<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
BUDGET GROUP, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 7514 59-3227576
(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 officers)
---------------------
SANFORD MILLER
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
BUDGET 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:
<TABLE>
<C> <C> <C>
C. WILLIAM BAXLEY ROBERT L. APRATI KENNETH C. HOFFMAN
KING & SPALDING EXECUTIVE VICE PRESIDENT, GREENBERG TRAURIG HOFFMAN LIPOFF
191 PEACHTREE STREET GENERAL COUNSEL ROSEN & QUENTEL P.A.
ATLANTA, GEORGIA 30303 BUDGET GROUP, INC. 1221 BRICKELL AVENUE
(404) 572-4600 4225 NAPERVILLE ROAD MIAMI, FLORIDA 33131
LISLE, ILLINOIS 60532 (305) 579-0500
(630) 955-7570
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the effectiveness of this Registration Statement.
If any securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, 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(d)
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTERED FEE(1)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock, $.01 par
value per share................. 1,800,000 34.0625 $61,312,500 $18,088
======================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee and
computed pursuant to Rule 457(f)(1) under the Securities Act of 1933, as
amended.
---------------------
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> 2
CRUISE AMERICA, INC.
11 West Hampton Avenue
Mesa, Arizona 85210-5258
December , 1997
Dear Fellow Shareholder:
You are cordially invited to attend a special meeting (the "Special
Meeting") of the shareholders of Cruise America, Inc. ("Cruise America") to be
held on January , 1998 at a.m., local time, at Cruise America's
corporate headquarters located at 11 West Hampton Avenue, Mesa, Arizona.
At the Special Meeting, we will ask you to consider and vote upon a
proposal to approve the Plan and Agreement of Merger (the "Merger Agreement")
among Cruise America, Budget Group, Inc., a Delaware corporation ("Budget"), and
CA Acquisition Corporation, a Florida corporation and wholly owned subsidiary of
Budget ("Sub"). Under the terms of the Merger Agreement, Sub will merge into
Cruise America (the "Merger") and each share of Cruise America Common Stock that
you own will be converted into the right to receive 0.28073 of a share of Budget
Class A Common Stock (and cash in lieu of fractional shares). If the Merger
takes place, Cruise America will become a wholly owned subsidiary of Budget.
THE BOARD OF DIRECTORS OF CRUISE AMERICA HAS DETERMINED THAT THE MERGER
AGREEMENT IS IN THE BEST INTERESTS OF CRUISE AMERICA AND ITS SHAREHOLDERS. THE
BOARD HAS ADOPTED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER.
The Merger is subject to certain conditions, including approval by the
holders of a majority of the outstanding shares of Cruise America Common Stock
and by various regulatory authorities.
The accompanying Proxy Statement/Prospectus provides detailed information
about the proposed Merger. I encourage you to read it thoroughly. In addition,
you can find more information about Budget and Cruise America in the documents
they have filed with the Securities and Exchange Commission.
Your vote is very important. We have enclosed a proxy card for your Cruise
America Common Stock. Whether or not you plan to attend the Special Meeting,
please take the time to complete, sign and date the enclosed proxy card and
return it in the enclosed postage paid envelope. If you plan to attend the
Special Meeting, you may vote in person if you wish, even if you have previously
returned your proxy card. We appreciate your prompt cooperation.
Sincerely,
Robert A. Smalley
Chairman of the Board
<PAGE> 3
CRUISE AMERICA, INC.
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY , 1998
---------------------
Cruise America, Inc. ("Cruise America") will hold a special meeting of
shareholders (the "Special Meeting") on January , 1998, at a.m., local
time, at Cruise America's corporate headquarters located at 11 West Hampton
Avenue, Mesa, Arizona, for the following purposes:
(1) To consider and vote upon a proposal to approve the Plan and
Agreement of Merger, dated as of November 25, 1997 (the "Merger
Agreement"), among Cruise America, Budget Group, Inc. ("Budget") and CA
Acquisition Corporation, a wholly owned subsidiary of Budget ("Sub"). The
Merger Agreement provides for the merger of Sub with and into Cruise
America, as a result of which Cruise America will become a wholly owned
subsidiary of Budget. Under the Merger Agreement, each share of Cruise
America Common Stock will be converted into the right to receive 0.28073 of
a share of Budget Class A Common Stock; and
(2) To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
The record date for determining shareholders entitled to vote at the
Special Meeting or any adjournment or postponement thereof is December 24, 1997.
The affirmative vote of holders of a majority of the outstanding shares of
Cruise America Common Stock is required for the approval of the Merger Agreement
and the transactions contemplated thereby.
The Board of Directors of Cruise America unanimously recommends that the
shareholders of Cruise America vote to approve the Merger Agreement and the
transactions contemplated thereby, which are described in detail in the
accompanying Proxy Statement/Prospectus. Please sign and promptly return the
proxy card in the enclosed envelope, whether or not you expect to attend the
Special Meeting.
By order of the Board of Directors
Eric R. Bensen, Secretary
Mesa, Arizona
December , 1997
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. IF
YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 4
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 PROXY STATEMENT/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 DECEMBER 16, 1997
CRUISE AMERICA, INC.
PROXY STATEMENT
SPECIAL MEETING TO BE
HELD ON JANUARY , 1998
---------------------
BUDGET GROUP, INC.
PROSPECTUS
SHARES OF CLASS A COMMON STOCK
---------------------
We are furnishing this Proxy Statement/Prospectus to the shareholders (the
"Cruise America Shareholders") of Cruise America, Inc. ("Cruise America") in
connection with the solicitation of proxies on behalf of the Board of Directors
of Cruise America for the special meeting of shareholders (the "Special
Meeting") to be held on January , 1998 at Cruise America's corporate
headquarters at 11 West Hampon Avenue, Mesa, Arizona. At the Special Meeting, we
will ask Cruise America Shareholders to consider and vote on a proposal to
approve and adopt the Plan and Agreement of Merger (the "Merger Agreement")
dated as of November 25, 1997, among Cruise America, Budget Group, Inc.
("Budget") and CA Acquisition Corporation, a wholly owned subsidiary of Budget
("Sub"), pursuant to which Sub will merge into Cruise America and Cruise America
will become a direct or indirect wholly owned subsidiary of Budget (the
"Merger"). If the Merger takes place, each outstanding share of common stock,
$.01 par value per share, of Cruise America ("Cruise America Common Stock"),
will be converted into the right to receive 0.28073 of a share of Class A Common
Stock, par value $.01 per share, of Budget ("Budget Common Stock"), and cash,
without interest, in lieu of fractional shares (the "Merger Consideration"). The
Merger is conditioned upon, among other things, approval of the Merger Agreement
by the holders of a majority of the outstanding shares of Cruise America Common
Stock.
Your vote is important. Whether or not you intend to be present at the
Special Meeting, please complete, sign, date and return the accompanying proxy
card in the enclosed envelope. If you choose to attend the Special Meeting, you
may revoke your proxy and personally cast your votes.
FOR CERTAIN FACTORS WHICH YOU SHOULD CONSIDER IN EVALUATING THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, SEE
"RISK FACTORS" BEGINNING ON PAGE 12.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED THE SHARES OF BUDGET COMMON STOCK TO BE ISSUED OR
DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE.
This Proxy Statement/Prospectus also constitutes a prospectus of Budget
relating to the issuance of shares of Budget Common Stock to Cruise America
Shareholders pursuant to the Merger. Budget has filed a Registration Statement
on Form S-4 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with the Securities and Exchange Commission (the
"Commission") covering the shares of Budget Common Stock to be issued in the
Merger.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS
DATED DECEMBER , 1997. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THE PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE,
AND NEITHER THE MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO CRUISE AMERICA
SHAREHOLDERS NOR THE ISSUANCE OF SHARES OF BUDGET COMMON STOCK IN THE MERGER
SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
This Proxy Statement/Prospectus is not an offer to sell or a solicitation of
an offer to purchase Budget Common Stock in any jurisdiction in which such offer
or solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it would be
unlawful.
Information contained in this Proxy Statement/Prospectus regarding Budget
has been furnished by Budget, and information contained in this Proxy
Statement/Prospectus regarding Cruise America has been furnished by Cruise
America.
THIS PROXY STATEMENT/PROSPECTUS AND THE ACCOMPANYING PROXY CARD ARE FIRST
BEING MAILED TO THE CRUISE AMERICA SHAREHOLDERS ON OR ABOUT DECEMBER , 1997.
---------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS DECEMBER , 1997.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Summary..................................................... 1
The Companies............................................... 2
Budget.................................................... 2
Cruise America............................................ 2
Recommendation of the Cruise America Board................ 3
The Merger.................................................. 3
Background and Structure of the Merger.................... 3
Reasons for the Merger.................................... 4
Terms of the Merger Agreement............................. 4
Regulatory Approvals...................................... 5
Dissenter's/Appraisal Rights.............................. 5
Irrevocable Proxy Agreements.............................. 5
Vote Required; Security Ownership by Management........... 6
Interests of Certain Persons in the Merger................ 6
Certain Federal Income Tax Consequences................... 6
Amendment to Cruise America's Rights Agreement............ 6
Opinion of Cruise America's Financial Advisor............. 6
Anticipated Accounting Treatment.......................... 7
Resales of Budget Common Stock............................ 7
Markets and Market Prices................................... 8
Comparative Per Share Information........................... 10
Risk Factors................................................ 12
Stock Price Fluctuations.................................. 12
Benefits to Certain Directors and Officers of Cruise
America; Possible Conflicts of Interest................ 12
Differences in Rights of Cruise America Shareholders...... 12
Termination Payments If Merger Fails to Occur............. 13
Substantial Leverage; Ability to Service Debt............. 13
Availability of Financing................................. 13
Integration of Budget Acquisition......................... 14
Ability to Implement Growth Strategy...................... 14
Judgment Against Cruise America........................... 14
Competition............................................... 15
Restrictions Imposed by Indebtedness...................... 15
Potential Changes in Manufacturers' Repurchase Programs... 15
Seasonality............................................... 16
Costs of Regulatory and Environmental Compliance.......... 16
Dependence on Principal Supplier.......................... 16
Risks of International Operations......................... 16
Dependence on Principal Executive Officers................ 17
Substantial Voting Power by Principal Executive
Officers............................................... 17
Potential Anti-Takeover Effects of Charter and Bylaw
Provisions; Possible Issuances of Preferred Stock...... 17
The Cruise America Proxy Solicitation Process............... 17
Special Meeting........................................... 17
Record Date and Shares Entitled to Vote................... 18
Vote Required; Security Ownership of Management........... 18
Solicitation and Revocation of Proxies.................... 18
The Merger.................................................. 19
Background of the Merger.................................. 19
Reasons for the Merger.................................... 20
</TABLE>
(i)
<PAGE> 6
<TABLE>
<S> <C>
Opinion of Cruise America's Financial Advisor............................................................. 21
Terms of the Merger Agreement............................................................................. 26
Regulatory Approvals...................................................................................... 28
Irrevocable Proxy Agreements.............................................................................. 28
Effective Time of the Merger and Exchange of Shares....................................................... 28
Recommendation of the Cruise America Board................................................................ 29
Interests of Certain Persons in the Merger................................................................ 29
Anticipated Accounting Treatment.......................................................................... 30
Certain Federal Income Tax Consequences................................................................... 31
Resale of Budget Common Stock............................................................................. 31
Comparison of Rights of Holders of Cruise America Common Stock and Budget Common Stock...................... 33
Authorized Capital Stock.................................................................................. 33
Dividends and Other Distributions......................................................................... 33
Special Meeting of Stockholders........................................................................... 33
Voting Requirements Generally............................................................................. 34
Amendment of Certificate or Articles of Incorporation..................................................... 34
Amendment of Bylaws....................................................................................... 34
Action by Written Consent................................................................................. 35
Voting in the Election of Directors....................................................................... 35
Number and Qualification of Directors..................................................................... 35
Removal of Directors...................................................................................... 36
Dissenter's/Appraisal Rights.............................................................................. 36
Preemptive Rights......................................................................................... 36
Liquidation Rights........................................................................................ 37
Anti-Takeover Provisions.................................................................................. 37
Transactions Involving Officers or Directors.............................................................. 39
Indemnification........................................................................................... 39
Directors' Liability...................................................................................... 40
Shareholder Approval of Merger............................................................................ 40
Selected Historical Financial Data of Budget................................................................ 42
Selected Historical Financial Data of BRACC................................................................. 44
Selected Historical Financial Data of Cruise America........................................................ 46
Unaudited Pro Forma Financial Data.......................................................................... 47
Business of Budget.......................................................................................... 62
General................................................................................................... 62
The Budget Acquisition.................................................................................... 62
Recent Developments....................................................................................... 63
Business of Cruise America.................................................................................. 63
General................................................................................................... 63
Pending Litigation........................................................................................ 64
Cruise America Principal Shareholders....................................................................... 65
Experts..................................................................................................... 67
Legal Matters............................................................................................... 67
Where You Can Find More Information......................................................................... 67
Annex A: Merger Agreement................................................................................... A-1
Annex B: Fairness Opinion................................................................................... B-1
</TABLE>
(ii)
<PAGE> 7
SUMMARY
Certain matters discussed in this Proxy Statement/Prospectus are forward
looking statements within the meaning of the federal securities laws. Although
Budget and Cruise America believe that the expectations reflected in such
forward looking statements are based upon reasonable assumptions, they can give
no assurance that their expectations will be achieved. Factors that could cause
actual results to differ materially from Budget's and Cruise America's current
expectations include, but are not limited to, general economic conditions and
other risks described in this document under the heading "Risk Factors" (Page
12) or included from time to time in Budget's and Cruise America's reports filed
with the Commission, including their reports on Form 10-K. This summary
highlights selected information from this document, and may not contain all of
the information that is important to you. To better understand the Merger, you
should read this entire document carefully, as well as those additional
documents to which we refer you. See "Where You Can Find More Information."
(Page 65)
Q: WHY IS CRUISE AMERICA MERGING WITH BUDGET? (See Page 20).
A: Cruise America's board of directors (the "Cruise America Board") believes
that the Merger is in your best interest and the best interest of Cruise
America. For a description of the factors considered by the Cruise America
Board see "The Merger -- Reasons for the Merger."
Q: WHAT WILL I BE ENTITLED TO RECEIVE FOR MY CRUISE AMERICA SHARES?
A: You will be entitled to receive 0.28073 of a share of Budget Common Stock
for each share of Cruise America Common Stock you now own. This is the
"exchange ratio." Budget will not issue fractional shares in the Merger.
As a result, the total number of shares of Budget Common Stock that you
will receive in the Merger will be rounded down to the nearest whole
number. You will be entitled to receive a cash payment, without interest,
for the value of the remaining fraction of a share of Budget Common Stock
that you would otherwise be entitled to receive based on the market value
(as determined in the Merger Agreement) of the Budget Common Stock at the
time of the Merger. The Budget Common Stock and cash in place of
fractional shares that Cruise America Shareholders are entitled to receive
in connection with the Merger is referred to as the "Merger
Consideration."
Q: PLEASE EXPLAIN THE EXCHANGE RATIO.
A: Cruise America Shareholders will be entitled to receive 0.28073 of a
share of Budget Common Stock in exchange for each share of Cruise America
Common Stock they own. For example, if you currently own 100 shares of
Cruise America Common Stock, then after the Merger you will be entitled to
receive 28 shares of Budget Common Stock and a check for the market value
(as determined in the Merger Agreement) of the 0.073 fractional share.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your signed proxy card in the enclosed return envelope as soon
as possible, so that we may vote your shares at the Special Meeting.
Cruise America's Board unanimously recommends that you vote in favor of
the proposed Merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before the Special Meeting. You
can do so in one of three ways. First, you can send a written notice
stating that you would like to revoke your proxy to the Secretary of
Cruise America at the address below. Second, you can complete a new proxy
card and send it to the Secretary of Cruise America at the address below.
Third, you can attend the Special Meeting and vote in person. You should
send any written notice revoking your proxy, or any request for a new
proxy card, to the Secretary of Cruise America at the following address:
Cruise America, Inc., 11 West Hampton Avenue, Mesa, Arizona 85210-5258,
Attention: Eric R. Bensen.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the Merger takes place, you will receive instructions on how to
exchange your shares of Cruise America Common Stock for shares of Budget
Common Stock and the cash payment for any fractional share.
1
<PAGE> 8
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the Merger in the first quarter of 1998.
However, it is possible that delays in obtaining regulatory approvals or
other consents could require us to postpone the Merger until a later time.
Q: HOW WILL I DETERMINE THE FEDERAL INCOME TAX BASIS OF MY BUDGET COMMON
STOCK AFTER THE MERGER?
A: Your tax basis for the Budget Common Stock that you receive in the
Merger, including any fractional share interest for which you will be
entitled to receive cash, will equal your basis in the Cruise America
Common Stock exchanged in the Merger.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT CRUISE AMERICA AND BUDGET? (See
page 67)
A: Accompanying this Proxy Statement/Prospectus are Cruise America's most
recent Annual Report on Form 10-K and quarterly reports on Form 10-Q.
These documents contain additional information about Cruise America.
Certain other documents containing information on Cruise America are
incorporated by reference in this Proxy Statement/Prospectus. Budget's
most recent Annual Report on Form 10-K, its quarterly reports on Form 10-Q
and certain other documents containing information on Budget are
incorporated by reference in this Proxy Statement/Prospectus. You may
obtain copies of these documents by requesting them in writing or by
telephone from Cruise America (602-464-7300) or Budget (904-238-7035), as
the case may be.
THE COMPANIES
BUDGET
Budget and its franchisees (together, the "Budget System") operate the
third largest worldwide general use car and truck rental system, with
approximately 3,200 locations and a peak fleet size during 1996 of 266,000 cars
and 18,000 trucks. The Budget System has locations in both the airport and local
(downtown and suburban) markets in all major metropolitan areas in the United
States, in many other small and mid-size U.S. markets and in more than 110
countries worldwide. The Budget System had approximately 455 company-owned
locations in the United States at December 31, 1996, accounting for
approximately 76% of 1996 U.S. system-wide revenues. In addition, Budget
franchisees operated approximately 500 royalty-paying franchise locations in the
United States at December 31, 1996. The Budget System is one of only three
vehicle rental systems that offer rental vehicles throughout the world under a
single brand name, with locations in Europe, Canada, Latin America, the Middle
East, Asia/Pacific and Africa. The Budget System currently maintains more local
market rental locations throughout the world than most of its major competitors.
The Budget System is also unique among major car rental systems in that it rents
trucks in most major markets worldwide. The Budget System's consumer truck
rental fleet is the fourth largest in the United States. The Budget System had
vehicle rental revenues of $2.5 billion for 1996 after giving effect to the
Budget Acquisition (as defined below).
Budget is also one of the largest independent retailers of late model
vehicles in the United States, with 26 retail car sales facilities and pro forma
revenues of $246.9 million for 1996. Budget operates its retail car sales
facilities under the name "Budget Car Sales".
On April 29, 1997, Budget acquired all the capital stock of Budget Rent a
Car Corporation ("BRACC") pursuant to a series of stock purchase agreements
among Team Rental Group, Inc. ("TEAM") ("TEAM" refers to Budget and its
subsidiaries prior to the Budget Acquisition), Ford Motor Company ("Ford") and
BRACC and the common stockholder of BRACC (the "Budget Acquisition").
