% in December
to 89% in August and averaged 80% for all of 1995. The Company has sought to
reduce this seasonal effect by acquiring franchise territories that are
winter travel destinations, and the Company believes that acquisitions of the
Los Angeles operation in October 1995 and the Phoenix operation in February
1996 have reduced and will continue to reduce the effect of these seasonal
characteristics.
Rental Vehicle Disposition. The Company's current operating strategy is to
maintain its fleet at an average age of 12 months or less. Approximately 85%
of the vehicles purchased by the Company in 1995 were eligible for
participation in manufacturers' repurchase programs. These programs currently
require that the Company maintain 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 3% of the Program Vehicles
purchased by the Company and scheduled to be returned in 1995 were ineligible
for return. At the time of return to the manufacturer, the Company 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 the Company's fleet will be dependent on the availability and
attractiveness of the manufacturers' repurchase programs, over which the
Company has no control. See "Risk Factors--Potential Changes in
Manufacturers' Repurchase Programs." In addition to disposal of its vehicle
rental fleet through the manufacturers' repurchase programs, the Company also
disposes of its rental fleet through automobile auctions, sales to
wholesalers and the Company's retail car sales operations. While the disposal
of rental vehicles through the Company's retail car sales operation has been
minimal to date, the Company believes that such dispositions may increase as
its retail car sales operation continues to grow and as the Company evaluates
the mix of its Program Vehicles and vehicles not subject to manufacturers'
repurchase programs.
Vehicle Rental Facilities. The Company leases all of its airport and
non-airport vehicle rental facilities and currently operates from 159 rental
locations. The airport facilities are located on airport property owned by
airport authorities or located near the airport in locations convenient for
bus transport of customers to the airport. One of the Company's airport
facilities in each Budget franchise territory serves as the administrative
headquarters for the franchise territory 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. See "Risk Factors--Risk of Non-Renewal of
Airport Concessions." The Company's non-airport facilities generally consist
of a limited parking facility and a rental and return desk and are generally
subject to long-term leases with renewal options. Certain of these leases
also have purchase options at the end of their terms.
Van Pooling Operations. Van Pool, the Company's commuter van pooling
subsidiary, was acquired by the Company in February 1996 and maintains
offices in 21 cities located in 15 states and the District of Columbia.
Founded in 1977, Van Pool provides van pooling services to individuals,
corporations and municipalities. Pursuant to van pool agreements between the
Company and either the volunteer driver, corporation or municipality (the
"contracting party"), the contracting party agrees to drive or arrange a van
pool which travels a fixed route set by the Company. The Company sets the
fees, which are collected by the driver and remitted to the Company. Van Pool
employs approximately 40 individuals at its home office in Troy, Michigan and
approximately 40 individuals in its local markets, and currently operates a
fleet of approximately 3,250 passenger vans.
RETAIL CAR SALES OPERATIONS
Since November 1994, TEAM has developed or acquired nine retail car sales
facilities, establishing TEAM as one of the largest independent retailers of
late model cars in the United States, with monthly revenue of $10.7 million
in May 1996.
Retail Car Sales Inventory. The Company has historically acquired most of
its retail car sales inventory at auctions, although it has acquired some
cars directly upon their disposition by other car rental companies and from
the TEAM rental fleet. In the future, the Company expects to increase its
acquisitions of cars from the disposition of cars used by other car rental
companies and to purchase a smaller portion from auctions. The Company
coordinates car purchases among its retail car sales locations
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<PAGE>
to enable it to benefit from volume purchases of cars. The average price of
automobiles purchased by the Company in 1995 for its retail car sales
facilities was approximately $11,750. The Company financed its retail sale
car purchases in 1995 primarily through a third party finance company.
Management and Personnel. The Company maintains decentralized management
of the day-to-day functions of its sales operations. The Company's retail car
sales operations are managed by two regional vice presidents, both of whom
own shares of Class A Common Stock and/or participate in the 1994 Option
Plan. See "Management--Benefit Plans--1994 Option Plan." In addition, each
retail car sales location is operated by a general manager, one or two sales
managers and one or two individuals responsible for financing and insurance.
Trademarks. Within its franchise territories, the Company operates its
retail car sales operations under the name "Budget Car Sales." However, BRAC
has indicated that the use of the Budget name in connection with retail
vehicle sales operations is not a contractual right granted under its
standard franchise agreements. The Company's management does not believe that
the success of these operations is dependent on the use of the Budget name
and currently plans to operate under a different name in its franchise
territories, if necessary. The Company also plans to operate under a
different name in those locations in which it is not a Budget franchisee.
Ultimately, the Company will seek to establish retail car sales operations at
multiple sites in larger metropolitan areas and advertise those operations
under one name.
Vehicle Pricing and Financing. While many cars display stickers
indicating their "blue book" value, customers are permitted to negotiate
pricing terms with the sales managers. Various local enterprises provide
financing to customers of the Company on a non-exclusive basis. In 1995, the
vehicles sold at its retail car sales facilities consisted primarily of 1995
model automobiles and passenger vans, with some 1994 models and very few 1993
models. To supplement its sale of vehicles, the Company sells extended
service contracts and related consumer insurance products to its customers.
Retail Car Sales/Service Facilities. Each of the Company's retail car
sales facilities consists of a showroom and an outdoor display area, which
together accommodate the on-site display of at least 100 cars, and a service
area. Although certain of the Company's retail car sales facilities have been
converted from facilities that were used in other businesses, the Company
prefers to build its own retail car sales facilities and believes that such
facilities can be built at an average cost of approximately $1.2 million. The
service departments operated at each retail car sales facility are
responsible for inspecting a car's condition and for providing necessary
reconditioning and maintenance services before sale. These services are
provided uniformly for its retail car sales facilities in accordance with an
inspection checklist developed by the Company. Service departments also
provide after-sale service for the Company's customers.
COMPETITION
The vehicle rental industry is characterized by intense price and service
competition. In any given location, the Company may encounter competition
from national, regional and local companies, many of which, particularly
those owned by the major automobile manufacturers, have greater financial
resources than the Company. The Company's main competitors for vehicle
rentals are Hertz, Avis, Alamo, National and Dollar, which serve primarily
airport and near-airport locations, and Enterprise, which primarily serves
non-airport locations. The Company's operations are generally the third or
fourth largest at the airports in which it operates, although its extensive
non-airport operations may give it a larger presence in the metropolitan
regions in which such airports are located. The key competitive factors in
the industry are pricing, quality of service, name identification, vehicle
availability and location. There have been many occasions during the history
of the vehicle rental industry in which all of the major vehicle rental
companies have been adversely affected by severe industry-wide price cutting,
and the Company has, on such occasions, lowered its prices in response to
such price cutting. However, during the past two years, industry-wide rates
have increased, reflecting, in part, both increased costs of owning and
maintaining vehicles and the need to generate returns on invested capital.
The retail car sales business is also characterized by intense competition
from a range of regional and local car dealerships and other retailers of
previously-owned vehicles. The Company believes that it
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<PAGE>
competes primarily against new car dealers retailing previously-owned cars.
The Company's retail car sales facilities are located among similar
facilities and, in some instances, together with the Company's rental
operations. The entry of large, well-capitalized retailers of late model
previously-owned cars may provide the Company with significant additional
competition.
FRANCHISE AGREEMENTS
The Company's status as a Budget franchisee is governed by franchise
agreements (the "Franchise Agreements"), which grant to the Company's
subsidiaries certain exclusive territories in which to operate the Budget
vehicle rental business. All of these agreements are direct, "prime"
franchise agreements with BRAC, except those relating to the Company's Los
Angeles and San Diego operations, which operates as a sub-franchisee of
SoCal, and the Company's Los Angeles truck rental operation, which operates
as a sub-franchisee of an unaffiliated third party. The Franchise Agreements
provide the franchisor with significant rights regarding the business and
operations of the Company and impose restrictions on the transfer of
ownership of the capital stock of the Company's subsidiaries without the
consent of the franchisor. These provisions could affect the Company's
ability to sell a car rental operating subsidiary or acquire other franchises
or expand within its existing franchise territories.
The Company is required to operate each of its franchises in accordance
with certain standards contained in the Budget operating manual (the
"Operating Manual"). The franchisor has the right to monitor the operations
of the Company's franchises and any default by the Company under a Franchise
Agreement or the Operating Manual may give the franchisor the right to
terminate the underlying franchise. The loss of certain franchise rights
could have a material adverse effect on the Company.
In general, the Franchise Agreements grant the Company the exclusive right
to operate a Budget Rent a Car and/or Budget Rent a Truck franchise in a
particular geographic area for a period of five years. The Franchise
Agreements for the San Diego, California, Albany and Rochester, New York,
Richmond, Virginia, Philadelphia and Pittsburgh, Pennsylvania, Cincinnati,
Ohio, Ft. Wayne, Indiana, Charlotte, North Carolina, Dayton, Ohio and
Hartford, Connecticut territories generally provide for an unlimited number
of five year renewal terms. Upon renewal, these Franchise Agreements (except
for the San Diego, California automobile rental franchise) may contain terms
and conditions (other than with respect to royalty fees) different from those
contained in the existing Franchise Agreements. The Franchise Agreement for
the Los Angeles, California territory with respect to automobile rentals
automatically renews for an unlimited number of five year terms. The
Franchise Agreement for the Phoenix, Arizona territory automatically renews
for an unlimited number of five year renewal terms as long as the franchisee
meets certain targets regarding the size of its rental fleet.
The standard terms of the fees payable to the franchisors under the
Company's Franchise Agreements are 7.5% of monthly gross rental revenue and
$1.25 per month credit card fee per average number of fleet vehicles, but the
Company has negotiated certain franchise agreements with more favorable
terms.
Pursuant to each Franchise Agreement, the Company must meet certain
guidelines relating to the number of rental offices in a franchised
territory, the number of vehicles maintained for rental and the amount of
advertising and promotion expenditures. The Franchise Agreements relating to
the Pittsburgh and Philadelphia operations grant the Company rights of first
refusal with respect to the franchise agreements relating to certain
additional territories in Delaware, New Jersey and Pennsylvania. In general,
each Franchise Agreement provides that the Company shall not (i) engage in
any other vehicle rental business within the franchise territory or within a
two mile radius of any other existing Budget rental location during the term
of such agreement and for 12 months thereafter; or (ii) disclose the terms of
the Operating Manual or any other confidential information relating to the
Budget System to any third party. In addition, each franchisee agrees not to
use the word "Budget" or any other Budget trademark other than in its vehicle
rental business, except with respect to the Los Angeles territory. Further,
the Company has agreed with BRAC in the Franchise Agreements for the San
Diego, California automobile rental operations that it will not conduct any
business other than its automobile rental operations at any location at which
it conducts Budget Rent a Car operations and not to conduct a car sales
business under the "Budget" name or on any Budget car rental premises unless
authorized to do so under a separate agreement.
37
<PAGE>
INSURANCE
The Company currently has insurance coverage in an amount of up to $1.0
million, with a $500,000 retention per occurrence, with respect to personal
injury and damage claims arising from the use of its vehicles, except with
respect to vehicles rented through its Los Angeles, San Diego and Phoenix
operations. The Company has entered into a contract with a third party
administrator, AIG Claim Service, Inc., to handle all claims outside of the
state of California involving injuries and property damage in excess of
$10,000. Crawford & Company adjusts property damage claims with values less
than $10,000. Under California law, vehicle rental customers are primarily
liable for damages arising from the use of rental vehicles. Vehicle rental
companies are secondarily liable for such damages up to an amount limited by
California law to $35,000 per occurrence (exclusive of legal fees and
conditioned upon the posting of a $35,000 bond), unless the vehicle rental
company has negligently maintained the vehicle or has "negligently entrusted"
the vehicle to a rental customer (e.g., the vehicle rental company rented to
a customer that did not have a valid driver's license). In addition, a
vehicle rental company can be held liable for damages arising from use of its
vehicles by its employees. A recent California Court of Appeals decision,
although not ruling on the issue, has suggested that rental car companies
generally may be subject to primary liability in connection with damages
arising from customers' operation of rental vehicles. If changes in
California law were ever effected to render permissively uninsured rental car
companies primarily liable for such damages, the Company would at such time
review its claims handling practices. The Company's Phoenix operations are
self-insured, with a $300,000 retention. There is a $700,000 excess coverage
policy with Firemans Fund Insurance and a $10 million excess policy through
National Union Fire Insurance Company. VPSI, Inc. is covered under the
National Union Fire Insurance Company policy up to $1.0 million, subject to a
$500,000 retention per occurrence. There is also a $4.0 million excess policy
through National Union.
The Company's workers compensation insurance coverage has been placed with
ITT Hartford, subject to a $500,000 retention. All claims will be
administered by ITT Hartford's claims operation. The Company's general
liability coverage has been placed with ITT Hartford. There is $1.0 million
per occurrence, $2 million aggregate coverage with no retention. The
Company's property coverage has been placed with Northbrook Insurance
Company. The retail vehicle sales operations are insured through Travelers
Insurance Company with $1.0 million aggregate coverage per location. There is
a $50,000 retention for automobile accidents, $15,000 retention for
garagekeepers legal liability claims and $10,000 retention for garage
operation losses. All claims will be handled by a third party administrator,
Frontier Adjusters. Finally, the Company has a total of $5.0 million in
directors and officers liability coverage through Steadfast and RLI Insurance
Companies. This coverage is subject to a $1.0 million retention for claims
relating to violations under federal securities laws and $100,000 retention
for any other claim. The Company has secured employment related practice
coverage with a $1.0 million aggregate limit, subject to a $25,000 per
occurrence deductible.
REGULATION AND ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws and regulations
including those relating to taxing and licensing of vehicles, franchising,
consumer credit, environmental protection, retail vehicle sales and labor
matters. The principal environmental regulatory requirements applicable to
the Company's operations relate to the ownership or use of tanks for the
storage of petroleum products, such as gasoline, diesel fuel and waste oils;
the treatment or discharge of waste waters; and the generation, storage,
transportation and off-site treatment or disposal of solid or liquid wastes.
The Company operates 29 locations at which petroleum products are stored in
underground or aboveground tanks. The Company has instituted an environmental
compliance program designed to ensure that these tanks are in compliance with
applicable technical and operational requirements, including periodic
integrity testing of underground storage tanks. The Company believes that the
locations where it currently operates (exclusive of certain locations in
Philadelphia and Pittsburgh) are in compliance, in all material respects,
with such regulatory requirements.
The Company may also be subject to requirements related to the remediation
of, or the liability for remediation of, substances that have been released
to the environment at properties owned or operated
38
<PAGE>
by the Company or at properties to which the Company sends substances for
treatment or disposal. Such remediation requirements may be imposed without
regard to fault and liability for environmental remediation can be
substantial. Certain of the locations in the Philadelphia, Pittsburgh and
Cincinnati franchise territories have been the subject of environmental
remediation as a consequence of leaks or spills and continue to have some
level of environmental impairment that may require further remediation. In
connection with the acquisition of those franchise territories, the Seller,
Chrysler Credit Corporation, Inc. ("CCC"), agreed to provide up to $873,750
for a period of three years for remediation activities at sites shown to be
impaired by assessments performed under the supervision of the Company.
Although the ultimate cost of these remediation activities is currently
unknown, the Company believes that the amount of funding to be provided by
CCC will be sufficient to cover the cost of these remediation activities. See
"Risk Factors--Environmental Risks Inherent in On-Site Petroleum Storage."
The Company may be eligible for reimbursement or payment of remediation
costs associated with future releases from its regulated underground storage
tanks. The states of California, Kentucky, Ohio, Pennsylvania and Virginia,
in which the Company maintains underground storage tanks, have established
funds to assist in the payment of remediation costs for releases from certain
registered underground tanks. Subject to certain deductibles, the
availability of funds, compliance status of the tanks and the nature of the
release, these tank funds may be available to the Company for use in
remediating future releases from its tank systems.
LEGAL MATTERS
From time to time, the Company is subject to routine litigation incidental
to its business. The Company maintains insurance policies that cover most of
the actions brought against the Company. See "Business--Insurance." The
Company is currently not involved in any legal proceeding which it believes
would have a material adverse effect upon its financial condition or
operations.
EMPLOYEES
The Company had approximately 2,000 employees at April 30, 1996, including
part-time and "on call" employees who shuttle vehicles between locations. At
April 30, 1996, 64 employees in San Diego, 53 employees in Pittsburgh and 69
employees in Philadelphia were subject to collective bargaining agreements.
The collective bargaining agreement covering the San Diego employees expires
in October 1997, the collective bargaining agreement covering the Pittsburgh
employees expires in November 1998 and the collective bargaining agreement
covering the Philadelphia employees expires in October 1998. The Company
believes that its employee relations are good.
HEADQUARTERS
The Company's headquarters facility consists of 2,500 square feet of
leased space in Daytona Beach, Florida. The Company believes that this
facility is sufficient for its needs because of the decentralized nature of
the Company's management.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers, directors and significant employees of the Company
are as follows:
NAME AGE POSITIONS WITH THE COMPANY
- --------------------- ----- -----------------------------------------------
CHAIRMAN OF THE BOARD OF DIRECTORS, CHIEF
Sanford Miller ....... 43 Executive Officer and Director
President, Chief Operating Officer and
John P. Kennedy ...... 51 Director
Jeffrey D. Congdon .. 53 Chief Financial Officer, Secretary and Director
Ronald D. Agronin ... 58 Director
Dr. Stephen L. Weber 54 Director
James F. Calvano .... 59 Director
Jeffrey R. Mirkin ... 43 Director
Alan D. Liker ........ 58 Director
Donald J. Norwalk ... 31 Vice President and Treasurer
Scott Tiemann ........ 37 Vice President and Corporate Controller
Jeffrey D. Widholm .. 32 Vice President--Corporate Development
Directors are elected annually to serve until the next annual meeting of
stockholders and until their successors are elected and qualified. Officers
are elected by and serve at the discretion of the Board of Directors.
Sanford Miller has been the Chairman of the Board of Directors and Chief
Executive Officer of the Company since April 1994. From August 1991 until
August 1994, he was Vice President of Tranex Rental of New York, Inc.
("Tranex"), which operated the Albany and Rochester Budget franchises, and
from December 1991 until August 1994, was Vice President of Capital City
Leasing, Inc. ("Capital City"), which operated the Richmond, Virginia Budget
franchise. Between 1989 and 1991, Mr. Miller served as Director of Marketing,
Special Accounts for BRAC. From 1981 to 1989, Mr. Miller was an executive
officer and principal stockholder of corporations that owned and operated 30
Budget franchises that were sold to BRAC in 1989. From 1979 to 1981, he was a
North East Regional Field Operations Manager for BRAC. Mr. Miller served as
President of the American Car Rental Association, a nation-wide industry
trade association, in 1993 and as Chairman of the Licensee Local Market
Advisory Board of the Budget System in 1989 and 1990. Mr. Miller is also a
director of MoneyGram Payment Systems, Inc. and Tomoka State Bank.
John P. Kennedy has been President, Chief Operating Officer and a director
of the Company since April 1994. From November 1991 until August 1994, he was
President of Metro West, Inc., whose wholly-owned subsidiary owns the
Company's San Diego airport operations. From September 1989 until October
1991, he was an independent consultant to the vehicle rental industry. From
July 1985 to August 1989, he served as President of NYRAC, Inc. d/b/a Budget
Rent a Car of Kennedy and La Guardia Airports. From 1968 to 1984, he served
in various capacities with Avis, including the position of Vice President of
Operations.
Jeffrey D. Congdon has been the Chief Financial Officer, Secretary and a
director of the Company since April 1994. Since December 1990, he has been
Secretary and Treasurer of Tranex Credit Corporation, which provides
financing for purchases of previously-owned vehicles. From 1980 to 1989, he
was an executive officer and principal stockholder of corporations that owned
and operated 30 Budget franchises that were sold to BRAC in 1989. From 1982
to the present, Mr. Congdon has owned and operated retail new and/or
previously-owned car sales operations in Indianapolis, Indiana.
Ronald D. Agronin was elected as a director in April 1994. Since 1993, Mr.
Agronin has served as Vice Chairman of Black Clawson Company, a manufacturer
of paper making machinery, and as President and Chief Executive Officer of
United Container Machinery, Inc., a container manufacturer. He served as
Executive Vice President and Chief Operating Officer of Black Clawson from
1987 until 1993. He serves as a director of both of these companies. Mr.
Agronin is the first cousin of Mr. Miller.
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<PAGE>
Dr. Stephen L. Weber was elected as a director in April 1994. Since June
1996, Dr. Weber has been President of San Diego State University. From August
1995 to June 1996, he was the Interim Provost at the State University of New
York System Office. From 1988 until June 1996, he was President of State
University of New York at Oswego. In July 1996, Dr. Weber will become
President of San Diego State University.
James F. Calvano was elected as a director of the Company in August 1994.
Since February 1996, Mr. Calvano has been the President and Chief Executive
Officer of MoneyGram Payment Systems, Inc., a provider of electronic money
transfer services. From February 1995 until February 1996, Mr. Calvano was
Executive Vice President of Marketing for Travelers Group, a subsidiary of
Travelers, Inc. From November 1993 until February 1996, he was Chief
Administrative Officer of Travelers Insurance Companies. From June 1991 until
May 1993, Mr. Calvano was President and Chief Operating Officer of New Valley
Corp. Two months before he assumed this position, New Valley Corp. suspended
payments on its publicly held debt. An involuntary bankruptcy petition under
Title 11 of the U.S. Code was filed against New Valley Corp. in November 1991
and a voluntary bankruptcy petition under Title 11 was filed by New Valley
Corp. in March 1993. From January 1989 until December 1990, Mr. Calvano was
President and Chief Executive Officer of Carlson Travel Group and Executive
Vice President of Carlson Companies Inc. From November 1986 until December
1988, he served as President of Commercial Credit Corp. and Executive Vice
President of Primerica Corp. Mr. Calvano served American Express Travel
Related Services Co., Inc. as its Vice Chairman, President of Payment Systems
Division, USA and President of Consumer Financial Services Division, USA
between October 1981 and November 1986. From 1972 to 1981, Mr. Calvano was
employed by Avis and served in various capacities, including President and
Chief Executive Officer, Executive Vice President and Chief Operating Officer
and Group Vice President, Western Hemisphere.
Jeffrey R. Mirkin was elected as a director of the Company in October
1995. Since 1985, Mr. Mirkin has been the Chief Executive Officer of SoCal, a
licensee of BRAC and through its wholly owned subsidiary, an operator of
Budget locations in Southern California. See "Certain Transactions."
Alan D. Liker has been a director since October 1995. He has served as a
business advisor to a number of individuals and companies during the past
five years, including as Vice President of SoCal since February 1992. Mr.
Liker is also a director of Herbalife International. Mr. Liker was a director
of Shaklee Corporation and its Japanese affiliate, Shaklee KK until their
sale in 1989. From 1976 to 1980, he was a principal of Xerox Development
Corporation, a strategic planning unit of Xerox Corporation. Mr. Liker was
previously a law professor at the Harvard University, University of
California (Los Angeles) and University of Southern California law schools.
Previously he was a director of First Charter Bank and Shop Television
Network. See "Certain Transactions."
Donald J. Norwalk has been Vice President and Treasurer of the Company
since July 1994. From January 1994 until July 1994, he was the SEC Reporting
and Compliance Officer for FFLC Bancorp, Inc., a bank holding company. From
January 1989 to January 1994, he was an auditor for Deloitte & Touche,
serving clients primarily in the financial, manufacturing and real estate
industries.
Scott Tiemann has been Vice President and Controller of the Company since
July 1994. From March 1992 until July 1994, he was employed by BRAC as the
Business Manager for Freedom River. From November 1989 until March 1992, he
was a city controller for BRAC.
Jeffrey D. Widholm has been Vice President of Corporate Development of the
Company since August 1995. From January 1987 until August 1995, he was a
corporate banking officer for BankOne, Indianapolis, N.A., where he was
responsible for a loan portfolio of middle market and large corporate
clients.
The Company's Board of Directors has a Compensation Committee and an
Audit/Finance Committee. The Compensation Committee, composed of Mr. Agronin
and Dr. Weber, establishes salaries, incentives and other forms of
compensation for directors, officers and other employees of the Company,
administers various incentive compensation and benefit plans and recommends
policies relating to such plans. The Audit/Finance Committee, composed of
Messrs. Agronin and Calvano,
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reviews the Company's accounting practices, internal accounting controls and
financial results and oversees the engagement of the Company's independent
auditors. Nonemployee directors receive an annual retainer of $12,000 and
participate in the 1994 Directors' Stock Option Plan. The Company also pays
the reasonable out-of-pocket expenses of each director in connection with his
attendance at each Board or committee meeting.
In connection with the Los Angeles Acquisition, the Company and the
Principal Executive Officers agreed that for so long as SoCal and its general
partners own 500,000 or more shares of the Class A Common Stock received in
the Los Angeles Acquisition, the Company and the Principal Executive Officers
will nominate and use their best efforts to elect to the Company's Board of
Directors two persons designated by SoCal and further, for so long as SoCal
and its general partners own less than 500,000 but more than 250,000 shares
of Class A Common Stock, the Company and the Principal Executive Officers
agreed to nominate to the Company's Board of Directors one person designated
by SoCal. Following the Los Angeles Acquisition, Messrs. Mirkin and Liker
were selected by SoCal and thereafter elected to the Board of Directors of
the Company.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation paid by the
Company during the last three fiscal years to the Chief Executive Officer and
certain other executive officers of the Company.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ---------------------
OTHER ANNUAL SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS
- --------------------------- ------ ------------- -------------- ---------------------
<S> <C> <C> <C> <C>
Sanford Miller ............. 1995 $183,667 $ -- 30,000
Chairman of the Board and 1994 $ 91,108(1) $ 14,067(2) --
Chief Executive Officer 1993 30,000(1) 17,918(2) --
John P. Kennedy ............ 1995 $173,333 $ -- 25,000
President and Chief 1994 $ 94,558 $ -- --
Operating Officer 1993 $111,900 $ -- --
Jeffrey D. Congdon ......... 1995 $173,333 $ -- 25,000
Chief Financial Officer 1994 $ 26,250(3) $ -- --
and Secretary 1993 $ -- $ -- --
</TABLE>
- ------------
(1) Does not include $6,924 and $27,696 of cash dividends paid by Tranex
and Capital City to Mr. Miller in 1994 and 1993, respectively.
(2) Other annual compensation consists of $12,476 and $15,192 of payments
made by the Company with respect to vehicles used by Mr. Miller in 1994
and 1993, respectively, and $1,591 and $2,726 of gasoline expenses in
connection with the use of these vehicles in 1994 and 1993,
respectively.
(3) Represents salary for the period from August 24, 1994 through December
31, 1994.
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OPTION GRANTS DURING FISCAL 1995
The following tables describe the stock options granted to the Chief
Executive Officer and certain other executive officers of the Company in the
last fiscal year.
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE Expiration
Name Granted Fiscal Year Per Share Date
- ------------- ------------ ---------------- ------------- ---------------
Mr. Miller .. 30,000 15.6% $9.50 March 1, 2005
Mr. Kennedy . 25,000 13.0% $9.50 March 1, 2005
Mr. Congdon . 25,000 13.0% $9.50 March 1, 2005
(RESTUBBED TABLE CONTINUED FROM ABOVE)
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR OPTION TERM
- ----------------------------------------
Name 5% 10%
- ------------- ---------- ----------
Mr. Miller .. $179,235 $454,217
Mr. Kennedy . $149,362 $378,514
Mr. Congdon . $149,362 $378,514
NUMBER OF
OPTIONS AT DECEMBER 31, 1995
------------------------------
NAME EXERCISEABLE UNEXERCISEABLE
- -------------- -------------- --------------
Mr. Miller .... -- 30,000
Mr. Kennedy .. -- 25,000
Mr. Congdon .. -- 25,000
No options were exercised in 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee is composed of Mr. Agronin and Dr. Weber,
neither of whom has ever (i) been an officer or employee of the Company or
any of its subsidiaries or (ii) entered into a related-party transaction with
the Company.
BENEFIT PLANS
1994 Option Plan. The 1994 Option Plan provides for the grant to selected
key employees of the Company and its subsidiaries of either incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of
1986 (the "Code") or nonqualified options (intended not to qualify as
incentive stock options) to purchase Class A Common Stock. The 1994 Option
Plan is administered by the Compensation Committee of the Board of Directors.
The maximum number of shares of Class A Common Stock that may be made subject
to options granted pursuant to the 1994 Option Plan is 260,000, and the
maximum number of shares for which an employee may be granted options in any
three-year period is 75,000, subject, in each case, to adjustments for
certain changes in the Company's capitalization. The price per share under an
incentive stock option must be at least the fair market value per share as of
the date of grant; the price per share under a nonqualified option is
determined by the Compensation Committee but may not be less than the greater
of 85% of such fair market value per share or the book value per share on the
date the nonqualified stock option is granted. In the case of an employee who
owns more than 10% of the voting power of the Company, the price per share
under an incentive stock option must be at least 110% of the fair market
value per share as of the date of grant. No option may be exercised within
six months from the date of grant, except that an option will be immediately
exercisable upon the occurrence of certain events, including a "change in
control" of the Company as defined in the 1994 Option Plan. Except in the
event of the death or disability of a holder of nonqualified stock options,
no option may be exercised more than 10 years after its date of grant (and,
in the case of an employee who owns more than 10% of the voting power of the
Company, an incentive stock option held by such employee may not be exercised
more than five years after its date of grant). Unless sooner terminated, the
1994 Option Plan terminates on April 24, 2004. As of the date of this
Prospectus, 192,600 options have been granted under the 1994 Option Plan and
an additional 250,000 options have been granted subject to the amendment of
the 1994 Option Plan to increase the number of shares available for grant
thereunder (as described in the following paragraph).
43
<PAGE>
The Board of Directors has approved and recommended to the stockholders
that they approve at the Company's annual stockholder meeting on June 18,
1996 a proposal to amend the 1994 Option Plan to (i) increase the number of
shares of Common Stock available for grant under such plan from 260,000 to
760,000, an increase of 500,000 shares of Common Stock, (ii) provide that the
committee that administers the 1994 Option Plan must be comprised of "outside
directors" and that the option price for all options to be granted under the
1994 Option Plan may not be less than the fair market value of Common Stock
on the day the option is granted in order to qualify the 1994 Option Plan for
an exception to the $1,000,000 remuneration deduction limitation imposed
under Section 162(m) of the Code and (iii) permit the grant of options to
purchase shares of Class B Common Stock. In the event that the proposed
amendment is approved, 317,400 options would remain available for grant under
the 1994 Option Plan (after giving effect to the grant of 250,000 options
described in the preceding paragraph).
1994 Directors' Stock Option Plan. The Company's 1994 Directors' Stock
Option Plan (the "1994 Directors' Plan") provides for the grant to directors
of the Company who are not employees of the Company ("outside directors") of
options to purchase Class A Common Stock. Because the 1994 Directors' Plan by
its terms specifies the class of directors eligible to receive options, the
timing of the grant of options, the number of shares underlying options to be
granted and the exercise price of such options, there is no discretionary
administration with regard to these matters. The Board of Directors may
appoint a committee to perform ministerial duties in connection with the 1994
Directors' Plan. The maximum number of shares of the Class A Common Stock
subject to options granted pursuant to the 1994 Directors' Plan is 25,000.
Each outside director was granted an option for 5,000 shares of Class A
Common Stock on the date on which the director was elected to office or, if
later, the effective date of the 1994 Directors' Plan. The exercise price per
share under an option was the fair market value per share as of the date of
grant. The options are exercisable in full beginning six months after the
date of grant, except that an option will be immediately exercisable upon the
occurrence of certain events, including a change in the control of the
Company. Except in the event of a holder's death or disability, no option may
be exercised more than 10 years after its date of grant. Unless sooner
terminated, the 1994 Directors' Plan will terminate on April 24, 2004. As of
the date of this Prospectus, 5,000 options have been granted to each of
Messrs. Agronin, Calvano, Weber, Mirkin and Liker under the 1994 Directors'
Plan. There are no additional options available for grant under the 1994
Directors' Plan.
CERTAIN TRANSACTIONS
Concurrently with the completion of the initial public offering in August
1994, Messrs. Miller, Kennedy, Congdon and certain current and former
employees of the Company (the "Exchange Stockholders"), who were the
stockholders of certain of the corporations that owned the Albany and
Rochester, New York, Richmond, Virginia and San Diego, California Budget
franchises, exchanged all of their shares of these corporate entities for an
aggregate of 563,400 shares of the Class A Common Stock and 1,936,450 shares
of the Class B Common Stock (the "Share Exchange"). The Principal Executive
Officers thereby acquired 100% of the shares of the Class B Common Stock that
have been issued by the Company. Upon consummation of the Share Exchange and
the redemption of the preferred stock of the Company's subsidiary that
operates the San Diego airport franchise, all of the Albany, Rochester,
Richmond and San Diego operating companies became wholly-owned subsidiaries
of the Company. See "Shares Eligible for Future Sale."
Pursuant to an agreement dated as of November 1, 1994, Team Rental of Ft.
Wayne, Inc. ("TRFW") a wholly-owned subsidiary of the Company, purchased all
of the shares of capital stock of Ft. Wayne Rental Group, Inc. ("Ft. Wayne").
Ft. Wayne, which was owned by Sanford Miller and others, including a former
employee of the Company, acquired the assets constituting the Ft. Wayne
business in June 1993 for approximately $26,000, plus the assumption of
approximately $66,000 of liabilities. The total purchase price for the stock
of Ft. Wayne was 18,500 shares of the Class A Common Stock of the Company
valued at approximately $200,000 (plus a de minimis amount of cash to prevent
the issuance of fractional shares of stock). Mr. Miller received 7,400 shares
of Class A Common Stock in exchange for his shares of Ft. Wayne stock. Prior
to the acquisition of Ft. Wayne, Tranex Rentals of New York, Inc. d/b/a
Budget Rent a Car of Albany and Rochester, which became a subsidiary of the
Company in the Share Exchange, leased vehicles to Ft. Wayne. The aggregate
payments under this lease amounted to approximately $366,000 in 1994.
44
<PAGE>
Messrs. Miller, Kennedy and Congdon have guaranteed the performance of the
obligations of some or all of the Company's subsidiaries under their
respective Franchise Agreements. In connection with the initial public
offering, the Company's franchisors agreed to release these individuals from
their guarantees under the Franchise Agreements and substitute the Company's
guarantee therefor, provided that the Company maintains net worth of at least
$15 million. In the event that the Company's net worth falls below this
level, the Company has the option to provide the franchisors with a $5
million letter of credit that could be drawn on in the event of a monetary
default under the Franchise Agreements or, in the alternative, to allow the
personal guarantees to be reinstated.
The Company's Richmond, Virginia airport facility is leased from a
partnership formed by Mr. Miller and an employee of the Company (the
"Richmond Partnership"). This lease terminates in 1998, subject to renewal.
Rental payments under the lease agreement amounted to approximately $31,200,
$95,000 and $97,000 in 1993, 1994 and 1995, respectively. The monthly base
rent under this lease (approximately $7,800, $7,900 and $8,100 in 1993, 1994
and 1995, respectively) escalates by approximately 3% per annum. The Company
has entered into another lease for a non-airport facility located in
Chesterfield County, Virginia that is owned by the Richmond Partnership. This
lease commenced in June 1994 and terminates in May 1999, subject to renewal.
Rental payments under the lease agreement amounted to approximately $24,000
and $33,000 in 1994 and 1995, respectively. The monthly base rent under this
lease was approximately $3,400 and $3,500 in 1994 and 1995, respectively and
escalates by approximately 3% per annum. The Company's Rochester, New York
airport facility is leased from a partnership formed by Mr. Miller and a
former employee of the Company. This lease terminates in 2003, subject to
renewal. The monthly base rent under this lease (approximately $6,350, $6,700
and $6,800 in 1993, 1994 and 1995, respectively) escalates by 5% per annum
until August 30, 1996, and thereafter annual increases will be the higher of
5% or the amount of the increase in the consumer price index. Rental payments
under the lease amounted to $25,400, $75,000 and $81,000 in 1993, 1994 and
1995, respectively. All of these leases are on a triple net basis (i.e., the
Company is responsible for the payment of taxes and insurance, utilities and
for the general maintenance of these facilities in addition to its
obligations to pay base rent). All of these leases provide for an initial
term of ten years and two five-year renewal terms. The Company believes that
these leases are on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.
The Company's Philadelphia, Pennsylvania retail vehicle sales facility,
regional administrative headquarters and vehicle maintenance facility are
leased from MCK Real Estate Corporation ("MCK"), which is owned by Messrs.
Miller, Congdon and Kennedy. This lease terminates in September 2002, subject
to renewal. Rental payments under the lease were approximately $168,000 for
1995. The monthly base rent (approximately $26,000 per month in 1995)
escalates by 3% per annum. The Company's Richmond, Virginia retail car sales
facility is leased from MCK. This lease terminates in October 2000, subject
to renewal. Rental payments under this lease were approximately $10,000 for
1995. The monthly base rent under this lease (approximately $10,000 per month
in 1995) escalates by 3% per annum. The Company's second Dayton, Ohio retail
car sales facility, which opened in April 1996, is leased from MCK. This
lease terminates in March 2001, subject to renewal. The monthly base rent
under this lease (approximately $10,000 per month in 1996) escalates by 3%
per annum. All of these leases are on a triple net basis. The Company
believes that these leases are on terms no less favorable than could be
obtained from unaffiliated third parties.
Prior to the Company's initial public offering, the Company's subsidiaries
funded their operations in part through loans from the Company's executive
officers. The following table sets forth certain information with respect to
loans provided by the Principal Executive Officers. All such loans, together
with accrued interest, were repaid upon the completion of the initial public
offering.
45
<PAGE>
ORIGINAL OUTSTANDING
NAME OF EXECUTIVE PRINCIPAL INTEREST RATE
OFFICER PROVIDING LOAN DATE OF LOAN AMOUNT PER ANNUM
- ---------------------- -------------- ----------- ----------------
Sanford Miller ........ January 1992 $ 40,000 10%
September 1992 $310,000 15%
December 1992 $ 56,000 10%
January 1993 $130,000 12%
June 1994 $516,257 12%
Jeff Congdon .......... December 1989 $200,000 prime plus 1.75%
September 1992 $310,000 15%
January 1993 $130,000 12%
June 1994 $516,257 12%
John Kennedy .......... September 1992 $310,000 15%
January 1993 $130,000 12%
June 1994 $250,000 12%
In addition, in order to finance the organizational expenses incurred by
the Company prior to the initial public offering, Messrs. Miller, Congdon and
Kennedy advanced the following amounts: Mr. Miller--$41,289 at prime plus
1.5%; $3,300, non-interest bearing; Mr. Congdon--$14,266 at prime plus 1.5%;
$1,800, non-interest bearing; and Mr. Kennedy--$14,266 at prime plus 1.5%;
$1,800, non-interest bearing. All of these advances, together with accrued
interest, were repaid upon completion of the initial public offering.
In connection with the Los Angeles Acquisition, the Company entered into a
Franchise Agreement with SoCal, under which the Company agreed to pay to the
seller, SoCal, a royalty of 5% of the monthly gross rental revenues derived
from those operations, subject to a minimum amount. In addition, the Company
issued a note to SoCal in the principal amount of approximately $4,750,000
(the "SoCal Note"), assumed the obligations of SoCal under a note in the
principal amount of approximately $4,700,000 which was secured by the
personal guaranty of Jeffrey R. Mirkin (the "SoCal Bank Note") and assumed
certain other indebtedness that was personally guaranteed by Mr. Mirkin. Mr.
Mirkin is the Chief Executive Officer and a general partner of SoCal and upon
consummation of the Los Angeles Acquisition became a director of the Company.
The Company operates as a sub-franchisee of SoCal in the San Diego territory
and pays royalty fees to SoCal based on rental revenues for vehicles other
than trucks. In 1993, 1994 and 1995, the Company paid SoCal approximately
$1,100,000, $1,000,000 and $1,200,000 in royalty fees, respectively. Except
as described above, prior to the Los Angeles Acquisition, there was no
material relationship between the Company and SoCal. The SoCal Note together
with accrued interest of $103,906, and the SoCal Bank Note were repaid in
April 1996. There is approximately $700,000 of other indebtedness currently
payable by the Company to SoCal.
Sanford Miller is a member of the board of directors of Tomoka State Bank
in Ormond Beach, Florida. The Company maintains a checking account at that
bank with an average balance of $100,000.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The table below sets forth, as of June 10, 1996 certain information with
respect to the beneficial ownership of Common Stock by (i) each person who is
known by the Company to be the beneficial owner of more than 5% of the Common
Stock of the Company, (ii) each of the executive officers and directors of
the Company and all directors and executive officers as a group and (iii)
each of the Selling Stockholders, in each case both before and after giving
effect to this Offering.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO NUMBER OWNED AFTER PERCENT OF TOTAL
THE OFFERING (1) OF SHARES THE OFFERING (1) VOTING POWER OF
--------------------- TO BE SOLD IN ------------------- COMMON STOCK
NUMBER PERCENT THE OFFERING NUMBER PERCENT AFTER THE OFFERING
- ------------------------------- ----------- --------- --------------- ------ ------ ------------------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------
Sanford Miller(2) .............. 926,500 12.4% -- 926,500 8.8% 32.6%
Jeffrey D. Congdon(3) .......... 533,350 7.2 -- 533,350 5.1 18.6
John P. Kennedy(4) ............. 523,500 7.0 -- 523,500 5.0 18.5
Ronald D. Agronin (5) .......... 7,000 * -- 7,000 * *
Dr. Stephen L. Weber(5) ........ 8,100 * -- 8,100 * *
James Calvano(5) ............... 5,000 * -- 5,000 * *
Jeffrey R. Mirkin(5)(6) ........ 1,055,000 14.2 400,000 655,000 6.3 2.4
Alan D. Liker(5)(7) ............ 83,333 1.1 -- 83,333 * *
All directors and officers as a
group (8 persons)(8) .......... 3,063,450 41.0 400,000 2,663,450 24.2 72.1
OTHER SELLING STOCKHOLDERS
- --------------------------
Katzin Investments L.C.(9) .... 272,727 3.7 272,727 -- -- --
Richard Sapia(10) .............. 204,875 2.8 100,000 104,875 1.4 *
James Salatto .................. 117,733 1.6 60,000 57,733 * *
OTHER FIVE PERCENT STOCKHOLDERS
- -------------------------------
Ronald Baron(11) ............... 454,000 6.1 -- 454,000 4.4 1.6
</TABLE>
- ------------
* Less than 1%.
(1) In determining the number and percent of shares beneficially owned by
each person, shares that may be acquired by such person pursuant to
options exercisable within 60 days of the date hereof are deemed
outstanding for purposes of determining the total number of
outstanding shares for such person and are not deemed outstanding for
such purpose for all other stockholders. To the best of the Company's
knowledge, except as otherwise indicated, beneficial ownership
includes sole voting and dispositive power with respect to all
shares.
(2) Of the 926,500 shares of Common Stock owned, 905,800 are shares of
Class B Common Stock and 20,700 are shares of Class A Common Stock,
4,000 of which shares are owned by Mr. Miller's children. Mr.
Miller's address is 125 Basin Street, Daytona Beach, Florida 32114.
(3) Of the 533,350 shares of Common Stock, 515,400 are shares of Class B
Common Stock and 17,950 are shares of Class A Common Stock. Mr.
Congdon's address is 7050 West Washington Street, Indianapolis,
Indiana 46241.
(4) Of the 523,500 shares of Common Stock, 515,400 are shares of Class B
Common Stock and 8,100 are shares of Class A Common Stock. Mr.
Kennedy's address is 45 Riverside Avenue, Westport, Connecticut
06880.
(5) Includes 5,000 shares of Class A Common Stock issuable upon exercise
of options granted under the 1994 Directors' Plan.
(6) Includes 1,050,000 shares of Class A Common Stock beneficially owned
by SoCal, a general partnership, of which Mr. Mirkin is a general
partner and the trustee of certain trusts which are general partners
of SoCal. Mr. Mirkin's address is 150 South Doheny Drive, Beverly
Hills, California 90211.
(7) Includes 78,333 shares of Class A Common Stock that may be acquired
by Mr. Liker from SoCal pursuant to an option granted by SoCal to Mr.
Liker.
(8) Includes 25,000 shares issuable upon the exercise of options granted
under the 1994 Directors' Plan.
(9) Katzin Investments L.C. is controlled by the former stockholders of
Arizona Rent A Car Systems, Inc. ("ARAC"). The Company acquired the
Phoenix Budget franchise through the acquisition of ARAC in February
1996.
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<PAGE>
(10) Mr. Sapia is a former employee of the Company and was a stockholder
of certain companies from which the Company acquired Budget rental
franchises.
(11) Includes 240,000 shares owned by BAMCO, Inc., a registered investment
advisor controlled by Mr. Baron, in its capacity as an advisor to
clients, which may include registered investment companies; 114,000
shares owned by Baron Capital Management, Inc., a registered
investment company controlled by Mr. Baron; and 100,000 shares owned
by Baron Capital Partners, L.P., an investment partnership of which
Mr. Baron is a general partner. Mr. Baron shares voting and
dispositive power as to 354,000 shares, as to which he disclaims
beneficial ownership. This information is represented in reliance
upon a Schedule 13D filed by Mr. Baron with the Securities and
Exchange Commission on or about April 24, 1996. Mr. Baron's address
is c/o BAMCO, Inc., 450 Park Avenue, New York, New York 10022.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 17,500,000 shares
of the Class A Common Stock, 2,500,000 shares of the Class B Common Stock and
250,000 shares of the preferred stock, $.01 par value per share (the
"Preferred Stock"). Immediately prior to the date of this Prospectus, there
were 5,493,176 shares of the Class A Common Stock, 1,936,600 shares of the
Class B Common Stock and no shares of the Preferred Stock outstanding. All of
the outstanding shares of Class B Common Stock are held by the Principal
Executive Officers.
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
Voting Rights. Each share of the Class A Common Stock is entitled to one
vote and each share of the Class B Common Stock is entitled to ten votes on
all matters submitted to a vote of the stockholders. The Class A Common Stock
and the Class B Common Stock vote together as a single class on all matters
presented for a vote of the stockholders, except as noted below. Immediately
following the Offering, the holders of the Class B Common Stock will have
approximately 69.5% of the combined voting power of the outstanding Class A
and Class B Common Stock and therefore will retain effective control of the
Company, continue to direct the business, management and policies of the
Company and continue to have the ability to elect all of the members of the
Board of Directors.
The Company's Amended and Restated Certificate of Incorporation requires a
vote of 60% of the number of shares of the Class B Common Stock outstanding,
voting separately as a class, and a majority of the shares of the Class A
Common Stock, voting separately as a class, to approve any modification to
the rights and privileges of the Class A Common Stock or the Class B Common
Stock or any reclassification or recapitalization of the Company's
outstanding capital stock.
Dividends. Each share of the Class A Common Stock is entitled to receive
dividends if, as and when declared by the Board of Directors of the Company
out of funds legally available therefore. Identical dividends, if any, must
be paid on both the Class A Common Stock and the Class B Common Stock at any
time that dividends are paid on either, except that stock dividends payable
on shares of the Class B Common Stock are payable only in shares of the Class
B Common Stock and stock dividends payable on shares of the Class A Common
Stock are payable only in shares of the Class A Common Stock. If a dividend
or distribution payable in the Class A Common Stock is made on the Class A
Common Stock, the Company must also make a pro rata and simultaneous dividend
or distribution of shares of Class B Common Stock on the Class B Common
Stock. If a dividend or distribution payable in Class B Common Stock is made
on the Class B Common Stock, the Company must also make a pro rata and
simultaneous dividend or distribution of shares of Class A Common Stock on
the Class A Common Stock.
Convertibility. Each share of the Class B Common Stock is convertible at
any time at the option of the holder into the Class A Common Stock on a
share-for-share basis. Shares of the Class B Common Stock will be
automatically converted into shares of the Class A Common Stock on a
share-for-share basis in the event that the record or beneficial ownership of
such shares of the Class B Common Stock shall be transferred (including,
without limitation, by way of gift, settlement, will or intestacy) to any
person or entity that was not a holder of Class B Common Stock at the time of
transfer. Therefore, the shares of Class B Common Stock will only exist so
long as they are held by one or more of the Principal Executive Officers.
Shares of the Class A Common Stock are not convertible.
Liquidation Rights. In the event of the dissolution of the Company, after
satisfaction of amounts payable to creditors and distribution to the holders
of outstanding Preferred Stock, if any, of amounts to which they may be
preferentially entitled, holders of the Class A Common Stock and the Class B
Common Stock are entitled to share ratably in the assets available for
distribution to the stockholders.
Other Provisions. There are no preemptive rights to subscribe to any
additional securities which the Company may issue and there are no redemption
provisions or sinking fund provisions applicable to the Class A Common Stock
or the Class B Common Stock, nor is either class subject to calls or
assessments by the Company. All outstanding shares of Common Stock are, and
all shares to be outstanding upon completion of this Offering will be,
legally issued, fully paid and nonassessable.
49
<PAGE>
PREFERRED STOCK
The Board of Directors of the Company has the authority, without further
action by the stockholders, to cause the Company to issue up to 250,000
shares of Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any
unissued shares of Preferred Stock and to fix the number of shares
constituting any series and the designations of such series. The issuance of
Preferred Stock, while providing flexibility in connection with possible
financings, acquisitions and other corporate transactions, could, among other
things, adversely affect the voting power of the holders of Common Stock and,
under certain circumstances, make it more difficult for a third party to gain
control of the Company, deny stockholders the receipt of a premium on their
Common Stock and have a depressive effect on market price of the Common
Stock. The Company has no present plan to issue any shares of Preferred
Stock.
WARRANTS
In connection with the Company's initial public offering and acquisition
of the Budget operations in Philadelphia, Pittsburgh and Cincinnati, the
Company issued to BRAC a warrant (the "BRAC Warrant") to purchase 175,000
shares of the Class A Common Stock at the price of the shares in the initial
public offering ($9.50 per share). The BRAC Warrant is exercisable commencing
August 1996 and expires in August 1999. After August 24, 1998 and prior to
August 24, 1999, the holder of the BRAC Warrant will have the right to cause
the Company to repurchase the BRAC Warrant for $2.0 million. In connection
with financing provided to the Company in April 1996, the Company issued to
NationsBank, National Association (South) a warrant (the "NationsBank
Warrant") to purchase 187,500 shares of Class A Common Stock at the then
current market price ($10.87 per share). The NationsBank Warrant is
exercisable from the date of its issuance and expires April 2001.
BYLAW PROVISIONS
The Company's Bylaws provide that special meetings of the stockholders may
be called only by the Board of Directors, the Chairman of the Board, the
Chief Executive Officer, the President or Secretary of the Company, or by one
or more stockholders holding shares entitled to cast not less than a majority
of the aggregate votes entitled to be cast at such meeting. The Bylaws also
provide that any action which may be taken at any meeting of stockholders may
be taken without a meeting and without prior notice if written consents
approving the action are signed by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to take
such action at a meeting of stockholders. Accordingly, the holders of the
Class A Common Stock will have insufficient voting power, in the aggregate,
to call special meetings of stockholders and the holders of the Class B
Common Stock may take certain actions by written consent without formally
convening a meeting of stockholders. These provisions will also make it more
difficult for a third party to gain control of the Company.
REGISTRATION RIGHTS
Concurrently with completion of the initial public offering, the Company
and the Exchange Stockholders entered into the registration rights agreement
(the "Registration Rights Agreement") granting such holders registration
rights with respect to the shares of Common Stock received by them as a
result of the Share Exchange. The Registration Rights Agreement provided that
the holders of at least 33% of the outstanding shares received in the Share
Exchange may require the Company to register such shares under the Securities
Act of 1933, as amended (the "Securities Act") on two occasions; provided
that the aggregate offering price of the shares so registered is not less
than $1 million on each occasion. The Registration Rights Agreement also
provided that at any time Class A Common Stock is to be registered by the
Company under the Securities Act, the Company must notify the Exchange
Shareholders to allow their participation in the registration, subject to
certain conditions. The Company has agreed to refrain from selling its
securities during the ten-day period prior to, and the 180-day period
following, the consummation of each underwritten offering made pursuant to
the Registration Rights Agreement. The Company has also agreed to pay the
costs and expenses of each registration effected under the Registration
Rights Agreement, other than underwriting discounts and commissions. The
50
<PAGE>
Registration Rights Agreement was amended in November 1, 1994 to include the
signatories to the Ft. Wayne Stock Purchase Agreement. The shares issuable
upon the exercise of the BRAC Warrant are also entitled to two demands and
unlimited "piggyback" registration rights with respect to the shares issuable
upon its exercise, while the shares issuable upon the NationsBank Warrant are
entitled to one demand and unlimited "piggyback" registration rights. The
Company will bear the expenses of registering such shares, other than
underwriting discounts and commissions. In connection with the Los Angeles
Acquisition, the Company and SoCal entered into a registration rights
agreement granting SoCal and its affiliated entities an unlimited number of
"piggyback" registrations subject to certain conditions. The Company will
bear the expenses of registering such shares, other than underwriting
discounts and commissions. In connection with the Phoenix Acquisition, the
Company granted to Katzin Investments L.C. three demand and an unlimited
number of "piggyback" registration rights for a period of two years for the
shares of Class A Common Stock issued in the Phoenix Acquisition. Katzin
Investments, L.C. is selling all of its shares of Class A Common Stock in the
Offering pursuant to its Registration Rights. See "Principal and Selling
Stockholders." In connection with the Offering, the Company has agreed to pay
the Selling Stockholders' costs and expenses, other than underwriting
discounts and commissions.
INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, the Company's
Restated Certificate of Incorporation provides that directors of the Company
will not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
international misconduct or a knowing violation of law, (iii) under Section
174 of the Delaware General Corporation Law, relating to prohibited
dividends, distributions and repurchases or redemptions of stock, or (iv) for
any transaction from which the director derives an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its directors,
officers, employees and other agents, to the fullest extent provided by
Delaware law. The Company has also entered into indemnification agreements
with certain of its executive officers and directors. The indemnification
agreements require the Company, among other things, to indemnify such
directors and officers against certain liabilities that may arise by reason
of their status or service as directors or officers (other than liabilities
arising from willful misconduct of a culpable nature), and to advance their
expenses incurred as a result of any proceeding against them as to which they
could be indemnified. The Company maintains directors' and officers'
insurance against certain liabilities.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Company pursuant to the arrangements described above, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable.
At present, there is no pending material litigation or proceeding
involving any director, officer, employee or agent of the Company where
indemnification will be required or permitted.
SECTION 203
The Company is subject to Section 203 of the Delaware General Corporation
Law, which prohibits a publicly held Delaware corporation from consummating a
"business combination," except under certain circumstances, with an
"interested stockholder" for a period of three years after the date such
person became an "interested stockholder" unless the business combination is
approved in a prescribed manner. An "interested stockholder" generally is
defined as a person who, together with affiliates and associates, owns (or,
within the prior three years, owned) 15% or more of a corporation's
outstanding voting stock. A "business combination" includes mergers, asset
sales and certain other transactions resulting in a financial benefit to an
interested stockholder.
TRANSFER AGENT
The transfer agent and registrar for the Class A Common Stock is Chemical
Bank.
51
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
8,660,449 shares of the Class A Common Stock and 1,936,600 shares of the
Class B Common Stock (assuming the Underwriters' over-allotment option is not
exercised). The Class B Common Stock is convertible on a share-for-share
basis into Class A Common Stock and must be converted to effect any public
sale of such stock. Of these shares, 7,454,400 shares, including the
4,000,000 shares of Class A Common Stock sold in the Offering, will be freely
tradeable without restriction under the Securities Act, except for any shares
purchased by an "affiliate" of the Company (as that term is defined in the
Securities Act), which will be subject to the resale limitations of Rule 144
under the Securities Act.
The remaining 1,206,049 shares of the Class A Common Stock and all shares
of the Class B Common Stock are "restricted" securities within the meaning of
Rule 144 and may not be resold in a public distribution, except in compliance
with the registration requirements of the Securities Act or pursuant to Rule
144. 563,400 of such shares of Class A Common Stock and all of the Class B
Common Stock will become eligible for sale under Rule 144 in August 1996. The
Company's executive officers and directors, who in the aggregate will hold
beneficially 705,850 shares of Class A Common Stock and all of the Class B
Common Stock after the Offering, have agreed that they will not sell,
contract or offer to sell or otherwise dispose of, directly or indirectly,
any shares of capital stock of the Company for a period of 90 days from the
date of this Prospectus without the prior written consent of CS First Boston
on behalf of the Underwriters. After such date, certain of these stockholders
have the right to demand that the Company register their shares under the
Securities Act in accordance with agreements between such holders and the
Company and may be able to dispose of their shares in a registered public
offering effected thereunder. In addition, certain stockholders and holders
of the stock purchase warrants possess certain demand and/or "piggyback"
registration rights. See "Description of Capital Stock--Registration Rights"
and "Management--Benefit Plans."
The Company has reserved 260,000 shares of Class A Common Stock for
issuance under the 1994 Option Plan and 25,000 shares of Class A Common Stock
for issuance under the 1994 Directors' Plan. 192,600 stock options are
currently issued or outstanding under the 1994 Option Plan and 25,000 stock
options are issued and outstanding under the 1994 Directors' Plan. In
addition, the stockholders will vote on a proposal at the annual meeting on
June 18, 1996 to increase the number of shares of Common Stock available for
issuance under the 1994 Option Plan to 760,000, an increase of 500,000
shares. The Company filed a Form S-8 registration statement under the
Securities Act to register all 285,000 shares of the Class A Common Stock
issuable under the 1994 Option Plan and 1994 Directors' Plan. The
registration statement became effective immediately upon filing. Shares
issued upon the exercise of stock options after the effective date of the
Form S-8 registration statement will be eligible for resale in the public
market without restriction, subject to Rule 144 limitations applicable to
affiliates and the lock-up agreements applicable to certain shares subject to
options as described in the preceding paragraph. The Company has reserved
362,500 shares of the Class A Common Stock for issuance upon the exercise of
stock purchase warrants.
52
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1996 (the "Underwriting Agreement") among TEAM, the Selling
Stockholders and the underwriters named below (the "Underwriters"), the
Underwriters have severally but not jointly agreed to purchase from the
Company and the Selling Stockholders the following respective numbers of
shares of Class A Common Stock, as set forth opposite their names.
NUMBER OF
UNDERWRITER SHARES
- ------------------------------------ -----------
CS First Boston Corporation .........
The Chicago Corporation .............
McDonald & Company Securities, Inc.
-----------
Total ............................. 4,000,000
===========
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Class A
Common Stock offered hereby (other than those shares covered by the
over-allotment option described below) if any are purchased. The Underwriting
Agreement provides that, in the event of a default by an underwriter, in
certain circumstances the purchase commitments of non-defaulting Underwriters
may be increased or the Underwriting Agreement may be terminated.
The Company has granted to the Underwriters an option exercisable by CS
First Boston Corporation on behalf of the Underwriters, expiring at the close
of business on the 30th day after the date of this Prospectus, to purchase up
to 600,000 additional shares of the Class A Common Stock at the public
offering price less the underwriting discounts and commissions, all as set
forth on the cover page of this Prospectus. The Underwriters may exercise
such option only to cover over-allotments, if any, in the sale of the shares
of Class A Common Stock. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Class A Common
Stock as it was obligated to purchase pursuant to the Underwriting Agreement.
The Company and the Selling Stockholders have been advised by the
Underwriters that the Underwriters propose to offer the shares of the Class A
Common Stock to the public initially at the public offering price set forth
on the cover page of this Prospectus and, through the Underwriters, to
certain dealers at such price less a concession of $ per share, and the
Underwriters and such dealers may allow a discount of $ per share on
sales to certain other dealers. After the public offering, the public
offering price and concession and discount to dealers may be changed by the
Underwriters.
In connection with this offering, the Underwriters and their respective
affiliates may engage in passive market making transactions in the Class A
Common Stock on the Nasdaq National Market in accordance with Rule 10b-6A
under the Securities Exchange Act of 1934 (the "Exchange Act"), during a
period before commencement of offers or sales of the shares offered hereby.
The passive market making transactions must comply with applicable volume and
price limits and be identified as such.
The Company, its officers and directors and the Selling Stockholders have
agreed that they will not offer, sell, contract to sell, announce their
intention to sell, pledge or otherwise dispose of, directly or indirectly,
or, in the case of the Company, file with the Securities and Exchange
Commission (the "Commission") a registration statement under the Securities
Act relating to any additional shares of the Company's Common Stock or
securities convertible into or exchangeable or exercisable for any shares of
the Company's Common Stock without the prior written consent of CS First
Boston Corporation, in the case of the Company's officers and directors and
the Selling Stockholders, for a period of 90 days and, in the case of the
Company, for a period of 180 days, after the date of this Prospectus, except
issuances pursuant to the exercise of stock options granted under the 1994
Option Plan.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or to contribute to payments which the Underwriters may
be required to make in respect thereof.
53
<PAGE>
CS First Boston Corporation acted as placement agent in connection with
the First Fleet Financing Facility and Second Fleet Financing Facility and is
expected to serve as the placement agent for the Third Fleet Financing
Facility. The Chicago Corporation and McDonald & Company Securities, Inc.
currently provide financial advisory services to the Company.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Class A Common Stock in Canada is being made only
on a private placement basis exempt from the requirement that the Company
prepare and file a prospectus with the securities regulatory authorities in
each province where trades of Class A Common Stock are effected. Accordingly,
any resale of the Class A Common Stock in Canada must be made in accordance
with applicable securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made in accordance with
available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the Class
A Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Class A Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company, the Selling
Stockholder and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities
laws to purchase such Class A Common Stock without the benefit of a
prospectus qualified under such securities laws, (ii) where required by law,
that such purchaser is purchasing as principal and not as agent, and (iii)
such purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Ontario purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets
of the issuer and such persons and the Selling Stockholders may be located
outside of Canada and, as a result, it may not be possible to satisfy a
judgment against the issuer or such persons and the Selling Stockholders in
Canada or to enforce a judgment obtained in Canadian courts against the
issuer or such persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Class A Common Stock to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale
of any Class A Common Stock acquired by such purchaser pursuant to this
Offering. Such report must be in the form attached to British Columbia
Securities Commission Blanket Order BOR #95/17, a copy of which may be
obtained from the Company. Only one such report must be filed in respect of
Class A Common Stock acquired on the same date and under the same prospectus
exemption.
54
<PAGE>
LEGAL MATTERS
The validity of the shares of the Class A Common Stock offered hereby will
be passed upon for the Company by King & Spalding, Atlanta, Georgia. Certain
legal matters in connection with the Offering will be passed upon for the
Underwriters by Hunton & Williams, Atlanta, Georgia.
EXPERTS
The consolidated financial statements of Team Rental Group, Inc. as of
December 31, 1995 and 1994 and for each of the three years in the period
ended December 31, 1995 included in this Prospectus and the related financial
statement schedules included elsewhere in the registration statement have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein and elsewhere in the registration statement
and are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The following financial statements included in this Prospectus have been
audited by other independent auditors as stated in their reports appearing
herein and elsewhere in the Registration Statement and are included in
reliance upon the reports of such firms given upon their authority as experts
in accounting and auditing:
(1) The financial statements as of December 31, 1994 and for each of
the three years in the period ended December 31, 1994 of BRAC-OPCO,
Inc.--Coopers & Lybrand L.L.P.; and
(2) The consolidated financial statements as of February 29, 1996 and
for each of the three years in the period ended February 29, 1996 of
Arizona Rent-A-Car Systems, Inc.--Michael Silver & Company.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company with the Commission can be inspected and
copied at the public reference section of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, or at its Regional Offices
located at 7 World Trade Center, Suite 1300, New York, New York 10048, and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of
such materials can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Class A Common Stock offered
hereby. This Prospectus, which is a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement.
For further information with respect to the Company and the Class A Common
Stock, reference is made to the Registration Statement and the exhibits and
schedules filed as a part thereof. Statements made herein concerning the
provisions of any documents are not necessarily complete, and in each
instance reference is made to the copy of such document filed as an exhibit
to the Registration Statement. Each such statement is qualified in its
entirety by such reference. The Registration Statement and the exhibits and
schedules thereto may be inspected, without charge, at the public reference
section or regional offices of the Commission at the address indicated above.
Copies of the Registration Statement can be obtained from the public
reference section of the Commission upon payment of prescribed fees.
55
<PAGE>
BUDGET RENT A CAR CORPORATION IS NOT SELLING, OFFERING FOR SALE OR
UNDERWRITING ALL OR ANY PART OF THE CLASS A COMMON STOCK. BUDGET RENT A CAR
CORPORATION DOES NOT ENDORSE OR MAKE ANY RECOMMENDATIONS WITH RESPECT TO THIS
OFFERING.
NEITHER THE OFFERING NOR THE CONTENTS OF THIS PROSPECTUS (AND
SPECIFICALLY, ANY FINANCIAL DATA CONTAINED HEREIN) HAVE BEEN PREPARED,
APPROVED OR ENDORSED BY BUDGET RENT A CAR CORPORATION, AND BUDGET RENT A CAR
CORPORATION ASSUMES NO OBLIGATION TO ANY INVESTOR IN CONNECTION WITH THIS
OFFERING OR THE ACCURACY OR ADEQUACY OF ANY PORTION OF THIS PROSPECTUS.
BUDGET RENT A CAR CORPORATION FURTHER DISCLAIMS ANY LIABILITY UNDER STATE
OR FEDERAL SECURITIES LAWS ARISING OUT OF OR IN CONNECTION WITH THIS
OFFERING, INCLUDING WITHOUT LIMITATION ANY LIABILITY AS A SELLER, AFFILIATE
OR CONTROLLING PERSON OF A SELLER OR AFFILIATE.
BUDGET RENT A CAR CORPORATION IS THE EXCLUSIVE OWNER OF THE BUDGET NAME
AND LOGO, A FEDERALLY REGISTERED TRADEMARK. NO INVESTOR SHOULD INTERPRET THE
USE AND DISPLAY OF SUCH NAME HEREIN AS APPROVAL, ENDORSEMENT, ACCEPTANCE OR
ADOPTION OF ANY REPRESENTATION OR STATEMENT CONTAINED HEREIN.
56
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
TEAM RENTAL GROUP, INC.
Independent Auditors' Report ......................................................... F-2
Consolidated Balance Sheets--December 31, 1994 and 1995 and (unaudited) March 31,
1996 ................................................................................ F-3
Consolidated Statements of Operations for Each of the Three Years in the Period Ended
December 31, 1995 and the (unaudited) Three Months Ended March 31, 1995 and 1996 ... F-4
Consolidated Statements of Stockholders' Equity for Each of the Three Years in the
Period Ended December 31, 1995 and the (unaudited) Three Months Ended March 31, 1996 F-5
Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended
December 31, 1995 and the (unaudited) Three Months Ended March 31, 1995 and 1996 ... F-6
Notes to Consolidated Financial Statements ........................................... F-7
BRAC-OPCO, INC.
Report of Independent Accountants .................................................... F-21
Balance Sheets--December 31, 1993 and 1994 ........................................... F-22
Statements of Income for Each of the Three Years in the Period Ended
December 31, 1994 ................................................................... F-24
Statements of Stockholder's Equity for Each of the Three Years in the Period Ended
December 31, 1994 ................................................................... F-25
Statements of Cash Flows for Each of the Three Years in the Period Ended
December 31, 1994 ................................................................... F-26
Notes to Financial Statements ........................................................ F-28
Consolidated Balance Sheet--September 30, 1995 (unaudited) ........................... F-37
Consolidated Statements of Operations for the Nine Months Ended September 30, 1995
(unaudited) ......................................................................... F-38
ARIZONA RENT-A-CAR SYSTEMS, INC. AND SUBSIDIARY
Independent Auditor's Report ......................................................... F-39
Consolidated Balance Sheets--February 28, 1994 and 1995, and February 29, 1996 ...... F-40
Consolidated Statements of Income (Loss) and Retained Earnings for Each of the Three
Years in the Period Ended February 29, 1996 ......................................... F-42
Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended
February 29, 1996 ................................................................... F-43
Notes to Consolidated Financial Statements ........................................... F-45
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Team Rental Group, Inc.:
We have audited the consolidated balance sheets of Team Rental Group, Inc.
as of December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity (deficiency) and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Team Rental Group, Inc. as
of December 31, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1995
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
April 12, 1996
F-2
<PAGE>
TEAM RENTAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- 1996
1994 1995
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents ........................... $ 878 $ 357 $ 4,674
Restricted cash and cash equivalents ................ 32,691 67,731 24,197
Trade and vehicle receivables, net of allowance for
doubtful accounts of $501 and $2,297 ............... 5,501 20,928 29,317
Accounts receivable, related parties ................ 59 61 61
Vehicle inventory ................................... 943 8,938 13,832
Revenue earning vehicles, net ....................... 97,127 219,927 314,591
Other property and equipment, net ................... 5,243 12,503 18,888
Deferred financing fees, net of accumulated
amortization of $102 and $425 ...................... 1,512 2,266 2,092
Franchise rights, net of accumulated amortization of
$641 and $1,500 .................................... 13,953 46,670 60,554
Other assets ........................................ 5,084 6,942 10,471
---------- ---------- -----------
Total ............................................. $162,991 $386,323 $478,677
========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Notes payable (including amounts to related parties
of $5,792 in 1995) ................................ $126,564 $318,233 $400,229
Capital lease obligations .......................... 623 784 739
Accounts payable ................................... 1,366 14,698 11,870
Accrued and other liabilities ...................... 4,529 9,315 18,684
Deferred income taxes .............................. 1,161 1,701 1,559
---------- ---------- -----------
Total liabilities ................................. 134,243 344,731 433,081
---------- ---------- -----------
COMMITMENTS (NOTE 12)
COMMON STOCK WARRANT ................................ 2,000 2,000 2,000
---------- ---------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 250,000 shares
authorized, no shares issued ......................
Class A common stock, $.01 par value, one vote per
share, 17,500,000 shares authorized, 4,036,300,
5,257,116 and 5,529,843 shares issued .............. 40 52 54
Class B common stock, $.01 par value, ten votes
per share, 2,500,000 shares authorized, 1,936,600
shares issued and outstanding ..................... 20 20 20
Additional paid-in capital ......................... 29,159 41,984 44,709
Accumulated deficit ................................ (2,471) (2,134) (857)
Treasury stock at cost (36,667 shares of Class A
common stock) ..................................... (330) (330)
---------- ---------- -----------
Total stockholders' equity ........................ 26,748 39,592 43,596
---------- ---------- -----------
Total ............................................. $162,991 $386,323 $478,677
========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
TEAM RENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- ---------------------
1993 1994 1995 1995 1996
--------- --------- ---------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Vehicle rental revenue ............ $22,321 $38,642 $107,067 $17,354 $44,697
Retail car sales revenue .......... 42,662 4,916 21,097
--------- --------- ---------- ---------- ---------
Total operating revenue .......... 22,321 38,642 149,729 22,270 65,794
--------- --------- ---------- ---------- ---------
OPERATING COSTS AND EXPENSES:
Direct vehicle and operating ...... 5,452 9,439 13,704 2,625 5,959
Depreciation--vehicles ............ 4,358 7,382 27,476 5,126 11,804
Depreciation--nonvehicle .......... 229 446 1,341 285 536
Cost of vehicle sales ............. 38,021 4,258 17,840
Advertising, promotion
and selling ..................... 1,658 3,090 11,826 2,036 4,600
Facilities ........................ 2,695 4,398 11,121 2,076 4,328
Personnel ......................... 4,537 7,947 24,515 4,494 10,689
General and administrative ........ 790 1,515 6,686 886 2,270
Amortization of franchise rights .. 152 229 859 112 514
--------- --------- ---------- ---------- ---------
Total operating costs and
expenses ....................... 19,871 34,446 135,549 21,898 58,540
--------- --------- ---------- ---------- ---------
Operating income .................... 2,450 4,196 14,180 372 7,254
--------- --------- ---------- ---------- ---------
OTHER (INCOME) EXPENSE:
Interest expense--vehicles ........ 2,462 3,909 13,874 2,616 5,621
Interest expense--other ........... 181 341 473 67 136
Interest income--restricted cash .. (670) (1,348) (400) (749)
Interest expense--related party ... 220 190 159 118
Nonrecurring income ............... (1,023)
--------- --------- ---------- ---------- ---------
Other expense--net ............... 1,840 3,770 13,158 2,283 5,126
--------- --------- ---------- ---------- ---------
Income (loss) before income taxes .. 610 426 1,022 (1,911) 2,128
Provision (credit) for income taxes 182 176 685 (765) 851
--------- --------- ---------- ---------- ---------
Net income (loss) ................... $ 428 $ 250 $ 337 $(1,146) $ 1,277
========= ========= ========== ========== =========
Weighted average common shares
outstanding ....................... 3,704 6,369 6,037 7,256
========= ========== ========== =========
Earnings (loss) per common share ... $ 0.07 $ 0.05 $ (0.19) $ 0.18
========= ========== ========== =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
TEAM RENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDERS'
COMMON PAID-IN ACCUMULATED TREASURY EQUITY
STOCK CAPITAL DEFICIT STOCK (DEFICIENCY)
-------- ------------ ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1993 ..... $15 $ 514 $(1,873) $(1,344)
Net income ....................... 428 428
Distributions on redeemable
preferred stock ................. (275) (275)
Dividends to common stockholders (60) (60)
-------- ------------ ------------- ---------- ---------------
Balances at December 31, 1993 ... 15 239 (1,505) (1,251)
Net income ....................... 250 250
Distributions on redeemable
preferred stock ................. (183) (183)
Dividends to common stockholders (47) (47)
Net proceeds from initial public
offering ........................ 45 28,903 28,948
Deferred taxes due to a change in
tax status ...................... (1,169) (1,169)
Shares issued in business
combinations .................... 200 200
-------- ------------ ------------- ---------- ---------------
Balances at December 31, 1994 ... 60 29,159 (2,471) 26,748
Net income ....................... 337 337
Shares issued in business
combinations .................... 12 12,825 12,837
Class A common stock acquired for
treasury ........................ $(330) (330)
-------- ------------ ------------- ---------- ---------------
Balances at December 31, 1995 ... 72 41,984 (2,134) (330) 39,592
Net income (unaudited) ........... 1,277 1,277
Shares issued in business
combination (unaudited) ......... 2 2,725 2,727
-------- ------------ ------------- ---------- ---------------
Balances at March 31, 1996
(unaudited) ..................... $74 $44,709 $ (857) $(330) $43,596
======== ============ ============= ========== ===============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
TEAM RENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1994 1995
---------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .......................................... $ 428 $ 250 $ 337
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation .............................................. 4,587 7,828 28,817
Amortization .............................................. 152 534 1,761
Deferred income tax provision ............................. (8) 540
Provision for doubtful accounts ........................... (112) (282) 1,796
Discount on acquisition note .............................. 58
Changes in certain assets and liabilities, net of effects
of acquisitions:
Receivables ............................................... (297) (871) (11,189)
Other assets .............................................. (323) (1,788) 387
Car sales inventory ....................................... (7,995)
Accounts payable .......................................... 247 (2,259) 9,484
Accrued and other liabilities ............................. 305 256 (7,790)
---------- ----------- -----------
Net cash provided by operating activities ................ 5,045 3,660 16,148
---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash ............................................ (32,691) (13,271)
Proceeds from sale of revenue earning vehicles ............ 48,516 73,728 293,905
Proceeds from sale of other property and equipment ........ 51
Purchases of revenue earning vehicles ...................... (52,767) (155,176) (315,863)
Purchases of other property and equipment .................. (229) (637) (4,562)
Purchase of franchise rights ............................... (1,839)
Payment for acquisitions, net of cash acquired ............ (5,727) (6,507)
---------- ----------- -----------
Net cash used in investing activities .................... (4,480) (122,291) (46,298)
---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net ................. 28,948
Net increase (decrease) in vehicle obligations ............ (33) (5,760) 20,947
Proceeds from notes payable:
Medium term notes ......................................... 105,682
Working capital facilities ................................ 6,890
Related party ............................................. 559 1,392
Other ..................................................... 2,610 3,399
Principal payments:
Related party ............................................. (33) (3,200) (276)
Capital leases ............................................ (66) (410) (666)
Other ..................................................... (747) (5,665) (259)
Deferred financing fees .................................... (1,614) (76)
Distributions on redeemable preferred stock ................ (275) (183)
Repayment of redeemable preferred stock .................... (2,747)
Dividends to common stockholders ........................... (60) (47)
Purchase of treasury stock ................................. (330)
---------- ----------- -----------
Net cash provided by (used in) financing activities .... (655) 119,006 29,629
---------- ----------- -----------
Net increase (decrease) in cash and cash equivalents ....... (90) 375 (521)
Cash and cash equivalents, beginning of period .............. 593 503 878
---------- ----------- -----------
Cash and cash equivalents, end of period .................... $ 503 $ 878 $ 357
========== =========== ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .......................................... $ (1,146) $ 1,277
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation .............................................. 5,411 12,340
Amortization .............................................. 296 514
Deferred income tax provision ............................. (520) (142)
Provision for doubtful accounts ...........................
Discount on acquisition note ..............................
Changes in certain assets and liabilities, net of effects
of acquisitions:
Receivables ............................................... (2,790) (8,389)
Other assets .............................................. (3,650) (3,529)
Car sales inventory ....................................... (4,894)
Accounts payable .......................................... 3,679 (2,828)
Accrued and other liabilities ............................. 7,172 9,369
----------- -----------
Net cash provided by operating activities ................ 8,452 3,718
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash ............................................ 14,925 43,534
Proceeds from sale of revenue earning vehicles ............ 60,831 43,878
Proceeds from sale of other property and equipment ........
Purchases of revenue earning vehicles ...................... (109,091) (106,812)
Purchases of other property and equipment .................. (2,176) (6,921)
Purchase of franchise rights ............................... (11,497)
Payment for acquisitions, net of cash acquired ............ (7,103)
----------- -----------
Net cash used in investing activities .................... (42,614) (37,818)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net .................
Net increase (decrease) in vehicle obligations ............ 29,112 13,540
Proceeds from notes payable:
Medium term notes .........................................
Working capital facilities ................................ 6,950 24,922
Related party .............................................
Other .....................................................
Principal payments:
Related party .............................................
Capital leases ............................................ (177) (45)
Other ..................................................... (58)
Deferred financing fees ....................................
Distributions on redeemable preferred stock ................
Repayment of redeemable preferred stock ....................
Dividends to common stockholders ...........................
Purchase of treasury stock .................................
----------- -----------
Net cash provided by (used in) financing activities .... 35,827 38,417
----------- -----------
Net increase (decrease) in cash and cash equivalents ....... 1,665 4,317
Cash and cash equivalents, beginning of period .............. 878 357
----------- -----------
Cash and cash equivalents, end of period .................... $ 2,543 $ 4,674
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(INTERIM FINANCIAL INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED. THE UNAUDITED INTERIM
FINANCIAL STATEMENTS REFLECT ALL ADJUSTMENTS, CONSISTING OF NORMAL RECURRING
ADJUSTMENTS WHICH ARE, IN THE OPINION OF MANAGEMENT, NECESSARY TO A FAIR
STATEMENT OF THE RESULTS FOR THE INTERIM PERIODS. INFORMATION FOR THE INTERIM
PERIODS IS NOT NECESSARILY INDICATIVE OF RESULTS TO BE ACHIEVED FOR THE FULL
YEAR.)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS--Team Rental Group, Inc. (the "Company") is
engaged in the business of the daily rental of vehicles, including cars,
trucks and passenger vans, and the retail sale of used vehicles. The Company
operates Budget Rent a Car ("Budget") franchises granted by Budget Rent a Car
Corporation ("BRAC") through its operating subsidiaries serving twelve
metropolitan regions in the U.S. including Philadelphia and Pittsburgh,
Pennsylvania; San Diego, California; Southern California (excluding San
Diego); Cincinnati and Dayton, Ohio; Albany and Rochester, New York;
Charlotte, North Carolina; Richmond, Virginia; Hartford, Connecticut and Fort
Wayne, Indiana. MCK Realty, Inc. ("MCK") is owned by the Company's principal
stockholders. Because MCK is controlled by the Company's principal
stockholders and the Company has guaranteed the lease payments assigned to a
bank, MCK is included in the consolidated financial statements.
BASIS OF PRESENTATION--The 1993 financial statements consist of companies
affiliated through common ownership and control and reflect the consolidated
accounts of each company. Concurrent with the initial public offering (Note
2), the Company exchanged 563,400 shares of Class A common stock and
1,936,450 shares of Class B common stock for all of the outstanding common
stock of the combined companies, which accordingly, became wholly owned
subsidiaries (the "Share Exchange"). The 1994 and 1995 consolidated financial
statements include the accounts of Team Rental Group, Inc. and its wholly
owned subsidiaries. All significant intercompany accounts have been
eliminated.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management of the
Company to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
investments including money market funds, commercial paper and time deposits
purchased with an original maturity of three months or less to be cash
equivalents.
RESTRICTED CASH AND CASH EQUIVALENTS--Restricted cash and cash equivalents
consists of Medium Term Notes (Note 2) proceeds not currently invested in
eligible revenue earning vehicles. Under the terms of the Medium Term Notes
Indentures, the Company is required to invest the proceeds in either
restricted cash investments as defined by the indenture or revenue earning
vehicles.
REVENUE EARNING VEHICLES--Revenue earning vehicles are stated at cost,
after deducting related discounts and manufacturers' incentives, and are
depreciated over their estimated economic lives or at rates corresponding to
manufacturers' repurchase program guidelines, where applicable. Depreciation
rates range from .5% to 3% per month. Management periodically reviews
depreciable lives and rates based on a variety of factors including general
economic conditions and estimated holding periods of the vehicles. Gains and
losses upon the sale of revenue earning vehicles are recorded as an
adjustment to depreciation expense.
ADVERTISING, PROMOTION AND SELLING--Advertising, promotion and selling
expense are charged to expense as incurred. The Company incurred advertising
expense of $275, $412 and $2,347 in 1993, 1994 and 1995, respectively.
F-7
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RETAIL CAR SALES INVENTORY--Retail car sales inventory is stated at the
lower of cost (first-in, first-out method) or market.
OTHER PROPERTY AND EQUIPMENT--Other property and equipment is recorded at
cost. Depreciation is being provided on the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
Buildings .....................................10 - 23 years
Equipment, furniture and fixtures ............. 3 - 10 years
Capital leases and leasehold improvements .... Lesser of estimated useful lives or terms of
related leases
</TABLE>
DEFERRED FINANCING FEES--Direct costs incurred in connection with the
Company's borrowings have been deferred and are being amortized over the
terms of the related loan agreements on the straight-line basis.
PREPAID ROYALTY FEES--Prepaid royalty fees of $1,797 and $1,217 (net of
accumulated amortization of $203 and $783) at December 31, 1994 and 1995,
respectively, are related to the abatement of fees at the Company's
Philadelphia operations through June 15, 1999 and are recorded in other
assets. The prepaid fees are being amortized using an accelerated method over
the royalty abatement period of five years.
FRANCHISE RIGHTS--Franchise agreements are renewable for an unlimited
number of one- and five-year periods, subject to certain terms and
conditions. Franchise rights are amortized using the straight-line method
over forty years. The Company believes that the vehicle rental industry and,
therefore, vehicle rental franchises have an expected life in excess of forty
years and the industry will continue as long as the automobile is an accepted
method of transportation. The specific markets the Company serves are
considered to be stable and are locations which are major national or
regional commercial centers that attract business and leisure travelers who
need rental vehicles. Circumstances that would indicate possible impairment
to franchise rights include the failure of Budget Rent a Car to maintain its
international network of rental car franchisers, the termination of the
Company's presence in one or more major airport markets, or a significant
permanent decline in cash flows from rental operations. The impairment would
be measured as the amount by which the carrying value of the related asset
exceeds the present value of estimated annual discounted cash flows generated
by the franchise operations utilizing an appropriate discount rate. Effective
January 1, 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, which requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amounts of these assets may not be recoverable. There was no
material effect on the Company's consolidated financial statements upon
adoption of SFAS No. 121 in 1995.
INCOME TAXES--Deferred tax assets and liabilities are computed based on
differences between the financial statement and income tax bases of assets
and liabilities using enacted tax rates. Deferred income tax expense or
benefit is based on the change in deferred tax assets and liabilities from
period to period, subject to an ongoing assessment of realization.
EARNINGS PER COMMON SHARE--Earnings per common share for the year ended
December 31, 1994 was computed assuming all of the outstanding common stock
of the combined companies (which totaled 2,500,000 shares) was outstanding
the entire year and the shares issued in connection with the initial public
offering and the Fort Wayne acquisition were outstanding from the dates
issued. Earnings per common share for the year ended December 31, 1995 was
based on the weighted average number of common shares outstanding during the
year considering the 1995 and 1996 acquisitions and the purchase of treasury
stock. The assumed issuance of the shares for the common stock warrant to
BRAC and the exercise of stock options does not have a materially dilutive
effect.
F-8
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RETENTION OF SELF INSURED RISKS--At December 31, 1995, the Company has
automobile liability insurance coverage of up to $1,000, with a $500
retention per occurrence with respect to personal injury and damage claims
arising from the use of its vehicles. The Company provides reserves on
reported claims and claims incurred but not reported at each balance sheet
date based on actuarial estimates. The actuarially determined reserves are
necessarily based on estimates, and while management believes that the
amounts are adequate, the ultimate liability may be in excess of, or less
than, the amounts provided. Such estimates are reviewed and evaluated in
light of emerging claim experience and existing circumstances. Any changes in
estimates from this review process are reflected in operations currently.
STOCK OPTIONS--In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, Accounting for Stock-Based Compensation, which
encourages, but does not require, companies to adopt the fair value based
method of accounting for stock-based employee compensation plans. Under the
fair value method, compensation cost is measured at the grant date based on
the fair value of the award and is recognized over the service period, which
is usually the vesting period. Companies are also permitted to continue to
account for such transactions under Accounting Principles Board Opinion No.
25, but would be required to disclose on a pro forma basis, net income and,
if presented, earnings per share, as if the fair value based method of
accounting had been applied.
The accounting requirements of the new method are effective for financial
statements for fiscal years beginning after December 15, 1995. The Company
has not yet determined if it will elect to change to the fair value based
method, nor has it determined the effect the new standard will have on net
income and earning per share should it elect to make such a change. Adoption
of the new standard will not have an effect on the Company's cash flows.
RECLASSIFICATIONS--Certain reclassifications have been made to the 1993
and 1994 consolidated statements to conform with the 1995 presentation.
2. INITIAL PUBLIC OFFERING AND MEDIUM TERM NOTES
The Company sold 3,300,000 shares of Class A common stock on August 25,
1994 and 154,400 shares of Class A common stock on September 19, 1994 at
$9.50 per share to investors in an initial public offering resulting in gross
proceeds of $32,800 to the Company. Net proceeds to the Company after
offering expenses were $28,948. The net proceeds were used to acquire certain
assets (certain liabilities were also assumed) of Freedom River, Inc.
("Freedom River"), capitalize Team Fleet Finance Corporation ("TFFC") a
wholly owned subsidiary, acquire vehicles under operating leases, redeem the
outstanding redeemable preferred stock, acquire the Budget Rent a Truck
franchise rights for San Diego, California, repay loans and accrued interest
to related and non-related third parties, and purchase equipment leased from
related parties.
Concurrent with the initial public offering, TFFC issued senior and
subordinated asset-backed notes ("Medium Term Notes") of $100,000 and $5,682,
respectively, in a private placement pursuant to an Indenture between TFFC
and Bankers Trust Company, as Trustee. The proceeds of the Medium Term Notes
are available to finance the purchase of rental fleet vehicles subject to
manufacturers' repurchase programs sponsored by Chrysler, General Motors and
Ford.
F-9
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
3. ACQUISITIONS
During 1994, 1995 and the three months ended March 31, 1996, the Company
acquired certain Budget franchise operations. The acquisitions have been
accounted for under the purchase method of accounting and, accordingly, the
Company has allocated the cost of the acquisitions on the basis of the
estimated fair value of the assets acquired and liabilities assumed. The 1995
and 1996 allocations are based on preliminary estimates and may be revised at
a later date. The accompanying consolidated statements of operations and cash
flows reflect the operations of the acquired companies from their respective
acquisition dates through the years ended December 31, 1994 and 1995, and the
three months ended March 31, 1995 and 1996.
1994 ACQUISITIONS
FREEDOM RIVER--Concurrent with the initial public offering, the Company
acquired certain assets and assumed certain operating liabilities of Freedom
River from Chrysler Credit Corporation ("CCC"), a secured creditor of Freedom
River, pursuant to a private foreclosure sale conducted by CCC. The assets
acquired consisted of the Budget vehicle rental operations in the
Philadelphia and Pittsburgh, Pennsylvania and Cincinnati, Ohio metropolitan
areas. Substantially all of Freedom River's assets, other than its fleet,
were purchased for approximately $10,600.
FORT WAYNE FRANCHISE--In November 1994, the Company exchanged 18,500
shares of Class A common stock with a value of $200 for all of the
outstanding common stock of Fort Wayne Rental Group, Inc. located in Fort
Wayne, Indiana. A principal stockholder and director of the Company, who was
a stockholder of Fort Wayne Rental Group, Inc., received 7,400 shares of
Class A common stock with a value of $80 in this transaction.
1995 ACQUISITIONS
DAYTON FRANCHISE--In January 1995, the Company purchased all of the
outstanding stock of Don Kremer, Inc., located in Dayton, Ohio, for $1,300.
The acquisition funding consisted of $650 cash and two notes totaling $650.
CHARLOTTE FRANCHISE--In January 1995, the Company purchased all of the
outstanding stock of MacKay Car & Truck Rentals, Inc., located in Charlotte,
North Carolina, for approximately $8,405 consisting of cash of $8,277 and
13,483 shares of Class A common stock.
HARTFORD FRANCHISE--In March 1995, the Company purchased all of the
outstanding stock of Rental Car Resources, Inc., located in Hartford,
Connecticut, for approximately $1,475 by issuing 157,333 shares of Class A
common stock.
OPCO FRANCHISE--In October 1995, the Company purchased all of the
outstanding stock of BRAC-OPCO, Inc., which operates Budget franchises in the
greater Los Angeles area, excluding the vehicle rental operations at Los
Angeles International Airport of Southern California and certain other
territories as set forth in the franchise agreement, for approximately $11,
234 by issuing 1,050,000 shares of Class A common stock.
The Company's results of operations as shown in the following table are
presented as if the acquisitions had occurred at the beginning of 1994. The
unaudited pro forma results are not necessarily indicative of the actual
results of operations that would have occurred had the acquisitions actually
been made at the beginning of 1994.
F-10
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
3. ACQUISITIONS (Continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995
---------- ----------
<S> <C> <C>
Operating revenue ............................... $155,343 $199,743
Income (loss) before provision for income taxes 3,634 (271)
Net income (loss) ............................... 1,781 (516)
Earnings (loss) per common share ................ 0.25 (0.07)
</TABLE>
Subsequent to December 31, 1995, the Company made two acquisitions as
listed below. The acquisitions will be accounted for under the purchase
method of accounting and, accordingly, the Company will allocate the cost of
the acquisitions on the basis of the estimated fair value of assets acquired
and liabilities assumed. Franchise rights acquired will be amortized over
forty years. The Company's consolidated statement of operations will not
include the revenues and expenses of the acquired businesses until 1996.
1996 ACQUISITIONS
VAN POOL OPERATIONS--In February 1996, the Company purchased for a nominal
amount all of the outstanding stock of VPSI, Inc. ("VPSI") located in
Detroit, Michigan. The Company borrowed $36,700 under a new financing
facility to finance the van fleet. VPSI provides commuter van pooling
services to business commuters in 22 states.
PHOENIX FRANCHISE--In February 1996, the Company purchased all of the
outstanding stock of Arizona Rent-A-Car Systems, Inc. located in Phoenix,
Arizona for approximately $18,000 consisting of cash of approximately $5,000,
a promissory note of $10,000 and 272,727 shares of Class A common stock.