Budget's executive offices are located at 125 Basin Street, Suite 210,
Daytona Beach, Florida 32114, and its telephone number is (904) 238-7035.
CRUISE AMERICA
Cruise America believes it is one of the largest companies in North America
specializing in the rental and sale of recreational vehicles (RVs). Cruise
America began rental and sales operations in Miami, Florida in
2
<PAGE> 9
1972, with an initial strategy to locate rental centers in metropolitan gateway
cities which are destinations for large numbers of domestic and international
travelers. Since that time, Cruise America has established 91 additional rental
and/or sales locations across the United States and Canada. At April 30, 1997,
Cruise America operated a total of 16 Hub offices, 76 Satellite offices, and a
rental fleet of 2,810 RVs.
Besides rentals, Cruise America sells new and used RVs (including vehicles
retired from the rental fleet) from its Hub offices. The sales effort is
marketed under the name RV DEPOT and for the year ended April 30, 1997, RV sales
represented approximately 44% of total revenue.
Cruise America's executive offices are located at 11 West Hampton Avenue,
Mesa, Arizona 85210-5258, and its telephone number is (602) 464-7300.
RECOMMENDATION OF THE CRUISE AMERICA BOARD
The Cruise America Board has unanimously adopted the Merger Agreement and
unanimously recommends that you vote FOR the proposal to approve the Merger
Agreement and the transactions contemplated thereby, including the Merger.
THE MERGER
The Merger Agreement, which is the legal document that governs the Merger,
is attached as Annex A to this Proxy Statement/Prospectus and is incorporated
herein by this reference. We encourage you to read the Merger Agreement
carefully.
BACKGROUND AND STRUCTURE OF THE MERGER (See page 19)
In the fall of 1996, and again in the spring of 1997, Sanford Miller, Chief
Executive Officer of Budget, and Randall S. Smalley, Chief Executive Officer of
Cruise America, engaged in several informal discussions relating to a possible
business combination between the companies, including a merger. During the
period between July 28, 1997 and August 19, 1997, senior executives of Budget
and Cruise America had further discussions and began to discuss the possible
terms of a merger between the companies. None of such discussions resulted in
any agreement.
On August 20, 1997, Budget indicated that, subject to negotiation of
acceptable terms and conditions, it may be interested in a possible merger
between Budget and Cruise America in which Cruise America Shareholders could
receive $8.50 per share in Budget Common Stock. Cruise America responded to
Budget that the $8.50 per share consideration was inadequate.
On October 1, 1997, following Cruise America's response, Budget indicated
that, subject to negotiation of acceptable terms and conditions, it may be
interested in a possible merger between Budget and Cruise America in which
Cruise America Shareholders could receive $9.50 per share in Budget Common
Stock. On October 9, 1997, senior executives of Cruise America and Budget met to
discuss a possible $9.50 per share transaction. Between October 10, 1997 and
October 15, 1997, senior executives of Cruise America and its legal counsel and
senior executives of Budget and its legal counsel held several discussions
concerning the terms and conditions of a non-binding letter of intent with
respect to such merger transaction.
On October 15, 1997, the Cruise America Board met to review and discuss the
material provisions of the non-binding letter of intent, including those
relating to the financial consideration, structure, tax treatment, conditions to
closing and exclusivity. During the meeting, Cruise America's outside legal
counsel also reviewed with the Cruise America Board the legal standards
applicable to its consideration of the proposed merger transaction.
Between October 15 and October 19, 1997, Cruise America and Budget
continued to have discussions in order to finalize the letter of intent. On
October 20, 1997, Budget and Cruise America signed the non-binding letter of
intent with respect to the proposed Merger and Budget and Cruise America issued
a press release announcing the proposed Merger.
3
<PAGE> 10
Pursuant to an engagement letter dated October 28, 1997, Cruise America
retained Peacock, Hislop, Staley & Given, Inc. ("PHS&G") to serve as its
financial advisor in connection with the Merger. The Merger Agreement was
negotiated during October and November.
On November 25, 1997, a special meeting of the Cruise America Board was
held at Cruise America's headquarters in Mesa, Arizona. At the meeting, a
representative of PHS&G made a presentation to the Cruise America Board which
included an analysis of the historical market prices and trading activity of
each of Cruise America Common Stock and Budget Common Stock; a comparison of the
financial position and operating results of each of Cruise America and Budget on
a stand-alone basis (using various methodologies). PHS&G rendered its opinion
that, as of such date and based on the assumptions and subject to the
qualifications and limitations set forth therein, the Merger consideration was
fair to Cruise America Shareholders from a financial point of view. Following
discussion of and questions by the Cruise America Board to the PHS&G
representative, the Cruise America Board voted unanimously to adopt and approve
the Merger Agreement and the transactions contemplated thereby, and to recommend
that the Cruise America Shareholders vote to approve the Merger Agreement and
the transactions contemplated thereby.
The Cruise America Board considered the terms of the Merger Agreement,
including the Merger Consideration, the conditions to closing, the
representations and warranties and the Termination Fee (as hereinafter defined),
before deciding to recommend that the Cruise America Shareholders approve the
Merger Agreement.
REASONS FOR THE MERGER (See Page 20)
Cruise America. In approving and adopting the Merger Agreement and
formulating its recommendation that the Cruise America Shareholders approve the
Merger Agreement and the consummation of the Merger, the Cruise America Board
considered a number of factors, including without limitation, the following: (i)
their familiarity with and review of Cruise America's business; (ii) the opinion
of PHS&G rendered to them on November 25, 1997 that, as of such date and based
on the assumptions and subject to the qualifications and limitations set forth
therein, the Merger Consideration was fair to the Cruise America Shareholders
from a financial point of view; (iii) the terms of the Merger Agreement,
including the Merger Consideration; and (iv) their review of alternatives to the
proposed Merger for enhancing shareholder value.
Budget. The Budget board of directors (the "Budget Board") approved the
Merger Agreement and the Merger after consulting with Budget's management and
legal counsel and after considering several factors, including, without
limitation, the following: (i) the compatibilities and potential synergies of
the Budget and Cruise America; (ii) the enhanced market position of Cruise
America and Budget as a result of the Merger; (iii) the reduction of Cruise
America's fleet costs; and (iv) the discussions with certain executive officers
and outside legal counsel.
TERMS OF THE MERGER AGREEMENT (See Page 26)
General. If the Cruise America Shareholders approve the Merger Agreement
and the other closing conditions are met, the Merger will occur at the Effective
Time (as hereinafter defined). Following the Merger, Cruise America will
continue as a direct or indirect wholly owned subsidiary of Budget.
Exchange Ratio. Each Cruise America Shareholder will be entitled to
receive 0.28073 of a share of Budget Common Stock for each share of Cruise
America Common Stock owned before the Merger.
Conditions to the Merger. The completion of the Merger depends upon the
satisfaction of a number of conditions, including:
- Cruise America Shareholder approval,
- clearance under United States antitrust laws,
- receipt of an opinion of Budget's counsel as to the tax-free nature of
the Merger for federal income tax purposes (except for cash paid in
place of fractional shares),
4
<PAGE> 11
- receipt of listing approval from the New York Stock Exchange ("NYSE")
for the Budget Common Stock to be issued in the Merger,
- the continued accuracy of each party's representations and warranties
as set forth in the Merger Agreement,
- the performance by each party of its obligations under the Merger
Agreement, and
- receipt by Budget of affiliate letters from possible affiliates of
Cruise America.
Some of the conditions may be waived by the appropriate party. Conditions that
cannot be waived include Cruise America Shareholder approval and clearance under
United States antitrust laws.
Effective Time. Subject to satisfaction or waiver of the conditions set
forth in the Merger Agreement, the parties will cause the Merger to become
effective immediately upon filing Articles of Merger with the Department of
State of the State of Florida or at such time thereafter as is provided in the
Articles of Merger (the "Effective Time").
Termination. Either Cruise America or Budget can terminate the Merger
Agreement under various circumstances, including if (a) both parties consent in
writing to termination; (b) the Merger is not completed by May 31, 1998; (c) a
court or other governmental authority prohibits the Merger; or (d) the Cruise
America Board, in compliance with its fiduciary duties, withdraws its
recommendation to the Cruise America Shareholders or approves another
acquisition transaction.
Fees and Expenses. Budget and Cruise America will pay their own fees,
costs and expenses incurred in connection with the Merger Agreement except that
the parties will equally divide printing and mailing costs associated with the
Registration Statement (of which this Proxy Statement/Prospectus forms a part)
and all filing and registration fees. In addition, Cruise America has agreed
that, if the Merger Agreement is terminated under certain circumstances,
including the withdrawal by the Cruise America Board of its recommendation to
the Cruise America Shareholders, then Cruise America will pay Budget $1.8
million to reimburse and compensate Budget for its expense, time and lost
opportunity costs in connection with the matters contemplated by the Merger
Agreement. Also, Cruise America may owe Budget an additional fee (not less than
$1.2 million) if it enters into an agreement with respect to, or consummates, a
business combination with another party within one year of terminating the
Merger Agreement.
REGULATORY APPROVALS (See Page 28)
In connection with the Merger, the following filings with, or approvals of,
governmental authorities are required: (i) the Commission's declaring the
Registration Statement (of which this Proxy Statement/Prospectus is a part)
effective; (ii) approvals in connection with compliance with applicable Blue Sky
or state securities laws; (iii) the filing of the Articles of Merger with the
Department of State of the State of Florida; (iv) the filings of such reports
under Section 13(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") as may be required in connection with the Merger Agreement and
other related transactions; and (v) appropriate filings under the Hart-Scott
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
Investment Canada Act. Both Cruise America and Budget made the appropriate
filings under the HSR Act on December 4, 1997. Unless terminated earlier, the
waiting period under the HSR Act expires on January 3, 1998.
DISSENTER'S/APPRAISAL RIGHTS (See Page 36)
Cruise America Shareholders are not entitled under the Florida Business
Corporation Act ("FBCA") to exercise dissenter's rights or appraisal rights in
connection with the Merger.
IRREVOCABLE PROXY AGREEMENTS (See Page 28)
Certain Cruise America Shareholders have executed Irrevocable Proxy
Agreements (the "Irrevocable Proxy Agreements") appointing Budget, with full
power of substitution, as proxy holder to represent their shares at the Special
Meeting. The shares owned by such shareholders represent approximately 30.1% of
the
5
<PAGE> 12
outstanding shares of Cruise America Common Stock entitled to vote on whether to
approve the Merger Agreement. Budget intends to vote the shares represented by
such proxies in favor of approval of the Merger Agreement.
VOTE REQUIRED; SECURITY OWNERSHIP BY MANAGEMENT (See Page 18)
Only holders of record of shares of Cruise America Common Stock at the
close of business on December 24, 1997 (the "Record Date") are entitled to vote
at the Special Meeting. Under Florida law and the Cruise America Articles of
Incorporation and Bylaws, the affirmative vote of the holders of a majority of
the outstanding shares of Cruise America Common Stock is required to approve the
Merger Agreement.
As of the date of this Proxy Statement/Prospectus, the executive officers
and directors of Cruise America beneficially owned an aggregate of 1,780,285
shares of Cruise America Common Stock, or approximately 28.9% of the shares of
Cruise America Common Stock then outstanding.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (See Page 29)
Certain executive officers and directors of Cruise America have interests
that may present them with potential conflicts of interest with respect to the
Merger. For example, certain executive officers and directors have entered into
the Irrevocable Proxy Agreements and certain of them have post-Merger employment
arrangements with Budget. In addition, Budget has agreed to indemnify the
executive officers and directors of Cruise America against certain liabilities
arising prior to the Effective Time to the fullest extent permitted under the
FBCA or the bylaws of Cruise America and to maintain Cruise America's existing
directors' and officers' liability insurance policy or a comparable policy, in
each case for a period of six years after the Effective Time. As of the date of
this Proxy Statement/Prospectus, executive officers and directors of Cruise
America beneficially own or control 1,780,285 shares of Cruise America Common
Stock. After the Merger occurs, such persons will beneficially own or control
approximately 499,779 shares of Budget Common Stock. The Cruise America Board
was aware of these interests and considered them, among other matters, in
approving the Merger Agreement and the transactions contemplated thereby.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (See Page 31)
Budget and Cruise America expect the Merger to be a tax-free reorganization
for federal income tax purposes so that no gain or loss will be recognized by
the Cruise America Shareholders, except in respect of cash received in lieu of
fractional shares. At the Effective Time as a condition to closing, Budget and
Cruise America will receive an opinion of King & Spalding, counsel to Budget, to
the effect that, subject to the assumptions, qualifications and limitations set
forth therein, the Merger will qualify as a tax-free reorganization for federal
income tax purposes under the Internal Revenue Code of 1986, as amended (the
"Code").
AMENDMENT TO CRUISE AMERICA'S RIGHTS AGREEMENT (See Page 28)
In connection with the execution of the Merger Agreement, Cruise America
amended its Rights Agreement dated as of March 8, 1989 between Cruise America
and ChaseMellon Securities LLC (formerly Mellon Securities Trust Company), as
rights agent (the "Rights Agreement"), so that (i) entering into the Merger
Agreement and Irrevocable Proxy Agreements and the consummation of the Merger
and the other transactions contemplated thereby did not and will not result in
the Rights (as defined in the Rights Agreement) being triggered or becoming
exercisable, and (ii) the Rights and Rights Agreement will terminate at the
Effective Time of the Merger.
OPINION OF CRUISE AMERICA'S FINANCIAL ADVISOR (See Page 21)
Pursuant to an engagement letter dated October 28, 1997, PHS&G was retained
by Cruise America to render an opinion as to the fairness from a financial point
of view of the Merger Consideration to be received by the Cruise America
Shareholders in connection with the proposed Merger. On November 25, 1997, at a
special meeting of the Cruise America Board to approve the Merger, PHS&G
delivered to the Cruise America Board its written opinion to the effect that, as
of the date of its opinion and based on the assumptions
6
<PAGE> 13
and subject to the qualifications and limitations set forth therein, the Merger
Consideration to be received by the Cruise America Shareholders pursuant to the
Merger Agreement was fair, from a financial point of view, to the Cruise America
Shareholders. A copy of the opinion of PHS&G is attached to this Proxy
Statement/ Prospectus as Annex B. The attached opinion sets forth the
assumptions made, the matters considered, the scope and limitations of the
review undertaken and procedures followed by PHS&G. CRUISE AMERICA SHAREHOLDERS
ARE URGED TO READ PHS&G'S OPINION IN ITS ENTIRETY. See "The Merger -- Opinion of
Cruise America's Financial Advisor."
ANTICIPATED ACCOUNTING TREATMENT (See Page 30)
The Merger is expected to qualify to be treated as a pooling of interests
for financial accounting purposes. Accordingly, the Merger will be treated as a
continuation of the existing businesses of Budget and Cruise America and
accounted for by combining the historical balances and results of Budget and
Cruise America. The assets and liabilities of Budget and Cruise America will be
carried forward at their recorded amounts. Results of operations of Budget after
the Merger will include the results of operations of Budget and Cruise America
for the entire fiscal period in which the Merger occurs. The reported results of
operations of Budget and Cruise America for prior periods will be combined and
restated as results of operations of the combined company.
RESALES OF BUDGET COMMON STOCK (See Page 31)
Shares of Budget Common Stock received in the Merger will be freely
tradeable by the holders thereof except for those shares held by holders who may
be deemed to be "affiliates" of Budget or Cruise America under applicable
federal securities laws. Cruise America has agreed to use commercially
reasonable efforts to provide to Budget the written agreements of certain
possible "affiliates" of Cruise America that they will not dispose of Budget
Common Stock received by them in the Merger except in compliance with the
Securities Act and Commission guidelines regarding qualifying for the "pooling
of interests" method of accounting.
7
<PAGE> 14
MARKETS AND MARKET PRICES
Budget. The Budget Common Stock has been listed on the NYSE under the
symbol "BD" since April 17, 1997. From the time of Budget's initial public
offering on August 25, 1994 through April 16, 1997, the Budget Common Stock was
traded on The Nasdaq National Market. As of December 15, 1997 there were 122
holders of record of Budget Common Stock. Although Budget is currently able to
pay cash dividends subject to limitations under the terms of its indebtedness,
Budget has never declared or paid cash dividends on the Budget Common Stock.
The following table sets forth for the fiscal quarter indicated the high
and low closing prices per share of Budget Common Stock as reported to Budget by
The Nasdaq National Market and the NYSE, as applicable.
<TABLE>
<CAPTION>
BUDGET
COMMON STOCK
------------------
HIGH LOW
------- --------
<S> <C> <C>
1995
First Quarter............................................. $ 9.75 $ 8.00
Second Quarter............................................ 9.00 7.25
Third Quarter............................................. 11.75 6.1875
Fourth Quarter............................................ 10.75 8.00
1996
First Quarter............................................. 10.50 8.25
Second Quarter............................................ 17.50 9.25
Third Quarter............................................. 20.25 12.375
Fourth Quarter............................................ 20.25 15.25
1997
First Quarter............................................. 29.50 16.00
Second Quarter............................................ 34.875 19.00
Third Quarter............................................. 37.00 28.1875
Fourth Quarter (through December 15, 1997)................ 37.00 32.875
</TABLE>
On October 17, 1997, the last trading date prior to public announcement of
the letter of intent relating to the proposed Merger, the closing sale price of
Budget Common Stock, as reported on a consolidated basis on the NYSE, was
$35.1875 per share. On November 24, 1997, the last trading date prior to the
public announcement of the signing of the Merger Agreement, the closing sale
price of Budget Common Stock, as reported on a consolidated basis on the NYSE,
was $34.50 per share.
8
<PAGE> 15
Cruise America. Cruise America Common Stock is listed on the American
Stock Exchange ("AMEX") under the symbol "RVR." Cruise America has not paid a
cash dividend on its shares of Cruise America Common Stock since 1982, and is
currently restricted from paying cash dividends under certain of its financing
arrangements. As of the Record Date there were holders of record of
Cruise America Common Stock.
The following table sets forth for the fiscal quarter indicated the high
and low closing prices per share of Cruise America Common Stock as reported on
the AMEX.
<TABLE>
<CAPTION>
CRUISE AMERICA
COMMON STOCK
--------------------
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR 1996
First Quarter ended July 31, 1995......................... $5.3125 $ 4.375
Second Quarter ended October 31, 1995..................... 5.50 4.6875
Third Quarter ended January 31, 1996...................... 5.875 5.00
Fourth Quarter ended April 30, 1996....................... 7.125 5.125
FISCAL YEAR 1997
First Quarter ended July 31, 1996......................... 8.00 6.25
Second Quarter ended October 31, 1996..................... 6.6875 5.25
Third Quarter ended January 31, 1997...................... 5.625 4.875
Fourth Quarter ended April 30, 1997....................... 5.1875 4.50
FISCAL YEAR 1998
First Quarter ended July 31, 1997......................... 7.4375 4.75
Second Quarter ended October 31, 1997..................... 8.25 6.50
Third Quarter (through December 15, 1997)................. 9.25 7.875
</TABLE>
On October 17, 1997, the last trading date preceding the public
announcement of the letter of intent relating to the proposed Merger, the
closing sale price of Cruise America Common Stock, as reported on the AMEX, was
$8.375 per share. On November 24, 1997, the last trading date prior to the
public announcement of the signing of the Merger Agreement, the closing sale
price of Cruise America Common Stock, as reported on the AMEX, was $8.875 per
share.
9
<PAGE> 16
COMPARATIVE PER SHARE INFORMATION
The following summary presents selected historical comparative unaudited
per share information for Budget and Cruise America, individually, and unaudited
per share information for Budget and Cruise America combined ("Combined
Company") which gives effect to the consummation of the Merger as if it had been
effective throughout the periods presented. Also presented is the Combined
Company unaudited pro forma data ("Pro Forma Combined Company") which gives
effect to the Merger discussed above, as well as the Transactions, as defined
elsewhere, as if they had occurred for balance sheet purposes at the balance
sheet date and for statement of operations purposes at the beginning of the
periods presented. Cruise America equivalent per share information amounts are
presented with respect to the Combined Company and the Pro Forma Combined
Company information. Such per share amounts allow comparison of historical
information with respect to the value of one share of Cruise America Common
Stock to the corresponding information with respect to the pro forma value of
one share of Cruise America Common Stock as a result of the Merger and the
Transactions, and are computed by multiplying the pro forma amounts by the
Exchange Ratio. Neither Budget nor Cruise America has paid any cash dividends
with regard to Budget Common Stock or Cruise America Common Stock, respectively,
during the periods for which comparative unaudited per share information is
presented.
For Budget, the statement of operations information for the years ended
December 31, 1996, 1995, and 1994, and balance sheet information as of December
31, 1996 and 1995, are based on, and should be read in conjunction with, the
consolidated audited financial statements of Budget incorporated herein by
reference. See "Where You Can Find More Information." The Cruise America
financial information and the remaining Budget financial information is based on
the respective historical consolidated unaudited financial statements of Cruise
America and Budget. In the opinion of the respective managements of Budget and
Cruise America, all adjustments necessary to present a fair statement of results
of interim periods of Budget and Cruise America (which adjustments were of a
normal recurring nature) have been included. The unaudited information for the
Combined Company and the Pro Forma Combined Company was derived from, and should
be read in conjunction with, the unaudited pro forma information appearing
elsewhere in this Proxy Statement/Prospectus. Results for Budget and Cruise
America for the nine months ended September 30, 1997, are not necessarily
indicative of results to be expected for their entire fiscal years, nor are pro
forma amounts necessarily indicative of results that will be obtained on a
combined basis.
<TABLE>
<CAPTION>
PER SHARE
----------------------
INCOME BOOK VALUE
------ ----------
<S> <C> <C>
Budget -- Historical
Year ended December 31, 1994.............................. $ 0.07 n/a
Year ended December 31, 1995.............................. $ 0.05 $ 5.50
Year ended December 31, 1996.............................. $ 0.47 $ 8.15
Nine months ended September 30, 1997...................... $ 1.68 $14.77
Unaudited Cruise America -- Historical(1)
Year ended December 31, 1994.............................. $(0.56) n/a
Year ended December 31, 1995.............................. $ 0.24 $ 4.58
Year ended December 31, 1996.............................. $ 0.55 $ 5.10
Nine months ended September 30, 1997...................... $(0.05)(2) $ 6.18
Budget and Cruise America -- Combined Company
Year ended December 31, 1994.............................. $(0.56) n/a
Year ended December 31, 1995.............................. $ 0.21 $ 7.54
Year ended December 31, 1996.............................. $ 0.70 $ 9.45
Nine months ended September 30, 1997...................... $ 1.53(2) $15.33
</TABLE>
10
<PAGE> 17
<TABLE>
<CAPTION>
PER SHARE
----------------------
INCOME BOOK VALUE
------ ----------
<S> <C> <C>
Cruise America -- Combined Company Equivalent(3)
Year ended December 31, 1994.............................. $(0.16) n/a
Year ended December 31, 1995.............................. $ 0.06 $ 2.12
Year ended December 31, 1996.............................. $ 0.20 $ 2.65
Nine months ended September 30, 1997...................... $ 0.43(2) $ 4.30
Combined Company -- Pro Forma
Year ended December 31, 1996.............................. $ 0.92 n/a
Nine months ended September 30, 1997...................... $ 0.67(2) n/a
Cruise America -- Pro Forma Combined Company Equivalent(3)
Year ended December 31, 1996.............................. $ 0.26 n/a
Nine months ended September 30, 1997...................... $ 0.19(2) n/a
</TABLE>
- ---------------
(1) The unaudited historical numbers for Cruise America for the years ended
December 31, 1996, 1995 and 1994 and the nine months ended September 30,
1997 were derived from the accounting records underlying the audited
financial statements for the fiscal years ended April 30, 1997, 1996 and
1995, incorporated herein by reference, and the unaudited interim financial
statements for the six months ended October 31, 1997.
(2) Reflects a one-time charge of $10.0 million to establish a reserve for
damages related to ongoing litigation. See "Risk Factors -- Judgment Against
Cruise America."
(3) Determined by multiplying the Exchange Ratio (0.28073) by the Combined
Company and the Pro Forma Combined Company per share amounts, as applicable,
so that the per share amounts are equated to the comparative values for each
share of Cruise America Common Stock.
11
<PAGE> 18
RISK FACTORS
Certain matters discussed in this Proxy Statement/Prospectus are forward
looking statements within the meaning of the federal securities laws. Although
Budget and Cruise America believe that the expectations reflected in such
forward looking statements are based upon reasonable assumptions, they can give
no assurance that their expectations will be achieved. In considering whether to
approve the Merger Agreement, the Cruise America Shareholders should carefully
consider, in addition to the other information in this Proxy
Statement/Prospectus, the following matters:
STOCK PRICE FLUCTUATIONS
The relative stock prices of the Budget Common Stock and the Cruise America
Common Stock at the Effective Time of the Merger may vary significantly from the
prices as of the date of signing of the Merger Agreement, the date hereof or the
date on which the Cruise America Shareholders vote on the Merger Agreement. Such
variations may be due to, among other factors, changes in the business,
operations and prospects of Budget and/or Cruise America, market assessments of
the likelihood that the Merger will be consummated and the timing thereof, or
general market or economic conditions.
The Exchange Ratio was fixed at 0.28073 by the parties and is not subject
to adjustment. Any increase or decrease of the market price of the Budget Common
Stock will correspondingly increase or decrease the value of Merger
Consideration to be received by the Cruise America Shareholders pursuant to the
Merger.
Further, there can be no assurance as to the trading volume or price of the
Budget Common Stock after the Effective Time of the Merger. Events outside the
control of Budget which could adversely affect the market value of Budget
assets, as well as the market value of the Budget Common Stock, may occur during
the period from the date of this Proxy Statement/Prospectus to the Effective
Time of the Merger or thereafter. All of the Budget Common Stock to be issued to
the Cruise America Shareholders in connection with the Merger will be freely
tradeable except for shares received by holders who may be deemed to be
"affiliates" of Budget or Cruise America under applicable federal securities
laws. Sales of a substantial number of shares of Budget Common Stock by current
Cruise America Shareholders following the consummation of the Merger, or the
perception that such sales could occur, could adversely affect the market price
for Budget Common Stock after the Merger.
BENEFITS TO CERTAIN DIRECTORS AND OFFICERS OF CRUISE AMERICA; POSSIBLE CONFLICTS
OF INTEREST
In considering the recommendation of the Cruise America Board with respect
to the Merger Agreement and the transactions contemplated thereby, Cruise
America Shareholders should be aware that certain members of the Cruise America
Board and management of Cruise America have certain interests in the Merger that
are different from the interests of the Cruise America Shareholders generally.
See "The Merger -- Interests of Certain Persons in the Merger." No special
procedures were put in place to resolve any conflicts resulting from these
interests. However, the Cruise America Board was aware of these interests and
considered them, among other matters, in approving the Merger Agreement and the
transactions contemplated thereby.
DIFFERENCES IN RIGHTS OF CRUISE AMERICA SHAREHOLDERS
The rights of the holders of Cruise America Common Stock are presently
governed by Florida law, the Cruise America Articles of Incorporation and the
Cruise America Bylaws. After completion of the Merger, the rights of the holders
of Cruise America Common Stock that are converted into Budget Common Stock will
be governed by Delaware law, the Budget Amended and Restated Certificate of
Incorporation and the Budget Bylaws. Certain differences may reduce certain
existing rights of Cruise America Shareholders. See "Comparison of Rights of
Holders of Cruise America Common Stock and Budget Common Stock."
12
<PAGE> 19
TERMINATION PAYMENTS IF MERGER FAILS TO OCCUR
No assurance can be given that the Merger will take place. The Merger
Agreement provides for the payment by Cruise America of a termination fee of
$1.8 million if the Merger is terminated by Cruise America or Budget under
certain circumstances, including because the Cruise America Board withdraws its
recommendation to the Cruise America Shareholders to approve the Merger. In
addition to the termination fee, in certain circumstances the Merger Agreement
provides for an additional payment by Cruise America of not less than $1.2
million if Cruise America enters into an agreement with respect to, or
consummates, a business combination with another party within one year of
termination of the Merger Agreement.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
Budget has substantial indebtedness and significant debt service
requirements. As of September 30, 1997, Budget's total indebtedness was $2.6
billion (representing 74.2% of its total capitalization), of which $2.3 billion
represented senior secured indebtedness for the purchase of vehicles and $299
million represented non-vehicle indebtedness (representing 8.6% of its total
capitalization, excluding fleet debt). As of September 30, 1997, Budget had
$367.4 million of incremental availability under its vehicle financing
facilities to finance the purchase of fleet vehicles. The degree to which Budget
is leveraged has important consequences for holders of the Budget Common Stock,
including the following: (i) the ability of Budget to obtain additional
financing in the future, whether for working capital, fleet purchases,
acquisitions or other purposes, may be impaired; (ii) a substantial portion of
Budget's cash flow from operations is required to be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing funds available to
Budget for other purposes; (iii) Budget's flexibility in planning for or
reacting to changes in market conditions may be limited; (iv) Budget may be more
vulnerable in the event of a downturn in its business; and (v) because a
substantial portion of its indebtedness bears interest at floating rates, any
increase in prevailing interest rates will result in an increase in interest
expense incurred by Budget, which could have an adverse effect on its results of
operations.
The ability of Budget to meet its debt service obligations will depend on
its future operating performance and financial results, which will be subject in
part to factors beyond the control of Budget. Although Budget's management
believes that Budget's cash flow will be adequate to meet its interest and
principal payments, there can be no assurance that Budget will continue to
generate earnings in the future sufficient to cover its fixed charges. If Budget
is unable to generate earnings in the future sufficient to cover its fixed
charges and is unable to borrow sufficient funds under its existing credit lines
or from other sources, it may be required to refinance all or a portion of its
existing indebtedness or to sell all or a portion of its assets. There can be no
assurance that a refinancing would be possible nor can there be any assurance as
to the timing of any asset sales or the proceeds which Budget could realize
therefrom. In addition, the terms of certain indebtedness of Budget restrict the
ability of Budget to sell assets and the use of the proceeds therefrom.
If for any reason, including a shortfall in anticipated operating results
or proceeds from asset sales, Budget were unable to meet its debt service
obligations, it would be in default under the terms of its indebtedness. In the
event of such a default, the holders of such indebtedness could elect to declare
all such indebtedness immediately due and payable, including accrued and unpaid
interest, and to terminate their commitments (if any) with respect to funding
obligations under such indebtedness. In addition, such holders could proceed
against their collateral, which, in the case of the fleet financing facilities,
consists of substantially all Budget's fleet vehicles. Any default with respect
to any of Budget's indebtedness could result in a default under other
indebtedness or result in a bankruptcy of Budget.
AVAILABILITY OF FINANCING
Budget depends upon third-party financing to purchase its fleet vehicles.
Continued availability of such financing on favorable terms will be critical to
Budget's operations. As of September 30, 1997, 68.6% of Budget's indebtedness
was incurred in connection with major vehicle manufacturers' vehicle repurchase
programs. As a result, a significant change in the credit quality of the vehicle
manufacturers, particularly Ford, would significantly affect Budget's ability to
obtain such financing on favorable terms. In addition, certain
13
<PAGE> 20
events, such as a material increase in damage to vehicles, could reduce the
value of the collateral securing Budget's fleet financing facilities and cause
the acceleration of the repayment of such facilities. An inability of Budget to
obtain vehicle financing on favorable terms would have a material adverse effect
on Budget's financial condition and results of operations. There can be no
assurance that the sources of financing utilized by Budget or alternative
financing will remain or become available to Budget or that such financing will
be available on terms acceptable to Budget.
INTEGRATION OF BUDGET ACQUISITION
The Budget Acquisition was significantly larger than any of TEAM's previous
acquisitions and the combination and integration of the respective operations of
TEAM and BRACC are of a substantially greater scale than previously undertaken
by either company. The difficulties of managing such combinations and
integration are increased by the necessity of coordinating the operations of
geographically diverse organizations, of integrating different strategies and
operating systems, of integrating management and operating personnel from both
companies and of managing a worldwide franchise system. The success of Budget
depends on the ability of Budget's management team to: (a) manage a
significantly larger organization, (b) maintain and further develop
relationships with Budget's franchisees and (c) conduct operations on a
worldwide basis. There can be no assurance that Budget's management team will be
able to successfully manage the combined operations of TEAM and BRACC. An
inability to successfully manage the integration of TEAM and BRACC would have a
material adverse effect on Budget's results of operations and financial
condition.
ABILITY TO IMPLEMENT GROWTH STRATEGY
Management of Budget is undertaking initiatives to increase Budget's
revenues and improve its profitability by, among other things, acquiring the
operations of certain franchisees, enhancing its operations outside the United
States, expanding its retail car sales operations, adding car rental locations
in its existing markets, adding truck rental locations and expanding its truck
rental fleet, and increasing its marketing efforts to corporate accounts. In
addition, management expects Budget to realize certain cost savings and other
operating efficiencies as a result of the implementation of its business
strategy. Increasing the revenues of Budget, and realizing cost savings and
other operating efficiencies, could be affected by a number of factors beyond
Budget's control, such as general economic conditions, increased operating
costs, competitive conditions in the vehicle rental industry, levels of air
travel, fuel shortages, increased costs of vehicles and regulatory developments.
Each of these initiatives will involve risks to Budget, and there can be no
assurance that Budget will be successful in growing its business or that Budget
will achieve the expected cost savings and other operating efficiencies. In
addition, Budget's substantial leverage could affect its success in growing its
business.
JUDGMENT AGAINST CRUISE AMERICA
In October 1997, a California jury awarded damages of approximately $7.4
million against Cruise America. The judgment included a $2.6 million award of
punitive damages. In addition, in November 1997, the court awarded plaintiff's
counsel fees and expenses of $2.5 million. The management of Cruise America
believes the jury verdict is unjust and that the damages awarded are
inappropriate and excessive. Cruise America intends to vigorously pursue a
reversal of the jury decision or the elimination of the damages awarded through
the California Court of Appeal. No assurances may be given that such verdict
will be reversed or such damages will be eliminated or reduced.
The action arose out of a claim for an alleged wrongful termination by
Cruise America of a sublease agreement. The lawsuit has been pending since May
1987 and has been tried twice previously. The first trial resulted in a judgment
for the plaintiff of approximately $3.5 million that was reversed on appeal and
remanded for retrial. The second trial resulted in a net judgment for Cruise
America of $399,000, which was reduced on appeal and again remanded for a
retrial. Pending appeal, Cruise America has taken a one-time charge of $10.0
million to establish a reserve for damages in its second fiscal quarter, which
ended October 31, 1997. This one-time charge will adversely affect Cruise
America's results of operations for the six month
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period ended October 31, 1997 and will adversely impact the results of
operations of Budget, after giving effect to the consummation of the Merger.
In December 1997, Budget and Cruise America entered into an agreement
pursuant to which Budget will post, on behalf of Cruise America, a supersedeas
bond (the "Bond") to stay execution of the judgment against Cruise America
pending resolution of the appeal. Cruise America will pay to Budget a fee plus
all costs for the posting of the Bond and has agreed to indemnify Budget for any
losses, claims or damages arising as a result of or in connection with the
posting of the Bond.
COMPETITION
The vehicle rental industry is characterized by intense competition,
particularly with respect to price and service. In any geographic market, Budget
may encounter competition from national, regional and local vehicle rental
companies. Budget's main competitors in the car rental market are The Hertz
Corporation, Avis, Inc., Alamo Rent-A-Car, Inc., National Car Rental System,
Inc. and Enterprise Rent-A-Car Company. In consumer truck rentals, Budget faces
competition primarily from U-Haul International, Inc., Ryder TRS, Inc. and
Penske Truck Rental. There have been occasions when the major vehicle rental
companies have been adversely affected by industry-wide price cutting, and
Budget has on such occasions lowered its prices in response. Budget will not
generally be able to unilaterally raise its prices or to maintain its prices in
times of industry-wide price cutting.
The retail car sales industry also is characterized by intense competition,
consisting primarily of local new car dealerships selling new and later model
cars. In addition to local dealerships, Budget may face competition from
retailers such as CarMax and AutoNation that compete on the basis of large
inventory size, no-haggle pricing and aftersale service.
RESTRICTIONS IMPOSED BY INDEBTEDNESS
The terms of Budget's indebtedness include a number of significant
covenants that, among other things, restrict the ability of Budget to dispose of
assets, incur additional indebtedness, create liens, repay other indebtedness,
pay dividends, make certain investments or acquisitions, repurchase or redeem
capital stock, engage in mergers or consolidations, or engage in certain
transactions with affiliates, and otherwise restrict corporate activities. There
can be no assurance that such restrictions will not adversely affect Budget's
ability to finance its future operations or capital needs or to engage in other
business activities that may be in the interest of Budget. In addition, the
terms of certain of such indebtedness also require Budget to comply with certain
financial covenants. The ability of Budget to comply with such covenants may be
affected by events beyond Budget's control. A breach of any of these covenants
or the inability of Budget to comply with the required financial ratios could
result in a default under such indebtedness. In the event of any such default,
the lenders under such indebtedness could elect to declare all borrowings
outstanding under such indebtedness, together with accrued interest and other
fees, to be due and payable, to require Budget to apply all of its available
cash to repay such borrowings or to prevent Budget from making scheduled debt
service payments. If Budget were unable to repay any such borrowings when due,
the lenders could proceed against their collateral. If the indebtedness of
Budget under such collateralized indebtedness or other indebtedness were to be
accelerated, there can be no assurance that the assets of Budget would be
sufficient to repay such indebtedness in full. There can be no assurance that
Budget will be able to comply with the covenants included in its debt agreements
in the future or that it would be able to obtain any necessary waivers of those
covenants.
POTENTIAL CHANGES IN MANUFACTURERS' REPURCHASE PROGRAMS
Approximately 89% of the vehicles purchased by TEAM, the predecessor to
Budget, and approximately 85% of the vehicles purchased by BRACC in model year
1997 were eligible for repurchase by specified automobile manufacturers at fixed
prices on designated dates pursuant to such manufacturers' vehicle repurchase
programs ("Program Vehicles"). The availability of Program Vehicles limits a car
rental company's risk of a decline in residual value at the time of disposition
and enables it to fix its depreciation expense in advance. Vehicle depreciation
is the largest cost factor in Budget's vehicle rental operations.
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Management 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 continued through 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 have continued for
1997 model year vehicles. However, Budget could be adversely affected if
automobile manufacturers reduce the availability of Program Vehicles, related
incentives or increase the guaranteed depreciation.