The Company's results of operations as shown in the following table are as
if the 1995 and 1996 acquisitions had occurred at the beginning of 1995.
These unaudited pro forma results are not necessarily indicative of the
actual results of operations that would have occurred had the acquisitions
actually been made at the beginning of 1995.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Operating revenue ............................... $63,019 $76,831
Income (loss) before provision for income taxes 764 (921)
Net income (loss) ............................... 458 (553)
Earnings (loss) per common share ................ 0.06 (0.07)
</TABLE>
4. REVENUE EARNING VEHICLES
Revenue earning vehicles consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
---------- ----------
<S> <C> <C>
Revenue earning vehicles ....................... $102,014 $245,849
Less accumulated depreciation and amortization (4,887) (25,922)
---------- ----------
$ 97,127 $219,927
========== ==========
</TABLE>
Depreciation expense was adjusted for losses of $111, $24 and $90 upon the
sale of revenue earning vehicles during the years ended December 31, 1993,
1994 and 1995, respectively.
F-11
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
5. OTHER PROPERTY AND EQUIPMENT
Other property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Buildings ...................................... $ 4,632 $10,160
Leasehold improvements ......................... 1,055 3,994
Furniture, fixtures and office equipment ...... 2,913 7,069
--------- ---------
8,600 21,223
Less accumulated depreciation and amortization (3,357) (8,720)
--------- ---------
$ 5,243 $12,503
========= =========
</TABLE>
Included in other property and equipment at December 31, 1994 and 1995 are
$256 and $827, respectively, of assets held under capital leases.
6. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
---------- ----------
<S> <C> <C>
Medium Term Notes:
Senior .................... $100,000 $138,500
Subordinated .............. 5,682 7,182
Vehicle obligations ........ 18,097 149,965
Working capital facilities 2,610 9,500
Related party obligations . 5,792
Other notes payable ........ 175 7,294
---------- ----------
$126,564 $318,233
========== ==========
</TABLE>
MEDIUM TERM NOTES--Medium term notes are comprised of Notes issued by TFFC
in August 1994 ("TFFC notes") and notes assumed in the acquisition of
BRAC-OPCO, Inc. in October 1995 ("OPCO notes").
The TFFC notes are comprised of senior notes requiring monthly interest
payments at average LIBOR, as defined, plus 0.75% (6.75% at December 31,
1995). Monthly principal payments of $16,667 commence in June 1999 with the
last payment due in November 1999. The subordinated notes require monthly
interest payments at average LIBOR, as defined, plus 1.30% per annum (7.3% at
December 31, 1995) and are payable in full in December 1999.
The OPCO notes are comprised of senior notes requiring monthly interest
payments at average LIBOR, as defined, plus 0.60% (6.60% at December 31,
1995). Monthly principal payments of $4,812 commence in November 1997 with
the last payment due in June 1998. The subordinated notes require monthly
interest payments at average LIBOR, as defined, plus 1.0% per annum (7.0% at
December 31, 1995) and are payable in full in December 1998.
The Company has two consolidated subsidiaries that have net assets
totaling $10.3 million which are restricted from transfer or distribution to
the parent company. These net assets are restricted in accordance with terms
of the Medium Term Notes.
F-12
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
6. NOTES PAYABLE (Continued)
VEHICLE OBLIGATIONS--Vehicle obligations consist of outstanding lines of
credit to purchase rental fleet and used vehicle inventory. Available
collateralized lines of credit at December 31, 1995 consist of $150,000 for
rental vehicles and $25,700 for used vehicle inventory with maturity dates
ranging from February 1996 to April 1997. Vehicle obligations are
collateralized by revenue earning vehicles financed under these credit
facilities and proceeds from the sale, lease or rental of vehicles and used
vehicle inventory.
Rental vehicle obligations are generally amortized over 5 to 15 months
resulting in monthly principal payments ranging from 2% to 3% of the
capitalized vehicle cost. When rental vehicles are sold, the related unpaid
obligation is due. Interest payments for rental fleet facilities are due
monthly at annual interest rates ranging from 8.0% to 9.75% at December 31,
1995. Management expects vehicle obligations will generally be repaid within
one year from the balance sheet date with proceeds received from either the
repurchase of the vehicles by the manufacturers in accordance with the terms
of the manufacturers' rental fleet programs or from the sale of the vehicles.
Monthly payments of interest only for used vehicle inventory obligations
are required at annual interest rates ranging from 8.25% to 9.75% at December
31, 1995. Used vehicle inventory obligations are paid when the inventory is
sold but in no event later than 120 days after the date of purchase.
WORKING CAPITAL FACILITIES--Working capital facilities of up to $13,000
are for the purchase of used vehicle inventory and working capital, require
monthly interest payments on the outstanding balance at LIBOR plus 1.85%
(7.53% at December 31, 1995) and expire November 1996. The facilities are
collateralized by accounts receivable, inventory, equipment, general
intangibles, investments and all other personal property of the Company and
guarantees of the respective subsidiaries. Under the terms of one of the
agreements, the Company is required to pay commitment fees quarterly equal to
0.125% per annum on the maximum amount of credit available under the credit
facility and an annual agent fee of $50 as long as the facility has an
outstanding balance. This agreement is subject to certain covenants, the most
restrictive of which requires the Company to maintain certain financial
ratios and minimum tangible net worth and prohibits the payment of cash
dividends. At December 31, 1995, the Company was not in compliance with
certain debt requirements and obtained waivers of such covenants. In February
1996, certain covenants were amended and the Company is in compliance with
the amended terms of the agreement.
RELATED PARTY OBLIGATIONS--At December 31, 1995, related party obligations
due to stockholders related primarily to the acquisition of certain franchise
territories and consist of an unsecured promissory note bearing interest at
8.75% per annum due January 1996; an unsecured promissory note bearing
interest at 9% per annum, payable in monthly installments of $4.3 plus
interest due March 2000; and two unsecured promissory notes bearing interest
at 8% per annum, payable in quarterly installments of $6.5 and $32.5 plus
interest and due October 1999 and October 1997, respectively.
OTHER NOTES PAYABLE--Other notes payable consist primarily of a secured
promissory note that bears interest at 8% per annum payable in annual
installments of $750, due August 1999, collateralized by personal guarantees
from the previous owners of Southern California operations; a business credit
note due November 1996 bearing interest at prime (8.75% December 31, 1995)
collateralized by real estate property and secured by personal guarantees of
certain stockholders of the Company; a collateralized promissory note bearing
interest at 8% per annum, payable in monthly installments of $7 plus
interest, due September 2010, collateralized by real estate property and
personal guarantees of certain stockholders of the Company; a mortgage note
bearing interest at 9.10% per annum, payable in monthly installments ranging
from $5.4 to $7.8 plus interest, due September 2000 with an option to extend
to September 2005, collateralized by real estate property; and a mortgage
note bearing interest at 7.5% per annum, payable in monthly installments of
$8.3 plus interest, due June 1998, collateralized by real estate property.
F-13
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
6. NOTES PAYABLE (Continued)
Future principal payments at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- -------------- ----------
<S> <C>
1996 .......... $165,147
1997 .......... 1,304
1998 .......... 41,183
1999 .......... 106,796
2000 .......... 3,086
Thereafter .... 717
----------
$318,233
==========
</TABLE>
7. RELATED PARTY TRANSACTIONS
The Company leases facilities from certain stockholders. Operating lease
payments for the year ended December 31, 1993, 1994 and 1995 were $33, $196
and $220, respectively. Capital lease payments for the year ended December
31, 1993 were $31. There were no capital lease payments to the stockholders
during 1994 or 1995. MCK has assigned lease payments from the Company to a
bank.
At December 31, 1995, the Company was leasing approximately $2,001 of
revenue earning vehicles to Arizona Rent-A-Car Systems, a franchise the
Company acquired in 1996 (see Note 3).
Prior to the acquisition of the Fort Wayne operations (see Note 3), the
Company leased fleet vehicles to Fort Wayne Rental Group, Inc. for
approximately $60 and $366 for the years ended December 31, 1993 and 1994,
respectively.
At December 31, 1994, the Company was leasing approximately $1,200 of
revenue earning vehicles to the Dayton Budget franchise which the Company
acquired in 1995 (see Note 3) and had trade vehicle receivables of $43 at
that date from the Dayton franchise.
At December 31, 1994 and 1995, the Company has non-interest bearing notes
receivable totaling $59, $61, respectively, due from a stockholder and
director which are payable on demand.
Approximately $635, $564 of cash and cash equivalents are on deposit with
or are being held as agent for the Company with a bank at December 31, 1994
and 1995, respectively. A stockholder and director of the Company serves on
the bank's board of directors.
8. LEASES
The Company leases revenue earning vehicles and facilities under leases
that expire at various dates through August 2013. Generally, the facility
leases are subject to payment increases based on cost of living indices and
require the Company to pay taxes, maintenance, insurance and certain other
operating expenses. Certain facility leases require the Company to pay fixed
amounts plus contingent rentals based on gross rental revenues, as defined,
and gasoline sales.
F-14
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
8. LEASES (Continued)
Future minimum payments under noncancellable leases at December 31, 1995
are as follows:
<TABLE>
<CAPTION>
OPERATING LEASES
------------------------
YEAR ENDING CAPITAL RELATED NON-RELATED
DECEMBER 31, LEASES PARTIES PARTIES
- ----------------------------------- --------- --------- -------------
<S> <C> <C> <C>
1996 ............................... $280 $ 186 $ 6,743
1997 ............................... 214 193 5,427
1998 ............................... 170 164 3,191
1999 ............................... 166 99 2,234
2000 ............................... 125 102 2,283
Thereafter ......................... 1,247 4,928
--------- --------- -------------
955 $1,991 $24,806
========= =============
Less amounts representing interest 171
---------
$ 784
=========
</TABLE>
Rent expense consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
-------- -------- ---------
<S> <C> <C> <C>
Revenue earning vehicles $ 905 $3,121 $ 1,518
Facilities:
Minimum rentals ........ 878 1,990 5,914
Contingent rentals .... 1,649 1,923 3,502
-------- -------- ---------
Total ................... $3,432 $7,034 $10,934
======== ======== =========
</TABLE>
9. INCOME TAXES
The provision (credit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-----------------------
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Current:
Federal .. $ 21 $184
State ..... 161 $ 145
Deferred:
Federal .. (23) 470
State ..... 15 70
------ ------ -------
Total ...... $182 $176 $685
====== ====== =======
</TABLE>
F-15
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
9. INCOME TAXES (Continued)
The provision (credit) for income taxes differs from the amount computed
using the statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1993 1994 1995
------- ------- ------
<S> <C> <C> <C>
Income tax provision at federal statutory rate .......... $ 208 $ 130 $348
Effect of (earnings) losses of nontaxable (subchapter S)
companies ............................................... (199) 645
Deductible preferred stock dividends ..................... (110)
Nondeductible portion of amortization of franchise rights 40 12 94
State tax provision, net of federal benefit .............. 161 30 215
Benefit of net operating loss carryforwards .............. (645)
Tax loss carryforwards not recognized .................... 57
Other .................................................... 25 4 28
------- ------- ------
$ 182 $ 176 $685
======= ======= ======
</TABLE>
The tax effects of temporary differences that give rise to the Company's
deferred tax assets and liabilities are as follows at December 31:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1994 1995
-------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards ...................... $1,048 $13,195
Non-deductible reserves ............................... 292 2,267
Alternative minimum tax carryforward .................. 197 197
Valuation allowance ................................... (7,378)
-------- ---------
1,537 8,281
-------- ---------
Deferred tax liabilities:
Difference between book and tax bases of revenue
earning vehicles and other property and equipment ... 2,613 8,690
Franchise rights ...................................... 85 1,292
-------- ---------
2,698 9,982
-------- ---------
Net deferred tax liability ............................ $1,161 $ 1,701
======== =========
</TABLE>
Concurrent with the Share Exchange, the nontaxable status of the commonly
owned companies was terminated and a deferred tax liability of approximately
$1,169 was recorded with a corresponding charge to the accumulated deficit.
The change in the deferred tax liability after the Share Exchange has been
reflected as a deferred income tax provision for the years ended December 31,
1994 and 1995, respectively.
At December 31, 1995, the Company and its subsidiaries have federal tax
loss carryforwards of approximately $36,942 expiring between December 2005
and December 2010. The Company has recorded a valuation allowance for a
portion of the acquired net operating loss carryforwards due to the
uncertainty of their ultimate realization. Any subsequently recognized tax
benefits attributed to the change in the valuation allowance will reduce
franchise rights.
The Internal Revenue Code places limitations on the utilization of net
operating losses and similar tax attributes by a corporation in the event of
a stock ownership change aggregating more than 50% over
F-16
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
9. INCOME TAXES (Continued)
a specified time period. Net operating loss carryforwards in existence when
ownership changes occur are subject to an annual utilization limitation that
may restrict the future utilization of the net operating losses. Similarly,
utilization of losses generated during years when separate returns have been
filed may be limited in the future. Such limitations have been considered in
the determination of deferred income taxes.
10. BENEFIT PLANS
STOCK OPTIONS--On April 25, 1994, the Company adopted the 1994 Incentive
Stock Option Plan (the "ISO Plan") and the 1994 Directors' Stock Option Plan
(the "Directors' Plan").
The ISO Plan provides for the issuance of up to 260,000 shares of Class A
common stock to key employees. The ISO Plan stock options may be either
incentive stock options or nonqualified options and expire ten years after
the date of grant. The exercise price of incentive stock options may not be
less than the fair market value of the underlying shares at the date of
grant. The exercise price for nonqualified options may not be less than 85%
of the fair market value of the underlying shares or, if greater, the book
value of the underlying shares at the date of grant.
The Directors' Plan provides for the issuance of 25,000 shares of Class A
common stock to selected directors of the Company. The Directors' Plan stock
options are nonqualified and expire ten years after the date of grant. The
exercise price of the nonqualified options under the Directors' Plan is the
fair market value of the underlying shares at the date of grant.
The Company has reserved 285,000 shares of Class A common stock for the
stock option plans. The following is an analysis of stock option activity for
each of the three years in the period ended December 31, 1995 and the stock
options outstanding at December 31, 1995:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS SHARES PRICE
- -------------------------------------------------- --------- ----------
<S> <C> <C>
Outstanding, January 1, 1993 to December 31, 1994 15,000 $9.50
Granted during 1995 ............................... 202,600 9.50
---------
Outstanding, December 31, 1995 .................... 217,600 9.50
=========
</TABLE>
At December 31, 1995, none of the outstanding stock options were
exercisable prior to September 1, 1996 and expire March 1, 2005. The options
are nontransferable and will be forfeited upon termination of employment, as
defined.
PROFIT SHARING PLAN--The Company adopted a Profit Sharing Plan with a
401(k) arrangement under the Internal Revenue Code effective January 1, 1996.
Employees are eligible to participate after completing one year of service
and attaining age 21. Participants may contribute 1% - 15% of their gross
compensation. The Company may make discretionary contributions not to exceed
15% of the total plan compensation. There were no contributions made during
1995 or the first quarter of 1996.
F-17
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
11. COMMON STOCK WARRANT
Concurrently with the Freedom River acquisition and in consideration of
the abatement of certain future royalty fees to BRAC with respect to Freedom
River's Philadelphia vehicle rental operation and other consideration
received from BRAC, the Company issued a warrant to BRAC (the "BRAC Warrant")
to purchase 175,000 shares of Class A common stock at the initial public
offering price. The warrant cannot be exercised prior to August 24, 1996 and
expires on August 24, 1999. Subsequent to August 24, 1998 and prior to August
24, 1999, BRAC will have the right to cause the Company to repurchase the
BRAC Warrant for $2,000. The Company has reserved Class A common stock for
the BRAC Warrant.
12. COMMITMENTS
FRANCHISE AGREEMENTS--The Company has various franchise agreements with
BRAC which require the payment of monthly royalty fees. These fees vary from
a flat fee of $13.25 per car per month to 7.5% of gross rental revenues, as
defined in the franchise agreements. The above franchise agreements are
generally renewable for an unlimited number of five-year periods, subject to
certain terms and conditions.
Concurrent with the initial public offering, the Company purchased for
$1,750 the direct franchise rights for Budget Rent a Truck facilities to
operate in certain geographic locations in San Diego County and Imperial
County, California. This reduced substantially all truck rental royalty fees
to 5% of gross rental revenues, as defined. Prior to the purchase of the
direct franchise rights, the Company paid royalty fees of 12% of gross rental
revenue.
The Company also participates in a "One-Way" truck rental program in San
Diego County and Imperial County, California sponsored by Budget whereby
trucks owned by Budget are stationed at the Company's facilities for one-way
rental by outside parties. The Company retains fees for Budget "One- Way"
truck rental revenue of 20%. Revenues from the "One-Way" truck rental program
for the years ended December 31, 1993, 1994 and 1995 were $301, $558 and
$1,027, respectively.
SUBLICENSE AGREEMENTS--The Company has sublicense agreements with Budget
of Southern California which entitles the Company to operate Budget Car
Rental facilities in Southern California. Sublicense fees to Budget of
Southern California range from 5% to 6.5% of gross revenues as defined in the
sublicense agreements.
The Company also has a sublicense agreement with Transportation Storage
Associates ("TSA") for the right to rent trucks in and around Los Angeles
County. Fees to TSA are 12% of gross revenues as defined in the sublicense
agreement.
Royalty and sublicense fees expensed by the Company for the years ended
December 31, 1993, 1994 and 1995 were $1,498, $2,348 and $5,715,
respectively. Budget reservation fees expensed by the Company for the years
ended December 31, 1993, 1994 and 1995 were $1,023, $1,574 and $3,904,
respectively.
13. FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosure About Fair Value of Financial Instruments. The estimated fair
value amounts are determined by the Company, using available market
information and appropriate valuation methodologies. However, considerable
judgment is required in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amount.
F-18
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
13. FINANCIAL INSTRUMENTS (Continued)
CASH AND CASH EQUIVALENTS, RECEIVABLES, ACCOUNTS PAYABLE AND NOTES
PAYABLE--The carrying amounts of these items are reasonable estimates of
their fair value.
BRAC STOCK WARRANT--The estimated fair value is based on a pricing model
which considers stock volatilities and the put feature of the BRAC Stock
Warrant. The estimated fair value was $2,000 and, $1,900 at December 31, 1994
and 1995, respectively.
14. NONRECURRING INCOME
In 1993, the Company ordered revenue earning vehicles from a vehicle
manufacturer pursuant to the manufacturer's repurchase program. Such vehicles
were not delivered by the manufacturer. The Company recognized as
nonrecurring income cash received of $1,023 for the non-delivery of the
vehicles.
15. SUPPLEMENTAL CASH FLOW DISCLOSURE
In 1995, the Company issued approximately $12,837 of Class A common stock
and notes payable of $650 for the 1995 acquisitions. Equipment financed
through capital leases in 1995 totaled approximately $827.
In 1994, $525 of revenue earning vehicles and property and equipment were
financed through capital leases. The terms of a capital lease with certain
stockholders and a director were modified and, therefore, the capital lease
asset and obligation of $536 were eliminated. The net book value of the
facility lease and capital lease obligation of $536 was deducted from
proceeds from the sale of property and equipment and principal payments of
capital lease obligations, respectively. The Company also issued $200 of
Class A common stock to acquire the Fort Wayne franchise. In addition,
property and equipment of $4,441 were acquired and notes payable of $4,016
were assumed in connection with the Freedom River acquisition.
In 1994, the Company recorded prepaid royalty fees and the BRAC Stock
Warrant of $2,000 for the abatement of certain fees and other consideration
received from BRAC (see Note 11).
In 1993, a $92 note was issued to the lessor of the Albany, New York
facility in satisfaction of an agreement to share leasehold improvement costs
and a corresponding asset was recorded. Facilities and equipment financed
through capital leases in 1993 totaled $916.
The Company paid interest of $2,756, $4,091 and $13,764 in 1993, 1994 and
1995, respectively.
Income taxes of $182 and $346 were paid in 1994 and 1995, respectively.
F-19
<PAGE>
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
16. SEGMENT INFORMATION
The Company is engaged in the business of the daily rental of vehicles,
principally cars, trucks, and passenger vans, and the retail sale of used
cars. Segment information for the year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
RETAIL CAR VEHICLE
SALES RENTAL ELIMINATIONS CONSOLIDATED
------------ ---------- -------------- --------------
<S> <C> <C> <C> <C>
Sales to Unaffiliated Customers ........ $42,662 $107,067 $149,729
Intersegment Sales ...................... 4,655 $(4,655)
Operating Revenue ....................... 42,662 111,722 (4,655) 149,729
Depreciation and Amortization ........... 193 29,483 29,676
Income Before Provision for Income Taxes 1,869 (847) 1,022
Identifiable Assets ..................... 30,195 356,127 386,322
</TABLE>
The Company operated in only the rental segment for the years ended
December 31, 1993 and 1994. No one customer represented more than 10% of the
Company's consolidated net sales for the years ended December 31, 1993, 1994
and 1995.
F-20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
BRAC-OPCO, Inc.
Santa Ana, California
We have audited the accompanying balance sheets of BRAC-OPCO, Inc. (a
wholly owned corporation of Budget Rent A Car of Southern California) as of
December 31, 1993 and 1994, and the related statements of income,
stockholder's equity, and cash flows for each of the three years in the
period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BRAC-OPCO, Inc. as of
December 31, 1993 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Sherman Oaks, California
March 23, 1995
F-21
<PAGE>
BRAC-OPCO, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
---------------------
1993 1994
---------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash ....................................................... $ 1,442 $ 1,159
Receivables--
Trade accounts (net of allowance for doubtful accounts of
$207 in 1993; $234 in 1994) .............................. 2,870 3,295
Vehicle sales ............................................. 13,404 9,691
Other ..................................................... 919 1,120
Prepaid vehicle licenses ................................... 1,216 1,345
Other prepaid expenses and current assets .................. 879 1,161
Rental vehicles (net of accumulated depreciation of
$9,769 in 1993; $11,319 in 1994) .......................... 99,799 108,622
---------- ---------
TOTAL CURRENT ASSETS .................................... 120,529 126,393
Property and equipment, net of accumulated depreciation .... 2,040 1,761
OTHER ASSETS:
Franchise rights at cost (net of accumulated amortization
of
$1,114 in 1993; $1,449 in 1994) ........................... 12,307 11,971
Deposits and other assets .................................. 420 314
---------- ---------
TOTAL ASSETS ............................................ $135,296 $140,439
========== =========
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE>
BRAC-OPCO, INC.
BALANCE SHEETS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
DECEMBER 31,
----------------------
1993 1994
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Vehicle contracts payable ................... $114,852 $120,110
Notes payable
So Cal ..................................... 949 1,453
Robert Steven Investments .................. 133 33
Other ...................................... 58 46
Accounts payable and accrued expenses ...... 4,685 4,796
Obligations under capital leases ............ 267 25
Other current liabilities ................... 763 1,288
---------- ----------
TOTAL CURRENT LIABILITIES ................ 121,707 127,751
LONG-TERM LIABILITIES:
Notes payable
So Cal ..................................... 7,083 5,801
Spectrum ................................... 3,558 3,000
Other ...................................... 29
Obligations under capital leases ............ 171 46
---------- ----------
TOTAL LIABILITIES ........................ 132,548 136,598
Contingencies and commitments (Notes 7 and 8)
STOCKHOLDER'S EQUITY:
Common stock, no par value--
Authorized--100,000 shares .................
Issued and outstanding--3,300 shares ...... 2,783 2,783
Additional paid-in capital .................. 3,635 3,635
Deficit ..................................... (3,670) (2,577)
---------- ----------
2,748 3,841
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY ...................................... $135,296 $140,439
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE>
BRAC-OPCO, INC.
STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Auto rentals ............................... $44,391 $56,956 $56,640
Truck rentals .............................. 4,196 6,886 7,715
Other ...................................... 425 594 700
--------- --------- ---------
TOTAL REVENUES .......................... 49,012 64,436 65,055
--------- --------- ---------
OPERATING EXPENSES:
Direct vehicle expenses--
Lease expenses ............................ 877 1,576 3,140
Depreciation .............................. 10,786 16,578 19,044
Interest on vehicle contracts ............. 7,731 8,352 8,315
Other ..................................... 7,602 10,205 9,474
Auto lease income ......................... (1,858) (2,740) (4,654)
--------- --------- ---------
TOTAL DIRECT VEHICLE EXPENSES ........... 25,138 33,971 35,319
Salaries and related overhead .............. 11,241 14,842 14,168
Occupancy .................................. 5,421 6,785 6,652
Selling, advertising and promotion ........ 3,602 4,745 4,764
General and administrative ................. 1,528 1,688 1,652
Bad debts .................................. 78 145 145
Amortization of franchise rights ........... 255 336 336
Other interest ............................. 304 464 345
--------- --------- ---------
TOTAL OPERATING EXPENSES ................ 47,567 62,976 63,381
--------- --------- ---------
INCOME FROM OPERATIONS ...................... 1,445 1,460 1,674
Other income (expenses):
Investment income .......................... 24 23 25
Interest expense--So Cal ................... (863) (629) (606)
--------- --------- ---------
Income before provision for income
taxes,
and before extraordinary item .......... 606 854 1,093
Provision for income taxes .................. 264
--------- --------- ---------
Income before extraordinary item ....... 342 854 1,093
Extraordinary item--tax benefit resulting
from utilization of operating loss
carryforward ............................... 264
--------- --------- ---------
NET INCOME .............................. $ 606 $ 854 $ 1,093
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE>
BRAC-OPCO, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN
------------------ CAPITAL
SHARES AMOUNT DEFICIT TOTAL
-------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1992 ..................... 1,200 $1,677 $3,435 $(5,130) $ (18)
Capital contributions from So Cal .............. 131 131
Issuance of stock to So Cal in consideration of
assignment of receivables ..................... 2,100 1,106 69 1,175
Net income ..................................... 606 606
-------- -------- ------------ ---------- --------
BALANCE AT DECEMBER 31, 1992 ................... 3,300 2,783 3,635 (4,524) 1,894
Net income ..................................... 854 854
-------- -------- ------------ ---------- --------
BALANCE AT DECEMBER 31, 1993 ................... 3,300 2,783 3,635 (3,670) 2,748
Net income ..................................... 1,093 1,093
-------- -------- ------------ ---------- --------
BALANCE AT DECEMBER 31, 1994 ................... 3,300 $2,783 $3,635 $(2,577) $3,841
======== ======== ============ ========== ========
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE>
BRAC-OPCO, INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Net income ..................................... $ 606 $ 854 $ 1,093
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization ................ 17,917 22,182 22,073
Bad debts .................................... 78 145 145
(Gain) loss on disposition of assets ......... 171 (530) (796)
(Increase) in trade receivables .............. (349) (28) (570)
(Increase) decrease in vehicle
rebates receivable ......................... (150) 320
(Increase) decrease in other receivables ..... (311) (62) (197)
(Increase) in prepaid vehicle licenses ....... (132) (129)
(Increase) in prepaid expenses and other
current assets ............................. (610) 19 (272)
(Increase) decrease in deposits .............. (168) 87 (46)
Increase (decrease) in accounts payable and
accrued expenses ........................... 994 461 107
(Decrease) in deferred vehicle rebate income . (826) (445) (51)
Increase (decrease) in other current
liabilities ................................ 340 (1) 549
----------- ----------- -----------
Net cash provided by operating activities .. 17,692 22,870 21,906
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of rental vehicles .......... 139,525 159,096 140,822
Repayments of vehicle contracts payable ........ (156,770) (179,380) (161,373)
Payments for purchase of property and equipment (589) (480) (412)
Proceeds from note receivable .................. 100 148
Acquisition of franchise rights ................ (263)
Proceeds from sale of property and equipment ... 71
----------- ----------- -----------
Net cash used in investing activities ....... (18,026) (20,664) (20,815)
----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE>
BRAC-OPCO, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan from So Cal ................................ 314 729
Increase (decrease) in interest payable So Cal .. 225 $ (905) (243)
Loan from Robert Steven Investments ............. 400
Repayments of principal to--
So Cal ......................................... (130) (256) (793)
Robert Steven Investments ...................... (50) (200) (117)
Others ......................................... (561) (271) (582)
Payment of obligations under capital leases ..... (197) (255) (368)
Capital contributions from So Cal ............... 131
---------- ---------- ----------
Net cash used in financing activities ........ (132) (1,887) (1,374)
---------- ---------- ----------
Net increase (decrease) in cash ................... (202) 319 (283)
Cash, beginning of year ........................... 1,325 1,123 1,442
---------- ---------- ----------
Cash, end of year ................................. $ 1,123 $ 1,442 $ 1,159
========== ========== ==========
SUPPLEMENTAL DISCLOSURE FOR CASH FLOW INFORMATION:
Cash paid for interest ........................... $ 8,673 $ 10,351 $ 9,509
SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Acquisition of rental vehicles by incurring debt $192,185 $182,104 $166,165
Acquisition of franchise rights by incurring debt 3,750
Acquisition of other assets by incurring debt ... 396
Acquisition of franchise rights by reducing note
receivable .................................... 740
Acquisition of property and equipment by reducing
note receivable ............................... 10
Issuance of stock to So Cal in consideration of
assignment of receivables ..................... 1,175
</TABLE>
See accompanying notes to financial statements.
F-27
<PAGE>
BRAC-OPCO, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION
BRAC-OPCO, Inc. (Opco or the Company), a wholly owned subsidiary
corporation of Budget Rent A Car of Southern California (So Cal), a
California general partnership, was formed on May 23, 1989 to acquire and
operate vehicle rental businesses in the name and style of "Budget Rent A
Car" as a franchisee of So Cal, and "Budget Rent A Truck" as a franchisee of
Transportation and Storage Associates, Inc., an unrelated franchisor.
So Cal holds the prime franchise rights to operate or sub-franchise auto
rental operations in Southern California and certain Nevada territories in
the name and style of "Budget Rent A Car". So Cal is owned 75% by The Mirkin
Partnership and Mirkin & Family, Inc., and 25% by Rubin Bird and R. & G.
Bird, Inc.
NOTE 2 ACQUISITIONS
The Company has acquired various assets and assumed certain liabilities of
several of So Cal's franchisees. Each acquisition was accounted for by the
purchase method of accounting. The results of operations of the acquired
franchises are included in the Company's statements of income for the periods
in which they were owned by the Company.
Effective August 11, 1992, the Company acquired certain assets, including
franchise rights, and assumed certain liabilities of Spectrum Investment
Corporation ("Spectrum") for $5,162,000. Spectrum previously operated several
franchises in territories covering the San Fernando Valley (including Burbank
Airport) and Orange County (other than Orange County Airport) under a
franchise agreement with So Cal. The purchase price consisted of $115,000 in
cash, $1,297,000 in assumed vehicle contracts payable, and a $3,750,000 note
(see Note 6B).
Effective January 6, 1993, the Company acquired certain assets, including
franchise rights, of an existing franchisee of So Cal in territories covering
Ventura and Santa Barbara counties for approximately $750,000. The purchase
price was paid through the reduction of $750,000 of an existing note
receivable which was due from the franchisee.
In each of the acquisitions, the full purchase price was allocated to
tangible assets and franchise rights which are being amortized using the
straight line method over 40 years.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. REVENUE RECOGNITION
Revenue from vehicle rental operations is recognized as earned under the
terms of rental contracts and excludes sales tax. Revenue on open contracts
is accrued to the balance sheet date based on the contract rental rates.
B. DEPRECIATION
Rental vehicles are stated at cost and are classified on the balance
sheets as a current asset because, in the ordinary course of business, they
are expected to be held for less than one year. Most vehicles are purchased
pursuant to guaranteed buy-back agreements with manufacturers, and are
depreciated by reference to such buy-back provisions at rates ranging from
.8% to 2.25% per month in 1992, .85% to 2.5% per month in 1993, and .875% to
2.25% per month in 1994 with the rate most prevalent being approximately
1.5%, 1.6% and 1.8%, in 1992, 1993 and 1994, respectively. Other rental
vehicles are depreciated at 2.5% in 1992, and rates ranging from 2.5% to 3%
in 1993 and 1994.
Vehicle rebates from manufacturers are recorded as deferred income on the
balance sheet and are amortized as a reduction of depreciation expense over
the anticipated holding period of the vehicles which range principally from 6
to 9 months. Depreciation expense is further adjusted by gains or losses on
sales of rental vehicles.
F-28
<PAGE>
BRAC-OPCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation under "direct vehicle expenses" on the statements of income
is summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Depreciation on rental vehicles ... $15,512 $19,142 $19,891
Amortization of rebates ............ (4,877) (2,034) (51)
Net loss (gain) on sale of vehicles 151 (530) (796)
--------- --------- ---------
$10,786 $16,578 $19,044
========= ========= =========
</TABLE>
The cost of other property and equipment is depreciated using
straight-line and accelerated methods over estimated useful lives ranging
from three to 32 years.
C. FRANCHISE RIGHTS
The Company assesses whether there has been a permanent impairment in the
value of franchise rights by considering factors such as expected future
operating income and trends, as well as the effects of demand, competition
and other economic factors. Management believes no permanent impairment has
occurred.
D. VEHICLE LICENSES
Vehicle license costs are capitalized and are amortized over the expected
holding period of the vehicles. The amortization expense is included in
"direct vehicle expenses - other" on the statements of income.
E. INCOME TAXES
Certain items of income and expense are recognized in different periods
for income tax and financial reporting purposes. Deferred taxes are provided
on such temporary differences. The principal temporary differences relate to
depreciation on rental vehicles, vehicle accident claims expenses, bad debts,
and amortization of franchise rights.
F. CASH AND CASH EQUIVALENTS
Cash equivalents are all highly liquid investments with a maturity of
three months or less from the date of acquisition.
The Company maintains its cash in bank accounts which, at times, exceeds
federally insured limits. The Company has not experienced any losses in such
accounts.
G. AUTO LEASE INCOME
Opco acts as a conduit in the acquisition of rental vehicles and the
leasing of said vehicles to other franchisees of So Cal, to assist such
franchisees in the acquisition of fleet. The lease income is reported as a
reduction of the related direct vehicle expenses and the net results of this
activity is not material to the statements of income.
H. ADVERTISING AND PROMOTION
Advertising and promotion expenses are reported net of reimbursements from
General Motors Corporation under a co-op advertising agreement which expired
August 31, 1992 and was not renewed. For the year ended December 31, 1992,
the reimbursement totalled $334,000.
F-29
<PAGE>
BRAC-OPCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--PROPERTY AND EQUIPMENT
Property and equipment, other than rental vehicles, is summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1993 1994
-------- --------
<S> <C> <C>
Building improvements ............................ $1,924 $2,157
Furniture, fixtures and equipment ................ 2,212 2,484
Vehicles ......................................... 52 46
-------- --------
Total property and equipment (including property
under capital leases of and $454 in 1993 and
$165 in 1994) ................................... 4,188 4,687
Less accumulated depreciation and amortization .. 2,148 2,926
-------- --------
$2,040 $1,761
======== ========
</TABLE>
NOTE 5--VEHICLE CONTRACTS PAYABLE
The Company purchases and leases its rental vehicles primarily from
manufacturers. Financing for the acquisition of the rental vehicles is
generally provided by affiliated finance companies of automobile
manufacturers. The lenders hold legal title to the vehicles as security for
the financing, and have a security interest in all revenue and receivables
resulting from vehicle rentals or sales
F-30
<PAGE>
BRAC-OPCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--VEHICLE CONTRACTS PAYABLE (Continued)
The terms of the major vehicle financing contracts are summarized as
follows:
<TABLE>
<CAPTION>
BALANCE AS OF DECEMBER 31,
--------------------------
1993 1994
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
GMAC--prime plus .75%, with monthly principal payments of
approximately $1,193,000 and $871,000, respectively. The maximum
allowable borrowings under this line are $100 million and $75
million in 1993 and 1994, respectively. .......................... $ 75,126 $ 59,823
Volvo Car Finance, Inc.--prime plus .75% for program vehicles, and
1% above prime for non-program vehicles, with monthly principal
payments of approximately $440,000 and $680,000, respectively.
The maximum allowable borrowings under this line are $60 million. 23,686 35,241
Ford Motor Credit Corp.--prime plus 1%, with monthly principal
payments of approximately $139,000 and $173,000, respectively.
The maximum allowable borrowings under this line are $26.5
million, including other franchisees' borrowings. There were no
other franchisees' borrowings outstanding at December 31, 1993
and 1994. ........................................................ 3,346 8,294
1st Source Bank--Trucker's Bank Plan - prime plus .75% to 1%, with
monthly principal payments of approximately $92,000 and $88,000,
respectively. The maximum allowable borrowings under this line
are $7 million. .................................................. 5,613 4,192
First Los Angeles Bank--prime plus 1%, with monthly principal
payments of approximately $29,000 and $193,000, respectively. The
maximum allowable borrowings under this line are $2 million and
$9 million in 1993 and 1994, respectively. ....................... 1,480 5,623
Associates Commercial Corporation--at rates of 8.5% to 8.75%, with
monthly principal payments of approximately $35,000 and $68,000,
respectively. .................................................... 1,820 2,701
So Cal--prime less .25%, with monthly principal payments of
approximately $16,000. ........................................... -- 466
Robert Steven Investments--greater of 12.5% or Union Bank's
reference rate plus 2.5%, with monthly principal payments of
approximately $39,000. (See Note 6A for description of
relationship.) ................................................... 307 --
Navistar Financial Corp.--at a rate of 7.75% with principal
payments of approximately $85,000 and $105,000, respectively. ... 3,474 3,770
---------- ----------
$114,852 $120,110
========== ==========
</TABLE>
Interest is paid monthly on all of the vehicle financing contracts.
Certain loan agreements contain provisions limiting the amount that can be
used to finance "risk vehicles" (other than manufacturer's buy-back program
eligible vehicles), and the GMAC agreement contains a provision which could
limit the amount of distributions to the partners of So Cal and provides,
under certain circumstances, for a prepayment premium of 3% of any principal
paid in advance.
Included above is approximately $13.4 and $9.7 million of debt related to
vehicles which had been sold as of December 31, 1993 and 1994, respectively.
This debt is repaid from the collections of the vehicle sales receivables,
which are included in current assets. Approximately $1.2 million and $957,000
of the
F-31
<PAGE>
BRAC-OPCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--VEHICLE CONTRACTS PAYABLE (Continued)
outstanding debt as of December 31, 1993 and 1994 respectively, was for the
financing of vehicle licenses, which is related to prepaid vehicle licenses,
included in current assets, at December 31, 1993 and 1994.
The entire balance of the vehicle financing obligations is classified as a
current liability on the balance sheets because, in the ordinary course of
business, the obligations are expected to be repaid within one year. However,
contractually vehicle finance obligations are repayable at varying monthly
rates of up to 2.25% of the loan.
So Cal guarantees the majority of the above loans.
NOTE 6--NOTES PAYABLE
A. ROBERT STEVEN INVESTMENTS (RSI)
As of December 31, 1993 and 1994, Opco was indebted to RSI, a partnership
of Rubin Bird (a partner of So Cal) and his children, in the amount of
$150,000 and $33,333, respectively under a note bearing interest at the rate
of 12.5% or 2.5% over prime, whichever is greater. The December 31, 1994
balance is payable in monthly installments of $16,667 plus interest at a rate
of 9% per annum. This promissory note is guaranteed by So Cal and
collateralized by certain equipment.
B. SPECTRUM
In connection with the acquisition of assets from Spectrum and Cal Fleet,
Opco is indebted to Spectrum in the original amount of $3,750,000 evidenced
by a promissory note bearing interest, payable quarterly, at 8% per annum.
Principal is payable in five equal annual installments of $750,000 commencing
August 11, 1995; however, the Company has prepaid $704,000 of principal as of
December 31, 1994, which reduces the principal payment otherwise due August
11, 1995. This note is guaranteed by So Cal and collateralized by the
franchise right to the territories purchased. The balance as of December 31,
1993 and 1994 was $3,558,000 and $3,046,000, respectively.
C. SUMMARY OF DEBT MATURITIES
Notes payable are scheduled to mature as of December 31, 1994 as follows
(dollars in thousands):
<TABLE>
<CAPTION>
RSI SPECTRUM TOTAL
----- ---------- -------
<S> <C> <C> <C>
Current portion ........................ $33 $ 46 $ 79
----- ---------- -------
Long-term portion, maturing as follows:
1996 .................................. -- 750 750
1997 .................................. -- 750 750
1998 .................................. -- 750 750
1999 .................................. -- 750 750
2000 and after ........................ -- -- --
----- ---------- -------
-- 3,000 3,000
----- ---------- -------
Total .............................. $33 $3,046 $3,079
===== ========== =======
</TABLE>
For current and long-term portion of notes payable to So Cal (see Note
11).
NOTE 7--CONTINGENCIES
A. VEHICLE ACCIDENT CLAIMS
Under California law, Opco is permissively uninsured with respect to
bodily injury and property damage claims arising from accidents involving its
vehicles. Except as further provided below, the
F-32
<PAGE>
BRAC-OPCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--CONTINGENCIES (Continued)
Company's liability generally will not exceed $35,000 per incident when the
accident is solely the responsibility of the renter or an unrelated third
party. The Company's special legal counsel, engaged specifically to deal with
these matters, advises that when such renter has insurance - which is the
case in approximately 85% of incidents - the Company has little, if any,
potential liability. However, in at least the following three circumstances
the Company could have unlimited liability mitigated by insurance coverage as
indicated:
1) Product liability - e.g., if a rented vehicle had not been properly
maintained.
2) Employee negligence - e.g., an accident caused by an employee of the
Company.
3) Negligent entrustment - e.g., renting a vehicle to a customer who, at
the time of the rental, is under the influence of alcohol or other controlled
substances.
With respect to either product liability or employee negligence, the
Company carries $1,000,000 of primary insurance coverage and an additional
$2,000,000 of excess liability coverage.
Based on the advice of special legal counsel, as well as the Company's
recent experience, management has established what it believes to be an
adequate provision for estimated losses on known and unreported claims at
December 31, 1993 and 1994 totaling $875,000 and $850,000, respectively,
which are included in "accounts payable and accrued expenses" on the balance
sheets.
B. LEGAL ACTIONS
The Company is party to a number of legal actions arising in the ordinary
course of its business. In management's opinion, based on advice of outside
legal counsel, the Company has adequate legal defenses and/or insurance
coverage respecting each of these actions and they will not have a material
adverse effect on the Company's operations or financial condition.
C. GROUP MEDICAL PLAN
The Company maintains a group medical insurance plan which, if terminated,
would have resulted in a liability as of December 31, 1994 in the amount of
approximately $266,000 in the form of a supplemental premium.
NOTE 8--LEASE COMMITMENTS
Opco leases numerous branch offices and other facilities under operating
leases, and various equipment and building improvements under capital leases.
The operating leases expire from 1995 to 2004, without regard to renewal
options extending beyond such dates. Various leases require payments in
excess of minimum base rent for property taxes, insurance, maintenance, and
cost of living escalations; or for overages based on percentage of sales.
Total rent expense for the years ended December 31, 1992, 1993, and 1994 was
approximately $3,900,000, $4,900,000, and $4,900,000, respectively.
So Cal operates certain of its properties under noncancelable operating
leases that, in addition to fixed rental payments, contain escalation clauses
that require the tenants to pay for real estate taxes and operating costs.
F-33
<PAGE>
BRAC-OPCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--LEASE COMMITMENTS (Continued)
Future minimum annual payments under capital and operating leases as of
December 31, 1994 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR LEASES LEASES
- ------------------------------------------------------ --------- -----------
<S> <C> <C>
1995 .................................................. $33 $3,274
1996 .................................................. 32 1,717
1997 .................................................. 19 1,149
1998 .................................................. -- 435
1999 .................................................. -- 317
Subsequent years ...................................... -- 1,159
--------- -----------
Total minimum lease payments ........................ 84 $8,051
===========
Less amount representing interest (rate equals 12.66%) 13
---------
Total obligations under capital leases .............. 71
Less current portion ................................ 25
---------
Long-term obligations under capital leases ......... $46
=========
</TABLE>
Opco leases five if its branch office and facilities from So Cal under
operating leases which expire from 1995 to 2004, without regard to renewal
options extending beyond such dates. Opco paid $243,000, $195,000 and
$185,000 in rent to So Cal for the years ended December 31, 1992, 1993 and
1994, respectively.
NOTE 9--RETIREMENT PLAN
Opco maintains a noncontributory qualified deferred compensation ("401K")
plan which enables eligible employees to set aside a portion of their
salaries as a contribution to the plan.
NOTE 10--INCOME TAXES
No net provision for federal or state income taxes has been made due to
the utilization of net operating loss carryforwards.
As of December 31, 1994, for income tax purposes, Opco's federal and state
net operating loss carryforwards were approximately $19.4 million and $3.5
million, respectively, which will expire during the years 1995 - 2009. U.S.
tax rules impose limitations on the use of net operating losses following
certain changes in ownership (see Note 13).
Effective January 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standard No. 109, "Accounting of Income
Taxes" (SFAS 109). As permitted under the new rules, the prior period's
financial statements have not been restated.
Under SFAS 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. Prior to the
adoption of SFAS 109, income tax expense was determined using the deferred
method. Deferred tax expense was based on items of income and expense that
were reported in different years in the financial statements and tax returns
and were measured at the tax rate in effect in the year the difference
originated.
F-34
<PAGE>
BRAC-OPCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--INCOME TAXES (Continued)
There was no cumulative or current effect of initial adoption of SFAS
109, on the net income or income tax expense for the year ended December 31,
1993.
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
The Company's deferred tax assets and liabilities at December 31, 1993 and
1994 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Vehicle related accruals ......... $ 771 $ 579
Other items ...................... 566 557
Net operating loss carryforwards 8,118 7,177
Valuation allowance .............. (3,539) (3,508)
--------- ---------
5,916 4,805
Deferred tax liabilities:
Depreciation of fleet ............ (4,759) (3,298)
Amortization of franchise rights (1,157) (1,507)
--------- ---------
Net ........................... $ 0 $ 0
========= =========
</TABLE>
A full valuation allowance has been established as the potential deferred
tax asset above may not be realized.
A reconciliation between the Company's effective tax rate and the federal
income tax rate is as follows:
<TABLE>
<CAPTION>
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
Federal income tax rate ............................ 34.0% 35.0% 35.0%
State taxes, net of federal effect ................. 6.3 6.6 6.0
Notes receivable and other assets with no tax basis -- 4.8 8.9
Net operating loss carryforwards ................... (41.0) (47.8) (52.7)
Other, net ......................................... .7 1.4 2.8
-------- -------- --------
Total .............................................. 0% 0% 0%
======== ======== ========
</TABLE>
NOTE 11--OTHER RELATED PARTY TRANSACTIONS
As of December 31, 1993 and 1994, Opco's total indebtedness to So Cal was
$8,032,000 and $7,254,000, respectively. The outstanding balance is comprised
of various loans in connection with the financing of one of Opco's initial
acquisitions as well as Opco's working capital needs.
F-35
<PAGE>
BRAC-OPCO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--OTHER RELATED PARTY TRANSACTIONS (Continued)
The notes and loans payable to So Cal are summarized as follows (dollars
in thousands):
<TABLE>
<CAPTION>
MONTHLY
PAYMENT
(INCLUDING
INTEREST PRINCIPAL AND
RATE TERM INTEREST)
- -------- ------------ -----------------
<S> <C> <C>
8.0% Demand $130
11.5% Due 10/96 4
- -- -- --
[TABLE CONTINUED FROM ABOVE]
1993 1994
- ---------------------- -----------------------
CURRENT LONG-TERM CURRENT LONG-TERM
PORTION PORTION PORTION PORTION
- ---------- ----------- --------- -------------
<C> <C> <C> <C>
$662 $6,993 $1,185 $5,755
40 90 44 46
247 -- 224 --
- --------- ----------- --------- -----------
$949 $7,083 $1,453 $5,801
========= =========== ========= ===========
</TABLE>
Both interest and principal on the 8% promissory notes are payable on
demand, or if no demand is made, then the entire balance of unpaid principal
and interest is due upon either the sale of more than 49% of the stock of
Opco, or substantially all of its assets. No demand has been made and,
accordingly, management has classified this liability between current and
long-term based on the principal that was anticipated, to be paid within one
year (See Note 13). Interest expense to So Cal for the years ended December
31, 1992, 1993, and 1994, was approximately $863,000, $629,000, and $606,000,
respectively.
So Cal has waived its rights to receive franchise fees from Opco until all
of the above debt has been repaid.
In addition, Opco was contingently liable to So Cal, which in turn was
contingently liable with respect to certain bank letters of credit issued in
the approximate amount of $672,000 as of December 31, 1994 relating to Opco's
operations.
Opco has not been charged for any of So Cal's salaries or other
administrative expenses.
NOTE 12--SUBSEQUENT EVENT
BRAC SOCAL Funding Corporation (Funding Corp.) was formed in December 1994
as a wholly-owned subsidiary of Opco for the purpose of purchasing vehicles
and leasing them to Opco and certain other franchisees of So Cal. In March
1995, Funding Corp. issued $40 million of floating rate rental car asset
backed notes under a private placement memorandum. In conjunction with this
financing, Opco also borrowed $4.5 million from First Los Angeles Bank which
was used in part, together with the $40 million, to pay down approximately
$42.9 million of the GMAC outstanding vehicle debt (see Note 5).
Concurrent with the GMAC Corporation prepayment described above, the
Company entered into an agreement with GMAC to modify the prepayment clause
of the vehicle financing agreement. Under the original agreement the Company
would have been subject to a premium of approximately $1.3 millon resulting
from the prepayment (see Note 5).
Under the new agreement, this premium is allocated over the next six
years, approximately $215,000 each year. However, the annual premium is
waived entirely if the Company maintains an average debt balance of $25
million during that year. If the average debt balance during any given year
falls between $20 million and $25 million, a prorated amount of the premium
is due GMAC for that year. The full annual premium is due for any year during
which the average debt balance falls below $20 million.
NOTE 13--TEAM ACQUISITION (UNAUDITED)
On April 10, 1995, an agreement in principle between So Cal and Team
Rental Group, Inc. (Team) was announced regarding the acquisition by Team or
its affiliate of all of Opco's outstanding stock for shares of Team stock to
be issued.
F-36
<PAGE>
BRAC-OPCO, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS (UNAUDITED)
<S> <C>
Cash and cash equivalents ...................... $ 421
Restricted cash ................................ 21,769
Trade receivables, net ......................... 3,063
Vehicle receivables, net ....................... 1,011
Notes receivable ............................... 81
Revenue earning vehicles, net .................. 95,390
Property and equipment, net .................... 1,175
Franchise rights, net .......................... 11,719
Other assets ................................... 3,549
-----------
Total assets .................................. $138,178
===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES:
Vehicle obligations--banks, finance companies . $ 79,073
Vehicle obligations--fleet financing facilities 40,000
Accounts payable ............................... 1,766
Accrued and other liabilities .................. 2,873
Auto liability ................................. 1,858
Notes due to sellers of acquired businesses ... 9,500
-----------
Total liabilities ............................. 135,070
STOCKHOLDERS' EQUITY:
Common stock ................................... 2,783
Additional paid-in-capital ..................... 6,470
Accumulated deficit ............................ (6,145)
-----------
Total stockholders' equity .................... 3,108
-----------
Total liabilities and stockholders' equity $138,178
===========
</TABLE>
F-37
<PAGE>
BRAC-OPCO, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
(UNAUDITED)
1995 1994
--------- ----------
<S> <C> <C>
Operating Revenues .............................. $49,121 $52,698
Operating Expenses:
Direct vehicle and operating ................... 4,949 7,479
Depreciation/Lease--vehicles ................... 18,123 16,019
Depreciation--nonvehicle ....................... 545 310
Advertising, promotion and selling ............. 3,988 3,573
Facilities ..................................... 4,885 5,133
Personnel ...................................... 10,209 10,715
General and administrative ..................... 1,539 1,383
Amortization ................................... 251 252
---------- ---------
Total operating expenses ...................... 44,489 44,864
---------- ---------
Operating income ................................ 4,632 7,834
Other (income) expense:
Vehicle interest .............................. 7,587 6,058
Other interest ................................ 640 731
Interest income ............................... (27) (18)
---------- ---------
Total other expenses ......................... 8,200 6,771
Income (loss) before provision for income taxes (3,568) 1,063
Provision (benefit) for income taxes ............
---------- ---------
Net income (loss) ............................... $(3,568) $ 1,063
========== =========
</TABLE>
F-38
<PAGE>
BRAC-OPCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS TOTAL
COMMON PAID-IN (ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT) EQUITY
-------- ------------ ------------- ---------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $2,783 $3,635 $(2,577) $ 3,841
Net income ................... (3,568) (3,568)
Capital contribution ......... 2,835 2,835
-------- ------------ ------------- ---------------
Balance at September 30, 1995 $2,783 $6,470 $(6,145) $ 3,108
======== ============ ============= ===============
</TABLE>
F-39
<PAGE>
BRAC-OPCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE-MONTHS
PERIODS ENDED SEPTEMBER 30,
1995 1994
----------- -----------
(DOLLAR AMOUNTS IN
THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ..................................... $ (3,568) $ 1,063
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation & amortization ........................... 20,600 15,770
Changes in operating assets and liabilities:
Accounts receivable .................................. 8,912 (176)
Other receivable ..................................... 1,039 (274)
Other assets ......................................... (729) 215
Accounts payable ..................................... (3,030) (658)
Auto liability ....................................... 1,858
Other liabilities .................................... 1,514 (165)
----------- -----------
Total adjustments ................................... 30,164 14,712
----------- -----------
Net cash provided by operating activities ............ 26,596 15,775
CASH FLOWS FROM OPERATING ACTIVITIES:
Restricted cash ....................................... (21,769)
Proceeds from sale of revenue-earning vehicles ....... 96,450 106,079
Purchases of revenue-earning vehicles ................. (102,736) (120,518)
Purchases of equipment and improvements ............... (244) (346)
----------- -----------
Net cash used in investing activities ................ (28,299) (14,785)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under notes payable ......... 40,750 200
Principal payments:
Vehicle obligations .................................. (38,202) (1,067)
Borrowings ........................................... (1,583)
Capital leases ....................................... (346)
----------- -----------
Net cash provided by (used in) financing activities .. 965 (1,213)
Net decrease in cash and cash equivalents ............. (738) (223)
Cash and cash equivalents, beginning of period ....... 1,159 1,372
----------- -----------
Cash and cash equivalents, end of period .............. $ 421 $ 1,149
=========== ===========
</TABLE>
F-40
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Arizona Rent-A-Car Systems, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Arizona
Rent-A-Car Systems, Inc. and Subsidiary as of February 28, 1994 and 1995, and
February 29, 1996, and the related consolidated statements of income (loss)
and retained earnings, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Arizona
Rent-A-Car Systems, Inc. and Subsidiary as of February 28, 1994 and 1995, and
February 29, 1996, and the results of their operations and their cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the consolidated financial statements, the
Company changed its method of computing depreciation for rental vehicles in
1996.
Michael Silver & Company
Certified Public Accountants
Skokie, Illinois
May 3, 1996
F-41
<PAGE>
ARIZONA RENT-A-CAR SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
ASSETS 1994 1995 1996
-------------- -------------- --------------
(IN 000'S)
<S> <C> <C> <C>
Cash ............................................... $ 947 $ 775 $ 571
Trade and vehicle receivables (net of allowance for
doubtful accounts of $60, $83 and $316,
respectively) ..................................... 5,437 5,340 3,066
Used vehicle inventory ............................. 1,756 1,392 --
Prepaid expenses ................................... 1,451 2,043 1,308
Other assets ....................................... 223 277 83
Goodwill, net of amortization ...................... 468 448 429
Cash surrender value of officer's life insurance .. -- 182 --
Refundable income taxes ............................ -- 998 --
Deferred income taxes .............................. -- -- 245
Other intangibles, net of amortization ............. 57 40 28
-------------- -------------- --------------
10,339 11,495 5,730
-------------- -------------- --------------
Rental vehicles .................................... 82,384 80,731 73,181
Less: accumulated depreciation ..................... 6,147 5,012 6,245
-------------- -------------- --------------
76,237 75,719 66,936
-------------- -------------- --------------
Net property and equipment ......................... 7,017 7,025 5,406
-------------- -------------- --------------
TOTAL ASSETS ..................................... $93,593 $94,239 $78,072
============== ============== ==============
</TABLE>
F-42
<PAGE>
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1995 1996
-------------- -------------- --------------
(IN 000'S)
<S> <C> <C> <C>
LIABILITIES
Cash overdraft ................................ $ -- $ 952 $ --
Notes payable -- rental vehicles .............. 76,816 76,695 68,007
Notes payable -- floor plan ................... 1,062 1,027 --
Notes payable -- other ........................ 1,682 1,488 --
Accounts payable and accrued expenses ........ 2,845 2,710 2,305
Vehicle self-insurance reserve ................ 1,373 1,331 2,298
Other liabilities ............................. 611 642 1,991
Income taxes payable .......................... 350 -- 50
Deferred income taxes ......................... 1,495 2,175 --
-------------- -------------- --------------
TOTAL LIABILITIES 86,234 87,020 74,651
-------------- -------------- --------------
STOCKHOLDERS' EQUITY
Common stock -- no par value; 2,000 shares
authorized; 667 shares issued and outstanding 67 67 67
Additional paid-in capital .................... 493 493 493
Retained earnings ............................. 6,799 6,659 2,861
-------------- -------------- --------------
TOTAL STOCKHOLDERS' EQUITY ................... 7,359 7,219 3,421
-------------- -------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $93,593 $94,239 $78,072
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-43
<PAGE>
ARIZONA RENT-A-CAR SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS
FOR THE YEARS ENDED,
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
-------------- -------------- --------------
(IN 000'S)
<S> <C> <C> <C>
Revenue ............................................ $49,934 $51,427 $47,337
Direct expenses .................................... 25,203 28,417 30,039
-------------- -------------- --------------
Gross profit ....................................... 24,731 23,010 17,298
Operating expenses ................................. 22,907 22,632 22,187
-------------- -------------- --------------
Income (loss) from continuing operations before
provision (benefit) for income taxes and
cumulative effect of a change in accounting
principle ......................................... 1,824 378 (4,889)
Provision (benefit) for income taxes ............... 1,037 97 (1,880)
-------------- -------------- --------------
Income (loss) from continuing operations before
cumulative effect of a change in accounting
principle ......................................... 787 281 (3,009)
Cumulative effect on prior years of changing to
different depreciation method (less applicable
income taxes of $215--see note 2) ................. -- -- (335)
-------------- -------------- --------------
Income (loss) from continuing operations .......... 787 281 (3,344)
Loss from discontinued operations (less applicable
income taxes of $272, $146 and $179, respectively) (202) (421) (284)
-------------- -------------- --------------
Net income (loss) .................................. 585 (140) (3,628)
Retained earnings--beginning of year ............... 6,214 6,799 6,659
Divident paid to stockholder ....................... -- -- (170)
-------------- -------------- --------------
Retained earnings--end of year ..................... $ 6,799 $ 6,659 $ 2,861
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-44
APITAL PRINTING SYSTEMS]
<PAGE>
ARIZONA RENT-A-CAR SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED,
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
-------------- -------------- --------------
(IN 000'S)
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net income (loss) .............................. $ 585 $ (140) $(3,628)
-------------- -------------- --------------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization ................. 16,998 14,102 15,492
(Gain) loss on sale of rental vehicles and
property and equipment ...................... (7,723) (2,570) 137
Deferred income taxes ......................... 80 680 (2,420)
Changes in operating assets and liabilities:
(Increase)/decrease in:
Trade and vehicle receivables ............... (645) 98 2,274
Used vehicle inventory ...................... (1,755) 363 1,392
Prepaid expenses ............................ (543) (592) 735
Other assets ................................ 6 (69) 14
Cash surrender value of officer's life
insurance ................................. -- (182) --
Refundable income taxes ..................... -- (998) 998
Increase/(decrease) in:
Cash overdraft .............................. (2,062) 952 (953)
Accounts payable, accrued expenses and
other liabilities ......................... 1,022 (145) 1,911
Income taxes payable ........................ 335 (350) 50
-------------- -------------- --------------
TOTAL ADJUSTMENTS .......................... 5,713 11,289 19,630
-------------- -------------- --------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES .................................... 6,298 11,149 16,002
-------------- -------------- --------------
</TABLE>
F-45
<PAGE>
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from investing activities:
Proceeds from sale of rental vehicles .......... 95,772 82,437 75,477
Purchases of rental vehicles .................... (83,614) (104,331) (58,352)
Purchases of property and equipment ............. (1,290) (676) (114)
-------------- -------------- --------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES ....................................... 10,868 (22,570) 17,011
-------------- -------------- --------------
Cash flows from financing activities:
Proceeds from issuance of debt .................. 91,765 107,867 74,548
Payment of debt ................................. (109,162) (96,583) (106,738)
Net payments of notes payable -- floor plan .... 1,062 (35) (1,027)
-------------- -------------- --------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES ....................................... (16,335) 11,249 (33,217)
-------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH ................... 831 (172) (204)
CASH--BEGINNING OF YEAR ........................... 116 947 775
-------------- -------------- --------------
CASH--END OF YEAR ................................. $ 947 $ 775 $ 571
============== ============== ==============
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest ........................................ $ 4,138 $ 5,140 $ 5,455
============== ============== ==============
Income taxes .................................... $ 350 $ 619 $ (902)
============== ============== ==============
</TABLE>
Non-cash investing and financing activities:
The Company acquired vehicles under capital lease agreements totaling
$22,658, $7,842 and $30,398 in the years ended 1994, 1995 and 1996,
respectively. The Company also disposed of vehicles, with a net book value of
approximately $19,400 and $7,000, under capital lease agreements during the
years ended 1995 and 1996, respectively.
The Company distributed a non-cash dividend to its former stockholder
totaling $170 during the year ended 1996. This dividend consisted of assets
in excess of liabilities owed to the former stockholder.
The accompanying notes are an integral part of these consolidated financial
statements.
F-46
<PAGE>
ARIZONA RENT-A-CAR SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1994 AND 1995, AND FEBRUARY 29, 1996
(IN 000S)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS--Arizona Rent-A-Car Systems, Inc. (the Company) is
engaged in the business of the daily rental of vehicles, including cars,
trucks and passenger vans. The Company operates as the exclusive licensee of
Budget Rent-A-Car Corporation (BRAC) for the state of Arizona. The Company is
obligated to pay certain monthly fees and meet certain other requirements
defined in the license agreement.
On February 27, 1996, Team Rental Group, Inc. (TEAM) purchased all of the
outstanding stock of the Company. TEAM owns and operates Budget vehicle
rental franchises granted by BRAC.
BASIS OF PRESENTATION--The consolidated financial statements include the
accounts of the Company and BRAC Car Sales, Inc., a wholly-owned subsidiary
of the Company. BRAC Car Sales, Inc. ceased operations in May 1995 and their
financial results have been reflected in the financial statements as
discontinued operations for 1994, 1995 and 1996. All significant
inter-company accounts and transactions have been eliminated.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires Company management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
RENTAL VEHICLES--Rental vehicles are stated at cost less related discounts
and are depreciated over their estimated economic lives or at rates
corresponding to the manufacturers' repurchase program guidelines, where
applicable. Depreciation rates range from 1% to 3% per month. Management
periodically reviews depreciable lives and rates based on a variety of
factors including general economic conditions and estimated holding periods
of the vehicles. Gains and losses upon the sale of rental vehicles are
recorded as an adjustment to depreciation expense.
PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost.
Depreciation is being provided on the straight-line and accelerated methods
over the following estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
Buildings 31 years
Equipment, furniture and fixtures 3 - 10 years
lesser of estimated useful lives or terms of
Capital leases and leasehold improvements related leases
</TABLE>
GOODWILL AND OTHER INTANGIBLES--Goodwill represents the excess of purchase
price over the fair value of identifiable net assets acquired and is being
amortized using the straight-line method over forty years. Other intangibles
represent acquisition costs of sub-franchisees allocated to franchise
agreements, customer lists and other items, and are being amortized on the
straight-line method over their estimated lives, ranging from five to ten
years.
VEHICLE SELF-INSURANCE RESERVE--At February 29, 1996, the Company has
automobile liability insurance coverage of up to $1,000 with a $300 retention
per occurrence with respect to personal injury and damage claims arising from
the use of its vehicles . The Company estimates and records reserves on all
reported claims. The Company provides reserves on claims incurred but not
reported based on actuarial estimates. The actuarially determined reserves
are necessarily based on estimates, and while management believes that the
amounts are adequate, the ultimate liability may be in excess of, or less
than, the amounts provided. Such estimates are reviewed and evaluated in
light of emerging claim experience and existing circumstances. Any changes in
estimates from this review process are reflected in operations currently.
F-47
<PAGE>
ARIZONA RENT-A-CAR SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1994 AND 1995, AND FEBRUARY 29, 1996
(IN 000S)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ADVERTISING, PROMOTION AND SELLING--Advertising, promotion and selling
expenses are charged to expense as incurred. The Company incurred advertising
expense of $1,055, $521 and $335 in 1994, 1995 and 1996, respectively.
INCOME TAXES--Deferred income taxes are provided in amounts sufficient to
give effect to timing differences between financial and tax reporting,
principally related to depreciation of rental vehicles and property and
equipment, self-insurance reserves and income tax credit carryforwards.
RECLASSIFICATIONS--Certain reclassifications have been made to the 1994
and 1995 consolidated statements to conform to the 1996 presentation.
NOTE 2--CHANGE IN DEPRECIATION METHOD OF RENTAL VEHICLES
Depreciation of rental vehicles has been computed using the number of days
method for the year ended February 29, 1996. Depreciation in prior years was
computed using the number of months method. The new method of depreciation
was adopted to more accurately reflect the holding cost of rental vehicles.
Pro-forma amounts have not been included due to immateriality.
NOTE 3--CHANGE IN ACCOUNTING ESTIMATE
During the year ended February 28, 1995, the Company revised the estimated
rate of depreciation of capital assets. If the Company would have continued
to use the prior depreciation rates the Company's net loss before income
taxes for the year ended February 28, 1995 would have been increased by
approximately $750. The effect for the year ended February 29, 1996 of the
revised estimated rate of depreciation of capital leases cannot be accurately
determined.
NOTE 4--OTHER PROPERTY AND EQUIPMENT
Other property and equipment consisted of the following as of:
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Land ........................................... $1,303 $ 1,303 $1,303
Buildings ...................................... 3,327 1,679 1,680
Leasehold improvements ......................... 1,443 3,419 3,102
Furniture and fixtures ......................... 415 434 881
Signs .......................................... 174 202 174
Equipment ...................................... 2,413 2,683 2,112
Computer software .............................. 627 658 651
-------------- -------------- --------------
9,702 10,378 9,903
Less accumulated depreciation and amortization 2,685 3,353 4,497
-------------- -------------- --------------
OTHER PROPERTY AND EQUIPMENT--NET ............ $7,017 $ 7,025 $5,406
============== ============== ==============
</TABLE>
Effective March 1, 1995, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires
that long-lived assets and certain identifiable assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amounts of these assets may not be recoverable. Upon adoption of
this standard, the Company reduced the useful lives for certain
F-48
<PAGE>
ARIZONA RENT-A-CAR SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1994 AND 1995, AND FEBRUARY 29, 1996
(IN 000S)
NOTE 4--OTHER PROPERTY AND EQUIPMENT (Continued)
leasehold improvements due to changes in the business climate. This change
resulted in an increase in amortization expense of approximately $720 for the
year ended February 29, 1996. This is included in Operating Expenses in the
1996 Statement of Income and Retained Earnings. Depreciation and amortization
expense on property and equipment was $618, $641 and $1,428 for the years
ended 1994, 1995 and 1996, respectively.
NOTE 5--NOTES PAYABLE--RENTAL VEHICLES
The following is a summary of notes payable--rental vehicles as of:
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Notes payable .................. $54,525 $68,830 $37,478
Capital lease obligation--TEAM -- -- 30,472
Capital lease obligation--Other 22,291 7,865 57
-------------- -------------- --------------
Total ........................ $76,816 $76,695 $68,007
============== ============== ==============
</TABLE>
Notes payable are short-term borrowings with various lenders. The note
agreements provide for principal payments ranging from 1 1/2 % to 3% of the
original note balance per month, but may be accelerated upon the occurrence
of certain events including the sale of vehicles. The notes bear interest on
formulas based on prime or the federal reserve 30-day direct commercial paper
rate. The rates ranged from 6.00% to 6.75%, 8.55% to 10.75% and 8.85% to
10.75% at the end of fiscal 1994, 1995 and 1996, respectively. The notes are
secured by rental vehicles and all inventories and receivables. The Company
is responsible for maintaining certain financial ratios under the terms of
their loan agreements, of which certain of these ratios have not been
satisfied at February 29, 1996. Waivers have been granted or the obligations
subsequently satisfied for those ratios not satisfied.
In December 1995, the Company entered into an arrangement to lease
vehicles from TEAM under a capital lease. Lease payments are calculated based
on TEAM's borrowing interest rate and depreciation equal to the
manufacturers' depreciation rates. The Company entered into another capital
lease agreement in December 1994 to acquire rental vehicles with no
additional vehicle leases allowed after February 28, 1995. The Company is
obligated to make monthly rental payments which are computed in a manner
similar to that used in determining the principal and interest payments due
under the Company's lending agreement with this lessor. The Company is
accounting for both of these lease arrangements as capital leases whereby
upon lease inception it records the cost of the related rental vehicles and
the entire lease obligation, including the residual guarantee.
The following is a summary of vehicles under these capital leases as of:
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Vehicle cost ................... $22,064 $7,976 $30,435
Less: accumulated depreciation 533 214 672
-------------- -------------- --------------
Net .......................... $21,531 $7,762 $29,763
============== ============== ==============
</TABLE>
Interest expense on the vehicle notes payable and capital lease
obligations was $3,894, $5,082 and $5,361 for the years ended 1994, 1995 and
1996, respectively.
F-49
<PAGE>
ARIZONA RENT-A-CAR SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1994 AND 1995, AND FEBRUARY 29, 1996
(IN 000S)
NOTE 5--NOTES PAYABLE--RENTAL VEHICLES (Continued)
Depreciation expense for rental vehicles was approximately $16,326,
$13,382 and $13,770 for the years ended 1994, 1995 and 1996, respectively,
including amortization for vehicles under capital leases.
NOTE 6--NOTES PAYABLE--OTHER
Notes payable--other consisted of the following as of:
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Mortgages on real estate properties requiring monthly
principal payments of $29 plus interest at rates
ranging from 6.25% to 8.75% in 1994 and 9.25% to
11.75% in 1995. This debt was paid by TEAM in 1996
(See Note 11) ....................................... $1,497 $1,166 $--
Loan from former stockholder requiring interest
payments of prime plus .50%. This loan was repaid
concurrent with the sale of the Company to TEAM .... 100 322 --
Notes payable on insurance premiums, was secured by
unearned premiums and unpaid claims, and beared
interest at 6.61% as of February 28, 1994 ........... 85 -- --
-------------- -------------- --------------
TOTAL NOTES PAYABLE--OTHER ......................... $1,682 $1,488 $--
============== ============== ==============
</TABLE>
Interest expense on the above debt was $166, $146 and $136 for the years
ended 1994, 1995 and 1996, respectively; of which $13, $17 and $31 was
related to the loan from the stockholder for the years ended 1994, 1995 and
1996, respectively.
NOTE 7--INCOME TAXES
The components of the provision (benefit) for income taxes are as follows
for the years ended:
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Current ................................ $685 $(730) $ 146
Deferred ............................... 80 681 (2,420)
-------------- -------------- --------------
PROVISION (BENEFIT) FOR INCOME TAXES $765 $ (49) $(2,274)
============== ============== ==============
</TABLE>
F-50
<PAGE>
ARIZONA RENT-A-CAR SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1994 AND 1995, AND FEBRUARY 29, 1996
(IN 000S)
NOTE 7--INCOME TAXES (Continued)
The deferred tax asset (liability) consisted of the following as of:
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net deferred tax liabilities resulting primarily from
tax and financial reporting differences in recording
depreciation on rental vehicles and property and
equipment ........................................... $(3,145) $(4,345) $(1,645)
Net deferred tax asset resulting primarily from
nondeductible self-insurance reserves, bad debt
allowances and deferred compensation ................ 700 695 1,210
Net deferred tax asset resulting from net operating
loss and credit carryforwards ....................... 950 1,475 680
-------------- -------------- --------------
NET DEFERRED TAX ASSET (LIABILITY) ................. $(1,495) $(2,175) $ 245
============== ============== ==============
</TABLE>
As of February 29, 1996, the Company had an alternative minimum tax credit
carryforward for income tax purposes of approximately $400, which has an
indefinite carryforward period, and general business tax credit carryovers of
approximately $225, which expire through 2001.
The income tax provisions for the years ended 1994, 1995 and 1996 do not
bear the customary relationship to the federal statutory rate due to state
taxes, permanent nondeductible expenses and adjustments to the estimates used
in computing the income tax provision for the previous year.
NOTE 8--FACILITY LEASE COMMITMENTS
The Company leases the land for its major airport facility from the city
of Phoenix under a noncancellable lease expiring in the year 2004. The base
annual rental is $161 with annual increases based on changes in the Consumer
Price Index.
The Company has a license to operate as an auto rental agency in the
Phoenix Sky Harbor International Airport which expires on October 31, 2000.
Rents due under this agreement are the greater of 10% of gross receipts, or
annual minimum rentals of $2,612. In addition, the Company is leasing parking
space and other related facilities for $325 per year.
The Company also leases facilities from former stockholders (see Note 11).
The Company leases additional rental locations on a month-to-month basis
which call for payment of fixed amounts and contingent percentage rentals.
Future minimum lease payments under all operating leases are as follows:
<TABLE>
<CAPTION>
YEARS ENDING FEBRUARY 28:
- -------------------------
<S> <C>
1997 ..................... $ 2,876
1998 ..................... 2,911
1999 ..................... 2,937
2000 ..................... 2,937
2001 ..................... 2,030
Thereafter ............... 565
--------
$14,256
========
</TABLE>
F-51
<PAGE>
ARIZONA RENT-A-CAR SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1994 AND 1995, AND FEBRUARY 29, 1996
(IN 000S)
NOTE 8--FACILITY LEASE COMMITMENTS (Continued)
Total rent expense on all operating leases for rental locations was
$3,821, $3,910 and $3,819 for the years ended 1994, 1995 and 1996,
respectively.
NOTE 9--RETIREMENT PLANS
The Company has a defined contribution employee profit sharing plan. All
employees of the Company are eligible upon satisfying entrance requirements.
Contributions, not to exceed 15% of qualified compensation, are at the
discretion of management. The Company's contribution to the Plan was $100 for
the year ended 1994. The Company did not make contributions in 1995 and 1996.
The Company has also instituted a 401(k) retirement plan whereby all
eligible employees may make contributions to the Plan. The Plan also provides
for discretionary Company contributions. The Company made plan contributions
of $29, $29 and $18 during the years ended 1994, 1995 and 1996, respectively.
NOTE 10--COMMITMENTS AND CONTINGENCIES
As of February 29, 1996, cash deposits in certain banks exceeded the
Federal Deposit Insurance Corporation insured limits by approximately $535.
At February 28, 1995 and February 29, 1996, the Company has recorded
approximately $450 and $650, respectively, for the potential settlement costs
of various claims. It is reasonably possible that there may be a change in
this estimate in the near term.
NOTE 11--TRANSACTIONS WITH RELATED PARTIES
Under the terms of sale of the Company's stock to TEAM, the former
stockholders accepted promissory notes which are collateralized by the stock
of the Company.
The Company leases a facility from these former stockholders. This lease
expires in September 2000, and requires base monthly rentals of $6. The
Company is responsible for additional rents based on a percentage of monthly
revenues in excess of those defined in the leases, as well as real estate
taxes. Rent expense on this location was $217, $310 and $303 for the years
ended 1994, 1995 and 1996, respectively.
The Company also leased facilities associated with BRAC Car Sales, Inc.
from the former principal stockholder. This lease was canceled in 1995 (see
Note 12). Rent expense on these locations was $315, $279 and $136 for the
years ended 1994, 1995 and 1996, respectively.
Upon acquiring the Company, TEAM satisfied the outstanding real estate
notes. This payable to TEAM of $852 at February 29, 1996 is included in Other
Liabilities on the Balance Sheet.
NOTE 12--DISCONTINUED OPERATIONS
On May 1, 1995, BRAC Car Sales Inc. ceased operations. The Company had
leased facilities associated with this operation from the former principal
stockholder. These lease obligations were canceled by this stockholder in
1995. In addition, this stockholder purchased the leasehold improvements and
certain other assets of BRAC Car Sales, Inc. at their net book values. The
used vehicle inventories were sold and the related flooring notes were
satisfied with the lenders. All other assets and liabilities of BRAC Car
Sales, Inc. were assumed by the Company. Any losses incurred after the
disposal date are considered to be losses from operations of the discontinued
segment, and are included in the accompanying financial statements.
F-52
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 9
The Company ................................ 14
Use of Proceeds ............................ 15
Price Range of Common Stock ................ 15
Dividend Policy ............................ 15
Capitalization ............................. 16
Pro Forma Consolidated Financial
Statements ................................ 17
Selected Financial Data .................... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 24
Business ................................... 30
Management ................................. 40
Certain Transactions ....................... 44
Principal and Selling Stockholders ........ 47
Description of Capital Stock ............... 49
Shares Eligible for Future Sale ............ 52
Underwriting ............................... 53
Notice to Canadian Residents ............... 54
Legal Matters .............................. 55
Experts .................................... 55
Additional Information ..................... 55
Index to Financial Statements .............. F-1
</TABLE>
[TEAM RENTAL LOGO]
4,000,000 Shares
Class A Common Stock
PROSPECTUS
CS First Boston
The Chicago Corporation
McDonald & Company Securities, Inc.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses in connection with the issuance
and distribution of the securities being registered, all of which will be
paid by the Company:
<TABLE>
<CAPTION>
<S> <C>
* Securities and Exchange Commission registration fee $ 23,164
* NASD filing fee and expenses ........................ 7,217
* Nasdaq Stock Market listing fee ..................... 17,500
Blue Sky qualification fees and expenses ............ 1,500
Transfer agents' fees ............................... 10,000
Printing and engraving expenses ..................... 200,000
Legal fees and expenses ............................. 165,000
Accounting fees and expenses ........................ 175,000
Miscellaneous ....................................... 35,619
---------
Total ............................................. $635,000
=========
</TABLE>
- ------------
* Actual.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the General Corporation Law of the State of Delaware
("DGCL") provides that a corporation has the power to indemnify any director
or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) against the
expenses, (including attorney's fees), judgments, fines or amounts paid in
settlement actually and reasonably incurred by them in connection with the
defense of any action by reason of being or having been directors or
officers, if such person shall have acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, provided
that such person had no reasonable cause to believe his conduct was unlawful,
except that, if such action shall be in the right of the corporation, no such
indemnification shall be provided as to any claim, issue or matter as to
which such person shall have been judged to have been liable to the
corporation unless and to the extent that the Court of Chancery of the State
of Delaware, or any court in which such suit or action was brought, shall
determine upon application that, in view of all of the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses as such court shall deem proper.
As permitted by Section 102(b)(7) of the DGCL, the Amended and Restated
Certificate of Incorporation of the Company (filed herewith as Exhibit 3.1)
(the "Restated Certificate of Incorporation") provides that no director shall
be liable to the Company or its stockholders for monetary damages for breach
of fiduciary duty as a director other than (i) for breaches of the director's
duty of loyalty to the Company and its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for the unlawful payment of dividends or
unlawful stock purchases or redemptions under Section 174 of the DGCL, and
(iv) for any transaction from which the director derived an improper personal
benefit.
The Company's Bylaws provide indemnification of the Company's directors
and officers, both past and present, to the fullest extent permitted by the
DGCL, and allow the Company to advance or reimburse litigation expenses upon
submission by the director or officer of an undertaking to repay such
advances or reimbursements if it is ultimately determined that
indemnification is not available to such director or officer pursuant to the
Bylaws. The Company's Bylaws also authorize the Company to
II-1
<PAGE>
purchase and maintain insurance on behalf of an officer or director, past or
present, against any liability asserted against him in any such capacity
whether or not the Company would have the power to indemnify him against such
liability under Section 145 of the DGCL.
The Company has entered into indemnification agreements with certain of
its directors and executive officers. The indemnification agreements require
the Company, among other things, to indemnify such directors and officers
against certain liabilities that may arise by reason of their status or
service as directors or officers (other than liabilities arising from willful
misconduct of a culpable nature), and to advance their expenses incurred as a
result of any preceding against them as to which they could be indemnified.
The Underwriting Agreement filed herewith as Exhibit 1.1 provides for the
indemnification by the Underwriters of directors and certain officers of the
Company against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On April 21, 1994, Messrs. Miller, Kennedy and Congdon each subscribed for
50 shares of the Class B Common Stock, at a price per share of $2.00 per
share (the "Initial Share Subscription"). The Initial Share Subscription was
effected pursuant to an exemption from registration under Section 4(2) of the
Securities Act in reliance, in part, on each of the subscribers'
representations and warranties set forth in their respective subscription
agreements and based on their status as the Principal Executive Officers of
the Company.
Concurrent with the initial public offering by the Company, the Company
and Messrs. Miller, Congdon, Kennedy, Britton, Hinkle and Sapia (the
"Exchange Stockholders") entered into a Share Exchange Agreement (the
"Exchange Agreement") providing for the exchange of all of the shares of
common stock of the corporations that owned the Albany and Rochester, New
York, Richmond, Virginia and San Diego, California Budget franchise
operations for shares of Common Stock. Pursuant to the Exchange Agreement,
the Exchange Stockholders received the following shares of Common Stock:
<TABLE>
<CAPTION>
STOCKHOLDER SHARES
- -------------------- --------------------------------
<S> <C>
Sanford Miller ...... 905,750 Class B Common Stock
Jeffrey Congdon .... 515,350 Class B Common Stock
John Kennedy ........ 515,350 Class B Common Stock
Brian Britton ....... 215,000 Class A Common Stock
Richard Hinkle ...... 150,000 Class A Common Stock
Richard Sapia ....... 198,400 Class A Common Stock
</TABLE>
The Share Exchange was effected pursuant to the exemption from
registration under Section 4(2) of the Securities Act in reliance, in part,
on each of the Exchange Stockholders' representations and warranties set
forth in the Exchange Agreement and based on their status as executive
managers of the Company.
In November 1994, the Company issued an aggregate of 18,500 shares of
Class A Common Stock to the stockholders of Fort Wayne Rental Group, Inc.
("Fort Wayne") in exchange for all of the outstanding shares of capital stock
of Fort Wayne (the "Fort Wayne Acquisition"). The Class A Common Stock issued
in the Fort Wayne Acquisition were issued to the following persons: Sanford
Miller--7,400 shares, Richard Sapia--6,475 shares, and Andrew Klein--4,625
shares. Such shares of Class A Common Stock were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act in
reliance, in part, on the representations and warranties set forth in the
Fort Wayne Acquisition agreement.
In January 1995, the Company issued 13,483 shares of Class A Common Stock
to MacKay Car & Truck Rentals, Inc. in partial consideration for all of the
outstanding shares of capital stock of McKay Car & Truck Rentals, Inc. (the
"Charlotte Acquisition"). The shares of Class A Common Stock issued in the
Charlotte Acquisition were issued pursuant to an exemption registration under
Section 4(2) of the Securities Act in reliance, in part, upon the
representations and warranties set forth in the Charlotte Acquisition
agreement.
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<PAGE>
In March 1995, the Company issued 157,333 shares of Class A Common Stock
to the shareholders of Rental Car Resources, Inc. ("Resources") in exchange
for all of the outstanding shares of Rental Car Resources, Inc. (the
"Hartford Acquisition"). The shares of Class A Common Stock issued in the
Hartford Acquisition were so issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act in reliance, in part,
on the representations and warranties set forth in the Hartford Acquisition
agreement.
In October 1995, the Company issued 1,050,000 shares of Class A Common
Stock to Budget Rent a Car of Southern California ("SoCal") in exchange for
all of the outstanding shares of BRAC-OPCO, Inc. (the "Los Angeles
Acquisition"). The shares of Class A Common Stock issued in the Los Angeles
Acquisition were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act in reliance, in part, on SoCal's
representations and warranties set forth in the Los Angeles Acquisition
agreement.
In February 1996, the Company issued 272,727 shares of Class A Common
Stock to Katzin Investments L.C. in partial consideration for all of the
outstanding shares of capital stock of Arizona Rent-A-Car Systems, Inc. (the
"Phoenix Acquisition"). The shares of Class A Common Stock issued in the
Phoenix Acquisition were issued pursuant to an exemption from registration
under Section 4(2) of the Securities Act in reliance, in part, upon the
representations and warranties set forth in the Phoenix Acquisition
agreement.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
<S> <C>
*1.1 Form of Underwriting Agreement.
2.1 Share Exchange Agreement dated April 25, 1994 among Team Rental Group, Inc., Sanford
Miller, Jeffrey Congdon, John Kennedy, Brian Britton, Richard Hinkle and Richard Sapia
(incorporated by reference to Exhibit 10.24 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
2.2 First Amendment to Share Exchange Agreement dated June 13, 1994 among Team Rental Group,
Inc., Sanford Miller, Jeffrey Congdon, John Kennedy, Brian Britton, Richard Hinkle and
Richard Sapia (incorporated by reference to Exhibit 10.36 to Amendment No. 1 to the
Company's Registration Statement on Form S-1, File No. 33-78274, dated June 17, 1994).
2.3 Second Amendment to Share Exchange Agreement dated July 5, 1994 among Team Rental Group,
Inc., Sanford Miller, Jeffrey Congdon, John Kennedy, Brian Britton, Richard Hinkle and
Richard Sapia (incorporated by reference to Exhibit 10.38 to Amendment No. 2 to the
Company's Registration Statement on Form S-1, File No. 33-78274, dated July 7, 1994).
2.4 Asset Purchase Agreement, dated April 25, 1994, among Freedom River, Inc., Chrysler
Credit Corporation, Team Rental of Cincinnati, Inc., Team Rental of Philadelphia, Inc.
and Team Rental of Pittsburgh, Inc. (incorporated by reference to Exhibit 10.21 to the
Company's Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
2.5 Agreement, dated October 20, 1995, among Team Rental Group, Inc., Team Rental of Southern
California, Inc., BRAC-OPCO, Inc., and Budget Rent a Car of Southern California
(incorporated by reference to Exhibit 2.5 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995).
II-3
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
2.6 Stock Purchase Agreement, dated as of December 21, 1995, by and among the Company,
Arizona Rent-A-Car Systems, Inc., David Katzin, Michael Katzin, Jon David Katzin,
Gabrielle De Lavigne, the David Katzin Irrevocable Trust (dated November 17, 1989) and
Katzin Investments L.C. (incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K dated December 21, 1995).
2.7 Stock Purchase Agreement, dated as of November 1, 1994, by and between Team Rental of Ft.
Wayne, Inc., Sanford Miller, Richard Sapia and Andrew Klein (incorporated by reference to
Exhibit 10.38 to the Company's Annual Report on Form 10-K for the year ended December 31,
1994).
2.8 Agreement, dated as of December 20, 1994, among the Company, MacKay Car & Truck Rentals,
Inc. and Kenneth V. MacKay (incorporated by reference to Exhibit 10 to the Company's
Current Report on Form 8-K dated January 13, 1995).
2.9 Agreement, dated December 22, 1994, by and among Don Kremer Lincoln Mercury, Inc.,
Richard E. Hagopian, and Team Rental Group, Inc. (incorporated by reference to Exhibit
10.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
2.10 Agreement, dated as of March 8, 1995, among Team Rental of Connecticut, Inc., Team Rental
Group, Inc., Rental Car Resources Inc. and James Salatto and Joseph Salatto (incorporated
by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1, File No.
33-78274, dated April 28, 1994).
3.2 By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
4.1 Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995).
4.2 Base Indenture between Team Fleet Financing Corporation, as Issuer, Team Rental Group,
Inc., as Servicer and Team Interestholder, and Bankers Trust Company, as Trustee,
relating to Rental Car Asset Backed Notes (incorporated by reference to Exhibit 4.1 to
the Company's Annual Report on Form 10-K for the year ended December 31, 1994).
4.3 Supplemental Indenture relating to Rental Car Asset Backed Notes (incorporated by
reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
4.4 Base Indenture among BRAC SOCAL Funding Corporation, as Issuer, BRAC-OPCO, Inc., as
Servicer and Retained Interestholder, and Bankers Trust Company, as Trustee (incorporated
by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
4.5 Series 1995-1 Supplement to Base Indenture among BRAC SOCAL Funding Corporation, as
Issuer, BRAC-OPCO, Inc., as Servicer and Retained Interestholder, and Bankers Trust
Company, as Trustee (incorporated by reference to Exhibit 4.6 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
II-4
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
4.6 Supplement No. 1 to Indenture, dated as of October 20, 1995, among BRAC SOCAL Funding
Corporation, BRAC-OPCO, Inc., Team Rental of Southern California, Inc., and Bankers Trust
Company (incorporated by reference to Exhibit 4.7 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).
4.7 Master Motor Vehicle Lease and Servicing Agreement by and among Team Fleet Financing
Corporation, as Lessor, Team Rental Group, Inc., as Guarantor, and Tranex Rentals of New
York, Inc., Capital City Leasing, Inc., Lee-Al, Inc., Westeam Enterprises, Inc., Team
Rental of Philadelphia, Inc., Team Rental of Pittsburgh, Inc. and Team Rental of
Cincinnati, Inc., as Lessees (incorporated by reference to Exhibit 4.3 to the Company's
Annual Report on form 10-K for the year ended December 31, 1994).
*4.8 Master Motor Vehicle Lease and Servicing Agreement, dated February 15, 1995 among BRAC
SOCAL Funding Corporation, as Lessor, BRAC OPCO, Inc. and certain other affiliates, as
Lessees, relating to the Second Fleet Financing Facility.
4.9 First Amendment to Registration Rights Agreement, dated as of November 1, 1994, among the
Company, Brian Britton, Jeffrey Congdon, Richard Hinkle, John Kennedy, Sanford Miller and
Richard Sapia (incorporated by reference to Exhibit 10.24 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
4.10 Letter Agreement, dated as of November 1, 1994, between Andrew Klein and the Company
acknowledging that Andrew Klein is a party to the Registration Rights Agreement, dated as
of August 25, 1994, as amended (incorporated by reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994).
4.11 Registration Rights Agreement, dated March 8, 1995, by and among Team Rental Group, Inc.
and James Salatto (incorporated by reference to Exhibit 4.12 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
4.12 Registration Rights Agreement, dated as of October 20, 1995, between Team Rental Group,
Inc. and Budget Rent a Car of Southern California (incorporated by reference to Exhibit
4.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
4.13 Registration Rights Agreement, dated as of February 27, 1996, between Team Rental Group,
Inc. and Katzin Investments L.C. (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated February 27, 1996).
4.14 Warrant No. 1-1994, dated as of August 24, 1994, to purchase 175,000 shares of Class A
Common Stock, par value $.01 per share, of the Company, issued to Budget Rent a Car
Corporation (incorporated by reference to Exhibit 10.26 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
***5.1 Opinion of King & Spalding.
10.1 Sublicense Agreement dated April 1, 1987 between Budget Rent A Car of Southern California
and Westeam Enterprises, Inc. (incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
II-5
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
10.2 Sublicense Agreement dated October 28, 198 between Budget Rent A Car of Southern
California and Lee-Al, Inc. (incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
*10.3 Letter Agreement dated October 23, 1989 between Transportation and Storage Associates
d/b/a Budget Rent a Truck of Southern California and Budget Rent a Car of Southern
California.
10.4 Prime License Agreement dated August 25, 1994 between Budget Rent A Car Corporation and
Team Rental of Pittsburgh, Inc. d/b/a Budget Rent A Car of Pittsburgh, Pennsylvania,
together with Addendum to License Agreement: Right of First Refusal, dated August 25,
1994 (incorporated by reference to Exhibit 10.5 to the Company's Annual Report on form
10-K for the year ended December 31, 1994).