SEASONALITY
The three-month period ended September 30, during the peak summer travel
months, has historically been the strongest period of the year for Budget. As a
result, any occurrence that disrupts travel patterns during the summer period
could have a material adverse effect on Budget's financial conditions and
results of operations. Cruise America's business is also seasonal. Cruise
America normally records profits in its first and second fiscal quarters (the
periods ending July 31 and October 31, respectively), and losses in the third
and fourth fiscal quarters (the periods ending January 1 and April 30,
respectively). Cruise America's purchases of motorhomes for the rental fleet are
also seasonal with the majority of the purchases being made in the first and
fourth quarters.
COSTS OF REGULATORY AND ENVIRONMENTAL COMPLIANCE
Budget is subject to various foreign, federal, state and local laws and
regulations that affect the conduct of its operations, including those related
to the sale of loss damage waivers, vicarious liability of vehicle owners,
consumer protection, advertising, used vehicle sales, the taxing and licensing
of vehicles, franchising operations and sales, and environmental compliance and
remediation. There can be no assurance that compliance with these laws and
regulations or the adoption of modified or additional laws and regulations will
not require material expenditures by Budget or otherwise have a material adverse
effect on its results of operations or financial condition.
DEPENDENCE ON PRINCIPAL SUPPLIER
Ford is Budget's principal supplier of vehicles. The number of vehicles
purchased from Ford has varied from year to year. In model year 1997,
approximately 73% of Budget's U.S. vehicle purchases were comprised of Ford
vehicles. Budget has agreed to purchase or lease Ford vehicles in such quantity
that the percentage of new Ford vehicles purchased or leased by Budget in the
United States, Canada, and other countries outside the European Union represents
at least 70% of the total new vehicle acquisitions by Budget, with a minimum
quantity of at least 80,000 vehicles in the United States in each model year.
Given the volume of vehicles purchased from Ford by Budget, shifting significant
portions of the fleet purchases to other manufacturers would require lead time
and certain operational changes. As a result, any inability of Ford to supply
Budget with the planned number and types of vehicles, any significant decline in
the quality and customer satisfaction with respect to Ford vehicles or any
failure of the parties to reach an agreement on the terms of any purchases,
could have a material adverse effect on Budget's financial condition and results
of operations.
RISKS OF INTERNATIONAL OPERATIONS
For 1996, on a pro forma basis, 8.9% of Budget's revenues were derived from
its international operations. Budget's international vehicle rental operations
are subject to certain risks, including adverse developments in the foreign
political and economic environment, varying governmental regulations, foreign
currency fluctuations, potential difficulties in staffing and managing foreign
operations and potential adverse tax consequences. There can be no assurance
that any of these factors will not have a material adverse effect on Budget's
results of operations or financial condition.
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DEPENDENCE ON PRINCIPAL EXECUTIVE OFFICERS
Budget's existing operations and continued future development are dependent
in part on the active participation of Sanford Miller, John Kennedy and Jeffrey
Congdon. The loss of the services of one or more of these individuals could have
a material adverse effect on Budget.
SUBSTANTIAL VOTING POWER BY PRINCIPAL EXECUTIVE OFFICERS
Budget has two classes of Common Stock: Class A Common Stock, holders of
which are entitled to one vote per share, and Class B Common Stock, holders of
which are entitled to ten votes per share. Messrs. Miller, Kennedy and Congdon
own all outstanding shares of Class B Common Stock, which, following the Merger,
together with the Class A Common Stock owned by such individuals, will represent
approximately 46.2% of the combined voting power of both classes of common
stock. As a result, such officers will be able to exert substantial influence
over the election of the Budget Board, thereby increasing the probability that
members elected by them will continue to direct the business, policies and
management of Budget.
POTENTIAL ANTI-TAKEOVER EFFECTS OF CHARTER AND BYLAW PROVISIONS;
POSSIBLE ISSUANCES OF PREFERRED STOCK
Certain provisions of Delaware law, Budget's Amended and Restated
Certificate of Incorporation (in particular, the voting rights of the Class B
Common Stock) and Budget'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 Budget.
Such provisions could limit the price that certain investors might be willing to
pay in the future for shares of the Budget 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 Budget 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. Budget has no current plans to issue any shares of preferred stock.
THE CRUISE AMERICA PROXY SOLICITATION PROCESS
SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished in connection with the
solicitation by the Cruise America Board of proxies to be voted at the Special
Meeting of Cruise America Shareholders to be held on January , 1998 at a.m.,
local time at Cruise America's corporate headquarters located at 11 West Hampton
Avenue, Mesa, Arizona. Each copy of this Proxy Statement/Prospectus mailed or
delivered to holders of Cruise America Common Stock is accompanied by the Notice
of Special Meeting, a form of Proxy and Cruise America's latest Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q. At the Special Meeting, Cruise
America Shareholders will be asked to consider and vote on a proposal to approve
and adopt the Merger Agreement and the transactions contemplated thereby. A copy
of the Merger Agreement is attached hereto as Annex A and is incorporated herein
by this reference.
If the Merger is consummated, each outstanding share of Cruise America
Common Stock will be converted into the right to receive 0.28073 of a share of
Budget Common Stock, plus cash, without interest, for any fractional shares of
Budget Common Stock after such conversion.
This Proxy Statement/Prospectus also constitutes the Prospectus of Budget
with respect to the shares of Budget Common Stock to be issued in the Merger.
Information in this Proxy Statement/Prospectus with respect to Budget, including
pro forma information, has been supplied by Budget. The information with respect
to Cruise America has been supplied by Cruise America.
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RECORD DATE AND SHARES ENTITLED TO VOTE
Only holders of record of shares of Cruise America Common Stock at the
close of business on the Record Date are entitled to vote at the Special
Meeting. As of the Record Date, there were shares of Cruise America Common
Stock issued and outstanding held by approximately holders of record.
Cruise America Shareholders who wish to vote at the Special Meeting must either
execute and return a proxy in accordance with the procedures set forth herein
and in the accompanying proxy or attend the Special Meeting in person.
VOTE REQUIRED; SECURITY OWNERSHIP OF MANAGEMENT
Under Florida law and Cruise America's Articles of Incorporation and
Bylaws, the affirmative vote of the holders of a majority of the outstanding
shares of Cruise America Common Stock is required to approve the Merger
Agreement. As of the date of this Proxy Statement/Prospectus, the executive
officers and directors of Cruise America beneficially owned an aggregate of
1,780,285 shares of Cruise America Common Stock, or approximately 28.9% of the
shares of Cruise America Common Stock then outstanding. Certain Cruise America
Shareholders have executed Irrevocable Proxy Agreements appointing Budget, with
full power of substitution, as proxy holder to represent their shares at the
Special Meeting. The shares owned by such shareholders who have signed the
Irrevocable Proxy Agreements represent approximately 30.1% of the outstanding
shares entitled to vote on whether to approve the Merger Agreement and the
transactions contemplated thereby. Budget intends to vote the shares represented
by such proxies in favor of approval of the Merger Agreement. Approval of the
Merger Agreement by the stockholders of Budget is not required.
Abstentions will be considered as shares present and entitled to vote for
purposes of determining the presence of a quorum and for purposes of determining
the outcome of any matter submitted to the Cruise America Shareholders for a
vote, but are not counted as votes "for" or "against" any matter. Cruise America
will treat shares referred to as "broker or nominee non-votes" (shares held by
brokers or nominees as to which instructions have not been received from the
beneficial owners or persons entitled to vote and the broker or nominee does not
have discretionary voting power on a particular matter) as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. For purposes of determining the outcome of any matter as to which the
proxies reflect broker or nominee non-votes, shares represented by such proxies
will be treated as not present and not entitled to vote on that subject matter
and therefore would not be considered by Cruise America when counting votes cast
on the matter (even though those shares are considered for quorum purposes and
may be entitled to vote on other matters). If less than a majority of the
outstanding shares of Cruise America Common Stock are represented at the Special
Meeting, a majority of the shares so represented may adjourn the Special Meeting
without further notice.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is enclosed with this Proxy Statement/Prospectus. All
shares of Cruise America Common Stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted in accordance
with the instructions indicated on such proxies. If no instructions are
indicated, such shares will be voted FOR approval of the Merger Agreement and,
in the discretion of the proxy holder as to any other matter which may properly
come before the Special Meeting.
Any Cruise America Shareholder that has previously delivered a properly
executed proxy may revoke such proxy at any time before its exercise. A proxy
may be revoked either by (i) filing with the Secretary of Cruise America prior
to the Special Meeting, at Cruise America's principal executive offices, either
a written revocation of such proxy or a duly executed proxy bearing a later date
or (ii) attending the Special Meeting and voting in person, regardless of
whether a proxy has previously been given. Presence at the Special Meeting will
not revoke a shareholder's proxy unless such shareholder votes in person.
The cost of solicitation of proxies will be borne by Cruise America.
Proxies may be solicited by personal interview, mail or telephone. In addition,
Cruise America may reimburse brokerage firms and other persons representing
beneficial owners of shares of Cruise America Common Stock for their expenses in
forwarding solicitation materials to beneficial owners. Proxies may also be
solicited by certain of Cruise America's
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executive officers, trust managers and regular employees, without additional
compensation, personally or by telephone or facsimile transmission.
THE MERGER
BACKGROUND OF THE MERGER
In the fall of 1996, and again in the spring of 1997, Sanford Miller, Chief
Executive Officer of Budget, and Randall S. Smalley, Chief Executive Officer of
Cruise America, engaged in several informal discussions relating to a possible
business combination between Cruise America and Budget, including a merger.
During the period between July 28, 1997 and August 19, 1997, senior executives
of Budget and Cruise America had further discussions and began to discuss the
possible terms of a merger between the companies. None of such discussions
resulted in any agreement.
On August 20, 1997, Budget indicated that, subject to negotiation of
acceptable terms and conditions, it may be interested in a possible merger
between Budget and Cruise America in which Cruise America Shareholders could
receive $8.50 per share in Budget Common Stock. Cruise America responded to
Budget that the $8.50 per share consideration was inadequate.
On October 1, 1997, Budget indicated that, subject to negotiation of
acceptable terms and conditions, it may be interested in a possible merger
between Budget and Cruise America in which Cruise America Shareholders could
receive $9.50 per share in Budget Common Stock. On October 9, 1997, senior
executives of Cruise America and Budget met to discuss a possible $9.50 per
share transaction. Between October 10, 1997 and October 15, 1997, senior
executives of Cruise America and its legal counsel and senior executives of
Budget and its legal counsel held several discussions concerning the terms and
conditions of a non-binding letter of intent with respect to such merger
transaction.
On October 15, 1997, the Cruise America Board met to review and discuss the
material provisions of the non-binding letter of intent, including those
relating to the financial consideration, structure, tax treatment, conditions to
closing and exclusivity. During the meeting, Cruise America's outside legal
counsel also reviewed with the Cruise America Board the legal standards
applicable to its consideration of the proposed merger transaction.
Between October 15 and October 19, 1997, Cruise continued to have
discussions in order to finalize the letter of intent. On October 20, 1997,
Budget and Cruise America signed the non-binding letter of intent with respect
to the proposed Merger and Budget and Cruise America issued a press release
announcing the proposed Merger.
Pursuant to an engagement letter dated October 28, 1997, Cruise America
retained PHS&G to serve as its financial advisor in connection with the Merger.
The Merger Agreement was negotiated during October and November 1997.
On November 25, 1997, a special meeting of the Cruise America Board was
held at Cruise America's headquarters in Mesa, Arizona. At the meeting, a
representative of PHS&G made a presentation to the Cruise America Board which
included an analysis of the historical market prices and trading activity of
each of Cruise America Common Stock and Budget Common Stock, a comparison of the
financial position and operating results of each of Cruise America and Budget
with those of other comparable publicly traded companies, and valuations of each
of Cruise America and Budget on a stand-alone basis (using various
methodologies). PHS&G rendered its opinion that, as of such date and based on
the assumptions and subject to the qualifications and limitations set forth
therein, the Merger Consideration was fair to Cruise America Shareholders from a
financial point of view. Following discussion of and questions by the Cruise
America Board to the PHS&G representative, the Cruise America Board voted
unanimously to adopt and approve the Merger Agreement and the transactions
contemplated thereby, and to recommend that the Cruise America Shareholders vote
to approve the Merger Agreement and the transactions contemplated thereby.
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The Cruise America Board considered the terms of the Merger Agreement,
including the Merger Consideration, the conditions, the representations and
warranties and the Termination Fee, before deciding to recommend that the Cruise
America Shareholders approve the Merger Agreement.
REASONS FOR THE MERGER
Cruise America. In approving and adopting the Merger Agreement and
formulating its recommendation that the Cruise America Shareholders approve the
Merger Agreement and the consummation of the Merger, the Cruise America Board
considered a number of factors, including, without limitation, the following:
1. The Cruise America Board's familiarity with and review of Cruise
America's business, operations, financial condition and earnings on an
historical and prospective basis;
2. The opinion of PHS&G to the Cruise America Board on November 25,
1997 that, as of such date and based on the assumptions and subject to the
qualifications and limitations set forth therein, the Merger Consideration
was fair to Cruise America Shareholders from a financial point of view;
3. The terms of the Merger Agreement, including the Merger
Consideration, in particular that it reflected a 10.5% premium for Cruise
America Shareholders based on the closing prices of Cruise America Common
Stock and Budget Common Stock on October 17, 1997, the last day of trading
prior to the public announcement of the letter of intent relating to the
proposed Merger as well as a premium over the historical trading prices of
the Cruise America Common Stock over the previous several years;
4. The Cruise America Board's knowledge and review, based in part on
the presentation by PHS&G, of (a) the historical stock price performance of
Budget, the potential for increased earnings for Cruise America
Shareholders as shareholders of Budget, and Budget's substantial market
capitalization, and (b) the business, operations and financial condition
and earnings of Budget on an historical and a prospective basis; and
5. The Cruise America Board's review of alternatives to the proposed
Merger for enhancing shareholder value, considering specifically the
factors relating to Cruise America's ability to continue to generate
revenue growth, improve profitability and enhance shareholder value on a
stand-alone basis and the lack of other merger or similar business
combination opportunities for Cruise America.
The foregoing discussion of the information and factors considered by the
Cruise America Board is not intended to be exhaustive but is believed to include
all material factors considered by the Cruise America Board. In reaching its
determination to approve and recommend the Merger Agreement and the transactions
contemplated thereby, the Cruise America Board did not assign any relative or
specific weights to the factors considered in reaching such determination.
THE CRUISE AMERICA BOARD HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF CRUISE AMERICA AND ITS SHAREHOLDERS, HAS ADOPTED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE CRUISE AMERICA SHAREHOLDERS VOTE
FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
Budget. The Budget Board believes that the terms of the Merger Agreement
and the Merger and the other transactions contemplated thereby are in the best
interests of Budget and the stockholders of Budget. Accordingly, the Budget
Board has approved the Merger Agreement. In reaching its decision, the Budget
Board considered several factors and consulted with Budget's management and
outside legal counsel. The principal reasons, to which relative weights were not
assigned, for the Budget Board's approval of the Merger Agreement include the
following:
1. The Budget Board believes that the business conducted by Cruise
America will complement and enhance Budget's core vehicle rental and
sales businesses. The Merger may afford certain cross-marketing
opportunities, including: (i) the cross promotion of both Cruise
America's and Budget's
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products; (ii) the development of joint marketing programs and (iii) the
potential of offering package deals with both Cruise America's and
Budget's existing customers. Also, Cruise America's proprietary modular
approach of refurbishing the camper portions of vehicles and remounting
them on new RV truck chassis may present unique cost-saving
opportunities with Budget's existing truck rental operations. Finally,
the Budget Board also believes that the Merger may result in certain
long-term business synergies through, among other matters, the sharing
of certain administrative, operational, research and development,
marketing and public company expenses, which may permit cost savings
through the elimination of duplicate costs.
2. Cruise America's strategically situated rental locations near
national parks and other scenic destinations across the United States
and Canada, as well as its established and growing base of inbound
European leisure travelers, is expected to enhance Budget's market
presence in these locations. Also, Cruise America's rentals and sales of
RVs is expected to complement and enhance Budget's existing rentals and
sales operations.
3. The Merger is expected to enable Budget to reduce Cruise
America's fleet financing costs due to Budget's lower borrowing rates
resulting from its larger size and net worth.
4. The senior executives of Budget negotiated the Merger
Consideration with executives of Cruise America on an arms'-length basis
and, as part of such negotiations, considered the projected contribution
of Cruise America's business operations to the results of operations of
Budget and the fact that the proposed Merger would be accretive to
Budget's estimated future earnings per share.
5. The Budget Board considered presentations from, and discussions
with, certain executive officers of Budget and outside legal counsel
regarding the business, financial, accounting and legal due diligence
with respect to Cruise America and the terms and conditions of the
Merger Agreement.
The Budget Board also discussed certain negative factors and risks that
could arise or do arise from the Merger. These included, among others, the
expansion into a new market, potential difficulties of integrating Cruise
America's operations into those of Budget, the significant costs involved in
connection with consummating the Merger and the substantial time and effort
Budget management will expend to effect the Merger and integrate the business of
Cruise America into Budget. The Budget Board believed that the benefits and
advantages of the Merger outweighed the negative factors and risks.
OPINION OF CRUISE AMERICA'S FINANCIAL ADVISOR
PHS&G has delivered to the Cruise America Board its written opinion dated
November 25, 1997, that, as of such date and based on the assumptions and
subject to the qualifications and limitations set forth therein, the Merger
Consideration is fair, from a financial point of view, to the Cruise America
Shareholders. The full text of the opinion of PHS&G, which sets forth the
assumptions made, procedures followed, matters considered and limitation on the
review undertaken, is attached as Annex B to this Proxy Statement/Prospectus.
CRUISE AMERICA SHAREHOLDERS ARE URGED TO READ PHS&G'S OPINION CAREFULLY AND IN
ITS ENTIRETY.
The Cruise America Board retained PHS&G pursuant to an engagement letter
dated October 28, 1997 to act as its financial advisor and to render its opinion
as to whether or not the Merger Consideration is fair, from a financial point of
view, to the Cruise America Shareholders. On November 25, 1997, PHS&G delivered
its opinion to the Cruise America Board that, as of such date and based on the
assumption and subject to the qualifications and limitations set forth therein,
the Merger Consideration was fair, from a financial point of view, to the Cruise
America Shareholders.
THE FULL TEXT OF PHS&G'S OPINION, DATED NOVEMBER 25, 1997, WHICH SETS FORTH
THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN BY PHS&G IN RENDERING ITS OPINION,
IS ATTACHED AS ANNEX B TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED
HEREIN BY REFERENCE. PHS&G'S OPIN-
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ION IS DIRECTED SOLELY TO THE FAIRNESS OF THE MERGER CONSIDERATION, AS OF THE
DATE OF THE OPINION AND FROM A FINANCIAL POINT OF VIEW, TO THE CRUISE AMERICA
SHAREHOLDERS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY CRUISE AMERICA
SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER.
IN ADDITION, PHS&G WAS NOT REQUESTED TO OPINE AS TO, AND ITS OPINION DID NOT
ADDRESS, THE UNDERLYING BUSINESS DECISION OF THE CRUISE AMERICA BOARD TO ENTER
INTO THE MERGER AGREEMENT OR TO PROCEED WITH OR TO EFFECT THE PROPOSED MERGER.
THE SUMMARY OF PHS&G'S OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION ATTACHED HERETO AS ANNEX B. CRUISE
AMERICA SHAREHOLDERS ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY.