10.5 Prime License Agreement dated August 25, 1994 between Budget Rent A Car Corporation and
Team Rental of Cincinnati, Inc. d/b/a Budget Rent A Car of Cincinnati, Ohio (incorporated
by reference to Exhibit 10.6 to the Company's Annual Report on form 10-K for the year
ended December 31, 1994).
10.6 Prime License Agreement dated August 25, 1994 between Budget Rent A Car Corporation and
Team Rental of Philadelphia, Inc. d/b/a Budget Rent A Car of Philadelphia, Pennsylvania,
together with Addendum to License Agreement dated August 25, 1994 and Addendum to License
Agreement: Right of First Refusal, dated August 25, 1994 (incorporated by reference to
Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.7 Prime License Agreement dated July 1, 1985 between Budget Rent a Car Corporation and
Capital City Leasing, Inc. d/b/a Budget Rent a Car of Richmond, Virginia, as amended by
the Letter dated April 26, 1994 from Budget Rent a Car Corporation to Team Rental Group
together with Consent Agreement Assignment of Prime License dated December 5, 1991 among
Budget Rent a Car Corporation, JHF Enterprises, Inc. and Capital City Leasing, Inc. d/b/a
Budget Rent a Car of Richmond, Virginia (incorporated by reference to Exhibit 10.9 to the
Company's Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
10.8 Prime License Agreement dated November 8, 1991 between Budget Rent a Car Corporation and
Tranex Rentals of New York, Inc. d/b/a Budget Rent a Car of Rochester, New York
(incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.9 Prime License Agreement dated August 1, 1991, between Budget Rent A Car Corporation and
Tranex Rentals of New York, Inc. d/b/a Budget Rent A Car of Albany, New York
(incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.10 Budget Rent a Car System Prime License Agreement, dated August 25, 1994, between Budget
Rent a Car Corporation and Westeam Enterprises, Inc. d/b/a Budget Rent a Truck of San
Diego, California (incorporated by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994).
II-6
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
10.11 Amended and Restated Sublicense Agreement, dated as of October 20, 1995, between Budget
Rent a Car of Southern California and Team Rental of Southern California, Inc., along
with Corporate Guaranty of Team Rental Group, dated as of October 20, 1995 (incorporated
by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.12 Car Rental Operating License dated October 1, 1982 between the City of Philadelphia,
Automotive Rentals, Inc. d/b/a Budget Rent A Car of Philadelphia and Budget Rent A Car
Corporation (incorporated by reference to Exhibit 10.11 to the Company's Registration
Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
10.13 Prime License Agreement dated February 1, 1995 by and between Budget Rent a Car
Corporation and Team Rental of Connecticut, Inc. d/b/a Budget Rent a Car of Hampden,
Massachusetts (incorporated by reference to Exhibit 10.13 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.14 Prime License Agreement dated February 1, 1995 by and between Budget Rent a Car
Corporation and Team Rental of Connecticut, Inc. d/b/a Budget Rent a Car of Hartford and
New Haven, Connecticut (incorporated by reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.15 Prime License Agreement dated December 22, 1994 by and between Budget Rent a Car
Corporation and Team Rental of Dayton, Inc. d/b/a Budget Rent a Car of Dayton and Budget
Car Sales (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.16 Prime License Agreement dated December 22, 1994 by and between Budget Rent a Car
Corporation and Team Rental of Dayton, Inc. d/b/a Budget Rent a Car of Richmond, Indiana
(incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.17 Prime License Agreement dated January 4, 1995 by and between Budget Rent a Car
Corporation and Team Rental of Charlotte, Inc. d/b/a Budget Rent a Car of Hickory, North
Carolina (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.18 Prime License Agreement dated January 4, 1995 by and between Budget Rent a Car
Corporation and Team Rental of Charlotte, Inc. d/b/a Budget Rent a Car of Charlotte,
North Carolina (incorporated by reference to Exhibit 10.18 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.19 Prime License Agreement dated January 4, 1995 by and between Budget Rent a Car
Corporation and Team Rental of Charlotte, Inc. d/b/a Budget Rent a Car of Asheville,
North Carolina (incorporated by reference to Exhibit 10.19 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.20 Prime License Agreement dated October 1, 1976 by and between Budget Rent a Car
Corporation of America and Don Kremer, Inc. d/b/a Budget Rent a Car of Dayton, as amended
by Amendment to License Agreement dated November 1, 1991 (incorporated by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
II-7
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
***10.21 Agreement dated November 23, 1960 between Rent-A-Car Services Corporation and Frank
Katzin, Ernst Sielaff and Harry Verblen, as co-partners, d/b/a Budget Rent-A-Car of
Arizona, as amended by the Addendum dated November 23, 1960, the Agreement dated October
, 1961, the Release Agreement dated December 30, 1963, the Amendatory Agreement dated
November 1, 1966, the Amendment to Franchise Agreement dated March 18, 1968, the Addendum
to License Agreement dated April 4, 1969, the Amendatory Agreement dated August 31, 1979,
the Second Amendatory Agreement dated August 31, 1979 and the letter agreement dated
January 27, 1981, together with the Consent to and Agreement of Assignment dated December
, 1962 among Budget Rent-A-Car Corporation of America, Frank Katzin, Harry Verblen and
Ernst Sielaff, as co-partners d/b/a Budget Rent-A-Car of Arizona, and David Katzin and
Charles H. Juliusburg, and the Consent to and Agreement of Assignment dated April 3, 1968
among Budget Rent-A-Car Corporation of America, Frank Katzin, Ernst Sielaff, David Katzin
and Charles Juliusburg, as co-partners d/b/a budget Rent-A-Car of Arizona, Margaret F
Katzin.
10.22 Lease Agreement dated September 1, 1993 between Tranex Partners and Tranex Rentals of New
York, Inc., as amended by First Agreement dated as of July 1, 1994 (incorporated by
reference to Exhibit 10.40 to the Company's Registration Statement on Form S-1, File No.
33-78274).
*10.23 Airport Concession Agreement between City of Phoenix (Aviation Department) and Arizona
Rent-a-Car Systems, Inc. dated November 1, 1990.
10.24 Lease Agreement dated September 1, 1993 between Miller and Hinkle, a Florida general
partnership, and Capital City Leasing, Inc., as amended by First Amendment dated as of
July 1, 1994 (Henrico County, Virginia) (incorporated by reference to Exhibit 10.41 to
Amendment No. 3 to the Company's Registration Statement on Form S-1, File No. 33-78274,
dated August 12, 1994).
*10.25 Lease Agreement dated June 1, 1994 between Miller and Hinkle, a Florida general
partnership, and Capital City Leasing, Inc. (Chesterfield County, Virginia).
10.26 Lease Agreement dated as of September 12, 1995 between MCK Real Estate Corporation, Team
Car Sales of Richmond, Inc. and Team Rental Group, Inc. (incorporated by reference to
Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
10.27 Agreement of Lease dated as of August 31,1995 between MCK Real Estate Corporation and
Team Rental of Philadelphia, Inc. (incorporated by reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995).
10.28 Environmental Remediation Agreement between Chrysler Credit Corporation and Team Rental
Group, Inc. (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.29 Agreement between Team Rental Group, Inc. and Transportation & Storage Associates dated
April 5, 1994 (incorporated by reference to Exhibit 10.5 to the Company's Registration
Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
10.30 Share Purchase Agreement dated January 11, 1996 between Chrysler Corporation and the
Company (incorporated by reference to Exhibit 2.2 to the Company's Form 10-Q for the
quarter ended March 31, 1996).
II-8
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
10.31 First Amended and Restated Credit Agreement, dated as of January 12, 1995, among Team
Fleet Services Corporation, the Company and NBD Bank, N.A. (incorporated by reference to
Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.32 First Amendment to Credit Agreement dated May 23, 1995 (incorporated by reference to
Exhibit 10.38 to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
10.33 Second Amendment to Credit Agreement dated July 11, 1995 (incorporated by reference to
Exhibit 10.39 to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
10.34 Third Amendment to Credit Agreement dated December 29, 1995 (incorporated by reference to
Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
10.35 Fourth Amendment to Credit Agreement dated February 27, 1996 (incorporated by reference
to Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December
31, 1995).
10.36 Fifth Amendment to Credit Agreement dated March 28, 1996 (incorporated by reference to
Exhibit 10.3 to the Company's Form 10-Q for the quarter ended March 31, 1996)
*10.37 Sixth Amendment to Credit Agreement dated May 1, 1996.
*10.38 Seventh Amendment to Credit Agreement dated May 31, 1994
10.39 Credit Agreement dated May 16, 1995 by and among Team Rental Group, Inc., Team Fleet
Services Corporation and BankOne Indianapolis, N.A. (incorporated by reference to Exhibit
10.42 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
10.40 First Amendment to BankOne Credit Agreement dated November 1, 1995 (incorporated by
reference to Exhibit 10.43 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.41 Second Amendment to BankOne Credit Agreement dated February 2, 1996 (incorporated by
reference to Exhibit 10.44 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.42 Form of World Omni, Inc. Term Note (incorporated by reference to Exhibit 10.45 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995).
10.43 Promissory Note, dated February 27, 1996, from Team Rental of Southern California, Inc.
to Budget Rent a Car of Southern California in the principal amount of approximately
$4,775,000 (incorporated by reference to Exhibit 10.46 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.44 Promissory Note, dated February 27, 1996, from the Company to Katzin Investments L.C. in
the aggregate principal amount of $10,000,000 (incorporated by reference to Exhibit 10.47
to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
10.45 Term Note dated February 27, 1996 from NationsBank, N.A. (South) to the Company
(incorporated by reference to Exhibit 10.48 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995).
II-9
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
10.46 Amendment No. 1 to Team Note dated April 2, 1996 from NationsBank, N.A. (South) to the
Company (incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended
March 31, 1996).
*10.47 Amendment No. 2 to Team Note dated May 27, 1996 from NationsBank, N.A. (South) to the
Company.
10.48 Revolving Credit Agreement by and between VPSI, Inc. and NationsBank, N.A. (South) dated
February 6, 1996 (incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q
for the quarter ended March 31, 1996).
10.49 Amendment and Waiver No. 1 to Revolving Credit Agreement and Security Agreement by and
between VPSI, Inc. and NationsBank, N.A. (South) dated March 28, 1996 (incorporated by
reference to Exhibit 10.5 to the Company's Form 10-Q for the quarter ended March 31,
1996).
*10.50 Revolving Credit Agreement dated as of May 31, 1996 among Team Fleet Services
Corporation, NationsBank, N.A. (South) and certain Lenders.
10.51 Subordination Agreement, dated as of October 20, 1995, among Budget Rent a Car of
Southern California, BRAC-OPCO, Inc., Team Rental Group, Inc. and Team Rental of Southern
California (incorporated by reference to Exhibit 10.49 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.52 Shareholders' Agreement, dated as of October 20, 1995, by and among Team Rental Group,
Inc., the holders of the Company's Class B Common Stock, and Budget Rent a Car of
Southern California (incorporated by reference to Exhibit 10.50 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
10.53 1994 Option Plan (incorporated by reference to Exhibit 10.27 to the Company's
Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
10.54 1994 Director's Plan (incorporated by reference to Exhibit 10.28 to the Company's
Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
10.55 Indemnification Agreement dated April 25, 1994 between the Company and Sanford Miller
(incorporated by reference to Exhibit 10.29 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.56 Indemnification Agreement dated April 25, 1994 between the Company and John Kennedy
(incorporated by reference to Exhibit 10.30 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.57 Indemnification Agreement dated April 25, 1994 between the Company and Jeffrey Congdon
(incorporated by reference to Exhibit 10.31 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.58 Indemnification Agreement dated April 25, 1994 between the Company and Ronald Agronin
(incorporated by reference to Exhibit 10.32 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.59 Indemnification Agreement dated April 25, 1994 between the Company and Stephen Weber
(incorporated by reference to Exhibit 10.33 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
**11.1 Statement re computation of per share earnings.
**21.1 Subsidiaries of the Company.
*23.1 Consent of Deloitte & Touche LLP
II-10
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
*23.2 Consent of Michael Silver & Company
*23.3 Consent of Coopers & Lybrand L.L.P.
***23.4 Consent of King & Spalding (included in Exhibit 5.1).
**27.1 Financial Data Schedule.
</TABLE>
- ------------
* Filed herewith.
** Previously filed.
*** To be filed by Amendment.
(b) Financial Statement Schedules of Team Rental Group, Inc. and
subsidiaries:
Independent Auditors' Report.
Schedule I--Condensed Financial Statements of the Company.
Schedule II--Schedule of Valuation and Qualifying Accounts.
II-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Team Rental Group, Inc.:
We have audited the consolidated financial statements of Team Rental
Group, Inc. as of December 31, 1995 and 1994, and for each of the three years
in the period ended December 31, 1995, and have issued our report thereon
dated April 12, 1996 (included elsewhere in this Registration Statement). Our
audits also included the financial statement schedules listed in Item 16 of
this Registration Statement. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic financial statements
taken as a whole, present fairly in all material respects the information set
forth therein.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
April 12, 1996
II-12
<PAGE>
SCHEDULE I
TEAM RENTAL GROUP, INC.
CONDENSED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents ............................................ $ 635 $ 2,138
Investment in subsidiaries ........................................... 31,152 47,730
Other assets ......................................................... 1,500 2,701
--------- ---------
TOTAL ASSETS ....................................................... $33,287 $52,569
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Notes payable ....................................................... $ 2,610 $ 9,455
Accounts payable and accrued liabilities ............................ 1,929 1,522
--------- ---------
Total liabilities .................................................. 4,539 10,977
--------- ---------
COMMON STOCK WARRANT ................................................. 2,000 2,000
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 250,000 shares authorized, no
shares issued ......................................................
Class A common stock, $.01 par value, one vote per share, 17,500,000
shares authorized, 4,036,300 and 5,257,116 shares issued .......... 40 52
Class B common stock, $.01 par value, ten votes per share, 2,500,000
shares authorized, 1,936,600 shares issued and outstanding ........ 20 20
Additional paid-in capital .......................................... 29,159 41,984
Accumulated deficit ................................................. (2,471) (2,134)
Treasury stock at cost (36,667 shares of Class A common stock) ..... (330)
--------- ---------
Total stockholders' equity ......................................... 26,748 39,592
--------- ---------
Total .............................................................. $33,287 $52,569
========= =========
</TABLE>
See notes to financial statements.
II-13
<PAGE>
SCHEDULE I (CONTINUED)
TEAM RENTAL GROUP, INC.
CONDENSED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1994 1995
------ ---------
<S> <C> <C>
REVENUE:
Equity in earnings of subsidiaries $749 $ 1,264
------ ---------
EXPENSES:
Personnel .......................... 295 1,301
General and administrative ......... 517 724
------ ---------
812 2,025
------ ---------
Loss from operations ............... (63) (761)
OTHER (INCOME) EXPENSE:
Interest expense ................... 20 852
Interest income .................... (69)
------ ---------
Other expense--net ................. 20 783
------ ---------
Loss before income taxes ............ (83) (1,544)
Benefit for income taxes ............ 333 1,881
------ ---------
Net income .......................... $250 $ 337
====== =========
</TABLE>
See notes to financial statements.
II-14
<PAGE>
SCHEDULE I (CONTINUED)
TEAM RENTAL GROUP, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 250 $ 337
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in earnings of subsidiaries ....................... 749 1,264
(Increase) decrease in other assets ...................... (1,436) 1,201
Increase in accounts payable and accrued liabilities .... 1,901 407
--------- ---------
Net cash provided by operations .......................... 1,464 3,209
--------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Increase in investments in subsidiaries ................... $(56) (3,403) (8,221)
------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable ............................... 39 2,571 6,845
Purchase of treasury stock ................................ (330)
Cash received from stockholder advances, net .............. 20
------- --------- ---------
Net cash provided by financing activities ................ 59 2,571 6,515
------- --------- ---------
Net increase in cash and cash equivalents .................. 3 632 1,503
Cash and cash equivalents, beginning of period ............. 3 635
------- --------- ---------
Cash and cash equivalents, end of period ................... $ 3 $ 635 $ 2,138
======= ========= =========
</TABLE>
See notes to financial statements.
II-15
<PAGE>
SCHEDULE I (CONTINUED)
TEAM RENTAL GROUP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These condensed financial statements consist of the parent company
financial statements only of Team Rental Group, Inc. (the "Company")
unconsolidated for any subsidiaries or divisions of the consolidated group.
For the purpose of these stand alone parent company financial statements, the
Company accounts for its investments in subsidiaries under the equity method
of accounting. These financial statements should be read in conjunction with
the consolidated financial statements of the Company for each of the three
years in the period ended December 31, 1995. The Company was formed on
December 31, 1992 as a holding company for a number of companies engaged in
the rental of vehicles, including cars, trucks and passenger vans. For the
year ended December 31, 1993 the Company had no operations.
II-16
<PAGE>
SCHEDULE II
TEAM RENTAL GROUP, INC.
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN C--ADDITIONS
--------------------------
COLUMN B CHARGED TO
BALANCE AT CHARGED TO OTHER COLUMN D-- COLUMN E--
BEGINNING OF COSTS AND ACCOUNTS DEDUCTIONS BALANCE AT END
COLUMN A--DESCRIPTION PERIOD EXPENSES DESCRIBED DESCRIBED OF PERIOD
- ----------------------------------------- -------------- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts--trade
and vehicle receivable--1993 activity .. $385 $(112) $ 273
Allowance for doubtful accounts--trade
and vehicle receivable--1994 activity .. $273 $ 228 $ 501
Allowance for doubtful accounts--trade
and vehicle receivable--1995 activity .. $501 $1,796 $2,297
</TABLE>
II-17
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions referred to in Item 14 or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against the public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The Company hereby undertakes that:
1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of New
York, State of New York on June 13, 1996.
TEAM RENTAL GROUP, INC.
By: /s/ Sanford Miller
----------------------------
Sanford Miller
Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the following persons in
the capacities indicated on June 13, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------- -----------------------------------------------------
<S> <C>
/s/ Sanford Miller
- ----------------------
Sanford Miller Chairman of the Board and Chief Executive Officer
(Principal Executive Officer) and Director
*
- ----------------------
John P. Kennedy President, Chief Operating Officer and Director
*
- ----------------------
Jeffrey D. Congdon Chief Financial Officer (Principal Financial and
Accounting Officer), Secretary and Director
*
- ----------------------
Ronald D. Agronin Director
*
- ----------------------
James F. Calvano Director
*
- ----------------------
Stephen L. Weber Director
*
- ----------------------
Jeffrey R. Mirkin Director
*
- ----------------------
Alan D. Liker Director
</TABLE>
* By: /s/ Sanford Miller
- -------------------------
Sanford Miller
Attorney-in-fact
II-19
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
<S> <C>
*1.1 Form of Underwriting Agreement.
2.1 Share Exchange Agreement dated April 25, 1994 among Team Rental Group, Inc., Sanford
Miller, Jeffrey Congdon, John Kennedy, Brian Britton, Richard Hinkle and Richard Sapia
(incorporated by reference to Exhibit 10.24 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
2.2 First Amendment to Share Exchange Agreement dated June 13, 1994 among Team Rental Group,
Inc., Sanford Miller, Jeffrey Congdon, John Kennedy, Brian Britton, Richard Hinkle and
Richard Sapia (incorporated by reference to Exhibit 10.36 to Amendment No. 1 to the
Company's Registration Statement on Form S-1, File No. 33-78274, dated June 17, 1994).
2.3 Second Amendment to Share Exchange Agreement dated July 5, 1994 among Team Rental Group,
Inc., Sanford Miller, Jeffrey Congdon, John Kennedy, Brian Britton, Richard Hinkle and
Richard Sapia (incorporated by reference to Exhibit 10.38 to Amendment No. 2 to the
Company's Registration Statement on Form S-1, File No. 33-78274, dated July 7, 1994).
2.4 Asset Purchase Agreement, dated April 25, 1994, among Freedom River, Inc., Chrysler
Credit Corporation, Team Rental of Cincinnati, Inc., Team Rental of Philadelphia, Inc.
and Team Rental of Pittsburgh, Inc. (incorporated by reference to Exhibit 10.21 to the
Company's Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
2.5 Agreement, dated October 20, 1995, among Team Rental Group, Inc., Team Rental of Southern
California, Inc., BRAC-OPCO, Inc., and Budget Rent a Car of Southern California
(incorporated by reference to Exhibit 2.5 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995).
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
2.6 Stock Purchase Agreement, dated as of December 21, 1995, by and among the Company,
Arizona Rent-A-Car Systems, Inc., David Katzin, Michael Katzin, Jon David Katzin,
Gabrielle De Lavigne, the David Katzin Irrevocable Trust (dated November 17, 1989) and
Katzin Investments L.C. (incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K dated December 21, 1995).
2.7 Stock Purchase Agreement, dated as of November 1, 1994, by and between Team Rental of Ft.
Wayne, Inc., Sanford Miller, Richard Sapia and Andrew Klein (incorporated by reference to
Exhibit 10.38 to the Company's Annual Report on Form 10-K for the year ended December 31,
1994).
2.8 Agreement, dated as of December 20, 1994, among the Company, MacKay Car & Truck Rentals,
Inc. and Kenneth V. MacKay (incorporated by reference to Exhibit 10 to the Company's
Current Report on Form 8-K dated January 13, 1995).
2.9 Agreement, dated December 22, 1994, by and among Don Kremer Lincoln Mercury, Inc.,
Richard E. Hagopian, and Team Rental Group, Inc. (incorporated by reference to Exhibit
10.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
2.10 Agreement, dated as of March 8, 1995, among Team Rental of Connecticut, Inc., Team Rental
Group, Inc., Rental Car Resources Inc. and James Salatto and Joseph Salatto (incorporated
by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1, File No.
33-78274, dated April 28, 1994).
3.2 By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
4.1 Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995).
4.2 Base Indenture between Team Fleet Financing Corporation, as Issuer, Team Rental Group,
Inc., as Servicer and Team Interestholder, and Bankers Trust Company, as Trustee,
relating to Rental Car Asset Backed Notes (incorporated by reference to Exhibit 4.1 to
the Company's Annual Report on Form 10-K for the year ended December 31, 1994).
4.3 Supplemental Indenture relating to Rental Car Asset Backed Notes (incorporated by
reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
4.4 Base Indenture among BRAC SOCAL Funding Corporation, as Issuer, BRAC-OPCO, Inc., as
Servicer and Retained Interestholder, and Bankers Trust Company, as Trustee (incorporated
by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
4.5 Series 1995-1 Supplement to Base Indenture among BRAC SOCAL Funding Corporation, as
Issuer, BRAC-OPCO, Inc., as Servicer and Retained Interestholder, and Bankers Trust
Company, as Trustee (incorporated by reference to Exhibit 4.6 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
4.6 Supplement No. 1 to Indenture, dated as of October 20, 1995, among BRAC SOCAL Funding
Corporation, BRAC-OPCO, Inc., Team Rental of Southern California, Inc., and Bankers Trust
Company (incorporated by reference to Exhibit 4.7 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).
4.7 Master Motor Vehicle Lease and Servicing Agreement by and among Team Fleet Financing
Corporation, as Lessor, Team Rental Group, Inc., as Guarantor, and Tranex Rentals of New
York, Inc., Capital City Leasing, Inc., Lee-Al, Inc., Westeam Enterprises, Inc., Team
Rental of Philadelphia, Inc., Team Rental of Pittsburgh, Inc. and Team Rental of
Cincinnati, Inc., as Lessees (incorporated by reference to Exhibit 4.3 to the Company's
Annual Report on form 10-K for the year ended December 31, 1994).
*4.8 Master Motor Vehicle Lease and Servicing Agreement, dated February 15, 1995 among BRAC
SOCAL Funding Corporation, as Lessor, BRAC OPCO, Inc. and certain other affiliates, as
Lessees, relating to the Second Fleet Financing Facility.
4.9 First Amendment to Registration Rights Agreement, dated as of November 1, 1994, among the
Company, Brian Britton, Jeffrey Congdon, Richard Hinkle, John Kennedy, Sanford Miller and
Richard Sapia (incorporated by reference to Exhibit 10.24 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
4.10 Letter Agreement, dated as of November 1, 1994, between Andrew Klein and the Company
acknowledging that Andrew Klein is a party to the Registration Rights Agreement, dated as
of August 25, 1994, as amended (incorporated by reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994).
4.11 Registration Rights Agreement, dated March 8, 1995, by and among Team Rental Group, Inc.
and James Salatto (incorporated by reference to Exhibit 4.12 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
4.12 Registration Rights Agreement, dated as of October 20, 1995, between Team Rental Group,
Inc. and Budget Rent a Car of Southern California (incorporated by reference to Exhibit
4.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
4.13 Registration Rights Agreement, dated as of February 27, 1996, between Team Rental Group,
Inc. and Katzin Investments L.C. (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated February 27, 1996).
4.14 Warrant No. 1-1994, dated as of August 24, 1994, to purchase 175,000 shares of Class A
Common Stock, par value $.01 per share, of the Company, issued to Budget Rent a Car
Corporation (incorporated by reference to Exhibit 10.26 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
***5.1 Opinion of King & Spalding.
10.1 Sublicense Agreement dated April 1, 1987 between Budget Rent A Car of Southern California
and Westeam Enterprises, Inc. (incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
10.2 Sublicense Agreement dated October 28, 198 between Budget Rent A Car of Southern
California and Lee-Al, Inc. (incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
*10.3 Letter Agreement dated October 23, 1989 between Transportation and Storage Associates
d/b/a Budget Rent a Truck of Southern California and Budget Rent a Car of Southern
California.
10.4 Prime License Agreement dated August 25, 1994 between Budget Rent A Car Corporation and
Team Rental of Pittsburgh, Inc. d/b/a Budget Rent A Car of Pittsburgh, Pennsylvania,
together with Addendum to License Agreement: Right of First Refusal, dated August 25,
1994 (incorporated by reference to Exhibit 10.5 to the Company's Annual Report on form
10-K for the year ended December 31, 1994).
10.5 Prime License Agreement dated August 25, 1994 between Budget Rent A Car Corporation and
Team Rental of Cincinnati, Inc. d/b/a Budget Rent A Car of Cincinnati, Ohio (incorporated
by reference to Exhibit 10.6 to the Company's Annual Report on form 10-K for the year
ended December 31, 1994).
10.6 Prime License Agreement dated August 25, 1994 between Budget Rent A Car Corporation and
Team Rental of Philadelphia, Inc. d/b/a Budget Rent A Car of Philadelphia, Pennsylvania,
together with Addendum to License Agreement dated August 25, 1994 and Addendum to License
Agreement: Right of First Refusal, dated August 25, 1994 (incorporated by reference to
Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.7 Prime License Agreement dated July 1, 1985 between Budget Rent a Car Corporation and
Capital City Leasing, Inc. d/b/a Budget Rent a Car of Richmond, Virginia, as amended by
the Letter dated April 26, 1994 from Budget Rent a Car Corporation to Team Rental Group
together with Consent Agreement Assignment of Prime License dated December 5, 1991 among
Budget Rent a Car Corporation, JHF Enterprises, Inc. and Capital City Leasing, Inc. d/b/a
Budget Rent a Car of Richmond, Virginia (incorporated by reference to Exhibit 10.9 to the
Company's Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
10.8 Prime License Agreement dated November 8, 1991 between Budget Rent a Car Corporation and
Tranex Rentals of New York, Inc. d/b/a Budget Rent a Car of Rochester, New York
(incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.9 Prime License Agreement dated August 1, 1991, between Budget Rent A Car Corporation and
Tranex Rentals of New York, Inc. d/b/a Budget Rent A Car of Albany, New York
(incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.10 Budget Rent a Car System Prime License Agreement, dated August 25, 1994, between Budget
Rent a Car Corporation and Westeam Enterprises, Inc. d/b/a Budget Rent a Truck of San
Diego, California (incorporated by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994).
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
10.11 Amended and Restated Sublicense Agreement, dated as of October 20, 1995, between Budget
Rent a Car of Southern California and Team Rental of Southern California, Inc., along
with Corporate Guaranty of Team Rental Group, dated as of October 20, 1995 (incorporated
by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.12 Car Rental Operating License dated October 1, 1982 between the City of Philadelphia,
Automotive Rentals, Inc. d/b/a Budget Rent A Car of Philadelphia and Budget Rent A Car
Corporation (incorporated by reference to Exhibit 10.11 to the Company's Registration
Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
10.13 Prime License Agreement dated February 1, 1995 by and between Budget Rent a Car
Corporation and Team Rental of Connecticut, Inc. d/b/a Budget Rent a Car of Hampden,
Massachusetts (incorporated by reference to Exhibit 10.13 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.14 Prime License Agreement dated February 1, 1995 by and between Budget Rent a Car
Corporation and Team Rental of Connecticut, Inc. d/b/a Budget Rent a Car of Hartford and
New Haven, Connecticut (incorporated by reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.15 Prime License Agreement dated December 22, 1994 by and between Budget Rent a Car
Corporation and Team Rental of Dayton, Inc. d/b/a Budget Rent a Car of Dayton and Budget
Car Sales (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.16 Prime License Agreement dated December 22, 1994 by and between Budget Rent a Car
Corporation and Team Rental of Dayton, Inc. d/b/a Budget Rent a Car of Richmond, Indiana
(incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.17 Prime License Agreement dated January 4, 1995 by and between Budget Rent a Car
Corporation and Team Rental of Charlotte, Inc. d/b/a Budget Rent a Car of Hickory, North
Carolina (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.18 Prime License Agreement dated January 4, 1995 by and between Budget Rent a Car
Corporation and Team Rental of Charlotte, Inc. d/b/a Budget Rent a Car of Charlotte,
North Carolina (incorporated by reference to Exhibit 10.18 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.19 Prime License Agreement dated January 4, 1995 by and between Budget Rent a Car
Corporation and Team Rental of Charlotte, Inc. d/b/a Budget Rent a Car of Asheville,
North Carolina (incorporated by reference to Exhibit 10.19 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.20 Prime License Agreement dated October 1, 1976 by and between Budget Rent a Car
Corporation of America and Don Kremer, Inc. d/b/a Budget Rent a Car of Dayton, as amended
by Amendment to License Agreement dated November 1, 1991 (incorporated by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
***10.21 Agreement dated November 23, 1960 between Rent-A-Car Services Corporation and Frank
Katzin, Ernst Sielaff and Harry Verblen, as co-partners, d/b/a Budget Rent-A-Car of
Arizona, as amended by the Addendum dated November 23, 1960, the Agreement dated October
, 1961, the Release Agreement dated December 30, 1963, the Amendatory Agreement dated
November 1, 1966, the Amendment to Franchise Agreement dated March 18, 1968, the Addendum
to License Agreement dated April 4, 1969, the Amendatory Agreement dated August 31, 1979,
the Second Amendatory Agreement dated August 31, 1979 and the letter agreement dated
January 27, 1981, together with the Consent to and Agreement of Assignment dated December
, 1962 among Budget Rent-A-Car Corporation of America, Frank Katzin, Harry Verblen and
Ernst Sielaff, as co-partners d/b/a Budget Rent-A-Car of Arizona, and David Katzin and
Charles H. Juliusburg, and the Consent to and Agreement of Assignment dated April 3, 1968
among Budget Rent-A-Car Corporation of America, Frank Katzin, Ernst Sielaff, David Katzin
and Charles Juliusburg, as co-partners d/b/a budget Rent-A-Car of Arizona, Margaret F
Katzin.
10.22 Lease Agreement dated September 1, 1993 between Tranex Partners and Tranex Rentals of New
York, Inc., as amended by First Agreement dated as of July 1, 1994 (incorporated by
reference to Exhibit 10.40 to the Company's Registration Statement on Form S-1, File No.
33-78274).
*10.23 Airport Concession Agreement between City of Phoenix (Aviation Department) and Arizona
Rent-a-Car Systems, Inc. dated November 1, 1990.
10.24 Lease Agreement dated September 1, 1993 between Miller and Hinkle, a Florida general
partnership, and Capital City Leasing, Inc., as amended by First Amendment dated as of
July 1, 1994 (Henrico County, Virginia) (incorporated by reference to Exhibit 10.41 to
Amendment No. 3 to the Company's Registration Statement on Form S-1, File No. 33-78274,
dated August 12, 1994).
*10.25 Lease Agreement dated June 1, 1994 between Miller and Hinkle, a Florida general
partnership, and Capital City Leasing, Inc. (Chesterfield County, Virginia).
10.26 Lease Agreement dated as of September 12, 1995 between MCK Real Estate Corporation, Team
Car Sales of Richmond, Inc. and Team Rental Group, Inc. (incorporated by reference to
Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
10.27 Agreement of Lease dated as of August 31,1995 between MCK Real Estate Corporation and
Team Rental of Philadelphia, Inc. (incorporated by reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995).
10.28 Environmental Remediation Agreement between Chrysler Credit Corporation and Team Rental
Group, Inc. (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.29 Agreement between Team Rental Group, Inc. and Transportation & Storage Associates dated
April 5, 1994 (incorporated by reference to Exhibit 10.5 to the Company's Registration
Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
10.30 Share Purchase Agreement dated January 11, 1996 between Chrysler Corporation and the
Company (incorporated by reference to Exhibit 2.2 to the Company's Form 10-Q for the
quarter ended March 31, 1996).
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
10.31 First Amended and Restated Credit Agreement, dated as of January 12, 1995, among Team
Fleet Services Corporation, the Company and NBD Bank, N.A. (incorporated by reference to
Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.32 First Amendment to Credit Agreement dated May 23, 1995 (incorporated by reference to
Exhibit 10.38 to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
10.33 Second Amendment to Credit Agreement dated July 11, 1995 (incorporated by reference to
Exhibit 10.39 to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
10.34 Third Amendment to Credit Agreement dated December 29, 1995 (incorporated by reference to
Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
10.35 Fourth Amendment to Credit Agreement dated February 27, 1996 (incorporated by reference
to Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December
31, 1995).
10.36 Fifth Amendment to Credit Agreement dated March 28, 1996 (incorporated by reference to
Exhibit 10.3 to the Company's Form 10-Q for the quarter ended March 31, 1996)
*10.37 Sixth Amendment to Credit Agreement dated May 1, 1996.
*10.38 Seventh Amendment to Credit Agreement dated May 31, 1994
10.39 Credit Agreement dated May 16, 1995 by and among Team Rental Group, Inc., Team Fleet
Services Corporation and BankOne Indianapolis, N.A. (incorporated by reference to Exhibit
10.42 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
10.40 First Amendment to BankOne Credit Agreement dated November 1, 1995 (incorporated by
reference to Exhibit 10.43 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.41 Second Amendment to BankOne Credit Agreement dated February 2, 1996 (incorporated by
reference to Exhibit 10.44 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.42 Form of World Omni, Inc. Term Note (incorporated by reference to Exhibit 10.45 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995).
10.43 Promissory Note, dated February 27, 1996, from Team Rental of Southern California, Inc.
to Budget Rent a Car of Southern California in the principal amount of approximately
$4,775,000 (incorporated by reference to Exhibit 10.46 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.44 Promissory Note, dated February 27, 1996, from the Company to Katzin Investments L.C. in
the aggregate principal amount of $10,000,000 (incorporated by reference to Exhibit 10.47
to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
10.45 Term Note dated February 27, 1996 from NationsBank, N.A. (South) to the Company
(incorporated by reference to Exhibit 10.48 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995).
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
10.46 Amendment No. 1 to Team Note dated April 2, 1996 from NationsBank, N.A. (South) to the
Company (incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended
March 31, 1996).
*10.47 Amendment No. 2 to Team Note dated May 27, 1996 from NationsBank, N.A. (South) to the
Company.
10.48 Revolving Credit Agreement by and between VPSI, Inc. and NationsBank, N.A. (South) dated
February 6, 1996 (incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q
for the quarter ended March 31, 1996).
10.49 Amendment and Waiver No. 1 to Revolving Credit Agreement and Security Agreement by and
between VPSI, Inc. and NationsBank, N.A. (South) dated March 28, 1996 (incorporated by
reference to Exhibit 10.5 to the Company's Form 10-Q for the quarter ended March 31,
1996).
*10.50 Revolving Credit Agreement dated as of May 31, 1996 among Team Fleet Services
Corporation, NationsBank, N.A. (South) and certain Lenders.
10.51 Subordination Agreement, dated as of October 20, 1995, among Budget Rent a Car of
Southern California, BRAC-OPCO, Inc., Team Rental Group, Inc. and Team Rental of Southern
California (incorporated by reference to Exhibit 10.49 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.52 Shareholders' Agreement, dated as of October 20, 1995, by and among Team Rental Group,
Inc., the holders of the Company's Class B Common Stock, and Budget Rent a Car of
Southern California (incorporated by reference to Exhibit 10.50 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
10.53 1994 Option Plan (incorporated by reference to Exhibit 10.27 to the Company's
Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
10.54 1994 Director's Plan (incorporated by reference to Exhibit 10.28 to the Company's
Registration Statement on Form S-1, File No. 33-78274, dated April 28, 1994).
10.55 Indemnification Agreement dated April 25, 1994 between the Company and Sanford Miller
(incorporated by reference to Exhibit 10.29 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.56 Indemnification Agreement dated April 25, 1994 between the Company and John Kennedy
(incorporated by reference to Exhibit 10.30 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.57 Indemnification Agreement dated April 25, 1994 between the Company and Jeffrey Congdon
(incorporated by reference to Exhibit 10.31 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.58 Indemnification Agreement dated April 25, 1994 between the Company and Ronald Agronin
(incorporated by reference to Exhibit 10.32 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.59 Indemnification Agreement dated April 25, 1994 between the Company and Stephen Weber
(incorporated by reference to Exhibit 10.33 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
**11.1 Statement re computation of per share earnings.
**21.1 Subsidiaries of the Company.
*23.1 Consent of Deloitte & Touche LLP
<PAGE>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------------------
*23.2 Consent of Michael Silver & Company
*23.3 Consent of Coopers & Lybrand L.L.P.
***23.4 Consent of King & Spalding (included in Exhibit 5.1).
**27.1 Financial Data Schedule.
</TABLE>
- ------------
* Filed herewith.
** Previously filed.
*** To be filed by Amendment.
<PAGE>
EXHIBIT 1.1
4,600,000 Shares
TEAM RENTAL GROUP, INC.
Class A Common Stock
UNDERWRITING AGREEMENT
________, 1996
CS FIRST BOSTON CORPORATION
As Representative of the Several Underwriters
55 East 52nd Street
Park Avenue Plaza
New York, NY 10055
THE CHICAGO CORPORATION
208 South LaSalle Street
Chicago, IL 60604
McDONALD & COMPANY SECURITIES, INC.
One American Square
Suite 2615
Indianapolis, IN 46282
Dear Sirs:
1. Introductory. Team Rental Group, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the several Underwriters named in
Schedule A hereto (the "Underwriters") 3,167,273 shares of its Class A Common
Stock, par value $.01 per share (the "Class A Common Stock") (such shares of
Class A Common Stock being hereinafter referred to as the "Firm Shares"), and,
at the option of the Underwriters, 600,000 additional shares of its Class A
Common Stock (such additional shares being included among the shares defined
below as "Optional Shares"). The stockholders listed in Schedule B hereto (the
"Selling Stockholders") also propose to sell to the Underwriters an aggregate
of not more than 832,727 outstanding additional shares of the Class A Common
Stock of the Company (such additional shares, together with the 600,000 shares
to be issued and sold by the Company as described above, being hereinafter
referred to as the "Firm Shares"). The Firm Shares and the Optional Shares are
hereinafter collectively referred to as the "Stock". The Company and the
Selling Stockholders hereby agree with the Underwriters as follows:
2. Representations and Warranties of the Company and the Selling
Stockholders.
(a) The Company represents and warrants to, and agrees with, the
several Underwriters that:
(i) A registration statement (No. 333-4507), including a form
of prospectus, relating to the Stock has been filed with the
Securities and Exchange Commission (the "Commission") and either (A)
has been declared effective under the Securities Act of 1933 (the
"Act") and is not proposed to be amended or (B) is proposed to be
amended by amendment or post-effective amendment. If the Company
does not propose to amend such registration statement and if any
post-effective amendment to such registration statement has been
filed with the Commission prior to the execution and delivery of
this Agreement, the
<PAGE>
most recent such amendment has been declared effective by the
Commission. For purposes of this Agreement, "Effective Time" means
(1) if the Company has advised you that it does not propose to amend
such registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission, or (2) if the
Company has advised you that it proposes to file an amendment or
post-effective amendment to such registration statement, the date
and time as of which such registration statement, as amended by such
amendment or post-effective amendment, as the case may be, is
declared effective by the Commission. "Effective Date" means the
date of the Effective Time. Such registration statement, as amended
at the Effective Time, including all information (if any) deemed to
be a part of such registration statement as of the Effective Time
pursuant to Rule 430A(b) and/or Rule 434 under the Act, is
hereinafter referred to as the "Registration Statement", and the
form of prospectus relating to the Stock, as first filed with the
Commission pursuant to and in accordance with Rule 424(b) ("Rule
424(b)") under the Act or (if no such filing is required) as
included in the Registration Statement, is hereinafter referred to
as the "Prospectus".
(ii) If the Effective Time is prior to the execution and
delivery of this Agreement: (A) on the Effective Date, the
Registration Statement conformed in all respects to the requirements
of the Act and the rules and regulations of the Commission (the
"Rules and Regulations") and did not include any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and (B) on the date of this Agreement, the Registration
Statement conforms, and at the time of filing of the Prospectus
pursuant to Rule 424(b), the Registration Statement and the
Prospectus will conform, in all respects to the requirements of the
Act and the Rules and Regulations, and neither of such documents
includes, or will include, any untrue statement of a material fact
or omits, or will omit, to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading. If the Effective Time is subsequent to the execution and
delivery of this Agreement: on the Effective Date, the Registration
Statement and the Prospectus will conform in all respects to the
requirements of the Act and the Rules and Regulations, and neither
of such documents will include any untrue statement of a material
fact or will omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
The two preceding sentences do not apply to statements in or
omissions from the Registration Statement or the Prospectus based
upon written information furnished to the Company by any Underwriter
through you specifically for use therein.
(iii) Except for certain agreements regarding registration
rights as disclosed in the Prospectus and filed as exhibits to the
Registration Statement (collectively, the "Registration Rights
Agreements"), there are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act
with respect to any securities of the Company owned or to be owned
by such person or to require the Company to include such securities
in the securities registered pursuant to the Registration Statement
or in any securities being registered pursuant to any other
registration statement filed by the Company under the Act; and the
Company has given proper notice to, and secured written waivers
from, each person holding such registration rights pursuant to the
Registration Rights Agreements.
(iv) Each of the Company and each corporation, partnership or
other business entity, a majority of the equity interests of which
are owned, directly or indirectly,
2
<PAGE>
by the Company (each, a "Subsidiary", and collectively, the
"Subsidiaries", all of which are listed on Schedule C hereto), has
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own its
properties and conduct its business as described in the Registration
Statement and the Prospectus, and is duly qualified to do business
as a foreign corporation in good standing in all other jurisdictions
in which it owns or leases substantial properties or in which the
conduct of its business requires such qualification. The Company
does not own, directly or indirectly, any securities of any entity
other than the Subsidiaries.
(v) The Company's authorized capitalization is as set forth in
the Registration Statement and the Prospectus; all outstanding
shares of the Class A Common Stock and the Class B Common Stock, par
value $.01 per share (the "Class B Common Stock"), of the Company
(including the Optional Shares to be sold by the Selling
Stockholders) have been duly and validly authorized and issued, are
fully paid and nonassessable; the Firm Shares and the Optional
Shares to be issued and sold by the Company have been duly and
validly authorized and, when issued and delivered against payment
therefor as provided herein, will be duly and validly issued, fully
paid and nonassessable; the Class A Common Stock, Class B Common
Stock and Preferred Stock, par value $.01 per share (the "Preferred
Stock"), of the Company conform to the descriptions thereof
contained in the Registration Statement and the Prospectus; and the
Stock has been approved for listing on the Nasdaq National Market
upon completion of the offering.
(vi) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required to be
obtained or made by the Company or any Subsidiary for the
consummation of the transactions contemplated by this Agreement in
connection with the sale of the Stock, except such as have been
obtained and made under the Act and the Rules and Regulations and
such as may be required under state securities laws.
(vii) The execution, delivery and performance of this Agreement
and the consummation of the transactions herein contemplated will
not result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, rule,
regulation or order of any governmental body or agency or any court
having jurisdiction over the Company or any Subsidiary or any of
their properties, or any agreement or instrument to which the
Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or to which any of the properties of the Company
or any Subsidiary is subject, or the charter or by-laws of the
Company or any Subsidiary.
(viii) This Agreement has been duly authorized, executed and
delivered by the Company.
(ix) As of the First Closing Date (as defined in Section 3),
the Company will be the sole beneficial owner of all of the
outstanding capital stock of each Subsidiary, free and clear of all
security interests, claims, liens or encumbrances, and all such
capital stock has been duly and validly authorized and issued and is
fully paid and nonassessable.
(x) Except for the 1,936,600 shares of Class B Common Stock,
which are convertible into 1,936,600 shares of Class A Common Stock,
the warrant held by Budget Rent a Car Corporation ("BRAC") to
purchase 175,000 shares of Class A Common Stock
3
<PAGE>
(the "BRAC Warrant"), the Warrant held by NationsBank, National
Association (South) to purchase 187,500 shares of Class A Common
Stock (the "NationsBank Warrant"), the options to purchase [260,000]
shares of Class A Common Stock issued under the Company's 1994
Incentive Stock Option Plan (the "1994 Option Plan"), and the
options to purchase 25,000 shares of Class A Common Stock issued
under the Company's 1994 Directors' Plan (the "1994 Directors'
Plan"), each as described in the Registration Statement and the
Prospectus, there are no outstanding securities or obligations
(together, "Convertible Securities") of the Company or any
Subsidiary convertible into or exchangeable for any capital stock of
the Company or any Subsidiary respectively, rights, warrants or
options (together, "Rights") to subscribe for or purchase from the
Company or any Subsidiary any such capital stock or any such
Convertible Securities or obligations, or obligations of the Company
or any Subsidiary to issue Convertible Securities or Rights.
(xi) Except for the rights of first refusal set forth in the
Share Exchange Agreement dated April 25, 1994, as amended on June
13, 1994 and July 5, 1994, among the Company, Brian Britton, Jeffrey
Congdon, Richard Hinkle, John Kennedy, Sanford Miller and Richard
Sapia, and the put right set forth in the BRAC Warrant, there are no
preemptive or other rights to subscribe for, purchase or sell,
except for the transfer restrictions set forth in the Registration
Rights Agreements, Sections 5(h) and 5(i) of this Agreement and in
the letter to be delivered pursuant to Section 6(l) of this
Agreement, and the voting restrictions set forth in the
Shareholders' Agreement dated October 20, 1995 among the Company,
the holders of Class B Common Stock and Budget Rent a Car of
Southern California ("SOCAL"), any restriction upon the voting or
transfer of, or the declaration or payment of any dividend or
distribution on, any shares of capital stock of the Company or any
Subsidiary.
(xii) No broker, finder, consultant or other person or entity
is entitled to any brokerage, finder's or other fee or commission in
connection with the sale of the Stock, except such fee or commission
as may be provided to the Underwriters by the express terms of this
Agreement.
(xiii) All vehicle rental operations of the Company and the
Subsidiaries are conducted pursuant to and in accordance with one of
the agreements listed on Schedule D hereto (individually, a
"Franchise Agreement"; collectively, the "Franchise Agreements").
(xiv) Each Franchise Agreement and, with respect to the
Franchise Agreements listed as items 1, 2 and 10 on Schedule D, each
underlying franchise agreement between SOCAL and BRAC, and, with
respect to the Franchise Agreements listed as item 20 on Schedule D,
each underlying franchise agreement between Transportation and
Storage Associates ("TSA") and BRAC, is legal, valid, binding and
enforceable, for the benefit of the Company, in accordance with its
terms and in full force and effect, with no existing event of
default or event which, but for the giving of notice or the lapsing
of time or both, would constitute an event of default, except for
any defaults or events of default that, individually or in the
aggregate, would not have a material adverse effect upon the
condition, financial or otherwise, results of operations, business
affairs or business prospects of the Company and its Subsidiaries,
taken as a whole; the operations of each vehicle rental location of
the Company and the Subsidiaries are conducted in compliance in all
respects with the terms of the applicable Franchise Agreement,
except for any such non-compliances that, individually or in the
aggregate, would not have a material adverse effect upon the
condition, financial or otherwise, results of operations, business
affairs or business prospects of the Company and
4
<PAGE>
its Subsidiaries, taken as a whole; and the descriptions of the
Franchise Agreements in the Registration Statement are accurate and
fairly summarize the terms thereof.
(xv) The Company and its Subsidiaries have obtained all
approvals, consents, authorizations and waivers of BRAC, SOCAL and
TSA that are required for the Subsidiaries' acquisition, whether
through acquisition of assets or capital stock of the previous
Budget franchisee or sub-franchisee, of the Franchise Agreements,
and for the consummation of the transactions contemplated by this
Agreement, the Registration Statement and the Prospectus in
connection with the issuance and sale of the Stock and for the use
of proceeds of the offering as described in the Registration
Statement and the Prospectus under the heading "Use of Proceeds,"
including, without limitation, (A) the consent and waiver of any
right of first refusal by BRAC, SOCAL or TSA, as required, with
respect to the issuance and sale of the Stock by the Company, and
(B) the consent of BRAC to (1) the use in its retail vehicle sales
operations and the Registration Statement, any preliminary
prospectus and the Prospectus of the "Budget" name and logo and (2)
the filing of the Franchise Agreements with the Commission.
(xvi) The Company and its Subsidiaries have obtained from each
lessor, governmental authority or other entity with which they or
their predecessors have entered into lease, concession or other
agreements, all approvals, consents, authorizations and waivers that
are required for the Subsidiaries' acquisition, whether through
acquisition of assets or capital stock of previous Budget
franchisees or sub-franchisees of such leases, concession or other
agreements, including, without limitation, such necessary consents,
authorizations and waivers with respect to each property utilized in
the conduct of the business of the Company and its Subsidiaries as
described in the Registration Statement and the Prospectus.
(xvii) The Company and its Subsidiaries hold such licenses,
certificates and permits from governmental entities and authorities
as are necessary to the conduct of the business of the Company and
the Subsidiaries as described in the Registration Statement and the
Prospectus; the Company and its Subsidiaries have fulfilled and
performed all of the material obligations necessary to maintain such
licenses, certificates and permits, except where the failure to
perform such obligations would not have a material adverse effect
upon the condition, financial or otherwise, results of operations,
business affairs or business prospects of the Company and its
Subsidiaries, taken as a whole; the Company and its Subsidiaries
conduct their business in compliance with all applicable federal,
state and local laws and regulations, except where the failure to be
in compliance would not have a material adverse effect upon the
condition, financial or otherwise, results of operations, business
affairs or business prospects of the Company and its Subsidiaries,
taken as a whole; and there is no pending or threatened action,
suit, proceeding or investigation that could lead to the revocation,
termination or suspension of any such license, certificate or
permit.
(xviii) To the best knowledge of the Company, each of the
Company and its Subsidiaries has obtained all permits, licenses and
other authorizations and has made all registrations and other
submittals that are required under all applicable federal, state and
local laws relating to the protection of health, safety or the
environment including but not limited to the Federal Water Pollution
Control Act (33 U.S.C. ss. 1251 et seq.), Resource Conservation and
Recovery Act (42 U.S.C. ss. 6901 et seq.), Safe Drinking Water Act
(21 U.S.C. ss. 349, 42 U.S.C. ss.ss. 300f - 300j), Toxic Substances
Control Act (15 U.S.C. ss. 2601 et seq.), Clean Air Act (42 U.S.C.
ss. 7401 et seq.), Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.), any
laws relating to emissions,
5
<PAGE>
discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment (including but not limited to ambient
air surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants,
chemicals or industrial toxic or hazardous substances or wastes, and
any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved
thereunder (collectively, the "Environmental Laws"), except to the
extent that failure to have any such permit, license or
authorization, or to have made such registration or submission,
individually or in the aggregate, does not have a material adverse
effect on the condition (financial or otherwise) or the earnings,
business affairs or business prospects of the Company and its
Subsidiaries, taken as a whole.
(xix) Except as described in the Registration Statement and the
Prospectus, each of the Company and its Subsidiaries has been and is
in compliance with all terms and conditions of any required permits,
licenses and authorizations, and has been and is in compliance with
all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws, except to the extent failure to
comply would not have a material adverse effect on the condition
(financial or otherwise) or the earnings, business affairs or
business prospects of the Company and its Subsidiaries, taken as a
whole.
(xx) To the best knowledge of the Company, (A) there are no
past or present events, conditions, circumstances, activities,
practices, incidents or actions, or plans relating to the business
as presently being conducted by the Company or its Subsidiaries,
that interfere with or prevent compliance or continued compliance
with the Environmental Laws, or that would be reasonably likely to
give rise to any legal liability (whether statutory or common law)
or otherwise would be reasonably likely to form the basis of any
claim, action, demand, suit, proceeding, hearing, lien, notice of
violation, study, investigation, remediation or cleanup
(collectively "Claims") based on or related to any Environmental Law
or the generation, manufacture, processing, distribution, use,
treatment storage, disposal, transport or handling, or the emission,
discharge, release into the workplace, the community or the
environment of any pollutant, contaminant, chemical or industrial
toxic or hazardous substance or waste, except for any liabilities or
any Claims that will not individually or in the aggregate have a
material adverse effect on the Company and its Subsidiaries, taken
as a whole, and (B) except as disclosed inthe Registration Statement
and the Prospectus, or otherwise to the Underwriters or their
counsel in writing, no asbestos-containing material and no
underground or aboveground storage tanks are located on property
owned or leased by the Company, or its Subsidiaries and none has
been previously removed or filled by the Company or its Subsidiaries
or any predecessor of the Company or its Subsidiaries.
(xxi) There are no Claims pending or, to the best knowledge of
each of the Company and its Subsidiaries, threatened against the
Company or any of its Subsidiaries based on or related to any
Environmental Law or the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling, or the emission,
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discharge, release into the workplace, the community or the
environment of any pollutant, contaminant, chemical or industrial
toxic, or hazardous substance or waste, and neither the Company nor
any of its Subsidiaries has received any notice of violation or
potential liability based on or related to any Environmental Law or
the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling, or the
emission, discharge, release into the workplace, the community or
the environment of any pollutant, contaminant, chemical or
industrial toxic or hazardous substance or waste.
(xxii) Neither the Company nor any of its Subsidiaries is
required to obtain any approval from any governmental agency
administering any Environmental Law in order to enter into or
consummate any of the transactions contemplated by this Agreement.
(xxiii) The Company and its Subsidiaries have, (A) good title
to all assets and properties owned by them (including, without
limitation, each Franchise Agreement), free and clear of all
security interests, claims, liens, mortgages or encumbrances, except
such as do not materially affect the value of such property and do
not interfere with the use made or proposed to be made of such
property by the Company or any Subsidiary, and (B) peaceful and
undisturbed possession under all leases to which the Company or any
Subsidiary is a party as lessee (whether as original lessee or
successor-in-interest or assignee of the original lessee); and all
leases to which the Company or any Subsidiary is a party (whether as
original lessee or successor-in-interest or assignee of the original
lessee) are valid, binding and enforceable, and no default by the
Company or such Subsidiary has occurred and is continuing
thereunder.
(xxiv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus and prior to the First Closing Date and any Subsequent
Closing Date (as defined in Section 3), (A) there will not have been
any material and adverse change, or any development involving a
prospective material adverse change, in the condition, financial or
otherwise, results of operations, business affairs or business
prospects of the Company and its Subsidiaries, taken as a whole,
whether or not arising in the ordinary course of business, and (B)
there have been no transactions entered into by the Company or any
Subsidiary, other than those in the ordinary course of business,
which are material with respect to the Company and the Subsidiaries,
taken as a whole.
Except as disclosed in the Registration Statement and the
Prospectus, there is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of the Company, threatenedagainst or
affecting the Company or any Subsidiary, which is required to be
disclosed in the Registration Statement or which might result in any
material adverse change in the condition, financial or otherwise,
results of operations, business affairs or business prospects of the
Company and its Subsidiaries, taken as a whole, or which might
materially and adversely affect the consummation of the transactions
contemplated by this Agreement; and all pending legal or
governmental proceedings to which the Company or any Subsidiary is a
party or of which any of their property or assets is the subject
which are not described in the Registration Statement and the
Prospectus, including ordinary routine litigation incidental to the
business of the Company, are, considered in the aggregate, not
material.
(xxv) To the best knowledge of the Company, neither the Company
nor any Subsidiary is engaged in any unfair labor practice that
would have a material adverse effect on the Company and its
Subsidiaries taken as a whole. There is (A) no unfair labor practice
complaint pending or, to the best knowledge of the Company,
threatened against the Company or any Subsidiary before the National
Labor Relations Board and no grievance or arbitration proceeding
arising out of or under collective bargaining agreements is pending
or, to the best knowledge of the Company, threatened, and (B) no
strike, labor dispute, slowdown or stoppage pending or, to the best
knowledge of the Company after due inquiry, threatened against the
Company or any Subsidiary, nor any existing or imminent labor
7
<PAGE>
disturbance by the employees of its, or any Subsidiary's, principal
suppliers, contractors or customers that could be expected to
materially and adversely affect the condition (financial or
otherwise) earnings, business affairs or business prospects of the
Company and its Subsidiaries, taken as a whole.
(xxvi) There is no document or contract of a character required
to be described in the Registration Statement or the Prospectus, or
to be filed as an exhibit to the Registration Statement, that is not
described or filed as required.
(xxvii) The Company and its Subsidiaries own, or are licensed
(or otherwise have the full right) to use, all trademarks and
tradenames that are used in or necessary for the conduct of their
respective businesses as described in the Registration Statement and
the Prospectus.
(xxviii) Deloitte & Touche are independent certified public
accountants within the meaning of the Act and the applicable
published Rules and Regulations; the financial statements included
in the Registration Statement and the Prospectus comply in all
material respects with the requirements of the Act and the Rules and
Regulations applicable to a Registration Statement on Form S-1 and
have been prepared, and fairly present the financial position,
results of operations and cash flows of the Company and its
Subsidiaries consolidated at the respective dates and for the
respective periods indicated, in accordance with generally accepted
accounting principals consistently applied throughout such period;
and the related supporting schedules included in the Registration
Statement present fairly the information required to be stated
therein in compliance in all material respects with the applicable
Rules and Regulations. The financial information and financial data
set forth in the Registration Statement and the Prospectus under the
captions "Prospectus Summary -- Summary Financial Data" (inclusive
of pro forma data contained therein), "Capitalization" (inclusive of
pro forma data contained therein), "Pro Forma Consolidated Financial
Statements," "Selected Financial Data" (inclusive of pro forma data
contained therein) and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" are derived from the
accounting records of the Company and its Subsidiaries, and are a
fair presentation of the data purported to be shown.
Any certificate signed by any officer of the Company and delivered
to the Underwriters or to counsel for the Underwriters pursuant to this
Agreement shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
(b) The Selling Stockholders represent and warrant to, and agree
with, the several Underwriters that:
(i) Each such Selling Stockholder has and on the Closing Date
for the purchase of Firm Shares will have, valid and marketable
title to the Firm Shares to be sold by such Selling Stockholder,
free and clear of all security interests, claims, liens or
encumbrances; each such Selling Stockholder has full right, power
and authority to enter into this Agreement and to sell, assign,
transfer and deliver any Firm Shares to be sold by such Selling
Stockholder hereunder, and upon the delivery of and payment for any
Firm Shares, the several Underwriters will acquire valid,
unencumbered and marketable title to the Firm Shares to be sold by
such Selling Stockholder, free and clear of all security interests,
claims, liens or encumbrances.
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<PAGE>
(ii) If the Effective Time is prior to the execution and
delivery of this Agreement: (A) on the Effective Date, the
Registration Statement conformed in all respects to the requirements
of the Act and the Rules and Regulations and did not include any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading, and (B) on the date of this
Agreement, the Registration Statement conforms, and at the time of
filing of the Prospectus pursuant to Rule 424(b), the Registration
Statement and the Prospectus will conform, in all respects to the
requirements of the Act and the Rules and Regulations, and neither
of such documents includes, or will include, any untrue statement of
a material fact or omits, or will omit, to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading. If the Effective Time is subsequent to the
execution and delivery of this Agreement: on the Effective Date, the
Registration Statement and the Prospectus will conform in all
respects to the requirements of the Act and the Rules and
Regulations, and neither of such documents will include any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading. The two preceding sentences do not apply to
statements in or omissions from the Registration Statement or
Prospectus that are based upon written information furnished to the
Company by any Underwriter through you specifically for use therein.
(iii) The execution, delivery and performance of this Agreement
and the consummation of the transactions herein contemplated on the
part of such Selling Stockholder will not result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any statute, rule, regulation or order of any
governmental body or agency or any court having jurisdiction over
such Selling Stockholder or any of its properties, or any agreement
or instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder is bound or to which any of the
properties of such Selling Stockholder is subject.
(iv) The representations and warranties of the
Company contained in Section 2(a) hereof are true and correct in all
material respects.
(v) Each such Selling Stockholder has not taken and
will not take, directly or indirectly, any action designed to or
which has constituted or which might reasonably be expected to cause
or result, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or otherwise, any stabilization or manipulation of
the price of any security of the Company to facilitate the sale or
resale of the Stock and has not effected any sales of any security of
the Company which, if effected by the Company, would be required to
be disclosed in response to Item 701 of Regulation S-K promulgated
under the Act.
(vi) No consent, approval, authorization or order
of, or filing with, any governmental agency or body or any court is
required to be obtained or made by any Selling Stockholder for the
consummation of the transactions contemplated by this Agreement in
connection with the sale of the Stock, except such as have been
obtained and made under the Act and the Rules and Regulations and
such as may be required under state securities laws.
(vii) The Power of Attorney and Custody Agreement
(as defined in Section 3 hereof) delivered to each Selling
Stockholder has been duly executed and delivered by each Selling
Stockholder, constitutes a valid and binding agreement of each
Selling Stockholder and is enforceable against each Selling
Stockholder in accordance with its terms.
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<PAGE>
(viii) This Agreement has been duly authorized, executed and
delivered by or on behalf of each Selling Stockholder, and
represents a valid and binding obligation of each Selling
Stockholder enforceable in accordance with its terms.
(ix) No Selling Stockholder has knowledge of any fact or
condition, financial or otherwise, not set forth in the Registration
Statement or the Prospectus which has materially and adversely
affected, or could materially and adversely affect, the condition,
financial or otherwise, results of operations, business affairs or
business prospects of the Company and its Subsidiaries, taken as a
whole.
3. Purchase, Sale and Delivery of Stock. On the basis of the
representations, warranties and agreements of the Company and the Selling
Stockholders herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each
Underwriter agrees, severally and not jointly, to purchase from the Company
and the Selling Stockholders, at a purchase price of $_____ per share, the
number of Firm Shares set forth opposite the name of each such Underwriter in
Schedule A hereto.
The Company and the Selling Stockholders will deliver the Firm
Shares to you for the accounts of the Underwriters, at such office in New
York, New York as you may designate, against payment of the purchase price by
certified or official bank checks in New York Clearing House (next day) funds,
drawn to the order of the Company, such payment to be made at the offices of
Hunton & Williams, NationsBank Plaza, Suite 4100, 600 Peachtree Street, N.E.,
Atlanta, Georgia 30308-2216, at ________ A.M. New York time, on __________,
1996, or at such other date and time not later than seven full business days
thereafter as you and the Company determine, such date and time being herein
referred to as the "First Closing Date". The certificates for the Firm Shares
to be so delivered by the Company will be in definitive form, in such
denominations and registered in such names as you request, and will be made
available for checking and packaging at least 24 hours prior to the First
Closing Date at such office in New York, New York as you may designate.
In addition, upon written notice from you, given to the Company not
more than 30 days subsequent to the date of the public offering of the Stock,
the Underwriters may purchase, from time to time, all or less than all of the
Optional Shares at the purchase price per share to be paid for the Firm
Shares. Such Optional Shares shall be purchased from the Company and the
Selling Stockholders on a prorata basis among the Selling Stockholders based
on the number of shares each of them has included in the Optional Shares for
the account of each Underwriter in the same proportion as the number of Firm
Shares set forth opposite such Underwriter's name in Schedule A hereto bears
to the total number of Firm Shares (subject to adjustment by you to eliminate
fractions) and may be purchased by the Underwriters only for the purpose of
covering over-allotments made in connection with the sale of the Firm Shares.
No Optional Shares shall be sold or delivered unless the Firm Shares
previously have been, or simultaneously are, sold and delivered. The right to
purchase the Optional Shares or any portion thereof may be surrendered or
terminated at any time upon notice by you to the Company and the Selling
Stockholders.
Certificates in negotiable form for the Firm Shares to be sold by
the Selling Stockholders hereunder have been placed in custody, for delivery
under this Agreement, under a Power of Attorney and Custody Agreement (the
"Power of Attorney and Custody Agreement") made with __________ as custodian
(the "Custodian") and __________ and __________ as attorneys-in-fact (the
"Attorneys-in-Fact"). The Selling Stockholders agree that the Firm Shares
represented by the certificates held in custody for the Selling Stockholders
under such Power of Attorney and Custody Agreement are subject to the
interests of the Underwriters hereunder, that the arrangements made
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<PAGE>
by the Selling Stockholders for such custody are to that extent irrevocable,
and that the obligations of the Selling Stockholders hereunder shall not be
terminated by operation of law, whether by the death or incapacity of any
Selling Stockholder, any of his or its partners or the occurrence of any other
event. If any death, incapacity or other such event shall occur before the
delivery of the Firm Shares hereunder, then certificates representing such
Firm Shares shall be delivered by the Custodian in accordance with the terms
and conditions of this Agreement as if such death, incapacity or other event
had not occurred, regardless of whether or not the Custodian shall have
received notice of such death, incapacity or other event.
The time for any delivery of and payment for any Optional Shares
that you elect to purchase is hereinafter referred to as the "Second Closing
Date" (which may be the First Closing Date), and the time for any delivery of
and payment for any Optional Shares not purchased on the Second Closing Date
(each, together with the Second Closing Date, a "Subsequent Closing Date"),
shall be determined by you but shall be not later than seven days after you
provide written notice of any election to purchase Optional Shares. The
Company will deliver the Optional Shares to you for the accounts of the
several Underwriters at such office in New York, New York as you may
designate, against payment of the purchase price therefor by certified or
official bank check or checks in New York Clearing House (next day) funds
drawn to the order of the Company and the Custodian, as applicable, at the
offices of Hunton & Williams, NationsBank Plaza, Suite 4100, 600 Peachtree
Street, N.E., Atlanta, Georgia 30308-2216. The certificates for the Optional
Shares will be in definitive form, in such denominations and registered in
such names as you request upon reasonable notice prior to any Subsequent
Closing Date, and will be made available for checking and packaging at such
office in New York, New York as you may designate, at a reasonable time in
advance of such Subsequent Closing Date. If a Subsequent Closing Date occurs
after the First Closing Date, the Company shall deliver to you on each
Subsequent Closing Date to occur after the First Closing Date, and the
obligation of the Underwriters to purchase the Optional Shares shall be
conditioned upon the receipt of, supplemental opinions, certificates and
letters confirming as of such date the opinions, certificates and letters
delivered on the First Closing Date pursuant to Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Stock for sale to the public as set forth in
the Prospectus.
5. Certain Agreements of the Company and the Selling Stockholders. The
Company and the Selling Stockholders agree with the several Underwriters that:
(a) If the Effective Time is prior to the execution and delivery of
this Agreement, the Company will file the Prospectus with the Commission
pursuant to and in accordance with subparagraph (1) (or, if applicable and if
consented to by you, subparagraph (4)) of Rule 424(b) not later than the
earlier of (i) the second business day following the execution and delivery of
this Agreement or (ii) the fifth business day after the Effective Date. The
Company will advise you promptly of any such filing pursuant to Rule 424(b).
(b) The Company will advise you promptly of any proposal to amend or
supplement the registration statement as filed or the related prospectus or
the Registration Statement or the Prospectus and will not effect such
amendment or supplementation without your written consent; the Company will
also advise you promptly of (i) the effectiveness of the Registration
Statement (if the Effective Time is subsequent to the execution and delivery
of this Agreement), (ii) any amendment or supplementation of the Registration
Statement or the Prospectus, and (iii) the institution by the Commission of
any stop order proceedings in respect of the Registration Statement,
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<PAGE>
and will use its best efforts to prevent the issuance of any such stop order
and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Stock is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company promptly will prepare and file
with the Commission an amendment or supplement which will correct such
statement or omission or an amendment which will effect such compliance.
Neither your consent to, nor the Underwriters' delivery of, any such amendment
or supplement shall constitute a waiver of any of the conditions set forth in
Section 6.
(d) As soon as practicable, but not later than the Availability Date
(as defined in this subsection), the Company will make generally available to
its securityholders an earnings statement covering a period of at least 12
months beginning after the Effective Date which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the preceding sentence,
"Availability Date" means the 45th day after the end of the fourth fiscal
quarter following the fiscal quarter that includes the Effective Date, except
that, if such fourth fiscal quarter is the last quarter of the Company's
fiscal year, "Availability Date" means the 90th day after the end of such
fourth fiscal quarter.
(e) The Company will furnish to you copies of the Registration
Statement (three of which will be signed and will include all exhibits), each
related preliminary prospectus, the Prospectus and all amendments and
supplements to such documents, in each case as soon as available and in such
quantities as you request.
(f) The Company will arrange for the qualification of the Stock for
sale under the laws of such jurisdictions as you designate and will continue
such qualifications in effect so long as required to complete the distribution
of the Stock.
(g) During the period of five years hereafter, the Company will
furnish to you and, upon request, to each of the other Underwriters, as soon
as practicable after the end of each fiscal year, a copy of its annual report
to stockholders for such year; and the Company will furnish to you (i) as soon
as available, a copy of each report or definitive proxy statement of the
Company filed with the Commission under the Exchange Act, or mailed to
stockholders, and (ii) from time to time, such other information concerning
the Company as you may reasonably request.
(h) The Company will not offer, sell, contract to sell or otherwise
dispose of any additional shares of its Class A Common Stock or any option,
warrant or other security exercisable or exchangeable for, or convertible
into, Class A Common Stock (other than options issued to employees or
directors pursuant to the 1994 Option Plan or the 1994 Directors' Plan that
may not be exercised until 180 days after the public offering of the Firm
Shares) without your prior written consent for a period of 180 days after the
date of the public offering of the Firm Shares.
(i) The Selling Stockholders agree not to offer, sell, contract to
sell, transfer, assign, hypothecate or otherwise dispose of any additional
shares of the Class A Common Stock of the Company without your prior written
consent for a period of 90 days after the date of the public offering of the
Firm Shares.
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<PAGE>
(j) The Company and the Selling Stockholders agree with the several
Underwriters that the Company and such Selling Stockholders will pay all
expenses incident to the performance of the obligations of the Company and
such Selling Stockholders, as the case may be, under this Agreement, and will,
jointly and severally, reimburse the Underwriters for any expenses (including
fees and disbursements of counsel) incurred by them in connection with the
qualification of the Stock for sale under the laws of such jurisdictions as
you designate and the printing of memoranda relating thereto, the filing with
the National Association of Securities Dealers, Inc. (the "NASD") relating to
the listing of the Stock on the Nasdaq National Market, the filing relating to
the review of documents by the NASD pursuant to the Corporate Financing Rule
of the NASD's Rules of Fair Practice, and the distribution of preliminary
prospectuses and the Prospectus (including any amendments and supplements
thereto) to the Underwriters.
(k) The Selling Stockholders agree to deliver to you on or prior to any
Subsequent Closing Date a properly completed and executed United States
Treasury Department Form W-9 (or other applicable form or statement specified
by Treasury Department regulations in lieu thereof).
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Firm Shares on the First
Closing Date and any Optional Shares on any Subsequent Closing Date will be
subject to the accuracy of the representations and warranties on the part of
the Company and the Selling Stockholders herein, the accuracy of the
statements of Company officers and the Selling Stockholders made pursuant to
the provisions hereof, the performance by the Company and the Selling
Stockholders of their respective obligations hereunder and the following
additional conditions precedent:
(a) You shall have received a letter, dated the date of delivery
thereof (which, if the Effective Time is prior to the execution and delivery
of this Agreement, shall be on or prior to the date of this Agreement or, if
the Effective Time is subsequent to the execution and delivery of this
Agreement, shall be prior to the filing of the amendment or post-effective
amendment to the registration statement to be filed shortly prior to the
Effective Time), of Deloitte & Touche confirming that they are independent
certified public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating in effect that:
(i) in their opinion the financial statements and schedules
examined by them and included in the Registration Statement and the
Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published Rules and Regulations;
(ii) on the basis of a reading of the latest available
unaudited consolidated financial statements of the Company and
inquiries of officials of the Company who have responsibility for
financial and accounting matters and other specified procedures,
nothing came to their attention that caused them to believe that:
(A) any material modifications should be made to the
unaudited consolidated financial statements included in the
Registration Statement and the Prospectus for them to be in
conformity with generally accepted accounting principals or
that such unaudited consolidated financial statements do not
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published
Rules and Regulations;
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(B) at the date of the latest available unaudited
consolidated balance sheet read by such accountants, or at a
subsequent specified date not more than five days prior to the
date of this Agreement, there was any change in the capital
stock or any increase in short-term indebtedness or long-term
debt of the Company and its Subsidiaries or any decrease in
consolidated net current assets or increase in consolidated
stockholders' deficit (i.e., an increase in the debit balance)
as compared with amounts shown on the latest balance sheet
included in the Prospectus; or
(C) for the period from the closing date of the latest
unaudited consolidated income statement included in the
Prospectus to the closing date of the latest available
unaudited consolidated income statement read by such
accountants, or to the subsequent specified date set forth in
clause (B) above, there were any decreases, as compared with
the corresponding period of the previous year in consolidated
operating revenue, operating income, income before
extraordinary items or net income;
except in all cases set forth in clauses (B) and (C) above for changes,
increases or decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter;
(iii) on the basis of specified procedures, including (A) a
reading of the unaudited pro forma consolidated balance sheet of the
Company at December 31, 1995 and March 31, 1996 and the unaudited
pro forma consolidated statement of operations for the year ended
December 31, 1995 and the three-month period ended March 31, 1996
included in the Registration Statement and the Prospectus; (B)
inquiries of certain officials of the Company who have
responsibility for financial and accounting matters about the basis
for the determination of the pro forma adjustments and whether the
unaudited pro forma financial statements referred to in clause (A)
comply as to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X; and (C)
proving the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the unaudited pro forma
financial statements referred to in clause (A), nothing came to
their attention that caused them to believe that the unaudited pro
forma consolidated financial statements referred to in clause (A)
included in the Registration Statement and the Prospectus do not
comply as to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the
pro forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statement and the
Prospectus (in each case to the extent that such dollar amounts,
percentages and other financial information are derived from the
general accounting records of the Company and its Subsidiaries
subject to the internal controls of the Company's accounting system
or are derived directly from such records by analysis or
computation) with the results obtained from inquiries, a reading of
such general accounting records and other procedures specified in
such letter and have found such dollar amounts, percentages and
other financial information to be in agreement with such results,
except as otherwise specified in such letter.
For purposes of this subsection, if the Effective Time is subsequent
to the execution and delivery of this Agreement, "Registration Statement"
shall mean the registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to
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<PAGE>
the Effective Time, and "Prospectus" shall mean the prospectus included in the
Registration Statement.
(b) If the Effective Time is not prior to the execution and delivery
of this Agreement, the Effective Time shall have occurred not later than 10:00
P.M., New York time, on the date of this Agreement or such later date as shall
have been consented to by you. If the Effective Time is prior to the execution
and delivery of this Agreement, the Prospectus shall have been filed with the
Commission in accordance with the Rules and Regulations and Section 2(a) of
this Agreement. Prior to such Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the knowledge
of the Company, any of the Selling Stockholders or you, shall be contemplated
by the Commission.
(c) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
the Company or its Subsidiaries which, in the judgment of a majority in
interest of the Underwriters including you, materially impairs the investment
quality of the Stock; (ii) any downgrading in the rating of any debt
securities or preferred stock of the Company or any of its Subsidiaries by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act), or any public announcement that any
such organization has under surveillance or review its rating of any debt
securities or preferred stock of the Company or any of its Subsidiaries (other
than an announcement with positive implications of a possible upgrading, and
no implication of a possible downgrading, of such rating); (iii) any
suspension or limitation of trading in securities generally on the New York
Stock Exchange or the Nasdaq National Market, or any setting of minimum prices
for trading on such exchange or market, or any suspension of trading of any
securities of the Company on any exchange or in the over-the-counter market;
(iv) any banking moratorium declared by Federal or New York authorities; or
(v) any outbreak or escalation of major hostilities in which the United States
is involved, any declaration of war by Congress or any other substantial
national or international calamity or emergency if, in the judgment of a
majority in interest of the Underwriters including you, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it impractical
or inadvisable to proceed with completion of the sale of and payment for the
Stock.
(d) You shall have received an opinion dated such Closing Date and,
if there are one or more Subsequent Closing Dates, dated such Subsequent
Closing Date of King & Spalding, counsel for the Company, to the effect that:
(i) the Company and its Subsidiaries have been duly
incorporated and are validly existing as corporations in good
standing under the laws of the respective jurisdictions of their
incorporation, with corporate power and authority to own their
properties and conduct their businesses as described in the
Registration Statement and the Prospectus; and the Company and its
Subsidiaries are duly qualified to do business as foreign
corporations in good standing in all other jurisdictions in which
they own or lease substantial properties or in which the conduct of
their businesses requires such qualification;
(ii) the Company's authorized capitalization is as set forth in
the Registration Statement and the Prospectus; all outstanding
shares of the Class A Common Stock and the Class B Common Stock of
the Company, including all of the shares of Stock delivered on such
Closing Date or Subsequent Closing Date, have been duly and validly
authorized and issued and are fully paid and nonassessable; the
Class A Common Stock, the
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Class B Common Stock and the Preferred Stock of the Company conform
to the descriptions thereof contained in the Registration Statement
and the Prospectus; the certificates evidencing the Stock are in due
and proper form; and the Stock has been approved for listing on the
Nasdaq National Market, subject to notice of issuance;
(iii) to the best knowledge of such counsel, the Company is the
sole beneficial owner of all of the outstanding capital stock of
each Subsidiary, free and clear of all security interests, claims,
liens or encumbrances, and all such capital stock has been duly and
validly authorized and issued and is fully paid and nonassessable;
(iv) except as described in the Registration Statement and the
Prospectus and filed as exhibits to the Registration Statement,
there are no contracts, agreements or understandings known to such
counsel between the Company and any person granting such person the
right to require the Company to file a registration statement under
the Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such
securities in the securities registered pursuant to the Registration
Statement or in any securities being registered pursuant to any
other registration statement filed by the Company under the Act; and
the Company has given proper notice to, and secured legally binding
waivers from, each person holding such registrations rights;
(v) no consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required to be
obtained or made by the Company or any Subsidiary for the
consummation of the transactions contemplated by this Agreement in
connection with the sale of the Stock, except such as have been
obtained and made under the Act and such as may be required under
state securities laws, as to which laws such counsel may express no
opinion;
(vi) the execution, delivery and performance of this Agreement
and the consummation of the transactions herein contemplated will
not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, rule,
regulation or order of any governmental body or agency or any court
having jurisdiction over the Company or any Subsidiary or any of
their properties, or any agreement or instrument to which the
Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or to which any of the properties of the Company
or any Subsidiary is subject, or the charter or by-laws of the
Company or any Subsidiary;
(vii) the Registration Statement was declared
effective under the Act as of the date and time specified in such
opinion, the Prospectus either was filed with the Commission pursuant
to subparagraph (1) or (4) of Rule 424(b) on the date specified
therein or was included in the Registration Statement (as the case
may be), and, to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement or any
part thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Act, and the
Registration Statement and the Prospectus, and each amendment or
supplement thereto, as of their respective effective or issue dates,
complied as to form in all material respects with the requirements of
the Act and the Rules and Regulations; such counsel has no reason to
believe that either the Registration Statement or the Prospectus, or
any such amendment or supplement, as of such respective dates,
contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading, or that the Prospectus, as
amended or supplemented, as of the date of such
16
<PAGE>
opinion, contains any untrue statement of a material fact or omits
to state any material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading; the descriptions in the Registration Statement and the
Prospectus of matters of law (including, without limitation, matters
relating to environmental laws), statutes, legal and governmental
proceedings and contracts and other documents are accurate and
fairly present the information required to be shown; and such
counsel does not know of any legal or governmental proceedings
required to be described in the Registration Statement or the
Prospectus which are not described as required or of any contracts
or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits
to the Registration Statement which are not described or filed as
required; it being understood that such counsel need express no
opinion as to the financial statements or other financial data
contained in the Registration Statement or the Prospectus;
(viii) this Agreement has been duly authorized, executed and
delivered by the Company, and represents a valid and binding
obligation of the Company enforceable in accordance with its terms,
subject as to enforcement as to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to
or affecting creditors' rights, and except that the enforceability
of the rights to indemnity and contribution pursuant to Section 7
hereunder may be limited by federal or state securities laws or the
public policy underlying such laws;
(ix) to the knowledge of such counsel, except for the 1,936,600
shares of Class B Common Stock, which are convertible into 1,936,600
shares of Class A Common Stock, the BRAC Warrant, the NationsBank
Warrant, the options to purchase [260,000] shares of Class A Common
Stock issued under the 1994 Option Plan, and the options to purchase
25,000 shares of Class A Common Stock issued under the 1994
Directors' Plan, each as described in the Registration Statement and
the Prospectus, there are no outstanding Convertible Securities of
the Company, Rights to subscribe for or purchase from the Company or
any Subsidiary any such Convertible Securities, or obligations of
the Company or any Subsidiary to issue Convertible Securities or
Rights;
(x) except for the rights of first refusal set forth in the
Share Exchange Agreement dated April 25, 1994, as amended on June
13, 1994 and July 5, 1994, among the Company, Brian Britton, Jeffrey
Congdon, Richard Hinkle, John Kennedy, Sanford Miller and Richard
Sapia, and the put right set forth in the BRAC Warrant, there are no
preemptive or other rights to subscribe for, purchase or sell, or,
except for the transfer restrictions set forth in the Registration
Rights Agreements, Sections 5(h) and 5(i) of this Agreement and in
the letter to be delivered pursuant to Section 6(l) of this
Agreement, and the voting restrictions set forth in the
Shareholders' Agreement dated October 20, 1995 among the Company,
the holders of Class B Common Stock and SOCAL, any restriction upon
the voting or transfer of, or the declaration or payment of any
dividend or distribution on, any shares of capital stock of the
Company or any Subsidiary;
(xi) the descriptions of the Franchise Agreements in the
Registration Statement and the Prospectus are accurate and fairly
summarize the terms thereof;
(xii) the Company and its Subsidiaries have
obtained all approvals, consents, authorizations and waivers of BRAC,
SOCAL, TSA and any other third parties who are franchisees or
sub-franchisees of BRAC, that are required for the Subsidiaries'
acquisition, whether through acquisition of assets or capital stock
of the previous Budget franchisee
17
<PAGE>
or sub-franchisee, of the Franchise Agreements, and for the
consummation of the transactions contemplated by this Agreement, the
Registration Statement and the Prospectus in connection with the
issuance and sale of the Stock and for the use of proceeds of the
offering as described in the Registration Statement and the
Prospectus under the heading "Use of Proceeds," including, without
limitation, (A) the consent and waiver of any right of first refusal
by BRAC, SOCAL or TSA, as required, with respect to the issuance and
sale of the Stock by the Company, and (B) the consent of BRAC to (1)
the use in the Company's retail vehicle sales operations, the
Registration Statement, any preliminary prospectus and the
Prospectus of the "Budget" name and logo and (2) the filing of the
Franchise Agreements with the Commission;
(xiii) the Company and its Subsidiaries have obtained from each
lessor, governmental authority or other entity with which they or
their predecessors have entered into lease, concession or other
agreements, all approvals, consents, authorizations and waivers that
are required for the Subsidiaries' acquisition, whether through
acquisition assets or capital stock of previous Budget franchisees
or sub-franchisees, of such leases, concession or other agreements,
including, without limitation, all necessary consents,
authorizations and waivers with respect to each property utilized in
the conduct of the business of the Company as described in the
Registration Statement and the Prospectus;
(xiv) to the best of such counsel's knowledge, (A) the Company
and each Subsidiary hold such licenses, certificates and permits
from governmental entities and authorities as are necessary to the
conduct of the business of the Company and the Subsidiaries as
described in the Registration Statement and the Prospectus; (B)
there is no pending or threatened action, suit, proceeding or
investigation that could lead to the revocation, termination or
suspension of any such license, certificate or permit; and (C)
neither the Company nor any of its Subsidiaries is in violation of
any statute, ordinance or law, which violation could materially
adversely affect the Company and its Subsidiaries, taken as a whole;
and
(xv) to the best of such counsel's knowledge, all material
leases and concession agreements to which the Company or any
Subsidiary is a party (whether as original party or
successor-in-interest or assignee of the original party) are valid,
binding and enforceable.
(e) You shall receive an opinion dated such Subsequent Closing Date
of King & Spalding, counsel for the Selling Stockholders, to the effect that:
(i) each Selling Stockholder has valid and marketable title to
any Optional Shares to be sold by such Selling Stockholder on such
Closing Date, free and clear of all security interests, claims,
liens or encumbrances, and has full right, power and authority to
sell, assign, transfer and deliver such Firm Shares hereunder, and
several Underwriters will acquire valid and unencumbered title to
any Firm Shares purchased by them from such Selling Stockholder
hereunder, free and clear of all security interests, claims, liens
or encumbrances;
(ii) no consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required to be
obtained or made by any Selling Stockholder for the consummation of
the transactions contemplated by this Agreement in connection with
the sale of any Firm Shares sold by such Selling Stockholder, except
such as
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<PAGE>
have been obtained and made under the Act and the Rules and
Regulations and such as may be required under state securities laws,
as to which laws such counsel may express no opinion;
(iii) the execution, delivery and performance of this Agreement
and the consummation of the transactions herein contemplated will
not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any rule,
regulation or order of any governmental agency or body or any court
having jurisdiction over any Selling Stockholder or any of its
properties or any agreement or instrument to which any Selling
Stockholder is a party or by which any Selling Stockholder is bound
or to which any of the properties of any Selling Stockholder is
subject;
(iv) the Power of Attorney and Custody Agreement
has been duly authorized, executed and delivered by each Selling
Stockholder, and represents a valid and binding obligation of each
Selling Stockholder enforceable in accordance with its terms, subject
as to enforcement as to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights; and
(v) this Agreement has been duly authorized,
executed and delivered by or on behalf of each Selling Stockholder,
and represents a valid and binding obligation of each Selling
Stockholder enforceable in accordance with its terms, subject as to
enforcement as to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights, and except that the enforceability of the rights to indemnity
and contribution pursuant to Section 7 hereunder may be limited by
federal or state securities laws or the public policy underlying such
laws.
(f) You shall have received from Hunton & Williams, counsel for the
Underwriters, such opinion or opinions dated such Closing Date with respect to
the incorporation of the Company, the validity of the Stock, the Registration
Statement, the Prospectus and other related matters as you may require, and
the Company and the Selling Stockholders shall have furnished to such counsel
such documents as they request for the purpose of enabling them to pass upon
such matters.
(g) You shall have received a certificate dated such Closing Date of
the Chairman of the Board, the President and the principal financial officer
of the Company in which such officers, to the best of their knowledge after
reasonable investigation, shall state that the representations and warranties
of the Company in this Agreement are true and correct on and as of such
Closing Date to the same effect as if made on such Closing Date, that the
Company has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to such Closing Date,
that no stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been instituted or
are contemplated by the Commission and that, subsequent to the date of the
most recent financial statements in the Prospectus, there has been no material
adverse change in the financial position or results of operations of the
Company and its Subsidiaries except as set forth in or contemplated by the
Prospectus or as described in such certificate.
(h) You shall have received a letter from Deloitte & Touche,
dated such Closing Date, that meets the requirements of subsection (a) of this
Section, except that the specified date referred to in such subsection will be
a date not more than five business days prior to such Closing Date for the
purposes of this subsection.
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<PAGE>
(i) On any Subsequent Closing Date for the purchase of Optional
Shares, you shall receive a certificate, dated such Subsequent
Closing Date from the Company which shall state that the
representations and warranties by the Company in this Agreement are
true and correct on and as of such Subsequent Closing Date to the
same effect as if made on such Subsequent Closing Date and that the
Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or
prior to such Subsequent Closing Date.
(j) The Company shall have furnished to you written agreements,
releases, certificates, acknowledgements, confirmations and other documents in
form and substance reasonably satisfactory to you (A) from BRAC, SOCAL and TSA
providing such parties' consent and, where applicable, waiver of any right of
first refusal by BRAC, SOCAL or TSA, as required, with respect to the issuance
and sale of the Stock by the Company, and (B) from BRAC, providing its consent
to (1) the use in the Company's retail vehicle sales operations, Registration
Statement, any preliminary prospectus and the Prospectus of the "Budget" name
and logo and (2) the filing of the Franchise Agreements with the Commission,
and (C) from BRAC, SOCAL and TSA, certificates stating that each Franchise
Agreement is currently in effect and legal, valid, binding and enforceable,
for the benefit of the Company, in accordance with its terms.
(k) You shall have received executed agreements in the form
annexed hereto as Exhibit A from each officer, director, Selling Stockholder
and holder of five percent or more of the outstanding shares of Common Stock
of the Company.
(l) The Company and the Selling Stockholders will furnish
you with such conformed copies of such opinions, certificates, letters and
documents as you reasonably request.
7. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related preliminary
prospectus, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through you
specifically for use therein. The Company hereby acknowledges and agrees with
the several Underwriters that, for all purposes of this Agreement, including,
without limitation, clause (ii) of Section 2(a), clause (ii) of Section 2(b),
this Section 7(a), Section 7(b) and Section 7(c), the only information
furnished to the Company by the Underwriters specifically for use in the
Registration Statement or the Prospectus is the information in the last
paragraph on the cover page of the Prospectus, the information on the inside
front cover of the Prospectus with respect to stabilization and the
information contained in the fourth and fifth paragraphs under the caption
"Underwriting" in the Prospectus.
20
<PAGE>
(b) The Selling Stockholders, jointly and severally, will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, the Prospectus or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Underwriter for any legal or other
expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action
as such expenses are incurred; provided, however, that the Selling
Stockholders will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by an Underwriter through you
specifically for use therein.
(c) Each Underwriter will, severally and not jointly, indemnify and
hold harmless the Company and the Selling Stockholders against any losses,
claims, damages or liabilities to which the Company or the Selling
Stockholders may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, the Prospectus or
any amendment or supplement thereto, or any related preliminary prospectus, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through you
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Company or any Selling Stockholder in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying
party under subsection (a), (b) or (c) above, notify the indemnifying party of
the commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under subsection (a), (b) or (c) above. In case any such
action is brought against any indemnified party and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on any claims that are the subject matter of such
action.
21
<PAGE>
(e) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of the losses, claims, damages or liabilities referred to in subsection (a),
(b) or (c) above (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other from the offering of the Stock or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
and the Selling Stockholders bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company, any
Selling Stockholders or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (e). Notwithstanding the provisions of this subsection (e), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the shares of the Stock underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (e) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders
under this Section shall be in addition to any liability which the Company and
the Selling Stockholders may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each director of the Company, to each officer of the Company
who has signed the Registration Statement and to each person, if any, who
controls the Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters
default in their obligations to purchase Stock hereunder on any Closing Date
and the aggregate number of shares of Stock that such defaulting Underwriter
or Underwriters agreed but failed to purchase does not exceed 10% of the total
number of shares of Stock that the Underwriters are obligated to purchase on
such Closing Date, you may make arrangements satisfactory to the Company and
the Selling Stockholders for the purchase of such Stock by other persons,
including any of the Underwriters, but if no such arrangements are made by
such Closing Date, the non-defaulting Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to
purchase the Stock that such defaulting Underwriters agreed but failed to
purchase on such Closing Date. If any Underwriter or
22
<PAGE>
Underwriters so default and the aggregate number of shares of Stock with
respect to which such default or defaults occur exceeds 10% of the total
number of shares of Stock that the Underwriters are obligated to purchase on
such Closing Date and arrangements satisfactory to you, the Company and the
Selling Stockholders for the purchase of such Stock by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter, the Company or the
Selling Stockholders, except as provided in Section 9 (provided that if such
default occurs with respect to Optional Shares after the First Closing Date,
this Agreement will not terminate as to the Firm Shares or as to any Optional
Shares previously purchased). As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability
for its default.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Company or its officers, the Selling Stockholders and the
several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation, or statement
as to the results thereof, made by or on behalf of any Underwriter, any
Selling Stockholders, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Stock. If this Agreement is terminated pursuant to Section
8 or if for any reason the purchase of the Stock by the Underwriters is not
consummated, the Company and the Selling Stockholders shall remain responsible
for the expenses to be paid or reimbursed by them pursuant to Section 5 and
the respective obligations of the Company, the Selling Stockholders and the
Underwriters under Section 7 shall remain in effect, and if any shares of
Stock have been purchased hereunder the representations and warranties in
Section 2 and all obligations under Section 5 shall also remain in effect,
except that if no Optional Shares are purchased, the representations and
warranties of the Selling Stockholders set forth in Section 2(b) and the
obligations of the Selling Stockholders set forth in Section 7 shall
terminate. If the purchase of the Stock by the Underwriters is not consummated
for any reason other than solely because of the termination of this Agreement
pursuant to Section 8 or the occurrence of any event specified in clause
(iii), (iv) or (v) of Section 6(c), the Company and the Selling Stockholders
will jointly reimburse the Underwriters for all out of pocket expenses
(including fees and disbursements of counsel) reasonably incurred by them in
connection with the offering of the Stock.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed or delivered to you, c/o CS First
Boston Corporation, Park Avenue Plaza, 55 East 52nd Street, New York, New York
10055, Attention: Investment Banking Department -- New Issue Processing Group,
or, if sent to the Company, will be mailed or delivered to it at Team Rental
Group, Inc., 125 Basin Street, Daytona Beach, Florida 32114, Attention: Mr.
Sanford Miller, or, if sent to the Selling Stockholders or any of them, will
be mailed or delivered to the addresses set forth on Exhibit B below each
Selling Stockholder's name; provided, however, that any notice to an
Underwriter pursuant to Section 7 will be mailed or delivered to such
Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective personal representatives
and successors and the officers and directors and controlling persons referred
to in Section 7, and no other person will have any right or obligation
hereunder.
12. Representation. You will act for the several Underwriters in
connection with the transactions contemplated by this Agreement, and any
action under this Agreement taken by you will be binding upon all of the
Underwriters. [Name] will act for the Selling Stockholders in connection
23
<PAGE>
with such transactions, and any action under or in respect of this Agreement
taken by [Name] will be binding upon the Selling Stockholders.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICT OR CHOICE OF LAW PRINCIPLES THEREOF.
[signature pages follow]
24
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us one of the counterparts hereof,
whereupon this Underwriting Agreement will become a binding agreement among
the Company, the Selling Stockholders and the several Underwriters in
accordance with its terms.
Very truly yours,
The Company: TEAM RENTAL GROUP, INC.
By:___________________________
Sanford Miller
Chief Executive Officer
The Selling Stockholders:
BUDGET RENT A CAR OF
SOUTHERN CALIFORNIA,
a general partnership
By:___________________________
Jeffrey R. Minkin, partner
KATZIN INVESTMENTS, L.C.,
a ____________________________
By:___________________________
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted as of
the date first above written.
CS FIRST BOSTON CORPORATION
By:___________________________________________
Name: _____________________________________
Title: ____________________________________
[signatures continue on following page]
25
<PAGE>
THE CHICAGO CORPORATION
By:____________________________________________
Name: ______________________________________
Title: _____________________________________
McDONALD & COMPANY SECURITIES, INC.
By:____________________________________________
Name: ______________________________________
Title: _____________________________________
26
MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT
dated as of February 15, 1995,
among
BRAC SOCAL FUNDING CORPORATION,
as Lessor,
THE PARTIES LISTED ON SCHEDULE 1 HERETO,
as Lessees,
BUDGET RENT A CAR OF SOUTHERN CALIFORNIA,
as Guarantor
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS...................................................... 1
2. GENERAL AGREEMENT................................................ 1
2.1. Acquisition of Vehicles................................. 3
2.2. Right of Lessees to Act as Lessor's Agent............... 5
2.3. Payment of Capitalized Cost by Lessor................... 6
2.4. Non-liability of Lessor................................. 6
2.5. Lessees' Rights to Purchase Vehicles.................... 6
2.6. Lessor's Right to Cause Vehicles to be Sold............. 7
3. TERM............................................................. 7
3.1. Vehicle Lease Commencement Date......................... 7
3.2. Lease Commencement Date................................. 8
4. RENT AND CHARGES................................................. 8
4.1. Certain Definitions..................................... 8
4.2. Payment of Rent......................................... 10
4.2.1. Monthly Base Rent............................... 10
4.2.2. Monthly Variable Rent........................... 10
4.2.3. Monthly Supplemental Rent....................... 10
4.3. Late Payment............................................ 10
4.4. Net Lease............................................... 10
5. THIRD PARTY LIABILITIES.......................................... 11
5.1. Personal Injury and Damage.............................. 11
5.2. [Reserved............................................... 11
5.3. Changes in Insurance Coverage........................... 11
6. RISK OF LOSS AND CASUALTY OBLIGATION............................. 12
6.1. Risk of Loss Borne by Lessee............................ 12
6.2. Casualty................................................ 12
7. VEHICLE USE...................................................... 12
8. LIENS............................................................ 13
9. NON-DISTURBANCE.................................................. 14
10. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND
FINES............................................................ 14
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11. MAINTENANCE AND REPAIRS.......................................... 14
12. VEHICLE WARRANTIES............................................... 15
12.1. No Lessor Warranties.................................... 15
12.2. Manufacturer's Warranties............................... 15
13. VEHICLE USAGE GUIDELINES AND RETURN.............................. 15
13.1. Usage................................................... 15
13.2. Return.................................................. 15
13.3. Termination Payments.................................... 16
13.4. Repurchase Price Interest............................... 16
14. DISPOSITION PROCEDURE............................................ 16
15. ODOMETER DISCLOSURE REQUIREMENT.................................. 16
16. GENERAL INDEMNITY................................................ 16
16.1. Indemnity by the Lessee................................. 16
16.2. Indemnity by Sublessee.................................. 18
16.3. Reimbursement Obligation by the Lessee Group............ 18
16.4. Defense of Claims....................................... 18
17. ASSIGNMENT....................................................... 19
17.1. [Reserved.]............................................. 19
17.1. Limitations on the Right of the Lessee to
Assign this Agreement................................... 19
18. DEFAULT AND REMEDIES THEREFOR.................................... 19
18.1. Events of Default....................................... 19
18.2. Effect of Lease Event of Default........................ 20
18.3. Rights of Lessor Upon Lease Event of Default,
Liquidation Event of Default or Limited
Liquidation Event of Default........................... 20
18.4. Rights of Trustee Upon LiQUidation Event of Default,
Limited Liquidation Event of Default and
Non-Performance of Certain Covenants.................... 22
18.5. Measure of Damages...................................... 23
18.6. Application of Proceeds................................. 24
19. MANUFACTURER EVENTS OF DEFAULT................................... 24
20. LESSEE PARTIAL WIND-DOWN EVENTS.................................. 25
21. ELIGIBILITY WAIVER EVENTS........................................ 25
22. CERTIFICATION OF TRADE OR BUSINESS USE........................... 25
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23. SURVIVAL......................................................... 25
24. ADDITIONAL LESSEES............................................... 25
25. TITLE............................................................ 27
26. GUARANTY......................................................... 27
26.1. Guaranty................................................ 27
26.2. Scope of Guarantor's Liability.......................... 27
26.3. Lessor's Right to Amend this Agreement, Etc............. 28
26.4. Waiver of Certain Rights by Guarantor................... 28
26.5. Lessees' Obligations to Guarantor and Guarantor's
Obligations to Lessees Subordinated..................... 29
26.6. Guarantor to Pay Lessor's Expenses...................... 31
26.7. Reinstatement........................................... 31
26.8. Pari Passu Indebtedness................................. 31
27. RIGHTS OF LESSOR ASSIGNED TO TRUSTEE............................. 31
28. RIGHT OF LESSEE TO DELEGATE RIGHTS AND OBLIGATIONS
HEREUNDER TO GUARANTOR........................................... 33
29. MODIFICATION AND SEVERABILITY.................................... 33
30. CERTAIN REPRESENTATIONS AND WARRANTIES........................... 33
30.1. Due Organization, Authorization, Etc.................... 33
30.2. Financial Information; Financial Condition.............. 33
30.3. Litigation.............................................. 34
30.4. Liens................................................... 34
30.5. Employee Benefit Plans.................................. 34
30.6. Investment Company Act.................................. 35
30.7. Regulations G, T, U and X............................... 35
30.8. Business Locations; Trade Names; Principal Places of
Business Locations...................................... 35
30.9. Taxes................................................... 35
30.10. Governmental Authorization............................... 35
30.11. Compliance with Laws..................................... 36
30.12. Eligible Vehicles........................................ 36
30.13. Supplemental Documents True and Correct.................. 36
31. CERTAIN AFFIRMATIVE COVENANTS.................................... 36
31.1. Corporate Existence; Foreign Qualification.............. 36
31.2. Books, Records and Inspections.......................... 36
31.3. Insurance............................................... 37
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31.4. Repurchase Programs...................................... 37
31.5. Reporting Requirements................................... 37
31.6. Taxes and Liabilities.................................... 39
31.7. Compliance with Laws..................................... 39
31.8. Maintenance of Separate Existence........................ 39
31.9. Trustee as Lienholder.................................... 39
32. CERTAIN NEGATIVE COVENANTS........................................ 39
32.1. Mergers, Consolidations.................................. 39
32.2. Other Agreements......................................... 40
32.3. Liens.................................................... 40
32.4. Use of Vehicles.......................................... 40
33. BANKRUPTCY PETITION AGAINST LESSOR................................ 40
34. SUBMISSION TO JURISDICTION........................................ 41
35. GOVERNING LAW..................................................... 41
36. JURY TRIAL........................................................ 42
37. NOTICES........................................................... 42
38. LIABILITY......................................................... 43
39. TITLE TO REPURCHASE PROGRAMS IN LESSOR............................ 43
40. HEADINGS.......................................................... 43
41. EXECUTION IN COUNTERPARTS......................................... 43
42. EFFECTIVENESS..................................................... 43
SCHEDULES AND ATTACHMENTS
Schedule 1 Lessees on Date of Execution of Lease
Schedule 2 Information Regarding Lessee Acquired Vehicles
Schedule 3 Business Locations
ATTACHMENT A Vehicle Acquisition Schedule
ATTACHMENT B Form of Power of Attorney
ATTACHMENT C Form of Joinder in Lease
ATTACHMENT D Form of Bill of Sale
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MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT
This Master Motor Vehicle Lease and Servicing Agreement (this
"Agreement"), dated as of February 15, 1995, by and among BRAC SOCAL FUNDING
CORPORATION, a Delaware corporation ("Lessor"), those direct or indirect
subsidiaries or permitted licensees (which, upon execution hereof, may include
Budget Rent a Car of Beverly Hills and Team Rental Group, Inc., collectively,
the "Permitted Licensees") of BUDGET RENT A CAR OF SOUTHERN CALIFORNIA, a
California general partnership ("BRAC SOCAL") that are listed on Schedule 1
hereto and those that become party to this Agreement pursuant to the
provisions of Section 24 hereof (individually, a "Lessee" and, collectively,
the "Lessees"), BRAC-OPCO, Inc. ("OPCO"; together with the Lessees from time
to time referred to as the "Lessee Group") and BRAC SOCAL, as guarantor the
"Guarantor";)
W I T N E S S E T H:
WHEREAS, the Lessor (such capitalized term, together with all other
capitalized terms used herein, shall have the meaning assigned thereto in
Section 1) has purchased or will purchase Vehicles from one or more
Manufacturers subject to the terms and conditions of such Manufacturers'
respective Repurchase Programs with the proceeds obtained by the issuance of
its Rental Car Asset Backed Note;
WHEREAS, the Lessor desires to lease to the Lessees and the Lessees
desire to lease from the Lessor Vehicles acquired by the Lessor pursuant to
such Repurchase Programs for use in the daily rental car businesses of the
Lessees; and
WHEREAS, the Guarantor has, pursuant to Section 26 hereof,
guaranteed the obligations of the Lessees under this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
1. DEFINITIONS. Certain capitalized terms used herein (including the
preamble and the recitals hereto) shall have the meanings ascribed to such
terms in the Definitions List attached as Schedule 1 to the Base Indenture
(the "Definitions List"), as such Definitions List may be amended or modified
from time to time in accordance with the provisions of the Indenture.
2. GENERAL AGREEMENT.
(a) Each Lessee and the Lessor intend that this Agreement is a lease
and that the relationship between the Lessor and the Lessees pursuant
hereto shall always be only that of lessor and lessee and each Lessee
hereby declares, acknowledges and agrees that the Lessor has title to and
is the owner of the Vehicles. No Lessee shall acquire by virtue of this
Agreement any right, equity, title or interest in or to any Vehicles,
except the right to use the same under the terms hereof. The parties
agree that
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this Agreement is a "true lease" and agree to treat this Agreement as a
lease for all purposes, including tax, accounting and otherwise.
(b) If, notwithstanding the intent of the parties to this Agreement,
this Agreement is characterized by any third party as a financing
arrangement or as otherwise not constituting a "true lease," then it is
the intention of the parties that this Agreement shall constitute a
security agreement under applicable law, and each Lessee hereby grants to
the Lessor a first priority security interest in all of such Lessee's
right, title and interest, if any, in and to all of the following assets,
property and interests in property, whether now owned or hereafter
acquired or created:
(i) the rights of such Lessee under this Agreement, as same may
be amended, modified or supplemented from time to time in accordance
with its terms, and any other agreements related to or in connection
with this Agreement to which such Lessee is a party, including any
rights under any subleasing agreements entered into by such Lessee
(the "Lessee Agreements"), including, without limitation, (a) all
monies due and to become due to such Lessee from the Guarantor and
the Lessees under or in connection with the Lessee Agreements,
whether payable as rent, guaranty payments, fees, expenses, costs,
indemnities, insurance recoveries, damages for the breach of any of
the Lessee Agreements or otherwise, (b) all rights, remedies,
powers, privileges and claims of such Lessee against any other party
under or with respect to the Lessee Agreements (whether arising
pursuant to the terms of such Agreements or otherwise available to
such Lessee at law or in equity), including the right to enforce any
of the Lessee Agreements and to give or withhold any and all
consents, requests, notices, directions, approvals, extensions or
waivers under or with respect to the Lessee Agreements or the
obligations of any party thereunder, (c) all liens and property from
time to time purporting to secure payment arising under or in
connection with the Lessee Agreements, or assigned to, such Lessee
describing any collateral securing such obligations or liabilities
and (d) all guarantees, insurance and other agreements or
arrangements of whatever character from time to time supporting or
securing payment of such obligations and liabilities of such Lessee
pursuant to the Lessee Agreements;
(ii) all Vehicles leased by such Lessee from the Lessor which,
notwithstanding that this Agreement is intended to convey only a
leasehold interest, are determined to be owned by such Lessee, and
all Certificates of Title with respect to such Vehicles;
(iii) all right, title and interest of such Lessee in, to and
under any Repurchase Programs, including any amendments thereof, and
all monies due and to become due thereunder in respect of Vehicles
leased under this Agreement which, notwithstanding that this
Agreement is intended to convey only a leasehold interest, are
determined to be owned by such Lessee, whether payable as Vehicle
repurchase
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prices, fees, expenses, +costs, indemnities, insurance recoveries,
damages for breach of the Repurchase Programs or otherwise;
(iv) the Collection Account;
(v) all additional property that may from time to time
hereafter be subjected to the grant and pledge under this Agreement,
as same may be modified or supplemented from time to time, by such
Lessee or by anyone on its behalf; and
(vi) all proceeds of any and all of the foregoing including,
without limitation, payments under insurance (whether or not the
Lessor is the loss payee thereof) and cash.
2.1. Acquisition of Vehicles. (a) From time to time, at the
discretion of the Lessor and the Lessees, subject to the terms and provisions
hereof, the Lessor agrees to lease to each Lessee and each Lessee agrees to
lease from the Lessor, subject to the terms hereof, the Vehicles identified in
vehicle orders placed by the Lessees pursuant to the terms of the Repurchase
Programs (each, a "Vehicle Order"). If requested by the Lessor, each Lessee
shall make each Vehicle order available to the Lessor, together with a
schedule containing the information with respect to the Vehicles included
within such Vehicle Order as is set forth in Attachment A hereto (each, a
"Vehicle Acquisition Schedule"), or in such form as is otherwise requested by
the Lessor. In addition, each Lessee leasing Vehicles pursuant to such Vehicle
Order agrees to provide such other information regarding such Vehicles as the
Lessor may require from time to time. The Lessees and the Lessor acknowledge
that concurrently with the execution and delivery of this Agreement, the
Lessees specified on Schedule 1 have made available to the Lessor the Vehicle
Orders to lease the Vehicles currently owned by the Lessor pursuant to this
Agreement, together with the required Vehicle Acquisition Schedules in respect
of such Vehicle Orders. Subject to the provisions of Section 21 hereof
(regarding Eligibility Waiver Events), the Lessor shall lease to the Lessees,
and the Lessees shall lease from the Lessor, only Vehicles purchased by the
Lessor pursuant to the terms of Eligible Repurchase Programs. This Agreement,
together with the Repurchase Programs and any other related documents attached
to this Agreement or submitted with a Vehicle Order (collectively, the
"Supplemental Documents"), will constitute the entire agreement regarding the
leasing of Vehicles by the Lessor to the Lessees.
(b) The Lessor and the Lessees each acknowledge that either
concurrently with the execution and delivery of this Agreement, or after the
date of this Agreement on not less than thirty (30) days' written notice to
the Lessor and the Trustee, any Lessee (each, a "Selling Lessee") may sell
Vehicles (the "Lessee Acquired Vehicles") to the Lessor for a price equal to
the Net Book Value of such Lessee Acquired Vehicles, in which event such
Lessee shall, immediately upon the consummation of such sale, lease such
Lessee Acquired Vehicles from.the Lessor pursuant to this Agreement (each such
transaction is referred to as "Lessee Sale Transaction"). Concurrently with
the execution and delivery of this Agreement, the Lessees listed on Schedule 2
hereto have agreed to sell to the Lessor certain Lessee
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Acquired Vehicles the consummation of such transaction to occur within 30 days
of the date of this Agreement. In connection with each Lessee Sale
Transaction, to evidence the conveyance of the Lessee Acquired Vehicles from
the Selling Lessee to the Lessor, the applicable Selling Lessee shall deliver
to the Lessor the following:
(i) a Vehicle Order (including a Vehicle Acquisition Schedule)
with respect to all Lessee Acquired Vehicles covered by such Lessee
Sale Transaction;
(ii) a report of the results of a search of the appropriate
records of the county and state in which the Lessee Acquired
Vehicles covered by such Lessee Sale Transaction are located and the
county and state in which the Selling Lessee's principal office is
located, which shall show no liens or other security interests
(other than Permitted Liens) with respect to the Lessee Acquired
Vehicles covered by such Lessee Sale Transaction or, in the event
that such search reveals any such Lien or security interest, there
shall be delivered to the Trustee a termination of such Lien or
security interest in form acceptable for filing;
(iii) confirmation from each lender holding a security interest
in any Lessee Acquired Vehicle covered by such Lessee Sale
Transaction stating unconditionally (A) that, if any sums are to be
paid to such lender in connection with such Lessee Sale Transaction,
such lender has been paid the full amount due t-o it in connect-ion
with such Lessee Sale Transaction and (B) that any lien or security
interest of such lender in any such Lessee Acquired Vehicle has been
released;
(iv) the original Certificate of Title for each Lessee Acquired
Vehicle together with a completed application to retitle such Lessee
Acquired Vehicle in the name of the Lessor and to have noted thereon
the Trustee's security interest in such Lessee Acquired Vehicle
pursuant to the Indenture;
(v) Uniform Commercial Code termination statements terminating,
or Uniform-Commercial Code partial releases releasing, any security
interests and other liens (other than Permitted Liens) in favor of
any Person with respect to each Lessee Acquired Vehicle covered by
such Lessee Sale Transaction and any related Repurchase Program
rights;
(vi) a bill of sale, substantially in the form attached hereto
as Attachment D (each, a "Lessee Bill of Sale"), conveying title to
the Lessee Acquired Vehicles, and all right, title and interest of
the Selling Lessee to the applicable Repurchase Program from the
Selling Lessee to the Lessor; and
(vii) written confirmation from the applicable Manufacturer
that the Lessor will be authorized to return such Lessee Acquired
Vehicles to the Manufacturer under the Lessor's Repurchase Program.
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In addition, the applicable Lessee shall deliver to the Trustee the items
required to be delivered to the Trustee pursuant to the provisions of Section
13.20 of the Base Indenture.
(c) In order to induce the Lessor to purchase Lessee Acquired
Vehicles, each Selling Lessee shall be deemed to have represented and
warranted to and in favor of the Lessor and the Trustee, as of the date
hereof or, with respect to a Lessee Sale Transaction that takes place
after the date of this Agreement, as of the date of such Lessee Sale
Transaction, as follows:
(i) The Selling Lessee is the true and lawful owner of all
Lessee Acquired Vehicles listed on Schedule 1 to the applicable Bill
of Sale as being owned by such Selling Lessee;
(ii) The Lessee Acquired Vehicles listed on Schedule 1 to the
applicable Bill of Sale as being owned by such Selling Lessee are
not subject to any lien, security interest or rights of any other
party, other than Permitted Liens;
(iii) The Lessee Acquired Vehicles listed on Schedule 1 to the
applicable Bill of Sale as being owned by such Selling Lessee are
Eligible Vehicles and have not been held beyond the Maximum Term
applicable thereto;
(iv) All representations and warranties contained in this
Agreement with respect to "Vehicles" owned by "Lessees" are true and
correct as applied to the Lessee Acquired Vehicles listed on
Schedule 1 to the applicable Bill of Sale as being owned by such
Selling Lessee; and
(v) The purchase price being paid by the Lessor for the Lessee
vehicles is listed on Schedule 1 to the applicable Bill of Sale and
such price constitutes, with respect to each Vehicle, the Net Book
Value of such Vehicle.
Other than Lessee Sale Transactions complying with the provisions of this
Section 2.1, the Lessor shall not purchase any Vehicles from any Lessee. After
any purchase of Lessee Vehicles by the Lessor, such Lessee Vehicles will be
subject to all the terms and conditions of this Agreement.
2.2. Right of Lessees to Act as Lessor's Agent. The Lessor agrees
that any member of the Lessee Group may act as the Lessor's agent in placing
Vehicle Orders on behalf of the Lessor, as well as filing claims on behalf of
the Lessor for damage in transit, and other Manufacturer delivery claims
related to the vehicles leased hereunder; provided, however, that the Lessor
may hold the Lessee Group liable for losses due to such member of the Lessee
Group's actions in performing as the Lessor's agent hereunder. In addition,
the Lessor agrees that each Lessee may make arrangements for delivery of
Vehicles to a location selected by the relevant Lessee at such Lessee's
expense. Each Lessee agrees to accept Vehicles as produced and delivered
except each Lessee will have the option to reject any
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Vehicle that may be rejected pursuant to the terms of the applicable
Repurchase Program. The relevant Lessee, acting as agent for the Lessor, shall
be responsible for pursuing any rights of the Lessor with respect to the
return of any Vehicle to the Manufacturer pursuant to the preceding sentence.
Subject to the provisions of Section 21 hereof (regarding Eligibility Waiver
Events), any member of the Lessee Group that places a Vehicle Order pursuant
to this Agreement agrees that all Vehicles ordered as provided herein shall be
ordered utilizing the procedures consistent with an Eligible Repurchase
Program.
2.3. Payment of Capitalized Cost by Lessor. Upon delivery of any
Vehicle, the Lessor shall pay to the Manufacturer the costs and expenses
incurred by it in connection with the acquisition of Vehicles under the
Repurchase Program as established by the Manufacturer's invoice (the
"Capitalized Cost") for such Vehicle and the relevant Lessee shall pay all
applicable costs and expenses of freight, packing, handling, storage, shipment
and delivery of such Vehicle to the extent that the same have not been
included within the Capitalized Cost.
2.4. Non-liability of Lessor. The Lessor shall not be liable to any
of the Lessees for any failure or delay in obtaining Vehicles or making
delivery thereof. AS BETWEEN THE LESSOR AND EACH LESSEE, ACCEPTANCE FOR LEASE
OF THE VEHICLES SHALL CONSTITUTE SUCH LESSEE'S ACKNOWLEDGMENT AND AGREEMENT
THAT SUCH LESSEE HAS FULLY INSPECTED SUCH VEHICLES, THAT THE VEHICLES ARE IN
GOOD ORDER AND CONDITION AND ARE OF THE MANUFACTURE, DESIGN, SPECIFICATIONS
AND CAPACITY SELECTED BY THE LESSEE, THAT SUCH LESSEE IS SATISFIED THAT THE
SAME ARE SUITABLE FOR THIS USE AND THAT THE LESSOR IS NOT A MANUFACTURER OR
ENGAGED IN THE SALE OR DISTRIBUTION OF VEHICLES, AND HAS NOT MADE AND DOES NOT
HEREBY MAKE ANY REPRESENTATION, WARRANTY OR COVENANT WITH RESPECT TO
MERCHANTABILITY, CONDITION, QUALITY, DURABILITY OR SUITABILITY OF THE VEHICLE
IN ANY RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES OR USES OF SUCH
LESSEE, OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR
CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT THERETO. The Lessor shall not be
liable for any failure or delay in delivering any Vehicle ordered for lease
pursuant to this Agreement, or for any failure to perform any provision
hereof, resulting from fire or other casualty, natural disaster, riot, strike
or other labor difficulty, governmental regulation or restriction, or any
cause beyond the Lessor's direct control. IN NO EVENT SHALL THE LESSOR BE
LIABLE FOR ANY INCONVENIENCES, LOSS OF PROFITS OR ANY OTHER CONSEQUENTIAL,
INCIDENTAL OR SPECIAL DAMAGES RESULTING FROM ANY DEFECT IN OR ANY THEFT,
DAMAGE, LOSS OR FAILURE OF ANY VEHICLE, AND THERE SHALL BE NO ABATEMENT OF
RENT BECAUSE OF THE SAME.
2.5. Lessees' Rights to Purchase Vehicles. Each Lessee will have the
option, exercisable with respect to any Vehicle during the Vehicle Term with
respect to such vehicle, to purchase any Vehicles leased under this Agreement
at the greater of (i) the applicable Net
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Book Value or (ii) the fair market value of the Vehicle as established by the
"Black Book" published by National Auto Research Division of Hearst Business
Corporation or, if such "Black Book" is no longer published, a national
publication then currently accepted in the United States automobile rental
industry for the valuation of Vehicles, which is proposed by the Servicer and
approved by the Lessor, such approval not to be unreasonably withheld or
delayed (the greater of such amounts being referred to as the "Vehicle
Purchase Price"), in which event such Lessee will pay the Vehicle Purchase
Price to the Lessor on or before the Due Date next succeeding such purchase by
the relevant Lessee plus all accrued and unpaid Monthly Base Rent and Monthly
Variable Rent with respect to such Vehicle through the date of such purchase.
The Lessor shall cause title to any such Vehicle to be transferred to the
relevant Lessee, and the Servicer shall cause the Trustee to cause its lien to
be removed from the certificate of title for such Vehicle, concurrently with
or promptly after the Vehicle Purchase Price for such Vehicle (and any such
unpaid Monthly Base Rent and Monthly Variable Rent) is paid by such Lessee to
the Trustee.
2.6. Lessor's Right to Cause Vehicles to be Sold. Notwithstanding
anything to the contrary contained herein, the Lessor shall have the right,-
at any time prior to the date thirty (30) days prior to the expiration of the
Maximum Term for any Vehicle, to require that the Lessee leasing such Vehicle
from the Lessor hereunder exercise commercially reasonable efforts to arrange
for the sale of such Vehicle to a third party for a price greater than the Net
Book Value thereof, in which event such Lessee shall, until not later than the
date thirty (30) days prior to the expiration of such Maximum Term, exercise
commercially reasonable efforts to arrange for the sale of such Vehicle to a
third party for a price greater than the Net Book Value or purchase the
Vehicle from the Lessor for the Vehicle Purchase Price. If a sale of the
Vehicle is arranged by the Lessee prior to such date thirty (30) days prior to
the expiration of such Maximum Term, then the Lessee shall deliver the Vehicle
to the purchaser thereof, the Lien of the Trustee on the Certificate of Title
of such Vehicle shall be released, and the Lessee shall cause to be delivered
to the Lessor the funds paid for such Vehicle by the purchaser. If the Lessee
is unable to arrange for a sale of the Vehicle prior to such date thirty (30)
days prior to the expiration of such Maximum Term, then the Lessee shall cease
attempting to arrange for such a sale and shall return such Vehicle to the
applicable Manufacturer as herein provided. In no event may any Vehicle be
sold pursuant to this Section 2.6 unless the funds to be paid to the Lessor
arising out of such sale exceed the Net Book Value of such Vehicle.
3. TERM.
3.1. Vehicle Lease Commencement Date. The "Vehicle Lease
Commencement Date" for each Vehicle shall mean the day as referenced in the
Vehicle Acquisition Schedule with respect to such Vehicle but in no event
beyond the date that funds are expended by the Lessor to acquire such Vehicle.
The "Vehicle Term" with respect to each Vehicle shall extend from the Vehicle
Lease Commencement Date through the earliest of (i) the Turnback Date for such
Vehicle, (ii) if the vehicle is sold to a third party (other than through an
auction conducted by or through or arranged by the Manufacturer pursuant to
its Repurchase
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Program), the date on which payment of an amount representing the Net Book
Value of such Vehicle are received by the Trustee (from such third party or
from any member of the Lessee Group on behalf of such third party) (iii) if
the Vehicle becomes a Casualty, the date funds in the amount of the Net Book
Value thereof are received by the Trustee from the applicable Lessee, or (iv)
the date that the Vehicle is purchased by the applicable Lessee pursuant to
Section 2.5 hereof and the Vehicle Purchase Price with respect to such
purchase (and any unpaid Monthly Base Rent and Monthly Variable Rent with
respect to such Vehicle) is received by the Trustee (the earliest of such four
dates being referred to as the "Vehicle Lease Expiration Date"). The Lessor
and each Lessee agree that each Lessee shall use its commercially reasonable
efforts to return each Vehicle to the related Manufacturer (a) not prior to
the end of the minimum holding period specified in the related Repurchase
Program (prior to which the Lessor may not return such Vehicle without penalty
(the "Minimum Term")) and (b) not later than the end of the maximum holding
period (after which the Lessor may not return such Vehicle without penalty
(the "Maximum Term")); provided, however, if for any reason, a Lessee fails to
return a Vehicle to the applicable Manufacturer during the time period between
the expiration of the Minimum Term and the expiration of the maximum Term,
such Lessee shall be obligated to purchase such Vehicle from the Lessor on the
first Due Date after the expiration of the Maximum Term for an amount equal to
the Vehicle Purchase Price with respect to such Vehicle. Each Lessee will pay
the equivalent of the Rent for the Minimum Term for Vehicles returned before
the Minimum Term, regardless of actual usage, unless a Vehicle is a Casualty
which will be handled in accordance with Section 6 hereof.
3.2. Lease Commencement Date. The "Lease Commencement Date" shall
mean the earlier of (i) the date of the issuance of the first Series of Notes
or (ii) the date of the Vehicle Lease Commencement Date for the first Vehicle
leased by a Lessee hereunder. The "Lease Expiration Date" shall mean the later
of (i) the date of the payment in full of all Series of Notes and all
outstanding Carrying Charges and (ii) the Vehicle Lease Expiration Date for
the last Vehicle leased by a Lessee hereunder. The "Term" of this Agreement
shall mean the period commencing on the Lease Commencement Date and ending on
the Lease Expiration Date.
4. RENT AND CHARGES. Each Lessee will pay Rent on a monthly basis as
set forth in this Section 4:
4.1. Certain Definitions. As used herein the following terms have
the following meanings:
"Monthly Base Rent" with respect to each Due Date and each
Vehicle shall equal the sum of the following, without double
counting, (a) the Depreciation Charge for the Related Month for such
Vehicle plus (b) the aggregate Net Book Value of such Vehicle, if
such Vehicle suffered a Casualty or was sold to any person (other
than to a Manufacturer pursuant to such Manufacturer's Repurchase
Program or to a third party pursuant to an auction conducted through
a Manufacturer's Repurchase
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Program) in each case, during the related month plus (c) the
aggregate Net Book Value (as of the applicable Turnback Date) of such
Vehicle, if such Vehicle was returned to the applicable Manufacturer
and such Manufacturer paid the Repurchase Price during the Related
Month to a Lessee minus (d) any amount received by the Lessor or the
Trustee, and deposited into the Collection Account, during the
Related Month from the applicable Manufacturer as the Repurchase
Price for the repurchase of such Vehicle or from a third party other
than a Manufacturer for the purchase of such Vehicle plus (e) the
aggregate amount of Termination Payments that became due during the
Related Month with respect to such Vehicle plus (f) the aggregate
amount of Repurchase Price Interest that became due during the
Related Month with respect to such Vehicle.
"Monthly Supplemental Rent" with respect to each Due Date shall
be equal to (x) the accrued interest on all Series of Notes for the
Related Month, plus (y) the Carrying Charges for the Related Month,
minus (z) the aggregate of all Monthly Variable Rent accrued with
respect to the Related Month for all Vehicles.
"Monthly Variable Rent" with respect to each Due Date and with
respect to each Vehicle shall equal the sum of (a) an amount equal
to the Net Book Value of such Vehicle during the Related Month
multiplied by the VFR for a one-year interest period, multiplied by
a fraction, the numerator of which shall be 30 and the denominator
of which shall be 360 and (b) the product of (i) an amount equal to
(x) all Carrying Charges for the Related Month less (y) any accrued
earnings on Permitted Investments in the Collection Account which
are available for distribution on the last Business Day of the
Related Month and (ii) a fraction, the numerator of which is the Net
Book Value of such Vehicle and the denominator of which is the Net
Book Value of all Vehicles. In the event the Vehicle Lease
Commencement Date occurs with respect to such Vehicle on a day other
than the last day of a Related Month, the Monthly Variable Rent for
such Vehicle shall be equal to the product.of (a) the Monthly
Variable Rent otherwise sayable with respect to such Vehicle,
multiplied by (b) a fraction the numerator of which is 12 and the
denominator of which is 360, multiplied by (c) the number of days in
such Related Month from, after and including such Vehicle Lease
Commencement Date through and including the last day of such Related
Month. In the event the Vehicle Lease Expiration Date occurs with
respect to such Vehicle during a Related Month, the Monthly Variable
Rent for such Vehicle shall be equal to the product of (a) the
Monthly Variable Rent otherwise payable with respect to such Vehicle
for the Related Month, multiplied by (b) a fraction the numerator of
which is 12 and the denominator of which is 360, multiplied by (c)
the number of days in such Related Month from, after and including
the first day of such Related Month through and including the
Vehicle Lease Expiration Date.
"Rent" means Monthly Base Rent, Monthly Variable Rent and
Monthly Supplemental Rent.
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"VFR" for any period, is an interest rate equal to (i) the
amount of interest accrued during such period with respect to all
Series of Notes divided by (ii) the average daily Invested Amounts
of all Series of Notes during such period.
4.2. Payment of Rent. On each Due Date:
4.2.1. Monthly Base Rent. Each Lessee shall pay to the Lessor all
Monthly Base Rent that has accrued during the Related Month with respect to
each Vehicle leased hereunder by such Lessee;
4.2.2. Monthly Variable Rent. Each Lessee shall pay to the Lessor
all Monthly Variable Rent that has accrued during the Related Month with
respect to each Vehicle leased hereunder by such Lessee; and
4.2.3. Monthly Supplemental Rent. Each Lessee shall pay such
Lessee's Share of the Monthly Supplemental Rent that has accrued during the
Related Month less any earnings on Permitted Investments not taken into
account in the calculation of Monthly Variable Rent.
4.3. Late Payment. In the event the relevant Lessee fails to remit
payment of any amount due on or before the Due Date, the amount not paid will
be considered delinquent and such Lessee will pay a late charge equal to the
VFR plus 1%, times the delinquent amount for the period from the Due Date
until such delinquent amount is received by the Trustee.
4.4. Net Lease. THIS AGREEMENT SHALL BE A NET LEASE, AND EACH
LESSEE'S OBLIGATION TO PAY ALL RENT AND OTHER SUMS HEREUNDER SHALL BE ABSOLUTE
AND UNCONDITIONAL, AND SHALL NOT BE SUBJECT TO ANY ABATEMENT OR REDUCTION FOR
ANY REASON WHATSOEVER. The obligations and liabilities of each Lessee
hereunder shall in no way be released, discharged or otherwise affected
(except as may be expressly provided herein including, without limitation, the
right of each Lessee to reject Vehicles pursuant to Section 2.2 hereof) for
any reason, including without limitation: (i) any defect in the condition,
merchantability, quality or fitness for use of the Vehicles or any part
thereof; (ii) any damage to, removal, abandonment, salvage, loss, scrapping or
destruction of or any requisition or taking of the Vehicles or any part
thereof; (iii) any restriction, prevention or curtailment of or interference
with any use of the Vehicles or any part thereof; (iv) any defect in or any
Lien on title to the Vehicles or any part thereof; (v) any change, waiver,
extension, indulgence or other action or omission in respect of any obligation
or liability of the relevant Lessee or the Lessor; (vi) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation
or other like proceeding relating to the relevant Lessee, the Lessor or any
other Person, or any action taken with respect to this Agreement by any
trustee or receiver of any Person mentioned above, or by any court; (vii) any
claim that the relevant Lessee has or might have
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against any Person, including without limitation the Lessor; (viii) any
failure on the part of the Lessor to perform or comply with any of the terms
hereof or of any other agreement; (ix) any invalidity or unenforceability or
disaffirmance of this Agreement or any provision hereof or any of the other
Related Documents or any provision of any thereof, in each case whether
against or by the relevant Lessee or otherwise; (x) any insurance premiums
payable by the relevant Lessee with respect to the Vehicles; or (xi) any other
occurrence whatsoever, whether similar or dissimilar to the foregoing, whether
or not the relevant Lessee shall have notice or knowledge of any of the
foregoing and whether or not foreseen or foreseeable. This Agreement shall be
noncancelable by the Lessees and, except as expressly provided herein, each
Lessee, to the extent permitted by law, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender this
Agreement, or to any diminution or reduction of Rent payable by each Lessee
hereunder. All payments by each Lessee made hereunder shall be final (except
to the extent of adjustments provided for herein), absent manifest error and,
except as otherwise provided herein, each Lessee shall not seek to recover any
such payment or any part thereof for any reason whatsoever, absent manifest
error. If for any reason whatsoever this Agreement shall be terminated in
whole or in part by operation of law or otherwise except as expressly provided
herein, each Lessee shall nonetheless pay an amount equal to each Rent payment
at the time and in the manner that such payment would have become due and
payable under the terms of this Agreement as if it had not been terminated in
whole or in part. All covenants and agreements of each Lessee herein shall be
performed at its cost, expense and risk unless expressly otherwise stated.
5. THIRD PARTY LIABILITIES. Each Lessee represents that it shall at
all times maintain insurance coverage in force in at least the following
amounts:
5.1. Personal Injury and Damage. Each Lessee (i) will be
permissively uninsured under California law up to the first $35,000 of
liability per occurrence with respect to personal injury and damage claims
arising from the use of the Vehicle and (ii) in its reasonable business
judgment will require high-risk renters of Vehicles to obtain additional
insurance in an amount of up to $1,000,000 on a rental-by-rental basis.
5.2. [Reserved.]
5.3. Changes in Insurance Coverage. No changes shall be made in any
of the foregoing third-party personal injury and damage policies unless the
prior written consent of the Lessor and the Trustee are first obtained. The
Lessor may grant or withhold its consent to any proposed change in such
policies in its sole discretion. The Trustee shall be required to grant its
consent to any proposed change in such insurance upon compliance with the
following conditions:
(i) The Lessee Group shall deliver not less than 30 days
written notice of any proposed change in such policies to the
Trustee, which notice shall contain a certification of a reputable
insurance broker that is not affiliated with any member of
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the Lessee Group that the third-party personal injury and damage
policies maintained by the Lessee Group (after the taking effect of
such proposed change) comports with industry standards for persons
engaged in the rental car business and having net worth and operating
income similar to that of the Lessee Group; and
(ii) The Lessee Group shall furnish to the Trustee a letter
from each Rating Agency with respect to each outstanding Series of
Notes to the effect that such proposed change will,not cause a
reduction in or a withdrawal of the current rating of such Notes.
6. RISK OF LOSS AND CASUALTY OBLIGATION.
6.1. Risk of Loss Borne by Lessee. Upon delivery of each Vehicle to
the relevant Lessee, as between the Lessor and such Lessee, such Lessee
assumes and bears the risk of loss, damage, theft, taking, destruction,
attachment, seizure, confiscation or requisition with respect to such Vehicle,
however caused or occasioned, and all other risks and liabilities, including
personal injury or death and property damage, arising with respect to any
Vehicle or the manufacture, purchase, acceptance, rejection, ownership,
delivery, leasing, subleasing, possession, use, inspection, registration,
operation, condition, maintenance, repair, storage, sale, return or other
disposition of such Vehicle, howsoever arising.
6.2. Casualty. If a Vehicle becomes a Casualty, then the Lessee that
is leasing such Vehicle will (i) promptly notify the Lessor thereof and (ii)
promptly, but in no event more than fifteen (15) days after such-Vehicle
becomes a Casualty, pay to the Lessor the Net Book Value of such Vehicle. Upon
payment by the Lessee to the Lessor of the Net Book Value of any Vehicle that
has become a Casualty (i) the Lessor shall cause title to such Vehicle to be
transferred to the relevant Lessee to facilitate liquidation of such Vehicle
by the Lessee, (ii) such Lessee shall be entitled to any physical damage
insurance proceeds applicable to such Vehicle (if at such time the applicable
Lessee carries such insurance coverage), and (iii) the Lien of the Trustee on
such Vehicle shall be released by the Servicer.
7. VEHICLE USE. So long as no Lease Event of Default has occurred
and so long as no Lessee Partial Wind-Down Event has occurred with respect to
the relevant Lessee (subject, however, to Section 2.6 hereof), such Lessee may
use Vehicles leased hereunder in the regular course of business of such
Lessee, which course of business may include, from time to time, the sublease
of such vehicles to third-parties, provided, that, in any event, the Lessees,
collectively, shall not, without the consent of the Trustee and the Required
Beneficiaries, sublease vehicles a Net Book Value of which represents an
amount in excess of 100-o of the outstanding principal amount of the Notes
issued under the Indenture and provided, further, that no such sublessee shall
be an Affiliate of the guarantor. Notwithstanding any such sublease, the
subletting Lessee and the Guarantor shall remain fully liable for their
respective obligations under the Operative Documents. Such use shall be
confined primarily to the United States, with limited use in Canada and
Mexico; provided, however, that the principal place of business or rental
office of such Lessee with respect to
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the Vehicles is located in the United States. The relevant Lessee shall
promptly and duly execute, deliver, file and record all such documents,
statements, filings and registrations, and take such further actions as the
Lessor, the Servicer or the Trustee shall from time to time reasonably request
in order to establish, perfect and maintain the Lessor's title to and interest
in the Vehicles and the Certificates of Title as against such Lessee or any
third party in any applicable jurisdiction and to establish, perfect and
maintain the Trustee's lien on the Vehicles and the Certificates of Title as a
perfected first 'lien in any applicable jurisdiction. Each Lessee may, at the
relevant Lessee's sole expense, change the place of principal location of any
Vehicles. Notwithstanding t-he foregoing, no change of location shall be
undertaken unless and until (i) all actions necessary to maintain the Lien of
the Trustee on such Vehicles and the Certificates of Title with respect to
such Vehicles shall have been taken and (ii) all legal requirements applicable
to such Vehicles shall have been met or obtained. Following a Lease Event of
Default, Lessee Partial wind-Down Event or Manufacturer Event of Default, and
upon the Lessor's request, the relevant Lessee shall advise the Lessor in
writing where all Vehicles leased hereunder as of such date are principally
located. The Lessee shall not knowingly use any Vehicles or knowingly permit
the same to be used for any unlawful purpose. Each Lessee shall use reasonable
precautions to prevent loss or damage to Vehicles. Each Lessee shall comply
with all applicable statutes, decrees, ordinances and regulations regarding
acquiring, titling, registering, leasing, insuring and disposing of Vehicles
and shall take reasonable steps to ensure that operators are licensed. Each
Lessee and the Lessor agree that each Lessee shall perform, at its own
expense, such Vehicle preparation and conditioning services with respect to
Vehicles purchased by the Lessor from the Manufacturers as are customary. The
Lessor or the Trustee or any authorized representative of the Lessor or the
Trustee may during reasonable business hours from time to time, without
disruption of each Lessee's business, subject to applicable law, inspect
Vehicles and registration certificates, Certificates of Title and related
documents covering Vehicles wherever the same be located. Each Lessee shall
not without the prior written consent of the Issuer and the Trustee sublease
any Vehicles, nor shall such Lessee assign any right or interest herein or in
any vehicles; provided, however, that the foregoing shall not be deemed to
prohibit the Lessees from renting Vehicles to third party customers in the
ordinary course of their car rental businesses.
8. LIENS. Except for Permitted Liens, each Lessee shall keep all
Vehicles leased by it free of all Liens arising during the Term. Upon the
Vehicle Lease Termination Date for each Vehicle leased hereunder should any
such Lien exist the Lessor may, in its discretion, remove such Lien and any
sum of money that may be paid by the Lessor in release or discharge thereof,
including attorneys' fees and costs, will be paid by the Lessee upon demand by
the Lessor. The Lessor may grant security interests in the Vehicles without
consent of the relevant Lessee; Provided, however, that if any such Liens
would interfere with the rights of such Lessee under this Agreement, the
Lessor must obtain the prior written consent of such Lessee. Each Lessee
acknowledges that the granting of Liens and the taking of other actions
pursuant to the Indenture and the Related Documents does not interfere with
the rights of such Lessee under this Agreement.
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9. NON-DISTURBANCE. So long as each Lessee satisfies its obligations
hereunder, its quiet enjoyment, possession and use of the Vehicles will not be
disturbed during the Term subject, however, to Section 2.6 hereof and except
that the Lessor and the Trustee each retains the right but not the duty, to
inspect the Vehicles without disturbing the ordinary conduct of such Lessee's
business. Upon the request of the Lessor or the Trustee from time to time,
each Lessee will make reasonable efforts to confirm to the Lessor and the
Trustee the location, mileage and condition of each Vehicle and to make
available for the Lessor's or the Trustee's inspection within a reasonable
time period, not to exceed 45 days, the Vehicles at the location where the
Vehicles are normally domiciled. Further, each Lessee will, during normal
business hours and with a notice of 3 Business Days, make its records
pertaining to the Vehicles available to the Lessor or the Trustee for
inspection at the location where the Lessee's records are normally domiciled.
10. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND FINES.
The Lessee Group, at its expense, shall be responsible for proper registration
and licensing of Vehicles, and titling of Vehicles in the name of the Lessor
(with the Lien of the Trustee noted thereon) and, where required, shall have
Vehicles inspected by any appropriate governmental authority; Provided,
however, that notwithstanding the foregoing, possession of all Certificates of
Title shall at all time remain with the Servicer in accordance with the
provisions of the Indenture. The Lessee leasing such Vehicle shall be
responsible for the payment of all registration fees, title fees, license
fees, traffic summonses, penalties, judgments and fines incurred with respect
to any Vehicle during the Vehicle Term for such Vehicle or imposed during the
Vehicle Term for such Vehicle by any governmental authority or any court of
law or equity with respect to Vehicles in connection with the relevant
Lessee's operation of Vehicles, and any such amounts paid by the Lessor, in
its discretion, on the relevant Lessee's behalf will be reimbursed within 30
days of the Lessor notifying such Lessee of such payment. The Lessor agrees to
execute a power of attorney in the form of Attachment B hereto (each, a "Power
of Attorney"), and such other documents as may be necessary in order to allow
the Lessees to title, register and dispose of the Vehicles; provided, however,
that possession of all Certificates of Title shall at all times remain with
the Servicer in accordance with the provisions of the Indenture, and each
Lessee acknowledges and agrees that it has no right, title or interest in or
with respect to any Certificate of Title. Notwithstanding anything herein to
the contrary, the Lessor may terminate such Power of Attorney as provided in
Section 18 hereof.
11. MAINTENANCE AND REPAIRS. Each Lessee shall pay for all
maintenance and repairs to keep Vehicles in good working order and condition,
and will maintain Vehicles as required in order to keep the Manufacturer's
warranty in force. Each Lessee will return Vehicles to an authorized
Manufacturer facility or the relevant Lessee's Manufacturer authorized
warranty station for warranty work. Each Lessee will comply with any
Manufacturer's recall of any Vehicle. Each Lessee will pay, or cause to be
paid, all usual and routine expenses incurred in the use and operation of
Vehicles including, but not limited to, fuel, lubricants, and coolants. Any
such expenses not paid by, or on behalf of, the relevant Lessee may, after 30
days' notice to such Lessee, be paid by the Lessor and any
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expenses incurred by the Lessor on such Lessee's behalf for maintenance,
repair, operation or use of Vehicles by such Lessee will be promptly
reimbursed (in any event no later than the next monthly Due Date following
such notice) by such Lessee to the Lessor in the amount paid by the Lessor.
Each Lessee shall not make any material alterations to any Vehicles without
the prior consent of the Lessor. Any improvements or additions to any Vehicles
shall become and remain the property of the Lessor, except that any addition
to Vehicles made by the relevant Lessee shall remain the property of such
Lessee if it can be disconnected from Vehicles without impairing the
functioning of such Vehicles or its resale value, excluding such addition.
12. VEHICLE WARRANTIES.
12.1. No Lessor Warranties. EACH LESSEE ACKNOWLEDGES THAT THE LESSOR
IS NOT THE MANUFACTURER, THE AGENT OF THE MANUFACTURER, OR THE DISTRIBUTOR OF
THE VEHICLES LEASED HEREUNDER. THE LESSOR MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, AS TO THE FITNESS, SAFENESS, DESIGN, MERCHANTABILITY,
CONDITION, QUALITY, CAPACITY OR WORKMANSHIP OF THE LEASED VEHICLES NOR ANY
WARRANTY THAT THE LEASED VEHICLES WILL SATISFY THE REQUIREMENTS OF ANY LAW OR
ANY CONTRACT SPECIFICATION, AND AS BETWEEN THE LESSOR AND EACH LESSEE, EACH
LESSEE AGREES TO BEAR ALL SUCH RISKS AT ITS SOLE COST AND EXPENSE. EACH LESSEE
SPECIFICALLY WAIVES ALL RIGHTS TO MAKE CLAIMS AGAINST THE LESSOR AND ANY
LEASED VEHICLE FOR BREACH OF ANY WARRANTY OF ANY KIND WHATSOEVER AND, AS TO
THE LESSOR, EACH LESSEE LEASES THE LEASED VEHICLES "AS IS." IN NO EVENT SHALL
THE LESSOR BE LIABLE FOR SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES,
WHATSOEVER OR HOWSOEVER CAUSED.
12.2. Manufacturer's Warranties. If a Vehicle is covered by a
Manufacturer's warranty, each Lessee, during the Vehicle Term, shall have the
right to make any claims under such warranty which the Lessor could make.
13. VEHICLE USAGE GUIDELINES AND RETURN.
13.1. Usage. As used herein "vehicle turn-in condition" with respect
to each Vehicle will be determined in accordance with the related Repurchase
Program. Vehicles not meeting the applicable Repurchase Program's vehicle
turn-in condition guidelines will be purchased by the relevant Lessee in
accordance with the Casualty procedure set forth in Section 6.2.
13.2. Return. Each Lessee will return each Vehicle (other than a
Casualty) to the nearest related Manufacturer official auction or other
facility designated by such Manufacturer at the relevant Lessee's sole
expense. Each Lessee agrees that the Vehicles will be in vehicle turn-in
condition as specified in the applicable Repurchase Program. Any
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rebates or credits applicable to the unexpired term of any license plates for
a vehicle shall inure to the benefit of the relevant Lessee.
13.3. Termination Payments. Upon receipt of payment of the
Repurchase Price of each Vehicle from the Manufacturer (or the receipt of
payment of the Repurchase Price of each vehicle through an auction conducted
by or through a Manufacturer), the Lessor will charge the relevant Lessee for
any Excess Damage Charges, Excess Mileage Charges or early turnback surcharges
as determined by the Manufacturer or its agent in accordance with the
applicable Repurchase Program (any such charges are referred to as
"Termination Payments"). The provisions of this Section 13.3 will survive the
expiration or earlier termination of the Term.
13.4. Repurchase Price Interest. The applicable Lessee shall pay to
the Lessor, as part of the Monthly Base Rent, interest accrued at a rate equal
to the VFR on the Repurchase Price of each Vehicle for the period between the
Turnback Date for such Vehicle and receipt of such Repurchase Price by the
Lessor from the Manufacturer ("Repurchase Price Interest"). The provisions of
this Section 13.4 will survive the expiration or earlier termination of the
Term.
14. DISPOSITION PROCEDURE. Each Lessee will comply with the
requirements of law and the requirements of the Repurchase Programs in
connection with, among other things, the delivery of Certificates of Title and
documents of transfer signed as necessary, signed Condition Report, and signed
odometer statement to be submitted with the Vehicles and accepted by the
Manufacturer or its agent at the time of Vehicle return. If a Vehicle is not
returned to the Manufacturer and accepted by the Manufacturer prior to the
Maximum Term with respect to such Vehicle, the relevant Lessee shall purchase
such Vehicle for the appropriate Vehicle Purchase Price and pay the Lessor
such amount within fifteen (15) days after the end of the Maximum Term
together with any Repurchase Price Interest accrued from the last day of the
Maximum Term to the date that such payment is received by the Lessor.
15. ODOMETER DISCLOSURE REQUIREMENT. Each Lessee agrees to comply
with all requirements of law and all Repurchase Program requirements in
connection with the transfer of ownership of any Vehicle by the Lessor,
including, without limitation, the submission of any required odometer
disclosure statement at the time of any such transfer of ownership.
16. GENERAL INDEMNITY.
16.1. Indemnity by the Lessee. Each member of the Lessee Group
agrees jointly and severally to indemnify and hold harmless the Lessor and the
Lessor's directors, officers, agents and employees (collectively, the
"Indemnified Persons"); against any and all claims, demands and liabilities of
whatsoever nature and all costs and expenses incurred by such lessee or any
sublessee of such lessee relating to or in any way arising out of:
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16.1.1. the ordering, delivery, acquisition, title on acquisition,
rejection, installation, possession, titling, retitling, registration,
re-registration, custody by the Lessee Group of title and registration
documents, use, nonuse, misuse, operation, deficiency, defect, transportation,
repair, control or disposition of any Vehicle leased hereunder or to be leased
hereunder pursuant to a request by the relevant Lessee. The foregoing shall
include, without limitation, any liability (or any alleged liability) of the
Lessor to any third party arising out of any of the foregoing, including,
without limitation, all legal fees, costs and disbursements arising out of
such liability (or alleged liability);
16.1.2. all (i) federal, state, county, municipal, foreign or other
fees and taxes of whatsoever nature, including but not limited to license,
qualification, registration, franchise, sales, use, gross receipts, ad
valorem, business, property (real or personal), excise, motor vehicle, and
occupation fees and taxes, and all federal, state and local income taxes
(including any taxes payable by the Lessor as a result of it being a member of
the consolidated Lessee Group), and penalties and interest thereon, whether
assessed, levied against or payable by the Lessor or otherwise, with respect
to any Vehicle or the acquisition, purchase, sale, rental, use, operation,
control, ownership or disposition of any Vehicle or measured in any way by the
value thereof or by the business of, investment in, or ownership by the Lessor
with respect thereto and (ii) documentary, scamp, filing, recording, mortgage
or other taxes, if any, which may be payable by the Lessor in connection with
this Agreement or the other Related Documents;
16.1.3. any violation by the relevant member of the Lessee Group of
this Agreement or of any Related Documents to which such member of the Lessee
Group is a party or by which it is bound or any laws, rules, regulations,
orders, writs, injunctions, decrees, consents, approvals, exemptions,
authorizations, licenses and withholdings of objecting of any governmental or
public body or authority and all other requirements having the force of law
applicable at any time to any Vehicle or any action or transaction by such
member of the Lessee Group with respect thereto or pursuant to this Agreement;
16.1.4. all out of pocket costs of the Lessor (including the fees
and out of pocket expenses of counsel for the Lessor) in connection with the
execution, delivery and performance of this Agreement and the other Related
Documents, including, without limitation, overhead expenses and any and all
fees of the Trustee, all fees payable in connection with any Enhancement, any
and all fees of the Servicer under the Indenture, fees payable to the Rating
Agencies and any underwriting or placement agency fees incurred in connection
with the sale of the Notes;
16.1.5. all out of pocket costs and expenses (including reasonable
attorneys, fees and legal expenses) incurred by the Lessor, the Trustee or the
Noteholders in connection with the administration, enforcement, waiver or
amendment
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of this Agreement and any other Related Documents and all indemnification
obligations of the Lessor under the Related Documents; and
16.1.6. all costs, fees, expenses, damages and liabilities
(including, without limitation, the fees and out of pocket expenses of
counsel) in connection with, or arising out of, any claim made by any third
party against the Lessor for any reason (including, without limitation in
connection,with any audit or investigation conducted by a Manufacturer under
its Repurchase Program).
16.2. Indemnity by Sublessee. Any member of the Lessee Group
subleasing vehicles under this Agreement will obtain from such sublessee,
prior to the commencement of the sublease and in a form satisfactory to the
Trustee, an indemnity substantially to the effect of and substantially in the
form of the Lessee Group's indemnity described above.
16.3. Reimbursement Obligation by the Lessee Group. Each member of
the Lessee Group shall forthwith upon demand reimburse the Lessor for any sum
or sums expended with respect to any of the foregoing, or shall pay such
amounts directly upon request from the Lessor; provided, however, that, if so
requested by the relevant member of the Lessee Group, the Lessor shall submit
to such member of the Lessee Group a statement documenting any such demand for
reimbursement or prepayment. To the extent that the relevant member of the
Lessee Group in fact indemnities the Lessor under the indemnity provisions of
this Agreement, such member of the Lessee Group shall be subrogated to the
Lessor's rights in the affected transaction and shall have a right to
determine the settlement of claims therein. The foregoing indemnity as
contained in this Section 16 shall survive the expiration or earlier
termination of this Agreement or any lease of any Vehicle hereunder.
16.4. Defense of Claims. Defense of any claim referred to in this
Section 16 for which indemnity may be required shall, at the option and
request of the Indemnified Person, be conducted by the relevant member of the
Lessee Group. The relevant member of the Lessee Group will inform the
Indemnified Person of any such claim and of the defense thereof and will
provide copies of material documents relating to any such claim or defense to
such Indemnified Person upon request. Such Indemnified Person may participate
in any such defense at its own expense provided such participation does not
interfere with the relevant member of the Lessee Group's assertion of such
claim or defense. The relevant member of the Lessee Group agrees that no
Indemnified Person will be liable to such member of the Lessee Group for any
claim caused directly or indirectly by the inadequacy of any Vehicle for any
purpose or any deficiency or defect therein or the use or maintenance thereof
or any repairs, servicing or adjustments thereto or any delay in providing or
failure to provide such or any interruption or loss of service or use thereof
or any loss of business, all of which shall be the risk and responsibility of
such member of the Lessee Group. The rights and indemnities of each
Indemnified Person hereunder are expressly made for the benefit of, and will
be enforceable by, each Indemnified Person notwithstanding the fact that such
Indemnified Person is either no longer a party to (or entitled to receive the
benefits of) this Agreement,'or was not a party to (or entitled to receive the
benefits of) this Agreement
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at its outset. Except as otherwise set forth herein, nothing herein shall be
deemed to require the relevant member of the Lessee Group to indemnify the
Lessor for any of the Lessor's acts or omissions which constitute gross
negligence or willful misconduct. This general indemnity shall not affect any
claims of the type discussed above which the relevant member of the Lessee
Group may have against the Manufacturer.
17. ASSIGNMENT.
17.1. [Reserved.]
17.1. Limitations on the Right of the Lessee to Assign this
Agreement. Each Lessee shall not, except as provided in the Indenture, without
prior written consent of the Lessor and the Trustee, assign this Agreement or
any of its rights hereunder to any other party; Provided, however, the
relevant Lessee may rent such Vehicles under the terms of such Lessee's normal
daily rental programs. Any purported assignment in violation of this Section
17.2 shall be void and of no force or effect. Nothing contained herein shall
be deemed to restrict the right of any Lessee to acquire or dispose of, by
purchase, lease, financing, or otherwise, motor vehicles that are not subject
to the provisions of this Agreement.
18. DEFAULT AND REMEDIES THEREFOR.
18.1. Events of Default. Any one or more of the following will
constitute an event of default (a "Lease Event of Default") as that term is
used herein:
18.1.1. there occurs (i) a default in the payment of any Monthly
Base Rent and the continuance thereof for a period of five days, (ii) a
default in the payment of any Monthly Variable Rent or Monthly Supplemental
Rent and the continuance thereof for five days or (iii) a default and
continuance thereof for five Business Days after notice thereof by the Lessor
or the Trustee to the Lessee Group in the payment of any amount payable under
this Agreement (other than amounts described in clause (i) or (ii) above);
18.1.2. any unauthorized assignment or transfer of this Agreement by
any member of the Lessee Group occurs;
18.1.3. the failure, in any material respect, of the Lessee Group to
maintain, or cause to be maintained, adequate coverage in respect of
third-party liabilities arising out of the use and rental of the Vehicles, as
required in Section 5 or Section 31.3;
18.1.4. subject to the provisions of Section 20 hereof regarding
Lessee Partial Wind-Down Events, the failure of the Lessee Group to observe or
perform any other material covenant, condition, agreement or provision hereof,
including, but not
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limited to, usage, and maintenance, and such default continues for more than
thirty (30) days after the earlier to occur of (a) the date a Responsible
Officer of the Lessee obtains knowledge of such default or (b) the date
written notice thereof is delivered by the Lessor or the Trustee to such
Lessee; provided, however, that if such failure cannot reasonably be cured
within such thirty (30) day period, no Lease Event of Default shall result
therefrom so long as, within such thirty (30) day period, such Lessee (i)
commences to cure same, (ii) delivers written notice to the Lessor and the
Trustee notifying the Lessor and the Trustee of such default and setting forth
the steps such Lessee intends to take in order to cure such default and (iii)
thereafter diligently prosecutes such cure to completion and completely cures
such default on or before the fiftieth (50th) day after the earlier of the
dates set forth in clause (a) and clause (b) above;
18.1.5. subject to the provisions of Section 20 hereof regarding
Lessee Partial Wind-Down Events, if any representation or warranty made by the
Lessee Group herein is inaccurate or incorrect or is breached or is false or
misleading in any material respect as of the date of the issuance or making
thereof and is not cured within 30 days after notice thereof from the Lessor
or the Trustee to-the Lessee Group; or
18.1.6. subject to the provisions of Section 20 hereof regarding
Lessee Partial Wind-Down Events, an Event of Bankruptcy occurs with respect to
any member of the Lessee Group.
18.2. Effect of Lease Event of Default. If (i) a Lease Event of
Default described in Section 18.1.1, 18.1.2 or 18.1.6 shall occur, then the
Monthly Base Rent (calculated as if all Vehicles had become a Casualty for the
Related Month), the Monthly Variable Rent (calculated as if the full amount of
interest, principal and other charges under all outstanding Series of Notes
were then due and payable in full) and the Monthly Supplemental Rent
(calculated as if the full amount of interest, principal and other charges
under all outstanding Series of Notes were then due and payable in full)
shall, automatically, without further action by the Lessor or the Trustee,
become immediately due and payable or (ii) any other Lease Event of Default or
any Liquidation Event of Default shall occur, the Lessor or the Trustee may
declare the Rent (calculated as described in clause (i) above) to be due and
payable, whereupon such Rent (as so calculated) shall, subject to Section
18.5, become immediately due and payable.
18.3. Rights of Lessor Upon Lease Event of Default, Liquidation
Event of Default or Limited Liquidation Event of Default. If a Lease Event of
Default, Limited Liquidation Event of Default or Liquidation Event of Default
shall occur, then the Lessor at its option may:
(i) Proceed by appropriate court action or actions, either at
law or in equity, to enforce performance by the Lessee Group (or
such member(s) thereof
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against which the Lessor determines to exercise its remedies
hereunder) of the applicable covenants and terms of this Agreement or
to recover damages for the breach hereof calculated in accordance
with Section 18.5; or
(ii) By notice in writing to the Lessee Group (or such
member(s) thereof against which the Lessor determines to exercise
its remedies hereunder) following the occurrence of a Lease Event of
Default, terminate this Agreement in its entirety (or in respect
only of the applicable member(s) thereof) and/or the right of
possession hereunder of the Lessee Group (or the applicable
member(s) thereof) as to the Vehicles, and the Lessor may direct
delivery by the Lessee Group (or the applicable member(s) thereof)
of documents of title to the Vehicles, whereupon all rights and
interests of the Lessee Group (or the applicable member(s) thereof)
to the Vehicles will cease and terminate (but the Lessee Group (or
the applicable member(s) thereof) will remain liable hereunder as
herein provided, however, the Lessee Group's liability will be
calculated in accordance with Section 18.5); and thereupon, the
Lessor or its agents may peaceably enter upon the premises of the
applicable Lessee(s) or other premises where the Vehicles may be
located and take possession of them and thenceforth hold, possess
and enjoy the same free from any right of the Lessee Group (or the
applicable member(s) thereof), or their successors or assigns, to
use the Vehicles for any purpose whatsoever, and the Lessor will,
nevertheless, have a right to recover from the Lessee Group (or the
applicable member(s) thereof) any and all amounts which under the
terms of Section 18.2 (as limited by Section 18.5) of this Agreement
may be then due. The Lessor will provide the Lessee Group (or the
applicable member(s) thereof) with written notice of the place and
time of the sale at least five days prior to the proposed sale,
which shall be deemed commercially reasonable, and any Lessee may
purchase the Vehicle(s) at the sale. Each and every power and remedy
hereby specifically given to the Lessor will be in addition to every
other power and remedy hereby specifically given or now or hereafter
existing at law, in equity or in bankruptcy and each and every power
and remedy may be exercised from time to time and simultaneously and
as often and in such order as may be deemed expedient by the Lessor;
provided, however, that the measure of damages recoverable against
the Lessees will in any case be calculated in accordance with
Section 18.5. All such powers and remedies will be cumulative, and
the exercise of one will not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Lessor in
the exercise of any such power or remedy and no renewal or extension
of any payments due hereunder will impair any such power or remedy
or will be construed to be a waiver of any default or any
acquiescence therein. Any extension of time for payment hereunder or
other indulgence duly granted to the Lessee Group (or the applicable
member(s) thereof) will not otherwise alter or affect the Lessor's
rights or the obligations hereunder of the Lessee Group (or the
applicable member(s) thereof). The Lessor's acceptance of any
payment after it will have become due hereunder will not be deemed
to alter or affect the Lessor's rights hereunder with respect to any
subsequent payments or defaults therein; or
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(iii) By notice in writing to the Lessee Group (or such
member(s) thereof against which the Lessor determines to exercise
its remedies hereunder), terminate the Power of Attorney.
18.4. Rights of Trustee Upon LiQUidation Event of Default, Limited
Liquidation Event of Default and Non-Performance of Certain Covenants.
(i) If a Liquidation Event of Default, a Limited Liquidation
Event of Default or Manufacturer Event of Default shall have
occurred and be continuing, the Lessor and the Trustee, to the
extent provided in the Indenture, shall have the rights against
Guarantor, each Lessee, each Manufacturer and the Collateral
provided in the Indenture (including, without limitation, the rights
granted under Section 9.3 of the Indenture) upon a Liquidation Event
of Default or Limited Liquidation Event of Default, including the
right to take possession of all Vehicles immediately from the
Lessees.
(ii) If the Guarantor or any Lessee shall default in the due
performance and observance of any of its obligations under Section
31.3, 31.4, 31.5(iv), 31.8, 32.3 or 32.4 hereof and such default
shall continue unremedied for a period of 30 days after notice
thereof shall have been given to the Guarantor by the Lessor, the
Lessor, the Trustee, as assignee of the Lessor's rights hereunder,
shall have the ability to exercise all rights, remedies, powers,
privileges and claims of the Guarantor or any Lessee against the
Manufacturers under or in connection with the Repurchase Programs
with respect to (i) Vehicles the Guarantor or any Lessee has
determined to turn back to the Manufacturers under such Repurchase
Programs and (ii) whether or not the Guarantor or any Lessee shall
then have determined to turn back such Vehicles, any Vehicles for
which the applicable Repurchase Period will end within one week or
less.
(iii) Upon a default in the performance (after giving effect to
any grace periods provided herein) by the Guarantor or any Lessee of
its obligations hereunder to keep the Vehicles free of Liens and to
maintain the Lien of the Trustee perfected on the Collateral, the
Trustee shall have the right to take actions reasonably necessary to
correct such default with respect to the subject Vehicles including
the execution of UCC financing statements with respect to Repurchase
Programs and other general intangibles and the completion of Vehicle
Perfection and Documentation Requirements on behalf of the Guarantor
or the Lessee as applicable.
(iv) Upon the occurrence of a Liquidation Event of Default or
Limited Liquidation Event of Default, the Guarantor and each Lessee
will return any Vehicles to the related Manufacturer in accordance
with the instructions of the Lessor. To the extent any Manufacturer
fails to accept any such Vehicles under the terms of the applicable
Repurchase Program, the Lessor shall have the right to otherwise
dispose of such Vehicles and to direct the Guarantor or the
applicable Lessee to dispose of
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such Vehicles in accordance with its instructions. In addition, the
Lessor shall have all of the rights, remedies, powers, privileges and
claims vis-a-vis the Guarantor or any Lessee, necessary or desirable
to allow '-Trustee to exercise the rights, remedies, powers,
privileges and claims given to the Trustee pursuant to Sections 9.2,
and 9.3 of the Base Indenture and the Guarantor and each Lessee
acknowledges that it has hereby granted to the Lessor all of the
rights, remedies, powers, privileges and claims granted to the
Trustee pursuant to Article 9 of the Base indenture and that, under
certain circumstances set forth in the Base Indenture, the Trustee
may act in lieu of the Lessor in the exercise of such rights,
remedies, powers, privileges and claims.
18.5. Measure of Damages. If a Lease Event of Default, Liquidation
Event of Default or Limited Liquidation Event of Default occurs and the Lessor
or the Trustee exercises the remedies granted to the Lessor or the Trustee
under this Article 18, the amount that the Lessor shall be permitted to
recover shall be equal to:
(i) all Rent under this Agreement (calculated as provided in
Section 18.2); plus
(ii) any damages and expenses, including reasonable attorneys'
fees and expenses (and including net after-tax losses of federal and
state income tax benefits to which the Lessor would otherwise be
entitled under this Agreement), which the Lessor or the Trustee will
have sustained by reason of the Lease Event of Default, Liquidation
Event of Default or Limited Liquidation Event of Default, together
with reasonable sums for such attorneys' fees and such expenses as
will be expended or incurred in the seizure, storage, rental or sale
of the Vehicles or in the enforcement of any right or privilege
hereunder or in any consultation or action in such connection; plus
(iii) all other amounts due and payable under this Agreement;
plus
(iv) interest on amounts due and unpaid under this Agreement at
the VFR plus it from time to time computed from the date of the
Lease Event of Default, Liquidation Event of Default or Limited
Liquidation Event of Default or the date payments were originally
due the Lessor under this Agreement or from the date of each
expenditure by the Lessor which is recoverable from the Lessees
pursuant to this Section 18, as applicable, to and including the
date payments are made by the Lessees; minus
(v) an amount equal to all sums realized by the Lessor, the
Trustee from the liquidation of the Vehicles leased hereunder
(either by receipt of payment from the Manufacturers under
Repurchase Programs, from sales of Vehicles to third parties, or
otherwise), -provided, however, if an Eligible Vehicle is turned
back to the Manufacturer under the applicable Repurchase Program and
accepted for repurchase by such Manufacturer (as evidenced by a
Condition Report indicating that such
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Vehicle conforms to the requirements for repurchase under such
Repurchase Program) the Lessor and the Trustee shall be deemed to
have received on account of this clause (y) an amount equal to the
Net Book Value of such Vehicle (less (a) any Termination Payments and
(b) Repurchase Price Interest (calculated as if the Repurchase Price
will be received on the 60th day after the Turnback Date) payable in
respect of such Vehicle).
18.6. Application of Proceeds. The proceeds of any sale or other
disposition pursuant to Section 18.2 or 18.3 shall be applied in the following
order: (i) to the reasonable costs and expenses incurred by the Lessor in
connection with such sale or disposition, including any reasonable costs
associated with repairing any Vehicles, and reasonable attorneys' fees in
connection with the enforcement of this Agreement, (ii) to the payment of
outstanding Rent (such payments to be applied first to outstanding variable
Rent, then to outstanding Supplemental Rent and then to outstanding Base
Rent), (iii) to the payment of all other amounts due hereunder, and (iv') any
remaining amounts to the Lessor, or such Person(s) as may be lawfully entitled
thereto.
19. MANUFACTURER EVENTS OF DEFAULT. Upon the occurrence of any of
the following events (each, a "Manufacturer Event of Default") with respect to
any Manufacturer (subject to the provisions of Section 21 hereof regarding
Eligibility Waiver Events), the relevant Lessee on behalf of the Lessor (a)
shall no longer place Vehicle Orders for additional Vehicles from such
Manufacturer (each, a "Defaulting Manufacturer") and (b) shall cancel any
Vehicle Order with such Defaulting Manufacturer to which a VIN has not been
assigned as of the date such Manufacturer Event of Default occurs:
19.1. The failure of such Manufacturer to pay any amount when due
pursuant to the related Repurchase Program with respect to a Vehicle turned in
to such Manufacturer; provided, however, that such failure continues for more
than ninety (90) days following the Turnback Date such that the aggregate of
any such amounts not paid are in the aggregate in excess of $2,000,000 net of
amounts that are the subject of a good faith dispute as evidenced in writing
by either a member of the Lessee Group or the Manufacturer-questioning the
accuracy of the amounts paid or payable in respect of certain Vehicles
tendered for repurchase under a Repurchase Program.
19.2. The termination of such Manufacturer's Repurchase Program
(subject to the provisions of Section 21 hereof regarding Eligibility Waiver
Events).
19.3. The occurrence of an Event of Bankruptcy with respect to such
Manufacturer.
19.4. Such Manufacturer is no longer an Eligible Manufacturer or the
Repurchase Program of such Manufacturer shall no longer be an Eligible
Repurchase Program (subject, in each case, to the provisions of Section 21
hereof regarding Eligibility Waiver Events).
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20. LESSEE PARTIAL WIND-DOWN EVENTS. Upon the occurrence of any of
the events described in Sections 18.1.4, 18.1.5 or 18.1.6 with respect to any
member (such member, the "Defaulting Lessee") of the Lessee Group other than
the Guarantor (a "Lessee Partial Wind-Down Event"), then such Defaulting
Lessee shall (a) no longer place Vehicle Orders for additional Vehicles from
any Manufacturer and (b) shall cancel Vehicle Orders for Vehicles to which a
VIN has not been assigned by the Manufacturer as of the date such Lessee
Partial Wind-Down Event occurs. In the case of a Lessee Partial Wind-Down
Event, the Lessor may (i) exercise any right or remedy in respect only of such
Defaulting Lessee provided for pursuant to the provisions of Section 18.3 or
19.4 hereof and (ii) terminate the Power of Attorney with respect to such
Defaulting Lessee; provided, however, if and for so long as no Lease Event of
Default shall have occurred (other than the Lease Event of Default that caused
such Lessee Partial Wind-Down Event), the Lessor shall not exercise any such
remedy or terminate such Power of Attorney in respect of any Lessee (other
than the Defaulting Lessee) solely as a result of such Lessee Partial
Wind-Down Event.
21. ELIGIBILITY WAIVER EVENTS. In the event that a Manufacturer
Event of Default occurs by reason of an event stated in Section 19.2 or 19.4
(a "Manufacturer Wind-Down Event"), then if (i) the Series Supplement for any
Series of Notes outstanding under the Indenture provides for the right of all
or less than all of the Noteholders to waive such Manufacturer Wind-Down Event
and (ii) the Requisite Noteholders in respect of any Series of Notes waives
such Manufacturer Wind-Down Event, the Lessees may continue to place Vehicle
Orders for the purchase of Vehicles from such Defaulting Manufacturer through
this Agreement; provided, however, the total Net Book Value of all Vehicles
leased hereunder through any Defaulting Manufacturer shall not exceed the
Maximum Defaulting Manufacturer Percentage of the Net Book Value of all
Vehicles leased under this Agreement. Any such waiver by any such Requisite
Noteholders shall be referred to as an "Eligibility Waiver Event".
22. CERTIFICATION OF TRADE OR BUSINESS USE. Each Lessee hereby
warrants and certifies, under penalties of perjury, that (1) such Lessee
intends to use the Vehicles listed on the Supplemental Document(s), attached
hereto and made a part hereof, which are subject to this Agreement, are to be
used in a trade or business of such Lessee, and (2) such Lessee has been
advised that it will not be treated as the owner of the Vehicle(s) for federal
income tax purposes.
23. SURVIVAL. In the event that, during the term of this Agreement,
any member of the Lessee Group becomes liable for the payment or reimbursement
of any obligations, claims or taxes pursuant to any provision hereof, such
liability will continue, notwithstanding the expiration or termination of this
Agreement, until all such amounts are paid or reimbursed by such Lessee.
24. ADDITIONAL LESSEES. Any direct or indirect Subsidiary or
Permitted Licensee of the Guarantor (for the purposes of this Section, each, a
"Guarantor Subsidiary")
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shall have the right to become a "Lessee" under and pursuant to the terms of
this Agreement by complying with the Provisions of this Section 24. In the
event a Guarantor Subsidiary desires to become a "Lessee" under this
Agreement, then the Guarantor and such Guarantor Subsidiary shall execute (if
appropriate) and deliver to the Lessor and the Trustee:
(i) a Joinder in Lease Agreement in the form attached hereto as
Attachment C (each, a "Joinder in Lease");
(ii) the certificate of incorporation for such Guarantor
Subsidiary, duly certified by the Secretary of State of the
jurisdiction of such Guarantor Subsidiary's incorporation, together
with a copy of the by-laws of such Subsidiary Guarantor, duly
certified by a Secretary or Assistant Secretary of such Guarantor
Subsidiary;
(iii) copies of resolutions of the Board of Directors of such
Guarantor Subsidiary authorizing or ratifying the execution,
delivery and performance, respectively, of those documents and
matters required of it with respect to this Agreement, duly
certified by the Secretary or Assistant Secretary of such Guarantor
Subsidiary;
(iv) a certificate of the Secretary or Assistant Secretary of
such Guarantor Subsidiary certifying the names of the individual or
individuals authorized to sign the Joinder in Lease Agreement and
the other Related Documents to be executed by it, together with
samples of the true signatures of each such individual;
(v) a good standing certificate for such Guarantor Subsidiary
in the jurisdiction of its incorporation and the jurisdiction of its
principal place of business;
(vi) a written search report from a Person satisfactory to the
Lessor and the Trustee listing all effective financing statements
that name such Guarantor Subsidiary as debtor or assignor, and that
are filed in the jurisdictions in which filings were made pursuant
to clause (vii) below, together with copies of such financing
statements, and tax and judgment lien search reports from a Person
satisfactory to the Lessor and the Trustee showing no evidence of
liens filed against such Guarantor Subsidiary that purport to affect
any Vehicles to be leased hereunder or any Collateral under the
Indenture;
(vii) evidence of the filing of proper financing statements on
Form UCC-1 naming such Guarantor Subsidiary, as debtor, and the
Lessor as secured party covering the collateral described in Section
2(b) hereof;
(viii) an officer's Certificate and an opinion of counsel each
stating that such joinder by such Guarantor Subsidiary complies with
this Section 24 and that all
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conditions precedent herein provided for relating to such
transaction have been complied with;
(ix) a statement from each of the Rating Agencies that such
Guarantor Subsidiary becoming a "Lessee" under this Agreement will
not cause a failure to meet the Rating Agency Condition; and
(x) any additional documentation that the Lessor or the Trustee
may require to evidence the assumption by such Guarantor Subsidiary
of the obligations and liabilities set forth in this Agreement.
Upon satisfaction of the foregoing conditions and receipt by such Guarantor
Subsidiary of the applicable Joinder in Lease executed by the Lessor, such
Guarantor Subsidiary shall for all purposes be deemed to be a "Lessee" for
purposes of this Agreement and shall be entitled to the benefits and subject
to the liabilities and obligations of a Lessee hereunder.
25. TITLE. This is an agreement to lease only and title to Vehicles
will at all times remain in the Lessor's name. No member of the Lessee Group
will have any rights or interest in Vehicles whatsoever other than the right
of possession and use as provided by this Agreement.
26. GUARANTY.
26.1. Guaranty. In order to induce the Lessor to execute and deliver
this Agreement and to lease Vehicles to the Lessees, and in consideration
thereof, the Guarantor hereby (i) unconditionally and irrevocably guarantees
to the Lessor the obligations of the Lessees to make any payments required to
be made by them under this Agreement, (ii) agrees to cause the Lessees to duly
and punctually perform and observe all of the terms, conditions, covenants,
agreements and indemnities of the Lessees under this Agreement, and (iii)
agrees that, if for any reason whatsoever, any Lessee fails to so perform and
observe such terms, conditions, covenants, agreements and indemnities, the
Guarantor will duly and punctually perform and observe the same (the
obligations referred to in clauses (i) - through (iii) above are collectively
referred to as the "Guaranteed Obligations"). The liabilities and obligations
of the Guarantor under the guaranty contained in this Section 26 (this
"Guaranty") will be absolute,and unconditional under all circumstances. This
Guaranty shall be a guaranty of payment and performance and not merely of
collection, and the Guarantor hereby agrees that it shall not be required that
the Lessor or the Trustee assert or enforce any rights against any of the
Lessees or any other person before or as a condition to the obligations of the
Guarantor pursuant to this Guaranty.
26.2. Scope of Guarantor's Liability. The Guarantor's obligations
hereunder are independent of the obligations of the Lessees, any other
guarantor or any other Person, and the Lessor may enforce any of its rights
hereunder independently of any other right or remedy that the Lessor may at
any time hold with respect to this Agreement or any security
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or other guaranty therefor. Without limiting the generality of the foregoing,
the Lessor may bring a separate action against the Guarantor without first
proceeding against any of the Lessees, any other guarantor or any other
Person, or any security held by the Lessor, and regardless of whether the
Lessees or any other guarantor or any other Person is joined in any such
action. The Guarantor's liability hereunder shall at all times remain
effective with respect to the full amount due from the Lessees hereunder,
notwithstanding any limitations on the liability of the Lessees to the Lessor
contained in any of the Related Documents or elsewhere. The Lessor's rights
hereunder shall not be exhausted by any action taken by the Lessor until a '
11 Guaranteed Obligations have been fully paid and performed. The liability of
the Guarantor hereunder shall be reinstated and revived, and the rights of the
Lessor shall continue, with respect to any amount at any time paid on account
of the Guaranteed Obligations which shall thereafter be required to be
restored or returned by the Lessor upon the bankruptcy, insolvency or
reorganization of any of the Lessees, any other guarantor or any other Person,
or otherwise, all as though such amount had not been paid.
26.3. Lessor's Right to Amend this Agreement, Etc. The Guarantor
authorizes the Lessor, at any time and from time to time without notice and
without affecting the liability of the Guarantor hereunder, to: (a) alter the
terms of all or any part of the Guaranteed Obligations and any security and
guaranties therefor including without limitation modification of times for
payment and rates of interest; (b) accept new or additional instruments,
documents, agreements, security or guaranties in connection with all or any
part of the Guaranteed Obligations; (c) accept partial payments on the
Guaranteed Obligations; (d) waive, release, reconvey, terminate, abandon,
subordinate, exchange, substitute, transfer, compound, compromise, liquidate
and enforce all or any part of the Guaranteed Obligations and any security or
guaranties therefor, and apply any such security and direct the order or
manner of sale thereof (and bid and purchase at any such sale), as the Lessor
in its discretion may determine; (e) release any Lessee, any guarantor or any
other Person from any personal liability with respect to all or any part of
the Guaranteed Obligations; and (f) assign its rights under this Guaranty in
whole or in part.
26.4. Waiver of Certain Rights by Guarantor. The Guarantor hereby
waives each of the following to the fullest extent allowed by law:
(a) all statutes of limitation as a defense to any action brought by
the Lessor against the Guarantor;
(b) any defense based upon:
(i) the unenforceability or invalidity of all or any part of
the Guaranteed Obligations or any security or other guaranty for the
Guaranteed Obligations or the lack of perfection or failure of
priority of any security for the Guaranteed Obligations; or
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(ii) any act or omission of the Lessor or any other Person that
directly or indirectly results in the discharge or release of any of
the Lessees or any other Person or any of the,Guaranteed Obligations
or any security therefor; or
(iii) any disability or any other defense of any Lessee or any
other Person with respect to the Guaranteed Obligations, whether
consensual or arising by operation of law or any bankruptcy,
insolvency or debtor-relief proceeding, or from any other cause;
(c) any right (whether now or hereafter existing) to require the
Lessor, as a condition to the enforcement of this Guaranty, to:
(i) accelerate the Guaranteed Obligations;
(ii) give notice to the Guarantor of the terms, time and place
of any public or private sale of any security for the Guaranteed
Obligations; or
(iii) proceed against any Lessee, any other guarantor or any
other Person, or proceed against or exhaust any security for the
Guaranteed Obligations;
(d) all rights of subrogation, all rights to enforce any remedy that
the Lessor now or hereafter has against any Lessee or any other Person,
and any benefit of, and right to participate in, any security now or
hereafter held by the Lessor with respect. to the Guaranteed Obligations;
(e) presentment, demand, protest and notice of any kind, including
without limitation notices of default and notice of acceptance of this
Guaranty;
(f) all suretyship defenses and rights of every nature otherwise
available under New York law and the laws of any other jurisdiction; and
(g) all other rights and defenses the assertion or exercise of which
would in any way diminish the liability of the Guarantor hereunder.
26.5. Lessees' Obligations to Guarantor and Guarantor's Obligations
to Lessees Subordinated. Until all of the Guaranteed Obligations have been
paid in full, the Guarantor agrees that all existing and future debts,
obligations and liabilities of the Lessees to the Guarantor or the Guarantor
to any of the Lessees (hereinafter collectively referred to as "Subordinated
Debt") shall be and hereby are expressly subordinated to the Guaranteed
Obligations on the terms set forth in clauses (a) through (e) below, and the
payment thereof is expressly deferred in right of payment to the prior payment
in full of the Guaranteed Obligations. For purposes of this Section 26.5, to
the extent the Guaranteed Obligations consist of the obligation to pay money,
the Guaranteed Obligations shall not be deemed paid in full unless and until
paid in full in cash.
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(a) Upon any distribution of assets of the Guarantor or any Lessee
upon any dissolution, winding up, liquidation or reorganization of such
Lessee, whether in bankruptcy, insolvency, reorganization or receivership
proceedings, or upon an assignment for the benefit of creditors or any
other marshalling of the assets and liabilities of the Guarantor or such
Lessee, or otherwise:
(i) the holders of the Guaranteed Obligations shall be entitled
to receive payment in full of the Guaranteed Obligations before the
Guarantor or the Lessee, as the case may be, is entitled to receive
any payment on account of the Subordinated Debt;
(ii) any payment by, or distribution of assets of, the
Guarantor or such Lessee of any kind or character, whether in cash,
property or securities, to which such Lessee or the Guarantor would
be entitled except for this subordination shall be paid or delivered
by the Person making such payment or distribution, whether a trustee
in bankruptcy, a receiver or liquidating trustee, or otherwise,
directly to the holders of the Guaranteed Obligations to be held as
additional security for the Guaranteed Obligations in an interest
bearing account until the Guaranteed Obligations have been paid in
full; and
(iii) if, notwithstanding the foregoing, any payment by, or
distribution of assets of, the Guarantor or such Lessee of any kind
or character, whether in cash, property or securities, in respect of
any Subordinated Debt shall be received by such Lessee or the
Guarantor before the Guaranteed Obligations are paid in full, such
payment or distribution shall be held in trust and immediately paid
over in kind to the holders of the Guaranteed Obligations in an
interest bearing account until the Guaranteed Obligations have been
paid in full.
(b) The Guarantor authorizes and directs each Lessee and each Lessee
authorizes and directs the Guarantor to take such action as may be
necessary or appropriate to effectuate and maintain the subordination
provided herein.
(c) No right of any holder of the Guaranteed Obligations to enforce
the.subordination herein shall at any time or in any way be prejudiced or
impaired by any act or failure to act on the part of the Guarantor, any
Lessee, the Lessor or any other Person or by any noncompliance by the
Guarantor, any Lessee, the Lessor or any other Person with the terms,
provisions and covenants hereof or of the Related Documents regardless of
any knowledge thereof that any such holder of the Guaranteed Obligations
may have or be otherwise charged with.
(d) Nothing express or implied herein shall give any Person other
than the Lessees, the Lessor, the Trustee and the Guarantor any benefit
or any legal or equitable right, remedy or claim hereunder.
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(e) If the Guarantor shall institute or participate in any suit,
action or proceeding against any Lessee or any Lessee shall institute or
participate in any suit, action or proceeding against the Guarantor, in
violation of the terms hereof, such Lessee or the Guarantor, as the case
may be, may interpose as a defense or dilatory plea this subordination,
and the holders of the Guaranteed Obligations are irrevocably authorized
to intervene and to interpose such defense or plea in their name or in
such Lessee's or the Guarantor's, as the case may be, name.
26.6. Guarantor to Pay Lessor's Expenses. The Guarantor agrees to
pay to the Lessor, on demand, all costs and expenses, including attorneys' and
other professional and paraprofessional fees, incurred by the Lessor in
exercising any right, power or remedy conferred by this Guaranty, or in the
enforcement of this Guaranty, whether or not any action is filed in connection
therewith. Until paid to the Lessor, such amounts shall bear interest,
commencing with the Lessor's demand therefor, at the VFR plus 1%.
26.7. Reinstatement. This Guaranty shall continue to be effective or
be reinstated, as the case may be, if at any time payment of any of the
amounts payable by any Lessee under this Agreement is rescinded or must
otherwise be restored or returned by the Lessor, upon an event of bankruptcy,
dissolution, liquidation or reorganization of any member of the Lessee Group
or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, any member of the Lessee
Group or any substantial part of their respective property, or otherwise, all
as though such payment had not been made.
26.8. Pari Passu Indebtedness. The Guarantor (i) represents and
warrants that, as of the date hereof, the obligations of the Guarantor under
this Guaranty will rank pari passu with any existing unsecured indebtedness of
the Guarantor and (ii) covenants and agrees that from and after the date
hereof the obligations of the Guarantor under this Guaranty will rank sari
- -passu with any unsecured indebtedness of the Guarantor incurred after the
date hereof.