PHS&G is an investment banking and advisory firm engaged, as part of its
activities, in the evaluation of businesses and their securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Cruise America retained
PHS&G because of its experience and expertise in the valuation of businesses and
their securities in connection with mergers and acquisitions. In the ordinary
course of business, PHS&G may, from time to time, trade equity securities of
Cruise America and Budget for its own account and for accounts of its customers,
and accordingly, may at any time hold a long or short position in such
securities.
In conducting its investigation and analysis and in arriving at its
opinion, PHS&G reviewed such information and took into account such financial
and economic factors as it deemed relevant under the circumstances. In that
connection, PHS&G, among other things: (i) reviewed certain internal
information, primarily financial in nature, including projections concerning the
business and operations of Cruise America and Budget furnished to PHS&G for
purposes of its analysis, as well as publicly available information including,
but not limited to, Cruise America's and Budget's recent filings with the
Commission and equity analyst research reports prepared by various investment
banking firms; (ii) reviewed the draft Merger Agreement in the form presented to
the Cruise America Board; (iii) compared the historical market prices and
trading activity of Cruise America Common Stock and Budget Common Stock with
those of certain other publicly traded companies PHS&G deemed relevant; (iv)
compared the financial position and operating results of Cruise America and
Budget with those of other publicly traded companies PHS&G deemed relevant; (v)
compared the proposed financial terms of the Merger with the financial terms of
certain other business combination transactions that PHS&G deemed relevant; and
(vi) reviewed the potential pro forma effects of the Merger on Budget prepared
by management of Budget and Cruise America. PHS&G held discussions with members
of Cruise America's and Budget's respective senior management concerning Cruise
America's and Budget's historical and current financial conditions and operating
results, as well as the future prospects of Cruise America and Budget,
respectively. PHS&G also considered such other information, financial studies,
analysis and investigations and financial, economic and market criteria as PHS&G
deemed relevant for the preparation of its opinion. The Merger Consideration was
determined by Cruise America and Budget in arm's length negotiations. Cruise
America did not place any limitation upon PHS&G with respect to the procedures
followed or factors considered by PHS&G in rendering its opinion.
In arriving at its opinion, PHS&G assumed and relied upon the accuracy and
completeness of all of the financial and other information that was publicly
available or provided to it by or on behalf of Cruise America and Budget, and
was not engaged, and did not undertake, to independently verify any such
information. PHS&G assumed, with Cruise America's consent, (i) all material
assets and liabilities (contingent or otherwise, known or unknown) of Cruise
America and Budget are as set forth in their respective financial statements;
(ii) the Merger will be accounted for as a pooling of interests pursuant to
Accounting Principles Board Opinion No. 16; and (iii) the Merger will be
consummated in accordance with the terms of the Merger Agreement without any
amendment thereto or waiver by Cruise America and Budget of any condition to
their respective obligations. PHS&G also has assumed that the financial
forecasts examined by it were reasonably prepared on bases reflecting the best
available estimates and good faith judgments of Cruise America's and Budget's
respective senior management as to future performance of Cruise America and
Budget, respectively.
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PHS&G did not undertake or obtain an independent evaluation or appraisal of any
of the assets or liabilities (contingent or otherwise) of Cruise America and
Budget, nor did it make a physical inspection of the properties or facilities of
Cruise America and Budget. PHS&G's opinion necessarily was based upon economic,
monetary and market conditions as they existed and could be evaluated on the
date of its opinion, and did not predict or take into account any changes which
may occur, or information which may become available, after the date thereof.
PHS&G has disclaimed any undertaking or obligation to advise any person of any
change in any facts or matters affecting the opinion of which it becomes aware
after the date of the opinion. PHS&G was not requested to, and did not,
participate in the structuring or negotiation of the proposed Merger or the
terms of the Merger Agreement, or solicit third party indications of acquiring
all or any part of Cruise America. Furthermore, PHS&G expressed no opinion as to
the price or trading range of Cruise America and Budget securities following the
date of such opinion.
The following is a summary of the material financial analyses performed by
PHS&G in connection with rendering its opinion. PHS&G considered all such
analyses as described herein in connection with its opinion and no one method of
analysis was given particular emphasis as described in more detail below.
Analysis of Cruise America Valuation. PHS&G reviewed the terms of the
proposed Merger, including the form of the Merger Consideration, the proposed
method of accounting, the closing price of Budget Common Stock as of November
24, 1997, and the resulting indicated value of the Merger per share of Cruise
America Common Stock. The proposed form of Merger Consideration permitted the
opportunity for each Cruise America Shareholder to receive 0.28073 shares (the
"Exchange Ratio") of Budget Common Stock for every one share of Cruise America
Common Stock, subject to the limitations described under "-- Terms of the Merger
Agreement." The proposed method of accounting for the Merger was the pooling of
interests method. The indicated value for the Merger was $9.50 per share of
Cruise America Common Stock (the "Indicated Value"), based upon the average
price per share of Budget Common Stock of $33.84 based on the thirty (30) days
prior to the announcement of the Merger on October 20, 1997. To the extent
Budget Common Stock is higher or lower than $33.84 per share when the Merger
becomes effective, every $1 increase or decrease in Budget Common Stock will
translate into a $0.28073 increase or decrease in the value of the Merger
Consideration. This analysis showed that the Exchange Ratio represented a
premium of 11% to market price on the day prior to the announcement, and of 25%,
30% and 60% based on the last 3, 4 and 12 months, respectively, prior to the
announcement. This analysis also showed that the Exchange Ratio as a multiple of
Cruise America's actual fiscal year ended April 30, 1997 ("1997 Earnings") and
estimated fiscal year 1998 and 1999 ("1998 Estimate") and ("1999 Estimate")
earnings per share ("EPS") represented 20.65x EPS for 1997, 23.75x EPS for 1998
and 21.78x EPS for 1999, based on management's "most likely" projected results
for 1999, without accounting for the merged companies benefits. Using the latest
published financial statements of July 31, 1997, the total consideration is
worth approximately $167.2 million ($60.3 million for equity plus the assumption
of $106.9 million of funded debt).
Analysis of Publicly Traded Companies Comparable to Cruise America. PHS&G
reviewed and compared certain publicly available financial information relating
to Cruise America to corresponding financial information, ratios and public
market multiples, as of the most recently reported period for twelve publicly
traded companies which PHS&G deemed most relevant: Avis Rent-A-Car, Inc.; Budget
Group, Inc.; Hertz Corporation; AMERCO; Rollins Truck Leasing Corporation; Ryder
Systems, Inc.; Fleetwood Enterprises, Inc.; Monaco Coach Corporation; SMC
Corporation; Thor Industries, Inc.; Winnebago Industries, Inc.; and Holiday RV
Superstores, Inc. (the "Selected Companies"). The Selected Companies (car and
truck rental companies and recreational vehicle manufacturers and dealers) were
chosen because they are publicly traded companies with operations that for
purposes of analysis, may be considered similar to the operations of Cruise
America. However, no public companies directly compete in Cruise America's
market and none of the Selected Companies have exactly the same business
fundamentals.
The data described below with respect to the Selected Companies consists of
adjusted mean data which excludes the high and low values for such group as of
the most recently reported period ("Adjusted Mean"). PHS&G calculated and
compared various financial multiples and ratios. The multiples of Cruise America
were calculated using a price of $9.50, the Indicated Value, and compared to the
Selected Companies last reported common stock prices on October 20, 1997. The
multiples and ratios for Cruise America were based
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on information provided by Cruise America's management and other publicly
available information and the multiples for each of the Selected Companies were
based on the most recent publicly available information. The Selected Companies
multiples were adjusted downward by 20% to account for (1) Cruise America's low
earnings growth opportunities as compared to the Selected Companies, (2) Cruise
America's significantly smaller size from a financial standpoint as compared to
the Selected Companies, and (3) Cruise America's lower historical and projected
return on equity as compared to the Selected Companies. With respect to the
Selected Companies, PHS&G considered price/last twelve months ("LTM") earnings
ratios, price/estimated 1997 and 1998 earnings ratios, price/LTM earnings before
interest and taxes ("EBIT") ratios and price/LTM operating cash flow ratios.
PHS&G's analyses of the Selected Companies, taking into account the 20% discount
discussed above, resulted in a price/LTM earnings ratio Adjusted Mean of 15.0x
compared to 21.30x for the Indicated Value, a price/estimated 1997 and 1998
ratios Adjusted Mean of 14.07x for estimated 1997 and 11.23x for estimated 1998
compared to price/estimated 1998 ratio of 23.75x and a price/ estimated 1999
ratio of 21.78x for the Indicated Value; a price/LTM EBIT ratio Adjusted Mean of
5.21x compared to 4.96x for the Indicated Value; and a price/LTM operating cash
flow ratio Adjusted Mean of 4.11x compared to 5.17x for the Indicated Value. The
per share valuation of Cruise America implied by the price/LTM earnings multiple
is $6.75. The per share valuation implied by the price/estimated 1997 multiple
is $5.63. The per share valuation implied by the price/estimated 1998 multiple
ranges from $4.94 to $6.74. The per share valuation implied by the price/LTM
EBIT multiple is $9.95. The per share valuation implied by the price/LTM
operating cash flow multiple is $7.56.
Discounted Future Earnings Analysis. PHS&G performed a discounted future
earnings analysis of Cruise America on a stand-alone basis using Cruise America
management's "most likely" projections for the five years ending April 30, 2002,
without taking into account any cost savings and synergies that may be realized
following the Merger. In that analysis, PHS&G assumed terminal value multiples
of 11x to 15x such projected earnings and discount rates of 17% to 21%. Such
analysis produced implied values of Cruise America Common Stock of $3.06 to
$4.77. Under more aggressive projection scenarios (beyond management
expectations), assuming larger fleet size (up to 4,269 vehicles instead of 3,817
in 2002) or substantially higher average daily rental rates (up to $128 in 2002
versus $94 in 1997) and using the same terminal value multiples and discount
rates, the analysis implied values of Cruise America Common Stock of $3.75 to
$5.85 with the larger fleet size scenario, $4.61 to $7.20 with price increase of
5% per year, $6.01 to $9.38 with price increase of 6% per year and $7.45 to
$11.68 with price increase of 7% per year. PHS&G also performed a discounted
future earnings analysis of Budget assuming that the cost savings and synergies
that Budget management estimates will be realized, beginning after the first
year of such projections, and based on Budget management and research analyst
reports, consensus earnings and growth estimates. Using terminal value multiples
of 18x to 22x and discount rates of 16% to 18%, the analysis produced implied
values of Cruise America Common Stock of $8.80 to $11.80. PHS&G noted that the
discounted future earnings analysis was included because it is a widely used
valuation methodology, but noted that the results of such methodology are highly
dependent upon numerous assumptions that must be made, including earnings growth
rates, terminal values and discounted rates.
Consideration of the Transaction Comparable Analysis. PHS&G examined
mergers and acquisitions of companies from January 1, 1993 to October 20, 1997,
under the following Standard Industry Classification codes: 3716, 5561, 7513,
7514 and 7519. While the transaction comparable analysis is a commonly used
valuation indicator, PHS&G did not employ such analysis for the purposes of its
opinion. Because the reasons for and circumstances surrounding each of the
transactions analyzed were diverse and because of the inherent differences
between the Merger and the selected transactions, an appropriate use of a
transaction comparable analysis in this instance necessarily involves
qualitative judgments concerning, among other things, differences between the
characteristics of these transactions and the Merger that would affect the
acquisition value of the selected transactions. For these reasons and for the
lack of relevant comparable transactions, PHS&G considered a transaction
comparable analysis inappropriate for valuing Cruise America.
Analysis of Budget. In order to assess the relative public market
valuation of the Budget Common Stock to be issued in the Merger, PHS&G (i)
reviewed certain publicly available financial information as to the most recent
reported period and stock market information as of October 20, 1997, for Budget
and certain
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selected publicly traded companies which PHS&G deemed relevant and (ii)
performed a discounted future earnings analysis of Budget. Such comparable
companies consisted of Avis Rent-A-Car, Inc.; Hertz Corporation; AMERCO; Rollins
Truck Leasing Corporation; Ryder's System, Inc.; Circuit City Stores -- CarMax;
and Cross Continent Auto Retailers, Inc. (the "Budget Comparable Companies").
The data described below with respect to the Budget Comparable Companies
consists of median data for such group and are compared to Budget Common Stock
and Budget's financial and operating information as reported as of October 20,
1997.
PHS&G noted that the mean ratios of price/LTM EPS, price/estimated 1997 and
1998 EPS, price/ LTM EBIT and price/LTM operating cash flow (as estimated by
Budget senior management for Budget and as derived from equity research
analysts' reports as reported by the Institutional Brokers Estimate System, a
database of institutional analysts' consensus earnings estimates, for the Budget
Comparable Companies), were 62.04x, 19.0x, 14.1x, 7.19x and 5.24x, respectively,
for the Budget Comparable Companies as compared to 185.89x, 21.97x, 16.84x,
15.28x and 6.61x, respectively, for Budget.
PHS&G performed a discounted future earnings analysis of Budget on a
stand-alone basis, making Budget's management and research analyst projections
of future earnings for the two-year period ending December 31, 1998, and the
five-year period ending December 31, 2002. PHS&G assumed terminal value
multiples of 18x to 22x such projected earnings and discount rates of 16% to
18%. Such analysis produced implied values of Budget Common Stock of $31.20 to
$38.90 based on 1998 estimated results and $31.50 to $41.90 based on 2002
projected results excluding the benefits and pro forma EPS accretion from the
Merger. PHS&G noted that the discounted future earnings analysis was included
because it is a widely-used valuation methodology, but noted that the results of
such methodology are highly dependent upon the numerous assumptions that must be
made, including earnings growth ratios, terminal values and discount rates.
Pro Forma Pooling Acquisition Analysis. PHS&G analyzed certain financial
aspects of the Merger on a pro forma "pooling of interests" basis. For purposes
of the pooling acquisition analysis, PHS&G relied on certain key assumptions
furnished by senior management of Cruise America and Budget, including the
amount and timing of assumed cost savings to be realized after the Merger, the
amount and timing of assumed revenue enhancements to be realized after the
Merger, the amount and timing of operating synergies to be realized after the
Merger, and the amount of restructuring charges to be incurred. These
assumptions were based on numerous variables and assumptions that are inherently
uncertain, including, without limitation, factors related to general economic,
market and competitive conditions. Accordingly, actual results could vary
significantly from those set forth in such assumptions. Based on these
assumptions, PHS&G's pro forma pooling acquisition analysis of the Merger from
Budget's perspective showed that the Merger, compared to continued operation of
Budget on a stand-alone basis, would result in pro forma EPS accretion of 8 to
12 cents per share.
Stock Trading Analysis. PHS&G reviewed the historical trading prices and
volume of Cruise America Common Stock and Budget Common Stock on a daily basis
from October 21, 1996, to October 20, 1997, and on a weekly basis from October
21, 1994, to October 24, 1997. PHS&G also compared the relative trading prices
of the Cruise America Common Stock to the Selected Companies and Budget Common
Stock to the Budget Comparable Companies over the previous three years.
The foregoing summary does not purport to be a complete description of the
analyses performed by PHS&G. The preparation of a fairness opinion is a complex
process and is not susceptible to partial analysis or a summary description.
PHS&G believes that its analyses must be considered as a whole and that
selecting portions of such analyses without considering all factors and analyses
would create an incomplete view of the process underlying its opinion. In its
analyses, PHS&G relied upon numerous assumptions made by senior management of
Cruise America and Budget with respect to industry performance, general business
and economic conditions, and other matters, many of which are beyond the control
of Cruise America and Budget. Analyses based upon forecasts of future results
are not necessarily indicative of actual values, which may be significantly more
or less favorable than suggested by such analyses. No company or transaction
used as a comparison in the analyses is identical to Cruise America or Budget or
to the Merger. Accordingly, an analysis of the results of the foregoing
necessarily involves complex considerations and judgments concerning financial
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and operating characteristics of the companies and other factors that could
affect the public trading volume of the companies to which Cruise America,
Budget and the Merger are being compared. Additionally, any estimates included
in PHS&G analyses do not purport to be appraisals and are not necessarily
reflective of the prices at which businesses actually may be sold. Because such
estimates are inherently subject to uncertainty, PHS&G does not assume
responsibility for their accuracy. PHS&G's opinion to the Cruise America Board
was one of many factors taken into consideration by the Cruise America Board in
making their determinations to approve the Merger Agreement.
Compensation. Pursuant to an engagement letter dated October 28, 1997,
between Cruise America and PHS&G, PHS&G has earned a fee of $125,000 for the
rendering of its written opinion dated November 25, 1997. Cruise America has
also agreed to reimburse PHS&G for its expense of legal counsel. Cruise America
has also agreed to indemnify PHS&G, its affiliates and their respective
directors, officers, employers, agents and controlling persons against certain
liabilities relating to or arising out of its engagement, including liabilities
under the federal securities laws. PHS&G has never provided any other investment
banking and advisory services to Cruise America or Budget in the past, and will
not earn any other fees contingent or otherwise in connection with this Merger.
TERMS OF THE MERGER AGREEMENT
General. The Merger Agreement provides that, following the approval of the
Merger Agreement by the Cruise America Shareholders and the satisfaction or
waiver of the other conditions to the Merger, at the Effective Time, Sub will be
merged with and into Cruise America in accordance with the provisions of the
FBCA. Cruise America will be the surviving corporation in the Merger and Cruise
America will become a direct or indirect wholly owned subsidiary of Budget.
Exchange Ratio. Each share of Cruise America Common Stock issued and
outstanding at the time of the Merger will be converted into the right to
receive 0.28073 of a share of Budget Common Stock. Any fractional shares of
Budget Common Stock that would result from such calculation will be converted
into cash. The Exchange Ratio was determined in arms' length negotiations
between representatives of Budget and Cruise America.
Conditions to the Merger. In addition to the approval of the Merger
Agreement by the holders of a majority of the outstanding shares of Cruise
America Common Stock, consummation of the Merger is subject to the satisfaction
or waiver of, among others, the following conditions: (i) both parties obtaining
all material consents, authorizations, orders and approvals of any governmental
body; (ii) both parties obtaining all material authorizations, consents, waivers
and approvals from parties to contracts or other agreements; (iii) expiration or
early termination of the applicable waiting period under the HSR Act; (iv)
effectiveness of the Registration Statement (of which this Proxy
Statement/Prospectus is a part) under the Securities Act; (v) Budget and Cruise
America obtaining a written opinion from King & Spalding, counsel to Budget, to
the effect that, among other things, the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code; (vi)
authorization for listing by the NYSE for the shares of Budget Common Stock to
be issued pursuant to the Merger Agreement; (vii) continued accuracy of each of
Budget's and Cruise America's representations and warranties as provided in the
Merger Agreement; and (viii) performance by each of Budget and Cruise America of
its respective obligations as provided in the Merger Agreement. The obligation
of Budget to effect the Merger is subject to the satisfaction or waiver of
Budget having received from Cruise America an affiliates letter from each
possible affiliate of Cruise America (as described in Section 5.16 of the Merger
Agreement).
Representations and Warranties. The Merger Agreement contains customary
representations and warranties including representations and warranties
regarding (i) the power and authority of Budget, Cruise America and Sub to enter
into the Merger Agreement and consummate the transactions contemplated thereby;
(ii) the capitalization of Budget and Cruise America; (iii) the
non-contravention of the Merger Agreement or the Merger with any organizational
document of Budget or Cruise America, or any agreement of which Cruise America
or Budget is a party or any applicable law; and (iv) compliance with applicable
laws.