27. RIGHTS OF LESSOR ASSIGNED TO TRUSTEE. Notwithstanding anything
to the contrary contained in this Agreement, each member of the Lessee Group
acknowledges that the Lessor has assigned all of its rights under this
Agreement to the Trustee for the benefit of the Noteholders. Accordingly, each
member of the Lessee Group agrees that:
(i) Subject to the terms of the Indenture, the Trustee shall
have all the rights, powers, privileges and remedies of the Lessor
hereunder and the Guarantor's and the relevant Lessee's obligations
hereunder shall not be subject to any claim.or defense which the
Guarantor or such Lessee may have against the Lessor (other than the
defense of payment actually made). Specifically, each member of the
Lessee Group agrees that, upon the occurrence of an Amortization
Event or, subject to the provisions of Section 20 hereof, a Lessee
Partial Wind-Down Event or, subject to the
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provisions of Section 19 hereof, a Manufacturer Event of Default,
the Trustee may exercise (for and on behalf of the Lessor) any right
or remedy against any member of the Lessee Group provided for herein
and no member of the Lessee Group will interpose as' a defense that
such claim should have been asserted by the Lessor;
(ii) Upon the delivery by the Trustee of any notice to any
member of the Lessee Group stating that a Manufacturer Event of
Default, an Amortization Event or Lessee Partial Wind-Down Event
with respect to such Lessee has occurred, then such member of the
Lessee Group, will, if so requested by the Trustee, treat the
Trustee or the Trustee's designee for all purposes as the lessor
hereunder and in all respects comply with all obligations under this
Agreement that are asserted by the Trustee as the successor to the
Lessor hereunder, irrespective of whether such member of the Lessee
Group has received any such notice from the Lessor; provided,
however, the Trustee, shall in no event be liable to any Lessee for
any action taken by it in its capacity as successor to the Lessor
other than actions that constitute negligence or willful misconduct;
(iii) Each member of the Lessee Group acknowledges that
pursuant to the Indenture the Lessor has irrevocably authorized and
directed such member of the Lessee Group to, and each such member of
the Lessee Group shall, make payments of Rent hereunder (and any
other payments hereunder) directly to the, Trustee for deposit in
the Collection Account established by the Trustee for receipt of
such payments pursuant to the Indenture and such payments shall
discharge the obligation of such member of the Lessee Group to the
Lessor hereunder to the extent of such payments. Upon written notice
to the relevant member of the Lessee Group of a sale or assignment
by the Trustee of its right, title and interest in moneys due under
this Agreement to a successor Trustee, such member of the Lessee
Group shall thereafter make payments of all Rent (and any other
payments hereunder) to the party specified in such notice;
(iv) upon request made by the Trustee at any time, each member
of the Lessee Group will take such actions as are requested by the
Trustee to assist the Trustee in maintaining the Trustee's perfected
security interest in the Vehicles leased under this Agreement, the
Certificates of Title with respect thereto, the Collateral pursuant
to the Indenture and the collateral granted to the Lessor pursuant
to Section 2(b) (such grant of collateral to be effective as of the
date of this Agreement, but only in the event that this Agreement is
recharacterized as described in such Section 2(b)); and
(v) This Agreement has been assigned by the Lessor to the
Trustee pursuant to the Indenture as collateral security only for
all Series of Notes that do not provide for segregated collateral
and, accordingly, all references herein to "all" Series of Notes
shall refer only to all Series of Notes that do not provide for
segregated collateral.
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28. RIGHT OF LESSEE TO DELEGATE RIGHTS AND OBLIGATIONS HEREUNDER TO
GUARANTOR. If and for so long as the Guarantor is acting as the Servicer under
the Indenture, any Lessee shall be permitted to delegate to the Guarantor
(acting in such capacity) its rights and obligations under this Agreement,
including, without limitation, its rights and obligations under Sections 10
and 11 hereof. No such delegation of rights or obligations shall, however,
operate in any manner to release any such delegating Lessee from any of its
obligations under this Agreement.
29. MODIFICATION AND SEVERABILITY. The terms of this Agreement will
not be waived, altered, modified, amended, supplemented or terminated in any
manner whatsoever except by written instrument signed by the Lessor and each
Lessee and consented to in writing by the Trustee. If any part of this
Agreement is not valid or enforceable according to law, all other parts will
remain enforceable. The Lessor shall provide prompt written notice to each
Rating Agency of any such waiver, modification or amendment.
30. CERTAIN REPRESENTATIONS AND WARRANTIES. Each Lessee represents
and warrants to the Lessor and the Trustee as to itself and as to each other
Lessee, and the Guarantor represents and warrants to the Lessor and the
Trustee as to itself and as to each Lessee, that as of the Closing Date with
respect to the first Series of Notes:
30.1. Due Organization, Authorization, Etc. The Guarantor is a
general partnership duly organized and validly existing. Each Lessee is a
corporation duly organized and validly existing and in good standing under the
laws of the jurisdiction of its incorporation and is duly qualified and in
good standing in each jurisdiction where, because of the nature of its
activities or properties, the failure so to qualify would have a Material
Adverse Effect on such Lessee. The execution, delivery and performance by the
Guarantor and each Lessee of this Agreement and the other Related Documents to
be executed and delivered by it are within its corporate or partnership powers
(as applicable), have been duly authorized by all necessary corporate or
partnership action (including, with respect to corporate action, shareholder
approval, if required), have received all necessary governmental and other
consents and approvals (if any shall be required), and do not and will not
contravene or conflict with, or create a default, breach, Lien or right of
termination or acceleration under, any Requirement of Law or Contractual
Obligation binding upon it, other than such default, breach, Lien or right of
termination or acceleration which does not have a Material Adverse Effect on
the Guarantor or such Lessee, as applicable. This Agreement and each other
Related Document to be executed and delivered by it are (or when executed and
delivered will be) the legal, valid, and binding obligations of the Guarantor
or such Lessee, enforceable against the Guarantor or such Lessee, as the case
may be, in accordance with their respective terms, subject to bankruptcy,
insolvency and other laws affecting the enforcement of creditors, rights. Each
Lessee is a Subsidiary or Permitted Licensee of the Guarantor.
30.2. Financial Information; Financial Condition. All balance
sheets, all statements of operations, of shareholders, equity and of cash
flow, and other financial data
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which have been or shall hereafter be furnished to the Lessor or the Trustee
for the purposes of or in connection with this Agreement or the Related
Documents have been and will be prepared in accordance with GAAP and do and
will present fairly the financial condition of the entities involved as of the
dates thereof and the results of their operations for the periods covered
thereby and that there has been no material change in the financial condition
or results of operation since the respective dates of such balance sheets,
statements and other- financial data. Such financial data include the
following financial statements and reports which have been furnished to the
Lessor and the Trustee-on or prior to such Closing Date:
(a) the audited combined balance sheet of the Guarantor and the
Lessees as of December 31, 1993 and the related statements of operations,
stockholders, deficit and cash flows for the fiscal year ending on such
date; and
(b) the unaudited pro forma consolidated balance sheets of the
Guarantor and the Lessees and statement of operations, accompanied by an
Officer's Certificate verifying the accuracy and completeness thereof
signed by an Authorized Officer of the Guarantor, for the 9 month period
ending September 30, 1994.
30.3. Litigation. Except for claims which are fully covered by
insurance, no claims, litigation (including, without limitation, derivative
actions), arbitration, governmental investigation or proceeding or inquiry is
pending or, to the best of the Guarantor's or such Lessee's knowledge,
threatened against the Guarantor or any Lessee which would, if adversely
determined, have a Material Adverse Effect on the Guarantor or such Lessee, as
applicable.
30.4. Liens. The Vehicles are free and clear of all Liens other than
(i) Permitted Liens, (ii) Liens in favor of the Trustee, and (iii) during only
the period commencing on such Closing Date and expiring on the date 30 days
thereafter, Liens in favor of lenders to the Lessor that have been paid in
full. The Trustee has obtained, and will continue to obtain, for the benefit
of the Noteholders pursuant to the terms of the Indenture, as security for the
liabilities under the Indenture and the Notes, a first priority perfected Lien
on all Vehicles leased under this Agreement. Except as otherwise permitted
under the Indenture, all Vehicle Perfection and Documentation Requirements
with respect to all Vehicles on or after the date hereof have and will
continue to be satisfied.
30.5. Employee Benefit Plans. (a) During the twelve consecutive
month period prior to such Closing Date: (i) no steps have been taken by the
Guarantor or any Lessee to terminate any Pension Plan and (ii) no contribution
failure has occurred with respect to any Pension Plan sufficient to give rise
to a Lien under Section 302(f)(1) of ERISA in connection with such Pension
Plan; (b) no condition exists or event or transaction has occurred with
respect to any Pension Plan which could result in the incurrence by the
Guarantor or any Lessee or any member of the Controlled Group of fines,
penalties or liabilities for ERISA violations, which in the case of any of the
events referred to in clause (a) above or this clause (b) would have a
Material Adverse Effect upon the Guarantor or such Lessee, as
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applicable, (c) neither the Guarantor nor any Lessee has any material
contingent liability with respect to any post-retirement benefits under a
Welfare Plan, other than liability for continuation coverage described in
Subtitle B of Part 6 of Title I of ERISA and liabilities which would not have
a Material Adverse Effect upon the Guarantor or such Lessee, as applicable,
and (d) neither the Guarantor nor the Lessee has established or maintains any
Pension Plan except as explicitly disclosed by the Guarantor or the Lessee, as
applicable, in a Certificate to such effect.
30.6. Investment Company Act. Neither the Guarantor nor any Lessee
is an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as
amended.
30.7. Regulations G, T, U and X. Neither the Guarantor nor any
Lessee is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System).
30.8. Business Locations; Trade Names; Principal Places of Business
Locations. Schedule 30.8 lists each of the locations where each Lessee and the
Guarantor maintains a chief executive office, principal place of business, or
any records; and Schedule 3 also lists each Lessee's and the Guarantor's legal
name, each name under or by which each Lessee and the Guarantor conducts its
business, each state in which each Lessee and the Guarantor conducts business
and each state in which each Lessee and the Guarantor has its principal place
of business.
30.9. Taxes. Each of the Guarantor and each Lessee has filed all tax
returns that are required to be filed by it, and has paid or provided adequate
reserves for the payment of all taxes, including, without limitation, all
payroll taxes and federal and state withholding taxes, and all assessments
payable by it that have become due, other than those that are not yet
delinquent or are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP. As of the Closing Date, there is no
ongoing material audit (other than routine sales tax audits and other routine
audits) or, to the Guarantor's or any Lessee's knowledge, material tax
liability for any period for which returns have been filed or were due other
than those contested in good faith by appropriate proceedings and with respect
to which adequate reserves have been established and are being maintained in
accordance with GAAP.
30.10. Governmental Authorization. The Guarantor and each Lessee has
all licenses, franchises, permits and other governmental authorizations
necessary for all businesses presently carried on by it (including owning and
leasing the real and personal property owned and leased by it), except where
failure to obtain such licenses, franchises, permits and other governmental
authorizes would not have a Material Adverse Effect on the Guarantor or such
Lessee, as applicable.
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30.11. Compliance with Laws. The Guarantor and each Lessee: (i) is
not in violation of any Requirement of Law, which violation would have a
Material Adverse Effect on the Guarantor or such Lessee, as applicable, and to
the best knowledge of the Guarantor and the Lessees, no such violation has
been alleged, (ii) has filed in a timely manner all reports, documents and
other materials required to be filed by it with any Governmental Agency (and
the information contained in each of such filings is true, correct and
complete in all material respects), except where failure to make such filings
would not have a Material Adverse Effect on the Guarantor or such Lessee, as
applicable, and (iii) has retained all records and documents required to be
retained by it pursuant to any Requirement of Law, except where failure to
retain such records would not have a Material Adverse Effect on the Guarantor
or such Lessee, as applicable.
30.12. Eligible Vehicles. Each Vehicle is or will be, as the case
may be, on the Vehicle Lease Commencement Date with respect to such Vehicle,
an Eligible Vehicle (subject to the provisions of Section 21 hereof regarding
Eligibility Waiver Requirements).
30.13. Supplemental Documents True and Correct. All information
contained in any Vehicle order or other Supplemental Document which has been
submitted, or which may hereafter be submitted by a Lessee to the Lessor is,
or will be, true, correct and complete.
Each of the foregoing representations and warranties will be deemed
to be remade as of the Closing Date with respect to each Series of Notes.
31. CERTAIN AFFIRMATIVE COVENANTS. Each Lessee covenants and agrees
as to itself and as to each other Lessee, and the Guarantor covenants and
agrees as to itself and as to each Lessee that, until the expiration or
termination of this Agreement, and thereafter until the obligations of such
Lessee or the Guarantor under this Agreement and the Related Documents are
satisfied in full, unless at any time the Lessor, the Trustee shall otherwise
expressly consent in writing, it (and, in the case of the Guarantor, will
cause each Lessee to):
31.1. Corporate Existence; Foreign Qualification. Do and cause to be
done at all times all things necessary to (i) maintain and preserve the
corporate existence of the Guarantor and each Lessee (subject to the
application of Section 32.1); (ii) be, and ensure that each Lessee is, duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction where the nature of its business makes such qualification
necessary and the failure to so qualify would have a Material Adverse Effect
on the Guarantor or such Lessee, as applicable; and (iii) comply with all
Contractual Obligations and Requirements of Law binding upon it, except to the
extent that the failure to comply therewith would not, in the aggregate, have
a Material Adverse Effect on the Guarantor or such Lessee, as applicable.
31.2. Books, Records and Inspections. (i) Maintain complete and
accurate books and records with respect to the Vehicles leased by it under
this Agreement; (ii) at any time
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and from time to time during regular business hours, and with reasonable prior
notice from the Lessor, or the Trustee, permit the Lessor, or the Trustee (or
such other person who may be designated from time to time by the Lessor or the
Trustee), or its agents or representatives to examine and make copies of all
books, records and documents in the possession or under the control of the
Guarantor or such Lessee relating to the Vehicles leased under this Agreement,
including without limitation, in connection with the Trustee's satisfaction of
any requests of a Manufacturer performing an audit under its Repurchase
Program; and (iii) visit the office and properties of the Guarantor or such
Lessee for the purpose of examining such materials, and to discuss matters
relating to the Vehicles leased hereunder or the Guarantor's or such Lessee's
performance under this Agreement with any of the officers or employees of the
Guarantor or such Lessee having knowledge of such matters.
31.3. Insurance. In addition to its obligations set forth in Section
5 hereof, each Lessee shall maintain or cause to be maintained, with
financially sound and reputable insurers satisfactory to the Lessor and the
Trustee, insurance with respect to their respective properties and businesses
against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or similar
businesses and similarly situated, of such types and in such amounts as are
customarily carried under similar circumstances by such other corporations,
and the Guarantor and the Lessee shall, from time to time upon the Lessor's or
the Trustee's reasonable request, deliver to the Lessor and the Trustee,
evidence of any such insurance then in effect. All self-insurance or statutory
permissive non-insurance maintained by any member of the Lessee Group shall be
maintained in a financially prudent manner.
31.4. Repurchase Programs. With respect to each Vehicle leased by
each Lessee (a) unless previously purchased by such Lessee pursuant to this
Agreement, turn in such Vehicle to the relevant Manufacturer within the
Repurchase Period therefor, (b) dispose of such Vehicle under the applicable
Repurchase Program according to its historical practice and in accordance with
the requirements of such Repurchase Program, and (c) comply with all of its
(and the Lessor's) obligations under the applicable Repurchase Program.
31.5. Reporting Requirements. Furnish, or cause to be furnished to
the Lessor:
(i) Audit Report. As soon as available and in any event within
one hundred ten days after the end of each fiscal year of the
Guarantor, a copy of the consolidated balance sheet of the Guarantor
and its Subsidiaries as at the end of such fiscal year, together
with the related statements of earnings, stockholders, equity and
cash flows for such fiscal year, prepared in reasonable detail and
in accordance with GAAP certified by Coopers & Lybrand (or such
other independent certified public accountants of recognized
national standing as shall be selected by the Guarantor);
(ii) Quarterly Statements. As soon as available, but in any
event within 45 days after the end of each fiscal quarter (except
the fourth fiscal quarter) of the Guarantor, copies of the unaudited
consolidated balance sheet of the Guarantor
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and its Subsidiaries as at the end of such fiscal quarter and
the,related unaudited statements of earnings, stockholders, equity
and cash flows for the portion of the fiscal year through such
fiscal quarter (and as to the statements of earnings for such fiscal
quarter) in each case setting forth in comparative form the figures
for the corresponding periods of the previous fiscal year, prepared
in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and certified
by the chief financial or accounting officer of the Guarantor as
presenting fairly the financial condition and results of operations
of the Guarantor and its Subsidiaries (subject to normal year-end
adjustments);
(iii) Lease Events of Default; Wind-Down Events. As soon as
possible but in any event within two Business Days after the
Guarantor or any Lessee has knowledge of the occurrence of any Lease
Event of Default, Potential Lease Event of Default, Manufacturer
Event of Default, Potential Manufacturer Event of Default, Lessee
Partial Wind-Down Event or Potential Lessee Partial Wind-Down Event,
a written statement of an authorized Officer describing such event
and the action that the Guarantor or a Lessee, as the case may be,
proposes to take with respect thereto;
(iv) Monthly Vehicle Statements. On or before the third
Business Day prior to each Due Date, a monthly vehicle statement
(each, a "Monthly Vehicle Statement") in a form acceptable to the
Lessor, which shall specify (i) the last eight digits of the vehicle
identification numbers (the "VIN") for the Vehicles leased hereunder
during the Related Month by such Lessee, (ii) the Capitalized Cost
for such Vehicles, (iii) the Net Book Value of such Vehicles as of
the end of the Related Month, (iv) those Vehicles that have been
turned back to Manufacturers pursuant to the applicable Repurchase
Program during the Related Month and the Repurchase Prices therefor,
(v) those Vehicles that have suffered a Casualty during the Related
Month and their respective Net Book Values, (vi) the aggregate
Repurchase Prices scheduled to be received by the Lessor during the
Related Month from the Manufacturers, (vii) the aggregate
Depreciation Charges for all Vehicles continuing in the possession
of the Lessee, (viii) the total amount of Monthly Base Rent and
Monthly Variable Rent being paid on such date, (ix) information with
respect to such Lessee necessary for the Servicer to compute the
Aggregate Asset Amount as of the end of the Related Month, (x)
information with respect to such Lessee necessary for the Servicer
to compute the Monthly Supplemental Rent for such Lessee with
respect to the Related Month, and (xi) any other charges owing from,
and credits due to, the Lessee submitting such Statement under this
Agreement; and
(v) Other. Promptly, from time to time, such other information,
documents, or reports respecting the Vehicles leased under this
Agreement or the condition or operations, financial or otherwise, of
the Guarantor or the Lessees as the Lessor or the Trustee may from
time to time reasonably request in order to protect the interests of
the Lessor or the Trustee under or as contemplated by this Agreement
or any other Related Document.
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31.6. Taxes and Liabilities. Pay when due all taxes, assessments and
other material (determined on a consolidated basis) liabilities (including,
without limitation, taxes, titling fees and registration fees payable with
respect to Vehicles) except as contested in good faith and by appropriate
proceedings with respect to which adequate reserves have been established, and
are being maintained, in accordance with GAAP if and so long as forfeiture of
any part of the Vehicles leased under this Agreement will not result from the
failure to pay any such taxes, assessments or other material liabilities
during the period of any such contest.
31.7. Compliance with Laws. Comply with all Requirements of Law
related to its businesses if the failure so to comply would have a Material
Adverse Effect on the Guarantor or such Lessee, as applicable.
31.8. Maintenance of Separate Existence. The Guarantor and each
Lessee acknowledges its receipt of a copy of that certain opinion letter
issued by Mayer, Brown & Platt, dated as of the Closing Date and addressing
the issue of substantive consolidation as it may relate to the Guarantor, each
Lessee and the Lessor. The Guarantor and each Lessee hereby agrees to maintain
in place all policies and procedures, and take and continue to take all
action, described in the factual assumptions set forth in such opinion letter
and relating to such Person.
31.9. Trustee as Lienholder. Concurrently with each leasing of a
Vehicle under this Agreement, the Servicer shall indicate on its computer
records that the Trustee as assignee of the Lessor is the holder of a Lien on
such Vehicle for the benefit of the Noteholders pursuant to the terms of the
Indenture.
32. CERTAIN NEGATIVE COVENANTS. Until the expiration or termination
of this Agreement and thereafter until the obligations of each Lessee and the
Guarantor are paid in full, the Guarantor and each Lessee agrees that, unless
at any time the Lessor and the Trustee shall otherwise expressly consent in
writing, it will not (and, in the case of the Guarantor, will not permit any
Lessee to):
32.1. Mergers, Consolidations. Be a party to any merger or
consolidation, other than: W a merger or consolidation of any Lessee into or
with the Guarantor (provided, however, that the Guarantor is the surviving
corporation and that the guarantor would not merely by virtue thereof become a
lessee hereunder) or any merger or consolidation of any Lessee with or into
another Lessee, and (ii) a merger or consolidation of the Guarantor or a
Lessee, into or with another entity if:
(a) the corporation formed by such consolidation or into or with
which the Guarantor or such Lessee, as the case may be, is merged shall
be a corporation organized and existing under the laws of the United
States of America or any State or the District of Columbia, and,- if the
Guarantor or such Lessee, as applicable, is not the surviving entity,
shall expressly assume, by an agreement supplement hereto executed and
delivered to the
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Trustee, the performance of every covenant and obligation of the
Guarantor or such Lessee, as applicable, hereunder and under all other
Related Documents;
(b) the Guarantor or the Lessee, as the case may be, has delivered
to the Trustee an officer's certificate and an opinion of counsel each
stating that such consolidation or merger and such supplemental agreement
comply with this Section 32.1 and that all conditions precedent herein
provided for relating to such transaction have been complied with; and
(c) the Rating Agency Condition shall be met with respect to such
assignment and succession.
32.2. Other Agreements. Enter into any agreement containing any
provision which would be violated or breached by the performance of its
obligations hereunder or under any instrument or document delivered or to be
delivered by it hereunder or in connection herewith.
32.3. Liens. Create or permit to exist any Lien with respect to any
vehicle leased hereunder now or hereafter existing or acquired, except Liens
in favor of the Lessor and the Trustee, and the following Liens to the extent
such liens in the aggregate would not materially adversely affect the
interests of the Lessor or the Trustee or the Secured Parties under this
Agreement or the Indenture or the likelihood of payment of Rent hereunder or
the Notes thereunder (herein collectively called the "Permitted Liens"): (i)
Liens for current taxes not delinquent or for taxes being contested in good
faith and by appropriate proceedings, and with respect to,which adequate
reserves have been established, and are being maintained, in accordance with
GAAP, (ii) Liens, including judgment liens, arising in the ordinary course of
business being contested in good faith and by appropriate proceedings, and
with respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP, (iii) Liens incurred in the ordinary
course of business in connection with worker's compensation, unemployment
insurance or other forms of governmental insurance or benefits, and (iv)
mechanics, materialmen's, landlords', warehousemen's and carrier's Liens, and
other Liens imposed by law, securing obligations arising in the ordinary
course of business that are being contested in good faith and by appropriate
proceedings and with respect to which adequate reserves have been established,
and are being maintained, in accordance with GAAP.
32.4. Use of Vehicles. Knowingly use or allow the Vehicles to be
used in any manner that would (i) make such Vehicles ineligible for repurchase
under an Eligible Repurchase Program (subject to the provisions of Section 21
hereof regarding Eligibility Waiver Events) or (ii) subject the Vehicles to
confiscation.
33. BANKRUPTCY PETITION AGAINST LESSOR. The Guarantor and each
Lessee hereby covenants and agrees (and agrees to cause any sublessee to agree
and covenant) that, prior to the date which is one year and one day after the
payment in full of
40
<PAGE>
all Series of Notes, it will not institute against, or.join any other Person
in instituting against, the Lessor any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States. In the
event that the Guarantor or any Lessee (or any sublessee thereof) takes action
in violation of this Section 33, the Lessor agrees, for the benefit of the
Noteholders, that it shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such a petition by the Guarantor or
any such Lessee against the Lessor or the commencement of such action and
raise the defense that the Guarantor or any such Lessee has agreed in writing
not to take such action and should be estopped and precluded therefrom and
such other defenses, if any, as its counsel advises that it may assert. The
provisions of this Section 33 shall survive the termination of this Agreement.
34. SUBMISSION TO JURISDICTION. The Lessor and the Trustee may
enforce any claim arising out of this Agreement in any state or federal court
having subject matter jurisdiction, including, without limitation, any state
or federal court located in the State of New York. For the purpose of any
action or proceeding instituted with respect to any such claim, the Guarantor
and each Lessee hereby irrevocably submits to the jurisdiction of such courts.
Each Lessee hereby irrevocably designates the Guarantor to receive for and on
behalf of such Lessee service of process in New York. The Guarantor and each
Lessee further irrevocably consents to the service of process out of said
courts by mailing a copy thereof, by registered mail, postage prepaid, to the
Guarantor or such Lessee, as the case may be, and agrees that such service, to
the fullest extent permitted by law, (i) shall be deemed in every respect
effective service of process upon it in any such suit, action or proceeding
and (ii) shall be taken and held to be valid personal service upon and
personal delivery to it. Nothing herein contained shall affect the right of
the Trustee and the Lessor to serve process in any other manner permitted by
law or preclude the Lessor or the Trustee from bringing an action or
proceeding in respect hereof in any other country, state or place having
jurisdiction over such action. The Guarantor and each Lessee hereby
irrevocably waives, to the fullest extent permitted by law, any objection
which it may have or hereafter have to the laying of the venue of any such
suit, action or proceeding brought in any such court located in the State of
New York and any claim that any such suit, action or proceeding brought in
such a court has been brought in an inconvenient forum.
35. GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement. All obligations of the Guarantor and each Lessee and all
rights of the Lessor or the Trustee expressed herein shall be in addition to
and not in limitation of those provided by applicable law or in any other
written instrument or agreement.
41
<PAGE>
36. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY, OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED
TRANSACTION, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
37. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission or
similar writing) and shall be given to such party, addressed to it, at its
address or telephone number,set forth on the signature pages below, or at such
other address or telephone number as such party may hereafter specify for the
purpose by notice to the other party. In each case, a copy of all notices,
requests and other communications that are sent by any party hereunder shall
be sent to the Trustee and a copy of all notices, requests and other
communications that are sent by any Lessee or the Guarantor to the Guarantor
or any other Lessee that pertain to this Agreement shall be sent to the Lessor
and the Trustee. Copies of notices, requests and other communications
delivered to the Trustee and the Lessor pursuant to the foregoing sentence
shall be sent to the following addresses:
TRUSTEE: BANKERS TRUST COMPANY
4 Albany Street
New York, New York 10006
Attention: Corporate Trust and
Agency Group/Structured Finance
Telephone: (212) 250-6533
Fax: (212) 250-6439
LESSOR: BRAC-OPCO, Inc.
130 West Central Avenue
Santa Ana, California 92707
Attention: Paul Christensen
Telephone: (714) 662-06-35
Fax: (714) 557-0364
Each such notice, request or communication shall be effective when received at
the address specified below. Copies of all notices must be sent by first class
mail promptly after transmission by facsimile.
42
<PAGE>
38. LIABILITY. Each member of the Lessee Group shall be held jointly
and severally liable for all of the obligations of each other member of the
Lessee Group hereunder.
39. TITLE TO REPURCHASE PROGRAMS IN LESSOR. Each Lessee, by its
execution hereof, acknowledges and agrees that (i) the Lessor is the sole
owner and holder of all right, title and interest in and to the Repurchase
Programs and (ii) such Lessee has no right, title or interest in any
Repurchase Program. To confirm the foregoing, each Lessee, by its execution
hereof, hereby assigns and transfers to the Lessor any rights that such Lessee
may have in respect of any Repurchase Programs.
40. HEADINGS. Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
41. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered,
shall be deemed to be an original and all of which counterparts, taken
together, shall constitute one and the same Agreement.
42. EFFECTIVENESS. This Agreement shall become effective
concurrently with the issuance of the first Series of Notes.
43
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement or
caused it to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
LESSOR:
BRAC SOCAL FUNDING CORPORATION
By:_______________________________
Name:__________________________
Title__________________________
Address: 130 West Central Avenue
Santa Ana, CA 92707
Attention:________________________
Telephone: (714) -
--- ----- -------
Telefax: (714) -
--- ----- -------
LESSEES:
BRAC-OPCO, INC.
By:_______________________________
Name:__________________________
Title__________________________
Address: 130 West Central Avenue
Santa Ana, CA 92707
Attention: Paul Christensen
Telephone: (714) 662-0635
Telefax: (714) 557-0364
[SAMPLE SIGNATURE BLOCK FOR LESSEES]
By:_______________________________
Name:__________________________
Title__________________________
Address:__________________________
__________________________
Attention:________________________
Telephone: ( ) -
---- ----- -------
Telefax: ( ) -
---- ----- -------
<PAGE>
GUARANTOR:
BUDGET RENT A CAR OF SOUTHER
CALIFORNIA,
a California general partnership,
By its partners:
R. & G. BIRD, INC.,
a California corporation
By:/S/ Rubin Bird
--------------------------
Rubin Bird
President and Secretary
RUBIN BIRD, an individual
By:/S/ Rubin Bird
--------------------------
Rubin Bird
MIRKIN & FAMILY, INC.,
a California general partnership,
By:/S/ Jeffrey R. Mirkin,
--------------------------
Jeffrey R. Mirkin,
President and Secretary
THE MIRKIN PARTNERSHIP,
a California general partnership,
By its partners:
By:/S/ Jeffrey R. Mirkin,
--------------------------
Jeffrey R. Mirkin, as Trustee of the
Morris J. Mirkin Trust for the benefit of
Jeffrey R. Mirkin, of the Morris J. Mirkin
Trust for the benefit of Margo K. Mirkin,
and of the Morris J. Mirkin Trust for the
benefit of Mitchell A. Mirkin
Address: 150 South Doheny Drive
Beverly Hills, CA 90211
Attention: Jeffrey Mirkin
_____________________________
Telephone: (310) 278-1021
Telefax: (310) 273-4734
BUDGET CAR AND TRUCK RENTAL
October 23, 1989
BY HAND
BUDGET RENT A CAR OF SOUTHERN CALIFORNIA,
a California General Partnership
150 South Doheny Beverly Hills, California 90211
BRAC-OPCO, Inc., a California Corporation
150 South Doheny
Beverly Hills, California 90211
Attn: Jeff Mirkin
John O'Rourke
Re: Licensing of New Territories
Gentlemen:
This letter will set forth the terms and conditions under which
Transportation and Storage Associates ("TSA") will license BRAC-OPCO, Inc. to
the territories (collectively, the "Territories") set forth below.
The Territories will include the following general areas:
1. Downtown L.A.
2. Midtown L.A.
3 South Bay/Torrance
4. Norwalk, Whittier, La Habra (excluding La Mirada)
5. Pasadena, San Gabriel area
6. Covina (excluding City of Industry and territories
franchised to others such as Alhambra, etc.)
7. Palm Springs, Indio Corridor
The precise territories, of course, will be as set forth in the specific
franchise agreements. There will be a separate franchise agreement for each
territory.
<PAGE>
Budget Rent a Car of Southern California
BRAC-OPCO, Inc.
October 23, 1989
Page 2
Minimum Performance or Penetration Requirements. The following shall set
forth the penetration requirements, in general terms, we agree upon.
The following schedule of vehicles required does not include (i.e., is in
addition to) trucks owned and operated by Budget Rent a Car Corporation in
their One Way Truck Rental Program. The subject of penetration requirements
and performance standards is discussed in detail in the franchise agreement
but, in general, we will agree to the following market penetration.
Year 1 Year 2 Year 3 Year 4 Year 5
------ ------ ------ ------ ------
Downtown L.A 50 100 150 200 250
Midtown L.A 10 20 30 40 50
South Bay/Torrance 10 25 50 70 100
Norwalk, Whittier, La Habra 15 30 40 50 60
(excluding La Mirada)
San Gabriel area, Pasadena 15 30 60 70 100
Covina (excluding City of 10 20 25 50 75
Industry and territories
franchised to others, such
as Alhambra, etc.)
Palm Springs, Indio 10 20 30 50 75
During each twelve month period subsequent to the sixtieth (60th) month
for which the franchise is renewed, you shall maintain available for rental a
yearly average of vehicles increasing by one vehicle for each and every
increase in population of 10,000 individuals (including transient population
or daily workers) for the specific territory, determined using a base year
population for 1994 and increased based upon the population growth since 1994
on each year of renewal. Franchisor shall provide the licensees with a census
study from a reputable third party in the event Franchisor asserts performance
requirements based upon transient population or daily workers that are not
included in governmental or chamber of commerce or similar reports.
<PAGE>
Budget Rent a Car of Southern California
BRAC-OPCO, Inc.
October 23, 1989
Page 3
The foregoing performance schedule shall be exclusive of mini-passenger
vans and certain other multi-purpose vehicles. The precise vehicles involved
and the licensing of those vehicles are subject to the final determination of
a dispute that has arisen between our company and Budget Rent a Car
Corporation, an Illinois Corporation and Budget Rent a Car of Southern
California. In the event the dispute is resolved favorably to our company, and
assuming your franchise agreements are otherwise effective and not in default,
these vehicles will be included within the vehicles licensed under the
franchise agreements subject to minimum performance or penetration
requirements for such vehicles equal to the greater of (1) the number of such
vehicles operated on the effective date of this letter agreement, or (2) the
number of such vehicles operated on the effective date of the franchise
agreements, for each territory licensed respectively. Said performance
requirements shall not increase further during the first five years of the
franchise and shall thereafter increase only as specified in the performance
schedule based upon population growth for the respective territories.
Also, your franchise agreement will be subject to the prior approval of
Budget Rent a Car Corporation.
From all Budget car rental offices in all of your territories, you shall
have available and offer to the public the full complement of vehicles
licensed in connection herewith, in a prompt manner for servicing customers,
even if vehicles are shuttled from the Master facility within a specific
territory to a smaller car and truck facility. The Master facility required
for each and every territory is discussed below in further detail.
Upon renewal of your franchise, it is understood and agreed that the
then current or renewed form of your franchise agreement may include terms and
conditions upon renewal that may be materially different from those contained
in your original franchise agreement, and may require you to expend additional
sums for capital improvements or otherwise, to conform to the franchisor's
then current standards of performance. However, royalties and other payments
for the rights licensed in the franchise agreement payable to Franchisor will
not be increased upon renewal; provided, that Franchisor has no control over
the One Way Truck Rental Program or fees charged by Budget Rent a Car
Corporation and those fees charged by Budget are subject to change, and
changes may arise in the future due to new, altered or experimental programs
developed by Budget.
In order to meet the minimum performance schedule for the number of
vehicles to be maintained in any given territory, once you are noticed of a
deficiency in the number of vehicles being operated in any given territory,
you will not be deemed to have cured the deficiency unless the aggregate
number of vehicles in all of your territories increases by the amount of the
deficiency in the territory for which notice is served; provided, however,
that if there is another territory or territories for which the number of
vehicles maintained for rental on an average daily
<PAGE>
Budget Rent a Car of Southern California
BRAC-OPCO, Inc.
October 23, 1989
Page 4
basis over the previous six months exceeds the minimum number of vehicles
required in said other territory or territories, then vehicles may be removed
from the territory or territories with the excess vehicles to the deficient
territory without the requirement that the overall number of vehicles for all
territories be increased.
Additionally, in the event of a deficiency in the number of vehicles
required for a specific territory, in order to effect a cure, the number of
vehicles available for rental in the territory with a deficiency must increase
to the extent required to cure the deficiency for the specific territory.
In the event there is a notice of deficiency in the minimum vehicle
requirements and a cure affected or attempted by the Franchisee, the minimum
number of vehicles required for each and every day following the cure shall
not fall below the then effective minimum performance requirements. In the
event the minimum number of vehicles maintained for rental for the territory
falls below 75% of the minimum vehicles required on any one or more days
following a notice of deficiency and a subsequent affected or attempted cure
thereof, then, in addition to the other rights and remedies of the Franchisor,
the Franchisor may terminate the franchise for the territory in question or
may convert the franchise for the territory to be non-exclusive in nature, at
the discretion of the Franchisor and without further notice nor the
opportunity to cure. Nothing contained in the previous sentence shall limit
the rights or remedies of the Franchisor in the event of a default in vehicle
requirements following a default and subsequent affected or attempted cure.
You or your successors shall not move vehicles among the various
territories in an attempt to defeat the minimum number of vehicles required in
any given territory, either before or after notice of the deficiency is
served, except in accordance with the above discussion concerning the
situation where there are more vehicles than required in another territory.
We have decided to franchise the territories separately, so that there
will be seven (7) separate franchises and franchise agreements.
You will participate in the One Way Truck Rental Program. Each separate
franchise must have appropriate trucking facilities (sometimes referred to
herein as a "Master facility") not just for the One Way Program, but to
service and offer a full product mix of vehicles licensed. The full service
"Master facility" may be a combined car and truck facility. For example, for
each and every one of your territories, you must provide at least one facility
that is full service and that accommodates all aspects of the vehicle rentals
licensed. If you meet the minimum vehicle requirements and you fail to abide
by the facility requirements, that would also constitute a default in the
performance requirements and would be subject to the same notice requirements,
remedies and alternatives of the franchisor as contained in the franchise
agreement and as provided therein for a failure to maintain a specified number
of vehicles. We do not want you to agree to more than you are comfortable
with, but we also do not want to license territory that will not be
<PAGE>
Budget Rent a Car of Southern California
BRAC-OPCO, Inc.
October 23, 1989
Page 5
developed by you or your successor.
Franchise Fee and Royalty Fee. We will require the following fees.
$10,000 will be paid as a down payment for all of the seven new franchises,
towards a total purchase price of $70,000. Said $60,000 of the total purchase
price shall be payable in the form of a five year fully amortized promissory
note bearing interest at the rate of ten percent (10%) per annum, payable
annually on each and every anniversary date following the date of said
promissory note.
BRAC-OPCO, Inc. shall own all of the seven separate franchises and SoCal
and its partners shall all jointly and severally guaranty all obligations of
BRAC-OPCO, Inc. and the transfers of one or more of the franchises shall be
subject to the terms and conditions of the franchise agreement. The guarantees
shall be similar in form and substance to those contained in the guarantees
signed by SoCal in connection with the Ractor and TransPac transfers to BRAC-
OPCO.
In general, royalties charged would be 12% of time, mileage and C.D.W.;
8% of time, mileage and C.D.W. on long term rentals (i.e., six months or
longer, but less than 12 months); and 3% of time, mileage and C.D.W. on long
term leases of twelve months or greater. Royalties of 5% of time, mileage and
C.D.W. would be charged on One Way Truck Rental vehicles owned by Budget Rent
a Car Corporation of Illinois, through January 1, 1990 and possibly modified
thereafter, since this is an experimental program being test marketed by
Budget Rent a Car Corporation.
In the event Budget Rent a Car Corporation offers to you as our
ifranchisee the Truck Allowance Program that has been discussed ("TAPS"), then
we will participate in that program if implemented. To date, there is no
written commitment from Budget Rent a Car Corporation to offer such a program,
but if it is implemented (and we were told it will be) by Budget Rent a Car
Corporation, then we will participate in the program. This would be an
incentive program that is anticipated to reduce your fees on an incremental
basis for additional trucks purchased in 1989 by approximately 4.5% to a total
royalty of 7.5% on the increment. We are not certain of the details of the
program at this time and this is not intended as an inducement for you to
enter into any agreements and we would not even mention it in this letter, but
for the fact that you are aware of the possible program and you requested our
commitment that we will participate in the program as presently announced. You
must consult the franchise agreement for specific charges.
This agreement is entered into in connection with the transfer of the
TransPac and Ractor franchise agreements and those claims of SoCal and
BRAC-OPCO, Inc. and any parties affiliated thereto, to operate a truck rental
business in the territories identified in this letter agreement only. This
letter agreement has no affect on and does not compromise or otherwise effect
the rights, claims and remedies of the parties in connection with the subject
matter of that lawsuit currently
<PAGE>
Budget Rent a Car of Southern California
BRAC-OPCO, Inc.
October 23, 1989
Page 6
pending in Los Angeles Superior Court entitled Transportation and Storage
Associates v. Budget Rent a Car Corporation, LASC Case No. 0718 904.
This letter will constitute an agreement between our respective
companies, our successors and assigns, and it will be subject to all of the
terms and conditions of your future franchise agreements and all additions,
modifications and renewals thereof. As franchisors yourselves, you understand
we will need to comply with the applicable laws before the franchise is
effective. Nonetheless, this letter agreement shall constitute an agreement to
proceed as set forth above and to cooperate towards the foregoing objectives.
Nothing contained herein shall be construed or deemed as the offer or sale of
a franchise or violative of applicable franchising laws and you hereby
covenant and warrant not to raise any objections or complaints now or in the
future on the
<PAGE>
Budget Rent a Car of Southern California
BRAC-OPCO, Inc.
October 23, 1989
Page 7
basis of a violation of applicable franchising laws in connection with this
letter agreement or the subject hereof, including without limitation, the
future franchising contemplated hereunder. Upon the execution of the Franchise
Agreement, this letter agreement shall become null and void and the only
operative agreement between the parties shall be the Franchise Agreement and
the renewals thereof with respect to the foregoing.
Very truly yours,
TRANSPORTATION AND STORAGE ASSOCIATES,
d.b.a., Budget Rent a Truck of Southern California
BY:/s/ Walter J. Rosenthal
-------------------------------
WALTER J. ROSENTHAL, President
IT IS SO AGREED AND UNDERSTOOD:
BUDGET RENT A CAR OF SOUTHERN CALIFORNIA,
A California General Partnership ("SoCal")
BY: /s/ Jeff Mirkin
-----------------------
ITS: Partner
BRAC-OPCO, INC., a California Corporation
BY: /s/ Jeff Mirki
-----------------------
ITS: President
/s/ Jeff Mirkin
- ----------------------
JEFF MIRKIN
/s/ Rubin Bird
- ----------------------
RUBIN BIRD
cc: Russell L. Berney, Esq.
AIRPORT AGREEMENT NO. 56628
CITY OF PHOENIX
CITY OF PHOENIX
AVIATION DEPARTMENT
a municipal corporation
and
ARIZONA RENT-A-CAR SYSTEMS, INC.
2114 E. Mohave, P.O. Box 20368
Phoenix, Arizona 85036
<PAGE>
AIRPORT AGREEMENT NO. 56628
TABLE OF CONTENTS
PART ONE
AUTHORIZATION TO OPERATE NONEXCLUSIVE
AUTOMOBILE RENTAL CONCESSION
Article I Authorization 2
Article II Effective Date and Term 3
Article III Fees 3
Article IV Books and Records 8
PART TWO
LICENSE FOR USE OF COUNTERSPACE, PARKING STALL
AND SERVICE AREAS
Article V License and Fees 11
PART THREE
GENERAL PROVISIONS
Article VI Advance Payment of Fees 15
Article VII Delinquent Fees 16
Article VIII Conduct of Business 16
Article IX Obligations of the City 17
Article X Obligations of Operator I8
Article XI Maintenance and Operations by Operator 19
Article XII Indemnity and Liability Insurance 22
Article XIII Cancellation by City 24
Article XIV Cancellation by Operator 26
Article XV Waiver of Performance 27
Article XVI Independence of Contract 27
Article XVII Assignment of Space 27
Article XVIII Assignment of Agreement or Merger 28
Article XIX Default 30
Article XX Performance Bond 31
<PAGE>
Article XXI Taxes 31
Article XXII Refuse 32
Article XXIII Repair of Damages 32
Article XXIV Contract Documents 32
Article XXV Forfeiture 32
Article XXVI Invalid Provisions 33
Article XXVII Conflict of Interest 33
Article XXVIII National Emergency 34
Article XXIX Inspection by the City 34
Article XXX Notice 35
Article XXXI Paragraph Headings 35
Article XXXII Rules and Regulations 35
Article XXXIII Disadvantage Business Enterprise Program
Compliance 37
Article XXXIV Successors and Assigns Bound 37
Article XXXV Approvals, Consents and Notices 37
Article XXXVI Attorney's Fees 37
Article XXXVII Security Plan 38
Article XXXVIII Corporate Authorization 38
<PAGE>
AIRPORT AGREEMENT NO. 56628
PHOENIX SKY HARBOR INTERNATIONAL AIRPORT
THIS AIRPORT AGREEMENT (the "Agreement") is made to be
effective as of November 1, 1990, by and between the CITY OF
PHOENIX, a municipal corporation, hereinafter referred to as
"City," and Arizona Rent-A-Car Systems, Inc., a Delaware
corporation, hereinafter referred to as "Operator," and supersedes
all previous agreements between the parties on the subject of the
operation of a nonexclusive automobile rental concession at Phoenix
Sky Harbor International Airport, Phoenix, Arizona, herein referred
to as "Airport".
W I T N E S S E T H:
WHEREAS, the City owns and operates the Airport;
WHEREAS, rental car services at the Airport are essential
for proper accommodation of passengers arriving at and departing
from the Airport and the provision of such services serves a public
purpose;
WHEREAS, the City has space available at the Airport for
up to ten (10) nonexclusive automobile rental concessions; and
WHEREAS, the Phoenix City Council on July 18, 1990
adopted Ordinance No. S-19549 authorizing the City Manager to enter
into an agreement with the Operator based upon certain terms and
conditions covering the operation of a nonexclusive automobile
rental concession at the Airport;
NOW, THEREFORE, IT IS MUTUALLLY AGREED by and between the
parties hereto as follows:
-1-
<PAGE>
This Agreement is in three parts. Part One authorizes the Operator
to conduct a nonexclusive automobile rental concession at the Airport. Part
Two provides the Operator with a license for the use of terminal counter space
and where applicable under the bid terms and conditions, ready-car parking
stalls and service areas. Part Three contains general provisions applicable to
both Part One and Part Two.
PART ONE - AUTHORIZATION TO OPERATE NONEXCLUSIVE
AUTOMOBILE RENTAL CONCESSION
ARTICLE I
AUTHORIZATION
A. The City hereby authorizes the Operator to operate a nonexclusive
automobile rental concession at the Airport. This authorization shall not be
construed as a lease, sublease, rental agreement or license with respect to
any real property owned by the City. It is understood and agreed that the
Operator has no interest whatsoever in the real property upon which the
concession is operated and no right to exclusive possession of any portion of
the City's property located at the Airport or elsewhere.
B. The City may authorize up to as many as nine (9) other Operators
to operate other nonexclusive automobile rental concessions at the Airport,
and this shall not be considered a violation of this Agreement. Each other
Operator so authorized shall comply with the guarantees proposed by each such
operator and utilized by the City in the award of this Agreement as set forth
in Articles III, V and VI.
-2-
<PAGE>
ARTICLE II
EFFECTIVE DATE AND TERM
The effective date of this Agreement is as of November 1, 1990.
Unless otherwise terminated as herein provided, the length of this Agreement
shall be for a period of ten (10) years commencing as of November 1, 1990,
unless terminated earlier by either the City or the Operator pursuant to the
terms of this Agreement.
ARTICLE III
FEES
A. As consideration for the City authorizing the Operator to
conduct a nonexclusive automobile rental concession at the Airport, Operator
shall pay to the City a fee equal to ten percent (10%) of gross receipts as
hereinafter defined or a minimum annual guarantee for each year of the length
of this Agreement according to the following schedule, whichever is greater:
First Year Two Million Two Hundred Ten Thousand Dollars
------------------------------------------------------
(Amount in words)
$2,210,000.00
------------------------------------------------------
(Amount in numbers)
Second Year Two Million Four Hundred Thirty Thousand Dollars
------------------------------------------------------
(Amount in words)
$2,430,000.000
------------------------------------------------------
(Amount in numbers)
-3-
APITAL PRINTING SYSTEMS]
<PAGE>
Third Year Two Million Six Hundred Twelve Thousand Dollars
----------------------------------------------------
(Amount in words)
$2,612,000.00
-----------------------------------------------------
(Amount in numbers)
Commencing with the fourth year of the Agreement, and all years
thereafter during the entire length of the Agreement, the minimum annual
guarantee will be established at seventy-five percent (75%) of the fee paid by
Operator during the immediate preceding year; however, in no event will the
minimum annual guarantee be less than $2,612,000.00, the minimum annual
guarantee for the third year of the Agreement.
B. Operator shall, within twenty (20) days after the close of each
calendar month, furnish the City a monthly statement of gross receipts
prepared in accordance with generally accepted accounting principles and
certified by a responsible officer of Operator. These reports shall show such
reasonable data and breakdown as may be required by the City and shall be
accompanied by Operator's payment of any additional consideration due
hereunder based upon ten percent (10%) of gross receipts as defined in
Paragraph D of this Article III.
C. That portion of the monthly consideration paid to the City based
upon ten percent (10%) of gross receipts in excess of one-twelfth (1/12th) of
the applicable minimum annual guarantee may be applied to the payment of
minimum guarantees in a subsequent month.
D. The term "gross receipts" as used herein shall be construed to
mean the aggregate amount of all sales realized by the
-4-
<PAGE>
Operator from the rental of any and all motor vehicles to customers
obtained at or from the Airport, except as hereinafter provided.
It shall include:
1. All time and mileage charges for the rental of vehicles
hereunder, including all revenue derived by Operator from rental of
vehicles delivered elsewhere; or, from exchanges whereby a vehicle,
delivered to a customer obtained from the Airport, is exchanged for
another vehicle within a radius of 30 miles from said Airport, wherein
rental agreements run consecutively.
2. "Drop charges" charged to a customer renting a vehicle at
the Airport but delivering same to another dealer at the destination
point.
3. All monies paid for Personal Accident Insurance coverage
incidental to the rental of vehicles at the Airport.
4. Credits given to the Operator's customers for such things as
out-of-pocket purchases for gas, oil, or emergency service, and deposits
regardless of where made.
5. Any revenues received where there is advance registration or
reservation for any person at the Airport for a rental vehicle.
E. Gross receipts shall not include:
1. Federal, state or municipal sales or similar taxes which are
separately stated and collected from customers of the Operator.
2. Revenue realized by the Operator as
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reimbursement for refueling a vehicle rented pursuant to a rental agreement
under which the customer is obligated to return the vehicle with a full
tank of gasoline.
3. Sums received from customers of the Operator for collision
damage waiver coverage.
4. Amounts received as insurance proceeds or otherwise for
damages to vehicles and other property of the Operator.
5. Sums received for loss, conversion, or abandonment of
Operator's vehicles.
6. Sums received from customers of Operator under its right to
recover from its customers for damages to the rented vehicles.
7. Proceeds recovered by the Operator from the sale of its
vehicles.
F. No deductions shall be allowed from gross receipts for the
payment of franchise fees or taxes levied on the Operator's activities,
facilities, equipment or real or personal property of the Operator.
G. The Operator shall have the right to conduct part of its business
on a credit basis; PROVIDED, HOWEVER, that the risk of such operation shall be
borne solely by the Operator, and the Operator shall report all income, both
cash and credit, in its monthly gross receipts statement to the City.
H. The Operator shall keep true and accurate account records, books
and data which shall, among other things, show all
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sales made and services performed for cash or credit or otherwise,
without regard to whether paid or not, and, also the gross sales of said
business and the aggregate amount of all sales and services and orders, and of
all the Operator's business done upon and within or from operating the
concession.
I. The City and its agents shall have the right at all reasonable
times and during all business hours to inspect and examine such records, cash
registers, books and other data as required to confirm the gross sales as
defined hereinabove.
J. Within ninety (90) days after the end of each calendar year,
Operator at its sole expense shall submit to the City a certified annual
statement of gross receipts for that year. The certified annual statement
shall consist of a statement of gross receipts, as defined in Paragraph D of
this Article III, prepared in accordance with generally accepted accounting
principles, with an audit report of that statement certified in accordance
with the following schedule:
Annual Gross Receipts Audit Report or Annual Statement
- --------------------- ---------------------------------
$0 to $99,999 File an annual statement certified by a
responsible officer of the Operator.
$100,000 to $999,999 File an uncertified audit report prepared
by an independent Certified Public Accountant.
$1,000,000 - up File a certified audit report prepared by
an independent Certified Public Accountant.
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In the event of an overpayment or underpayment by the Operator, an
amount equal to such payment shall be promptly paid by, or credited to, the
Operator.
ARTICLE IV
BOOKS AND RECORDS
A. Operator shall maintain records within the City of Phoenix
sufficient to meet the reasonable requirements of the City of Phoenix Auditor
in order to determine Operator's volume of business and activities by reason
of this Agreement.
B. Operator agrees, that at its own cost and expense, it will have
on duty at all reasonable times, either at the Airport or within the City, at
least one (1) employee in order to accomplish the following:
1. To prepare and maintain for up to three (3) years after the
termination of this Agreement a record of all revenues derived from its
operation under said Agreement, including all revenues included in the
definition of the term "gross receipts" as hereinbefore set forth.
2. To follow and comply with the directives of the Aviation
Director relative to:
a. Maintaining forms as follows:
(i) Blank rental agreements used for off-airport
locations, excluding airport shuttle locations, shall not be
kept on the Airport. The City shall, for enforcement purposes
of this paragraph, have the right to examine Operator's
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desks, cabinets, safes, etc., located on Airport
premises at any reasonable times.
(ii) All reservation registers including teletype and
other necessary reservation records, for Maricopa County, shall
be maintained by Operator, and made available to the City, for
up to three (3) years after the termination of this Agreement,
unless otherwise authorized by the City.
b. Form and method for reports and payment of gross receipts as
follows:
(i) Operator shall within twenty (20) days after the
close of each calendar month furnish the City a monthly
statement of gross receipts prepared in accordance with
generally accepted accounting principles and certified by a
responsible officer of Operator.
c. The City or its designated representative shall have the
right to examine, inspect and audit the books and other records of
Operator, including the reservation register and contracts consummated in
a manner and in such a way as complies with generally accepted accounting
principles including, but not limited to statistical sampling.
d. If the City shall not be satisfied with any audit findings
conducted by it, the City shall serve notice upon Operator of such
dissatisfaction with such
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audit findings. If Operator agrees with the City's audit findings,
Operator shall within thirty (30) days after receipt of said notice make
known its agreement to the City in writing and pay all monies due to the
City. If Operator does not agree with the City's findings, Operator
shall, within sixty (60) days after receipt of said notice from the City,
furnish to the City at Operator's expense an audit made by an independent
Certified Public Accountant mutually agreeable to both parties. All
expenses of the City's audit shall be paid by Operator, if the report of
Operator's retained auditor certifies that the City's audit contained a
finding prejudicial to the City's receipt of gross receipts, as
heretofore described, in an amount equal to or greater than two percent
(2%) of the amount of gross receipts reported by Operator. It is the
intention of the parties that the audit will be on an annual basis;
however, the City reserves the right to make the audit at any time. The
final audit of the independent Certified Public Accountant made as
aforesaid shall be conclusive upon the parties, and Operator shall pay to
the City, within thirty (30) days after a copy of the certified Public
Accountant's final report has been delivered to Operator, the amount, if
any, shown thereby to be due and owing the City. The failure of Operator
to make payment to the City within this thirty (30) day period shall
constitute
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a material breach of this Agreement and shall give cause to the City for
immediate termination thereof.
e. The City reserves the right to prescribe or change reporting
forms, their method and time of submission, and the payment schedule. The
City shall first submit to Operator in writing specifics of any desired
changes.
f. It is the intent and purpose of the foregoing provisions
that:
(i) The Operator shall keep and maintain records
which will enable the City as well as Operator to ascertain and
determine clearly and accurately the share of gross receipts payable
by Operator to the City;
(ii) The program to be prescribed for the method of
reporting gross receipts will be adequate to provide a control and
test check of all revenues derived from operations conducted by
Operator under authority of this Agreement.
PART TWO - LICENSE FOR USE OF COUNTERSPACE,
PARKING STALL AND SERVICE AREAS
ARTICLE V
LICENSE AND FEES
The City hereby provides the Operator with a license during the term
of this Agreement for the use of terminal
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counterspace, and where applicable under the bid terms and conditions, ready-car
parking stalls and service areas, as more fully set out below (hereafter
sometimes referred to as "operating space"). This license shall not be construed
as a lease, sub-lease or rental agreement with respect to any real property
owned by the City. It is understood and agreed that Operator has no interest
whatsoever in the real property upon which the concession is operated and no
right to exclusive possession of any portion of the City's property.
In addition to and independent of Operator paying the percentage or
minimum annual guarantee fee for each year called for by Part One of this
Agreement, Operator shall pay the City a fee for the license to use the
operating space described in and as shown on Exhibits "A - H" attached hereto
and made a part hereof, more specifically being terminal counterspace and
where applicable under the bid terms and conditions, ready-car parking stalls
and service areas, as follows:
1. Operator shall operate with 263 square feet of counter space
in Terminal 2; 301 square feet of counter space in Terminal 3; and 300
square feet of counter space in Terminal 4 for the operation of its
automobile rental concession. Operator has no right to exclusive
possession of any portion of the terminal building space. This space may
be changed or exchanged by the Aviation Director at any time for
comparable space as determined by the Aviation Director at his sole
discretion. Operator shall, during the length of the
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Agreement, pay fees for the use of said areas in the terminal
building at rates set each July 1st by the City, and rates now being
$32.16 per square foot per year in Terminal 2; $35.64 per square foot per
year in Terminal 3; and $55.08 per square foot per year in Terminal 4.
Adjustment of rates for the use of counter space in the respective
terminals shall be based upon the City's costs attributable to operating
and maintaining the respective terminal buildings, which shall be
computed and allocated in a manner consistent with generally accepted
accounting principals.
2. For the first year of operation the one hundred ninety-six
(196) stalls at Terminal 2; three hundred fifty-five (355) stalls at
Terminal 3; and six hundred fifty-two (652) stalls at Terminal 4 are to
be divided by the Aviation Director among the Operators requesting
parking stalls in proportion to the aggregate guaranteed amount bid by
each Operator as it bears to the total guaranteed amounts bid by all Tier
A Operators. Operator has no right to exclusive possession of any portion
of the parking stalls and the space may be changed or exchanged by the
Aviation Director at any time for comparable space as determined by the
Aviation Director at his sole discretion. Commencing on November 1st of
the third (3rd) Agreement year, and every two (2) years thereafter during
the entire length of the Agreement, ready-car parking stalls shall be
reallocated among the Operators based upon the proportion of actual gross
receipts for the
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preceding two (2) year period ending August 31st, as it bears to the
total gross receipts of Operators for the preceding two (2) year period
ending August 31st. Unless parking stalls are changed or exchanged by the
Aviation Director, Operator shall remain responsible for payment of fees
for the use of parking stalls throughout the term of this Agreement. In
the event of any necessary interpretation of the biannual reallocation of
stalls, the parties will be bound by the decision of the Aviation
Director.
Operator shall have the opportunity prior to November 1 of the third
(3rd) Agreement year and every two (2) years thereafter to decide whether or
not he/she desires ready-car parking stalls. Operators electing to utilize
ready-car parking stalls at all three (3) terminal facilities, shall be
required to utilize their portion of the stalls throughout the entire ten (10)
year term of this Agreement and will not be allowed to assign their stalls at
any time during the length of the Agreement. Operator's assigned ready-car
parking stalls at all three (3) Terminals shall be as described on Exhibits
"D - H" attached hereto, and Operator shalll pay a monthly fee of $47.00 per
stall at Terminal 2 and $70.00 per stall at Terminal 3. Operator shall operate
on 28,800 square feet of ready-car parking stall area at Terminal 4 and shall
pay a fee of $4.82 per square foot per year for the use of these stalls. These
rates will remain fixed throughout the entire ten (10) year length of the
Agreement.
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3. Operator shall operate with 7,341 square feet of service
area for turnaround facilities on Level A of the Terminal 3 parking
structure and 4,290 square feet of service area on Level 2 of the
Terminal 4 parking structure as described on Exhibits "F & H" attached;
and Operator shall pay a fee of $2.45 per square foot per year for the
use of Terminal 3 service area and $7.12 per square foot per year for the
use of Terminal 4 service area. Operator has no right to exclusive
possession of any portion of the service areas and the space may be
changed or exchanged by the Aviation Director at any time for comparable
space as determined by the Aviation Director at his sole discretion. The
rate established for service areas will remain fixed throughout the
entire ten (10) year length of this Agreement.
PART THREE - GENERAL PROVISIONS
ARTICLE VI
ADVANCE PAYMENT OF FEES
Effective November 1, 1990, Operator shall pay to the City the sum
of Two Hundred Eleven Thousand Two Hundred Twenty-Five and 74/100 Dollars
($211,225.74), as and for payment in advance of one-twelfth (1/12th) of the
fee guaranteed by Operator for the first year of this Agreement under Part
One; one-twelfth (1/12th) of the current annual fee for terminal counter space
under Part Two; one-twelfth (1/12th) of the fee for assigned ready-car stalls
under Part Two; and one-twelfth (1/12th) of the fee for service
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areas under Part Two. Thereafter, during the entire length of the Agreement
hereof, Operator shall, on or before the first day of each month, pay
one-twelfth (1/12th) of the applicable minimum annual guarantee fee for each
year under Part One and one-twelfth (1/12th) of the annual fees under Part Two
so that these items shall be paid monthly in advance.
ARTICLE VII
DELINQUENT FEES
Without waiving any other right or action available to the City in
the event of default in payment of any of the Part One or Part Two fees, if
Operator is delinquent for a period of thirty (30) days or more in paying to
the City any fee due and owing to the City pursuant to this Agreement,
Operator shall pay to the City interest thereon at the rate of eighteen
percent (18%) per annum from the date such item was due and owing until full
payment has been made.
ARTICLE VIII
CONDUCT OF BUSINESS
A. Operator covenants and agrees that all charges and earnings for
services rendered at the Airport under the operation of said Agreement shall
be considered cash, in the calculation of payments hereunder. Operator
covenants and agrees, except as may otherwise be provided in other contracts
entered into between Operator and the City, that the Operator will not engage
in any business at the Airport other than that permitted under the terms of
this Agreement.
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B. Operator further covenants and agrees that it will not enter into
or execute any contract to park its vehicles at the Airport except with the
consent of the Aviation Director.
C. Operator shall conduct its operations within the Airport in such
a manner as shall reduce to the minimum that is reasonably practicable the
emanation therefrom of noise, vibration, dust, fumes and odors so as not to
interfere with the use of adjacent areas on the Airport.
ARTICLE IX
OBLIGATIONS OF THE CITY
The City will:
1. Furnish 110-volt electricity as may be reasonably necessary
for illumination and the operation of the Operator's business machines at
each terminal counter area.
2. Furnish the necessary heating and cooling as determined by
the City in the terminal buildings.
3. Furnish counter shells in the designated rental car business
areas in the terminals.
4. Furnish, maintain, and repair fuel storage tanks,
underground fuel line systems, plumbing systems and related equipment
necessary to service fueling and car cleaning facilities in the Terminal 3
and Terminal 4 service areas.
5. Perform normal custodial duties around the counter area the
Operator is operating at, including sweeping and dusting, removing any
trash and taking reasonable
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precautions to prevent Operator's operating space and any
supplies therein from being tampered with, damaged, destroyed, marred or
removed, but shall not be liable for any such damage or removal not
caused by its own negligence.
6. Clean and maintain the parking area surface the Operator is
licensed to use, if applicable.
ARTICLE X
OBLIGATIONS OF OPERATOR
A. Operator shall be required to provide, maintain and repair in the
parking, service and counter areas all necessary improvements, facilities,
decorations, signs, fixtures and equipment, including above-ground fueling and
car cleaning equipment within the operating spaces of Terminals 3 and 4 and
all other improvements not provided by the City. Such improvements,
facilities, decorations, fixtures and equipment shall be of high quality, safe
modern in design, attractive in appearance, and shall be in general keeping
with the decor of the building and surrounding areas and shall be subject to
the written approval of the Aviation Director prior to installation thereof
within the operating space. In addition, Operator shall install all needed
furniture and provide and pay for its janitorial service within its operating
space.
B. In order to maintain a high level of custodial services at the
Airport, the City, upon a default of this Agreement, may enter the operating
space of Operator and provide the necessary custodial services, including the
replacement of any
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furnishings in Operator's operating space visible to the general public, and
bill the Operator for the expenses thereof.
C. Upon termination of this Agreement all signs, facilities,
decorations, trade fixtures and equipment which Operator may install during
the term of this Agreement shall be removed from the operating space within
fifteen (15) days from the date of termination and Operator shall, within said
period of time, repair the operating space so that it is in as good condition
as it was at the time this Agreement was entered into, normal wear and tear
excepted.
D. Operator shall obtain prior written approval from the Aviation
Director before making any changes to the operating space. In addition,
Operator shall obtain prior written approval from the Aviation Director before
installing any equipment which requires any electrical connection or changes
in those installed on the premises. In the event Operator desires electrical
outlets other than the standard 110-volt outlets provided by the city,
Operator shall install and pay for any additional installations.
E. The City shall have the right to enter the operating space of the
Operator at any time to inspect and examine it.
ARTICLE XI
MAINTENANCE AND OPERATIONS BY OPERATOR
A. During the continuance of this Agreement, Operator shall at all
times maintain an adequate number of vehicles to meet reasonable public
demand, taking into consideration the varying seasonal requirements of the
traveling public.
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B. Vehicles offered for public services on the Airport in the
operation of this Agreement shall be available at all hours of the day or
night except as authorized by the Aviation Director.
C. Oral solicitation of Operator's business shall be made only
behind the counter Operator is operating at within the passenger terminal
buildings, and Operator shall prohibit and restrain its agents, servants and
employees from loud, noisy, boisterous, or otherwise objectionable
solicitation. However, the Aviation Director may, at his discretion, allow
Operator to conduct customer assistance activities outside the counter area it
is operating at. The Operator may identify and advertise its automobile rental
counter in an equal or comparable manner to those of other automobile rental
Operators operating in the Airport terminal buildings by signs of equal size
to those of other Operators approved by the Aviation Director. In no event
shall Operator place any signage, advertising or other form of solicitation on
top of or outside of the counter area it is operating at. In addition, all
other advertising materials of whatever nature, including but not limited to,
rates, schedules, accounting forms, etc., shall not unduly clutter the counter
area, said counter area to be maintained in a clean and orderly manner, and
all displayed materials shall be subject to the approval of the Aviation
Director.
D. Operator shall not divert customers or revenue from the Airport
where any part of a rental contract was negotiated at the Airport or through
any airline. Operator also shall not use
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any media for this purpose.
E. Operator shall pay for all costs of operation of communication
equipment used or installed by it.
F. Operator shall comply, at its own cost and expense with all
applicable federal, state or local laws, ordinances, rules or regulations of
the Airport now in effect or hereafter promulgated. Operator shall not use or
suffer or permit any person to use any portion of the Airport utilized by it
under this Agreement for any purpose not in compliance with said laws, rules
or regulations. Any violation of this Paragraph by Operator shall be
construed as a material breach of this Agreement, authorizing the termination
thereof at the election of the City, unless Operator, upon receipt of written
notice, takes immediate remedial measures acceptable to the City.
G. Turnaround Facilities
1. Operator shall install and maintain, at its own cost and
expense, its own fuel dispensing equipment and car cleaning equipment
necessary for its operation in the service areas of Terminal 3 and
Terminal 4 parking structures.
2. Operator shall, at its sole cost and expense, maintain all
improvements thereon and all appurtenances thereto in the service areas,
which also includes storage rooms, including all signs, in a presentable
condition consistent with good business practices.
3. Operator's fuel dispensing equipment shall be tested and
approved by the City of Phoenix Fire Department and
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shall meet A.S.T.M. or comparable fuel industry standards. In addition,
Operator shall at all times maintain and keep the fuel dispensing
equipment in safe operating condition and shall be subject to inspection
by the City or the Phoenix Fire Department.
4. Operator shall at all times maintain and keep in safe
operating condition the sump tank located in the service area of Level A,
in the Terminal 3 parking garage.
ARTICLE XII
INDEMNITY AND LIABILITY INSURANCE
A. Indemnity. Operator hereby agrees to indemnify and save harmless
the City and its elected or appointed officials, agents, boards, commission,
employees and representatives, hereinafter referred to as the City, from all
suits, including attorneys' fees and costs of litigation, actions, loss,
damage, expense, cost or claims, of any character or any nature arising out of
or in connection with any act or omission of the Operator, its agents and
employees, and of any subcontractor, its agents and employees, in any way
arising out of or resulting from any activity of Operator on the Airport which
results directly or indirectly in the injury to or death of any person or
persons, or on account of any act, claim or amount arising or recovered under
Worker's Compensation law, or arising out of the failure of the Operator or
those acting under Operator to conform to any statutes, ordinance, regulation,
law or court decree. It is the intent of the Operator and the City that the
City shall, in all instances, except for loss
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or damage resulting from the sole negligence of the City be indemnified by the
Operator against all liability, losses and damages of any nature whatever for
or on account of any injuries to or death of persons or damages to or
destruction of property belonging to any person arising out of or in any way
connected with Operator's activity on the Airport. The parties shall give each
other prompt notice of any claim made or suit instituted which in any way
directly or indirectly affects or might affect each other, and each party
shall have the right to compromise and defend the same to the extent of its
own interest. The City shall have the right, but not the duty, to participate
in the defense of any claim or litigation with attorneys of the City's
selection without relieving the Operator of any obligations hereunder.
Operator's obligations hereunder shall survive any termination of this
Agreement or Operator's activities on the Airport. In addition, Operator shall
hold City harmless against all mechanic's, materialman's liens and/or liens of
a like nature, and against all reasonable attorneys' fees and other costs
arising by reason of any such liens or claims.
B. Liability Insurance. Operator shall deliver to the City prior to
its use of operating space or conduct of any business at the Airport a
certificate of insurance acceptable to the Aviation Director showing liability
insurance coverage for the benefit of the City with a combined single limit of
liability for bodily injury, property damage, personal injury,
products/completed operations, contractual liability and automobile liability
coverage
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with a limit of at least One Million Dollars ($1,000,000) as the result of any
single occurrence. This coverage should be provided under a Comprehensive
General Liability Form (CGL). Contractual liability coverage may be provided
by a broad form CGL endorsement or separate endorsement to provide required
coverages not automatically included in the CGL form. Said policy(s) shall
also contain a provision that a written notice of cancellation or of any
material change in the policy shall be delivered to the City thirty (30) days
in advance of the effective date thereof. Any enumeration of specific
insurance coverage and amounts shall not limit or restrict the Operator's
indemnity covenant set forth in this Agreement.
C. City Named as Additional Insured. All insurance policies provided
for in this Agreement shall name the City as an additional insured and current
certificates thereof shall be deposited with the City. Operator's coverage
shall be primary for any and all losses arising out of the performance of this
Agreement.
ARTICLE XIII
CANCELLATION BY CITY
A. The City may cancel this agreement by giving Operator thirty (30)
days written notice after the happening of any of the following events:
1. The taking of possession for a period of fifteen (15) days
or more of all or substantially all of the property belonging to the
Operator and located on the
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operating space by or pursuant to lawful authority of any legislative
act, resolution, rule, order or decree of any court or governmental
board, agency, officer, receiver, trustee or liquidator.
2. The filing of any lien against the operating space being
used by the Operator, if and to the extent a lien can be filed against
such space, resulting from any act or omission of Operator which is not
discharged or contested in good faith as determined by the City by proper
legal proceedings within fifteen (15) days of receipt of actual notice by
Operator.
3. The failure or refusal of Operator to observe or perform any
of the covenants, terms and conditions herein contained and on its part
to be observed and performed, excepting payment of fees, as covered in
Article XIX, and such failure shall continue for a period of more than
thirty (30) days after delivery by the City of a written notice of such
breach.
4. The voluntary termination by Operator of its operations at
the Airport for a period of fifteen (15) days or more.
B. The City may place Operator in default of this Agreement by
giving Operator fifteen (15) days written notice for Operator's failure or
refusal to timely pay the fees as provided in Articles III, V and VI. During
said fifteen (15) day notice period, Operator shall cure its fees default;
otherwise, this
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Agreement may be deemed terminated at the City's sole option without further
notice.
C. No waiver by the City of default in performance of any
requirements of this Agreement shall be construed to be or act as a waiver of
any subsequent default in performance of the same or any other requirement.
The acceptance of fees by the City for any period or periods after a default
by Operator shall not be deemed a waiver of the City's right to exercise its
remedies under this Agreement for nonperformance.
ARTICLE XIV
CANCELLATION BY OPERATOR
Operator may cancel this Agreement at any time that it is not in
default in its obligations by giving the City thirty (30) days written notice
after the happening of any of the following events materially impairing the
conduct of its normal business from the premises:
A. Issuance by a court of competent jurisdiction of an injunction in
any way preventing or restraining normal use of the Airport or any substantial
part of it and the remaining in force of such injunction for a period of
Ninety (90) consecutive days.
B. The inability of Operator or its customers to operate at, for a
period of ninety (90) consecutive days, the Airport or any substantial part of
it due to enactment or enforcement of any law or regulation, or because of
fire, earthquake or similar casualty or Acts of God or the public enemy.
C. The lawful assumption by the United States
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Government of the operation, control or use of the Airport or any substantial
part of it for military purposes in time of war or national emergency.
ARTICLE XV
WAIVER OF PERFORMANCE
The failure of the City to insist in any instance or in more than
one instance upon a strict performance by the Operator of any of the
provisions, terms, covenants, reservations, conditions or stipulations
contained in this Agreement shall not be considered as a waiver or
relinquishment thereof for the future. No waiver by the City of any provision,
term, covenant, reservation, condition or stipulation contained in this
Agreement shall be deemed to have been made in any instance unless expressed
in the form of a resolution by the City Council.
ARTICLE XVI
INDEPENDENCE OF CONTRACT
It is further mutually understood and agreed that nothing herein
contained is intended or shall be construed as in any way relating or
establishing the relationship of copartners between the parties hereto or as
constituting the Operator as the agent or representative or employee of the
City for any purpose or in any manner whatsoever.
ARTICLE XVII
ASSIGNMENT OF OFFICE AND/OR STORAGE SPACE
The Aviation Director may, in his sole discretion, designate a space
or location on the Airport for office and/or
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storage space on which Operator may conduct its operations under this
Agreement, if the Aviation Director deems such space or location to be
available and necessary for this purpose. The space or location so
designated, if any, shall be designated under such conditions as the Aviation
Director may from time to time prescribe. The location of space so assigned,
if any, may be changed, and the use of any space or location may be revoked at
any time at the discretion of the Aviation Director. It is understood and
agreed that the imposition of any conditions upon the use of said space by the
Aviation Director shall not be construed to affect or change the revocable
character of the agreement or permission to utilize the space. The privilege
which may be granted to Operator by the Aviation Director to erect improvements
on any space shall not be construed so as to couple the Operator with any
interest in the space or affect or change in any manner the revocable character
of the Agreement or permission to utilize said space. It is understood and
agreed that Operator has no interest whatsoever in the office/storage space and
no right to exclusive possession of any portion of such space.
ARTICLE XVIII
ASSIGNMENT OF AGREEMENT OR MERGER
Operator shall not at any time, without the prior written consent of
the City:
A. Assign or transfer this Agreement or interest therein;
B. Unite, merge, consolidate or combine, either
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directly or indirectly, with any other person, firm or corporation operating
at the Airport under any other automobile rental concession, whether such
uniting, merging, consolidating or combining be through the sale of property
or sale of stock or otherwise; or
C. Permit any of its directors, officers, agents or employees to
serve as a director, officer, agent or employee of any other person, firm or
corporation operating at the Airport under any other automobile rental
concession.
D. Any attempt by Operator to perform any of the acts prescribed
under Paragraphs A, B or C of this Article XVIII without the prior written
consent of the City shall be considered a breach of this Agreement and shall
be cause for the termination of this Agreement.
E. Any of the acts prescribed above requiring the City's prior
written consent shall be conditioned as may be applicable as follows:
1. A Tier B small business concession can assign, transfer,
unite, merge, consolidate or combine to or with a Tier A concession or
other qualified company whose annual gross receipts average over the
previous three (3) fiscal years is $1.2 million or over; however, the
business shall not be operated under the name of the Tier A concession or
the name of the qualifying company.
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ARTICLE XIX
DEFAULT
A. Operator agrees that if it is in arrears in the payment of fees
for a period of fifteen (15) days, or if Operator fails to operate the
facilities herein continuously as required in this Agreement; or if said
Operator fails or neglects to do or perform or observe any of the covenants
contained herein on its part to be kept and performed, and such failure or
neglect shall continue for a period of not less than fifteen (15) days after
the City has notified Operator in writing of Operator's default hereunder, and
Operator has failed to correct or begin actively curing such default within
said fifteen (15) days; then, and in any of said cases or events, the City
may, at its option, immediately or at any time thereafter, without demand or
notice, enter into and upon the space being operated on by Operator, or any
part thereof, and terminate the Agreement and expel said Operator and those
claiming by, through, or under it and remove its effects, if any, forcibly if
necessary, without being deemed guilty of trespass and without prejudice to
any remedy which otherwise might be used for arrears of fees or preceding
breach of covenant. On the entry aforesaid, this Agreement shall terminate.
B. The City may, at its option, in the event of any of the
above-enumerated defaults which are not corrected in the time allowed, refuse
to allow Operator to bring any of its automobiles upon or provide services
from the Airport.
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ARTICLE XX
PERFORMANCE BOND
Operator, prior to November 1, 1990 and commencing business
operations on the Airport under this Agreement, shall furnish the City with a
valid surety bond in the amount of FIFTY THOUSAND DOLLARS ($50,000) issued by
a surety company qualified to do business in the State of Arizona and
acceptable and satisfactory to the City, or such other security approved by
the City. The surety bond shall be maintained and kept by Operator in full
force and effect during the length of this Agreement and shall be conditioned
to assure the faithful and full performance by Operator of this Agreement and
to stand as security for the payment by Operator of any valid claim by the
City against Operator. The Surety company may issue the performance bond for a
term of one (1) year and may renew said performance bond annually.
ARTICLE XXI
TAXES
Operator shall pay any applicable tax or other exaction assessed or
assessable as the result of its conduct of business at the Airport under
authority of this Agreement, including any such tax payable by the City. In
the event that laws or judicial decisions result in the imposition of a real
property tax on the interest of the City in the operating space, such tax
shall also be paid by Operator for the period this Agreement is in effect.
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ARTICLE XXII
REFUSE
Operator shall be responsible for placing in a central location, as
determined by the City, all refuse and trash which shall be disposed of by the
City.
ARTICLE XXIII
REPAIR OF DAMAGES
The City shall repair all damages to the operating space and to the
airport terminal buildings caused by the Operator or its employees, agents or
suppliers and will bill the cost of such repairs to Operator. Such charge
shall be paid within fifteen (15) days of the receipt of a bill from the City.
ARTICLE XXIV
CONTRACT DOCUMENTS
The final contract documents will consist of this Agreement, the
executed bid form and the completed Business Information questionnaire submitted
at the time of bidding.
ARTICLE XXV
FORFEITURE
In the event Operator willfully falsifies any of its records
or figures so as to deprive the City of any of its rights under the terms of
this Agreement, such falsification shall be grounds for cancellation of this
Agreement, at the City's option. In addition to all other conditions and terms
of this Agreement, in the event Operator, or any of its agents, officers or
employees shall willfully falsify any records or willfully divert automobile
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rental business from the Airport to some other agent, person, firm or agency,
so as to deprive the City of any revenues due it, Operator agrees to pay to
the City as liquidated damages, three (3) times the amount of revenue due the
City which as been willfully diverted away from the City, including all
associated audit costs incurred by the City.
ARTICLE XXVI
INVALID PROVISIONS
It is further expressly understood and agreed that in the event any
covenant, condition or provision herein contained is held to be invalid by any
court of competent jurisdiction, the invalidity of such covenant, condition or
provision shall in no way affect any other covenant, condition or provision
herein contained, provided that the invalidity of such covenant, condition or
provision does not materially prejudice either Operator or City in their
respective rights and obligations contained in the valid covenants, conditions
or provisions of this Agreement.
ARTICLE XXVII
CONFLICT OF INTEREST
Operator hereby represents that it is familiar with the
provisions of the Phoenix Charter and Arizona Revised Statutes 38-511 and
certifies that it knows of no facts which constitute a violation of said
Charter. Operator further certifies that it has made a complete disclosure to
the City of all facts bearing upon any possible interest, direct or indirect,
which it believes any member of the City Council or other officer or employee
of the City
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<PAGE>
presently has or will have in this Agreement or in the performance hereof or
any portion of the profits hereof. Willful concealment of such facts by
Operator shall constitute a material breach of this Agreement and shall be
grounds for termination by the City.
ARTICLE XXVIII
NATIONAL EMERGENCY
In the event of any national emergency wherein there is a
curtailment of the use of motor vehicles by the general public, or a
limitation of the supply of gasoline available for general use either by
executive decree or legislative action which, in fact, is a major curtailment
of the Operator's operation and in that event, the minimum guarantee provided
for in Article III hereof shall not be required to be paid by Operator during
said period. However, Operator shall be obligated to continue to pay the
prescribed percentage, stated in Article III, and if any such national
emergency shall continue beyond a period of one (1) year, then either party to
this Agreement may terminate the same on sixty (60) days written notice to the
other party.
ARTICLE XXIX
INSPECTION BY THE CITY
The City may enter upon the operating space at reasonable times for
any purposes necessary, incidental to, or connected with the exercise of its
governmental functions, or for fire protection or security purposes.
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ARTICLE XXX
NOTICE
Notices to the City are sufficient if hand delivered or sent by
certified mail, postage prepaid, addressed to:
City of Phoenix Aviation Department
3400 Sky Harbor Boulevard
Phoenix, Arizona 85034-4420
Attention: Aviation Business & Properties Division
And notices to Operator are sufficient if sent by the same means to:
Arizona Rent-A-Car Systems, Inc.
2114 E. Mohave
P.O. Box 20368
Phoenix, Arizona 85036
or to such other respective addresses as the parties may later designate to each
other in writing.
ARTICLE XXXI
PARAGRAPH HEADINGS
All the paragraph and subparagraph headings of this Agreement are
for reference only and shall not be considered to define or limit the scope of
any provision.
ARTICLE XXXII
RULES AND REGULATIONS
A. General. Operator shall observe and comply with all laws,
ordinances, rules and regulations of the United States Government, the State
of Arizona, the County of Maricopa, and the City of Phoenix and all agencies
thereof now in effect or hereafter promulgated which may be applicable to its
performance under this Agreement, and further, Operator will display to the
City any
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permits, licenses or other evidence of compliance with such laws upon request.
B. Federal Requirements. Without limiting any other conditions set
forth elsewhere in this Agreement, Operator shall comply with the specific
requirements more particularly set forth on Exhibit "I" attached hereto and
incorporated herein by this reference.
C. Specific Federal Requirements. Operator shall observe and comply
with all applicable Federal, State and/or local laws, rules and regulations
concerning the handling and disposal of Hazardous Materials including, but not
necessarily limited to 14 Code of Federal Regulations, Part 139, Environmental
Protection requirements under RCRA (42 U.S.C. 6901 et seq.) and CERCLA (42
U.S.C. 9601 et seq.). Further, Operator agrees to indemnify, defend and hold
harmless the City from, against and in respect to any and all losses, claims,
fines, penalties, liabilities, damages, costs or expenses based upon or
arising out of the release of any Hazardous Materials by Operator during the
term of this Agreement. Such indemnification shall extend, but is not limited,
to any and all claims by third parties for injury to any person (including
disease, disability and death), and/or for any damage to any property
(including loss of use) and/or for cleanup, removal, remediation or
reclamation thereof which are based upon or arise out of the release by
Operator of any Hazardous Materials for which liability may arise under the
common law or under any Federal, State or local law or regulation in effect
during the length of the
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Agreement.
ARTICLE XXXIII
DISADVANTAGED BUSINESS ENTERPRISE
PROGRAM COMPLIANCE
Operator acknowledges the City's intention to comply with the
Disadvantaged Business Enterprise Program requirements specified by the U.S.
Congress pursuant to 49 U.S.C. 2210 (A)(17). Operator is encouraged to
participate in the Program implemented by the City throughout the term hereof
to the best of its ability.
ARTICLE XXXIV
SUCCESSORS AND ASSIGNS BOUND
All the provisions of this Agreement shall bind the legal
representatives, successors and assigns of the respective parties.
ARTICLE XXXV
APPROVALS CONSENTS AND NOTICES
All approvals, consents and notices called for in this Agreement
must be in writing and may not be established by oral testimony.
ARTICLE XXXVI
ATTORNEYS' FEES
In the event of litigation between the City and Operator to enforce
the rights or obligations provided by this Agreement the non-prevailing party
shall pay for the prevailing party's reasonable attorneys' fees and costs of
litigation as may be determined by the court.
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ARTICLE XXXVII
SECURITY PLAN
The City has implemented an Airport Security Plan in a form
acceptable to the Federal Aviation Administration pursuant to 14 Code of
Federal Regulations Part 107. The City reserves the right to modify that plan
from time to time as it deems necessary to accomplish its purposes. Operator
shall at all times comply with the security Plan and indemnify and hold
harmless the City from any violations of said Security Plan committed by any
agents, invitees or employees of Operator.
ARTICLE XXXVIII
CORPORATE AUTHORIZATION
In the event Operator is a corporation, certified copies of a
resolution of the Directors and Stockholders authorizing execution of this
Agreement shall be furnished to the Aviation Director with the execution of
said Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this 28th day of January, 1993
A22:AZRENTAG.WPF
FAF:NAB:AWS:JB/slw
ATTEST: CITY OF PHONENIX, a municipal
corporation
Frank A. Fairbanks, City Manager
- -----------------------------------
City Clerk
By:
-----------------------------------
N. A. BERTHOLF, JR
AVIATION DIRECTOR
APPROVED AS TO FORM:DPW
- -----------------------------------
Acting City Attorney
OPERATOR
ARIZONA RENT-A-CAR SYSTEM, INC.
By:
-----------------------------------
[TITLE]
ATTEST:
- -----------------------------------
Assistant Secretary
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LEASE AGREEMENT
THIS AGREEMENT OF LEASE, made this 1st day of June, 1994, by and
between Miller and Hinkle, a Florida General Partnership (hereinafter called
"Landlord", having a principal address of 9320 NW 14th Place, Gainesville,
Florida 32606 and Capital City Leasing, Inc., a Florida Corporation qualified
to do business in the Commonwealth of Virginia (hereinafter called "Tenant"),
having a principal address of 5851 Lewis Road, Sandston, Virginia 23150.
WITNESSETH THAT, in consideration of rents, covenants and agreements
hereinafter set forth, Landlord and Tenant enter into the following lease
agreement (hereinafter called "Lease").
ARTICLE I
DEFINITIONS
The terms used herein shall have the definitions specified hereunder
only:
Section 1.01. PREMISES. That the property being hereby leased by
LANDLORD TO TENANT, is more particularly described in Article II, Section
2.01, hereinbelow.
Section 1.02. LEASE TERM. This lease shall be for a term as
described in Article II, Section 2.02, hereinbelow.
Section 1.03 RENT COMMENCEMENT DATE. The Annual Rental due pursuant
to this Lease shall commence to be due on June 1, 1994.
Section 1.04. POSSESSION DATE. The possession date
is June 1, 1994.
Section 1.05. LEASE YEAR. A "Lease Year" shall be a period of
twelve (12) consecutive months during the Lease Term. The first Lease Year
shall be the period commencing on the Possession Date of this Lease and
terminating on the last day of the twelfth (12th) full calendar month after
said Possession Date. All months for the purposes of pro-rata or proportionate
determinations shall be considered as having thirty (30) days.
Section 1.06. TENANT'S WORK. All work, including labor & material,
necessary to complete Premises for TENANT'S use.
Section 1.07. REAL ESTATE TAXES. "Real Estate Taxes" shall include
any form of assessment, license fee, license tax, business license fee,
business license tax, commercial rental tax, levy, charge, penalty, tax or
similar imposition, imposed by any authority having the direct power to tax
including any city, county, state or federal government, or any school,
agricultural, lighting, drainage or other improvement or special assessment
district thereof, as against any legal or equitable interest of Landlord in
the Premises including, but not limited to, the following:
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(a) any tax on Landlord's "right" to rent or "right" to other income
from the Premises or as against Landlord's business of leasing the Premises;
(b) any assessment, tax, fee, levy or charge in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included with in the definition of real estate tax. It is the intention of
Tenant and Landlord that all such new and increased assessments, taxes, fees,
levies and charges be included within the definition of "Real Estate Taxes"
for the purposes of the Lease;
(c) any assessment, tax, fee levy or charge allocable to or measured
by the area of the Premises or the rent payable hereunder, including, without
limitation, any gross income tax or excise tax levied by the State, city or
federal government, or any political subdivision thereof, with respect to the
receipt of such rent, or upon or with respect to the possession, leasing,
operating, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises, or any portion thereof;
(d) any assessment, tax, fee, levy or charge, upon this transaction
or any document to which Tenant is a party, creating or transferring an
interest or an estate in the premises.
Notwithstanding any provision of this Section 1.07 expressed or
implied to the contrary, "Real Estate Taxes" shall not include Landlord's
federal or state income, franchise, inheritance or estate taxes.
ARTICLE II
LEASED PREMISES AND TERM
Section 2.01. LEASED PREMISES. Landlord, for and in consideration
of the covenants and agreements herein set forth, and the Annual Rental
hereafter specifically
reserved, does hereby lease unto said Tenant, for the term and upon the terms
and conditions set forth in this Lease, the following described property
situated in the County of Chesterfield, State of Virginia, to wit:
ALL THAT certain lot, piece or parcel of land with all improvements thereon
and appurtenances thereto belonging, lying and being in Chesterfield County,
Virginia, containing 0.623+- acres and more particularly described as follows:
ALL THAT certain piece or parcel of land, lying and being in Chesterfield
County, Virginia, containing 0.623 acre, more or less, as shown on a plat of
survey by M.L. Corso & Associates, Ltd., Professional Land Surveyors, dated
August 15, 1980, entitled "Map Showing 0.623 Acre of Land Situated on the
South Side of U.S. Route 60, West of Providence Road, in Chesterfield County,
Va.", a copy of which plat is recorded in Deed Book 1487, page 243, and to
which plat reference is hereby made for a more particular description of the
property herein conveyed. Plat by Potts and Minter, P.L.S., dated February 12,
1985 recorded herewith.
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BEING the same property conveyed to James R. Richeson and Mary W. Richeson,
husband and wife, by deed from John B. Cave and Phyllis B. Cave, husband and
wife, dated February 25, 1985 and recorded March 1, 1985 in the Clerk's
Office, Circuit Court, County of Chesterfield, Virginia, in Deed Book 1695,
page 1296.
Section 2.02. TERM. Subject to and upon the terms and conditions
set forth herein, or in any Exhibit or Addendum attached hereto, this Lease
shall continue in force for a term of five (5) years, commencing the 1st day
of June, 1994 (hereinafter called ("Possession Date"), and ending on the 31st
day of May, 1999 (hereinafter called the "Termination Date").
Section 2.03. OPTION TERM. Tenant shall have the option to renew
this Lease for an additional 3 five (5) year terms commencing June 1, 1999,
and terminating May 31, 2004, by providing Landlord written notice of its
intent to renew by April 1, 1999.
ARTICLE III
RENTAL
Section 3.03. ANNUAL RENTAL.
a. During and for the term hereof, Tenant covenants and agrees to
pay to Landlord in lawful money of the United States of America, at the above
address, or at such other place as Landlord may hereafter notify Tenant in
writing, without previous notice or demand therefore, and without deduction,
set-off or abatement, the following sums of rental (hereinafter called "Annual
Rental"), payable in advance, on or before the first day of each and every
month of the term of this Lease, commencing on the 1st day of June, 1994,
(1) In Year One, the same being June 1, 1994, to May 31, 1995,
the Annual Rental of $40,800.00 payable in equal monthly installments of
$3400.00;
(2) In Year Two, the same being June 1, 1995, to May 31, 1996,
the Annual Rental of $42,024.00 payable in equal monthly installments of
$3502.00;
(3) In Year Three, the same being June 1, 1996, to May 31, 1997,
the Annual Rental of $43,285.00 payable in equal monthly installments of
$3607.00;
(4) In Year Four, the same being June 1, 1997, to May 31, 1998,
the Annual Rental of $44,583.00 payable in equal monthly installments of
$3715.00;
(5) In Year Five, the same being June 1, 1998, to May 31, 1999,
the Annual Rental of $45,917.00 payable in equal monthly installments of
$3826.00;
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Section 3.02. ANNUAL RENTAL OPTION TERM. In the event Tenant
exercises its option to renew this Lease pursuant to Section 2.03 hereof, the
Annual Rental during the first of the three, five years options shall be as
follows:
(1) In Year One, the same being June 1, 1999, to May 31, 2000,
the Annual Rental of $47,289.00 payable in equal monthly installments of
$3941.00.
(2) In Year Two, the same being June 1, 2000, to May 31, 2001,
the Annual Rental of $48,711.00 payable in equal monthly installments of
$4059.00.
(3) In Year Three, the same being June 1, 2001, to May 31, 2002,
the Annual Rental of $50,169.00 payable in equal monthly installments of
$4181.00.
(4) In Year Four, the same being June 1, 2002, to May 31, 2003,
the Annual Rental of $51,677.00 payable in equal monthly installments of
$4306.00.
(5) In Year Five, the same being June 1, 2003, to May 31, 2019,
the Annual Rental of $53,222.00 payable in equal monthly installments of
$4435.00.
Section 3.03. ADDITIONAL RENTAL. Tenant shall pay as additional rent and
without notice, abatement, deduction or set-off, all sums, costs and expenses
(hereinafter called "Additional Rental"), which Tenant, in any of the
provisions of this Lease, or through a separate agreement relating to the
Premises, assumes or agrees to pay, including but not limited to Tenant work,
and in the event of any non-payment thereof, the Landlord shall have (in
addition to all other rights and remedies) all the rights and remedies
provided herein or by law in the case of non-payment of the Annual Rental.
Section 3.04. LATE CHARGE. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Annual Rental, Additional Rental or other
sums due under this Lease will cause Landlord to incur additional costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such additional costs include, without limitation,
processing and accounting charges and late charges which my be imposed upon
Landlord by the term of the mortgage or deed of trust covering the Premises.
Therefore, if any installment of Annual rental or any other sum due from
Tenant shall not be received by Landlord within Ten (10) days after the date
that such amount shall be due, Tenant agrees to pay and shall pa, to Landlord
a late charge, equal to 5% of the monthly installment of annual rent then due
or $150.00, whichever is less. The parties hereto hereby agree that such late
charge represents a fair and reasonable estimate of the cost Landlord will
incur by reason of late payment by Tenant. Acceptance of such late charge by
Landlord shall in no event constitute a waiver by Landlord of Tenant's default
with respect to such overdue amount or prevent Landlord from exercising any or
all of the other rights and remedies provided herein or by law.
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ARTICLE IV
POSSESSION
Section 4.01. POSSESSION. Possession of the Premises is hereby
granted by Landlord to Tenant.
ARTICLE V
REAL ESTATE TAXES
Section 5.01. REAL ESTATE TAXES. Tenant shall pay timely all Real
Estate Taxes assessed or imposed upon the Premises allocable to the Lease
Term, such taxes to be pro-rated between the Landlord and the Tenant for
periods at the beginning and the end of the Lease term which do not constitute
full fiscal tax years. Landlord shall not be responsible to pay any portion
the Real Estate Taxes assessed or imposed upon the Premises allocable to the
Lease Term.
Notwithstanding anything herein to the contrary, Landlord shall
forward all notices of tax imposition or assessment and all notices of any
increases in assessments to Tenant on the Premises and Tenant shall have the
right to protest any increase, provided however, that Tenant be responsible
for all costs of protest in addition to any costs, interest or penalties
levied by any taxing authority in regards to Tenants untimely payment of Real
Estate Taxes.
ARTICLE VI
PAYMENTS FOR TENANT
Section 6.01. PAYMENTS FOR TENANT If Landlord pays any monies or
incurs any expense to correct a breach of this Lease by Tenant or to do
anything in this Lease required to be done by Tenant, all amounts so paid or
incurred shall, on notice to Tenant, be considered Additional Rental payable
by Tenant with the first monthly installment of Annual Rental thereafter
becoming due and payable, and may be collected as by law provided in the case
of said Annual Rental. Notwithstanding anything to the contrary contained
herein, Landlord shall not expend any monies to correct a breach of this Lease
until Landlord has given Tenant written notice of such breach or failure and
has given Tenant at least ten (10) days after such notice (or, if cure cannot
be accomplished within such ten-day period, such other time as is reasonably
necessary) in which to cure the breach.
ARTICLE VII
UTILITIES, SERVICES AND EASEMENTS
Section 7.01. UTILITIES. TENANT shall not install any equipment
which can exceed the capacity of any utility facilities on the Premises and if
any equipment installed by Tenant requires additional utility facilities, the
same shall be installed at Tenant's expense in compliance with all code
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requirements and plans and specifications which must be approved in writing by
Landlord, which approval shall not be unreasonably withheld. Tenant shall be
solely responsible for and promptly pay all charges for use or other utility
services on the Premises whether same are supplied by Landlord, any
governmental authority or utility company. Landlord shall not be liable to
Tenant for interruption in or curtailment of any utility service, nor shall
any such interruption or curtailment constitute a constructive eviction or
grounds for rental abatement in whole or in part hereunder.
Section 7.02. MAINTENANCE OF UTILITIES. Tenant shall maintain and
keep in good condition the heating, ventilating, and air conditioning systems
serving the Premises. All repairs shall be made, at Tenant's sole cost and
expense as needed.
Section 7.03. TENANT ARRANGEMENT FOR UTILITIES. Tenant shall
purchase its energy supply from the utility company. Tenant shall, within five
(5) days after execution hereof notify each utility company serving the
Premises that it desires such service in its own name, and that all bills for
same are to come directly to Tenant, and further, Tenant shall tender to the
utility company any deposits required. Tenant's obligations shall not be
affected by Tenant's ability
Section 7.04. EASEMENTS. Landlord reserves the right to grant
easements on the Premises, make boundary adjustments to the Premises and
dedicate for public use portions of the Premises without Tenant's consent
provided that no such grant or dedication shall interfere with Tenant's use of
the Premises or otherwise cause Tenant to incur cost or expense. From time to
time upon Landlord's demand, Tenant shall execute, acknowledge and deliver to
Landlord in accordance with Landlord's instructions any and all documents or
instruments necessary to effect Tenant's covenants herein.
ARTICLE VIII
CONDUCT OF BUSINESS BY TENANT
Section 8.01. USE OF PREMISES. The Leased Premises shall be sued
and occupied for the purpose of a car and truck rental, leasing, sales and
service facility.
Section 8.02. CONDUCT OF BUSINESS. Tenant shall not use or allow
the Premises or any part thereof to be used or occupied for any unlawful
purpose or in violation of any Certificate of Occupancy or Certificate of
Compliance covering or affecting the use of the Premises, and will not permit
any act to be done or any condition to exist on the Premises or any article to
be brought thereon which may be dangerous, unless safeguarded as required by
law, or which may in law constitute a nuisance, public or private, or which
may make void or voidable any insurance then in force with respect to the
Premises. Tenant shall not permit the restriction or in such manner as might
reasonably tend to impair the Landlord's title to the Premises. In the event
that any governmental authority having jurisdiction thereof shall at any time
contend or declare by notice, violation, order, or in any other manner
whatsoever that the Premises is used for a purpose which is a violation of
such Certificate of Occupancy, the Tenant shall, upon five (5) days written
notice from the
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Landlord, immediately discontinue such use of the Premises, provided however,
that Tenant shall have the right to protest or challenge any alleged violation
with the appropriate governmental authority, and provided that Tenant shall be
responsible for all costs associated with the protest and shall hold harmless
and indemnify Landlord from any penalties or other costs levied by any
governmental authority concerning a violation of the Certificate of Occupancy.
Failure by the Tenant to discontinue such use after such notice shall be
considered a default in the fulfillment of a covenant of this Lease and the
Landlord shall have the right to terminate this Lease immediately, and in
addition thereto shall have the right to exercise any and all rights and
privileges and remedies given to the Landlord by and pursuant to the
provisions of this Lease. The provisions incorporated in this Article VIII
with reference to the nature of the business to be conducted by the Tenant in
the Premises shall not be deemed or construed to constitute a representation
or guaranty by the Landlord that such business may be conducted in the
Premises or is lawful or permissible under the Certificate of Occupancy issued
for the Improvements of which such property forms a part, or otherwise
permitted by law.
Section 8.03. OPERATION BY TENANT. Tenant covenants and agrees that
it will frequently and regularly arrange for removal of garbage, trash,
rubbish and other refuse from the Premises; not permit any sound system
audible, outside the Premises; not commit or permit waste or nuisance upon the
Premises; not permit or cause odors to emanate or be dispelled from the
Premises; comply with all laws, recommendations, ordinances, rules and
regulations of the governmental, public, private and other authorities and
agencies, including those with authority over insurance rates, with respect to
the use or occupancy of the Premises; not place a load on any floor in the
Premises which exceeds the floor load per square foot which such floor was
designed to carry.
ARTICLE IX
REPAIRS, MAINTENANCE AND ALTERATIONS
Section 9.01. TENANT'S REPAIRS AND MAINTENANCE. Tenant, at its sole
cost and expense, shall at all times keep and maintain the Premises including,
without limitation, all driveways, walkways, parking areas, the area between
the store front and the curb, landscaped areas, signs, entrances, vestibules,
partitions, (interior and exterior), walks (structured and non structured)
floors, subfloors, ceilings, roofs (interior and exterior), building
foundations, windows (including frames and moldings), glass, plate glass,
doors, door openers, fixtures, equipment and appurtenances thereof
(including lighting, heating, electrical, plumbing, ventilating and air
conditioning fixtures and systems as well as other mechanical equipment and
appurtenances), in all aspects in good order, and repair (which shall include,
without limitation, periodic painting and decorating), clean, orderly,
sanitary and safe. Tenant shall, at Tenant's sole cost and expense,
immediately replace all glass on the Premises that my be broken during the
Lease Term hereof with glass at least equal to the specifications and quality
of the glass so replaced. Landlord shall have no obligation whatsoever to
repair or maintain the Premises or the equipment therein, whether structural
or nonstructural, all of which obligations are intended to be those of Tenant.
As part of Tenant;s responsibilities under this Section 9.01, Tenant shall
keep all
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portions of the Premises, as set forth above free of trash and debris, and
clear of ice and snow.
Section 9.02. LANDLORD'S RIGHTS. If Tenant fails to perform its
obligations hereunder, Landlord may, but shall not be obligated to, perform
Tenant's obligations or perform work resulting from Tenant's acts, actions or
omissions and add the cost of the same plus fifteen percent (15%) (to cover
Landlord's administrative costs) to the next monthly installment of Annual
Rental due hereunder. All Landlord's rights hereunder are subject to Section
6.01 hereof.
Section 9.03. LANDLORD'S WAIVER. Tenant expressly waives the
benefit of any statute or regulation which would otherwise afford Tenant the
right to make repairs at Landlord's failure to keep the Premises in good
order, condition and repair. Landlord shall not be liable to Tenant for injury
or damage that may result from any defect in the construction or condition of
the Premises. Tenant waives any right to make repairs at the expense of
Landlord under any law, statute or ordinance now or hereafter in effect.
Section 9.04. ALTERATIONS. Tenant shall not, without Landlord's
prior written consent, which consent shall not be withheld unreasonably, make
any structural changes, in, on or about the Premises, where said changes
exceed TEN THOUSAND ($10,000.00) DOLLARS in cost. Should Tenant make any
Alterations without the prior approval of Landlord, Landlord may require that
Tenant remove any or all of the same. Any Alterations in or about the Premises
that Tenant shall desire to make and which require the consent of the Landlord
shall be presented to the Landlord in written form, with proposed detailed
plans. Landlord shall grant or deny (with stated reasons) the request within
fifteen (15) days of receipt of such request. Failure to timely deny any
request shall be deemed approval of same by Landlord. If Landlord shall give
its consent, the consent shall be deemed conditioned upon Tenant's acquiring a
permit to do so from appropriate governmental agencies, the furnishing of a
copy thereof to Landlord prior to the commencement of the work and the
compliance by Tenant of all conditions of said permit in prompt and
expeditious manner.
Section 9.05. EXPIRATION OF TERM Unless Landlord requires their
removal, as set forth in Section 9.04, all Alterations which may be made on
the Premises shall become the property of Landlord and remain upon and be
surrendered with the Premises at the expiration of the Lease Term. Tenant's
machinery and personal property shall remain the property of the Tenant and
may be removed by Tenant. Subject to the foregoing, on the last day of the
Lease term hereof, or on any sooner termination, Tenant shall surrender the
Premises, including but not limited to, all improvements, equipment,
landscaping, driveways, walkways, and parking lots, to Landlord in good
condition, broom clean, reasonable wear and tear excepted, and deliver all
keys for the Premises to Landlord. Tenant shall repair any damage to the
Premises occasioned by the removal of Tenant's trade fixtures, furnishings and
equipment pursuant to this Section 9.05, which repair shall include the
patching and filling of holes and repair of structural damage. Notwithstanding
anything to the contrary stated or implied elsewhere in this Lease, Tenant
shall leave all power panels, electrical systems, lighting fixtures, plumbing,
space heaters, air conditioning, air lines, and fencing on the Premises in
good operating condition.
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Section 9.06. INSPECTION OF PREMISES. Landlord, its agents and
employees shall have the right to enter the Premises from time to time, after
giving reasonable notice to Tenant, at reasonable times to examine and to
inspect the same, to inspect the performance by Tenant of the terms and
conditions hereof, to show the Premises to prospective purchasers, tenants,
lenders and other persons as provided below. During the last three (3) months
of the Lease Term, Landlord may exhibit the Premises to prospective tenants
and other persons and maintain upon the Premises such signs and notices deemed
advisable by Landlord. In addition, during any emergency, Landlord or its
agents may enter the Premises forcibly with no liability therefor and without
in any manner affecting Tenant's obligations under this Lease. Nothing herein
contained, however, shall be deemed to impose upon Landlord any obligations,
responsibility or liability whatsoever, for any care, maintenance or repair
except as otherwise herein expressly provided.
Section 9.07. WORKMANLIKE QUALITY. All repairs, alterations,
additions, and restoration by Landlord or Tenant hereinafter required or
permitted shall be done in a good and workmanlike manner and in compliance
with all applicable laws and lawful ordinances, by-laws, regulations and
orders of governmental authority and of the insurers of the Premises.
Section 9.08. LIENS. Tenant shall promptly pay and discharge all
claims for services, supplies, labor or materials furnished or alleged to have
been furnished to or for Tenant at or for use in the Premises, which are or
may be secured by any mechanic's or materialmen's lien against the Premises,
any part thereof or any interest therein, and shall indemnify and hold
Landlord harmless against the same unless such services, supplies, labor or
materials were supplied at Landlord's instance. Tenant shall give Landlord not
less than the (100 days notice prior to the commencement of any work in the
Premises, and Landlord shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Tenant shall,
in good faith, contest the validity of any such lien, claim or demand, then
Tenant shall, at its sole expense, defend itself and Landlord against the same
and shall pay and satisfy any adverse judgment that may be rendered thereon
before the enforcement thereof against the Landlord or the Premises, upon the
condition that if Landlord shall require, Tenant shall furnish to Landlord a
surety bond satisfactory to Landlord in an amount equal to such contested
lien, claim or demand indemnifying Landlord against liability for the same and
holding the Premises free from the effect of such lien or claim. In addition,
Landlord may require Tenant to pay Landlord's reasonable attorneys' fees and
costs in participating in such action if Landlord shall decide it is to its
best interest to do so. If any such lien is filed, Landlord may, but shall not
be required to, take such action or pay such amount as may be necessary to
remove such lien; and Tenant shall pay Landlord as Additional Rent any such
amounts expended by Landlord plus fifteen (15%) percent of same. The failure
of Tenant to pay such Additional Rent shall constitute a default under this
Lease.
Section 9.09. "GOOD CONDITION". Any obligation of Tenant under this
Lease to leave or keep property in "good condition" (or words of similar
import) shall be limited to an obligation of Tenant to leave or keep such
property in the condition of such property on the Possession Date, reasonable
wear and tear excepted.
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ARTICLE X
DAMAGE AND DESTRUCTION
Section 10.01. RECONSTRUCTION. If the Improvements are damaged or
destroyed during the Lease Term, Landlord shall, except as hereinafter
provided, diligently repair or rebuild them to substantially the condition in
which they existed immediately prior to such damage or destruction; provided
that any damage which is estimated in good faith by Landlord to be under One
Thousand Dollars ($1,000.00) may be repaired by Tenant, and Landlord shall
reimburse Tenant upon demand for expenses incurred in such repair work to the
extent of any proceeds received by Landlord from extended coverage insurance
described in Section 12.01.
Section 10.02. RENT ABATEMENT. Annual Rental due and payable
hereunder shall be abated proportionately during any period in which, by
reason of any such damage or destruction Tenant reasonably determines that
there is substantial interference with the operation of Tenant's business in
the Premises, having regard to the extent to which Tenant may be required to
discontinue, substantially limit or substantially curtail its business in the
Premises. Such abatement shall continue for the period commencing with such
damage or destruction and ending with a substantial completion by Landlord of
the work or repair or reconstruction which Landlord obligated or undertakes to
do and Tenant's business is capable of being substantially resumed, whichever
is the latter, unless such damage is a result of Tenant's negligence. If it be
determined that continuation of business is not practical pending
reconstruction, Annual Rental due and payable hereunder shall abate until
reconstruction is substantially completed and Tenant's business is capable of
being substantially resumed, whichever is the earlier, unless such damage is a
result of Tenant's negligence.
Section 10.03. EXCESSIVE DAMAGE OR DESTRUCTION OR UNINSURED CASUALTY.
In the event of damage to or destruction of all or any portion of the
Improvements which is not fully covered by the insurance proceeds received by
Landlord or which has not been insured under the insurance policies required
under Section 12.01 above, Tenant or Landlord may terminate this Lease by
written notice to the other party, given within thirty (30) days after the
date of notice to Landlord that said damage or destruction is not so covered,
provided however that Tenant may but is not obligated to repair or replace the
damage or destruction where the proceeds of the insurance are not adequate to
cover the costs associated with said repair and replacement. In the event
Tenant elects to repair or replace, Tenant shall give Landlord notice of its
intention within ten (10) days after receiving Landlord's notice of all costs
and expenses associated therewith which are in excess of the insurance
proceeds, and this Lease shall remain in full force and effect and the
Improvements shall be repaired and rebuilt in accordance with the provisions
for repair set forth in Section 10.01 hereinabove.
Section 10.04. WAIVER. With respect to any destruction which
Landlord is obligated to repair or may elect to repair under the terms of this
Article X, Tenant hereby waives all right to terminate this Lease pursuant to
rights otherwise presently or hereafter accorded by law to tenants, except as
expressly otherwise provided herein.
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Section 10.05. DAMAGE NEAR END OF TERM. If the improvements are
partially destroyed or damaged during the last three (3) months of the Lease
Term, Landlord may, at Landlord's option, cancel and terminate this Lease as
of the date of occurrence of such damage by giving written notice to Tenant of
Landlord's election to do so within thirty (30) days after the date of
occurrence of such damage.
Section 10.06. TENANT'S RESPONSIBILITY. In the event Landlord or
any mortgagee under any mortgage to which this Lease is subordinate shall be
unable to collect the insurance proceeds applicable to such damage because of
some action or inaction on the part of Tenant, or the agents, contractors,
employees, guest, invitee, or licensees of Tenant, the cost of repairing such
damage shall be paid by Tenant and there shall be no abatement of Annual
Rental.
Notwithstanding anything to the contrary contained herein, in the
event Tenant is liable for the cost of repairing any damage, Landlord shall
execute an Assignment of the Insurance Proceeds to Tenant, and Tenant shall be
entitled to take whatever action is necessary as a result of Landlord's
inability to collect the insurance proceeds.
Section 10.07. LANDLORD'S LIABILITY. Except as provided in Section
10.01 hereof, Landlord shall not be liable for any inconvenience or annoyance
to Tenant or injury to the business of Tenant resulting in any way from damage
from fire or other casualty or the repair thereof.
Section 10.08. TENANT'S LIABILITY. Except as may be provided in
Section 12.07 hereof, nothing herein contained shall relieve Tenant from any
liability to Landlord or to Landlord's insurers in connection with any damage
to the Improvements by fire or other casualty if Tenant shall be legally
liable in such respect.
Section 10.09. TENANT'S PROPERTY. Landlord's obligation to repair
or rebuild the Premises shall not include the repair, reconstruction or
replacement of any fixtures, improvements, personal property or decorations of
Tenant whether or not Tenant has received an allowance therefor.
Section 10.10. LIMITATION. Notwithstanding anything to the contrary
contained herein, in no event shall Landlord be required to expend any amount
in excess of the amount recovered from the insurance coverage provided by
Tenant in accordance with the provisions of Article XII hereof.
ARTICLE XI
CONDEMNATION
Section 11.01. CONDEMNATION. If Landlord shall receive notice that
twenty five percent (25%) or more of the Premises shall be acquired or
condemned by right of eminent domain, inversely condemned or sold in lieu of
condemnation for any public or quasi-public use or purpose (hereinafter called
"Condemned") the Tenant, at Tenant's election, may terminate this Lease by
giving notice to Landlord of its election, and in such event, rentals shall be
apportioned and adjusted as of the date of termination. If the Lease shall not
be terminated as aforesaid, then it shall continue in full force and
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effect, and Landlord shall within a reasonable time after possession is
physically taken (subject to delays due to shortage of labor, materials or
equipment, labor difficulties, breakdown of equipment, government
restrictions, fires, other casualties or other causes beyond the reasonable
control of Landlord) repair or rebuild what remains of the Premises for
Tenant's occupancy; and a just proportion of the Annual Rental shall be
abated, according to the nature and extent of the injury to the Premises,
until such repairs and rebuildings are completed, and thereafter for the
balance of the Lease Term.
Section 11.02 LANDLORD'S DAMAGES. Landlord reserves, and Tenant
assigns to Landlord, all rights to damages on account of any taking or
condemnation or anyact of any public or quasipublic authority for which
damages are payable. Tenant shall execute such instruments of any damages
recovered in any proceeding. if Tenant fails to execute instruments required
by Landlord, or undertake such other steps as requested, Landlord shall be
deemed the duly authorized irrevocable agent and attorney-in-fact of Tenant to
execute such instruments and undertake such steps on behalf of Tenant.
Section 11.03. TENANT'S DAMAGES. Notwithstanding anything to the
contrary contained herein, Tenant shall have the right to claim and recover
from the condemning authority, but not from Landlord, such compensation as may
be separately awarded or recoverable by Tenant in Tenant's own right on
account of any and all costs or loss (including loss of business) to which
Tenant might be put in removing Tenant's merchandise, furniture, fixtures,
leasehold improvements and equipment.
ARTICLE XII
INSURANCE AND INDEMNITY
Section 12.01. COVERAGE. The following insurance shall be carried
protecting Landlord and any mortgagee of the Premises and first payable in
case of loss to such holders of mortgages of the Premises as Landlord may from
time to time require:
(a) Insurance providing for payment of replacement costs against
damage by fire, extended coverage perils, and vandalism and malicious mischief
perils (including, without limitation, cost of debris removal and demolition),
in the amount of Five Hundred Thousand ($500,000.00)
Dollars;
(b) Landlord and Tenant's comprehensive general liability insurance
with the following limits, or such higher limits as Landlord may reasonably
require in case of increase in risk: Five Hundred Thousand Dollars
($500,000.00) on account of bodily injury to or death of one person, and One
Million Dollars ($1,000,000.00) on account of bodily injury or death of more
than one person as the result of any one accident or disaster, and Two Hundred
Fifty Thousand Dollars ($250,000.00) on account of fire and casualty damage.
Section 12.02. PAYMENT OF PREMIUMS. Tenant shall obtain, at
Tenant's sole cost and expense, all insurance required pursuant to Section
12.01 hereof. All such insurance shall be written in companies reasonably
satisfactory to Landlord and in the forms customarily in use from time to time
in the locality of the Premises. Tenant shall deposit with holders of
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mortgages encumbering the Premises, if any, insurance policies, duplicates or
certificates as such holders may require, and shall in all cases furnish
Landlord with copies of such certificates. Said policies or certificates shall
provide that such policies shall not be cancelable or subject to reduction or
coverage or otherwise be subject to modification except after thirty (30) days
prior written notice by registered mail to Landlord and such mortgagees.
Unless Landlord advises Tenant to the contrary in writing, such policies
carried by Tenant may have a $5,000.00 deductible clause and Tenant shall
self-insure to the extent of said $5,000.00. Landlord shall not be responsible
to pay any of the aforesaid insurance premiums during the Lease Term hereof.
Section 12.03. TENANT'S GENERAL LIABILITY INSURANCE. Tenant shall,
at its own cost and expense, keep and maintain in full force during the Lease
Term a policy or policies of comprehensive general liability insurance,
written by an insurance company approved by Landlord in the form customary to
the locality, insuring Tenant's activities with respect to the Premises
against loss, damage or liability for personal injury or death of any person
or loss or damage to property occurring in, upon or about the Premises with
limits of not less than those set forth in Subsection 12.01 (b) hereinabove
for injury or death of any one or more persons, or property damage, including
damage caused by boiler accident, if applicable; provided, however, that if at
any time during the Lease Term, Tenant shall have in full force and effect a
blanket policy of general liability insurance with the same coverage for the
Premises as described above, as well as coverage of other premises and
properties of Tenant, or in which Tenant has some interest, such blanket
insurance shall satisfy the requirement hereof.
Section 12.04. TENANT'S PROPERTY INSURANCE. Tenant shall assume
the risk of damage to any fixtures, goods, inventory, merchandise, equipment,
furniture and leasehold improvements, and Landlord shall not be liable for
injury to Tenant's business or any loss of income therefrom relative to such
damage.
Section 12.05. TENANT'S INSURANCE CERTIFICATES. Tenant shall
furnish to Landlord, upon the Possession Date and thereafter within thirty
(30) days prior to the expiration of each such policy, a certificate of
insurance issued by an insurance carrier for each policy of insurance carried
by Tenant pursuant hereto. Said certificates shall expressly provide that such
policies shall not be cancelable or subject to reduction of coverage or
otherwise be subject to modification except after thirty (30) days prior
written notice by registered mail to the parties named as insureds in this
Section 12.05. Landlord shall be named as the insured under each such policy
of insurance maintained by Tenant pursuant to this Lease. Upon Landlord's
written notice to Tenant that additional parties have become the holders of
interests in the Premises, such additional parties shall be included as
additional insureds under the policies required to be purchased hereunder.
Section 12.06. TENANT'S FAILURE. If Tenant fails to maintain any
insurance required in this Lease, Tenant shall be liable for any loss or cost
resulting from said failure. This Section 12.06 shall not be deemed to be a
waiver of any of Landlord's rights and remedies under any other provision of
this Lease.
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Section 12.07. WAIVER OF SUBROGATION. All insurance with respect to
the Premises carried by either party, whether or not required, shall include
provisions denying to the insurer acquisition by subrogation of rights of
recovery against the other party to the extent the rights have not been waived
by the insured prior to occurrence of loss or injury, provided that there
results therefrom no additional premium or that the other party agrees to pay
any additional premium. The other party shall be entitled to have certificates
of the policies containing either provision. Tenant shall not acquire as an
insured under any insurance on the Improvements, or as a payee of any such
insurance proceeds, andy right to participate in the adjustment of loss or to
receive the proceeds except as specifically provided in Section 10.01. Each
party, notwithstanding any provisions of this Lease to the contrary, waives
any rights of recovery against the other for loss or injury against which the
waiving party is protected by insurance containing provisions denying to the
insurer acquisition of rights by subrogation. Each policy of insurance
obtained by Tenant shall contain a provision in which the insurer acknowledges
this waiver of subrogation.
Section 12.08. TENANT'S WORKER'S COMPENSATION INSURANCE. Tenant
agrees to hold Landlord harmless from any claims against Landlord arising
solely as a result of any failure of Tenant to maintain Worker's Compensation
Insurance as required by law.
Section 12.09. INDEMNIFICATION OF LANDLORD. Tenant shall indemnify
and hold Landlord and the Premises harmless from and against (a) any and all
liability, penalties, losses, damages, costs and expenses, demands, causes of
action, claims of judgments arising from or growing out of any injury to any
person or persons or any damage to any property as a result of any accident or
other occurrence during the Lease Term occasioned by any act or omission of
the Tenant, its officers, employees, agents, servants, subtenants,
concessionaires, licensee, contractors, invitees or permittees, or arising
from or growing out of Tenant's use, maintenance, occupation or operation of
the Premises during the Lease term; and (b) all legal costs and charges,
including reasonable attorneys' fee, incurred with respect to any of such
matters and the defense of any action arising out of the same or of in
discharging the Premises or any part hereof from any and all liens, charges or
judgments
Section 12.10. TENANT'S OPERATION. Tenant will not do or suffer to
be done anything which will contravene the aforesaid insurance policies or
prevent the procuring of such policies in amounts and companies approved by
Landlord. If anything done, omitted to be done or suffered to be done by
Tenant in, upon or about the Premises shall cause the rates of any insurance
effected or carried on the Premisses, or other property of Landlord to be
increased beyond the regular rate from time to time applicable to the Premises
for use for the purpose permitted under this Lease, or such other property for
the use or uses made thereof, Tenant will pay the amount of such increase
promptly. If mandated and when required by state or local codes, laws, rules
or regulations; Tenant shall install chemical extinguishing devices approved
by the Fire Insurance Rating Organization as may be required by any insurer of
Landlord, and shall keep such devices under service as required by such
organization. If gas is used in the Premises, Tenant shall install gas cut-off
devices (manual and automatic).
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Section 12.11. ENVIRONMENTAL INDEMNIFICATIONS. Landlord has
purchased a Level II Environmental Audit to be performed on the Leased
Premises; and, the report of such audit rendered by Belpar Environmental, Inc.
and consisting of paragraphs 1.0 through 1.5 and 2.0 through 2.4 inclusive,
together with Appendix A through F inclusive, together with letter addendum
dated September 1, 1993, consisting of one page, plus two UST regulation
attachments, by this reference, is made a part hereof and incorporated herein.
In reliance upon the data contained in such Report, Landlord and Tenant
acknowledge and agree that as to but not exceeding the scope nature and
warranties contained and described in such Report such data shall constitute
the base line of the environmental status of the leased premises and the
leased underground storage tank(s).
Landlord hereby agrees to indemnify and hold Tenant free and harmless from any
and all costs, expenses (including attorneys fees and legal costs), demands,
claims, suits and losses of every nature and description resulting from or
directly or indirectly arising out of Landlord's (and Landlord's predecessors
entitle) use and occupancy of the leased premises prior to September 1, 1993,
in violation of any Federal, State, County or City (including agencies
thereof) environmental laws, statutes, ordinances, rules or regulations now
existing or hereinafter enacted pertaining to health, industrial hygiene or
environmental conditions on, under or about the leased premises including
(without limitation) CERCLA and RCRA.
Tenant hereby agrees to indemnify and hold Landlord free and harmless from any
and all costs, expenses (including attorneys fees and legal costs), demands,
claims suits and losses of every nature and description resulting from or
directly or indirectly arising out of Landlord's (and Landlord's predecessors
in title) use and occupancy of the leased premises on and after September 1,
1993, in violation of any Federal, State, County or City (including agencies
thereof) environmental laws, statutes, ordinances, rules or regulations now
existing or hereinafter enacted pertaining to health, industrial hygiene or
environmental conditions on, under or about the leased premises including
(without limitation CERCLA and RCRA. Section 6.02 of the Agreement for sale
and purchases of assets of even date herewith are incorporated and expressly
made a part hereof.
ASSIGNMENT, SUBLETTING
AND CHANGE OF CONTROL
Section 13.01. CONSENT REQUIRED.
(a) The Tenant shall not, in any event, assign this Lease in whole or
in any part of the Premises, nor mortgage, pledge, encumber or otherwise
transfer this Lease or the Premises or any part thereof, nor suffer or permit
the occupation of, or part with or share possession of all or any part of the
Premises by any person (collectively "Transfer") without the prior written
consent of the Landlord, in each instance such consent shall not be
unreasonably withheld. Any purported Transfer contrary to the provisions
hereof without prior written consent of Landlord shall be void. The consent by
the Landlord to any Transfer, if granted, shall not constitute a waiver of the
necessity for such consent to subsequent Transfer. This prohibition against a
Transfer is construed so as to include a prohibition against any
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Transfer by operation of law and no Transfer shall take place by reason of
failure by the Landlord to give notice to the Tenant within thirty (30) days
as is required by Section 13.03.
(b) If there is a permitted Transfer of this a Lease, the Landlord
may collect Annual Rental from the assignee, subtenant or occupant
(collectively "Transferee") in the event of default of Tenant, and apply the
net amount collected to the Annual Rental required to be paid pursuant to this
Lease, but no acceptance by the Landlord of any payments by a Transferee shall
be deemed a waiver of the covenant, or the acceptance of the Transferee as a
Tenant, or a release of the Tenant from the further performance by the Tenant
of the covenants or obligations on the part of the Tenant herein contained.
Any document of consent evidencing such Transfer of this Lease is permitted or
consented to by the Landlord shall be prepared by the Landlord or its counsel,
and all legal costs with respect thereto shall be paid by the Tenant to the
Landlord forthwith upon demand. Any consent by the Landlord shall be subject
to the Tenant causing any such Transferee to promptly execute an agreement
directly with the Landlord agreeing to be bound by all of the terms, covenants
and conditions contained in this Lease as if such Transferee had originally
executed this Lease as Tenant. Notwithstanding any such Transfer permitted or
consented to by the Landlord, the Tenant shall be jointly and severally liable
with the Transferee on this Lease and shall not be released from performing
any of the terms, covenants and conditions of this Lease.
Section 13.02. LANDLORD'S OPTION. If the Tenant intends to effect
a Transfer of all or any part of the Premises or this Lease, in whole or in
part, or any estate or interest hereunder, then ad so often as such event
shall occur, the Tenant shall give prior written notice to the Landlord of
such intent, specifying therein the proposed Transferee and providing such
information with respect thereto including, without limitation, information
concerning the principals thereof and such credit, financial or business
information relating to the proposed Transferee as the Landlord or the
Mortgagee requires, and the Landlord shall, within fifteen (15) days after
having received such notice and all such necessary information, notify the
Tenant in writing either that (a) it consents or does not consent to the
Transfer in accordance with t he provisions and qualifications in the Article
XIII, or (b) it elects to cancel this Lease in preference to giving of such
consent, the right to cancellation shall not be exercised by Landlord to
contravene Landlord's obligation not to unreasonably withhold its consent. If
the Landlord elects to cancel this Lease as aforesaid the Tenant shall notify
the Landlord in writing within fifteen (154) days thereafter of the Tenant;s
intention either to refrain from such Transfer or to accept the cancellation
of this Lease. IF the Tenant fails to deliver such notice within such period
of fifteen (15) days, this Lease will thereby be terminated upon the
expiration of the said fifteen (15) day period. If the Tenant advises the
Landlord it intends to refrain from such Transfer, then the Landlord;s
election to cancel this Lease as aforesaid shall become null and void in such
instance. Notwithstanding anything to the contrary contained herein, however,
if Landlord does not exercise its option to cancel this Lease pursuant to the
foregoing provisions, Landlord may nevertheless withhold its consent to such
assignment or subletting but shall not unreasonably do so.
Section 13.03. EXCESS SUBLEASE RENTAL. DELETED.
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Section 13.04. CORPORATE OWNERSHIP. If Tenant is a corporation or
if the Landlord has consented to a Transfer of this Lease to a corporation,
any transfer or issue by sale, assignment, bequest, inheritance, operation of
law or other disposition, or by subscription from time to time of all or any
part of the corporate shares of the Tenant or of any parent or subsidiary
corporation of the Tenant or any corporation which is an associate or
affiliate of the Tenant,which results in any change in the present effective
voting control of the Tenant y the person holding such voting control at the
date of execution of this Lease (or at the date a Transfer of this Lease to a
corporation is permitted) and which does not receive the prior written consent
of the Landlord in each instance, which consent may not be unreasonably
withheld, notwithstanding any statutory provision to the contrary, shall be
deemed a "Transfer' as hereinbefore defined. If this Lease is terminated
pursuant to Section 13.02 hereof, the Landlord may re-enter and take
possession of the Premises whereupon the Landlord's rights and remedies
contained in Article XV hereof shall apply.
Section 13.05. RELEASE. Whenever Landlord conveys its interest in
the Premised, Landlord shall be automatically released from the further
performance of covenants on the part of Landlord herein contained, and from
any and all further liability, obligations, costs and expenses, demands,
causes of action, claims or judgments arising from or growing out of, or
connected with this Lease after the effective date of said release. The
assignee executes and assumption of such and assignment whereby the assignee
expressly agrees to assume all of Landlord's obligations, duties,
responsibilities and Landlord, Tenant shall execute a form of release and such
other documentation as may be required to further effect the provisions of
this Section 13.04, provided that if Landlord makes said request of Tenant,
Landlord shall be responsible for Tenant;s attorney fees in reviewing any
documentation so long as said attorney fees of not exceed Two Hundred Fifty
($250.00) Dollars.
Section 13.06. ASSIGNMENT PURSUANT TO BANKRUPTCY CODE.
(a) In the event this Lease is assigned to any person or entity
pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et
seg. (the "Bankruptcy Code"), and all monies or other considerations payable
or otherwise to be delivered in connection with such assignment shall be paid
or delivered to Landlord, said considerations shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenant or
of the estate of Tenant within the meaning of the Bankruptcy Code. Any and all
monies or other considerations constituting Landlord's property under the
preceding sentence not paid or delivered to Landlord shall be held in trust
for the benefit of Landlord and be promptly paid or delivered to Landlord.
(b) Any person or entity to which Lease is assigned pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seg., shall be
deemed without further act or deed to have assumed all of the obligations
arising under this Lease on and after the date of such assignment. Any such
assignee shall upon demand execute and deliver to Landlord and instrument
confirming such assumption.
ARTICLE XIV
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OFFSET STATEMENT, ATTORNMENT, SUBORDINATION
Section 14.01. OFFSET STATEMENT (ESTOPPEL CERTIFICATE). Within ten
(10) days after Landlord's or Tenant's request, the party to whom the request
is made shall execute in recordable form a declaration to any person
designated by the requesting party (a) ratifying this Lease; (b) stating the
Possession, Rent Commencement and Termination Dates; and (c) certifying (i)
that this Lease is in full force and effect and has not been assigned,
modified, supplemented or amended (except by such writings as shall be state),
(ii) that all conditions under this Lease to be performed by Landlord or
Tenant as the case may be, have been satisfied (stating exceptions, if any),
(iii) no defenses or offsets against the enforcement of this Lease by Landlord
or Tenant as the case may be, exist, (or if any stating those claimed), (iv)
advance rent, if any paid by Tenant, (v) the date to which rent has been paid,
(vi) the amount of security deposited with Landlord, and such other
information as the requesting party reasonably requires. Persons receiving
such statements shall be entitled to rely upon same.
Section 14.02. ATTORNMENT. Tenant shall, in the event of a sale or
assignment of Landlord;s interest in the Premises or if the Premisses comes
into the hand s or a mortgagee, ground lessor or any other person, attorn to
the purchaser or such mortgagee or other person and recognize the same as
Landlord hereunder upon such purchaser, ground lessor or other person's
execution of a non-disturbance agreement satisfactory to Tenant, and upon such
execution shall execute within ten (10) days, at Landlord's request, any
attornment agreement required by any such mortgagee to be executed, containing
such provisions as such mortgagee requires.
Section 14.03. SUBORDINATION. This Lease, unless Landlord's
mortgagee requests otherwise, shall be subordinate to the liens of any
mortgages or any lien resulting from any method of financing or refinancing
(hereinafter collectively referred to as "Mortgagee") now or hereafter
existing on all or a part of the Premises, and to all renewals, modifications,
replacements, consolidations and extensions thereof, and within ten (10) days
after request therefor the Tenant shall execute and deliver all documents
requested by a mortgagee or security holder to effect such subordination.
Notwithstanding this Section 14.03, so long as Tenant is not in default under
the terms of this lease, Tenant shall have the right to quiet enjoyment of the
Premises.
ARTICLE XV
DEFAULT BY TENANT
Section 15.01. TENANT'S DEFAULTS. The following shall be considered
for all purposes to be defaults under the terms of this Lease: (a) any failure
of Tenant to pay any installment of Annual Rental after a ten (10) day grace
period, or pay, within fifteen (15) days after written demand therefor by
Landlord, andy Additional Rental or other amount when due hereinunder; (b) any
failure by Tenant to perform or observe any other of the terms, provisions,
conditions and covenants of the Lease for more than thirty (30) days after
written notice of such failure (or, if cure of such failure cannot reasonably
be accomplished in such 30-day period, the failure of Tenant to commence cure
within said period and diligently prosecute such cure to completion); (c) if
Tenant, or any guarantor of this Lease, shall become bankrupt or insolvent or
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file or have filed against it a petition in bankruptcy, provided however, that
Tenant shall have thirty (30) days to obtain a dismissal in the event of
Tenant's Involuntary Bankruptcy or for reorganization or arrangement or for
the appointment of receiver or trustee of all or a portion of Tenant's or any
Guarantor's property, or Tenant or any such Guarantor making an assignment for
the benefit of creditors, in which event neither Tenant nor any person
claiming through or under Tenant by virtue of any statute or order of any
court shall be entitled to possession or to remain in possession but shall
forthwith quit and surrender the Premises; (e) if the Premises comes in the
hands of any person other than as expressly permitted under this Lease. In any
such event, and without grace period, demand or notice except as expressly
stated to the contrary herein, any other notice to which Tenant may be
entitled being hereby waived, Landlord, in addition to all other rights or
remedies it may have, shall thereupon have the right to re-enter and take
possession of the Premises, remove all persons and property from the Premises
and store such property at Tenant's expense, all without notice or resort to
legal process and without being deemed guilty of trespass or becoming liable
for any loss or damage occasioned thereby. Nothing herein shall be construed
to require Landlord to give any notice before exercising any of its rights and
remedies provided for in this Lease.
Section 15.02. RIGHT TO RELET. If Landlord reenters as above
provided, or if it takes possession pursuant to legal proceedings or
otherwise, it may either terminate this Lease by sending notice to Tenant that
the term and estate hereby vested in Tenant and any and all other rights of
Tenant hereunder shall cease on the date specified in such notice (such date
not to be less than five (5) days after the date of the notice) or it may,
from time to time, without terminating the Lease, make such alterations and
repairs as it deems advisable to relet the Premises, and relet the Premises or
any part thereof for such term or terms (which may extend beyond the Lease
Term) and at such rentals and upon such other terms and conditions as shall be
reasonable at the time; upon each such reletting all rentals received by
Landlord therefrom shall be applied first to any indebtedness other than
Annual Rental due hereunder from Tenant to Landlord; second to pay any
reasonable costs and expenses of reletting, including brokers; and attorney's
fees and costs of alterations and repairs; third, to Annual Rental due
hereunder and the residue, if any, shall be held by Landlord and applied in
payment of future rent as it becomes due hereunder.
If rentals received from such reletting during any month are less
than that to be paid during the month by Tenant hereunder, Tenant shall
immediately pay any such deficiency to Landlord. No re-entry or taking
possession of the Premises by Landlord shall be construed as an election to
terminate this Lease unless written notice of such termination is given by
landlord.
Notwithstanding any such reletting without termination Landlord may
at any time thereafter terminate this Lease for any prior breach or default.
If Landlord terminates this Lease for any breach, in addition to any other
remedies it may have, it may recover from Tenant all damages incurred by
reason of such breach or default including the excess, if any, of the total
rent and charges reserved in this Lease for the remainder of the Lease Term
over the then reasonable rental value of the Premises for the remainder of the
Lease Term, all of which shall be immediately due and payable by Tenant to
Landlord.
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Section 15.03. COUNTERCLAIM. If Landlord commences any proceedings
for non-payment of rent, Tenant will not request a jury trial nor interpose
any counterclaim of any nature or description in such proceedings. This shall
not, however, be construed as a waiver of Tenant's right to assert such claims
in a separate action brought by Tenant. The covenants to pay rent and other
amounts hereunder are independent covenants and Tenant shall have no right to
hold back, offset or fail to pay any such amounts for default by Landlord or
any other reason whatsoever.
Section 15.04. WAIVER OF RIGHTS OF REDEMPTION. To the extent
permitted by law, Tenant waives any and all rights of redemption granted by or
under any present or future laws if Tenant is evicted or dispossessed for any
cause, or if Landlord obtains possession of the Premises due to Tenant's
default hereunder or otherwise.
Section 15.05. OTHER. If Tenant causes or threatens to cause a
breach of any of the covenants, agreements, terms or conditions contained in
this Lease, Landlord shall e entitled to obtain all sums held by Tenant, by
any trustee or in any account provided for herein, to enjoin such breach or
threatened breach, and to invoke any right and remedy allowed at law or in
equity or by statute or otherwise as though re-entry, summary proceedings and
other remedies were not provided for in this Lease.
Section 15.06. CUMULATIVE. Except as herein provided otherwise,
each right and remedy of Landlord provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy provided
for in this Lease or now or hereafter existing at law or in equity or by
statute or otherwise. The exercise or beginning of the exercise by Landlord of
any one or more of the cumulative rights or remedies provided for in this
Lease, or now or hereafter existing at law or in equity or by statute or
otherwise, shall not preclude the simultaneous or later exercise by Landlord
of any or all other rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise.
Section 15.07. NO WAIVER. No failure by Landlord to insist upon the
strict performance of any term hereof or to exercise any right or remedy
consequent upon a breach hereof, and no acceptance of full or partial payment
of Annual Rental during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. Efforts by Landlord to mitigate
the damages caused by Tenant's breach of this Lease shall not be construed to
be a waiver of Landlord's right to recover damages under this Article XV.
Nothing in this Article XV affects the right of Landlord to indemnification by
Tenant in accordance with Section 12.09 hereinabove for liability arising
prior to the termination of this Lease for personal injuries or property
damage.
ARTICLE XVI
DEFAULT BY LANDLORD
Section 16.01. DEFAULT DEFINED, NOTICE. Landlord shall in no event
be charged with default in any of its obligations hereunder unless and until
Landlord shall have failed to perform such obligations within thirty (30) days
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(or if cure of such failure cannot reasonably be accomplished in such 30 day
period,the failure of Landlord to cure within said period and diligently
procreate such cure to completion) after written notice to Landlord by Tenant,
specifically describing such failure.
Section 16.02. NOTICE TO MORTGAGEE. If the holder of a mortgage
covering the Premises shall have given written notice to Tenant at the address
to which notices to such holder are to be sent, Tenant shall give such holder
written notice simultaneously with any notice given to Landlord of any default
of Landlord, and if Landlord fails to cure any default asserted in said notice
within the time provided above, Tenant shall notify such holder in writing of
the failure to cure, and said holder shall have thirty (30) days after receipt
of such second notice to cure such default before Tenant may take any action
by reason of such default.
ARTICLE XVII
TENANT'S PROPERTY
Section 17.01. TAXES ON LEASEHOLD. Tenant shall be responsible for
and shall pay before delinquent all municipal, county, federal, or state taxes
coming due during or after the term of this Lease against any leasehold
interest or personal property of any kind owned or placed in, upon, or about
the Premises by Tenant.
ARTICLE XVIII
SECURITY DEPOSIT
Section 18.01. AMOUNT OF DEPOSIT. None
ARTICLE XIX
HOLDING OVER, SUCCESSORS
Section 19.01. HOLDING OVER. If Tenant wrongfully holds over or
occupies the Premises beyond the Lease Term (it being agreed there shall be no
such holding over or occupancy without Landlord's written consent), Tenant
shall pay Landlord for each day of such holding over a sum equal to the
greater of (a) twice the monthly installment of Annual Rental, prorated for
the number od days of such holding over; or (b) double the fair market rental
value of the Premises, plus a pro-rata portion of all other amounts which
Tenant would have been required to pay hereunder and this Lease been in
effect. If Tenant holds over with or without Landlord's written consent,
Tenant shall occupy the Premises on a tenancy from month to month, and all
other terms and provisions of this Lease shall be applicable to such period.
Section 19.02. SUCCESSORS. All rights and liabilities herein given
to or imposed upon the respective parties hereto shall bind and inure to the
several respective heirs, successors, administrators, executors and assigns of
the parties and if Tenant is more than one person, they shall be bound jointly
and severally by this Lease. No rights, however, shall inure to the benefit of
any assignee of Tenant unless the assignment was approved by Landlord in
writing in accordance with the terms and provisions of Article XII hereof.
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ARTICLE XX
QUIET ENJOYMENT
Section 20.01. LANDLORD'S COVENANT. Landlord shall keep all
mortgages and deeds of trust now or hereafter placed against the leased
Premises in good standing and provided Tenant pay s the Annual Rental and
other amounts herein provided when due, and observes and performs all of the
covenants, terms and conditions contained in this Lease, Tenant shall
peaceably and quietly hold and enjoy the Premises for the Lease Term without
interruption by Landlord or any person or persons claiming by, through or
under Landlord, subject,nevertheless, to the terms and conditions of this
Lease.
ARTICLE XXI
SURRENDER OF PREMISES
Section 21.01. SURRENDER. This Lease shall terminate at the end of
the Lease Term hereof without the necessity of any notice from either Landlord
or Tenant to terminate the same and Tenant hereby waives notice to vacate the
Premises and agrees that Landlord shall be entitled to the benefit of all
provisions of law respecting the summary recovery of possession of Premises
from a Tenant holding over to the same extent as if statutory notice had been
given. On the last day of the Lease Term hereof, Tenant shall peaceably and
quietly surrender the Premises. Tenant shall indemnify Landlord against loss
or liability resulting from delay by Tenant in so surrendering the Premises,
including, without limitation, any claims made by any succeeding Tenant
founded on such delay. In the event Tenant shall fail to deliver the Premises
to Landlord in the condition called for under Section 21.01 or Section 9.05
hereof, Landlord shall have the right to cause any such deficiency to be
corrected, and Tenant agrees to pay the cost thereof. The provisions of this
Section 21.01 and Section 9.05 hereof shall survive termination of this Lease.
ARTICLE XII
OPTION TO PURCHASE
Section 22.01. TENANT'S OPTION TO PURCHASE. Tenant shall have the
option to purchase the Premises at the expiration of the Term of the Lease as
contained in Section 2.02 hereof by providing Landlord notice of its intent to
purchase the Premises by June 1, 2013.
Section 22.02. PREMISES PURCHASE PRICE. Tenant's option to purchase
the Premises shall be the Fair Market Value of Premises as established by an
independent MAI certified real estate appraiser of whom both Landlord and
Tenant agree upon, and the parties shall stipulate to the appraiser that
he/she shall not consider and include the instant lease incident to the
determination of Fair Market Value. Landlord and Tenant agree that the cost of
said appraisal shall be divided equally between the parties. Notwithstanding
anything to the contrary contained in this Section 22.02, the Landlord may
sell and the Tenant may purchase at such other price and on such terms as may
be otherwise acceptable and agreed to by Tenant and Landlord.
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Section 22.03. SETTLEMENT OF THE PREMISES. In the event Tenant
elects to purchase the Premises under Sections 22.01 and 22.01, Closing of
this transaction shall occur prior to September 1, 2013, by Landlord's
delivery to Tenant of a General Warranty Deed which shall convey good and
merchantable title with covenants of further assurances. The costs of closing
shall be divided equally between the Buyer and Seller.
ARTICLE XXIII
MISCELLANEOUS
Section 23.01. WAIVER. No covenant, term or condition of this Lease
shall be deemed waived by Landlord or Tenant unless waived in writing.
Section 23.02. ACCORD AND SATISFACTION. Landlord is entitled to
accept, receive and cash or deposit any payment made by Tenant for any reason
or purpose or in any amount whatsoever, and apply the same at Landlord's
option to any obligation of Tenant and the same shall not constitute payment
of any amount owed except that to which Landlord has applied the same. No
endorsement or statement on any check or letter of Tenant shall be deemed an
accord and satisfaction or otherwise recognized for any purpose whatsoever.
The acceptance of any such check or payment shall be without prejudice to
Landlord's right to recover any and all amounts owed by Tenant hereunder and
Landlord's right to pursue any other available remedy. Likewise any payments
made by Tenant under protest shall not be construed as a waiver of Tenant's
rights.
Section 23.03. ENTIRE AGREEMENT. There are no representations,
covenants, warranties, promises, agreements, conditions or undertakings, oral
or written, between Landlord and Tenant regarding the subject matter and time
period which are the subjects of this Lease other than herein set forth.
Except as herein otherwise provided, no subsequent alteration, amendment,
change or addition to this Lease shall be binding upon Landlord or Tenant
unless in writing and signed by the parties hereto.
Section 23.04. NO PARTNERSHIP. Landlord does not, in any way or for
any purpose, become a partner, employer, principal, master or agent or joint
venturer of or with Tenant.
Section 23.05. FORCE MAJEURE. If Landlord or Tenant shall be
delayed or hindered in or prevented from the performance of any act required
hereunder by reason of strikes, lockouts, labor troubles, inability to procure
material,failure of power, restrictive governmental laws or regulations,
riots, insurrection, war or other reason of a like nature not the fault of
Landlord or Tenant, as the case may be, the period for the performance of any
such act shall be extended for a period equivalent to the period of such
delay.
Section 23.06. SUBMISSION OF LEASE. Submission of this Lease to
Tenant does not constitute an offer to Lease; the Lease shall become effective
only upon execution and delivery thereof by Landlord to Tenant. The effective
date of this Lease shall be the Possession Date stated herein.
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Section 23.07. NOTICES. All notices from tenant to Landlord and
from Landlord to Tenant required or permitted by any provision of this
Agreement shall be directed to Landlord or Tenant as follows at the principle
address hereinabove set forth:
All notices to be given hereunder by either party shall be written
and sent by registered or certified mail, postage prepaid, addressed to the
party intended to be notified at the address set forth above. Either party
may, at any time, or from time to time, notify the other, in writing, of a
substitute address. Notice given as aforesaid shall be sufficient service
thereof and shall be deemed given as of the date received, as evidence by the
return receipt of the registered or certified mail. A duplicate copy of all
notices from Tenant relating to any default on the part of the Landlord shall
be sent to any mortgagee as herein provided; however, failure on tenant's part
to forward said duplicate notice to any mortgagee shall not prejudice any of
Tenant's rights in this Section 23.07.
Section 23.08. CAPTIONS AND SECTION NUMBERS. This Lease shall be
construed without reference to titles of Articles and Sections which are
inserted only for convenience of reference.
Section 23.09. NUMBERS AND GENDERS. The use herein of singular term
shall include the plural and use of masculine, feminine or neuter genders
shall include all others.
Section 23.10. JOINT AND SEVERAL LIABILITY. If Tenant and Landlord
are a partnership or other business organization the members of which are
subject to personal liability, the liability of each such member shall be
deemed to be joint and several.
Section 23.11. LIMITATION OF LIABILITY. Notwithstanding anything to
the contrary herein contained, the term "Landlord" shall mean only the owner
at the time in question of the Premises, so that in the event of any transfer
or transfers of the title to the Premises, the transferor shall be and hereby
is relieved and freed of all obligations of Landlord under this Lease accruing
after such transfer, and it shall be deemed, without further agreement, that
such transferee has assumed and agreed to perform and observe all obligations
of Landlord herein during the period it is the holder of Landlord's interest
under this Lease. In any event, Tenant shall look only to Landlord's estate
and property in the Premises and the land on which it is located for
satisfaction of each and every remedy of the Tenant in the event of any
default by Landlord hereunder, and no other property or assets of Landlord
hereunder, and no other property or assets of Landlord or its partners or
principals, disclosed or undisclosed, shall be subject to levy, execution or
any other enforcement procedure for the satisfaction of Tenant's remedies
under or with respect to this Lease, the relationship of Landlord and Tenant
hereunder or Tenant's use or occupancy of the Premises. The aforegoing
exculpation of personal liability is absolute and without any exception
whatsoever.
Section 23.12. BROKER'S COMMISSION. Each party represents and
warrants that it has caused or incurred no claims for brokerage commission or
finder's fees in connection with the execution of this Lease except as may be
provided for hereinafter in this Section of the Lease, and each party shall
indemnify
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and hold the other harmless against and from all liabilities arising from any
such claims caused or incurred by it (including without limitation, the cost
of attorney fees in connection therewith).
Section 23.13. PARTIAL INVALIDITY. if any term, covenant or
condition of this Lease or the application thereof to any person or
circumstance, shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term, covenant or condition to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term, covenant or
condition of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
Section 23.14. NO REPRESENTATIONS BY LANDLORD. Neither Landlord nor
any agent or employee of Landlord, has made any representations or promises,
with respect to the Premises except as herein expressly set forth, and no
rights, privileges, easements or licenses are acquired by Tenant except as
herein set forth. The Tenant by Taking possession of the Premises, shall
accept the same "as is", and such taking of possession shall be conclusive
evidence that the Premises are in good and satisfactory condition at the time
of such taking of possession.
Section 23.15. BINDING EFFECT OF LEASE. It is agreed that all
rights, remedies and liabilities herein given to or imposed upon either of the
parties hereto, shall extend to their respective heirs, executors,
administrators, and except as otherwise expressly provided in this Lease,
their successors and assigns. Landlord may freely and fully assign its
interest hereunder.
Section 23.16. VIRGINIA LAW TO CONTROL. This Lease shall be
construed, interpreted and enforced according to the laws of the Commonwealth
of Virginia, without regard to principles of conflict of laws.
IN WITNESS WHEREOF, Landlord, Tenant and Guarantor have signed and
sealed this Lease as of the day and year first above written.
ATTEST: LANDLORD:
MILLER/HINKLE PARTNERSHIP
By: (Seal)
- ---------------------------------- ----------------------
Richard G. Hinkle
General Partner
By: (Seal)
- ---------------------------------- --------------------
Sandford Miller
General Partner
ATTEST: TENANT:
CAPITAL CITY LEASING, INC.
T/A BUDGET RENT A CAR OF RICHMOND
By: (Seal)
- ---------------------------------- ---------------------
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SIXTH AMENDMENT TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
among
TEAM FLEET SERVICES CORPORATION,
TEAM RENTAL GROUP, INC.
and
NBD BANK, N.A.
DATED AS OF MAY 1, 1996
<PAGE>
SIXTH AMENDMENT TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
THIS SIXTH AMENDMENT, dated as of the 1st day of May, 1996, is
among TEAM FLEET SERVICES CORPORATION, TEAM RENTAL GROUP, INC. and
NBD BANK, N.A. The parties agree as follows:
WITNESSETH:
WHEREAS, on January 12, 1995, the parties entered into a certain
First Amended and Restated Credit Agreement, as amended May 23, 1995, July 11,
1995, December 29, 1995, February 27, 1996 and March 28, 1996 (the "Original
Agreement"); and
WHEREAS, the parties desire to further amend the Original
Agreement as herein provided;
NOW, THEREFORE, in consideration of the premises, and the promises
herein contained, the parties agree that the Original Agreement shall be, and
it hereby is, amended as follows:
PART I. AMENDATORY PROVISIONS
SECTION 1
DEFINITIONS
1.1. Defined Terms.
(a) Section 1.1 of the Original Agreement is hereby
amended by substituting the following new definitions in lieu
of the existing like definitions:
"Applicable Margin" means (a) in the case of the
Working Capital Line (i) 2.5% prior to the infusion of Additional
Equity and (ii) 2.0% upon and after the infusion of Additional
Equity, and (b) in the case of the Floor Plan Line (A) 2.25% prior to
the infusion of Additional Equity, and (B) 1.75% upon and after the
infusion of Additional Equity.
"Floor Plan Line" means the secured floor plan
revolving credit in the maximum principal amount of Forty-One Million
Dollars ($41,000,000) from the date hereof to and including November
1, 1996, governed by this Agreement, including any renewal or
extension thereof.
"Non-Vehicle Leverage Ratio" means, on the date of
determination, Team Rental's consolidated (a) total Indebtedness
minus indebtedness related to financed vehicles (excluding such
indebtedness which constitutes a contingent liability of a Borrower,
but, for financial statement purposes, has been included in Team
Rental's consolidated financial statements) divided by (b) Net Worth.
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"Working Capital Line" means the secured working
capital revolving credit in the maximum principal amount of Thirteen
Million Dollars ($13,000,000) from the date hereof to and including
November 1, 1996, governed by this Agreement, including any renewal
or extension thereof.
(b) Section 1.1 of the Original Agreement is hereby
amended by adding the following new definition:
"Additional Equity" means, from the date hereof,
the investment or investments in the capital stock of the Borrowers
by Persons not Affiliates in an aggregate amount equal to or greater
than Forty-Five Million Dollars ($45,000,000).
SECTION 2
CREDIT
2.1. Commitments. Section 2.1 of the Original Agreement is
hereby amended by substituting the following new Sections 2.1.1 and
2.1.2 in lieu of the existing Sections 2.1.1 and 2.1.2,
respectively:
2.1.1. Floor Plan Line. Subject to the terms and
conditions of this Agreement, the Bank shall make the Floor
Plan Line available to Team Fleet in a maximum principal
amount equal to the lesser of: (a) the Borrowing Base, or (b)
Forty-One Million Dollars ($41,000,000). Advances under the
Floor Plan Line shall be evidenced by the Floor Plan Note.
2.1.2. Working Capital Line. Subject to the terms and
conditions of this Agreement, Bank shall make the Working Capital
Line available to Borrowers in the maximum principal amount, together
with the aggregate amount of all outstanding Letter of Credit
Liabilities, equal to the lesser of: (a) the Borrowing Base, or (b)
Thirteen Million Dollars ($13,000,000). Advances under the Working
Capital Line shall be evidenced by the Working Capital Note.
2.1.3. Letters of Credit.
(a) Commitment. Section 2.1.3(a) of the
Original Agreement is hereby amended by deleting
"from the date hereof to and including April 30,
1996 and Seven Million Dollars ($7,000,000) on and
after April 1, 1996" commencing in the twelfth
(12th) line thereof.
2.5 Fees. Section 2.5 of the Original Agreement is hereby
amended by adding the following new Section 2.5.1A:
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2.5.1A. Amendment Fee. Borrowers shall pay to Bank a
non-refundable commitment fee equal to $100,000, payable at
the time of the execution of this Sixth Amendment.
SECTION 5
COVENANTS
5.1. Negative Covenants. The Original Agreement is hereby
amended by substituting the following new Section 5.1.15 in lieu of
the existing Section 5.1.15:
5.1.15. Non-Vehicle Leverage Ratio. Permit Team
Rental's Non-Vehicle Leverage Ratio to exceed (a) 1.10 to 1.00
prior to the infusion of Additional Equity and (b) .50 to 1.00
after the infusion of Additional Equity.
SECTION 6
CONDITIONS PRECEDENT
6.2 Conditions to Subsequent Advances under the Facilities. The
Original Agreement is hereby amended by substituting the following new Section
6.2.4 in lieu of the existing Section 6.2.4:
6.2.4. Expenses. Borrowers shall have reimbursed Bank
for all reasonable expenses incurred by Bank in connection
with the Facilities, including, without limitation, the Bank's
closing attorneys' fees.
PART II. CONTINUING EFFECT
Capitalized terms used herein and not specifically herein defined
shall have the meanings ascribed to such terms in the Original Agreement. All
other terms, conditions, representations, warranties and covenants contained
in the Original Agreement shall remain the same and shall continue in full
force and effect. In consideration hereof, the Borrowers represent and warrant
that each representation and warranty set forth in the Original Agreement, as
hereby amended, remains true and correct as of the date hereof, except to the
extent that such representation and warranty is expressly intended to apply
solely to an earlier date and that, to its knowledge, there currently exists
no offsets, counterclaims or defenses to the performance of the Obligations,
nor, except as disclosed on Schedule 1 to the Original Agreement has there
occurred any Default or Unmatured Default thereunder, and no Default or
Unmatured Default, after giving effect to the transactions contemplated or
otherwise covered by this Sixth Amendment, is or shall be occasioned thereby.
The representations and warranties contained in the Original Agreement
originally shall survive this Sixth Amendment in their original form, except
as expressly herein modified, and shall survive as the continuing
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3
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representations and warranties of the Borrowers, except to the extent that
such representation and warranty is expressly intended to apply solely to an
earlier date. Except as expressly herein provided, the Original Agreement and
this Sixth Amendment shall be interpreted, wherever possible, in a manner
consistent with one another, but in the event of any irreconcilable
inconsistency, this Sixth Amendment shall control. The parties each hereby
agree to cooperate in all reasonable requests of each other party hereto,
including, without limitation, the execution of financing statements and other
documents, which the requesting party deems reasonable, necessary, appropriate
or expedient to carry out the intents and purposes of this Sixth Amendment.
PART III. CONDITIONS PRECEDENT
Notwithstanding anything contained in this Sixth Amendment to the
contrary, the Bank shall have no obligation under this Sixth Amendment, and
this Sixth Amendment shall not be effective, until each of the following
conditions precedent have been fulfilled to the satisfaction of the Bank:
(a) Each of the conditions set forth in Section 6.2 of
the Original Agreement shall have been satisfied;
(b) The Bank shall have received each of the following,
in form and substance satisfactory to the Bank:
(i) The Loan Documents, as amended, including,
without limitation, this Sixth Amendment, duly executed
in the form approved by the Bank;
(ii) A duly executed certificate of the Secretary
or any Assistant Secretary of each Borrower and Guarantor
(A) certifying as to attached copies of resolutions of the
Boards of Directors of each Borrower and Guarantor
authorizing the execution, delivery and performance,
respectively, of the Loan Documents, as amended, and any
other documents provided for in this Sixth Amendment to
which the Borrowers or Guarantors are a party, and (B)
certifying as complete and correct as to attached copies of
the Articles of Incorporation and By-Laws of the Borrowers
and the Guarantors, or certifying that such Articles of
Incorporation or By-Laws have not been amended (except as
shown) since the previous delivery thereof to the Bank; and
(iii) All reasonable expenses of the Bank, shall
have been reimbursed by the Borrowers, including, without
limitation, the Bank's attorneys' fees; and
(c) All legal matters incident to this Sixth Amendment
shall be reasonably satisfactory to the Bank and its counsel.
CA\CHA\100557-1
4
<PAGE>
IN WITNESS WHEREOF, the Borrowers and the Bank have caused this Sixth
Amendment to be executed by their respective officers duly authorized as of
the date first above written.
TEAM FLEET SERVICES CORPORATION
By:____________________________
Its:___________________________
TEAM RENTAL GROUP, INC.
By:___________________________
Its:__________________________
NBD BANK, N.A.
By:___________________________
Steven P. Clemens,
Vice President
CA\CHA\100557-1
5
<PAGE>
SEVENTH AMENDMENT TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
among
TEAM FLEET SERVICES CORPORATION,
TEAM RENTAL GROUP, INC.
and
NBD BANK, N.A.
DATED AS OF MAY 31, 1996
EXHIBIT A
<PAGE>
SEVENTH AMENDMENT TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
THIS SEVENTH AMENDMENT, dated as of the 31st day of May, 1996, is
among TEAM FLEET SERVICES CORPORATION, TEAM RENTAL GROUP, INC.
and NBD BANK, N.A. The parties agree as follows:
WITNESSETH:
WHEREAS, on January 12, 1995, the parties entered into a certain
First Amended and Restated Credit Agreement, as amended May 23, 1995, July 11,
1995, December 29, 1995, February 27, 1996, March 28, 1996 and May 1, 1996
(the "Original Agreement"); and
WHEREAS, the parties desire to further amend the Original
Agreement as herein provided;
NOW, THEREFORE, in consideration of the premises, and the promises
herein contained, the parties agree that the Original Agreement shall be, and
it hereby is, amended as follows:
PART I. AMENDATORY PROVISIONS
SECTION 1
DEFINITIONS
1.1. Defined Terms.
(a) Section 1.1 of the Original Agreement is hereby
amended by substituting the following new definitions in lieu
of the existing like definitions:
"NationsBank Loan" means, collectively, (a) the
secured revolving loan from NationsBank to Team Fleet in the maximum
principal amount of up to One Hundred Million Dollars ($100,000,000)
governed by that certain Revolving Credit Agreement, dated as of May
31, 1996, among Team Fleet, NationsBank and lenders party thereto
from time to time, and (b) the secured bridge loan from NationsBank
to Team Rental in the maximum principal amount of Seventeen Million
Dollars ($17,000,00) for the purpose of acquiring one hundred percent
(100%) of the issued and outstanding shares of capital stock of
Arizona Rent-A-Car Systems, Inc.
(b) Section 1.1 of the Original Agreement is hereby
further amended by adding the following new definitions:
"Acquisition" means the acquisition of (i) a
controlling equity interest in another Person (including the purchase
of an option, warrant or convertible or similar type security to
acquire such a controlling interest at the time it becomes
exercisable by the holder thereof), whether by
103567
<PAGE>
purchase of such equity interest of upon exercise of an option or
warrant for, or conversion of securities into, such equity interest,
or (ii) assets of another Person which constitute all or
substantially all of the assets of such Person or of a line or lines
of business conducted by such Person.
"Capital Expenditures" means, with respect to the
Borrowers and the Subsidiaries, for any period the sum of (without
duplication) (i) all expenditures (whether paid in cash or accrued as
liabilities) by either Borrower or any Subsidiary during such period
for items that would be classified as "property, plant or equipment"
or comparable items on the consolidated balance sheet of Team Rental,
including, without limitation, all transactional costs incurred in
connection with such expenditures provided the same have been
capitalized, excluding, however, the amount of any Capital
Expenditures paid for with proceeds of casualty insurance evidenced
in writing and submitted to the Bank, and (ii) with respect to any
Capital Lease entered into by either Borrower or any Subsidiary
during such period, the present value of the lease payments due under
such Capital Lease over the term of such Capital Lease applying a
discount rate equal to the interest rate provided in such lease (or
in the absence of a stated interest rate, that rate used in the
preparation of the financial statements furnished to the Bank from
time to time pursuant to Section 5.2.1), all the foregoing in
accordance with GAAP.
"Capital Leases" means all the leases which have
been or should be capitalized in accordance with GAAP (including
Statement No. 13 of the Financial Accounting Standards Board and any
successor thereof).
"Consolidated EBIT" means, with respect to the
Borrowers and the Subsidiaries for any Four-Quarter Period ending on
the date of computation thereof, the sum of, without duplication, (i)
Consolidated Net Income, plus (ii) Consolidated Interest Expense
accrued during such period, plus (iii) taxes on income accrued during
such period, all determined on a consolidated basis in accordance
with GAAP.
"Consolidated EBITDA" means, with respect to the
Borrowers and the Subsidiaries for any Four-Quarter Period ending on
the date of computation thereof, the sum of, without duplication, (i)
Consolidated Net Income, plus (ii) Consolidated Interest Expense
accrued during such period, plus (iii) taxes on income accrued during
such period, plus (iv) amortization, plus (v) depreciation, all
determined on a consolidated basis in accordance with GAAP.
"Consolidated Fixed Charged Ratio" means, with
respect to the Borrowers and the Subsidiaries for any Four-Quarter
Period ending on the date of computation thereof, the ratio of (i)
Consolidated EBITDA for such period minus (without duplication)
Capital Expenditures, minus depreciation
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2
<PAGE>
relating solely to Team Vehicles for such period, to (ii)
Consolidated Fixed Charges for such period.
"Consolidated Fixed Charges" means, with respect to
the Borrowers and the Subsidiaries for any Four-Quarter Period ending
on the date of computation thereof, the sum of, without duplication,
(i) Consolidated Interest Expense accrued during such period, plus
(ii) current maturities of Consolidated Indebtedness, plus (iii)
income taxes paid during such period, all determined on a
consolidated basis in accordance with GAAP.
"Consolidated Indebtedness" means all Indebtedness
for Money Borrowed of the Borrowers and the Subsidiaries, all
determined on a consolidated basis.
"Consolidated Interest Expense" means, with respect
to any period of computation thereof, the gross interest expense of
the Borrowers and the Subsidiaries, including without limitation (i)
the current amortized portion of debt discounts to the extent
included in gross interest expense, (ii) the current amortized
portion of all fees payable in connection with the incurrence of
Indebtedness to the extend included in gross interest expense and
(iii) the portion of any payments made in connection with Capital
Leases allocable to interest expense, all determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period of
computation thereof, the gross revenues from operations of the
Borrowers and the Subsidiaries (including payments received by the
Borrowers and the Subsidiaries of (i) interest income, and (ii)
dividends and distributions made in the ordinary course of their
businesses by Persons in which investment is permitted pursuant to
this Agreement and not related to an extraordinary event), minus all
operating and non-operating expenses of the Borrowers and the
Subsidiaries including taxes on income, all determined on a
consolidated basis in accordance with GAAP; but excluding as income:
(i) net gains on the sale, conversion or other disposition of capital
assets, (ii) net gains on the acquisition, retirement, sale of other
disposition of capital stock and other securities of Team Rental or
its Subsidiaries, (iii) net gains on the collection of proceeds of
life insurance policies, (iv) any write-up of any asset, and (v) any
other net gain or credit of an extraordinary nature as determined in
accordance with GAAP; provided, however, that for purposes of
determining compliance with the provisions of Sections
_______________ hereof, there shall be disregarded any increase in
Consolidated Net Income upon giving effect to any Acquisition which
results from the treatment of such Acquisition as a "pooling of
interests".
"Consolidated Non-Vehicle Indebtedness" means
Consolidated Indebtedness minus Consolidated Vehicle
Indebtedness.
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3
<PAGE>
"Consolidated Non-Vehicle Indebtedness to
Consolidated EBITDA Ratio" means with respect to the Borrowers and
Subsidiaries on the date of computation thereof, the ratio of (i)
Consolidated Non-Vehicle Indebtedness for such period to (ii)
Consolidated EBITDA minus depreciation relating solely to Team
Vehicles for such period.
"Consolidated Vehicle Indebtedness" means
Consolidated Indebtedness relating solely to the financing of any
Team Vehicles and secured thereby.
"Four Quarter Period" means a period of four full
consecutive fiscal quarters of the Borrowers and the Subsidiaries,
taken together as one accounting period.
"Indebtedness for Money Borrowed" means, with
respect to any Person, all indebtedness in respect of money borrowed,
including, without limitation, all Capital Leases and the deferred
purchase price of any property or asset, evidenced by a promissory
note, bond or similar written obligation for the payment of money
(including, without limitation, conditional sales or similar title
retention agreements).
"NationsBank" means NationsBank, National
Association (South), a national banking association.
"NationsBank Intercreditor Agreement" means the
Intercreditor Agreement among NationsBank, the Bank and Team Fleet,
dated as of May 31, 1996.
"Issuance Date" means the earliest date that Team
Rental issues any securities pursuant to that certain registration
statement, dated May 24, 1996 (which registration statement has been
filed with the Securities and Exchange Commission).
"Team Vehicles" means all of the Borrowers' and
each Subsidiary's now existing and hereafter acquired motor vehicle
inventory consisting of cars, vans and other vehicles of all types
and descriptions, whether held for sale, lease or rental purposes,
including, without limitation, any such vehicles financed by a
Facility.
"Team Vehicle Utilization" means, on any given day,
the percentage of Team Vehicles that are leased to customers of Team
Rental or the Subsidiaries on such date.
(c) Section 1.1 of the Original Agreement is hereby further
amended by substituting "(i) liens securing the NationsBank Loan as
described in the NationsBank Intercreditor Agreement, and (j)" in
lieu of "and (i)" in the definition of Permitted Encumbrances.
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4
<PAGE>
SECTION 5
COVENANTS
5.1. Negative Covenants.
(a) The Original Agreement is hereby amended as follows:
5.1.8. Guaranties. Section 5.1.8. of the Original
Agreement is hereby amended by substituting "(d) the guaranty
by Team Rental of the obligations of Team Fleet under the
NationsBank Loan constituting the revolving line of credit,
and (e) the guaranty by Team Fleet of the obligations of Team
Rental under the NationsBank Loan constituting the secured
bridge loan." in lieu of "and (d) the guaranty by Team Fleet
of the obligations of Team Rental under the NationsBank Loan."
(b) The Original Agreement is hereby further amended by
substituting the following new Section 5.1.15 in lieu of the
existing Section 5.1.15:
5.1.15. Non-Vehicle Leverage Ratio. Permit the Non-
Vehicle Leverage Ratio to exceed (a) 1.10 to 1.00 as of March
31, 1996 and at all times prior to the infusion of Additional
Equity, and (b) .50 to 1.00 after the infusion of Additional
Equity.
(c) The Original Agreement is hereby further amended by
adding the following new Sections 5.1.16, 5.1.17, 5.1.18 and 5.1.19:
5.1.16. Consolidated Fixed Charge Ratio. Permit the
Consolidated Fixed Charge Ratio to be less than (a) 1.00 to
1.00 for the Four-Quarter Period ended June 30, 1996, and (b)
1.05 to 1.00 for each Four-Quarter Period thereafter.
5.1.17. Consolidated EBIT to Consolidated Interest Expense.
Permit the ratio of Consolidated EBIT to Consolidated Interest
Expense to be less than (a) 1.20 to 1.00 for the Four-Quarter Period
ended June 30, 1996, (b) 1.20 to 1.00 for the Four-Quarter Period
ended September 30, 1996, and (c) 1.35 to 1.00 for each Four-Quarter
Period thereafter.
5.1.18. Consolidated Non-Vehicle Indebtedness to
Consolidated EBITDA. Permit the Consolidated Non-Vehicle Indebtedness
to Consolidated EBITDA Ratio to be more than (a) 1.60 to 1.00 for the
Four-Quarter Period ended June 30, 1996, (b) 1.60 to 1.00 for the
Four-Quarter Period ended September 30, 1996, and (c) 1.25 to 1.00
for each Four-Quarter Period thereafter.
5.1.19. Team Vehicle Utilization. Permit the
average daily Team Vehicle Utilization to be less than seventy-five
percent (75%) in any calendar month.
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5
<PAGE>
PART II. CONTINUING EFFECT
Capitalized terms used herein and not specifically herein defined
shall have the meanings ascribed to such terms in the Original Agreement. All
other terms, conditions, representations, warranties and covenants contained
in the Original Agreement shall remain the same and shall continue in full
force and effect. In consideration hereof, the Borrowers represent and warrant
that each representation and warranty set forth in the Original Agreement, as
hereby amended, remains true and correct as of the date hereof, except to the
extent that such representation and warranty is expressly intended to apply
solely to an earlier date and that, to its knowledge, there currently exists
no offsets, counterclaims or defenses to the performance of the Obligations,
nor, except as disclosed on Schedule 1 to the Original Agreement has there
occurred any Default or Unmatured Default thereunder, and no Default or
Unmatured Default, after giving effect to the transactions contemplated or
otherwise covered by this Seventh Amendment, is or shall be occasioned
thereby. The representations and warranties contained in the Original
Agreement originally shall survive this Seventh Amendment in their original
form, except as expressly herein modified, and shall survive as the continuing
representations and warranties of the Borrowers, except to the extent that
such representation and warranty is expressly intended to apply solely to an
earlier date. Except as expressly herein provided, the Original Agreement and
this Seventh Amendment shall be interpreted, wherever possible, in a manner
consistent with one another, but in the event of any irreconcilable
inconsistency, this Seventh Amendment shall control. The parties each hereby
agree to cooperate in all reasonable requests of each other party hereto,
including, without limitation, the execution of financing statements and other
documents, which the requesting party deems reasonable, necessary, appropriate
or expedient to carry out the intents and purposes of this Seventh Amendment.
PART III. CONDITIONS PRECEDENT
Notwithstanding anything contained in this Seventh Amendment to the
contrary, the Bank shall have no obligation under this Seventh Amendment, and
this Seventh Amendment shall not be effective, until each of the following
conditions precedent have been fulfilled to the satisfaction of the Bank:
(a) Each of the conditions set forth in Section 6.2 of
the Original Agreement shall have been satisfied;
(b) The Bank shall have received each of the following,
in form and substance satisfactory to the Bank:
(i) The Loan Documents, as amended, including,
without limitation, this Seventh Amendment, duly executed
in the form approved by the Bank;
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6
<PAGE>
(ii) A duly executed certificate of the Secretary
or any Assistant Secretary of each Borrower and Guarantor
(A) certifying as to attached copies of resolutions of the
Boards of Directors of each Borrower and Guarantor
authorizing the execution, delivery and performance,
respectively, of the Loan Documents, as amended, and any
other documents provided for in this Seventh Amendment to
which the Borrowers or Guarantors are a party, and (B)
certifying as complete and correct as to attached copies of
the Articles of Incorporation and By-Laws of the Borrowers
and the Guarantors, or certifying that such Articles of
Incorporation or By-Laws have not been amended (except as
shown) since the previous delivery thereof to the Bank; and
(iii) All reasonable expenses of the Bank, shall
have been reimbursed by the Borrowers, including, without
limitation, the Bank's attorneys' fees; and
(c) All legal matters incident to this Seventh Amendment
shall be reasonably satisfactory to the Bank and its counsel.
IN WITNESS WHEREOF, the Borrowers and the Bank have caused this
Seventh Amendment to be executed by their respective officers duly authorized
as of the date first above written.
TEAM FLEET SERVICES CORPORATION
By:----------------------------
Jeffrey D. Congdon,
Chief Financial Officer
TEAM RENTAL GROUP, INC.
By:----------------------------
Jeffrey D. Congdon,
Chief Financial Officer
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7
<PAGE>
NBD BANK, N.A.
By:---------------------------
Steven P. Clemens,
Vice President
103567
8
AMENDMENT NO. 2 TO
TERM NOTE
AMENDMENT NO. 2 TO TERM NOTE (the "Amendment Agreement") is made and
entered into as of the 27th day of May, 1996 by and between TEAM RENTAL GROUP,
INC., a Delaware corporation (the "Borrower"), and NATIONSBANK, NATIONAL
ASSOCIATION (SOUTH), a national banking association (the "Lender"). Unless the
context otherwise requires, all terms used herein without definition shall
have the definition provided therefor in the Note (defined below).
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender have entered into the Term Note
dated as of February 27, 1996 (as amended by Amendment No. 1 thereto dated as
of April 2, 1996) whereby the Lender has made to the Borrower a term loan
(such note, as at any time amended, restated, modified or supplemented, being
referred to as the "Note"); and
WHEREAS, the Borrower and the Lender have agreed that the Note shall be
amended in the manner set forth herein;
NOW, THEREFORE, in consideration of the premises and conditions herein
set forth, it is hereby agreed as follows:
1. AMENDMENT TO NOTE. Subject to the conditions hereof, the Note is
hereby amended by replacing in the date "May 27, 1996" in the first full
paragraph thereof with the date "June 28, 1996."
2. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender to enter
into this Amendment Agreement, the Borrower hereby represents and warrants
that the Note has been re-examined by the Borrower and that:
(a) The representations and warranties made by the Borrower in
Article II thereof are true on and as of the date hereof;
(b) There has been no material change in the condition, financial or
otherwise, of the Borrower and its Subsidiaries since February 27, 1996
other than changes in the ordinary course of business;
(c) The business and properties of the Borrower and its Subsidiaries
are not, and since February 27, 1996 have not been, adversely affected in
any substantial way as the result of any fire, explosion, earthquake,
accident, strike, lockout, combination of workers, flood, embargo, riot,
activities of armed forces, war or acts of God or the public enemy, or
cancellation or loss of any major contracts; and
(d) After giving effect to this Amendment Agreement no condition
exists which, upon the effectiveness of the amendment contemplated
hereby, would constitute a Default or
<PAGE>
an Event of Default on the part of the Borrower under the Note or any
other Loan Document, either immediately or with the lapse of time or the
giving of notice, or both.
3. CONSENT OF GUARANTORS. The Guarantors have joined in the execution of
this Amendment Agreement for the purposes of consenting hereto and for the
further purpose of confirming their guaranty of Obligations of Borrower as
provided in the Guaranty.
4. ENTIRE AGREEMENT. This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, condition, representation
or warranty, express or implied, not herein set forth shall bind any party
hereto, and no one of them has relied on any such promise, condition,
representation or warranty. Each of the parties hereto acknowledges that,
except as in this Amendment Agreement otherwise expressly stated, no
representations, warranties or commitments, express or implied, have been made
by any party to the other. None of the terms or conditions of this Amendment
Agreement may be changed, modified, waived or canceled orally or otherwise,
except by writing, signed by all the parties hereto, specifying such change,
modification, waiver or cancellation of such terms or conditions, or of any
proceeding or succeeding breach thereof.
5. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically
amended, modified or supplemented, the Note and all other Loan Documents are
hereby confirmed and ratified in all respects and shall remain in full force
and effect according to their respective terms.
6. COUNTERPARTS. This Amendment Agreement may be executed in any number
of counterparts, each of which shall be deemed an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument.
7. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE INTERNAL LAWS AND JUDICIAL DECISIONS OF THE STATE OF FLORIDA.
THE BORROWER AND THE GUARANTOR HEREBY SUBMIT TO THE JURISDICTION AND VENUE OF
THE STATE AND FEDERAL COURTS OF FLORIDA FOR THE PURPOSES OF RESOLVING DISPUTES
HEREUNDER OR FOR THE PURPOSES OF COLLECTION.
8. ENFORCEABILITY. Should any one or more of the provisions of this
Amendment Agreement be determined to be illegal or unenforceable as to one or
more of the parties hereto, all other provisions nevertheless shall remain
effective and binding on the parties hereto.
9. NOTE. All references in any of the Loan Documents to the Note shall
mean and include such agreement as amended hereby.
2
<PAGE>
10. SUCCESSORS AND ASSIGNS. This Amendment Agreement shall be binding
upon and inure to the benefit of each of the Borrower, the Guarantors and the
Lender and their respective successors, assigns and legal representatives;
provided, however, that the Borrower and the Guarantors, without the prior
consent of the Lender, may not assign any rights, powers, duties or
obligations hereunder.
[Remainder of page intentionally left blank.]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written.
BORROWER:
TEAM RENTAL GROUP, INC.
By:_______________________________
Name:
Title:
WITNESS:
- ----------------------------
LENDER:
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH)
By:_______________________________
Name:
Title:
SIGNATURE PAGE 1 OF 2
<PAGE>
GUARANTORS:
VPSI, INC.
By:_____________________________
Name: Sanford Miller
Title: Vice President
TEAM CAR SALES OF SOUTHERN
CALIFORNIA, INC.
TEAM FLEET SERVICES CORPORATION
TEAM CAR SALES OF DAYTON, INC.
TEAM RENTAL OF CONNECTICUT, INC.
DON KREMER, INC.
TEAM RENTAL OF FT. WAYNE, INC.
TEAM RENTAL OF SOUTHERN
CALIFORNIA, INC.
TEAM RENTAL OF ROCHESTER, INC.
ARIZONA RENT-A-CAR SYSTEMS, INC.
TEAM RENTAL OF PHILADELPHIA, INC.
TEAM CAR SALES OF CHARLOTTE, INC.
TEAM RENTAL OF PITTSBURGH, INC.
TEAM CAR SALES OF PHILADELPHIA, INC.
TEAM CAR SALES OF RICHMOND, INC.
TEAM CAR SALES OF SAN DIEGO, INC.
LEE-AL, INC.
MACKAY CAR & TRUCK RENTALS, INC.
WESTEAM ENTERPRISES, INC.
TRANEX RENTALS OF NEW YORK, INC.
CAPITAL CITY LEASING, INC.
TEAM RENTAL OF CINCINNATI, INC.
By:_________________________________
Name: Sanford Miller
Title: President
Signature Page 2 of 2
<PAGE>
ACKNOWLEDGMENT OF EXECUTION ON BEHALF OF
TEAM RENTAL GROUP, INC.
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
Before me, the undersigned, a Notary Public in and for said County
and State on this __st day of May, 1996 A.D., personally appeared
___________________ known to be the ___________________ of Team Rental Group,
Inc. (the "Borrower"), who, being by me duly sworn, says he works at
_________________________________________________ and that by authority duly
given by, and as the act of, the Borrower, the foregoing and annexed Amendment
No. 2 to Term Note dated as of May 27, 1996, was signed by him as said
_____________________ on behalf of the Borrower.
Witness my hand and official seal this __st day of May, 1996.
- -------------------------------------
Notary Public
(SEAL)
My Commission Expires: ______________
<PAGE>
AFFIDAVIT OF JOHN MILLER
The undersigned, being first duly sworn, deposes and says that:
1. He is an ________________________________ of NationsBank, National
Association (South) (the "Bank") and works at NationsBank Tower, 100 Southeast
2nd Street, 14th Floor, Miami, Florida 33131.
2. The Amendment No. 2 to Term Note of Team Rental Group,
Inc. to the Bank extending the Termination Date to June 28,
1996, dated as of May 27, 1996 was executed before him and
delivered to him, on behalf of the Bank in Charlotte, North
Carolina on May __, 1996.
This the __st day of April, 1996.
- ---------------------------------------
John Miller
Acknowledgment of Execution
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
Before me, the undersigned, a Notary Public in and for said County
and State on this __st day of May, 1996 A.D., personally appeared
______________________ who before me affixed his signature to the above
Affidavit.
Witness my hand and official seal this __st day of May, 1996.