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Covenants. The Merger Agreement also contains customary covenants
including covenants regarding (i) the conduct of business of Cruise America
during the pendancy of the Merger; (ii) continued access to information; (iii)
listing of the Budget Common Stock to be issued as Merger Consideration on the
NYSE; and (iv) notice to the other party of any material change in the normal
course of business.
Amendment. The Merger Agreement may be amended at any time by action of
the board of directors of each of Budget, Sub and Cruise America, except that no
amendment can be made after the approval of the Cruise America Shareholders if
such amendment reduces the amount or changes the form of consideration to be
delivered to the Cruise America Shareholders.
Employment Agreements. Concurrently with the execution of the Merger
Agreement, Randall S. Smalley, Robert A. Smalley, Robert A. Smalley, Jr. and
Eric R. Bensen executed new employment agreements (the "New Employment
Agreements") with Cruise America which will supersede and replace such
employees' existing employment agreements (the "Existing Agreements") with
Cruise America at the Effective Time. The New Employment Agreements provide for
a three year term for Robert A. Smalley and Eric R. Bensen and a five year term
for Randall A. Smalley and Robert A. Smalley, Jr. The employees are paid base
salaries of $285,000 (Randall A. Smalley), $260,000 (Robert A. Smalley, Jr.),
and $190,000 (Eric R. Bensen), respectively. These salaries are equal to the
salaries each respective employee received under his previous employment
agreement with Cruise America. Before the Effective Time, Cruise America, Budget
and Robert A. Smalley intend to enter into a termination agreement (the
"Termination Agreement") which will terminate Robert A. Smalley's New Employment
Agreement effective upon the execution of the Termination Agreement and will
terminate Robert A. Smalley's Existing Employment Agreement at the Effective
Time. Upon termination of Mr. Smalley's Existing Employment Agreement, Cruise
America will pay or cause to be paid under the Comprehensive Omnibus Budget
Reconciliation Act ("COBRA"), the COBRA premiums for Robert A. Smalley for
eighteen months after termination.
The New Employment Agreements include a covenant not to compete beginning
on the effective date of the New Employment Agreements and extending to the
second anniversary of the termination of the employee's employment thereunder
for Eric R. Bensen and on the third anniversary for the other employees. The New
Employment Agreements include a provision that provides for a termination
payment to the employee if such employee's employment is terminated without
cause by Cruise America or is terminated by the employee for Good Reason (as
defined in the New Employment Agreements). In addition, at the expiration of the
employee's employment under the New Employment Agreements, Cruise America agrees
to pay (or cause to be paid) COBRA premiums for such employee for twelve months
after expiration. Prior to the Effective Time, Cruise America has agreed not to
amend or terminate any of the New Employment Agreements.
Prior to the Effective Time, Cruise America has agreed that it will use its
best efforts to cause Robert Barton, Assistant Vice President of International
Marketing and Real Estate, and Don Markowski, Regional Manager of Canada, to
enter into employment agreements (the "Employment Agreements") substantially in
the form as exhibits attached to the Merger Agreement. The Employment Agreements
will provide for a three year term for each employee, and base salaries of
$125,000 (Robert Barton) and Canadian $75,000 (Don Markowski), respectively. The
Employment Agreements include a covenant not to compete beginning on the
effective date of the Employment Agreements and extending to the second
anniversary of the termination of the employee's employment thereunder.
Termination. The Merger Agreement may be terminated by (i) mutual written
agreement by Cruise America and Budget; (ii) Cruise America or Budget if the
conditions to such parties' obligations to consummate the Merger have not been
complied with or performed; (iii) Cruise America or Budget if the Merger is not
consummated by May 31, 1998; (iv) Cruise America or Budget if the other party is
enjoined or restrained by any governmental authority or other regulatory body,
and such injunction or restraining order prevents the performance by Cruise
America of its obligations under the Merger Agreement; (v) Cruise America or
Budget if the Cruise America Board withdraws or materially modifies its
recommendation to the Cruise America Shareholders or recommends another
Acquisition Proposal (as defined in the Merger
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Agreement) to the Cruise America Shareholders; and (vi) Budget if the
Anticipated Transaction Costs (as defined in the Merger Agreement) of Cruise
America exceed $1 million.
Fees and Expenses. Budget will pay its own fees, costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby, and Cruise America will pay its own respective fees, costs
and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby, except that the parties will equally divide
(i) printing and mailing costs associated with the Registration Statement (of
which this Proxy Statement/Prospectus is a part) and (ii) all filing and
registration fees related thereto. Cruise America has agreed that its
Anticipated Transactional Costs will be reasonable and customary for
transactions of this type, and in any event shall not exceed $1 million.
Termination Fees. Cruise America has agreed that, if the Merger Agreement
is terminated because the Cruise America Board withdraws its recommendation to
the Cruise America Shareholders to approve the Merger, Cruise America shall pay
Budget $1.8 million (the "Termination Fee") to reimburse and compensate Budget
for its expense, time and lost opportunity costs in connection with the matters
contemplated by the Merger Agreement. In addition, if Cruise America enters into
an agreement with respect to, or consummates, an Alternative Transaction (as
defined below) within one year of the payment by Cruise America of the
Termination Fee, Cruise America will pay to Budget an additional fee (the
"Topping Fee"), concurrently with the consummation of such Alternative
Transaction. The Topping Fee shall be equal to 25% of any Incremental Value (as
hereinafter defined). The Incremental Value is the amount by which the value of
the Alternative Transaction to Cruise America Shareholders shall exceed the
value of the Merger. In no case shall the Topping Fee be less than $1.2 million.
Amendment to Cruise America's Rights Plan. In connection with the
execution of the Merger Agreement, Cruise America amended its Rights Agreement
so that (i) entering into the Merger Agreement and Irrevocable Proxy Agreements
and the consummation of the Merger and the other transactions contemplated
thereby did not and will not result in the Rights (as defined in the Rights
Agreement) being triggered or becoming exercisable, and (ii) the Rights and
Rights Agreement will terminate at the Effective Time.
Antitakeover Statutes. Cruise America and the Cruise America Board have
taken all action to exempt the Merger Agreement and the Irrevocable Proxy
Agreements and the transactions contemplated thereby and thereby from, and the
Merger Agreement and the Irrevocable Proxy Agreements and the transactions
contemplated thereby are exempt from the requirements of antitakeover laws and
regulations of any state, including, without limitation, the provisions of
Sections 607.0901 and 607.0902 of the FBCA.
REGULATORY APPROVALS
In connection with the Merger, the following filings with, or approvals of,
governmental authorities are required: (i) the Commission's declaring the
Registration Statement (of which this Proxy Statement/Prospectus is a part)
effective; (ii) approvals in connection with compliance with applicable Blue Sky
or state securities laws; (iii) the filing of the Articles of Merger with the
Department of State of the State of Florida; (iv) the filings of such reports
under Section 13(a) of the Exchange Act as may be required in connection with
the Merger Agreement and other related transactions; and (v) appropriate filings
under the HSR Act, and the Investment Canada Act. Both Cruise America and Budget
made the appropriate filings under the HSR Act on December 4, 1997. Unless
terminated earlier, the waiting period under the HSR Act expires on January 3,
1998.
IRREVOCABLE PROXY AGREEMENTS
Concurrently with the execution of the Merger Agreement, Budget entered
into the Irrevocable Proxy Agreements with Randall S. Smalley, Robert A.
Smalley, Robert A. Smalley, Jr. and Sally Smalley DiLucente (the "Holders"), who
collectively hold in the aggregate approximately 30.1% of the outstanding Cruise
America Common Stock, pursuant to which each Holder granted to Budget an
irrevocable proxy to vote the shares of Cruise America Common Stock beneficially
owned or controlled by each Holder in favor of
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the Merger Agreement and the Merger (including with respect to any procedural
matters related thereto) at any meeting or by written consent of the
shareholders of Cruise America.
During the term of the Irrevocable Proxy Agreements, the Holders agree not
to directly or indirectly solicit, initiate or encourage the submission of any
Acquisition Proposal (as hereinafter defined). The Holders also agree to (i)
advise Budget of the receipt of any Acquisition Proposal, its material terms and
the identity of such persons making such proposal and (ii) keep Budget informed
of the status and details of any Acquisition Proposal. As used in the
Irrevocable Proxy Agreements, the term "Acquisition Proposal" means any bona
fide proposal with respect to a merger, consolidation, share exchange, joint
venture, business combination or similar transaction involving Cruise America or
any Cruise America subsidiary, or any purchase of all or any significant portion
of the assets of Cruise America or any Cruise America subsidiary.
Pursuant to the Irrevocable Proxy Agreements, the Holders covenant not to
acquire or sell, transfer, assign, pledge, encumber or otherwise dispose of the
shares of Cruise America Common Stock, or enter into any contract, option or
other arrangement or understanding with respect to the direct or indirect
acquisition or sale, assignment, transfer, pledge, encumbrance or other
disposition of any of the Shares; provided however, that each Holder can sell,
transfer, assign or otherwise dispose of no more than 20,000 shares of Cruise
America Common Stock in the aggregate after the date the Irrevocable Proxy
Agreements were executed and prior to the period commencing thirty days before
the Effective Time of the Merger.
EFFECTIVE TIME OF THE MERGER AND EXCHANGE OF SHARES
Effective Time of the Merger. The Merger will become effective upon the
filing of the articles of merger relating thereto with the Department of State
of the State of Florida or at such other time thereafter as provided therein.
The Merger Agreement provides that the parties thereto will cause the articles
of merger to be filed as soon as practicable after all of the conditions to the
consummation of the Merger have been satisfied or waived.
Exchange of Cruise America Stock Certificates. Immediately after the
Effective Time, instructions and a letter of transmittal will be furnished to
all Cruise America Shareholders for use in exchanging their Cruise America stock
certificates for certificates evidencing the shares of Budget Common Stock they
will be entitled to receive as a result of the Merger. CRUISE AMERICA
SHAREHOLDERS SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES FOR EXCHANGE UNTIL
INSTRUCTIONS AND THE LETTER OF TRANSMITTAL ARE RECEIVED.
RECOMMENDATION OF THE CRUISE AMERICA BOARD
THE CRUISE AMERICA BOARD HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF CRUISE AMERICA AND ITS SHAREHOLDERS, HAS ADOPTED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE CRUISE AMERICA SHAREHOLDERS VOTE
FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, Cruise America Shareholders should be aware that
certain executive officers and directors of Cruise America have certain
interests that may present them with potential conflicts of interest with
respect to the Merger.
Ownership of Cruise America Common Stock. As of the date of this Proxy
Statement/Prospectus, executive officers and directors of Cruise America
beneficially own or control an aggregate of 1,780,285 shares of Cruise America
Common Stock. After the consummation of the Merger, such persons will own or
control 499,779 shares of Budget Common Stock.
Stock Incentive Plans. Prior to or as of the Effective Time, the options
to acquire 397,100 shares of Cruise America Common Stock subject to stock
options granted under the Cruise America stock incentive plans will be converted
and exchanged, without any action on the part of the holder thereof, into
options to acquire, upon payment of the exercise price (which shall equal the
exercise price per share for the option
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immediately prior to the Merger, divided by the Exchange Ratio multiplied by the
number of shares to which the option relates), the number of shares of Budget
Common Stock the option holder would have received pursuant to the Merger if the
holder had exercised his or her option immediately prior thereto, rounded to the
next lowest whole number.
Employment Agreements. Concurrently with the execution of the Merger
Agreement, Randall S. Smalley, Robert A. Smalley, Robert A. Smalley, Jr. and
Eric R. Bensen executed the New Employment Agreements with Cruise America which
will supersede and replace such employees' Existing Employment agreements with
Cruise America at the Effective Time. The New Employment Agreements provide for
a three year term for Robert A. Smalley and Eric R. Bensen and a five year term
for Randall A. Smalley and Robert A. Smalley, Jr. The employees are paid base
salaries of $285,000 (Randall A. Smalley), $260,000 (Robert A. Smalley, Jr.),
and $190,000 (Eric R. Bensen), respectively. These salaries are equal to the
salaries each respective employee received under his Existing Agreement. Before
closing, Cruise America, Budget and Robert A. Smalley intend to enter into the
Termination Agreement which will terminate Robert A. Smalley's New Employment
Agreement effective upon the execution of the Termination Agreement and will
terminate Robert A. Smalley's Existing Employment Agreement at the Effective
Time. Upon termination of Mr. Smalley's Existing Employment Agreement, Cruise
America will pay or cause to be paid under COBRA, the COBRA premiums for Robert
A. Smalley for eighteen months after termination.
The New Employment Agreements include a covenant not to compete beginning
on the effective date of the New Employment Agreements and extending to the
second anniversary of the termination of the employee's employment thereunder
for Eric R. Bensen and on the third anniversary for the other employees. The New
Employment Agreements include a provision that provides for a termination
payment to the employee of such employee's employment is terminated without
cause by Cruise America or is terminated by the employee for Good Reason (as
defined in the New Employment Agreements). In addition, at the expiration of the
employee's employment under the New Employment Agreements, Cruise America agrees
to pay (or cause to be paid) COBRA premiums for such employee for twelve months
after expiration. Prior to the Effective Time, Cruise America has agreed not to
amend or terminate any of the New Employment Agreements.
Indemnification; Insurance. For a period of six years after the Effective
Time, Cruise America, as the surviving corporation in the Merger, will provide
with respect to each present or former director and officer of Cruise America
and its subsidiaries, the indemnification rights which such parties had before
the consummation of the Merger, whether under an indemnification agreement with
Cruise America or a Cruise America subsidiary, or under the FBCA or the bylaws
of Cruise America or a Cruise America subsidiary. Immediately following the
Effective Time, Budget shall cause to remain in effect the current directors'
and officers' liability insurance policies maintained by Cruise America or any
Cruise America subsidiary with respect to claims arising from facts or events
which occurred at or before the Effective Time, and Budget will maintain such
coverage for a period of six years after the Effective Date. In no event shall
Budget be required to expend on an annual basis more than an amount equal to
150% of the current annual premiums paid by Cruise America and the Cruise
America subsidiaries for such insurance, and, in the event the cost of such
coverage shall exceed that amount, Budget shall purchase as much coverage as
possible for such amount.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to qualify to be treated as a pooling of interests
for financial accounting purposes. Accordingly, the Merger will be treated as a
continuation of the existing businesses of Budget and Cruise America and
accounted for by combining the historical balances and results of Budget and
Cruise America. The assets and liabilities of Budget and Cruise America will be
carried forward at their recorded amounts. Results of operations of Budget after
the Merger will include the results of operations of Budget and Cruise America
for the entire fiscal period in which the Merger occurs. The reported results of
operations of Budget and Cruise America for prior periods will be combined and
restated as results of operations of the combined company.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary has been included in reliance upon the opinion of
King & Spalding, counsel to Budget, as to the material federal income tax
consequences of the Merger to the Cruise America Shareholders. The summary is
based on the provisions of the Code, the Treasury Regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all as in
effect as of the date hereof. Such laws or interpretations may differ at the
Effective Time, and relevant facts also may differ. This summary does not
address the treatment of certain shareholders who may be subject to special tax
rules, such as individuals who acquired their shares pursuant to employee stock
options or otherwise as compensation.
Based upon the opinion of King & Spalding, Cruise America and Budget expect
that the Merger will be treated as a tax-free reorganization for federal income
tax purposes so that no gain or loss will be recognized by the Cruise America
Shareholders except in respect of cash received in lieu of fractional shares of
Budget Common Stock. The opinion of King & Spalding, however, will not be
binding upon the IRS or the courts, and will be subject to a number of
assumptions, qualifications and limitations. If the Merger is consummated, and
it is later determined that the Merger did not qualify as a tax-free
reorganization under the Code, Cruise America Shareholders, in addition to the
gain or loss recognized on the cash received in lieu of fractional shares (as
described below), would recognize taxable gain or loss upon the receipt of the
Budget Common Stock in the Merger.
Cash received in the Merger by a Cruise America Shareholder in lieu of a
fractional share of Budget Common Stock will be treated under Section 302 of the
Code as having been received by such Cruise America Shareholder in exchange for
such fractional share, and such Cruise America Shareholder generally will
recognize capital gain or loss in such exchange equal to the difference between
the cash received and such Cruise America Shareholder's tax basis allocable to
the fractional share.
THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN
TAX ASPECTS OF THE MERGER. THE DISCUSSION IS BASED ON CURRENTLY EXISTING
PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER
AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING ARE
SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF
THIS DISCUSSION. EACH CRUISE AMERICA SHAREHOLDER SHOULD CONSULT HIS OR HER OWN
TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM
OR HER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL STATE, LOCAL AND FOREIGN
TAX LAWS.
RESALE OF BUDGET COMMON STOCK
Shares of Budget Common Stock to be issued to Cruise America Shareholders
in connection with the Merger will be freely transferrable under the Securities
Act, except for shares issued to any person who, as of the date of the Special
Meeting, may be deemed to be an "affiliate" of Cruise America within the meaning
of Rule 145 under the Securities Act. In general, affiliates of Cruise America
include its directors, executive officers and any other person or entity who
controls, is controlled by, or is under control with, Cruise America. Rule 145,
among other things, imposes certain restrictions upon the resale of securities
received by affiliates in connection with certain reclassifications, mergers,
consolidations or asset transfers. Budget Common Stock received by affiliates of
Cruise America in the Merger will be subject to the applicable resale
limitations of Rule 145. Commission guidelines regarding qualifying for the
"pooling of interests" method of accounting also limit sales of shares by
affiliates of Cruise America. Generally, affiliates of Cruise America are not
permitted to dispose of any shares of Cruise America beneficially owned by them,
or shares of Budget Common Stock they receive in connection with the Merger,
during the period beginning 30 days before the Effective Time and ending when
financial results covering at least 30 days of post-Merger operations of Cruise
America and Budget have been published.
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In the Merger Agreement, Cruise America has agreed to deliver to Budget a
letter identifying all persons who are, as of the date of the Special Meeting,
possible affiliates within the meaning of Rule 145 under the Securities Act. In
addition, Cruise America agreed to use commercially reasonable efforts to cause
each such affiliate to deliver to Budget on or prior to the Effective Time a
written statement to the effect that such person will not sell, transfer or
otherwise dispose of any shares of Budget Common Stock received in the Merger by
such affiliate unless (i) such sale, transfer or other disposition is registered
under the Securities Act and is consistent with the requirement of "pooling of
interests" accounting, (ii) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 under the
Securities Act and is consistent with the requirement of "pooling of interests"
accounting or (iii) in the opinion of counsel reasonably acceptable to Budget,
such sale, transfer or other disposition is otherwise exempt from registration
under the Securities Act and is consistent with the requirement of "pooling of
interests" accounting. Budget may place legends on certificates representing
shares of Budget Common Stock which are issued to affiliates of Cruise America
in the Merger to restrict such transfers.