- -------------------------------------
Notary Public
(SEAL)
My Commission Expires: _____________
REVOLVING CREDIT AGREEMENT
by and among
TEAM FLEET SERVICES CORPORATION, as Borrower,
NATIONSBANK, NATIONAL ASSOCIATION (SOUTH), as Agent
and as Lender
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
May 31, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Terms
1.01 Definitions.....................................................2
1.02 Rules of Interpretation....................................... 26
ARTICLE II
The Loans
2.01 Revolving Credit Facility..................................... 28
2.02 Payment of Interest........................................... 30
2.03 Payment of Principal.......................................... 30
2.04 Payments; Non-Conforming Payments............................. 30
2.05 Mandatory Repayments.......................................... 31
2.06 Notes......................................................... 32
2.07 Pro Rata Payments............................................. 32
2.08 Reductions; Allocation of Reductions and
Increases..................................................... 32
2.09 Conversions and Elections of Subsequent
Interest Periods.............................................. 33
2.10 Fees.......................................................... 33
2.11 Deficiency Advances........................................... 34
2.12 Use of Proceeds............................................... 34
2.13 Swing Line.................................................... 34
2.14 Increase and Decrease in Amounts.............................. 36
ARTICLE III
Yield Protection and Illegality
3.01 Additional Costs.............................................. 37
3.02 Suspension of Loans........................................... 38
3.03 Illegality.................................................... 39
3.04 Compensation.................................................. 39
3.05 Alternate Loan................................................ 40
3.06 Taxes......................................................... 40
ARTICLE IV
Conditions to Making Loans
4.01 Conditions of Initial Advance................................. 42
4.02 Conditions of Loans........................................... 45
4.03 Post-Closing Conditions; Conditions to Increase
in Total Revolving Credit Commitment.......................... 46
i
<PAGE>
Page
ARTICLE V
Representations and Warranties
5.01 Representations and Warranties................................ 48
ARTICLE VI
Security
6.01 Security...................................................... 56
6.02 Further Assurances............................................ 56
6.03 Certificates of Title......................................... 56
6.04 Repurchase Receivables; Segregated Account.................... 56
ARTICLE VII
Affirmative Covenants
7.01 Financial Reports, Etc........................................ 58
7.02 Maintain Properties........................................... 60
7.03 Existence, Qualification, Etc................................. 60
7.04 Regulations and Taxes......................................... 60
7.05 Insurance. ......................................... 60
7.06 True Books.................................................... 60
7.07 Pay Indebtedness to Lenders and Perform Other
Covenants..................................................... 61
7.08 Right of Inspection........................................... 61
7.09 Observe all Laws.............................................. 61
7.10 Officer's Knowledge of Default or Other Events................ 61
7.11 Suits or Other Proceedings.................................... 61
7.12 Notice of Discharge of Hazardous Material or
Environmental Complaint. .............. 62
7.13 Environmental Compliance...................................... 62
7.14 Indemnification............................................... 62
7.15 Further Assurances............................................ 62
7.16 ERISA Requirements............................................ 63
7.17 Continued Operations.......................................... 63
7.18 Use of Proceeds............................................... 63
7.19 Repurchase Party.............................................. 63
7.20 Vehicle Turn-in; Vehicle Records.............................. 64
7.21 New Repurchase Agreements..................................... 64
7.22 New Subsidiaries.............................................. 64
ARTICLE VIII
Negative Covenants
8.01 Indebtedness.................................................. 65
8.02 Transfer of Assets............................................ 65
8.03 Acquisitions.................................................. 65
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Page
8.04 Liens......................................................... 65
8.05 Investments................................................... 66
8.06 Merger or Consolidation....................................... 67
8.07 Restricted Payments........................................... 67
8.08 Limitations on Sales and Leasebacks........................... 67
8.09 Change in Control............................................. 67
8.10 Transactions with Affiliates.................................. 67
8.11 ERISA......................................................... 67
8.12 Fiscal Year................................................... 68
8.13 Dissolution, etc.............................................. 68
8.14 Rate Hedging Obligations...................................... 68
ARTICLE IX
Events of Default and Acceleration
9.01 Events of Default............................................. 70
9.02 Agent to Act.................................................. 73
9.03 Cumulative Rights............................................. 73
9.04 No Waiver..................................................... 74
9.05 Allocation of Proceeds........................................ 74
ARTICLE X
The Agent
10.01 Appointment................................................... 75
10.02 Attorneys-in-fact............................................. 75
10.03 Limitation on Liability....................................... 75
10.04 Reliance...................................................... 76
10.05 Notice of Default............................................. 76
10.06 No Representations............................................ 76
10.07 Indemnification............................................... 77
10.08 Lender........................................................ 77
10.09 Resignation................................................... 77
10.10 Sharing of Payments, etc...................................... 78
10.11 Fees.......................................................... 79
ARTICLE XI
Miscellaneous
11.01 Assignments and Participations................................ 80
11.02 Notices....................................................... 82
11.03 Setoff........................................................ 83
11.04 Survival...................................................... 84
11.05 Expenses...................................................... 84
11.06 Amendments.................................................... 85
11.07 Counterparts.................................................. 86
11.08 Waivers by Borrower........................................... 86
11.09 Indemnification; Limitation of Liability...................... 86
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Page
11.10 Usury Savings Clause.......................................... 87
11.11 Termination................................................... 87
11.12 Governing Law................................................. 88
11.13 Headings and References....................................... 88
11.14 Confidentiality............................................... 89
11.15 Severability.................................................. 89
11.16 Entire Agreement.............................................. 89
11.17 Agreement Controls............................................ 89
EXHIBIT A Applicable Commitment Percentages.............................A-1
EXHIBIT B Form of Assignment and Acceptance.............................B-1
EXHIBIT C Notice of Appointment (or Revocation) of
Authorized Representative.....................................C-1
EXHIBIT D Form of Borrowing Base Certificate............................D-1
EXHIBIT E-1 Form of Borrowing Notice--Loans...............................E-1
EXHIBIT E-2 Form of Borrowing Notice--Swing Line Loans....................E-4
EXHIBIT F Form of Interest Rate Selection Notice........................F-1
EXHIBIT G Form of Revolving Note........................................G-1
EXHIBIT H Form of Opinion of Borrower's and Guarantor's
Counsel.......................................................H-1
EXHIBIT I-1 Form of Team Rental Guaranty and Suretyship
Agreement.....................................................I-1
EXHIBIT I-2 Form of Affiliate Guaranty and Suretyship
Agreement.....................................................I-2
EXHIBIT J Compliance Certificate........................................J-1
SCHEDULE 1 Repurchase Agreements............................J-4
SCHEDULE 2 Material Subsidiaries............................J-5
SCHEDULE 3 Existing Insurance...............................J-6
SCHEDULE 5.01(b) Conflicting Agreements...........................J-7
SCHEDULE 5.01(d) Subsidiaries and Investments.....................J-8
SCHEDULE 5.01(f) Contingent Liabilities...........................J-9
SCHEDULE 5.01(g) Liens...........................................J-10
SCHEDULE 5.01(j) Litigation......................................J-11
SCHEDULE 8.01 Indebtedness....................................J-12
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REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of May 31, 1996 (the
"Agreement"), is made by and among:
TEAM FLEET SERVICES CORPORATION, a Delaware corporation having its
principal place of business in Daytona, Florida (the "Borrower"), NATIONSBANK,
NATIONAL ASSOCIATION (SOUTH), a national banking association organized and
existing under the laws of the United States in its capacity as a Lender
("NationsBank"), and each other financial institution executing and delivering
a signature page hereto and each other financial institution which may
hereafter execute and deliver an instrument of assignment with respect to this
Agreement pursuant to Section 11.01 (hereinafter such financial institutions
may be referred to individually as a "Lender" or collectively as the
"Lenders"), and NATIONSBANK, NATIONAL ASSOCIATION (SOUTH), a national banking
association organized and existing under the laws of the United States, in its
capacity as agent for the Lenders (in such capacity, and together with any
successor agent appointed in accordance with the terms of Section 10.09, the
"Agent");
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lenders make available
to the Borrower a revolving credit facility of up to $100,000,000, the
proceeds of which shall be used to finance the Borrower's daily rental fleet
of vehicles; and
WHEREAS, the Lenders are willing to make such facility available to
the Borrower upon the terms and conditions set forth herein;
NOW, THEREFORE, the Borrower and the Lender hereby agree as follows:
<PAGE>
ARTICLE I
Definitions and Terms
1.01 Definitions. For the purposes of this Agreement, in addition to
the definitions set forth above, the following terms shall have the respective
meanings set forth below:
"Acquisition" means the acquisition of (i) a controlling
equity interest in another Person (including the purchase of an
option, warrant or convertible or similar type security to acquire
such a controlling interest at the time it becomes exercisable by the
holder thereof), whether by purchase of such equity interest or upon
exercise of an option or warrant for, or conversion of securities
into, such equity interest, or (ii) assets of another Person which
constitute all or substantially all of the assets of such Person or
of a line or lines of business conducted by such Person;
"Advance" means a borrowing under the Revolving Credit
Facility consisting of the aggregate principal amount of a Base Rate
Loan or a Eurodollar Rate Loan, as the case may be;
"Affiliate" means a Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or
is under common control with the Borrower; (ii) which beneficially
owns or holds 10% or more of any class of the outstanding voting
stock (or in the case of a Person which is not a corporation, 10% or
more of the equity interest) of the Borrower; (iii) 10% or more of
any class of the outstanding voting stock of which is beneficially
owned or held by the Borrower (or in the case of a Person which is
not a corporation, 10% or more of the equity interest) of which is
beneficially owned or held by the Borrower; provided, however, at the
time the Borrower registers any security issued by it pursuant to the
Securities Act of 1933, as amended, the figure "10%" used in this
definition shall automatically change to "5%" without further action.
The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting stock, by
contract or otherwise.
"Applicable Commitment Percentage" means, with respect to
each Lender at any time, a fraction, the numerator of which shall be
such Lender's Revolving Credit Commitment and the denominator of
which shall be the Total Revolving Credit Commitment, which
Applicable Commitment Percentage for each Lender as of the Closing
Date is as set forth in Exhibit A; provided that the Applicable
Commitment Percentage of each Lender shall be increased or decreased
to reflect any assignments to or by such Lender effected in
accordance with Section 11.01.
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"Applicable Margin" means with respect to Eurodollar Rate
Loans, 1.50% per annum;
"Applicable Reserve Percentage" means, for any day, for any
Eurodollar Rate Loan or CD Rate Loan with respect thereto, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board, as such regulation may be
amended from time to time or any successor regulation, as the maximum
reserve requirement (including, without limitation, any basic,
supplemental, emergency, special, or marginal reserves) applicable
with respect to: (a) Eurocurrency liabilities as that term is defined
in Regulation D (or against any other category of liabilities that
includes deposits by reference to which the interest rate of
Eurodollar Rate Loans is determined) in the case of any Eurodollar
Rate Loan, or (b) non-personal Dollar time deposits (or against any
other category of liabilities that includes deposits by reference to
which the interest rate of CD Rate Loans is determined) in the case
of any CD Rate Loan, in each case whether or not the Agent or any
Lender has any Eurocurrency liabilities or Dollar time deposits
subject to such reserve requirement at that time. Eurodollar Rate
Loans shall be deemed to constitute Eurocurrency liabilities and as
such shall be deemed subject to reserve requirements without benefits
of credit for proration, exceptions or offsets that may be available
from time to time to the Agent or any Lender. The Eurodollar Rate and
CD Rate shall be adjusted automatically on and as of the effective
date of any change in the Applicable Reserve Percentage;
"Assessment Rate" means the rate per annum (rounded upward
to the nearest 1/100 of 1%) determined in good faith by the Agent in
accordance with its usual procedures for its customers generally
(which determination shall be conclusive absent manifest error) to be
the maximum effective assessment rate per annum payable by a bank
insured by the Federal Deposit Insurance Corporation (or any
successor) as of the date of the determination of the applicable CD
Rate for insurance on Dollar time deposits, exclusive of any credit
allowed against such annual assessment on account of assessment
payments made or to be made by such bank and exclusive of any
adjustments not applicable to banks generally. The CD Rate shall be
adjusted automatically as of the effective date of each change in the
Assessment Rate;
"Assignment and Acceptance" shall mean an Assignment and
Acceptance in the form of Exhibit B (with blanks appropriately filled
in) delivered to the Agent in connection with an assignment of a
Lender's interest under this Agreement pursuant to Section 11.01;
"Authorized Representative" means any of the President,
the Chief Executive Officer, the Treasurer, the Chief
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Operating Officer or the Vice President of the Borrower or any other
person expressly designated by the Board of Directors of the Borrower
(or the appropriate committee thereof) as an Authorized
Representative of the Borrower, as set forth from time to time in a
certificate in the form attached hereto as Exhibit C;
"Base Rate" means the greater of (i) the Prime Rate or (ii)
the Federal Funds Effective Rate plus one-half percent (1/2%). Any
change in the Base Rate shall be effective as of 12:01 A.M. on the
date of any change in the Federal Funds Effective Rate or Prime Rate
giving rise thereto;
"Base Rate Loan" means a Loan for which the rate of
interest is determined by reference to the Base Rate;
"Base Rate Refunding Loan" means a Base Rate Loan made to
pay NationsBank with respect to Swing Line Outstandings;
"Board" means the Board of Governors of the Federal
Reserve System (or any successor body);
"Borrowing Base" shall mean, at any time, an amount equal to
the aggregate (without duplication) of the following:
(a) with respect to each Eligible Vehicle, the
Eligible Net Book Value of such Eligible Vehicle, plus
(b) the Eligible Repurchase Receivables;
"Borrowing Base Certificate" means a certificate of an
Authorized Representative in the form attached hereto as
Exhibit D;
"Borrowing Notice" means the notice delivered by an
Authorized Representative in connection with an Advance under the
Revolving Credit Facility or a Swing Line Loan, in the forms attached
hereto as Exhibits E-1 and E-2, respectively;
"Business Day" means any day which is not a Saturday, Sunday
or a day on which banks in the States of Florida and North Carolina
are authorized or obligated by law, executive order or governmental
decree to be closed;
"Capital Expenditures" means, with respect to Team Rental
and its Subsidiaries, for any period the sum of (without duplication)
(i) all expenditures (whether paid in cash or accrued as liabilities)
by Team Rental or any Subsidiary during such period for items that
would be classified as "property, plant or equipment" or comparable
items on the consolidated balance sheet of Team Rental and its
Subsidiaries, including without limitation all transactional costs
incurred in connection with such expenditures provided
4
<PAGE>
the same have been capitalized, excluding, however, the amount of any
Capital Expenditures paid for with proceeds of casualty insurance as
evidenced in writing and submitted to the Agent together with any
compliance certificate delivered pursuant to Section 7.01(a) or (b),
and (ii) with respect to any Capital Lease entered into by Team
Rental or any of its Subsidiaries during such period, the present
value of the lease payments due under such Capital Lease over the
term of such Capital Lease applying a discount rate equal to the
interest rate provided in such lease (or in the absence of a stated
interest rate, that rate used in the preparation of the financial
statements described in Section 7.01(a)), all the foregoing in
accordance with GAAP applied on a Consistent Basis;
"Capital Leases" means all leases which have been or should
be capitalized in accordance with Generally Accepted Accounting
Principles as in effect from time to time including Statement No. 13
of the Financial Accounting Standards Board and any successor
thereof;
"Capitalized Cost" means for each Vehicle, the price paid
for such Vehicle by the Borrower to the Dealer, including dealer
profit not to exceed $200 and delivery charges but excluding taxes
and any registration or titling fees (or, in the case of a Vehicle
which was not new when acquired by the Borrower, if less, the
purchase price thereof exclusive of taxes and any registration or
titling fees or other charges);
"CD Rate" means, for any CD Rate Loan, the rate of interest
per annum determined pursuant to the following formula:
Floating CD Rate
CD Rate__________________________________ + Assessment Rate + 1.50%
1 - Applicable Reserve Requirement
"CD Rate Loan" means a Swing Line Loan, for which the rate
of interest is determined by reference to the CD Rate;
"Certificate of Title" means, for each Vehicle, the
manufacturer's certificate or statement of origin, the certificate of
title, certificate of ownership, bill of sale or any such other
instrument evidencing the ownership of such Vehicle and, where the
context requires, the one such instrument evidencing the ownership of
such Vehicle;
"Change of Control" means, at any time:
(a) any Person other than Team Rental shall own any Voting
Stock of the Borrower (or securities convertible into or exchangeable
for such Voting Stock) or otherwise have the ability to elect any
members of the board of directors of the Borrower;
5
<PAGE>
(b) any "person" or "group" (each as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) other than Sanford Miller,
Jeffrey D. Congdon or John P. Kennedy either (A) becomes the
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, of Voting Stock of Team Rental (or securities
convertible into or exchangeable for such Voting Stock) representing
10% or more of the combined voting power of all Voting Stock of Team
Rental (on a fully diluted basis) or (B) otherwise has the ability,
directly or indirectly, to elect a majority of the board of directors
of Team Rental;
(c) The election or appointment, within a twelve-month
period, of persons to the Borrower's or Team Rental's board of
directors who were not directors of the Borrower or the Team Rental,
as the case may be, at the beginning of such twelve-month period, and
whose election or appointment was not approved by a majority of those
persons who were directors on the respective board at the beginning
of such period, where such newly elected or appointed directors
constitute 30% or more of the directors of the board of directors of
the Borrower or Team Rental, as the case may be; or
(d) on or after the Closing Date, any Person or two or more
Persons acting in concert shall have acquired by contract or
otherwise, or shall have entered into a contract or arrangement that,
upon consummation thereof, will result in its or their acquisition of
the power to exercise, directly or indirectly, a controlling
influence on the management or policies of the Borrower or Team
Rental;
"Clear Certificate of Title" means, with respect to any
Vehicle, the Certificate of Title for such vehicle if the Agent (or
an agent designated by the Agent) shall have received, in form and
substance satisfactory to the Agent, the Certificate of Title and
duly executed and authorized releases or assignments, to the extent
necessary, together with a copy of the duly executed power of
attorney, if applicable, with respect to any Liens of third Persons
which appear on the records of any jurisdiction or which have been
filed with respect to such vehicle or which have otherwise been
granted to, or created in favor of, the applicable lienholder,
including, without limitation, any Lien noted on the Certificate of
Title for such Vehicle;
"Closing Date" means the date as of which this Agreement is
executed by the Borrower, the Agent and the Lenders and on which the
conditions set forth in Section 4.01 hereof have been satisfied;
"Code" means the Internal Revenue Code of 1986, as
amended, any successor provision or provisions and any
regulations promulgated thereunder;
6
<PAGE>
"Collateral" means, collectively, the Vehicles, the
Repurchase Agreements, the Repurchase Receivables, any leases of the
Vehicles, and any other property of the Borrower or any other Person
from time to time securing any of the
Obligations;
"Commitment Fee" means the Commitment Fee payable by the
Borrower to the Agent pursuant to Section 2.10(b);
"Confidential Information" means information that is
furnished to the Agent or any Lender by or on behalf of Borrower,
Team Rental or any of its Subsidiaries, on a confidential basis in
connection with the Loan Documents or any of the transactions
contemplated thereby, but does not include any such information that
(a) is or becomes generally available to the public (other than as a
result of a breach by the Agent or such Lender of its confidentiality
obligations hereunder), (b) was available to the Agent or any Lender
on a nonconfidential basis prior to its disclosure to the Agent or
Lender by, or on behalf of, Borrower, Team Rental or any of its
Subsidiaries, or (c) is or becomes available to the Agent or Lender
on a nonconfidential basis from a source that is not, to the best of
the Agent's or such Lender's knowledge, as the case may be, bound by
a confidentiality arrangement with Borrower, Team Rental or any of
its Subsidiaries, in respect of such information or otherwise
prohibited from disclosing such information;
"Consistent Basis" in reference to the application of
Generally Accepted Accounting Principles means the accounting
principles observed in the period referred to are comparable in all
material respects to those applied in the preparation of the audited
financial statements of the Borrower referred to in Section 5.01(f)
hereof;
"Consolidated EBIT" means, with respect to Team Rental and
its Subsidiaries for any Four-Quarter Period ending on the date of
computation thereof, the sum of, without duplication, (i)
Consolidated Net Income, plus (ii) Consolidated Interest Expense
accrued during such period, plus (iii) taxes on income accrued during
such period, all determined on a consolidated basis in accordance
with GAAP applied on a Consistent Basis;
"Consolidated EBITDA" means, with respect to Team Rental and
its Subsidiaries for any Four-Quarter Period ending on the date of
computation thereof, the sum of, without duplication, (i)
Consolidated Net Income, (ii) Consolidated Interest Expense, (iii)
taxes on income, (iv) amortization, and (v) depreciation, all
determined on a consolidated basis in accordance with GAAP applied on
a Consistent Basis;
"Consolidated Fixed Charge Ratio" means, with respect to
Team Rental and its Subsidiaries for any Four-Quarter Period
7
<PAGE>
ending on the date of computation thereof, the ratio of (i)
Consolidated EBITDA for such period to (ii) Consolidated Fixed
Charges for such period;
"Consolidated Fixed Charges" means, with respect to Team
Rental and its Subsidiaries for any Four-Quarter Period ending on the
date of computation thereof, the sum of, without duplication, (i)
Consolidated Interest Expense, (ii) current maturities of
Consolidated Indebtedness, (iii) depreciation of Team Vehicles during
such period, (iv) Capital Expenditure during such period, (v) cash
dividends and distributions paid during such period and (vi) cash
taxes paid during such period, all determined on a consolidated basis
in accordance with GAAP applied on a Consistent Basis;
"Consolidated Indebtedness" means all Indebtedness for
Money Borrowed of Team Rental and its Subsidiaries, all
determined on a consolidated basis;
"Consolidated Interest Expense" means, with respect to any
period of computation thereof, the gross interest expense of Team
Rental and its Subsidiaries, including without limitation (i) the
current amortized portion of debt discounts to the extent included in
gross interest expense, (ii) the current amortized portion of all
fees payable in connection with the incurrence of Indebtedness to the
extent included in gross interest expense and (iii) the portion of
any payments made in connection with Capital Leases allocable to
interest expense, all determined on a consolidated basis in
accordance with GAAP applied on a Consistent Basis;
"Consolidated Net Income" means, for any period of
computation thereof, the gross revenues from operations of Team
Rental and its Subsidiaries (including payments received by Team
Rental and its Subsidiaries of (i) interest income, and (ii)
dividends and distributions made in the ordinary course of their
businesses by Persons in which investment is permitted pursuant to
this Agreement and not related to an extraordinary event), less all
operating and non-operating expenses of Team Rental and its
Subsidiaries including taxes on income, all determined on a
consolidated basis in accordance with GAAP applied on a Consistent
Basis; but excluding as income: (i) net gains on the sale, conversion
or other disposition of capital assets, (ii) net gains on the
acquisition, retirement, sale or other disposition of capital stock
and other securities of Team Rental or its Subsidiaries, (iii) net
gains on the collection of proceeds of life insurance policies, (iv)
any write-up of any asset, and (v) any other net gain or credit of an
extraordinary nature as determined in accordance with GAAP applied on
a Consistent Basis;
8
<PAGE>
"Consolidated Net Worth" means, as of any date on which the
amount thereof is to be determined, the consolidated net worth of
Team Rental and its Subsidiaries, as determined on a consolidated
basis in accordance with GAAP applied on a Consistent Basis;
"Consolidated Non-Vehicle Indebtedness" means
Consolidated Indebtedness minus Consolidated Vehicle
Indebtedness;
"Consolidated Non-Vehicle Leverage Ratio" means, as of the
date of computation thereof, the ratio of (i) Consolidated
Non-Vehicle Indebtedness (determined as at such date) to (ii)
Consolidated Net Worth;
"Consolidated Vehicle Indebtedness" means Consolidated
Indebtedness relating solely to the financing of any Team
Vehicles and secured thereby;
"Contingent Obligation" of any Person means all contingent
liabilities required (or which, upon the creation or incurring
thereof, would be required) to be included in the financial
statements (including footnotes) of such Person in accordance with
GAAP applied on a Consistent Basis, including Statement No. 5 of the
Financial Accounting Standards Board, all Rate Hedging Obligations
and any obligation of such Person guaranteeing or in effect
guaranteeing any Indebtedness, dividend or other obligation of any
other Person (the "primary obligor") in any manner, whether directly
or indirectly, including obligations of such Person however incurred:
(1) to purchase such Indebtedness or other
obligation or any property or assets constituting
security therefor;
(2) to advance or supply funds in any manner (i)
for the purchase or payment of such Indebtedness or other
obligation, or (ii) to maintain a minimum working capital,
net worth or other balance sheet condition or any income
statement condition of the primary obligor;
(3) to grant or convey any lien, security interest,
pledge, charge or other encumbrance on any property or
assets of such Person to secure payment of such Indebtedness
or other obligation;
(4) to lease property or to purchase securities or
other property or services primarily for the purpose of
assuring the owner or holder of such Indebtedness or
obligation of the ability of the primary obligor to make
payment of such Indebtedness or other obligation; or
9
<PAGE>
(5) otherwise to assure the owner of the
Indebtedness or such obligation of the primary obligor
against loss in respect thereof;
"Dealer" means any Person (including a Repurchase Party)
from whom the Borrower purchases Eligible Vehicles, and shall include
dealers of Repurchase Parties whose vehicles, when sold to the
Borrower, constitute Eligible Vehicles;
"Default" means any event or condition which, with the
giving or receipt of notice or lapse of time or both, would
constitute an Event of Default hereunder;
"Default Rate" means (i) with respect to each Eurodollar
Rate Loan, until the end of the Interest Period applicable thereto, a
rate of two percent (2%) above the Eurodollar Rate applicable to such
Loan, and thereafter at a rate of interest per annum which shall be
two percent (2%) above the Base Rate, (ii) with respect to Base Rate
Loans, at a rate of interest per annum which shall be two percent
(2%) above the Base Rate and (iii) in any case, the maximum rate
permitted by applicable law, if lower;
"Depreciation Rate" means, with respect to each Repurchase
Vehicle, the monthly depreciation charge, if any, set forth in the
respective Repurchase Agreement, or, if there is no such charge, then
a monthly depreciation charge of 2.5% per month;
"Dollars" and the symbol "$" means dollars constituting
legal tender for the payment of public and private debts in the
United States of America;
"Eligible Net Book Value" means, as to any Eligible Vehicle
as of any date of determination, the total of (a) its Capitalized
Cost, less (b) accrued depreciation for such Eligible Vehicle using a
depreciation rate which is not less than 100% of the Depreciation
Rate applicable thereto;
"Eligible Repurchase Party" means a Repurchase Party
which is not the subject of a Repurchase Party Default or a
Repurchase Party Adverse Change;
"Eligible Repurchase Receivables" means, at any time of
determination, all payments due from and payable by an Eligible
Repurchase Party, the amount of which shall be deemed to be the sum
of the Eligible Net Book Values of the related Eligible Vehicles on
their respective Repurchase Dates, resulting from the acceptance of
such Eligible Vehicles by the Repurchase Party for repurchase under a
Repurchase Agreement with such Repurchase Party, which, in any case,
are assigned to the Lender under the Security Agreement and are not
unpaid for more than ninety (90) days after the respective Repurchase
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<PAGE>
Dates for such Eligible Vehicles. Payments which would otherwise
constitute Eligible Repurchase Receivables shall not constitute
Eligible Repurchase Receivables if they are due from and payable by a
Repurchase Party which has become subject to a Repurchase Party
Default or a Repurchase Party Adverse Change;
"Eligible Securities" means the following obligations:
(a) Government Securities;
(b) the following debt securities of the following
agencies or instrumentalities of the United States of
America if at all times the full faith and credit of the
United States of America is pledged to the full and timely
payment of all interest and principal thereof:
(i) all direct or fully guaranteed
obligations of the United States Treasury; and
(ii) mortgage-backed securities and
participation certificates guaranteed by the
Government National Mortgage Association;
(c) the following obligations of the following
agencies or instrumentalities of the United States of
America:
(i) participation certificates and debt
obligations of the Federal Home Loan Mortgage
Corporation;
(ii) consolidated debt obligations, and
obligations secured by a letter of credit, of the
Federal Home Loan Banks; and
(iii) debt obligations and mortgage-backed
securities of the Federal National Mortgage
Association which have not had the interest portion
thereof severed therefrom;
(d) obligations of any corporation organized under
the laws of any state of the United States of America or
under the laws of any other nation, payable in the United
States of America, expressed to mature not later than 92
days following the date of issuance thereof and rated at
least "A-1" by S&P and "P-1" Moody's;
(e) interest bearing demand or time deposits issued
by the Lender or certificates of deposit maturing within one
year from the date of acquisition issued by a bank or trust
company organized under the laws of the United States or of
any state thereof having capital surplus and
11
<PAGE>
undivided profits aggregating at least $400,000,000 and
being rated A-3 or better by S&P or A or better by
Moody's;
(f) Pre-Refunded Municipal Obligations;
(g) shares of mutual funds which invest in
obligations described in paragraphs (a) through (g) above,
the shares of which mutual funds are at all times rated
"AAA" by S&P;
(h) asset-backed remarketed certificates of
participation representing a fractional undivided interest
in the assets of a trust, which certificates are rated at
least "A-1" by S&P and "P-1" by Moody's; and
(i) any other investments expressly permitted by
the corporate investment policy of Team Rental or the
Borrower, as approved from time to time by their respective
Boards of Directors;
Obligations listed in paragraphs (a), (b) and (c) above
which are in book-entry form must be held in a trust account with the
Federal Reserve Bank or with a clearing corporation or chain of
clearing corporations which has an account with the Federal Reserve
Bank;
"Eligible Vehicles" means, collectively, Repurchase Vehicles
owned by the Borrower (not to include vehicles leased to Borrower)
and included in the Borrower's vehicle rental fleet the purchase of
which was financed or refinanced with the proceeds of an Advance
hereunder, and with respect to which, in each case, the Borrower has
granted to the Agent (or an agent designated by the Agent), in each
case for the benefit of the Agent and the Lenders, a first priority
Lien under the Security Agreement and:
(a) such Lien has become perfected and is of first
priority in accordance with the priority and perfection
rules of each applicable jurisdiction (such perfection to
include, without limitation (except for Liens on vehicles
subject to Certificates of Title issued by states where the
lien of a creditor cannot be indicated on the Certificate of
Title, but where the security interest in which can be
perfected notwithstanding such absence of indication), the
due notation on the Vehicle's Certificate of Title of the
Lien of the Lender (or an agent designated by the Lender) in
the form and otherwise as required by the applicable
jurisdiction; or
(b) the Borrower has delivered to the Agent (or
an
agent designated by the Agent), in each case for the
benefit of the Agent and the Lenders, Clear Certificates
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of Title, which Clear Certificates of Title are held by the
Agent (or an agent designated by the Agent) on behalf of the
Lenders in the Restricted Space;
provided, however, that if the respective Repurchase Party for a
Vehicle becomes subject to a Repurchase Party Default or a Repurchase
Party Adverse Change prior to the Lenders making Advances hereunder
with respect to such Vehicle, then such Vehicle shall not be an
Eligible Vehicle; provided further that if, at any time, the
respective Repurchase Party for an Eligible Vehicle (y) becomes
subject to a Repurchase Party Default, or (z) becomes subject to a
Repurchase Party Adverse Change which adverse change is not cured to
the satisfaction of the Agent within thirty (30) days, then such
Vehicle shall immediately cease to be an Eligible Vehicle; and;
provided further that if any Vehicle has been leased by Borrower to
an Affiliate of Borrower pursuant to Section 4.2(f) of the Security
Agreement, then such Vehicle shall not be an Eligible Vehicle unless,
in addition to satisfying the foregoing requirements (and without
limitation thereof), (i) the Borrower has delivered to the Agent (A)
the sole original of such lease executed by both the Borrower and
such Affiliate, and (B) evidence of the filing of precautionary UCC
financing statements acceptable to the Agent showing the Borrower as
lessor, such Affiliate as lessee and the Agent as assignee, (ii) the
Borrower has delivered to the Agent at the Restricted Space all
supplements and supplemental schedules to such lease, and (iii) the
Agent (for itself and on behalf of the Lenders) has a perfected,
first priority security interest in such lease;
"Environmental Laws" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, the Superfund Amendments and Reauthorization Act of 1986,
the Resource Conservation and Recovery Act, the Toxic Substances
Control Act, as amended, the Clean Air Act, as amended, the Clean
Water Act, as amended, any other "Superfund" or "Superlien" law or
any other federal, or applicable state or applicable published local
statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to, or imposing liability or standards of
conduct concerning, any hazardous, toxic or dangerous waste,
substance or material;
"ERISA" means, at any date, the Employee Retirement Income
Security Act of 1974, as amended, and the regulations thereunder, all
as the same shall be in effect at such date;
"Eurodollar Business Day" means a Business Day on which the
relevant international financial markets are open for the transaction
of the business contemplated by this Agreement in London, England and
New York, New York;
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"Eurodollar Rate" means, for the Interest Period for any
Eurodollar Rate Loan, the rate of interest per annum determined
pursuant to the following formula:
Interbank Offered Rate Applicable
Eurodollar Rate =____________________________________ +
1 - Applicable Reserve Percentage Margin
"Eurodollar Rate Loan" means a Loan for which the rate of
interest is determined by reference to the Eurodollar Rate;
"Event of Default" means any of the occurrences set forth
as such in Section 9.01 hereof;
"Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the regulations promulgated thereunder;
"Facility Termination Date" means the date on which the
Revolving Credit Termination Date shall have occurred, and the
Borrower shall have fully, finally and irrevocably paid and satisfied
all Obligations (other than Obligations in the nature of continuing
indemnities or expense reimbursement obligations not yet due and
payable);
"Federal Funds Effective Rate" means, for any day, the rate
per annum (rounded upward to the nearest 1/100% of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal Reserve Bank of New
York on the Business Day next succeeding such day, provided that (a)
if such day is not a Business Day, the Federal Funds Effective Rate
for such day shall be such rate on such transactions on the next
preceding Business Day, and (b) if no such rate is so published on
such next succeeding Business Day, the Federal Funds Effective Rate
for such day shall be the average rate quoted to the Agent on such
day on such transactions, as determined by the Agent;
"Fiscal Year" means the fiscal year of Team Rental and its
Subsidiaries commencing on January 1 of each calendar year and ending
on December 31 of each calendar year;
"Floating CD Rate" means, for any CD Rate Loan, the per
annum rate of interest (expressed as a percentage and rounded upwards
if necessary to the nearest 1/100 of 1%) determined in good faith by
the Agent in accordance with the usual procedures for its customers
generally to be the average of the secondary market bid rates at
approximately 10:00 A.M. Charlotte, North Carolina time on each day
of such CD Rate Loan of at least two dealers of recognized standing
in negotiable certificates of deposit for the purchase at face value
of negotiable certificates of deposit of major money center banks for
delivery on such day in an amount
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<PAGE>
approximately equal to the principal amount of such CD Rate
Loan for a period of 90 days;
"Four-Quarter Period" means a period of four full
consecutive fiscal quarters of Team Rental and its Subsidiaries,
taken together as one accounting period.
"GAAP" or "Generally Accepted Accounting Principles" means
those principles of accounting set forth in pronouncements of the
Financial Accounting Standards Board, the American Institute of
Certified Public Accountants or which have other substantial
authoritative support and are applicable in the circumstances as of
the date of a report, as such principles are from time to time
supplemented and amended;
"Government Securities" means direct obligations of, or
obligations the timely payment of principal and interest on which are
fully and unconditionally guaranteed by, the United States of
America;
"Governmental Authority" shall mean any Federal, state,
municipal, national or other governmental department, commission,
board, bureau, agency or instrumentality or political subdivision
thereof or any entity or officer exercising executive, legislative or
judicial, regulatory or administrative functions of or pertaining to
any government or any court, in each case whether of a state of the
United States, the United States or a foreign governmental entity;
"Guarantors" means, at any date, Team Rental and all
Subsidiaries of Team Rental or the Borrower at such date, other than
Metro West, Inc., Team Realty Services, Inc., Team Fleet Financing
Corporation, Brac Socal Funding Corporation, Fort Wayne Rental Group,
Inc., or (until it signs a Guaranty pursuant to Section 4.03) Dayton
Auto Lease Company;
"Guaranty" means each Guaranty and Suretyship Agreement in
substantially the form of Exhibit I-1 or I-2 attached hereto, as any
such Guaranty may be amended, modified or supplemented from time to
time in accordance with the terms thereof;
"Hazardous Material" means and includes any hazardous, toxic
or dangerous waste, substance or material, the generation, handling,
storage, disposal, treatment or emission of which is subject to any
Environmental Law;
"Indebtedness" means with respect to any Person, without
duplication, all Indebtedness for Money Borrowed, all indebtedness of
such Person for the acquisition of property, all indebtedness secured
by any Lien on the property of such Person whether or not such
indebtedness is assumed, all
15
<PAGE>
liability of such Person by way of endorsements (other than for
collection or deposit in the ordinary course of business), all
Contingent Obligations, all Rate Hedging Obligations and other items
which in accordance with Generally Accepted Accounting Principles is
classified as a liability on a balance sheet other than accrued
expenses and accrued taxes; but excluding all accounts payable in the
ordinary course of business so long as payment therefor is due within
one year; provided that in no event shall the term Indebtedness
include partners' capital, surplus and retained earnings, minority
interest in Subsidiaries, lease obligations (other than pursuant to
Capital Leases), reserves for current and deferred income taxes and
investment credits, other deferred credits and reserves, and deferred
compensation obligations;
"Indebtedness for Money Borrowed" means, with respect to any
Person, all indebtedness in respect of money borrowed, including
without limitation all Capital Leases and the deferred purchase price
of any property or asset, evidenced by a promissory note, bond or
similar written obligation for the payment of money (including, but
not limited to, conditional sales or similar title retention
agreements);
"Interbank Offered Rate" means, with respect to any
Eurodollar Rate Loan for the Interest Period applicable thereto, the
average (rounded upward to the nearest one-sixteenth (1/16th) of one
percent) per annum rate of interest determined by the office of the
Agent (each such determination to be conclusive and binding) as of
two Eurodollar Business Days prior to the first day of such Interest
Period, as the effective rate at which deposits in immediately
available funds in Dollars are being, have been, or would be offered
or quoted by the Agent to major banks in the applicable interbank
market for Eurodollar deposits at any time during the Eurodollar
Business Day which is the second Eurodollar Business Day immediately
preceding the first day of such Interest Period, for a term
comparable to such Interest Period and in the amount of the
Eurodollar Rate Loan. If no such offers or quotes are generally
available for such amount, the Agent shall be entitled to determine
the Eurodollar Rate by estimating in its reasonable judgment the per
annum rate (as described above) that would be applicable if such
quote or offers were generally available;
"Interest Period" for each Eurodollar Rate Loan means a
period commencing on the date such Eurodollar Rate Loan is made or
converted and each subsequent period commencing on the last day of
the immediately preceding Interest Period for such Eurodollar Rate
Loan, and ending, at the Borrower's option, on the date one, two or
three months thereafter as notified to the Agent by the Authorized
Representative three (3) Eurodollar Business Days prior to the
beginning of such Interest Period; provided, that,
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<PAGE>
(i) if the Authorized Representative fails to notify
the Agent of the length of an Interest Period three (3)
Eurodollar Business Days prior to the first day of such
Interest Period, the Loan for which such Interest Period was
to be determined shall be deemed to be a Base Rate Loan as
of the first day thereof;
(ii) if an Interest Period for a Eurodollar Rate Loan
would end on a day which is not a Eurodollar Business Day,
such Interest Period shall be extended to the next
Eurodollar Business Day (unless such extension would cause
the applicable Interest Period to end in the succeeding
calendar month, in which case such Interest Period shall end
on the next preceding Eurodollar Business Day); and
(iii) any Interest Period which begins on the last
Eurodollar Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end
on the last Eurodollar Business Day of a calendar month;
(iv) no Interest Period shall extend past the
Revolving Credit Termination Date; and
(v) there shall not be more than five (5) Interest
Periods in effect on any day;
"Interest Rate Selection Notice" means the telephonic or
telefacsimile request of an Authorized Representative to elect a
subsequent Interest Period for or to convert a Loan or Loans of any
type hereunder, as such election or conversion shall be otherwise
permitted herein. Any Interest Rate Selection Notice shall be binding
on and irrevocable by the Borrower and if telephonic shall be
confirmed by facsimile transmission delivered to the Agent, effective
upon receipt, on the same Business Day upon which the telephonic
request is made, by the Authorized Representative in the form
attached hereto as Exhibit F;
"Investment Grade Rating" means, with respect to a Person, a
rating of the senior, unsecured long-term debt of such Person or, if
such Person does not have a senior, unsecured long-term debt rating
from Moody's and S&P, such Person's parent corporation, of Baa3 or
higher by Moody's and BBB- or higher by S&P;
"Lending Office" means, as to each Lender, the Lending
Office of such Lender designated on the signature pages hereof or in
an Assignment and Acceptance or such other office of such Lender (or
of an affiliate of such Lender) as such Lender may from time to time
specify to the Authorized Representative
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<PAGE>
and the Agent as the office by which its Loans are to be made
and maintained;
"Lien" means any interest in property securing any
obligation owed to, or a claim by, a Person other than the owner of
the property, whether such interest is based on the common law,
statute or contract, and including but not limited to the lien or
security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. For the purposes of
this Agreement, the Borrower or any Subsidiary shall be deemed to be
the owner of any property which it has acquired or holds subject to a
conditional sale agreement, financing lease, or other arrangement
pursuant to which title to the property has been retained by or
vested in some other Person for security purposes;
"Loan" or "Loans" means any borrowing pursuant to an
Advance under the Revolving Credit Facility;
"Loan Documents" means this Agreement, the Notes, the
Guaranties, the Security Agreement and all other instruments and
documents heretofore or hereafter executed or delivered to and in
favor of any Lender or the Agent (or an agent designated by the
Agent) in connection with the Loans made under this Agreement, as the
same may be amended, modified or supplemented from the time to time;
"Material Adverse Effect" means a material adverse effect on
(i) the business, properties, operations or condition, financial or
otherwise, of (A) Team Rental and its consolidated Subsidiaries taken
as an aggregate or (B) the Borrower individually, (ii) the ability of
the Borrower or any Guarantor to pay or perform its respective
obligations, liabilities and indebtedness under the Loan Documents as
such payment or performance becomes due in accordance with the terms
thereof, or (iii) the rights, powers and remedies of the Agent or any
Lender under any Loan Document or the validity, legality or
enforceability thereof (including for purposes of clauses (ii) and
(iii) the imposition of burdensome conditions thereon);
"Material Subsidiary" means (a) any Subsidiary identified on
Schedule 2 attached hereto, (b) any Subsidiary that leases any
Vehicle from the Borrower or otherwise, or (c) any other Subsidiary
having more than $500,000 in assets on the Closing Date or the date
of determination;
"Moody's" means Moody's Investors Service, Inc., a
Delaware corporation;
"Multi-employer Plan" means an employee pension benefit
plan covered by Title IV of ERISA and in respect of which the
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<PAGE>
Borrower or any Subsidiary is an "employer" as described in Section
4001(b) of ERISA, which is also a multi-employer plan as defined in
Section 4001(a)(3) of ERISA;
"Notes" means, collectively, the promissory notes of the
Borrower evidencing Loans executed and delivered to the Lenders as
provided in Section 2.06 hereof substantially in the form attached
hereto as Exhibit G;
"Obligations" means the obligations, liabilities and
Indebtedness of the Borrower with respect to (i) the principal and
interest on the Loans as evidenced by the Notes, (ii) the payment and
performance of all other obligations, liabilities and Indebtedness of
the Borrower to NationsBank, the Agent or any Lender hereunder, under
any one or more of the other Loan Documents or with respect to the
Loans, and (iii) all obligations of the Borrower to any Lender which
arise under a Swap Agreement;
"Outstandings" means, collectively, at any date, the
Swing Line Outstandings and Revolving Credit Outstandings on
such date;
"Participation" means with respect to any Lender (other than
NationsBank) and a Swing Line Loan, the extension of credit
represented by the participation of such Lender hereunder in the
liability of NationsBank in respect of such Swing Line Loan;
"Person" means an individual, partnership, corporation,
trust, limited liability company, unincorporated organization,
association, joint venture or a government or agency or political
subdivision thereof;
"Pre-Refunded Municipal Obligations" means obligations of
any state of the United States of America or of any municipal
corporation or other public body organized under the laws of any such
state which are rated, based on the escrow, in the highest investment
rating category by both S&P and Moody's and which have been
irrevocably called for redemption and advance refunded through the
deposit in escrow of Government Securities or other debt securities
which are (i) not callable at the option of the issuer thereof prior
to maturity, (ii) irrevocably pledged solely to the payment of all
principal and interest on such obligations as the same becomes due
and (iii) in a principal amount and bear such rate or rates of
interest as shall be sufficient to pay in full all principal of,
interest, and premium, if any, on such obligations as the same
becomes due as verified by a nationally recognized firm of certified
public accountants;
"Prime Rate" means the rate of interest per annum
announced publicly by the Agent as its prime rate from time to
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<PAGE>
time. The Prime Rate is not necessarily the best or the
lowest rate of interest offered by the Agent;
"Principal Office" means the office of the Agent at
Independence Center, 15th Floor, Charlotte, North Carolina
28255, Attention: Corporate Credit Services or such other
office and address as the Agent may from time to time
designate;
"Rate Hedging Obligations" means any and all obligations of
the Borrower, Team Rental or any of their respective Subsidiaries,
whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions
and modifications thereof and substitutions therefor), under (a) any
and all agreements, devices or arrangements designed to protect at
least one of the parties thereto from the fluctuations of interest
rates, exchange rates or forward rates applicable to such party's
assets, liabilities or exchange transactions, including, but not
limited to, Dollar-denominated or cross-currency interest rate
exchange agreements, forward currency exchange agreements, interest
rate cap or collar protection agreements, forward rate currency or
interest rate options, puts, warrants and those commonly known as
interest rate "swap" agreements; and (b) any and all cancellations,
buybacks, reversals, terminations or assignments of any of the
foregoing;
"Regulation D" means Regulation D of the Board as the
same may be amended or supplemented from time to time;
"Regulatory Change" means any change effective after the
Closing Date in United States federal or state laws or regulations
(including Regulation D and capital adequacy regulations) or foreign
laws or regulations or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks,
which includes any of the Lenders, under any United States federal or
state or foreign laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged
with the interpretation or administration thereof or compliance by
any Lender with any request or directive regarding capital adequacy,
including with respect to "highly leveraged transactions," whether or
not having the force of law, whether or not failure to comply
therewith would be unlawful and whether or not published or proposed
prior to the date hereof;
"Repurchase Agreement" means each fleet incentive program
offered through an Eligible Repurchase Party together with the
repurchase agreement or guaranteed depreciation agreement among the
Borrower and such Eligible Repurchase Party relating to such fleet
incentive program and pursuant to which such Eligible Repurchase
Party agrees to repurchase vehicles sold
20
<PAGE>
to the Borrower thereunder or to reimburse the Borrower in respect of
shortfalls in resale prices of vehicles upon terms and conditions set
forth therein, and with respect to which the Borrower has complied
with Sections 7.19 and 7.21 hereof, including the obtaining of such
consent or approval of the Agent as may be required thereby, together
with any amendment, supplement or modification thereto allowed
pursuant to the terms hereof and thereof and any similar agreements
entered into from time to time for the purpose of financing Vehicles
hereunder by the Borrower and an Eligible Repurchase Party with
respect to which the Borrower has complied with Sections 7.19 and
7.21 hereof; provided that (i) with respect to any new repurchase
agreement (including a repurchase agreement of a new Repurchase
Party) that is proposed for consideration after the date hereof as a
Repurchase Agreement, prior to such new repurchase agreement
constituting a "Repurchase Agreement" hereunder, the Agent has been
given not less than ten (10) days notice (or such shorter period of
time as shall be acceptable to the Agent) of a draft of such new
repurchase agreement as it then exists at the time of such notice
(and shall be provided a final copy of such new repurchase agreement
promptly upon its being available) and shall have consented to the
inclusion of such new repurchase agreement as a "Repurchase
Agreement" hereunder and (ii) with respect to any change in the terms
of any existing Repurchase Agreement, prior to such Repurchase
Agreement constituting a "Repurchase Agreement" hereunder, the Agent
shall have been provided in writing a copy of such change and shall
have consented to such change in the terms thereof;
"Repurchase Date" means, with respect to any Eligible
Vehicle, the date on which the applicable Repurchase Party accepts
such Eligible Vehicle for repurchase under the terms of the
applicable Repurchase Agreement and becomes obligated to pay the
Repurchase Price thereof;
"Repurchase Party" means any Person approved by the Agent
hereunder as a "Repurchase Party" in respect of Eligible Vehicles
acquired by the Borrower and which enters into a Repurchase Agreement
in accordance with Section 7.19 hereof;
"Repurchase Party Adverse Change" means, with respect to any
Repurchase Party, (a) the occurrence of any material adverse effect
upon the ability of such Person to perform, or a material default,
under one or more of its Repurchase Agreements, in any case,
resulting from any act, omission, situation, status, event or
undertaking, either singly or taken together (as determined by the
Agent); or (b) the failure of such Person to have an Investment Grade
Rating (or, in the case of a Repurchase Party with respect to foreign
Vehicles, if such Person and its foreign corporate parent, if any,
both fail to have an Investment Grade Rating);
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<PAGE>
"Repurchase Party Default" means, with respect to any
Repurchase Party, (a) the filing of a petition, answer or consent by
or against such Person seeking relief under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other
applicable Federal, state or foreign bankruptcy law or other United
States or foreign similar law, or the consenting by such Person to
the institution of proceedings thereunder against such Person or to
the filing of any such petition or to the appointment of or taking of
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of such Person, or of any
substantial part of its properties, or the making by such Person of a
general assignment for the benefit of creditors or such Person's
failure generally to pay its debts as they become due, or the taking
of any action in furtherance of any such action; or (b) the entry of
a decree or order for relief under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other
applicable Federal, state or foreign bankruptcy law or similar United
States of foreign law, with respect to such Person, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
similar official for such Person, or for any substantial part of its
properties, or ordering the winding-up or liquidation of its affairs,
or the filing of an involuntary petition against such Person and the
entry of a temporary stay, which petition and stay is not being
diligently contested or which petition and stay has continued
undismissed for a period of sixty (60) consecutive days; or (c) a
proceeding shall be commenced by such person, or by any governmental
authority having jurisdiction over such Person, seeking to establish
the invalidity or unenforceability of all or any portion of any
Repurchase Agreement (exclusive of questions of interpretation of any
provision thereof), or such Person shall deny any obligation (i) to
repurchase Eligible Vehicles or (ii) to make any material payments,
in each case, under any of its Repurchase Agreements;
"Repurchase Party Payment" has the meaning assigned in
Section 6.04 hereof;
"Repurchase Price" means the price at which a Repurchase
Party is obligated, upon acceptance, to repurchase or has repurchased
an Eligible Vehicle pursuant to a Repurchase Agreement;
"Repurchase Receivable" means all payments due from and
payable by a Repurchase Party (i) in respect of the repurchase price
for a Vehicle tendered by or on behalf of the Borrower and accepted
by the Repurchase Party under the applicable Repurchase Agreement or
(ii) in respect of the deficiency of the resale price of a Vehicle
under the amount guaranteed or otherwise provided as the basis for
computing payments due the Borrower under the applicable Repurchase
Agreement;
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<PAGE>
"Repurchase Receivable Account" has the meaning assigned
in Section 6.04 hereof;
"Repurchase Vehicles" means, collectively, Vehicles which
(a) have been purchased under a Repurchase Agreement in favor of the
Borrower, which Repurchase Agreement has been assigned to the Agent
(for the benefit of the Lenders), and such assignment has been
consented by the respective Repurchase Party, subject to the last
sentence of Section 7.19, and (b) are subject to and eligible for
repurchase under such Repurchase Agreement (which Repurchase
Agreement has been consented to by the Agent);
"Required Lenders" means, as of any date, Lenders on such
date having Credit Exposures (as defined below) aggregating at least
66-2/3% of the aggregate Credit Exposures of all the Lenders on such
date. For purposes of the preceding sentence, the amount of the
"Credit Exposure" of each Lender shall be equal to the aggregate
principal amount of the Loans owing to such Lender plus the aggregate
unutilized amounts of such Lender's Revolving Credit Commitment
(without regard to any Swing Line Outstandings); provided that if any
Lender shall have failed to pay to NationsBank its Applicable
Commitment Percentage of any Swing Line Loan, such Lender's Credit
Exposure attributable to all Swing Line Outstandings shall be deemed
to be held by NationsBank for purposes of this definition;
"Restricted Payment" means (a) any dividend or other
distribution, direct or indirect, on account of any shares of any
class of stock of Team Rental or any of its Subsidiaries (including
Borrower) (other than those payable or distributable by a Subsidiary
other than the Borrower to Team Rental or the Borrower) now or
hereafter outstanding, except a dividend payable solely in shares of
a class of stock to the holders of that class; (b) any redemption,
conversion, exchange, retirement or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any
class of stock of Team Rental or any of its Subsidiaries (including
Borrower) (other than those payable or distributable solely to the
Borrower) now or hereafter outstanding; (c) any payment made to
retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock of
Team Rental or any of its Subsidiaries (including Borrower) now or
hereafter outstanding; and (d) any issuance and sale of capital stock
of any Subsidiary of Team Rental (including Borrower) (or any option,
warrant or right to acquire such stock) other than to the Borrower;
"Restricted Space" shall have the meaning assigned
thereto in the Security Agreement;
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<PAGE>
"Revolving Credit Commitment" means, with respect to each
Lender, the obligation of such Lender to make Loans to the Borrower
up to an aggregate principal amount at any one time outstanding equal
to such Lender's Applicable Commitment Percentage of the Total
Revolving Credit Commitment;
"Revolving Credit Facility" means the facility described in
Article II hereof providing for Loans to the Borrower by the Lenders
in the aggregate principal amount of the Total Revolving Credit
Commitment;
"Revolving Credit Outstandings" means, as of any date of
determination, the aggregate principal amount of all Loans then
outstanding and all interest accrued thereon;
"Revolving Credit Termination Date" means the earliest to
occur of (i) November 31, 1996, or (ii) such earlier date of
termination of Lender's obligations pursuant to Section 9.01 upon the
occurrence of an Event of Default, or (iii) the earlier date of
closing of the "Senior Financing" (as defined in that certain letter
agreement dated April 3, 1996 between NationsBank Capital Markets,
Inc., and Team Rental), or (iv) such date as the Borrower may
voluntarily permanently terminate the Revolving Credit Facility by
payment in full of all Obligations;
"Sales and Ineligible Vehicle Report" means a certificate of
an Authorized Representative in the form attached as Exhibit 1 to
Exhibit D hereto;
"S&P" means Standard & Poor's Ratings Group, a division
of McGraw-Hill;
"Security Agreement" means the Security Agreement of even
date herewith between the Borrower and the Agent, as amended,
modified or supplemented from time to time in accordance with the
terms thereof;
"Single Employer Plan" means any employee pension benefit
plan covered by Title IV of ERISA and in respect of which the
Borrower or any Subsidiary is an "employer" as described in Section
4001(b) of ERISA, which is not a Multi-employer Plan;
"Solvent" means, when used with respect to any Person, that
at the time of determination:
(i) the fair value of its assets (both at fair
valuation and at present fair salable value on an orderly
basis) is in excess of the total amount of its liabilities,
including, without limitation, Contingent Obligations; and
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(ii) it is then able and expects to be able to pay
its debts as they mature; and
(iii) it has capital sufficient to carry on its
business as conducted and as proposed to be conducted;
"Subsidiary" means any corporation or other entity in which
more than 50% of its outstanding voting stock or more than 50% of all
equity interests is owned directly or indirectly by Team Rental or
the Borrower or by one or more of Team Rental's or the Borrower's
Subsidiaries;
"Swap Agreement" means one or more agreements with respect
to Indebtedness evidenced by any or all of the Notes on terms
mutually acceptable to Borrower and such Person and approved by each
of the Lenders, which agreements create Rate Hedging Obligations;
provided, however, that no such approval of the Lenders shall be
required to the extent such agreements are entered into between the
Borrower and any Lender;
"Swing Line" means the revolving line of credit
established by NationsBank in favor of the Borrower pursuant
to Section 2.13;
"Swing Line Loans" means loans made by NationsBank to the
Borrower pursuant to Section 2.13;
"Swing Line Outstandings" means, as of any date of
determination, the aggregate principal amount of all Swing Line Loans
then outstanding;
"Team Rental" means Team Rental Group, Inc., a Delaware
corporation;
"Team Vehicles" shall mean all of Team Rental's and each of
its Subsidiaries' now existing and hereafter acquired motor vehicle
inventory consisting of cars, vans and other vehicles of all types
and descriptions, whether held for sale, lease or rental purposes
(and including without limitation any Vehicles financed hereunder);
"Team Vehicle Utilization" means, on any given day, the
percentage of Team Vehicles that are leased to customers of Team
Rental or any of its Subsidiaries on such date;
"Total Revolving Credit Commitment" means a principal amount
of $15,000,000, as such amount may be increased in accordance with
Section 4.03, or reduced from time to time in accordance with Section
2.08;
"$30 Million Credit Agreement" means the term loan agreement
anticipated to be entered into on or after the date hereof, providing
for a term loan in the original principal
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amount of approximately $30,000,000, by NationsBank, National
Association (South) (or other lenders) to Team Rental;
"Unused Fee" means the fee payable by Borrower to the
Lender pursuant to Section 2.10(a);
"Vehicles" shall mean all of the Borrower's now existing and
hereafter acquired motor vehicle inventory consisting of automobiles,
light trucks and vans of all types and descriptions, whether held for
sale, lease or rental purposes, the acquisition or refinancing of
which are financed pursuant to this Agreement;
"Voting Stock" means shares of capital stock issued by a
corporation, or equivalent interests in any other Person, the holders
of which are ordinarily, in the absence of contingencies, entitled to
vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.
1.02 Rules of Interpretation.
(a) All accounting terms not specifically defined herein shall have
the meanings assigned to such terms and shall be interpreted in accordance
with GAAP applied on a Consistent Basis.
(b) Each term defined in Article 1 or 9 of the Florida Uniform
Commercial Code shall have the meaning given therein unless otherwise defined
herein, except to the extent that the Uniform Commercial Code of another
jurisdiction is controlling, in which case such terms shall have the meaning
given in the Uniform Commercial Code of the applicable jurisdiction.
(c) The headings, subheadings and table of contents used herein or in
any other Loan Document are solely for convenience of reference and shall not
constitute a part of any such document or affect the meaning, construction or
effect of any provision thereof.
(d) Except as otherwise expressly provided, references herein to
articles, sections, paragraphs, clauses, annexes, appendices, exhibits and
schedules are references to articles, sections, paragraphs, clauses, annexes,
appendices, exhibits and schedules in or to this Agreement.
(e) All definitions set forth herein or in any other Loan Document
shall apply to the singular as well as the plural form of such defined term,
and all references to the masculine gender shall include reference to the
feminine or neuter gender, and vice versa, as the context may require.
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(f) Unless the context indicates otherwise, when used herein or in
any other Loan Document, the disjunctive "or" includes the conjunctive "and".
(g) When used herein or in any other Loan Document, words such as
"hereunder", "hereto", "hereof" and "herein" and other words of like import
shall, unless the context clearly indicates to the contrary, refer to the
whole of the applicable document and not to any particular article, section,
subsection, paragraph or clause thereof.
(h) References to "including" means including without limiting the
generality of any description preceding such term, and for purposes hereof the
rule of ejusdem generis shall not be applicable to limit a general statement,
followed by or referable to an enumeration of specific matters, to matters
similar to those specifically mentioned.
(i) All dates and times of day specified herein shall refer to such
dates and times at Charlotte, North Carolina.
(j) Each of the parties to the Loan Documents and their counsel have
reviewed and revised, or requested (or had the opportunity to request)
revisions to, the Loan Documents, and any rule of construction that
ambiguities are to be resolved against the drafting party shall be
inapplicable in the construing and interpretation of the Loan Documents and
all exhibits, schedules and appendices thereto.
(k) Any reference to an officer of the Borrower or any other Person
by reference to the title of such officer shall be deemed to refer to each
other officer of such Person, however titled, exercising the same or
substantially similar functions.
(l) All references to any agreement or document as amended, modified
or supplemented, or words of similar effect, shall mean such document or
agreement, as the case may be, as amended, modified or supplemented from time
to time only as and to the extent permitted therein and in the Loan Documents.
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ARTICLE II
The Loans
2.01 Revolving Credit Facility
(a) Commitment. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make Advances to the Borrower, from
time to time from the Closing Date until the Revolving Credit Termination Date
on a pro rata basis as to the total borrowing requested by the Borrower on any
day determined by such Lender's Applicable Commitment Percentage up to but not
exceeding the Revolving Credit Commitment of such Lender, provided, however,
that each Advance shall be used to purchase or re-finance Eligible Vehicles on
or after the Closing Date, and the amount of an Advance shall be no greater
than the Borrower's actual purchase price for the respective Vehicles (as
specified on the respective Borrowing Notice); provided, further that the
Borrower's purchase price for an Eligible Vehicle shall be no greater than the
Eligible Net Book Value of such Vehicle; provided further, that the Lenders
will not be required and shall have no obligation to make any Advance (i) so
long as a Default or an Event of Default has occurred and is continuing or
(ii) if the Agent has accelerated the maturity of the Notes as a result of an
Event of Default; and provided further that immediately after giving effect to
each Advance, the principal amount of all Revolving Credit Outstandings plus
Swing Line Outstandings shall not exceed the lesser of the Total Revolving
Credit Commitment or the Borrowing Base. Within such limits, the Borrower may
borrow, repay and reborrow hereunder, on a Business Day in the case of a Base
Rate Loan and on a Eurodollar Business Day in the case of a Eurodollar Rate
Loan, from the Closing Date until, but (as to borrowings and reborrowings) not
including, the Revolving Credit Termination Date; provided, however, that (x)
no Eurodollar Rate Loan shall be made which has an Interest Period that
extends beyond the Revolving Credit Termination Date and (y) each Eurodollar
Rate Loan may, subject to the provisions of Section 2.09, be repaid only on
the last day of the Interest Period with respect thereto unless the Borrower
shall pay to the Agent for the account of the Lenders the additional amount,
if any, required under Section 3.04.
(b) Amounts. Except as otherwise permitted by the Lenders from time
to time, the aggregate unpaid principal amount of the Revolving Credit
Outstandings plus Swing Line Outstandings shall not exceed at any time, an
amount equal to the lesser of the Total Revolving Credit Commitment or the
Borrowing Base, and in the event there shall be outstanding any such excess,
the Borrower shall immediately make such payments and prepayments as shall be
necessary to comply with this restriction. Each Loan hereunder, other than
Base Rate Refunding Loans, and each conversion under Section 2.09 shall be in
an amount of at least $100,000 or an integral multiple of $10,000.
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(c) Advances. (i) An Authorized Representative shall give the Agent
(1) at least three (3) Eurodollar Business Days' irrevocable telefacsimile
transmission of a Borrowing Notice or Interest Rate Selection Notice (as
applicable) of each Eurodollar Rate Loan (whether representing an additional
borrowing hereunder or the conversion of a borrowing hereunder from Base Rate
Loans to Eurodollar Rate Loans or the continuation of a Eurodollar Rate Loan
for an additional Interest Period) prior to 10:30 A.M.; and (2) irrevocable
telefacsimile transmission of a Borrowing Notice of each Base Rate Loan
representing an additional borrowing hereunder prior to 10:30 A.M. on the day
of such proposed Base Rate Loan. Each such notice, which shall be effective
upon receipt by the Agent, shall specify the amount of the borrowing, the type
of Loan (Base Rate or Eurodollar Rate), the date of borrowing and, if a
Eurodollar Rate Loan, the Interest Period to be used in the computation of
interest. Notice of receipt of such Borrowing Notice or Interest Rate
Selection Notice, as the case may be, together with the amount of each
Lender's portion of an Advance requested thereunder, shall be provided by the
Agent to each Lender by telefacsimile transmission with reasonable promptness,
but (provided the Agent shall have received such notice by 10:30 A.M.) not
later than 1:00 P.M. on the same day as the Agent's receipt of such notice.
(ii) Not later than 2:00 P.M. on the date specified for each
borrowing under this Section 2.01, each Lender shall, pursuant to the terms
and subject to the conditions of this Agreement, make the amount of the
Advance or Advances to be made by it on such day available by wire transfer to
the Agent in the amount of its pro rata share, determined according to such
Lender's Applicable Commitment Percentage of the Revolving Loan or Revolving
Loans to be made on such day. Such wire transfer shall be directed to the
Agent at the Principal Office and shall be in the form of Dollars constituting
immediately available funds. The amount so received by the Agent shall,
subject to the terms and conditions of this Agreement, be made available to
the Borrower by delivery of the proceeds thereof to the respective Dealer (or
finance source of a Dealer) as required pursuant to Section 2.12 hereof and as
directed in the applicable Borrowing Notice by the Authorized Representative.
(iii) The Borrower shall have the option to elect the
duration of the initial and any subsequent Interest Periods and to convert the
Loans in accordance with Section 2.09. Eurodollar Rate Loans and Base Rate
Loans may be outstanding at the same time, provided, however, there shall not
be outstanding at any one time Eurodollar Rate Loans having more than ten (10)
different Interest Periods. If the Agent does not receive a Borrowing Notice
or an Interest Rate Selection Notice giving notice of election of the duration
of an Interest Period or of conversion of any Loan to or continuation of a
Loan as a Eurodollar Rate Loan by the time prescribed by Section 2.01(c) or
2.09, the Borrower shall be deemed to have elected to convert such Loan to (or
continue such Loan as)
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a Base Rate Loan until the Borrower notifies the Agent in accordance with
Section 2.09.
2.02 Payment of Interest. (a) The Borrower shall pay interest to the
Agent for the account of each Lender on the outstanding and unpaid principal
amount of each Loan made by such Lender for the period commencing on the date
of such Loan until such Loan shall be due at the then applicable Base Rate for
Base Rate Loans or applicable Eurodollar Rate for Eurodollar Rate Loans, as
designated by the Authorized Representative pursuant to Section 2.01 hereof or
as otherwise provided herein; provided, however, that if any amount shall not
be paid when due (at maturity, by acceleration or otherwise), all amounts
outstanding hereunder shall bear interest thereafter at the Default Rate.
(b) Interest on each Loan shall be computed on the basis of a year of
360 days and calculated for the actual number of days elapsed. Interest on
each Loan shall be paid (a) quarterly in arrears on the last Business Day of
each calendar quarter commencing June 30, 1996, on each Base Rate Loan, (b) on
the last day of the applicable Interest Period for each Eurodollar Rate Loan,
and (c) upon payment in full of the principal amount of the Loan at the
Revolving Credit Termination Date.
2.03 Payment of Principal. The principal amount of each Loan shall be
due and payable to the Agent in full on the Revolving Credit Termination Date,
or earlier as specifically provided herein. The principal amount of any Base
Rate Loan may be prepaid in whole or in part at any time. The principal amount
of any Eurodollar Rate Loan may be prepaid only at the end of the applicable
Interest Period unless the Borrower shall pay to the Agent for the account of
the Lenders the additional amount, if any, required under Section 3.04. All
prepayments of Loans made by the Borrower shall be in the amount of $1,000,000
or such greater amount which is an integral multiple of $1,000,000, or the
amount equal to all Revolving Credit Outstandings, or such other amount as
necessary to comply with Section 2.01(b) or Section 2.08.
2.04 Payments; Non-Conforming Payments. (a) Each payment of principal
(including any prepayment) and payment of interest and fees, and any other
amount required to be paid for the Lenders with respect to the Loans, shall be
made to the Agent at the Principal Office in Dollars and in immediately
available funds before 2:00 P.M. on the date such payment is due. The Agent
may at the written direction of the Borrower, but shall not be obligated to,
debit the amount of any such payment which is not made by such time to any
ordinary deposit account, if any, of the Borrower with the Agent. Except for
permanent reductions of the Revolving Credit Facility as provided in Section
2.08 or mandatory prepayments pursuant to Section 2.05, the Borrower shall
give the Agent one (1) Business Day prior telephonic notice of any payment of
principal, such notice to be given by not later than 11:00 a.m. on the date of
such payment.
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(b) The Agent shall deem any payment by or on behalf of the Borrower
hereunder that is not made both (i) in Dollars and in immediately available
funds and (ii) prior to 2:00 P.M. to be a non-conforming payment. Any such
payment shall not be deemed to be received by the Agent until the later of (A)
the time such funds become available funds and (B) the next Business Day. Any
non-conforming payment will not be deemed a payment and interest shall
continue to accrue on any principal as to which a non-conforming payment is
made, until the later of (Y) the time such funds become available funds and
(Z) the next Business Day at the Default Rate from the date such amount was
due and payable until the date such amount is paid in full.
(c) In the event that any payment hereunder or under the Notes
becomes due and payable on a day other than a Business Day, then such due date
shall be extended to the next succeeding Business Day unless provided
otherwise under clause (ii) of the definition of "Interest Period"; provided
that interest shall continue to accrue during the period of any such
extension, and provided further, that in no event shall any such due date be
extended beyond the Revolving Credit Termination Date.
2.05 Mandatory Repayments.
(a) Depreciation Payments. Within ten (10) days after the end of each
calendar month, the Borrower shall pay to the Agent for the account of the
Lenders an amount equal to the aggregate of the depreciation on each Eligible
Vehicle during such month, determined as follows: (i) calculated over the
course of such month at the applicable Depreciation Rate multiplied by the
Eligible Net Book Value (as at the beginning of such month) for each Eligible
Vehicle or (ii) if the monthly depreciation charge for an Eligible Vehicle (as
set forth in the respective Repurchase Agreement) is an absolute Dollar amount
rather than a rate, than the Borrower shall pay such amount to the Agent as
depreciation for such Vehicle during such month. Such payments shall be
applied by the Agent (on a pro rata basis in accordance with Section 2.07) to
any outstanding principal or accrued interest on the Loans.
(b) Vehicle Sales. Immediately after the sale of any Eligible
Vehicle, the Borrower shall pay to the Agent for the account of the Lenders
(on a pro rata basis in accordance with Section 2.07) an amount equal to the
Eligible Net Book Value of such Vehicle immediately prior to such sale.
(c) Ineligible Vehicles. Any Vehicle shall immediately cease to be an
Eligible Vehicle if (a) the respective Repurchase Party becomes subject to a
Repurchase Party Default, (b) the respective Repurchase Party becomes subject
to a Repurchase Party Adverse Change which is not cured to the satisfaction of
the Agent within thirty (30) days, or (c) such Vehicle otherwise fails in any
way to satisfy the requirements for an Eligible Vehicle. Immediately after any
Vehicle ceases to be an Eligible Vehicle, the Borrower
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shall pay to the Agent for the account of the Lenders (on a pro rata basis in
accordance with Section 2.07) an amount equal to the Eligible Net Book Value
of such Vehicle.
2.06 Notes. Loans made by each Lender shall be evidenced by, and be
repayable with interest in accordance with the terms of, the Note payable to
the order of such Lender in the amount of its Revolving Credit Commitment,
which Note shall be dated the Closing Date or a later date pursuant to an
Assignment and Acceptance and shall be duly completed, executed and delivered
by the Borrower.
2.07 Pro Rata Payments. Except as otherwise provided herein, (a) each
payment on account of the principal of and interest on the Loans and the fees
described in Section 2.10(a) shall be made to the Agent for the account of the
Lenders pro rata based on their Applicable Commitment Percentages, (b) all
payments to be made by the Borrower for the account of each of the Lenders on
account of principal, interest and fees, shall be made without diminution,
setoff, recoupment or counterclaim, and (c) the Agent will promptly distribute
to the Lenders in immediately available funds payments received in fully
collected, immediately available funds from the Borrower.
2.08 Reductions; Allocation of Reductions and Increases.
(a) Reductions. The Borrower shall, by notice from an Authorized
Representative, have the right from time to time (but not more frequently than
once during each fiscal quarter), upon not less than two (2) Business Days
written notice to the Agent to reduce the Total Revolving Credit Commitment.
Each such reduction shall be in the aggregate amount of $5,000,000 or such
greater amount which is in an integral multiple of $1,000,000, and shall
permanently reduce the Total Revolving Credit Commitment. No such reduction
shall result in the payment of any Eurodollar Rate Loan other than on the last
day of the Interest Period of such Loan unless such prepayment is accompanied
by amounts due, if any, under Section 3.04. Each reduction of the Total
Revolving Credit Commitment shall be accompanied by payment of the Loans to
the extent that the principal amount of Revolving Credit Outstandings plus
Swing Line Outstandings exceeds the lesser of the Total Revolving Credit
Commitment or the Borrowing Base, after giving effect to such reduction,
together with accrued and unpaid interest on the amounts prepaid.
(b) Allocation of Reductions and Increases. Concurrently with any
reduction of, or increase in, the Total Revolving Credit Commitment pursuant
to Section 2.08(a) or 4.03, the Revolving Credit Commitment of each Lender
shall automatically be increased or decreased (as the case may be) on a pro
rata basis, so that the Applicable Commitment Percentage of each Lender is
unchanged by such increase or decrease in the Total Revolving Credit
Commitment.
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2.09 Conversions and Elections of Subsequent Interest Periods.
Provided that no Default or Event of Default shall have occurred and be
continuing and subject to the limitations set forth below and in Article III,
the Borrower may:
(a) upon delivery, effective upon receipt, of a properly completed
Interest Rate Selection Notice to the Agent on or before 10:30 A.M. on any
Business Day, convert all or a part of Eurodollar Rate Loans to Base Rate
Loans on the last day of the Interest Period for such Eurodollar Rate Loans;
and
(b) upon delivery, effective upon receipt, of a properly completed
Interest Rate Selection Notice to the Agent on or before 10:30 A.M. three (3)
Eurodollar Business Days the prior to the date of such election or conversion:
(i) elect a subsequent Interest Period for all or a portion of
Eurodollar Rate Loans to begin on the last day of the current
Interest Period for such Eurodollar Rate Loans;
(ii) convert Base Rate Loans to Eurodollar Rate Loans on
any date.
Each election and conversion pursuant to this Section 2.09 shall be
subject to the limitations on Eurodollar Rate Loans set forth in the
definition of "Interest Period" herein and in Sections 2.01, 2.02 and Article
IV hereof. The Agent shall give written notice to each Lender of such notice
of election or conversion prior to 3:00 P.M. on the day such notice of
election or conversion is received. All such continuations or conversions of
Loans shall be effected pro rata based on the Applicable Commitment
Percentages of the Lenders.
2.10 Fees.
(a) Unused Fee. For the period beginning on the date that is fifteen
(15) days after the Closing Date and ending on the Revolving Credit
Termination Date, the Borrower agrees to pay to the Agent, for the pro rata
benefit of the Lenders based on their Applicable Commitment Percentages, an
Unused Fee equal to three- tenths of one percent (.30%) per annum multiplied
by the average daily amount by which the Total Revolving Credit Commitment
exceeds the Revolving Credit Outstandings (without giving effect to Swing Line
Outstandings or the Participations of any Lenders therein except for the
Participation therein purchased by NationsBank as a Lender). Such payments of
fees provided for in this Section shall be due in arrears on the last Business
Day of each calendar quarter beginning June 30, 1996 to and on the Revolving
Credit Termination Date. Notwithstanding the foregoing, so long as any Lender
fails to make available any portion of its Revolving Credit Commitment when
requested, such Lender shall not be entitled to receive payment of its pro
rata share of such fee until such Lender shall
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make available such portion. Such fee shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed.
(b) Commitment Fee. In addition to the foregoing, the Borrower shall
pay to the Agent on or before the Closing Date the Commitment Fee (the
"Commitment Fee") required pursuant to a letter agreement of even date
herewith between the Borrower and the Agent.
2.11 Deficiency Advances. No Lender shall be responsible for any
default of any other Lender in respect to such other Lender's obligation to
make any Loan hereunder or fund its purchase of any Participation hereunder
nor shall the Revolving Credit Commitment of any Lender hereunder be increased
as a result of such default of any other Lender. Without limiting the
generality of the foregoing, in the event any Lender shall fail to advance
funds to the Borrower as herein provided, the Agent may in its discretion, but
shall not be obligated to, advance under the Note in its favor as a Lender all
or any portion of such amount or amounts (each, a "deficiency advance") and
shall thereafter be entitled to payments of principal of and interest on such
deficiency advance in the same manner and at the same interest rate or rates
to which such other Lender would have been entitled had it made such advance
under its Note; provided that, upon payment to the Agent from such other
Lender of the entire outstanding amount of each such deficiency advance,
together with accrued and unpaid interest thereon, from the most recent date
or dates interest was paid to the Agent by the Borrower on each Loan
comprising the deficiency advance at the interest rate per annum for overnight
borrowing by the Agent from the Federal Reserve Bank, then such payment shall
be credited against the applicable Note of the Agent in full payment of such
deficiency advance and the Borrower shall be deemed to have borrowed the
amount of such deficiency advance from such other Lender as of the most recent
date or dates, as the case may be, upon which any payments of interest were
made by the Borrower thereon.
2.12 Use of Proceeds. The proceeds of the Loans made pursuant to the
Revolving Credit Facility hereunder shall be used by the Borrower to finance
or refinance its purchase of Eligible Vehicles. The proceeds of Loans shall be
paid directly by the Agent to the Dealer (or the financing source of the
Dealer) selling such Vehicles to the Borrower (as specified in the respective
Borrowing Notice).
2.13 Swing Line. (a) Notwithstanding any other provision of this
Agreement to the contrary, in order to administer the Revolving Credit
Facility in an efficient manner and to minimize the transfer of funds between
the Agent and the Lenders, NationsBank shall make available Swing Line Loans
to the Borrower prior to the Revolving Credit Termination Date. NationsBank
shall not make any Swing Line Loan pursuant hereto (i) if to the actual
knowledge of NationsBank the Borrower is not in compliance with all the
conditions to the making of Loans set forth in this Agreement,
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(ii) if after giving effect to such Swing Line Loan, the Swing Line
Outstandings exceed $10,000,000, or (iii) if after giving effect to such Swing
Line Loan, the sum of the Swing Line Outstandings and Revolving Credit
Outstandings exceeds the lesser of the Total Revolving Credit Commitment or
the Borrowing Base. Swing Line Loans shall be limited to CD Rate Loans. The
Company may borrow, repay and reborrow under this Section 2.13. Unless
notified to the contrary by NationsBank, borrowings under the Swing Line shall
be made in the minimum amount of $500,000 or, if greater, in amounts which are
integral multiples of $50,000, upon written request by telefacsimile
transmission, effective upon receipt, by an Authorized Representative of the
Borrower made to NationsBank not later than 2:00 P.M. on the Business Day of
the requested borrowing. Each such Borrowing Notice shall specify the amount
of the borrowing and the date of borrowing, and shall be in the form of
Exhibit D-2, with appropriate insertions. Unless notified to the contrary by
NationsBank, each repayment of a Swing Line Loan shall be in the minimum
amount of $500,000 or an integral multiple of $50,000 in excess thereof, or
the aggregate amount of all Swing Line Outstandings. If the Borrower instructs
NationsBank to debit any demand deposit account of the Borrower in the amount
of any payment with respect to a Swing Line Loan, or Nationsbank otherwise
receives repayment, after 2:00 P.M. on a Business Day, such payment shall be
deemed received on the next Business Day.
(b) CD Rate Loans shall bear interest at the CD Rate, the interest
payable on Swing Line Loans is solely for the account of NationsBank, and all
accrued and unpaid interest on Swing Line Loans shall be payable on the dates
and in the manner provided in Sections 2.02(b) and 2.04 with respect to
interest on Base Rate Loans (except that the amount of interest on Swing Line
Loans shall be based on the CD Rate). The Swing Line Outstandings shall be
evidenced by the Note delivered to NationsBank pursuant to Section 2.06.
(c) Upon the making of a Swing Line Loan, each Lender shall be deemed
to have purchased from NationsBank a Participation therein in an amount equal
to that Lender's Applicable Commitment Percentage of such Swing Line Loan.
Upon demand made by NationsBank, each Lender shall, according to its
Applicable Commitment Percentage of such Swing Line Loan, promptly provide to
NationsBank its purchase price therefor in an amount equal to its
Participation therein. Any Advance made by a Lender pursuant to demand of
NationsBank of the purchase price of its Participation shall be deemed (i)
provided that the conditions to making Loans shall be satisfied, a Base Rate
Refunding Loan under Section 2.01 until the Borrower converts such Base Rate
Loan in accordance with the terms of Section 2.09, and (ii) in all other
cases, the funding by each Lender of the purchase price of its Participation
in such Swing Line Loan. The obligation of each Lender to so provide its
purchase price to NationsBank shall be absolute and unconditional and shall
not be affected by the occurrence of an Event of Default or any other
occurrence or event.
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The Borrower, at its option and subject to the terms hereof, may
request an Advance pursuant to Section 2.01 in an amount sufficient to repay
Swing Line Outstandings on any date and the Agent shall provide from the
proceeds of such Advance to NationsBank the amount necessary to repay such
Swing Line Outstandings (which Nationsbank shall then apply to such repayment)
and credit any balance of the Advance in immediately available funds in the
manner directed by the Borrower pursuant to Section 2.01(c)(ii). The proceeds
of such Advances shall be paid to NationsBank for application to the Swing
Line Outstandings and the Lenders shall then be deemed to have made Loans in
the amount of such Advances. The Swing Line shall continue in effect until the
Revolving Credit Termination Date, at which time all Outstandings and accrued
interest thereon shall be due and payable in full.
2.14 Increase and Decrease in Amounts. The amount of the Total
Revolving Credit Commitment which shall be available to the Borrower as
Advances shall be reduced by the aggregate amount of outstanding Swing Line
Loans.
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ARTICLE III
Yield Protection and Illegality
3.01 Additional Costs. (a) The Borrower shall promptly pay to the
Agent for the account of a Lender from time to time, without duplication, such
amounts as such Lender may determine to be necessary to compensate it for any
costs incurred by such Lender which it determines are attributable to its
making or maintaining any Loan (or any Swing Line Loan, in the case of
NationsBank) or its obligation to make any Loans or any Lender's Participation
in any Swing Line Loans, or any reduction in any amount receivable by such
Lender under this Agreement or the Notes in respect of any of such Loans or
Swing Line Loans, or such obligation, including reductions in the rate of
return on a Lender's capital (such increases in costs and reductions in
amounts receivable and returns being herein called "Additional Costs"), in
each case resulting from any Regulatory Change which: (i) changes the basis of
taxation of any amounts payable to such Lender under this Agreement or the
Notes in respect of any of such Loans (other than taxes imposed on or measured
by the income, revenues or assets); or (ii) imposes or modifies any reserve,
special deposit, or similar requirements relating to any extensions of credit
or other assets of, or any deposits with or other liabilities of, such Lender
(other than any such reserve, deposit or requirement reflected in the Prime
Rate, the Federal Funds Effective Rate or the Interbank Offered Rate, in each
case computed in accordance with the respective definitions of such terms set
forth in Section 1.01 hereof); or (iii) has or would have the effect of
reducing the rate of return on capital of any such Lender to a level below
that which such Lender could have achieved but for such Regulatory Change
(taking into consideration such Lender's policies with respect to capital
adequacy); or (iv) imposes any other condition which imposes increased costs
on the Agent or the Lenders under or with respect to their respective rights,
duties or obligations under this Agreement or the Notes or the making or
maintenance of or any Lender's Participation in Swing Line Loans (or any of
such extensions of credit or liabilities). Each Lender will notify the
Authorized Representative and the Agent of any event occurring after the
Closing Date which would entitle it to compensation pursuant to this Section
3.01(a) as promptly as practicable after it obtains knowledge thereof and
determines to request such compensation.
(b) Without limiting the effect of the foregoing provisions of this
Section 3.01, in the event that, by reason of any Regulatory Change, any
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of the Lender which includes deposits by reference to which the
interest rate on Eurodollar Rate Loans is determined as provided in this
Agreement or a category of extensions of credit or other assets of any Lender
which includes Eurodollar Rate Loans or (ii) becomes subject to restrictions
on the amount of such a category of liabilities or
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assets which it may hold, then, if the Lender so elects by notice to the Agent
and the other Lenders, the obligation hereunder of such Lender to make, and to
convert Base Rate Loans into, Eurodollar Rate Loans that are the subject of
such restrictions shall be suspended until the date such Regulatory Change
ceases to be in effect and the Borrower shall, on the last day(s) of the then
current Interest Period(s) for outstanding Eurodollar Rate Loans convert such
Eurodollar Rate Loans into Base Rate Loans; provided, however, that the
suspension of such obligation and the conversion of any Eurodollar Rate Loans
into Base Rate Loans shall apply only to any Lender who is affected by such
restrictions and who has provided such notice to the other Lenders, and the
obligation of the other Lenders to make, and to convert Base Rate Loans into,
Eurodollar Rate Loans shall not be affected by such restrictions. In the event
that the obligation of some, but not all, of the Lenders to make, or to
convert Base Rate Loans into, Eurodollar Rate Loans is suspended, then any
request by the Borrower during the pendency of such suspension for a
Eurodollar Rate Loan shall be deemed a request for such Eurodollar Rate Loan
from the Lender(s) not subject to such suspension and for a Base Rate Loan
from the Lender(s) who are subject to such suspension, in each case in the
respective amounts based on the Lenders' respective Applicable Commitment
Percentages.
(c) Determinations by any Lender for purposes of this Section 3.01 of
the effect of any Regulatory Change on its costs of making or maintaining, or
being committed to make, Loans, or by NationsBank of the effect of any
Regulatory Change on its costs in connection with the making or maintenance
of, or any other Lender's Participation in, any Swing Line Loans hereunder, or
on amounts receivable by any Lender in respect of Loans, and of the additional
amounts required to compensate the Lender in respect of any Additional Costs,
shall be made taking into account such Lender's policies, or the policies of
the parent corporation of such Lender, as to the allocation of capital, costs
and other items and shall be conclusive absent manifest error. The Lender
requesting such compensation shall furnish to the Authorized Representative
and the Agent within one hundred eighty (180) days of the incurrence of any
Additional Costs for which compensation is sought an explanation of the
Regulatory Change and calculations, in reasonable detail, setting forth such
Lender's determination of any such Additional Costs.
3.02 Suspension of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any interest rate for
any Eurodollar Rate Loan for any Interest Period, the Agent determines (which
determination made on a reasonable basis shall be conclusive absent manifest
error) that:
(a) quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Rate" in Section 1.01
hereof are not being provided in the relevant amounts or for the
relevant maturities for purposes of
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determining the rate of interest for such Eurodollar Rate Loan
as provided in this Agreement; or
(b) the relevant rates of interest referred to in the
definition of "Interbank Offered Rate" in Section 1.01 hereof upon
the basis of which the Eurodollar Rate for such Interest Period is to
be determined do not adequately reflect the cost to the Lenders of
making or maintaining such Eurodollar Rate Loan for such Interest
Period;
then the Agent shall give the Authorized Representative prompt notice thereof,
and so long as such condition remains in effect, the Lenders shall be under no
obligation to make Eurodollar Rate Loans that are subject to such condition,
or to convert Loans into Eurodollar Rate Loans, and the Borrower shall on the
last day(s) of the then current Interest Period(s) for outstanding Eurodollar
Rate Loans, as applicable, convert such Eurodollar Rate Loans into another
Eurodollar Rate Loan if such Eurodollar Rate Loan is not subject to the same
or similar condition, or Base Rate Loans, if available hereunder. The Agent
shall give the Authorized Representative notice describing in reasonable
detail any event or condition described in this Section 3.02 promptly
following the determination by the Agent that the availability of Eurodollar
Rate Loans is, or is to be, suspended as a result thereof.
3.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender to honor its
obligation to make or maintain Eurodollar Rate Loans hereunder, then such
Lender shall promptly notify the Borrower thereof (with a copy to the Agent)
and such Lender's obligation to make or continue Eurodollar Rate Loans, or
convert Base Rate Loans into Eurodollar Rate Loans, shall be suspended until
such time as such Lender may again make and maintain Eurodollar Rate Loans,
and such Lender's outstanding Eurodollar Rate Loans shall be converted into
Base Rate Loans in accordance with Section 2.09 or earlier if required by
applicable law. The conversion of any Eurodollar Rate Loans into Base Rate
Loans shall apply only to any Lender who is affected by such restrictions and
who has provided the notice described above, and the obligation of the other
Lenders to make, and to convert Base Rate Loan into, Eurodollar Rate Loans
shall not be affected by such restrictions. In the event that the obligation
of some, but not all, of the Lenders to make, or to convert Base Rate Loans
into, Eurodollar Rate Loans is so suspended, then any request by the Borrower
during the pendency of such suspension for a Eurodollar Rate Loan shall be
deemed a request for such Eurodollar Rate Loan from the Lender(s) not subject
to such suspension and for a Base Rate Loan from the Lender(s) who are subject
to such suspension, in each case in the respective amounts based on the
Lenders' respective Applicable Commitment Percentages.
3.04 Compensation. The Borrower shall promptly pay to each
Lender, upon the request of such Lender, such amount or amounts as
shall be sufficient (in the reasonable determination of such
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Lender) to compensate it for any loss, cost or expense incurred by it as a
result of:
(a) any payment, prepayment or conversion of a Eurodollar
Rate Loan on a date other than the last day of the Interest Period
for such Eurodollar Rate Loan, including without limitation any
conversion required pursuant to Section 3.01, 3.02 or 3.03; or
(b) any failure by the Borrower to borrow or convert a
Eurodollar Rate Loan on the date for such borrowing or conversion
specified in the relevant Borrowing Notice or Interest Rate Selection
Notice under Article II hereof;
such compensation to include, without limitation, an amount equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount so paid, prepaid or converted or not borrowed for the period
from the date of such payment, prepayment or conversion or failure to borrow
or convert to the last day of the then current Interest Period for such Loan
(or, in the case of a failure to borrow or convert, the Interest Period for
such Loan which would have commenced on the date scheduled for such borrowing
or conversion) at the applicable rate of interest for such Eurodollar Rate
Loan provided for herein over (ii) the Interbank Offered Rate (as reasonably
determined by the Agent) for Dollar deposits of amounts comparable to such
principal amount and maturities comparable to such period. A determination of
a Lender as to the amounts payable pursuant to this Section 3.04 shall be
conclusive, provided that such determinations are made on a reasonable basis.
The Lender requesting compensation under this Section 3.04 shall promptly
furnish to the Authorized Representative and the Agent calculations in
reasonable detail setting forth such Lender's determination of the amount of
such compensation.
3.05 Alternate Loan. In the event any Lender suspends the making of
any Eurodollar Rate Loan pursuant to this Article III (herein a "Restricted
Lender"), the Restricted Lender's Commitment Percentage of any Eurodollar Rate
Loan shall bear interest at the Base Rate or the Eurodollar Rate for which the
suspension does not apply, as selected by Borrower, until the Restricted
Lender once again makes available the applicable Eurodollar Rate Loan.
Notwithstanding the provisions of Section 2.02(b), interest shall be payable
to the Restricted Lender at the time and manner as paid to those Lenders
making available Eurodollar Rate Loans.
3.06 Taxes. (a) All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future excise,
stamp or other taxes, fees, duties, levies, imposts, charges, deductions,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority, but excluding (i) franchise taxes, (ii) any taxes (other than
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withholding taxes) that would not be imposed but for a connection between a
Lender or the Agent and the jurisdiction imposing such taxes (other than a
connection arising solely by virtue of the activities of such Lender or the
Agent pursuant to or in respect of this Agreement or any other Loan Document),
(iii) any taxes imposed on or measured by the Lender's assets, net income,
receipts or branch profits and (iv) any taxes arising after the Closing Date
solely as a result of or attributable to the Lender changing its designated
lending office after the date hereof (such non-excluded items being
collectively called "Taxes"). In the event that any withholding or deduction
from any payment to be made by the Borrower hereunder is required in respect
of any Taxes pursuant to any applicable law, rule or regulation, then the
Borrower will
(A) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(B) promptly forward to the Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment
to such authority; and
(C) pay to the Agent for the account of each Lender such
additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount
such Lender would have received had no such withholding or deduction
been required.
(c) Prior to the date that any Lender or participant organized under
the laws of a jurisdiction outside the United States becomes a party hereto,
such Person shall deliver to the Borrower and the Agent such certificates,
documents or other evidence, as required by the Code or Treasury Regulations
issued pursuant thereto, properly completed, currently effective and duly
executed by such Lender or participant establishing that payments to it
hereunder and under the Notes are (i) not subject to United States Federal
backup withholding tax and (ii) not subject to United States Federal
withholding tax under the Code because such payment is either effectively
connected with the conduct by such Lender or participant of a trade or
business in the United States or totally exempt from United States Federal
withholding tax by reason of the application of the provisions of a treaty to
which the United States is a party or such Lender is otherwise exempt.
(d) If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Agent, for the account
of the respective Lenders, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by the Lender as a result of any
such failure. For purposes of this Section 3.06, a distribution hereunder by
any Lender to or for the account of any Lender shall be deemed a payment by
the Borrower.