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COMPARISON OF RIGHTS OF HOLDERS OF CRUISE AMERICA COMMON STOCK AND
BUDGET COMMON STOCK
Upon consummation of the Merger, and to the extent they receive shares of
Budget Common Stock, the shareholders of Cruise America, a Florida corporation,
will become stockholders of Budget, a Delaware corporation (the "Budget
Stockholders"). The rights of Cruise America Shareholders will thereafter be
governed by applicable Delaware law ("Delaware Law"), including the Delaware
General Corporation Law ("DGCL"), and by the Amended and Restated Certificate of
Incorporation and Bylaws of Budget (the "Budget Certificate" and the "Budget
Bylaws," respectively). The following is a summary of the material differences
between the rights of Cruise America Shareholders and the Budget Stockholders
pursuant to the differences in Delaware Law and applicable Florida law ("Florida
Law"), including the FBCA, and between the Budget Certificate and Budget Bylaws,
on the one hand, and the Articles of Incorporation and Bylaws of Cruise America
(the "Cruise America Articles" and the "Cruise America Bylaws," respectively),
on the other hand. The following summary does not purport to be a complete
statement of the difference in the rights of Cruise America Shareholders and
Budget Stockholders. This summary is qualified in its entirety by reference to
the full text of the Budget Certificate and the Budget Bylaws, the Cruise
America Articles and Cruise America Bylaws, and Delaware Law and Florida Law.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Cruise America consists of 15,000,000
shares of common stock, par value $.01 per share and 1,000,000 shares of
Preferred Stock, par value $1.00 per share. The authorized capital stock of
Budget consists of 35,000,000 shares of Class A Common Stock, par value $.01 per
share, 2,500,000 shares of Class B Common Stock, par value $.01 per share, and
250,000 shares of Preferred Stock, par value $.01 per share.
DIVIDENDS AND OTHER DISTRIBUTIONS
Delaware Law permits a corporation to declare and pay dividends to
stockholders out of surplus (defined as net assets minus capital) or, if there
is no surplus, out of net profits for the fiscal year in which the dividend is
declared and/or for the proceeding fiscal year as long as the amount of capital
of the corporation following the declaration and payment of the dividend is not
less than the aggregate amount of the capital represented by the issued and
outstanding stock of any classes which may have a preference upon the
distribution of assets. Subject to the rights of holders of preferred stock, the
Budget Certificate permits Budget to make dividends on its common stock if such
dividends are made in equal distributions to the holders of Class A and Class B
Common Stock.
Florida law permits a corporation to pay dividends to shareholders as long
as, after giving effect to such distribution, the corporation will be able to
pay its debts as they become due in the usual course of business and the
corporation's total assets will not be less than the sum of its total
liabilities plus (unless the articles of incorporation permit otherwise) the
amount that would be needed, if the corporation were to be dissolved at the time
of the distribution, to satisfy upon dissolution the preferential rights of
shareholders, whose preferential rights are superior to those receiving the
distribution. The Cruise America Articles contain no restrictions on the payment
of dividends except that it requires that dividends on any outstanding preferred
stock be paid before any dividends are paid on its common stock.
SPECIAL MEETING OF STOCKHOLDERS
Under the DGCL, a special meeting of stockholders can be called by the
corporation's board of directors or by such person or persons as may be
authorized by the corporation's certificate of incorporation or bylaws. Under
the Budget Bylaws, a special meeting of the stockholders of Budget may be called
by the Budget Board, the Chairman of the Board, the Chief Executive Officer, the
President or the Secretary of Budget or by the record holders of at least a
majority of the combined voting power of the shares of capital stock issued,
outstanding and entitled to vote at the meeting. Under Florida Law, a special
meeting of shareholders can be called by a corporation's board of directors, the
persons authorized by the articles of incorporation or bylaws,
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the holders of not less than ten percent of all votes entitled to be cast on any
issue to be considered at the proposed special meeting, unless a different
percentage, not to exceed fifty percent, is provided in the articles of
incorporation. Under the Cruise America Bylaws, a special meeting may be called
by the Cruise America Board, or the holder of not less than ten percent of all
shares entitled to vote at the meeting.
VOTING REQUIREMENTS GENERALLY
Under Delaware Law, the affirmative vote of the majority of shares present
in person or represented by proxy at a duly held meeting at which a quorum is
present and entitled to vote on the subject matter is deemed to be the act of
the stockholders, unless the DGCL, the certificate of incorporation or the
bylaws of the corporation specify a different voting requirement. Under Florida
Law, the affirmative vote of the majority of votes entitled to be cast on the
matter at a meeting where a quorum exists is required for shareholder action
unless the FBCA, the articles of incorporation or the bylaws state otherwise.
The Budget Bylaws states that each Budget Stockholder is entitled to one
vote for every share of Class A Common Stock held and ten votes for every Class
B Common Stock held by such stockholder. The vote of a majority of the combined
voting power of the shares present in person or represented by proxy at a duly
held meeting at which a quorum is present is deemed to be the act of the Budget
Stockholders. The Cruise America Bylaws provide that the affirmative vote of the
majority of shares present in person or represented by proxy at a duly held
meeting at which a quorum is present and entitled to vote is deemed the act of
the Cruise America Shareholders.
AMENDMENT OF CERTIFICATE OR ARTICLES OF INCORPORATION
Under Delaware Law, an amendment to a corporation's certificate of
incorporation requires the approval of the board of directors and the approval
of a majority of the outstanding shares entitled to vote thereon. The holders of
the outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes.
Under Florida Law, a corporation's articles of incorporation may be amended
if the board of directors recommends the amendment and the holders of a majority
of the outstanding shares entitled to vote thereon, and a majority of the
outstanding stock of each class entitled to vote as a class approve the
amendment, unless the FBCA, the articles of incorporation or the bylaws require
a greater vote.
The Budget Certificate does not state how the Budget Certificate may be
amended. The Cruise America Articles state that the Cruise America Articles may
be amended in the manner provided for by Florida Law.
AMENDMENT OF BYLAWS
Under Delaware Law, the stockholders may amend the bylaws. The certificate
of incorporation may also confer the power to amend the bylaws upon the board of
directors; however, the fact that such power has been conferred on the board of
directors will not divest the stockholders' power to amend the bylaws. Under
Florida Law, a corporation's bylaws may be amended by the board of directors or
the shareholders, provided that the board of directors may not amend or repeal
any bylaw adopted by shareholders if the shareholders specifically provide that
such bylaw is not subject to amendment or repeal by the board of directors.
The Budget Certificate gives the Budget Board the power to adopt or amend
the bylaws without any stockholder action. The Budget Bylaws empower both the
Budget Board and the Budget Stockholders to amend the bylaws unless the Budget
Certificate or Delaware Law reserves such amendment power to the stockholders in
whole or in part, or if the stockholders in adopting, amending or repealing a
particular bylaw expressly provide that the board of directors may not amend or
repeal that bylaw.
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Cruise America Bylaws grant the Cruise America Board the authority to amend
or repeal the Cruise America Bylaws. Such action by the Cruise America Board
requires an affirmative vote of not less than two-thirds of the members of the
Cruise America Board.
ACTION BY WRITTEN CONSENT
Under Delaware Law, unless otherwise provided in a corporation's
certificate of incorporation, any action that may be taken at any annual or
special meeting of stockholders may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, is signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize such action at a meeting at which all
shares entitled to vote thereon were present and voted. Under Florida Law, the
shareholders may take action without a meeting if a consent in writing to such
action is signed by the shareholders having a minimum number of votes that would
be necessary to take such action at a meeting.
Budget Bylaws do not restrict the ability of the Budget Stockholders to
take action by written consent. Cruise America Bylaws permit the Cruise America
Shareholders to take action by written consent; provided however, that if the
consent is not circulated by the Cruise America Board, prior notice must be sent
to the Secretary who thereafter must set a record date for determining the
shareholders entitled to consent to such action.
VOTING IN THE ELECTION OF DIRECTORS
Under Delaware and Florida Law, the directors of a corporation shall be
elected by a plurality of the votes cast by the holders of shares entitled to
vote in the election of directors at a meeting of shareholders at which a quorum
is present, unless the articles or certificate or incorporation provides for
cumulative voting. Neither the Budget Certificate nor the Cruise America
Articles provides for cumulative voting.
Under Delaware Law, vacancies and newly created directorships may be filled
by a majority of the directors then in office, although less than a quorum,
unless otherwise provided in the certificate of incorporation or bylaws. If, at
the time of filling any vacancy or newly created directorship, the directors
then in office constitute less than a majority of the whole board of directors
as constituted immediately prior to such increase, the Delaware Court of
Chancery may, upon application of stockholders holding at least ten percent of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office. Under Florida Law, vacancies may be filled by the affirmative vote of
a majority of the remaining directors or by the shareholders, unless the
articles of incorporation provide otherwise.
Under the Budget Bylaws, vacancies occurring on the Budget Board as a
result of the removal of a director without cause may be filled only by a vote
of the record holders of a majority of the combined voting power of the shares
present and entitled to vote. Vacancies occurring for any other reason may be
filled by such vote or written consent of the Budget Board. Under Cruise America
Bylaws, a vacancy in the Cruise America Board occurring for any reason shall be
filled by the affirmative vote of at least two-thirds of the directors then in
office.
NUMBER AND QUALIFICATION OF DIRECTORS
Under Delaware Law, the minimum number of directors a corporation may have
is one. Delaware Law permits the board of directors alone to change the
authorized number, or the range, of directors by amendment to the bylaws, unless
the directors are not authorized in the certificate of incorporation to amend
the bylaws or the number of directors is fixed in the certificate of
incorporation, in which case a change in the number of directors may be made
only upon amendment of the certificate of incorporation.
Under Florida Law, the board of directors of a corporation must consist of
at least one director, with the number specified in or fixed in accordance with
the articles of incorporation. The number of directors may be increased or
decreased in the manner provided in the articles of incorporation or bylaws.
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The Budget Bylaws provide for three directors, or such other number as
shall be fixed from time to time by the Budget Board. The Cruise America Bylaws
provide that the number of directors shall be fixed from time to time within the
limits of the Cruise America Articles. The Cruise America Articles state that
the number of directors shall not be less than five, but not more than
twenty-five.
REMOVAL OF DIRECTORS
Under Delaware Law, a director of a corporation without a classified board
of directors may be removed with or without cause. Budget does not have a
classified board of directors. The Budget Bylaws provide that any director or
all the directors may be removed with or without cause by the holders of the
majority of the combined voting power of the shares then entitled to vote at an
election of the Budget Board.
Under Florida Law, the shareholders may remove one or more directors with
or without cause unless the articles of incorporation provide that directors can
only be removed for cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group can vote to remove him.
The Cruise America Bylaws provide that any director or the entire Cruise America
Board may be removed with or without cause by the holders of the majority of the
shares then entitled to vote at a shareholder meeting called expressly for that
purpose.
DISSENTER'S/APPRAISAL RIGHTS
Under Delaware Law, a stockholder has a right to dissent from certain
corporate actions and to be entitled to an appraisal by the Court of Chancery of
the fair value of such stockholder's shares of stock. Such corporate actions
include: (i) a merger or consolidation pursuant to certain sections of DGCL and
(ii) certain corporate actions that a corporation includes in its certificate of
incorporation to provide for appraisal rights. However, no appraisal rights are
available for the shares of any class or series of stock which stock at the
record date were either listed on a national securities exchange or designated
as a national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. ("NASD") or held of record by
more than 2,000 holders (the "Market Shares"). Notwithstanding the previous
sentence, appraisal rights are available for the Market Shares if the holders
are required by the terms of the merger to accept for the Market Shares anything
except (i) shares of the surviving corporation; (ii) shares of any other
corporation which shares of stock at the effective date of the merger will be
either listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the NASD or held of
record by more than 2,000 holders; (iii) cash in lieu of fractional shares; or
(iv) any combination of (i) through (iii).
Under Florida Law, any shareholder of a corporation has the right to
dissent from, and obtain payment of the fair value of such shareholder's shares
in the event of the following corporate actions: (i) consummation of a plan of
merger if the shareholder is entitled to vote on the merger; (ii) consummation
of a sale or exchange of all, or substantially all, of the property of the
corporation, if the shareholder is entitled to vote on such sale or exchange;
(iii) the occurrence of control-share acquisition (see "Comparison of Rights of
Holders of Cruise America Common Stock and Budget Common Stock -- Antitakeover
Provisions"); (iv) consummation of a plan of share exchange if the shareholder
is entitled to vote of such share exchange; (v) any amendment to the articles of
incorporation if the shareholder is entitled to vote on the amendment and if
such amendment would adversely affect such shareholder by altering or abolishing
certain shareholder rights; and (vi) any corporation action taken, to the extent
the articles of incorporation provides for a right to dissent. Unless the
articles of incorporation provide otherwise, with respect to a plan of merger, a
proposed sale or exchange of property or a share exchange, no shareholder shall
have a right to dissent if on the record date the shares were either registered
on a national securities exchange or held of record by not fewer than 2,000
shareholders.
PREEMPTIVE RIGHTS
Under both Delaware Law and Florida Law, shareholders do not possess
preemptive rights as to the issuance of additional or treasury securities by the
corporation, unless the corporation's articles or certificate of
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incorporation provides otherwise. The Budget Certificate and the Budget Bylaws
and the Cruise America Articles and the Cruise America Bylaws do not provide for
preemptive rights.
LIQUIDATION RIGHTS
Generally under both Delaware and Florida Law, shareholders are entitled to
share ratably in the distribution of assets upon the dissolution of their
corporation. Preferred shareholders typically do not participate in the
distribution of assets of a dissolved corporation beyond their established
contractual preferences. Once the rights of preferred shareholders have been
fully satisfied, common shareholders are entitled to the distribution of any
remaining assets.
ANTI-TAKEOVER PROVISIONS
Statutory Provisions. Section 203 of the DCGL prohibits a publicly held
Delaware corporation from engaging, under certain circumstances, in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless (i) prior to the date at which the stockholder became an
interested stockholder, the board of directors approved either the business
combination or the transaction in which the person becomes an interested
stockholder; (ii) upon consummation of the transaction which results in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding shares held by directors who are officers or
held in certain employee stock plans); or (iii) the business combination is
approved by the board of directors and by at least 66 2/3% of the outstanding
voting stock of the corporation (excluding shares held by the interested
stockholder) at a meeting of stockholders (and not by written consent) held on
or subsequent to the date such stockholder became an interested stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or at any time within the prior three years did own) 15% or
more of the corporation's voting stock. A "business combination" includes,
without limitation, mergers, consolidations, stock sales and asset based
transactions and other transactions resulting in a financial benefit to the
interested stockholder.
Section 607.0901 of the FBCA, informally known as the "Fair Price Statute,"
provides that the approval of the holders of two-thirds of the voting shares of
a company, other than the shares owned by an Interested Shareholder (as
hereinafter defined) would be required in order to effectuate certain
transactions, including without limitation a merger, sale of assets, sale of
shares and reclassification of securities involving a corporation and an
Interested Shareholder (an "Affiliated Transaction"). An "Interested
Shareholder" is defined under the FBCA as the beneficial owner of more than 10%
of the voting shares outstanding. The foregoing special voting requirement is in
addition to the vote required by any other provision of the FBCA or a
corporation's articles of incorporation.
The special voting requirement does not apply in any of the following
circumstances: (i) the Affiliated Transaction is approved by a majority of the
corporation's disinterested directors; (ii) the corporation has not had more
than 300 shareholders of record at any time during the three years proceeding
the announcement of the Affiliated Transaction; (iii) the Interested Shareholder
has beneficially owned 80% of the corporation's voting shares for five years;
(iv) the Interested Shareholder beneficially owns 90% of the corporation's
voting shares; or (v) all of the following conditions are met: (A) the cash and
fair value of other consideration to be paid per share to all holders of voting
shares equals the highest per share price calculated pursuant to various methods
set forth in Section 607.0901 of the FBCA; (B) the consideration paid by the
interested shareholder in the Affiliated Transaction is cash or in the same form
of consideration the Interested Shareholder has previously paid for the shares;
(C) during such portion of the three year period proceeding the announcement
date that the Interested Shareholder has been an Interested Shareholder, except
as approved by a majority of the disinterested directors, there shall have been
no failure to declare and pay at the regular dated thereof for any periodic
dividends, no reductions in the annual rate of dividends, no increase in the
voting shares owned by the interested shareholder, no benefit to the interested
shareholder from loans, guaranties or other financial assistance or tax
advantages provided by the corporation; and (D) the corporation must mail a
proxy statement to the voting shareholders of the corporation.
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A corporation may "opt out" of the Fair Price Statute by electing to do so
in its original articles of incorporation or by adopting an amendment to its
articles of incorporation or bylaws opting out and having such amendment
approved by the holders of a majority of the voting shares not held by the
interested shareholder, its affiliates or associates. The amendment will not be
effective until 18 months after such vote, and will not apply to any Affiliated
Transaction with someone who is an interested shareholder on or prior to the
effective date of the amendment. Cruise America has not opted out of the
provisions of the Fair Price Statute.
Section 607.0902 of the FBCA, informally known as the "Control Share
Acquisition Statute," provides that the voting rights to be accorded Control
Shares (as defined below) of a Florida corporation that has (i) 100 or more
shareholders, (ii) its principal place of business, its principal office, or
substantial assets in Florida and (iii) either (A) more than 10% of its
shareholders residing in Florida, (B) more than 10% of its shares owned by
Florida residents, or (C) 1,000 shareholders residing in Florida, must be
approved by a majority of each class of voting securities of the corporation,
excluding those shares held by interested persons, before the Control Shares
will be granted any voting rights.
"Control Shares" are defined in the FBCA to be shares acquired in a Control
Share Acquisition (as defined below) that, when added to all other shares of the
issuing corporation owned by such person, would entitle such person to exercise,
either directly or indirectly, voting power within any of the following ranges:
(a) 20% or more but less than 33% of all voting power of the corporation's
voting securities, (b) 33% or more but less than a majority of all voting power
of the corporation's voting securities, or (c) a majority or more of all of the
voting power of the corporation's voting securities. A "Control Share
Acquisition" is defined in the FBCA as an acquisition, either directly or
indirectly, by any person of ownership of, or the power to direct the exercise
of voting power with respect to, outstanding Control Shares. The Control
Acquisition Statute also states that, if provided in the articles of
incorporation or bylaws of a corporation prior to their acquisition, Control
Shares may be redeemed by the corporation for fair value in certain
circumstances. Finally, unless otherwise provided in a corporation's articles of
incorporation or bylaws prior to a Control Share Acquisition, in the event
Control Shares are accorded full voting rights and the acquiring person has
acquired Control Shares with a majority or more of all voting power, all
shareholders will have dissenters' rights.
The Control Share Acquisition Statute further provides that, in certain
circumstances, an acquisition of shares that otherwise would be governed by its
provisions does not constitute a Control Share Acquisition. Among such
circumstances are acquisitions of shares approved by the corporation's board of
directors and mergers effected in compliance with the applicable provisions of
the FBCA, if the corporation is a party to the agreement of merger.
Budget's Classification of Stock. Budget has two classes of Common Stock:
Class A Common Stock, holders of which are entitled to one vote per share, and
Class B Common Stock, holders of which are entitled to ten votes per share.
Three executive officers own all outstanding shares of Class B Common Stock,
which, following the Merger, together with the Class A Common Stock owned by
such individuals, will represent approximately 46.2% of the combined voting
power of both classes of Common Stock. As a result, such officers will be able
to exert substantial influence over any vote to approve a potential business
combination.
Cruise America's Rights Plan. Cruise America adopted the Rights Agreement
which distributed to each record holder of common stock a right to purchase one
one-hundredth of a share of Series A Junior Participating Preferred Stock (the
"Right") under the happening of certain events, including (i) an Acquiring
Person (as defined in the Rights Plan) acquiring more than 20% of the common
stock; (ii) a tender offer for more than 30% of the outstanding shares of common
stock; or (iii) the beneficial ownership of a certain number of shares exceeding
15% of the outstanding shares of common stock. The Rights Agreement permitted
the Cruise America Board to redeem the rights at $.01 per right prior to the
earlier of 30 days after the Stock Acquisition Date (as defined in the Rights
Agreement) or March 18, 1999.