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ARTICLE IV
Conditions to Making Loans
4.01 Conditions of Initial Advance. The obligations of the Lenders to
make the initial Advance, and of NationsBank to make any Swing Line Loan,
pursuant to this Agreement are subject to the conditions precedent that:
(a) the Agent shall have received on the Closing Date, in
form and substance satisfactory to the Agent and the Lenders, the
following:
(i) executed originals of each of this Agreement, the Notes,
the Guaranties, the Security Agreement and the other Loan Documents,
together with all schedules and exhibits thereto;
(ii) favorable written opinions of special counsel to the
Borrower and the Guarantors dated the Closing Date, addressed to the
Agent and the Lenders substantially in the form of Exhibit H attached
hereto;
(iii) resolutions of the board of directors or other
appropriate governing body (or of the appropriate committee thereof)
of the Borrower and each Guarantor certified by its secretary or
assistant secretary as of the Closing Date, appointing (in the case
of the Borrower) the initial Authorized Representative and approving
and adopting the Loan Documents to be executed by such Person, and
authorizing the execution and delivery thereof;
(iv) specimen signatures of officers of the Borrower and
each Guarantor executing the Loan Documents on behalf of such Person,
certified by the secretary or assistant secretary of the Borrower or
such Guarantor, as applicable;
(v) the charter documents of the Borrower and each Guarantor
certified as of a recent date by the Secretary of State of its state
of incorporation, or a certificate of the secretary of the Borrower
or such Guarantor (as the case may be) certifying that there have
been no changes in such charter documents from the certified copies
thereof delivered to the NationsBank on February 27, 1996;
(vi) the by-laws of the Borrower and each Guarantor
certified as of the Closing Date as true and correct by its secretary
or assistant secretary, or a certificate of the secretary or
assistant secretary of the Borrower or such Guarantor (as the case
may be) certifying that there have been no changes in such by-laws
from the certified copies thereof delivered to NationsBank on
February 27, 1996;
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(vii) certificates issued as of a recent date by the
Secretaries of State of the jurisdiction of incorporation of the
Borrower and each Guarantor, as the case may be, as to the due
existence and good standing of the Borrower or such Guarantor
therein;
(viii) appropriate certificates of qualification to do
business, good standing and, where appropriate, authority to conduct
business under assumed name, issued in respect of the Borrower and
each Guarantor as of a recent date by the Secretary of State or
comparable official of each jurisdiction in which the failure to be
qualified to do business or authorized so to conduct business could
reasonably be expected to result in a Material Adverse Effect;
(ix) certificate of an Authorized Representative dated the
Closing Date demonstrating compliance with the financial covenants in
Section 8.15 hereof, substantially in the form of Exhibit J;
(x) evidence of insurance required by the Loan
Documents;
(xi) executed UCC financing statements naming the
Borrower as debtor and the Agent as secured party;
(xii) executed copies of precautionary UCC financing
statements, pursuant to Section 4.2(f) of the Security Agreement,
naming the Borrower as lessor, the respective Affiliates as lessee,
and the Agent as assignee;
(xiii) certified copies of all Eligible Repurchase
Agreements;
(xiv) evidence satisfactory to the Agent that the Borrower
has delivered the original Certificate of Title for each Eligible
Vehicle to the Agent at the Restricted Space, or (if no Certificate
of Title exists for a new Eligible Vehicle) the Borrower has applied
for a Certificate of Title for such Eligible Vehicle, showing the
Borrower as owner and (to the extent required by Section 6.03)
showing the Agent as lienholder;;
(xv) the initial Borrowing Base Certificate;
(xvi) the initial Borrowing Notice, if any;
(xvii) a letter agreement with respect to the Commitment
Fee and Agent's fee and payment of the Commitment Fee and
Agent's fee;
(xviii) any other necessary third-party consents,
including consents of other lenders to the Borrower or any
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Guarantor (other than the consent of General Motors Acceptance
Corporation and Ford Motor Credit Company to the Guaranties by
Lee-Al, Inc. and Westeam Enterprises, Inc.);
(xix) the results of UCC searches under the name of the
Borrower, Team Rental and each Subsidiary of the Borrower or Team
Rental in each jurisdiction where the financing statements under
clauses (xii) and (xiii) are to be filed, or at least in (A) the
jurisdiction where the chief executive office of the Borrower is
located and (B) those jurisdictions where at least 95% (by Eligible
Net Book Value) of the Vehicles are expected to be located;
(xx) UCC-3 termination statements terminating the Liens
of First Los Angeles Bank and First Interstate Bank of
Arizona, N.A. on assets of Team Rental of Southern California,
Inc. (successor to Brac-Opco, Inc.) and Arizona Rent-A-Car
Systems, Inc., respectively; and executed intercreditor
agreements satisfactory to the Agent with each of NBD Bank and
Truckers Bank Plan;
(xxi) a list of each Eligible Repurchase Party approved
by the Agent;
(xxii) an executed anti-coercion statement of the
Borrower and each Guarantor;
(xxiii) the audited annual financial statements of Team
Rental and its consolidated Subsidiaries (including the Borrower) as
of December 31, 1995, and unaudited quarterly financial statements of
Team Rental and its consolidated Subsidiaries as of March 31, 1996;
and
(xxiv) such other documents, instruments, certificates and
opinions as the Lender may reasonably request on or prior to the
Closing Date in connection with the consummation of the transactions
contemplated hereby.
(b) In the good faith judgment of the Agent and the Lenders:
(i) there shall not have occurred or become known to the
Agent or the Lenders any event, condition, situation or status since
the date of the information contained in the financial and business
projections, budgets, pro forma data and forecasts concerning the
Borrower, Team Rental and their respective Subsidiaries delivered to
the Agent prior to the Closing Date that has had or could reasonably
be expected to result in a Material Adverse Effect;
(ii) no litigation, action, suit, investigation or other
arbitral, administrative or judicial proceeding shall be pending or
threatened which could reasonably be likely to result in a Material
Adverse Effect; and
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(iii) the Borrower, Team Rental and their respective Subsidiaries
shall have received all approvals, consents and waivers, and shall
have made or given all necessary filings and notices as shall be
required to consummate the transactions contemplated hereby without
the occurrence of any default under, conflict with or violation of
(A) any applicable law, rule, regulation, order or decree of any
Governmental Authority or arbitral authority or (B) any agreement,
document or instrument to which any of the Borrower, Team Rental or
any of their respective Subsidiaries is a party or by which any of
them or their properties is bound.
4.02 Conditions of Loans. The obligations of the Lender to make any
Loans, and of NationsBank to make any Swing Line Loans, hereunder on or
subsequent to the Closing Date are subject to the satisfaction of the
following conditions:
(a) the Agent (or, in the case of Swing Line Loans,
NationsBank) shall have received a notice of such borrowing or
request if required by Article II hereof;
(b) the representations and warranties of the Borrower and
the Guarantors set forth in Article V hereof and in each of the other
Loan Documents shall be true and correct in all material respects on
and as of the date of such Advance or Swing Line Loan, with the same
effect as though such representations and warranties had been made on
and as of such date, except to the extent that such representations
and warranties expressly relate to an earlier date and except that
the financial statements referred to in Section 5.01(f)(i) shall be
deemed to be those financial statements most recently delivered to
the Lender pursuant to Section 7.01 hereof;
(c) With respect to any Loans to be used by the Borrower to
finance the purchase of vehicles under Repurchase Agreements, the
Borrower shall have complied with Sections 7.19 and 7.21 hereof;
(d) at the time of each such Advance or Swing Line Loan, no
Default or Event of Default specified in Article XI hereof, shall
have occurred and be continuing; and
(e) immediately after giving effect to:
(i) a Loan (A) the Revolving Credit Outstandings
and Swing Line Outstandings shall not exceed the lesser of
the Total Revolving Credit Commitment or the Borrowing Base,
and (B) the aggregate principal balance of all outstanding
Loans for each Lender shall not exceed such Lender's
Revolving Credit Commitment;
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(ii) a Swing Line Loan (A) the Revolving Credit
Outstandings and Swing Line Outstandings shall not exceed
the lesser of the Total Revolving Credit Commitment or the
Borrowing Base and (B) the Swing Line Outstandings shall not
exceed $10,000,000.
4.03 Post-Closing Conditions; Conditions to Increase in Total
Revolving Credit Commitment. In addition to the foregoing, the following
conditions must be satisfied within 30 days after the date of this Agreement
(the failure to satisfy such conditions within such period constituting an
Event of Default); if the following conditions are satisfied within such 30
day period, then the Total Revolving Credit Commitment shall automatically
increase to $100,000,000:
(a) the satisfaction of each of the conditions set forth
in Section 4.01; and
(b) the Agent shall have received, in form and substance
satisfactory to the Agent and the Lenders, the following:
(i) favorable written opinions of special local
counsel to the Borrower, addressed to the Agent and the
Lenders, with respect to the perfection of the Liens of the
Agent and the Lenders in the Collateral, delivered by
counsel located in California and Arizona;
(ii) supplemental favorable written opinion of
special counsel to the Borrower and the Guarantors;
(iii) the executed consent by each counterparty to
an Eligible Repurchase Agreement, consenting to the
assignment thereof to the Agent;
(iv) favorable opinions of counsel to each
Repurchase Party, addressed to the Agent and the Lenders,
with respect to the respective Repurchase Agreement;
(v) the results of UCC searches under the name of
the Borrower, Team Rental and each Subsidiary of the
Borrower or Team Rental in each jurisdiction where the
financing statements under clauses (xii) and (xiii) of
Section 4.01(a) are to be filed;
(vi) an executed intercreditor agreement in a form
acceptable to the Agent signed by Bank One, Indianapolis,
and every other lender or creditor having a lien on any
Vehicle or other Collateral (including any liens on the
interests of the Borrower or any Affiliate in such
property), or UCC-3 termination statements terminating such
liens;
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(vii) the consents of General Motors Acceptance
Corporation and Ford Motor Credit Company or the
termination of their credit facilities barring the
Guaranties by Lee-Al, Inc. and Westeam Enterprises, Inc.;
(viii) a Guaranty by Dayton Auto Lease Company;
(ix) a revised Schedule 8.01 hereto, describing in
detail all Indebtedness existing as of the date hereof;
and
(x) the execution and delivery of, and occurrence
of the closing under, the $30 Million Credit Agreement.
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ARTICLE V
Representations and Warranties
5.01 Representations and Warranties. The Borrower represents and
warrants with respect to itself, Team Rental and their respective Subsidiaries
(which representations and warranties shall survive the delivery of the
documents mentioned herein and the making of Loans), that:
(a) Organization and Authority.
(i) the Borrower, Team Rental and each such
Subsidiary is a corporation duly organized and validly
existing under the laws of the jurisdiction of its
incorporation;
(ii) the Borrower, Team Rental and each such Subsidiary
(x) has the requisite power and authority to own its
properties and assets and to carry on its business as now
being conducted and as contemplated in the Loan Documents,
and (y) is qualified to do business in every jurisdiction in
which failure so to qualify would have a Material Adverse
Effect;
(iii) the Borrower has the power and authority to
execute, deliver and perform this Agreement and the Notes,
and to borrow hereunder, and to execute, deliver and perform
each of the other Loan Documents to which it is a party; and
(iv) when executed and delivered, each of the Loan
Documents to which Borrower or any Guarantor is a party will
be the legal, valid and binding obligation or agreement, as
the case may be, of the Borrower or such Guarantor,
enforceable against the Borrower or such Guarantor in
accordance with its terms, subject to the effect of any
applicable bankruptcy, moratorium, insolvency,
reorganization or other similar law affecting the
enforceability of creditors' rights generally and to the
effect of general principles of equity which may limit the
availability of equitable remedies (whether in a proceeding
at law or in equity);
(b) Loan Documents. The execution, delivery and
performance by the Borrower and each Guarantor of each of the
Loan Documents to which it is a party:
(i) have been duly authorized by all requisite
corporate action (including any required shareholder
approval) of the Borrower and each such Guarantor required
for the lawful execution, delivery and performance thereof;
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(ii) do not violate any provisions of (1) applicable
law, rule or regulation, (2) any order of any court or other
agency of government binding on the Borrower or any
Guarantor or their respective properties, or (3) the charter
documents or by-laws of Borrower or any Guarantor;
(iii) (except as set forth in Schedule 5.01(b) hereto)
does not and will not be in conflict with, result in a
breach of or constitute an event of default, or an event
which, with notice or lapse of time, or both, would
constitute an event of default, under any indenture,
agreement or other instrument to which Borrower or any
Guarantor is a party, or by which the properties or assets
of Borrower or any Guarantor are bound;
(iv) does not and will not result in the creation or
imposition of any Lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of Borrower
or any Guarantor except any liens in favor of the Agent and
the Lenders created by the Loan Documents.
(c) Solvency. The Borrower and each Guarantor are
Solvent after giving effect to the transactions contemplated
by this Agreement and the other Loan Documents.
(d) Subsidiaries and Stockholders. Neither Borrower nor
Team Rental has any Subsidiaries other than those Persons listed as
Subsidiaries in Schedule 5.01(d) hereto; Schedule 5.01(d) to this
Agreement states as of the date hereof the authorized and issued
capitalization of each Subsidiary listed thereon, the number of
shares or other equity interests of each class of capital stock or
interest issued and outstanding of each such Subsidiary and the
number and/or percentage of outstanding shares or other equity
interest (including options, warrants and other rights to acquire any
interest) of each such class of capital stock or equity interest
owned by Borrower, by Team Rental or by any such Subsidiary; the
outstanding shares or other equity interests of each such Subsidiary
have been duly authorized and validly issued and are fully paid and
nonassessable; and Borrower, Team Rental and each such Subsidiary
owns beneficially and of record all the shares and other interests it
is listed as owning in Schedule 5.01(d), free and clear of any Lien.
(e) Ownership Interests. Neither Borrower nor Team
Rental owns any interest in any Person other than the Persons
listed in Schedule 5.01(d) hereto;
(f) Financial Condition. (i) The Borrower has heretofore
furnished to each Lender an unaudited consolidated and
consolidating balance sheet of Team Rental and its
Subsidiaries (including Borrower) as at December 31, 1995, and
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the notes thereto and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows for the
Fiscal Year then ended as examined and certified by Deloitte &
Touche, and unaudited consolidated and consolidating interim
financial statements of Team Rental and its Subsidiaries consisting
of a consolidated and consolidating balance sheets and related
consolidated and consolidating statements of income, stockholders'
equity and cash flows, in each case without notes, for and as of the
end of the three-month period ending March 31, 1996. Except as set
forth therein, such financial statements (including the notes
thereto) present fairly the financial condition of Team Rental and
its Subsidiaries (including Borrower) as of the end of such Fiscal
Year and three-month period and results of their operations and the
changes in their stockholders' equity for the Fiscal Year and interim
period then ended, all in conformity with Generally Accepted
Accounting Principles applied on a Consistent Basis, subject however,
in the case of unaudited interim statements, to year end audit
adjustments;
(ii) since March 31, 1996, there has been no material adverse
change in the condition, financial or otherwise, of, or in the
businesses, properties, performance, prospects or operations of (A)
Team Rental and its consolidated Subsidiaries taken as an aggregate
or (B) the Borrower individually, nor have such businesses or
properties, taken as a whole, been materially adversely affected as a
result of any fire, explosion, earthquake, accident, strike, lockout,
combination of workers, flood, embargo or act of God; and
(iii) except as set forth in the financial statements referred to
in Section 5.01(f)(i) or in Schedule 5.01(f) or Schedule 5.01(j)
hereto, neither Team Rental nor any Subsidiary (including Borrower)
has incurred, other than in the ordinary course of business, any
material Indebtedness, Obligations, commitments or other liability
contingent or otherwise which remain outstanding or unsatisfied;
(g) Title to Properties. The Borrower, Team Rental, and each
of their respective Subsidiaries has good and marketable title to all
its real and personal properties, subject to no transfer restrictions
or Liens of any kind, except for (x) the transfer restrictions and
Liens described in Schedule 5.01(g)- Liens attached hereto and
incorporated herein by reference, and (y) Liens permitted under
Section 8.04;
(h) Taxes. The Borrower, Team Rental and each of their
respective Subsidiaries has filed or caused to be filed all federal,
state and local tax returns which are required to be filed by it and
except for taxes and assessments being contested in good faith and
against which reserves satisfactory to the Borrower's independent
certified public accountants have been established, has paid or
caused to be
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paid all taxes as shown on said returns or on any assessment received
by it, to the extent that such taxes have become due;
(i) Other Agreements. Neither the Borrower nor Team
Rental or any of their respective Subsidiaries is
(i) a party to any judgment, order, decree or any
agreement or instrument or subject to restrictions which
individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect; or
(ii) in default in the performance, observance or
fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument to which
the Borrower, Team Rental or any of their respective
Subsidiaries is a party, which default has, or if not
remedied within any applicable grace period could have a
Material Adverse Effect;
(j) Litigation. Except as set forth in Schedule 5.01(j)
hereto, there is no action, suit or proceeding at law or in equity or
by or before any governmental instrumentality or agency or arbitral
body pending, or, to the knowledge of the Borrower, threatened by or
against the Borrower, Team Rental, or any of their respective
Subsidiaries or affecting the Borrower, Team Rental or any such
Subsidiary or any properties or rights of the Borrower, Team Rental
or any such Subsidiary which could reasonably be expected to have a
Material Adverse Effect;
(k) Margin Stock. The Borrower does not own any "margin
stock" as such term is defined in Regulation U, as amended (12 C.F.R.
Part 221), of the Board. The proceeds of the borrowings made pursuant
to Article II hereof will be used by the Borrower only for the
purposes set forth in Section 2.12 hereof. None of such proceeds will
be used, directly or indirectly, for the purpose of purchasing or
carrying any margin stock or for the purpose of reducing or retiring
any Indebtedness which was originally incurred to purchase or carry
margin stock or for any other purpose which might constitute any of
the Loans under this Agreement a "purpose credit" within the meaning
of said Regulation U or Regulation X (12 C.F.R. Part 224) of the
Board. Neither the Borrower nor any agent acting in its behalf has
taken or will take any action which might cause this Agreement or any
of the documents or instruments delivered pursuant hereto to violate
any regulation of the Board or to violate the Securities Exchange Act
of 1934, as amended, or the Securities Act of 1933, as amended, or
any state securities laws, in each case as in effect on the date
hereof;
(l) Investment Company. Neither the Borrower nor Team
Rental or any of their respective Subsidiaries is an
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"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended (15
U.S.C. ss. 80a-1, et seq.). The application of the proceeds of the
Loans and repayment thereof by the Borrower and the performance by
the Borrower and the Guarantors of the transactions contemplated by
this Agreement will not violate any provision of said Act, or any
rule, regulation or order issued by the Securities and Exchange
Commission thereunder, in each case as in effect on the date hereof;
(m) Patents, Etc. The Borrower, Team Rental and each of
their respective Subsidiaries owns or has the right to use, under
valid license agreements or otherwise, all material patents,
licenses, franchises, trademarks, trademark rights, trade names,
trade name rights, trade secrets and copyrights necessary to the
conduct of its business as now conducted, without known conflict with
any patent, license, franchise, trademark, trade secrets and
confidential commercial or proprietary information, trade name,
copyright, rights to trade secrets or other proprietary rights of any
other Person;
(n) No Untrue Statement. Neither this Agreement nor any
other Loan Document or certificate or document executed and delivered
by or on behalf of the Borrower or any Guarantor in accordance with
or pursuant to any Loan Document contains any misrepresentation or
untrue statement of material fact or omits to state a material fact
necessary, in light of the circumstance under which it was made, in
order to make any such representation or statement contained therein
not misleading in any material respect;
(o) No Consents, Etc. Neither the respective businesses or
properties of the Borrower, Team Rental or any of their respective
Subsidiaries, nor any relationship between the Borrower, Team Rental
or any such Subsidiary and any other Person, nor any circumstance in
connection with the execution, delivery and performance of the Loan
Documents and the transactions contemplated hereby is such as to
require a consent, approval or authorization of, or filing,
registration or qualification with, any governmental or other
authority or any other Person on the part of the Borrower, Team
Rental or any such Subsidiary as a condition to the execution,
delivery and performance of, or consummation of the transactions
contemplated by, this Agreement or the other Loan Documents or if so,
such consent, approval, authorization, filing, registration or
qualification has been obtained or effected, as the case may be;
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(p) ERISA.
(i) None of the employee benefit plans maintained
at any time by the Borrower, Team Rental or any of their respective
Subsidiaries, or the trusts created thereunder has engaged in a
prohibited transaction which could subject any such employee benefit
plan or trust to a material tax or penalty on prohibited transactions
imposed under Internal Revenue Code Section 4975 or ERISA;
(ii) None of the employee benefit plans maintained at
any time by the Borrower, Team Rental or any of their respective
Subsidiaries, which are employee pension benefit plans and which are
subject to Title IV of ERISA or the trusts created thereunder has
been terminated so as to result in a material liability of the
Borrower, Team Rental or any such Subsidiary under ERISA nor has any
such employee benefit plan of the Borrower, Team Rental or any such
Subsidiary incurred any material liability to the Pension Benefit
Guaranty Corporation established pursuant to ERISA, other than for
required insurance which have been paid or are not yet due and
payable; neither the Borrower nor Team Rental or any such Subsidiary
has withdrawn from or caused a partial withdrawal to occur with
respect to any Multi-employer Plan resulting in any assessed and
unpaid withdrawal liability; the Borrower, Team Rental and each such
Subsidiary has made or provided for all contributions to all such
employee pension benefit plans which they maintain and which are
required as of the end of the most recent fiscal year under each such
plan; neither the Borrower nor Team Rental or any such Subsidiary has
incurred any accumulated funding deficiency with respect to any such
plan, whether or not waived; nor has there been any reportable event,
or other event or condition, which presents a material risk of
termination of any such employee benefit plan by such Pension Benefit
Guaranty Corporation;
(iii) The present value of all vested accrued benefits
under the employee pension benefit plans which are subject to Title
IV of ERISA, maintained by the Borrower, Team Rental or any of their
respective Subsidiaries did not, as of the most recent valuation date
for each such plan, exceed the then current value of the assets of
such employee benefit plans allocable to such benefits;
(iv) The consummation of the Loans provided for in
Article II will not involve any prohibited transaction under ERISA
which is not subject to a statutory or administrative exemption;
(v) To the best of the Borrower's knowledge, each
employee pension benefit plan subject to Title IV of ERISA,
maintained by the Borrower, Team Rental or any of their respective
Subsidiaries has been administered in accordance
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with its terms in all material respects and is in compliance in all
material respects with all applicable requirements of ERISA and other
applicable laws, regulations and rules;
(vi) There has been no withdrawal liability incurred and
unpaid with respect to any Multi-employer Plan to which the Borrower,
Team Rental or any of their respective Subsidiaries is or was a
contributor;
(vii) As used in this Agreement, the terms "employee
benefit plan," "employee pension benefit plan," "accumulated funding
deficiency," "reportable event," and "accrued benefits" shall have
the respective meanings assigned to them in ERISA, and the term
"prohibited transaction" shall have the meaning assigned to it in
Code Section 4975 and ERISA;
(viii) Neither the Borrower nor Team Rental or any of
their respective Subsidiaries has any liability not disclosed on any
of the financial statements furnished to the Lenders pursuant to
Section 5.01(f) hereof, contingent or otherwise, under any plan or
program or the equivalent for unfunded post-retirement benefits,
including pension, medical and death benefits, which liability would
have a material adverse effect on the financial condition of the
Borrower, Team Rental or any such Subsidiary;
(q) No Default. As of the date hereof, there does not
exist any Default or Event of Default hereunder;
(r) Hazardous Materials. The Borrower, Team Rental and each
of their respective Subsidiaries is in compliance with all applicable
Environmental Laws in all material respects and neither the Borrower
nor Team Rental or any such Subsidiary has been notified of any
action, suit, proceeding or investigation which calls into question
compliance by the Borrower, Team Rental or any such Subsidiary with
any Environmental Laws or which seeks to suspend, revoke or terminate
any license, permit or approval necessary for the generation,
handling, storage, treatment or disposal of any Hazardous Material;
(s) Employment Matters. The Borrower, Team Rental and each
of their respective Subsidiaries is in compliance in all material
respects with all applicable laws, rules and regulations pertaining
to labor or employment matters, including without limitation those
pertaining to wages, hours, occupational safety and taxation and
there is neither pending or threatened any material litigation,
administrative proceeding nor, to the knowledge of the Borrower, any
investigation, in respect of such matters;
(t) Eligible Vehicles. Each vehicle identified as or
included as an Eligible Vehicle in any Borrowing Base
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Certificate or other Loan Document (i) was new when purchased by the
Borrower and satisfies the criteria applicable to "Eligible
Vehicles"; and (ii) has been purchased under, and is eligible for
repurchase under, an Eligible Repurchase Agreement for a purchase
price of not less than the Eligible Net Book Value for such vehicle.
Each amount identified as or included as an Eligible Repurchase
Receivable in any Borrowing Base Certificate or other Loan Document
satisfies the criteria applicable to an "Eligible Repurchase
Receivable" and is owed in an amount at least equal to the amount so
set forth or included in such Borrowing Base Certificate or other
Loan Document. All vehicles purchased or financed with the proceeds
of any Advance are Eligible Vehicles. The Eligible Repurchase
Agreements in effect as of the Closing Date are those certain
agreements described on Schedule 1 hereto.
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ARTICLE VI
Security
6.01 Security. As security for the full and timely payment and
performance of all Obligations, the Borrower shall on or before the Closing
Date grant to the Agent, for the benefit of the Agent and the Lenders, a first
priority security interest in all of the Vehicles, Repurchase Agreements,
Repurchase Receivables, leases of the Vehicles, and all other Collateral, and
execute for such purposes the Security Agreement and do all things necessary
in the opinion of the Agent to perfect such security interest.
6.02 Further Assurances. At the request of the Agent, the Borrower
will execute, by its duly authorized officers, any certificate, instrument,
statement or document, or to procure any such certificate, instrument,
statement or document, or to take such other action (and pay all connected
costs) which the Agent deems necessary from time to time to create, continue
or preserve the Liens of the Agent and the Lenders in the Collateral (and the
perfection and priority thereof) contemplated hereby and by the other Loan
Documents.
6.03 Certificates of Title. With respect to any Vehicle that the
Borrower is to purchase as a new vehicle from the respective manufacturer
(using the proceeds of a Loan hereunder) (each, a "New Vehicle"): before such
New Vehicle shall become an Eligible Vehicle, the Borrower must file with the
applicable Governmental Authority (and shall deliver to the Agent, at the
Restricted Space, a copy of) an application for a Certificate of Title for
such Vehicle, showing: (a) the Borrower as owner, and (b) (if required by such
Governmental Authority for perfection of such Lien, or if otherwise permitted
by such Governmental Authority) the Agent as first lienholder for such
Vehicle. In addition, the Borrower shall deliver such Certificate of Title
(showing the notation of any such Lien) to the Agent, at the Restricted Space,
as soon as possible (and in any event within one (1) day after the Borrower's
receipt thereof). Prior to any Vehicle other than a New Vehicle becoming an
Eligible Vehicle, the Borrower shall deliver to the Agent, at the Restricted
Space, the Certificate of Title for such Vehicle. In addition, the Borrower
shall take all actions necessary to perfect the Lien of the Agent (in itself
and on behalf of the Lenders) on each Vehicle (including without limitation
causing a notation on such Lien of the Agent (or an agent designated by the
Agent), on behalf of the Agent and the Lenders, to be made on the respective
Certificate of Title as soon as possible).
6.04 Repurchase Receivables; Segregated Account. The Borrower
shall, prior to the Closing Date, establish a deposit account (the
"Repurchase Receivable Account") for the deposit of all Repurchase
Receivables and proceeds thereof and all other payments (whether
relating to the Vehicles financed hereunder or any other motor
vehicles) received by the Borrower from any Repurchase Party. The
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Repurchase Receivable Account shall be established with a bank acceptable to
the Agent, and shall be maintained by the Borrower until the Revolving Credit
Termination Date and thereafter so long as any Obligations remain outstanding
or any Lender has any obligation to make any Loan under the Loan Documents.
The Repurchase Receivable Account shall be segregated from all other monies of
the Borrower; and no monies other than Repurchase Receivables, proceeds
thereof or other payments received from a Repurchase Party (whether relating
to the Vehicles financed hereunder or any other motor vehicles), shall be
deposited in the Repurchase Receivable Account. Upon receipt of any Repurchase
Receivable or proceeds thereof, or any check, draft or other form of payment
from any Repurchase Party with respect to a Repurchase Agreement (whether
relating to the Vehicles financed hereunder or any other motor vehicles) (such
receivables, proceeds, checks, drafts, and payments being referred to
collectively as the "Repurchase Party Payments"), the Borrower shall
immediately (and in any event within one day of receipt) deposit such
Repurchase Party Payment in the Repurchase Receivable Account. Within two days
of receipt of such Repurchase Party Payment, the Borrower shall (i) identify
the motor vehicles to which such payment relates, (ii) determine the portion
of such payment that constitutes Repurchase Receivables or proceeds thereof or
that otherwise relates to a Vehicle financed hereunder, and (iii) pay such
portion to the Agent. To the extent that any Repurchase Party Payment does not
constitute Repurchase Receivables or proceeds thereof and does not relate to a
Vehicle financed hereunder, the Borrower shall, within such 2-day period,
determine whether any other lender financed the respective motor vehicle and,
if such lender is entitled to receive such payment, the Borrower shall pay
such amount to such lender.
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ARTICLE VII
Affirmative Covenants
In addition to the foregoing, until the Facility Termination Date,
unless the Required Lenders shall otherwise consent in writing, the Borrower
will and will cause Team Rental and each of their respective Subsidiaries to:
7.01 Financial Reports, Etc. (a) as soon as practical and in any
event within 90 days after the end of each Fiscal Year of Team Rental, deliver
or cause to be delivered to the Agent and each Lender (i) consolidated and
consolidating balance sheets of Team Rental and its Subsidiaries (including
the Borrower), and the notes thereto as at the end of such Fiscal Year, and
the related consolidating statements of income, stockholders' equity and cash
flows and the respective notes thereto, for such Fiscal Year, setting forth
(other than for consolidating statements) comparative financial statements for
the preceding Fiscal Year, all prepared in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis and containing opinions of
Deloitte & Touche, or other such independent certified public accountants
selected by the Borrower and reasonably satisfactory to the Agent, which are
unqualified as to the scope of the audit performed and as to the "going
concern" status of Team Rental or the Borrower and without any exception not
acceptable to the Lenders, and (ii) a certificate of an Authorized
Representative demonstrating compliance with Section 8.15 hereof, which
certificate shall be in the form of Exhibit J;
(b) as soon as practical and in any event (x) within 45 days after
the end of each fiscal quarter (except the last of the Fiscal Year), and (y)
within 30 days after the end of each calendar month, deliver to the Agent and
each Lender (i) consolidated and consolidating balance sheets of Team Rental
and its Subsidiaries (including the Borrower) as of the end of such reporting
period (fiscal quarter or calendar month, as the case may be), the related
consolidated and consolidating statements of income, stockholders' equity and
cash flows for such reporting period and for the period from the beginning of
the Fiscal Year through the end of such reporting period, accompanied by a
certificate of an Authorized Representative to the effect that such financial
statements present fairly the financial position of Team Rental and its
Subsidiaries (including the Borrower) as of the end of such reporting period
and the results of their operations and the changes in their financial
position for such reporting period, in conformity with the standards set forth
in Section 5.01(f)(i) with respect to interim financial statements, and (ii) a
certificate of an Authorized Representative containing computations for such
quarter comparable to that required pursuant to Section 7.01(a)(ii);
(c) together with each delivery of the financial statements
required by Section 7.01(a)(i) hereof, deliver to the Agent and
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each Lender a letter from Team Rental's accountants specified in Section
7.01(a)(i) hereof stating that in performing the audit necessary to render an
opinion on the financial statements delivered under Section 7.01(a)(i), they
obtained no knowledge of any Default or Event of Default by the Borrower in
the fulfillment of the terms and provisions of (or incorporated by reference
into) this Agreement insofar as they relate to financial matters (which at the
date of such statement remains uncured); and if the accountants have obtained
knowledge of such Default or Event of Default, a statement specifying the
nature and period of existence thereof;
(d) promptly upon their becoming available to the Borrower, the
Borrower shall deliver to the Agent and each Lender a copy of (i) all regular
or special reports or effective registration statements which Team Rental,
Borrower or any of their respective Subsidiaries shall file with the
Securities and Exchange Commission (or any successor thereto) or any
securities exchange, (ii) any proxy statement distributed by Team Rental, the
Borrower or any such Subsidiary to its shareholders, bondholders or the
financial community in general, and (iii) any management letter or other
report submitted to Team Rental, the Borrower or any such Subsidiaries by
independent accountants in connection with any annual, interim or special
audit of Team Rental, the Borrower or any such Subsidiaries;
(e) as soon as practical and in any event within ten (10) days after
the end of each calendar month, deliver to the Agent and each Lender a
Borrowing Base Certificate and a Sales and Ineligible Vehicle Report, in each
case as of the end of such calendar month;
(f) as soon as practical and in any event within ten (10) days after
the end of each calendar month, deliver to the Agent and each Lender a list of
the Eligible Vehicles sold by the Borrower during such month, identifying each
Eligible Vehicle by make, model, vehicle identification number and Eligible
Net Book Value immediately prior to such sale;
(g) as soon as practical and in any event within 45 days after the
end of each fiscal quarter (including the last of the Fiscal Year), deliver to
the Agent and each Lender an audit of the Borrowing Base as of the end of such
fiscal quarter, prepared by an accounting firm acceptable to the Agent,
verifying the amount of the Borrowing Base and providing such other
information concerning the Borrowing Base and the components thereof as the
Agent may request;
(h) on the last day of each month, and at any other time promptly
upon the request of the Agent, deliver to the Agent a list identifying each
Vehicle by make, model and vehicle identification number, and stating whether
(as of the end of such day) such Vehicle was under lease to a customer,
undergoing repairs, being
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held for lease to customers, being held for repurchase by or
delivery to a Repurchase Party, or in any other status;
(i) promptly, from time to time, deliver or cause to be delivered to
the Agent and each Lender such other information regarding Borrower's, Team
Rental's and each of their respective Subsidiaries' operations, business
affairs and financial condition as the Agent or such Lender may reasonably
request. The Agent and each Lender is hereby authorized to deliver a copy of
any such financial information delivered hereunder to the Lenders (or any
affiliate of the Lender) or to the Agent, to any Governmental Authority having
jurisdiction over the Agent or any Lender pursuant to any written request
therefor or in the ordinary course of examination of loan files, to any other
Person who shall acquire or consider the acquisition of a participation
interest in or assignment of any Loan permitted by this Agreement and to any
Affiliate of the Agent or any Lender.
7.02 Maintain Properties. Maintain all material properties necessary
to its operations in good working order and condition (ordinary wear and tear
excepted) and make all needed repairs, replacements and renewals as are
necessary to conduct its business in accordance with customary business
practices.
7.03 Existence, Qualification, Etc. Do or cause to be done all things
necessary to preserve and keep in full force and effect its existence and all
material rights and franchises, trade names, trademarks and permits and
maintain its license or qualification to do business as a foreign corporation
and good standing in each jurisdiction in which the failure to so maintain or
qualify would have a Material Adverse Affect.
7.04 Regulations and Taxes. Comply with or contest in good faith all
material statutes and governmental regulations and pay all material taxes,
assessments, governmental charges, claims for labor, supplies, rent and any
other obligation which, if unpaid, might become a Lien against any of its
properties except liabilities being contested in good faith and against which
adequate reserves have been established in accordance with Generally Accepted
Accounting Principles and liabilities which do not in the aggregate at any
time exceed $500,000.
7.05 Insurance. Maintain all insurance required by the
Security Agreement or any other Loan Document.
7.06 True Books. Keep true books of record and account in which full,
true and correct entries will be made of all of its dealings and transactions,
and set up on its books such reserves as may be required by Generally Accepted
Accounting Principles with respect to doubtful accounts and all taxes,
assessments, charges, levies and claims and with respect to its business in
general, and include such reserves in interim as well as year-end financial
statements.
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7.07 Pay Indebtedness to Lenders and Perform Other Covenants. (a)
Make full and timely payment of the principal of and interest on the Notes and
all other Obligations whether now existing or hereafter arising; and (b) duly
comply with all the terms and covenants contained in all Loan Documents and
other instruments and documents given to the Agent or any Lender pursuant
hereto or thereto.
7.08 Right of Inspection. Permit any Person designated by the Agent
or any Lender to visit and inspect any of the properties, corporate books and
financial reports of the Borrower, Team Rental, or any other of their
respective Subsidiaries, and to discuss their respective affairs, finances and
accounts with their principal officers and independent certified public
accountants, all at reasonable times, at reasonable intervals and with
reasonable prior notice.
7.09 Observe all Laws. Conform to and duly observe in all material
respects all laws, rules and regulations and all other valid requirements of
any regulatory authority with respect to the conduct of its business.
7.10 Officer's Knowledge of Default or Other Events. Upon the
President, the Chief Executive Officer, the Treasurer, the Chief Operating
Officer or any Vice President of the Borrower or any Guarantor obtaining
knowledge of any of the following:
(a) any Default or Event of Default hereunder or under the
$30 Million Credit Agreement or any other obligation of the Borrower,
Team Rental or any of their respective Subsidiaries described in
Section 9.01(e),
(b) any change in the list of inspection sites at which
Eligible Vehicles may be tendered for repurchase under the
terms of any Repurchase Agreement, or
(c) the occurrence of any Repurchase Party Default or
Repurchase Party Adverse Change,
cause such officer or an Authorized Representative to promptly notify the
Agent of the nature thereof, the period of existence thereof, and what action
the Borrower, Team Rental or such Subsidiary proposes to take with respect
thereto.
7.11 Suits or Other Proceedings. Upon the President, Chief Financial
Officer or the Controller of the Borrower or any Guarantor obtaining knowledge
of any litigation or other proceedings being instituted against the Borrower,
Team Rental or any of their respective Subsidiaries, or any attachment, levy,
execution or other process being instituted against any assets of the
Borrower, Team Rental or any such Subsidiary, in an aggregate amount greater
than $500,000 not otherwise covered by insurance, promptly deliver to the
Agent written notice thereof stating the
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nature and status of such litigation, dispute, proceeding, levy, execution or
other process.
7.12 Notice of Discharge of Hazardous Material or Environmental
Complaint. Promptly provide to the Agent true, accurate and complete copies of
any and all notices, complaints, orders, directives, claims, or citations
received by the Borrower, Team Rental or any of their respective Subsidiaries
relating to any material (a) violation or alleged violation by the Borrower,
Team Rental or any such Subsidiary of any applicable Environmental Laws or
OSHA; (b) release or threatened release by the Borrower or any Subsidiary or
at any facility or property owned or leased or operated by the Borrower, Team
Rental or any such Subsidiary, of any Hazardous Material, except where
occurring legally; or (c) liability or alleged liability of the Borrower, Team
Rental or any such Subsidiary for the costs of cleaning up, removing,
remediating or responding to a release of Hazardous Materials.
7.13 Environmental Compliance. If the Borrower, Team Rental or any of
their respective Subsidiaries shall receive notice from any governmental
authority that the Borrower, Team Rental or any such Subsidiary has violated
any applicable Environmental Laws, the Borrower shall to the extent required
by law and after expiration of all valid appeals and administrative
proceedings (and in any event within the time period permitted by the
applicable governmental authority) remove or remedy, or cause the applicable
Subsidiary to remove or remedy, such violation.
7.14 Indemnification. The Borrower hereby agrees to defend, indemnify
and hold the Agent and each Lender, and their respective officers, directors,
employees and agents, harmless from and against any and all claims, losses,
penalties, liabilities, damages and expenses (including, without limitation,
assessment and cleanup costs and reasonable attorneys' fees) arising directly
or indirectly from, out of or by reason of (a) the violation of any
Environmental Law by the Borrower, Team Rental, or any of their respective
Subsidiaries, or with respect to any property owned, operated or leased by the
Borrower, Team Rental or any such Subsidiary, or (b) the handling, storage,
treatment, emission or disposal of any Hazardous Material by or in respect of
the Borrower, Team Rental or any such Subsidiary or property owned or leased
or operated by the Borrower, Team Rental or any such Subsidiary. The
provisions of this Section 7.14 shall survive repayment of the Obligations,
occurrence of the Revolving Credit Termination Date and expiration or
termination of this Agreement.
7.15 Further Assurances. At the Borrower's cost and expense, upon
request of the Agent, duly execute and deliver or cause to be duly executed
and delivered, to the Agent such further instruments, documents, certificates,
financing and continuation statements, and applications for lien notation, and
do and cause to be done such further acts that may be reasonably necessary or
advisable in the reasonable opinion of the Agent to carry out more effectively
the
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provisions and purposes of this Agreement and the other Loan
Documents.
7.16 ERISA Requirements. Comply in all material respects with all
requirements of ERISA applicable to it and furnish to the Agent as soon as
possible and in any event (i) within thirty (30) days after the Borrower knows
or has reason to know that any reportable event with respect to any employee
benefit plan subject to Title IV of ERISA maintained by the Borrower, Team
Rental or any of their respective Subsidiaries which could give rise to
termination or the imposition of any material tax or penalty has occurred,
written statement of an Authorized Representative describing in reasonable
detail such reportable event and any action which the Borrower, Team Rental or
applicable Subsidiary proposes to take with respect thereto, together with a
copy of the notice of such reportable event given to the Pension Benefit
Guaranty Corporation ("PBGC") or a statement that said notice will be filed
with the annual report of the United States Department of Labor with respect
to such plan if such filing has been authorized, (ii) promptly after receipt
thereof, a copy of any notice that the Borrower, Team Rental or any such
Subsidiary may receive from the PBGC relating to the intention of the PBGC to
terminate any employee benefit plan or plans of the Borrower, Team Rental or
any such Subsidiary or to appoint a trustee to administer any such plan, and
(iii) within 10 days after a filing with the PBGC pursuant to Section 412(n)
of the Code of a notice of failure to make a required installment or other
payment with respect to a plan, a certificate of an Authorized Representative
setting forth details as to such failure and the action that the Borrower,
Team Rental or the affected Subsidiary, as applicable, proposes to take with
respect thereto, together with a copy of such notice given to the PBGC.
7.17 Continued Operations. Continue at all times (i) to conduct its
business and engage principally in a line or lines of business involving the
sale and leasing of Vehicles, and (ii) preserve, protect and maintain free
from Liens its material patents, copyrights, licenses, trademarks, trademark
rights, trade names, trade name rights, trade secrets and know-how necessary
or useful in the conduct of its operations, except to the extent Borrower,
Team Rental or any of their respective Subsidiaries is otherwise permitted
hereunder to dispose of assets.
7.18 Use of Proceeds. Use the proceeds of the Loans solely
for the purposes specified in Section 2.12 hereof.
7.19 Repurchase Party. In the event the Agent consents to the
designation hereunder as Eligible Vehicles of vehicles purchased or to be
purchased by the Borrower under a Repurchase Agreement, the Borrower agrees to
provide to the Agent (a) an assignment of such Repurchase Agreement in favor
of the Agent (or an agent designated by the Agent) on behalf of the Agent and
the Lenders, and consented to by the applicable Repurchase Party, which
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shall be in a form acceptable to the Agent, (b) a repurchase agreement
executed by the applicable Repurchase Party which shall be in a form
acceptable to the Agent, and (c) such other agreements and documents as may be
reasonably requested by the Agent. The foregoing notwithstanding, during the
first thirty (30) days after the date of this Agreement, Ford Motor Company,
Chrysler Corporation, Mazda Motor of America, Inc. and Nissan Motor
Corporation in U.S.A. shall not be required to consent to the assignment of
their respective Repurchase Agreements, but each such consent must be obtained
by the end of such 30-day period.
7.20 Vehicle Turn-in; Vehicle Records. The Borrower will tender each
Eligible Vehicle to the applicable Repurchase Party prior to (i) the last day
on which such Eligible Vehicle is eligible for repurchase under the Repurchase
Agreement applicable to such Eligible Vehicle and (ii) such Eligible Vehicle
exceeding the mileage limitation, if any, under the Repurchase Agreement
applicable to such Eligible Vehicle. The Borrower will maintain up-to-date
records as to the vehicle identification number, make, model, invoice price,
depreciation, mileage, location and activity status of each of its vehicles.
7.21 New Repurchase Agreements. Promptly upon receipt, the Borrower
will deliver to the Agent copies of any new Repurchase Agreements, or any
changes in existing Repurchase Agreements, if the Borrower desires that
vehicles purchased thereunder constitute Eligible Vehicles hereunder.
Notwithstanding the foregoing, the prior written consent of the Agent shall be
required in order to constitute as Eligible Vehicles hereunder vehicles
subject to any such new or changed Repurchase Agreement.
7.22 New Subsidiaries. Simultaneously with the acquisition or
creation of any Subsidiary of the Borrower or Team Rental, cause to be
delivered to the Agent for the benefit of the Lenders a Guaranty executed by
such Subsidiary substantially in the form of Exhibit I.
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ARTICLE VIII
Negative Covenants
Until the Obligations have been paid and satisfied in full and this
Agreement has been terminated in accordance with the terms hereof, unless the
Agent shall otherwise consent in writing, the Borrower will not, nor will it
permit Team Rental or any of their respective Subsidiaries to:
8.01 Indebtedness. Incur, create, assume or permit to exist
any Indebtedness, howsoever evidenced, except
(a) Indebtedness existing as of the date hereof and as set
forth in Schedule 8.01 attached hereto and incorporated herein by
reference, and any extension of such Indebtedness with the same
lenders on substantially the same terms;
(b) Indebtedness owing to the Agent or any Lender in
connection with this Agreement, any Note or any Loan Document;
(c) the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business;
(d) Indebtedness of up to an aggregate outstanding
principal amount of $1,000,000 incurred to acquire fixed
assets which may or may not be secured.
8.02 Transfer of Assets. Sell, lease, transfer or otherwise dispose
of (i) any interest in any Guarantor, or (ii) any other asset of Borrower or
any Guarantor except (a) assets sold in the ordinary course of business, (b)
assets which are substantially worn, damaged or obsolete or (c) other assets
in any Fiscal Year having an aggregate book value not exceeding $500,000.
8.03 Acquisitions. Enter into any agreement, contract, binding
commitment or other arrangement providing for any Acquisition, or take any
action to solicit the tender of securities or proxies in respect thereof in
order to effect any Acquisition, unless (i) the Person to be (or whose assets
are to be) acquired does not oppose such Acquisition and the line or lines of
business of the Person to be acquired are substantially the same as one or
more line or lines of business conducted by the Borrower, Team Rental and
their respective Subsidiaries, (ii) no Default or Event of Default shall have
occurred and be continuing either immediately prior to or immediately after
giving effect to such Acquisition, and (iii) the cost of such Acquisition is
not greater than $5,000,000 individually or $10,000,000 in the aggregate with
all other Acquisitions consummated on or after the Closing Date.
8.04 Liens. Incur, create or permit to exist any pledge,
Lien, charge or other encumbrance of any nature whatsoever with
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respect to any Vehicle or any other property or assets of the Borrower or any
Subsidiary to secure Indebtedness owed to any other Person, except for:
(a) Liens described on Schedule 8.01 securing
Indebtedness permitted by Section 8.01(a);
(b) Liens in favor of the Agent or any Lender under this
Agreement and the Loan Documents;
(c) Liens securing Indebtedness permitted by Section
8.01(d), encumbering only fixed assets acquired with the
proceeds of such Indebtedness; or
(d) Liens on assets other than the Collateral which Liens
are terminated within thirty (30) days after the earlier of receipt
of notice of such Lien by the Authorized Representative from the
Agent or any Lender or the Borrower becomes aware of such Lien.
8.05 Investments. Purchase, own, invest in or otherwise acquire,
directly or indirectly, any stock or other securities, or make or permit to
exist any interest whatsoever in any other Person or permit to exist any loans
or advances to any Person, except that Borrower may maintain investments or
invest in:
(a) Eligible Securities;
(b) investments existing as of the date hereof and as set
forth in Schedule 5.01(d);
(c) accounts receivable arising and trade credit granted in
the ordinary course of business and any securities received in
satisfaction or partial satisfaction thereof in connection with
accounts of financially troubled Persons to the extent reasonably
necessary in order to prevent or limit loss; and
(d) investments in Subsidiaries;
provided that, the foregoing notwithstanding, the Borrower will not, and will
not permit Team Rental or any of their respective Subsidiaries, under any
circumstances, to make any contribution, loan or advance, or otherwise
transfer any funds or property, to any Subsidiary of Team Rental or the
Borrower if such Subsidiary is not a Guarantor; except that Team Rental may
make payments to Team Fleet Financing Corporation ("TFFC") or Brac Socal
Funding Corporation ("Brac Socal") as required by the terms of the existing
financing arrangements for TFFC or Brac Socal, so long as such payments do not
include the proceeds of any Loans or Swing Line Loans.
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8.06 Merger or Consolidation. (a) Consolidate with or merge into any
other Person, or (b) permit any other Person to merge into it; or (c)
liquidate, wind-up or dissolve or sell, transfer or lease or otherwise dispose
of all or a substantial part of its assets (other than sales in the ordinary
course of business); provided, however, (i) any Subsidiary of Team Rental or
any Subsidiary of the Borrower may merge or transfer all or substantially all
of its assets into or consolidate with any wholly-owned Subsidiary of Team
Rental or any wholly-owned Subsidiary of the Borrower, if (in either case) the
surviving entity is a Guarantor, and (ii) any Person may merge with the
Borrower if the Borrower shall be the survivor thereof and such merger shall
not cause, create or result in the occurrence on any Default or Event of
Default hereunder.
8.07 Restricted Payments. Make any Restricted Payment or
apply or set apart any of their assets therefor or agree to do any
of the foregoing.
8.08 Limitations on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Borrower, Team Rental or any
of their respective Subsidiaries of real or personal property, whether now
owned or hereafter acquired in a related transaction or series of related
transactions, which has been or is to be sold or transferred by the Borrower,
Team Rental or any such Subsidiary to such Person or to any other Person to
whom funds have been or are to be advanced by such Person on the security of
such property or rental obligations of the Borrower, Team Rental or such
Subsidiary.
8.09 Change in Control. Cause, suffer or permit to exist or
occur any Change of Control.
8.10 Transactions with Affiliates. Enter into any transaction after
the date hereof, including, without limitation, the purchase, sale, leasing or
exchange of property, real or personal, or the rendering of any service, with
any Affiliate of the Borrower, except (a) that such Persons may render
services to the Borrower, Team Rental or their respective Subsidiaries for
compensation at the same rates generally paid by Persons engaged in the same
or similar businesses for the same or similar services and (b) in the ordinary
course of and pursuant to the reasonable requirements of the Borrower's (or
Team Rental's or any Subsidiary's) business consistent with past practice of
the Borrower, Team Rental and such Subsidiaries.
8.11 ERISA. With respect to all employee pension benefit plans
maintained by the Borrower, Team Rental or any of their respective
Subsidiaries:
(i) terminate any of such employee pension benefit plans
so as to incur any liability to the Pension Benefit Guaranty
Corporation established pursuant to ERISA;
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(ii) allow or suffer to exist any prohibited transaction
involving any of such employee pension benefit plans or any trust
created thereunder which would subject the Borrower, Team Rental or
any such Subsidiary to any material tax or penalty or other liability
on prohibited transactions imposed under Internal Revenue Code
Section 4975 or ERISA;
(iii) fail to pay to any such employee pension benefit
plan any contribution which it is obligated to pay under the
terms of such plan;
(iv) allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such
employee pension benefit plan;
(v) allow or suffer to exist any occurrence of a reportable
event or any other event or condition, which presents a material risk
of termination by the Pension Benefit Guaranty Corporation of any
such employee pension benefit plan that is a Single Employer Plan,
which termination could result in any liability to the Pension
Benefit Guaranty Corporation; or
(vi) incur any withdrawal liability with respect to any
Multi-employer Plan.
8.12 Fiscal Year. Change its Fiscal Year.
8.13 Dissolution, etc. Wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except (a) in the case of a Subsidiary other
than the Borrower, Team Rental or a Material Subsidiary, or (b) in connection
with the merger or consolidation of Team Rental or any Subsidiaries into each
other or into the Borrower permitted pursuant to Section 8.06.
8.14 Rate Hedging Obligations. Without the prior written consent of
the Agent, incur any Rate Hedging Obligations or enter into any agreements,
arrangements, devices or instruments relating to Rate Hedging Obligations.
8.15 Financial Covenants.
(a) Consolidated Net Worth. Permit as at the Closing Date,
Consolidated Net Worth to be less than $35,632,800, such amount to be
increased at the end of each fiscal quarter, beginning with the fiscal quarter
ending March 31, 1996, by (i) seventy-five percent (75%) of Consolidated Net
Income greater than zero for such fiscal quarter and (ii) seventy-five percent
(75%) of the Net Proceeds of any equity offering by Team Rental or any of its
Subsidiaries greater than zero during such fiscal quarter (excluding, however,
proceeds of an equity sale by a consolidated
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Subsidiary solely to Team Rental or another consolidated
Subsidiary);
(b) Consolidated Fixed Charge Ratio. Permit at any time
the Consolidated Fixed Charge Ratio to be less than (a) 1.00 to
1.00 for the Four-Quarter Period ended June 30, 1996, or (b) 1.05
to 1.00 for any Four-Quarter Period ended on a date after June 30,
1996;
(c) Consolidated Non-Vehicle Leverage Ratio. Permit at
any time the Consolidated Non-Vehicle Leverage Ratio to be more
than 1.25 to 1.00;
(d) Consolidated EBIT to Consolidated Interest Expense.
Permit at any time the ratio of Consolidated EBIT to Consolidated Interest
Expense to be less than (a) 1.20 to 1.00 for the Four- Quarter Period ended
June 30, 1996, (b) 1.20 to 1.00 for the Four- Quarter Period ended September
30, 1996, or (c) 1.35 to 1.00 for any Four-Quarter Period ended on a date
after September 30, 1996;
(e) Consolidated Non-Vehicle Indebtedness to Consolidated
EBITDA. Permit at any time the ratio of Consolidated Non-Vehicle Indebtedness
to Consolidated EBITDA (minus depreciation relating solely to Team Vehicles)
(the "Non-Vehicle Indebtedness- to-EBITDA Ratio") to be more than (a) 1.60 to
1.00 for the Four- Quarter Period ended June 30, 1996, (b) 1.60 to 1.00 for
the Four- Quarter Period ended September 30, 1996, or (c) 1.25 to 1.00 for any
Four-Quarter Period ended on a date after September 30, 1996, provided,
however, that commencing on the earliest date (the "Issuance Date") that the
Borrower issues any securities pursuant to the registration statement dated
May 24, 1996 (which has been filed with the Securities and Exchange
Commission), the Non-Vehicle Indebtedness-to-EBITDA Ratio shall not be greater
than 1.25 to 1.00 for any Four-Quarter Period that ends on or after the
Issuance Date;
(f) Team Vehicle Utilization. Permit the average daily
Team Vehicle Utilization to be less than seventy-five percent (75%)
in any calendar month.
8.16 Prepayments, Etc. of Indebtedness. (a) Prepay, redeem,
purchase, defease or otherwise satisfy prior to the scheduled
maturity thereof in any manner, or make any payment in violation of
any subordination terms of, any Indebtedness, other than as
approved in writing by the Agent; or
(b) amend, modify or change in any manner any term or condition of
any Indebtedness or any lease so that the terms and conditions thereof are
less favorable to the Agent and the Lenders than the terms of such
Indebtedness or leases as of the Closing Date.
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ARTICLE IX
Events of Default and Acceleration
9.01 Events of Default. If any one or more of the following events
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body), that is to say:
(a) if default shall be made in the due and punctual payment
of the principal of any Loan, when and as the same shall be due and
payable whether at maturity, by acceleration or otherwise; or
(b) if default shall be made in the due and punctual payment
of any amount of interest on any Loan or of any fees or other amounts
payable to the Agent or any Lender under the Loan Documents and such
default shall continue for three (3) days after the same shall be due
and payable; or
(c) if default shall be made in the performance or
observance of any covenant set forth in Sections 7.05, 7.08, 7.10(a),
7.11, 7.12 or Article VIII hereof; or
(d) if a default shall be made in the performance or
observance of, or shall occur under, any covenant, agreement or
provision contained in this Agreement or any Note (other than as
described in clauses (a), (b) or (c) above) and such default shall
continue for 30 or more days after the earlier of receipt of notice
of such default by the Authorized Representative from the Agent or
any Lender or the Borrower becomes aware of such default, or if a
default shall be made in the performance or observance of, or shall
occur under, any covenant, agreement or provision contained in the
Guaranty or in any of the other Loan Documents (beyond any applicable
grace period, if any, contained therein) or in any instrument or
document delivered to the Lender in connection with or pursuant to
this Agreement or any of the Obligations evidencing or creating any
obligation, guaranty or Lien in favor of the Agent or any Lender, or
if any Loan Document ceases to be in full force and effect (other
than by reason of any action by the Agent), or if without the written
consent of the Agent and the Lenders, this Agreement or any other
Loan Document shall be disaffirmed or shall terminate, be terminable
or be terminated or become void or unenforceable for any reason
whatsoever (other than in accordance with its terms in the absence of
default or by reason of any action by the Agent or the Lenders); or
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(e) if a default shall occur, which is not waived, (i) in
the payment of any principal, interest, premium or other amounts with
respect to any Indebtedness or Rate Hedging Obligation (other than
the Loans) of the Borrower, Team Rental or any of their respective
Material Subsidiaries in an amount not less than $500,000 in the
aggregate outstanding, or (ii) in the performance, observance or
fulfillment of any term or covenant contained in any agreement or
instrument under or pursuant to which any such Indebtedness or Rate
Hedging Obligation may have been issued, created, assumed, guaranteed
or secured by the Borrower, Team Rental or any of their respective
Material Subsidiaries, and such default shall continue for more than
the period of grace, if any, therein specified, or if such default
shall permit the holder of any such Indebtedness (or any agent or
trustee acting on behalf of one or more holders) to accelerate the
maturity thereof; or
(f) if an Event of Default (as defined in the $30 Million
Credit Agreement or any other agreement or instrument evidencing any
other Indebtedness owed by the Borrower, Team Rental or any of their
respective Subsidiaries to the Agent or any Lender) which is not
waived shall occur; or
(g) if any representation, warranty or other statement of
fact contained herein or any other Loan Document or in any writing,
certificate, report or statement at any time furnished to the Agent
or any Lender by or on behalf of the Borrower or any Guarantor
pursuant to or in connection with this Agreement or any other Loan
Documents, or otherwise, shall be false or misleading in any material
respect when given; or
(h) if the Borrower, Team Rental or any of their respective
Material Subsidiaries shall be unable to pay its debts generally as
they become due; file a petition to take advantage of any insolvency
statute; make an assignment for the benefit of its creditors;
commence a proceeding for the appointment of a receiver, trustee,
liquidator or conservator of itself or of the whole or any
substantial part of its property; file a petition or answer seeking
reorganization or arrangement or similar relief under the federal
bankruptcy laws or any other applicable law or statute; or
(i) if a court of competent jurisdiction shall enter an
order, judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of the Borrower, Team Rental or any of
their respective Material Subsidiaries or of the whole or any
substantial part of its properties and such order, judgment or decree
continues unstayed and in effect for a period of sixty (60) days, or
approve a petition filed against the Borrower, Team Rental or any
such Subsidiary seeking reorganization or arrangement or similar
relief under the federal bankruptcy laws or any other applicable law
or
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statute of the United States of America or any state, which petition
is not dismissed within sixty (60) days; or if, under the provisions
of any other law for the relief or aid of debtors, a court of
competent jurisdiction shall assume custody or control of the
Borrower, Team Rental or any such Subsidiary or of the whole or any
substantial part of its properties, which control is not relinquished
within sixty (60) days; or if there is commenced against the
Borrower, Team Rental or any such Subsidiary any proceeding or
petition seeking reorganization, arrangement or similar relief under
the federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state which proceeding or
petition remains undismissed for a period of sixty (60) days; or if
the Borrower, Team Rental or any such Subsidiary takes any action to
indicate its consent to or approval of any such proceeding or
petition; or
(j) if (i) any judgment where the amount not covered by
insurance (or the amount as to which the insurer denies liability) is
in excess of $500,000 is rendered against the Borrower, Team Rental
or any of their respective Material Subsidiaries, or (ii) there is
any attachment, injunction or execution against any of the
Borrower's, Team Rental's or any such Subsidiary's properties for any
amount in excess of $500,000; and, in any case, such judgment,
attachment, injunction or execution remains unpaid, unstayed,
undischarged, unbonded or undismissed for a period of thirty (30)
days; or
(k) if the Borrower, Team Rental or any of their respective
Material Subsidiaries shall, other than in the ordinary course of
business (as determined by past practices), suspend all or any part
of its operations material to the conduct of the business of the
Borrower, Team Rental or such Subsidiary, taken as a whole; or
(l) if the Borrower, Team Rental or any of their respective
Subsidiaries shall breach any of the terms or conditions of any
agreement under which any Rate Hedging Obligation permitted pursuant
to Section 8.14 is created and such breach shall continue beyond any
grace period, if any, relating thereto pursuant to the terms of such
Obligation, or the Borrower, Team Rental or any such Subsidiary shall
disaffirm or seek to disaffirm any such agreement or any of its
obligations thereunder; or
(m) if the Borrower shall fail to satisfy the conditions
set forth in Section 4.03 within thirty (30) days after the
date of this Agreement; or
(n) if there shall occur and not be waived an Event of
Default as defined in any of the other Loan Documents;
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then, and in any such event and at any time thereafter, if such Event of
Default or any other Event of Default shall have not been waived,
(A) either or both of the following actions may be
taken: (i) the Agent, with the consent of the Required
Lenders may, and at the direction of the Required Lenders
shall, declare any obligation of the Lenders and NationsBank
to make further Loans and Swing Line Loans terminated,
whereupon the obligation of the Lenders to make further
Loans, and of NationsBank to make further Swing Line Loans,
hereunder shall terminate immediately, and (ii) the Lender
shall, at the direction of the Required Lenders, at their
option, declare by notice to the Borrower any or all of the
Obligations to be immediately due and payable, and the same,
including all interest accrued thereon and all other
obligations of the Borrower to the Agent and the Lenders,
shall forthwith become immediately due and payable without
presentment, demand, protest, notice or other formality of
any kind, all of which are hereby expressly waived, anything
contained herein or in any instrument evidencing the
Obligations to the contrary notwithstanding; provided,
however, that notwithstanding the above, if there shall
occur an Event of Default under clause (h) or (i) above,
then the obligation of the Lenders to make Loans, and of
NationsBank to make Swing Line Loans, hereunder shall
automatically terminate and any and all of the Obligations
shall be immediately due and payable without the necessity
of any action by the Agent or any Lender or notice to the
Agent or any Lender;
(B) the Agent and each of the Lenders shall have
all of the rights and remedies available under the Loan
Documents or under any applicable law.
9.02 Agent to Act. In case any one or more Events of Default shall
occur and not have been waived, the Agent may, and at the direction of the
Required Lenders shall, proceed to protect and enforce their rights or
remedies either by suit in equity or by action at law, or both, whether for
the specific performance of any covenant, agreement or other provision
contained herein or in any other Loan Document, or to enforce the payment of
the Obligations or any other legal or equitable right or remedy.
9.03 Cumulative Rights. No right or remedy herein conferred upon the
Agent or the Lenders is intended to be exclusive of any other rights or
remedies contained herein or in any other Loan Document, and every such right
or remedy shall be cumulative and shall be in addition to every other such
right or remedy contained herein and therein or now or hereafter existing at
law or in equity or by statute, or otherwise.
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9.04 No Waiver. No course of dealing between the Borrower and the
Lenders or the Agent or any failure or delay on the part of any Lender or the
Agent in exercising any rights or remedies under any Loan Document or
otherwise available to it shall operate as a waiver of any rights or remedies
and no single or partial exercise of any rights or remedies shall operate as a
waiver or preclude the exercise of any other rights or remedies hereunder or
of the same right or remedy on a future occasion.
9.05 Allocation of Proceeds. If an Event of Default has occurred and
not been waived, and the maturity of the Notes has been accelerated pursuant
to Article IX hereof, all payments received by the Agent hereunder, in respect
of any principal of or interest on the Obligations or any other amounts
payable by the Borrower hereunder, shall be applied by the Agent in the
following order:
(a) amounts due to the Lenders pursuant to Sections 2.09
and 11.05;
(b) payments of interest on Loans and Swing Line Loans, to
be applied for the ratable benefit of the Lenders (with amounts
payable in respect of Swing Line Outstandings being included in such
calculation and paid to NationsBank);
(c) payments of principal of Loans and Swing Line Loans, to
be applied for the ratable benefit of the Lenders (with amounts
payable in respect of Swing Line Outstandings being included in such
calculation and paid to NationsBank);
(d) amounts due to the Lenders pursuant to Sections 7.14
and 11.09;
(e) payments of all other amounts due under any of the
Loan Documents, if any, to be applied for the ratable benefit
of the Agent and the Lenders;
(f) amounts due to any of the Lenders in respect of
Obligations consisting of liabilities under any Swap Agreement
with any of the Lenders on a pro rata basis according to the
amounts owed; and
(g) any surplus remaining after application as provided
for herein, to the Borrower or otherwise as may be required by
applicable law.
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ARTICLE X
The Agent
10.01 Appointment. Each Lender hereby irrevocably designates and
appoints NationsBank as the Agent for the Lenders under this Agreement, and
each of the Lenders hereby irrevocably authorizes NationsBank as the Agent for
such Lender, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers as are
expressly delegated to the Agent by the terms of this Agreement and such other
Loan Documents, together with such other powers as are reasonably incidental
thereto. The Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any of the
Lenders, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agent.
10.02 Attorneys-in-fact. The Agent may execute any of its duties
under the Loan Documents by or through agents or attorneys-in-fact and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence, gross
negligence or willful misconduct of any agents or attorneys-in-fact selected
by it with reasonable care.
10.03 Limitation on Liability. Neither the Agent nor any of its
officers, directors, employees, agents or attorneys-in-fact shall be liable to
the Lenders for any action lawfully taken or omitted to be taken by it or them
under or in connection with the Loan Documents except for its or their own
gross negligence or willful misconduct. Neither the Agent nor any of its
affiliates shall be responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower, Team
Rental or any of their respective Subsidiaries, or any officer or
representative thereof contained in any Loan Document, or in any certificate,
report, statement or other document referred to or provided for in or received
by the Agent under or in connection with any Loan Document, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of any
Loan Document, or for any failure of the Borrower, Team Rental or any such
Subsidiary to perform its obligations under any Loan Document, or for any
recitals, statements, representations or warranties made, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of any
collateral. The Agent shall not be under any obligation to any of the Lenders
to ascertain or to inquire as to the observance or performance of any of the
terms, covenants or conditions of any Loan Document on the part of the
Borrower, Team Rental or any such Subsidiary or to inspect the properties,
books or records of the Borrower, Team Rental or any such Subsidiary.
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10.04 Reliance. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any Note, writing, resolution, notice,
consent certificate, affidavit, letter, cablegram, telegram, telefacsimile or
telex message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless an
Assignment shall have been filed with and accepted by the Agent. The Agent
shall be fully justified in failing or refusing to take any action under the
Loan Documents unless it shall first receive advice or concurrence of the
Lenders or the Required Lenders as provided in this Agreement or it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under the Loan Documents in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all present and future holders of the Notes.
10.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender, the Authorized
Representative or the Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Agent receives such a notice, the Agent shall
promptly give notice thereof to the Lenders. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided that, unless and until the Agent
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Event of Default as it shall deem advisable in the best interests of the
Lenders.
10.06 No Representations. Each Lender expressly acknowledges that
neither the Agent nor any of its affiliates has made any representations or
warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of the Borrower, Team Rental or their respective
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the financial condition,
creditworthiness, affairs, status and nature of the Borrower, Team Rental and
each such Subsidiary and made its own decision to enter into this Agreement.
Each Lender also represents that it will, independently and without reliance
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upon the Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
the Loan Documents and to make such investigation as it deems necessary to
inform itself as to the status and affairs, financial or otherwise, of the
Borrower, Team Rental and such Subsidiaries. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Borrower, Team Rental and such Subsidiaries which
may come into the possession of the Agent or any of its affiliates.
10.07 Indemnification. Each of the Lenders agree to indemnify the
Agent in its capacity as such (to the extent not reimbursed by the Borrower,
Team Rental or their respective Subsidiaries and without limiting any
obligations of the Borrower or any other Credit Party to do so), ratably
according to the respective principal amount of the Notes held by them (or, if
no Notes are outstanding, ratably in accordance with their respective
Applicable Commitment Percentages as then in effect) from and against any and
all liabilities, obligations, losses (excluding any losses suffered by the
Agent as a result of Borrower's failure to pay any fee owing to the Agent),
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may at any time
(including without limitation at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating
to or arising out of any Loan Document or any other document contemplated by
or referred to therein or the transactions contemplated thereby or any action
taken or omitted by the Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct. The agreements in this subsection
shall survive the Facility Termination Date and the termination of this
Agreement.
10.08 Lender. The Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower,
Team Rental and their respective Subsidiaries as though it were not the Agent
hereunder. With respect to its Loans made or renewed by it and any Note issued
to it, the Agent shall have the same rights and powers under this Agreement as
any Lender and may exercise the same as though it were not the Agent, and the
terms "Lender" and "Lenders" shall, unless the context otherwise indicates,
include the Agent in its individual capacity.
10.09 Resignation. If the Agent shall resign as Agent under
this Agreement, then the Required Lenders may appoint, with the
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consent, so long as there shall not have occurred and be continuing a Default
or Event of Default, of the Borrower, which consent shall not be unreasonably
withheld, a successor Agent for the Lenders, which successor Agent shall be a
commercial bank organized under the laws of the United States or any state
thereof, having a combined surplus and capital of not less than $500,000,000,
whereupon such successor Agent shall succeed to the rights, powers and duties
of the former Agent and the obligations of the former Agent shall be
terminated and canceled, without any other or further act or deed on the part
of such former Agent or any of the parties to this Agreement; provided,
however, that the former Agent's resignation shall not become effective until
such successor Agent has been appointed and has succeeded of record to all
right, title and interest in any collateral held by the Agent; provided,
further, that if the Required Lenders and, if applicable, the Borrower cannot
agree as to a successor Agent within ninety (90) days after such resignation,
the Agent shall appoint a successor Agent which satisfies the criteria set
forth above in this Section 10.9 for a successor Agent and the parties hereto
agree to execute whatever documents are necessary to effect such action under
this Agreement or any other document executed pursuant to this Agreement;
provided, however that in such event all provisions of the Loan Documents,
shall remain in full force and effect. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article X shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
10.10 Sharing of Payments, etc. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, set-off, counterclaim or
otherwise, obtain payment with respect to its Obligations (other than pursuant
to Article III) which results in its receiving more than its pro rata share of
the aggregate payments with respect to all of the Obligations (other than any
payment expressly provided hereunder to be distributed on other than a pro
rata basis and payments pursuant to Article III), then (a) such Lender shall
be deemed to have simultaneously purchased from the other Lenders a share in
their Obligations so that the amount of the Obligations held by each of the
Lenders shall be pro rata and (b) such other adjustments shall be made from
time to time as shall be equitable to insure that the Lenders share such
payments ratably; provided, however, that for purposes of this Section 10.10
the term "pro rata" shall be determined with respect to the Revolving Credit
Commitment of each Lender and to the Total Revolving Credit Commitment after
subtraction in each case of amounts, if any, by which any such Lender has not
funded its share of the outstanding Loans and Obligations. If all or any
portion of any such excess payment is thereafter recovered from the Lender
which received the same, the purchase provided in this Section 10.10 shall be
rescinded to the extent of such recovery, without interest. The Borrower
expressly consents to the foregoing arrangements and agrees that each Lender
so purchasing a portion of the other Lenders' Obligations may exercise all
rights of payment
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(including, without limitation, all rights of set-off, banker's lien or
counterclaim) with respect to such portion as fully as if such Lender were the
direct holder of such portion.
10.11 Fees. The Borrower agrees to pay to the Agent, for its
individual account, an annual Agent's fee as from time to time agreed to by
the Borrower and Agent in writing.
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ARTICLE XI
Miscellaneous
11.01 Assignments and Participations. (a) At any time after the
Closing Date each Lender may, with the prior consent of the Agent and (so long
as no Default or Event of Default shall have occurred and be continuing) the
Borrower, which consents shall not be unreasonably withheld, and, if demanded
by the Borrower (following such Lender's demand for the suspension of making
or maintaining Eurodollar Rate Loans pursuant to Section 3.01(b)(i)) will,
assign to one or more banks or financial institutions all or a portion of its
rights and obligations under the Loan Documents (including, without
limitation, all or a portion of any Note payable to its order); provided, that
(i) each such assignment shall be of a constant and not a varying percentage
of all of the assigning Lender's rights and obligations under the Revolving
Credit Facility, (ii) for each assignment involving the issuance and transfer
of a Note, the assigning Lender shall execute an Assignment and Acceptance and
the Borrower hereby agrees to execute a replacement Note or Notes to give
effect to the assignment, (iii) the amount of Revolving Credit Commitment
which shall be assigned is a minimum of $10,000,000, and, if greater, an
amount which is an integral multiple of $1,000,000, (iv) such assignee shall
have an office located in the United States, (v) no consent of the Borrower or
the Agent shall be required in connection with any assignment by a Lender to
another Lender or to an affiliate of any Lender, (vi) each such assignment
made as a result of a demand by the Borrower pursuant to this Section 11.01(a)
shall be arranged by the Borrower with the approval of the Agent, which
approval shall not be unreasonably withheld or delayed, and shall be either an
assignment of all of the rights and obligations of the assigning Lender under
this Agreement or an assignment of a portion of such rights and obligations
made concurrently with another such assignment or other such assignments that,
in the aggregate, cover all of the rights and obligations of the assigning
Lender under this Agreement, and (vii) no Lender shall be obligated to make
any such assignment as a result of a demand by the Borrower pursuant to this
Section 11.01(a) unless and until such Lender shall have received one or more
payments in an aggregate amount at least equal to the aggregate outstanding
principal amount of the Loans, Participations and all other Obligations and
amounts hereunder owing to such Lender, together with accrued interest thereon
to the date of payment of such principal amount, from the Borrower or one or
more assignees otherwise permitted hereunder. Upon such execution, delivery,
approval and acceptance, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder or under any such
Note have been assigned or negotiated to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and a holder
of such Note and (y) the assignor thereunder shall, to the extent that rights
and obligations hereunder or under such Note have been
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assigned or negotiated by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this
Agreement. Any Lender who makes an assignment shall pay to the Agent a
one-time administrative fee of $3,500 which fee shall not be reimbursed by the
Borrower.
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) the assignment
made under such Assignment and Acceptance is made under such Assignment and
Acceptance without recourse; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower, Team Rental or any of their respective
Subsidiaries or the performance or observance by the Borrower, Team Rental or
any such Subsidiary of any of its obligations under any Loan Document or any
other instrument or Document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies
of the financial statements delivered pursuant to Section 5.01(f) or Section
7.01, as the case may be, and such other Loan Documents and other documents
and information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance; (iv) such assignee
will, independently and without reliance upon the Agent, such assigning Lender
or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under any Loan Document; (v) such assignee
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under the Loan Documents as are delegated to the
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of the Loan Documents are required to be performed by it as a Lender and
a holder of such Notes.
(c) The Agent shall maintain at its address referred to herein a copy
of each Assignment and Acceptance delivered to and accepted by it.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender, the Agent shall give prompt notice thereof to Borrower.
(e) Nothing herein shall prohibit any Lender from pledging or
assigning, without notice to or consent of the Borrower and without the
payment of the administrative fee referred to in Section 11.1(a), any Note to
any Federal Reserve Bank in accordance with applicable law.
(f) Each Lender may sell participations at its expense to one
or more banks or other entities as to all or a portion of its
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rights and obligations under this Agreement; provided, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender shall remain the holder of
any Note issued to it for the purpose of this Agreement, (iv) such
participations shall be in a minimum amount of $1,000,000 and shall include an
allocable portion of such Lender's Participation, (v) Borrower, the Agent and
the other Lenders shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement
and with regard to any and all payments to be made under this Agreement;
provided, that the participation agreement between a Lender and its
participants may provide that such Lender will obtain the approval of such
participant prior to such Lender's agreeing to any amendment or waiver of any
provisions of any Loan Document which would (A) extend the maturity of any
Note, (B) reduce the interest rates hereunder or (C) increase the Revolving
Credit Commitment of the Lender granting the participation, and (vi) the sale
of any such participations which require Borrower to file a registration
statement with the United States Securities and Exchange Commission or under
the securities regulations or laws of any state shall not be permitted.
(g) The Borrower may not assign, nor shall it cause, suffer or permit
Team Rental or any of their respective Subsidiaries to assign any rights,
powers, duties or obligations under this Agreement or the other Loan Documents
without the prior written consent of all the Lenders.
11.02 Notices. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective on the day on which delivered to
such party (against receipt therefor) at the address set forth below or such
other address as such party shall specify to the other parties in writing (or,
in the case of telephonic notice or notice by telecopy, telegram or telex
(where the receipt of such message is verified by return) expressly provided
for hereunder, when received during normal business hours at such telephone,
telecopy or telex number as may from time to time be specified in written or
verbal notice to the other parties hereto or otherwise received), or if sent
prepaid by certified or registered mail return receipt requested on the third
Business Day after the day on which mailed, or by overnight courier or express
mail on the day following the date sent, addressed to such party at said
address:
(a) if to the Borrower:
Team Fleet Services Corporation
125 Basin Street, Suite 210
Daytona, Florida 32114
Attention: Sanford Miller, Chief Executive Officer
Telephone: (904) 238-7035
Telefacsimile: (904) 238-7461
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with a copy to:
Team Rental Group, Inc.
125 Basin Street, Suite 210
Daytona, Florida 32114
Attention: Sanford Miller, President
Telephone: (904) 238-7035
Telefacsimile: (904) 238-7461
(b) if to the Agent:
NationsBank, National Association (South)
NationsBank Tower
100 Southeast 2nd Street
14th Floor
Miami, Florida 33131
Attention: Corporate Finance
Telephone: (305) 533-2417
Telefacsimile: (305) 533-2437
with a copy to:
NationsBank, National Association (South)
Independence Center, 15th Floor
101 North Tryon Street
Charlotte, North Carolina 28255
Attention: Barbara Pollock
Corporate Credit Support
Telephone: (704) 388-1112
Telefacsimile: (704) 386-8694
(c) if to the Lenders:
At the addresses set forth on the signature pages
hereof and on the signature page of each Assignment
and Acceptance;
(d) if to any Guarantor:
-----------------------
-----------------------
- ----------------------------
Attention: ____________
Telephone: ______________
Telefacsimile: ___________
11.03 Setoff. The Borrower agrees that the Agent and each Lender
shall have a lien for all the Obligations of the Borrower upon all deposits or
deposit accounts, of any kind, or any interest in any deposits or deposit
accounts thereof, now or hereafter pledged, mortgaged, transferred or assigned
to the Agent or such Lender or otherwise in the possession or control of the
Agent or such Lender (other than for safekeeping) for any purpose for the
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account or benefit of the Borrower and including any balance of any deposit
account or of any credit of the Borrower with the Agent or such Lender,
whether now existing or hereafter established, hereby authorizing the Agent
and each Lender at any time or times (upon the occurrence and during the
continuation of an Event of Default) with or without prior notice to apply
such balances or any part thereof to such of the Obligations of the Borrower
to the Lenders then past due and in such amounts as they may elect, and
whether or not the collateral or the responsibility of other Persons
primarily, secondarily or otherwise liable may be deemed adequate. For the
purposes of this paragraph, all remittances and property shall be deemed to be
in the possession of the Agent or such Lender as soon as the same may be put
in transit to it by mail or carrier or by other bailee.
11.04 Survival. All covenants, agreements, representations and
warranties made herein shall survive the making by the Lenders of the Loans
and the execution and delivery to the Lenders of this Agreement and the Notes
and shall continue in full force and effect so long as any of Obligations
remain outstanding or any Lender has any commitment hereunder or the Borrower
has continuing obligations hereunder unless otherwise provided herein.
Whenever in this Agreement, any of the parties hereto is referred to, such
reference shall be deemed to include the successors and permitted assigns of
such party and all covenants, provisions and agreements by or on behalf of the
Borrower which are contained in this Agreement, the Notes and the other Loan
Documents shall inure to the benefit of the successors and permitted assigns
of the Lenders or any of them.
11.05 Expenses. The Borrower agrees (a) to pay or reimburse the Agent
for all its reasonable and customary out-of-pocket costs and expenses incurred
in connection with the preparation, negotiation and execution of, this
Agreement or any of the other Loan Documents (including travel expenses
relating to closing), and the consummation of the transactions contemplated
hereby and thereby, including, without limitation, the reasonable and
customary fees and disbursements of counsel to the Agent as well as all such
expenses and costs arising in connection with any amendment, supplement or
modification to this Agreement or any other Loan Documents, (b) to pay or
reimburse the Agent and the Lenders for all their reasonable costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement and the other Loan Documents, including without
limitation, the reasonable fees and disbursements of their counsel, and (c) to
pay, indemnify and hold the Agent and the Lenders harmless from any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any failure to pay or delay in paying, documentary, stamp,
excise and other similar taxes, if any, which may be payable or determined to
be payable in connection with the execution and delivery of this Agreement or
any other Loan Documents, or consummation of any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement or any other Loan Documents. The foregoing
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notwithstanding, the reimbursable fees and expenses of counsel for the Agent
under Section 11.05(a) in connection with the preparation, negotiation and
execution of (but not any amendment, supplement or modification to) this
Agreement and the $30 Million Credit Agreement shall not exceed $175,000 in
the aggregate.
11.06 Amendments. No amendment, modification or waiver of any
provision of any Loan Document and no consent by the Lenders to any departure
therefrom by the Borrower or any Guarantor shall be effective unless such
amendment, modification or waiver shall be in writing and signed by the Agent,
shall have been approved by the Required Lenders through their written
consent, and the same shall then be effective only for the period and on the
conditions and for the specific instances and purposes specified in such
writing; provided, however, that, no such amendment, modification or waiver
(i) which changes, extends or waives any provision
of Section 2.07, Section 10.09 or this Section 11.06, the
amount of or the due date of any scheduled installment of or
the rate of interest payable on any Obligation, which
changes the definition of "Required Lenders", which permits
an assignment by the Borrower or any Guarantor of its
Obligations under any Loan Document, which reduces the
required consent of Lenders provided hereunder, which
increases, decreases (other than pursuant to the express
terms hereof) or extends (other than pursuant to the express
terms hereof) the Revolving Credit Commitment of any Lender,
or which waives any condition to the making of any Loan,
shall be effective unless in writing and signed by each of
the Lenders;
(ii) which releases Collateral or the guaranty
obligation under any Guaranty (other than pursuant to the
express terms hereof or thereof) shall be effective unless
with the written consent of each of the Lenders; or
(iii) which affects the rights, privileges, immunities
or indemnities of NationsBank as provider of Swing Line
Loans, shall not be effective unless in writing and signed
by NationsBank; or
(iv) which affects the rights, privileges, immunities or
indemnities of the Agent shall be effective unless in
writing and signed by the Agent.
Notwithstanding any provision of the other Loan Documents to the contrary, as
between the Agent and the Lenders, execution by the Agent shall not be deemed
conclusive evidence that the Agent has obtained the written consent of the
Required Lenders. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances, except as otherwise expressly provided herein. No
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delay or omission on any Lender's or the Agent's part in exercising any right,
remedy or option shall operate as a waiver of such or any other right, remedy
or option or of any Default or Event of Default.
11.07 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully-executed counterpart.
11.08 Waivers by Borrower. In any litigation in any court with
respect to, in connection with, or arising out of this Agreement, the Loans,
any of the Notes, any of the other Loan Documents, the Obligations, or any
instrument or document delivered pursuant to this Agreement or the other Loan
Documents, or the validity, protection, interpretation, collection or
enforcement thereof, or any other claim or dispute howsoever arising between
the Borrower and the Agent or any Lender, the Borrower, the Agent and each
Lender hereby waive, to the extent permitted by applicable law, trial by jury
in connection with any such litigation.
11.09 Indemnification; Limitation of Liability. In consideration of
the execution and delivery of this Agreement by the Agent and each Lender and
the extension of credit under the Loans, the Borrower hereby indemnifies,
exonerates and holds the Agent and each Lender and each of their respective
affiliates, officers, directors, employees, agents and advisors (collectively,
the "Indemnified Parties") free and harmless from and against any and all
claims, actions, causes of action, suits, losses, costs, liabilities and
damages, and expenses incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys' fees and
disbursements (collectively, the "Indemnified Liabilities") that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of, or in connection with
the execution, delivery, enforcement, performance or administration of this
Agreement and the other Loan Documents, or any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of any
Loan whether or not such action is brought against the Agent or any Lender,
the shareholders or creditors of the Agent or any Lender or an Indemnified
Party or an Indemnified Party is otherwise a party thereto and whether or not
the transactions contemplated herein are consummated, except to the extent
such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct, and if
and to the extent that the foregoing undertaking may be unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable
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law. The Borrower agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to it, Team
Rental, any of their respective Subsidiaries, or any security holders or
creditors thereof arising out of, related to or in connection with the
transactions contemplated herein, except to the extent that such liability is
found in a final non-appealable judgment by a court of competent jurisdiction
to have resulted from such Indemnified Party's gross negligence or willful
misconduct; provided, however, in no event shall any Indemnified Party be
liable for consequential, indirect or special, as opposed to direct, damages.
11.10 Usury Savings Clause. Notwithstanding any other provision
herein, the aggregate interest rate charged under any of the Notes, including
all charges or fees in connection therewith deemed in the nature of interest
under applicable law shall not exceed the Highest Lawful Rate (as such term is
defined below). If the rate of interest (determined without regard to the
preceding sentence) under this Agreement at any time exceeds the Highest
Lawful Rate (as defined below), the outstanding amount of the Loans made
hereunder shall bear interest at the Highest Lawful Rate until the total
amount of interest due hereunder equals the amount of interest which would
have been due hereunder if the stated rates of interest set forth in this
Agreement had at all times been in effect. In addition, if when the Loans made
hereunder are repaid in full the total interest due hereunder (taking into
account the increase provided for above) is less than the total amount of
interest which would have been due hereunder if the stated rates of interest
set forth in this Agreement had at all times been in effect, then to the
extent permitted by law, the Borrower shall pay to the Agent an amount equal
to the difference between the amount of interest paid and the amount of
interest which would have been paid if the Highest Lawful Rate had at all
times been in effect. Notwithstanding the foregoing, it is the intention of
the Lenders and the Borrower to conform strictly to any applicable usury laws.
Accordingly, if any Lender contracts for, charges, or receives any
consideration which constitutes interest in excess of the Highest Lawful Rate,
then any such excess shall be cancelled automatically and, if previously paid,
shall at such Lender's option be applied to the outstanding amount of the
Loans made hereunder or be refunded to the Borrower. As used in this
paragraph, the term "Highest Lawful Rate" means the maximum lawful interest
rate, if any, that at any time or from time to time may be contracted for,
charged, or received under the laws applicable to such Lender which are
presently in effect or, to the extent allowed by law, under such applicable
laws which may hereafter be in effect and which allow a higher maximum
nonusurious interest rate than applicable laws now allow.
11.11 Termination. The termination of this Agreement shall not affect
any rights of the Borrower, the Lenders or the Agent or any obligation of the
Borrower, the Lenders or the Agent, arising prior to the effective date of
such termination, and the provisions
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hereof shall continue to be fully operative until all transactions entered
into or rights created or obligations incurred prior to such termination have
been fully disposed of, concluded or liquidated and the Obligations arising
prior to or after such termination have been irrevocably paid in full. The
rights granted to the Agent or any Lenders hereunder and under the other Loan
Documents shall continue in full force and effect, notwithstanding the
termination of this Agreement, until all of the Obligations have been paid in
full after the termination hereof (other than Obligations in the nature of
continuing indemnities or expense reimbursement obligations not yet due and
payable) or the Borrower has furnished to the Agent and each Lender with an
indemnification satisfactory to the Agent and each Lender with respect
thereto. All representations, warranties, covenants, waivers and agreements
contained herein shall survive termination hereof until payment in full of the
Obligations unless otherwise provided herein. Notwithstanding the foregoing,
if after receipt of any payment of all or any part of the Obligations, any
Lender is for any reason compelled to surrender such payment to any Person
because such payment is determined to be void or voidable as a preference,
impermissible setoff, a diversion of trust funds or for any other reason, this
Agreement shall continue in full force and the Borrower shall be liable to,
and shall indemnify and hold the Agent or such Lender harmless for, the amount
of such payment surrendered until the Agent or such Lender shall have been
finally and irrevocably paid in full. The provisions of the foregoing sentence
shall be and remain effective notwithstanding any contrary action which may
have been taken by the Agent or the Lenders in reliance upon such payment, and
any such contrary action so taken shall be without prejudice to the Agent's or
the Lender's rights under this Agreement and shall be deemed to have been
conditioned upon such payment having become final and irrevocable.
11.12 GOVERNING LAW. ALL DOCUMENTS EXECUTED PURSUANT TO THE
TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING, WITHOUT LIMITATION, THIS
AGREEMENT AND EACH OF THE LOAN DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE
UNDER, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS AND JUDICIAL DECISIONS OF THE STATE OF FLORIDA; PROVIDED THAT
THIS SECTION 11.12 SHALL NOT AFFECT THE APPLICABILITY OF, AND INTERPRETATION
OR CONSTRUCTION OF APPROPRIATE TERMS AND PROVISIONS UNDER THE UNIFORM
COMMERCIAL CODE OF ANY JURISDICTION WHICH GOVERN THE LIENS ON ANY OF THE
COLLATERAL. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION AND VENUE OF THE
STATE AND FEDERAL COURTS OF FLORIDA FOR THE PURPOSES OF RESOLVING DISPUTES
HEREUNDER OR FOR THE PURPOSES OF COLLECTION.
11.13 Headings and References. The headings of the Articles
and Sections of this Agreement are inserted for convenience of
reference only and are not intended to be a part of, or to affect
the meaning or interpretation of this Agreement. Words such as
"hereof", "hereunder", "herein" and words of similar import shall
refer to this Agreement in its entirety and not to any particular
Section or provisions hereof, unless so expressly specified. As
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used herein, the singular shall include the plural, and the masculine shall
include the feminine or a neutral gender, and vice versa, whenever the context
requires.
11.14 Confidentiality. Neither the Agent nor any Lender shall
disclose any Confidential Information to any Person without the prior consent
of Borrower, other than (a) to such Agent's or such Lender's Affiliates and
their officers, directors, employees, agents, counsels, accountants, and
advisors, (b) to the Agent and other Lenders, (c) to actual and prospective
assignees and participants, (d) as required by any law, rule or regulation or
by judicial process, or (e) as requested or required by any Governmental
Authority.
11.15 Severability. If any provision of this Agreement or the other
Loan Documents shall be determined to be illegal or invalid as to one or more
of the parties hereto, then such provision shall remain in effect with respect
to all parties, if any, as to whom such provision is neither illegal nor
invalid, and in any event all other provisions hereof shall remain effective
and binding on the parties hereto.
11.16 Entire Agreement. This Agreement, together with the other Loan
Documents, constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all previous proposals,
negotiations, representations, commitments and other communications between or
among the parties, both oral and written, with respect thereto.
11.17 Agreement Controls. In the event that any term of any of the
Loan Documents other than this Agreement conflicts with any term of this
Agreement, the terms and provisions of this Agreement shall control.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be made, executed and delivered by their duly authorized officers as of the
day and year first above written.
TEAM FLEET SERVICES CORPORATION
WITNESS:
__________________________ By:________________________________
Name: ____________________________
__________________________ Title: ____________________________
SIGNATURE PAGE 1 OF 2
<PAGE>
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH), as Agent
By:________________________________
Name: _____________________________
Title: ____________________________
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH), as Lender
By:________________________________
Name: _____________________________
Title: ____________________________
Lending Office:
NationsBank, National Association (South)
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Barbara Pollock
Corporate Credit Support
Telephone: (704) 386-1112
Telefacsimile: (704) 386-8694
Wire Transfer Instructions:
NationsBank, National Association (South)
Tampa, Florida
ABA# 063100277
Account No.: 136621002163
Reference: Team Rental Group
Attention: Corporate Credit Support
SIGNATURE PAGE 2 OF 2
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-4507 of Team Rental Group, Inc. of our report dated April 12, 1996,
appearing in the Prospectus, which is a part of such Registration Statement,
and of our report dated April 12, 1996 relating to the financial statement
schedules appearing elsewhere in this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
June 13, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion of our auditors report dated May 3, 1996
(covering the years ended February 28, 1994 and 1995 and February 29, 1996)
for Arizona Rent-A-Car Systems, Inc. into this Registration Statement on Form
S-1 and to the reference to our firm under the heading "Experts" in such
Registration Statement.
Michael Silver & Company
Certified Public Accountants
Skokie, Illinois
June 13, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
Amendment No. 1 (Registration No. 333-4507) of our report dated March 23,
1995 on our audits of the financial statements of BRAC-OPCO, Inc. We also
consent to the reference to our firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Sherman Oaks, California
June 13, 1996