In connection with the execution of the Merger Agreement, Cruise America
amended the Rights Agreement to provided that (i) entering into the Merger
Agreement and Irrevocable Proxy Agreements and the consummation of the Merger
and the other transactions contemplated thereby did not and will not result
38
<PAGE> 45
in the Rights being triggered or becoming exercisable, and (ii) the Rights and
Rights Agreement will terminate at the Effective Time of the Merger.
TRANSACTIONS INVOLVING OFFICERS OR DIRECTORS
Under Delaware Law, no contract or transaction between a corporation and
one or more of its directors or officers, or between a corporation and any other
entity in which one or more of its directors or officers are directors or
officers, or have a financial interest, is void or voidable if (i) the material
facts as to the director's or officer's relationship or interest and as to the
contract or transaction are disclosed or known to the board of directors or
committee which authorizes the contract or transaction by the affirmative vote
of a majority of the disinterested directors; (ii) the material facts as to the
director's or officer's relationship or interest and as to the contract or
transaction are disclosed or known to the stockholders entitled to a vote
thereon, and the contract or transaction is specifically approved by the
stockholders; or (iii) the contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified by the board of directors,
a committee thereof, or the stockholders. A corporation may make loans to,
guarantee the obligations of or otherwise assist its officers or other employees
and those of its subsidiaries, including directors who are also officers or
employees, when such action, in the judgment of the directors, may reasonably be
expected to benefit the corporation.
Under Florida Law, no contract or other transaction between a corporation
and one or more directors in which one or more of its of its directors are
directors or officers or is financially interested shall be either voidable or
void because of such relationship if (i) the relationship or interest is
disclosed or known to the board of directors which authorizes the transaction
without counting the votes of the interested directors; (ii) the relationship or
interest is disclosed or known to the shareholders who authorize the
transaction; or (iii) the contract or transaction is fair and reasonable as to
the corporation at the time it is authorized by the board of directors or
shareholders. The Cruise America Bylaws also state that an interested director
transaction is not void or voidable under the above three circumstances.
INDEMNIFICATION
Under Delaware Law, a corporation has the power to indemnify any agent
against expenses, judgments, fines and settlements incurred in a proceeding,
other than an action by or in the right of the corporation, if the person acted
in good faith and in a manner that the person reasonably believed to be in the
best interests of the corporation or not opposed to the best interests of the
corporation, and, in the case of a criminal proceeding, had no reason to believe
that their conduct was unlawful. In the case of an action by or in the right of
the corporation, the corporation has the power to indemnify any agent against
expenses incurred in defending or settling the action if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation; provided, however, that no
indemnification may be made when a person is adjudged liable to the corporation,
unless a court determines such person is entitled to indemnification for
expenses, and then such indemnification may be made only to the extent that such
court shall determine. Delaware Law requires that to the extent an officer,
director, employee or agent of a corporation is successful on the merits or
otherwise in defense of any third-party or derivative proceeding, or in defense
of any claim, issue or matter therein, the corporation must indemnify such
person against expenses incurred in connection therewith.
The Budget Bylaws permit indemnification in circumstances described under
the Delaware Law. Also, the Budget Bylaws state that the rights to
indemnification provided thereunder are not exclusive of any other
indemnification rights the directors might be entitled to under law.
Under Florida law, the directors and officers of a corporation may be
indemnified against certain liabilities which they may incur in their capacity
as officers and directors. Such indemnification is generally available if the
executive acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of the corporation, and with
respect to any criminal proceeding, had no reasonable cause to believe his or
her conduct was unlawful. In the case of an action by or in the right of the
corporation, the corporation has the power to indemnify any person who was a
party to a proceeding by or in
39
<PAGE> 46
the right of the corporation if such person acted in good faith and in a manner
such person reasonably believed to be in the best interests of the corporation.
Indemnification may also be available unless a court of competent jurisdiction
establishes by final adjudication that the actions or omissions of the executive
are material to the cause of action so adjudicated and constituted: (a) a
violation of the criminal law, unless the executive had reasonable cause to
believe his or her conduct was lawful; (b) a transaction from which the
executive derived an improper personal benefit; or (c) willful misconduct or
conscious disregard for the best interests of the corporation in a proceeding by
or in the right of the corporation or procure a judgment in its favor or in a
proceeding by or in the right of a shareholder.
The Cruise America Bylaws indemnify any director who is made a party to a
proceeding by reason that they are a director of Cruise America unless the
conduct of such person is finally adjudicated to have been grossly negligent or
to constitute willful misconduct. The Cruise America Bylaws state that the
indemnification rights thereunder are not exclusive of any other indemnification
rights which the director might be entitled.
DIRECTORS' LIABILITY
Under Delaware Law, a corporation may adopt a provision in its certificate
of incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit director monetary liability for (i) breaches of the director's duty of
loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends or unlawful stock repurchases or
redemptions; or (iv) transactions in which the director received an improper
personal benefit.
Florida Law provides that a director will not be personally liable for
monetary damages to the corporation or any other person for any statement, vote,
decision or failure to act, regarding corporate management or policy, by a
director unless: (a) the director breached or failed to perform his duties as a
director, and (b) the director's breach of or failure to perform those duties
constitutes: (1) a violation of the criminal law, unless the director had
reasonable cause to believe his conduct was lawful or had no reasonable cause to
believe his conduct was unlawful; (2) a transaction in which the director
derived an improper personal benefit; (3) a payment of certain unlawful
dividends and distributions; (4) in a proceeding by or in the right of the
corporation to procure judgment in its favor or by or in the right of a
shareholder, conscious disregard for the best interests of the corporation, or
willful misconduct; or (5) in a proceeding by or in the right of someone other
than the corporation or a shareholder, recklessness or an act or omission which
was committed in bad faith or with malicious purpose or in a manner exhibiting
wanton and willful disregard of human rights, safety or property. This provision
would absolve directors of the corporation of personal liability for negligence
in the performance of their duties, including gross negligence. It would not
permit a director to be exculpated, however, from liability for actions
involving conflicts of interest or breaches of the traditional "duty of loyalty"
to Cruise America and its shareholders, and it would not affect the availability
of injunctive and other equitable relief as a remedy.
SHAREHOLDER APPROVAL OF MERGER
Under Delaware Law, the principal terms of a merger generally require the
approval of the stockholders of each of the merging corporations. Unless
otherwise required in a corporation's certificate of incorporation, Delaware Law
does not require the vote of stockholders of a constituent corporation surviving
the merger if (i) the merger agreement does not amend the existing certificate
of incorporation, (ii) each share of the surviving corporation outstanding
before the merger is an identical outstanding or treasury share after the
merger, and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or the
number of shares to be issued by the surviving corporation in the merger does
not exceed 20% of the shares outstanding immediately prior to the merger.
Under Florida Law, the principal terms of a merger generally require the
approval of the shareholders of each corporation party to a merger. Unless
required by the corporation's articles of incorporation, action by the
40
<PAGE> 47
shareholders of the surviving corporation is not required if (i) the articles of
incorporation of the surviving corporation will not differ from its articles
before the merger; (ii) each shareholder of the surviving corporation whose
shares were outstanding prior to the effective date of the merger will hold the
same number of shares immediately after the merger; and (iii) the number of
voting shares outstanding immediately after the merger, plus the number of
voting shares issuable as a result of the merger, will not exceed by more than
20 percent the total number of voting shares of the surviving corporation
outstanding immediately before the merger.
41
<PAGE> 48
SELECTED HISTORICAL FINANCIAL DATA OF BUDGET
The following table sets forth selected consolidated statements of
operations data and selected consolidated balance sheet data of Budget. The
selected financial data for each of the five years ended December 31, 1996 are
derived from the consolidated financial statements of Budget. The data presented
for each of the nine months ended September 30, 1996 and 1997 are derived from
unaudited financial statements, but in the opinion of Budget reflect all
adjustments (consisting of normal recurring adjustments) that Budget considers
necessary for a fair presentation of such information in accordance with
generally accepted accounting principles. Information for the nine months ended
September 30, 1997 includes the operations of BRACC from April 29, 1997. The
selected financial data below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Budget" and the Consolidated Financial Statements and notes thereto incorporated
by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Operating revenue:
Vehicle rental revenue(a).... $21,968 $22,321 $38,642 $107,067 $223,250 $166,531 $685,891
Retail car sales revenue..... -- -- -- 42,662 134,120 94,489 172,623
Royalties and other
revenue.................... -- -- -- -- -- -- 32,702
------- ------- ------- -------- -------- -------- --------
Total operating
revenue............. $21,968 $22,321 $38,642 $149,729 $357,370 $261,020 $891,216
------- ------- ------- -------- -------- -------- --------
Operating expenses:
Direct vehicle and
operating.................. 5,989 5,452 9,439 13,704 35,098 24,392 80,938
Depreciation -- vehicle...... 2,832 4,358 7,382 27,476 60,735 43,983 187,842
Depreciation -- non-
vehicle.................... 212 229 446 1,341 2,589 1,915 12,046
Cost of car sales............ -- -- -- 38,021 113,747 77,727 147,376
Advertising, promotion and
selling.................... 1,477 1,658 3,090 11,826 22,983 17,101 69,064
Facilities................... 2,662 2,695 4,398 11,121 20,406 14,924 66,101
Personnel.................... 4,292 4,537 7,947 24,515 53,097 38,239 158,340
General and administrative... 736 790 1,515 6,686 11,605 8,013 36,654
Amortization................. 151 152 229 859 1,843 1,468 4,981
------- ------- ------- -------- -------- -------- --------
Total operating
expenses............ $18,351 $19,871 $34,446 $135,549 $322,103 $227,762 $763,342
------- ------- ------- -------- -------- -------- --------
Operating income............... $ 3,617 $ 2,450 $ 4,196 $ 14,180 $ 35,267 $ 33,258 $127,874
------- ------- ------- -------- -------- -------- --------
Other (income) expense:
Vehicle interest expense..... $ 2,440 $ 2,462 $ 3,909 $ 13,874 $ 25,336 $ 18,542 $ 63,268
Non-vehicle interest expense
(income), net.............. 619 401 (139) (716) 838 2,158 8,698
Non-recurring expense
(income)................... -- (1,023) -- -- 1,275 -- --
------- ------- ------- -------- -------- -------- --------
Total other expense... $ 3,059 $ 1,840 $ 3,770 $ 13,158 $ 27,449 $ 20,700 $ 71,966
------- ------- ------- -------- -------- -------- --------
Income before income taxes..... 558 610 426 1,022 7,818 12,558 55,908
Provision for income taxes..... -- 182 176 685 3,321 4,395 23,454
------- ------- ------- -------- -------- -------- --------
Net income..................... $ 558 $ 428 $ 250 $ 337 $ 4,497 $ 8,163 $ 32,454
======= ======= ======= ======== ======== ======== ========
Weighted average common and
common equivalent shares
outstanding:
Primary.................... -- -- 3,704 6,369 9,488 8,675 19,324
Fully diluted.............. -- -- 3,704 6,369 9,488 8,820 24,393
Earnings per common and common
equivalent share:
Primary.................... -- -- $ 0.07 $ 0.05 $ 0.47 $ 0.94 $ 1.68
Fully diluted.............. -- -- 0.07 0.05 0.47 0.93 1.48
</TABLE>
42
<PAGE> 49
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------- -------------
1992 1993 1994 1995 1996 1997
------- ------- -------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Revenue earning vehicles, net............. $23,343 $23,577 $ 97,127 $219,927 $319,257 $1,989,965
Vehicle inventory......................... -- -- 943 8,938 16,413 34,168
Total assets.............................. 32,027 33,325 162,991 386,323 587,223 3,481,801
Fleet financing facilities................ 23,890 23,857 123,779 295,647 360,120 2,285,199
Other notes payable....................... 3,795 3,632 2,785 22,586 93,989 298,387
Total debt................................ 27,880 28,533 127,187 319,017 454,689 2,584,034
Redeemable preferred stock................ 2,747 2,747 -- -- -- --
Common stock warrant...................... -- -- 2,000 2,000 2,000 --
Stockholders' equity (deficit)............ (1,344) (1,251) 26,748 39,592 92,001 404,648
</TABLE>
- ---------------
(a) Includes revenue from vehicle rentals and related products (such as
insurance and loss damage waivers).
43
<PAGE> 50
SELECTED HISTORICAL FINANCIAL DATA OF BRACC
The following table sets forth selected consolidated statements of
operations data and selected consolidated balance sheet data of BRACC. The
selected financial data for each of the five years ended December 31, 1996 are
derived from the consolidated financial statements of BRACC. The data presented
for each of the three months ended March 31, 1996 and 1997 are derived from
unaudited financial statements, but in the opinion of BRACC reflect all
adjustments (consisting of normal recurring adjustments) that BRACC considers
necessary for a fair presentation of such information in accordance with
generally accepted accounting principles. The selected financial data below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations of BRACC" and the Consolidated
Financial Statements and notes thereto incorporated by reference in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
STATEMENTS OF OPERATIONS DATA:
Operating revenue:
Vehicle rental revenue(a)....... $1,080,700 $ 954,188 $1,011,203 $1,034,873 $ 963,764 $221,778 $228,135
Retail car sales revenue........ 72,253 63,596 77,999 83,795 91,503 22,734 20,913
Other revenue................... 61,435 61,903 66,564 74,802 77,554 17,259 17,363
---------- ---------- ---------- ---------- ---------- -------- --------
Total operating
revenue................ $1,214,388 $1,079,687 $1,155,766 $1,193,470 $1,132,821 $261,771 $266,411
Operating costs and expenses:
Direct vehicle and operating.... 221,239 176,252 134,126 153,081 121,288 25,871 31,713
Depreciation -- vehicle......... 278,344 206,271 257,356 323,619 263,846 54,583 65,439
Depreciation -- non-vehicle..... 25,297 20,431 21,410 19,520 26,645 6,502 6,413
Cost of car sales............... 64,639 54,969 67,314 72,416 78,944 19,598 18,430
Advertising, promotion and
selling....................... 108,978 99,879 99,738 106,446 83,304 19,441 27,585
Facilities...................... 115,155 108,741 110,386 113,286 114,325 28,471 28,904
Personnel....................... 274,081 248,947 269,370 280,901 248,655 61,939 63,985
General and administrative...... 85,625 82,731 69,117 88,612 54,194 17,638 14,430
Intangible amortization......... 17,223 17,852 16,874 17,006 16,969 4,185 4,180
---------- ---------- ---------- ---------- ---------- -------- --------
Total operating costs and
expenses............... $1,190,581 $1,016,073 $1,045,691 $1,174,887 $1,008,170 $238,228 $261,079
Operating income.................. $ 23,807 $ 63,614 $ 110,075 $ 18,583 $ 124,651 $ 23,543 $ 5,332
Other expense:
Vehicle interest expense........ 101,032 78,205 86,127 124,758 92,738 22,949 22,589
Non-vehicle interest expense.... 18,923 16,283 18,823 25,151 31,444 7,265 7,043
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before provision for
income taxes.................... $ (96,148) $ (30,874) $ 5,125 $ (131,326) $ 469 $ (6,671) $(24,300)
Provision (benefit) for income
taxes........................... (4,900) -- 4,000 1,314 3,000 600 (4,860)
---------- ---------- ---------- ---------- ---------- -------- --------
Net income (loss)................. $ (91,248) $ (30,874) $ 1,125 $ (132,640) $ (2,531) $ (7,271) $(19,440)
========== ========== ========== ========== ========== ======== ========
</TABLE>
44
<PAGE> 51
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
-------------------------------------------------------------- MARCH 31,
1992 1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Revenue earning vehicles, net... $1,362,548 $1,339,000 $1,543,661 $1,353,989 $1,303,975 $ 1,494,755
Vehicle inventory............... 5,753 7,396 9,674 11,756 14,299 14,828
Total assets.................... 2,590,002 2,405,204 2,602,374 2,488,115 2,328,115 2,484,152
Fleet financing facilities...... 1,628,190 1,462,783 1,614,247 1,465,472 1,361,619 1,513,259
Other notes payable............. 216,326 245,714 268,039 452,475 468,767 474,055
Total debt...................... 1,844,516 1,708,497 1,882,286 1,917,947 1,830,386 1,987,314
Mandatory redeemable preferred
stock......................... 206,250 221,250 236,250 251,250 5,178 5,272
Stockholders' equity............ 111,934 59,558 49,909 (106,102) 143,965 121,288
</TABLE>
- ---------------
(a) Includes revenue from vehicle rentals and related products (such as
insurance and loss damage waivers).
45
<PAGE> 52
SELECTED HISTORICAL FINANCIAL DATA OF CRUISE AMERICA
The following table sets forth selected consolidated statements of
operations data and selected consolidated balance sheet data of Cruise America.
The selected financial data for each of the five years ended April 30, 1997 are
derived from the consolidated financial statements of Cruise America. The data
presented for each of the six months ended October 31, 1996 and 1997 are derived
from unaudited consolidated financial statements, but in the opinion of Cruise
America reflect all adjustments (consisting of normal recurring adjustments)
that Cruise America considers necessary for a fair presentation of such
information in accordance with generally accepted accounting principles. The
selected financial data below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Cruise America" and the Consolidated Financial Statements and notes thereto
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, OCTOBER 31,
------------------------------------------------ -----------------
1993 1994 1995 1996 1997 1996 1997
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
STATEMENTS OF OPERATIONS DATA:
Operating revenue:
Rental revenue........................ $ 45,686 $40,537 $36,842 $44,319 $53,764 $46,271 $49,730
Sales revenue......................... 61,077 55,540 48,476 43,569 41,856 18,318 26,517
Total operating revenue........ 106,763 96,077 85,318 87,888 95,620 64,589 76,247
Gross profit from operations............ 26,273 21,108 27,037 29,535 33,968 31,208 33,864
Net earnings (loss)..................... $ (800) $(3,101) $ 185 $ 1,006 $ 2,713 $ 9,917 $ 3,315(1)
======== ======= ======= ======= ======= ======= =======
Earnings (loss) per share............... $ (.14) $ (.55) $ .03 $ .17 $ .46 $ 1.67 $ .56
Shares used in calculation.............. 5,543 5,630 5,694 5,859 5,869 5,924 6,000
</TABLE>
<TABLE>
<CAPTION>
AS OF APRIL 30, AS OF
------------------------------------------------- OCTOBER 31,
1993 1994 1995 1996 1997 1997
-------- ------- ------- ------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Rental vehicles, net......................... $ 70,755 $46,474 $51,315 $63,518 $ 73,965 $ 90,180
Total assets................................. 105,372 89,762 89,378 95,695 107,224 128,297
Total rental vehicle financing............... 50,950 25,356 30,622 40,284 49,480 60,572
Long-term debt, excluding current
installments............................... 8,937 28,432 23,892 19,412 13,771 12,198
Stockholders' equity......................... 24,761 22,064 22,329 23,462 26,064 29,305
</TABLE>
- ---------------
(1) In October 1997, Cruise America took a one-time charge of $10.0 million to
establish a reserve for damages related to ongoing litigation. See "Risk
Factors -- Judgment Against Cruise America."
46
<PAGE> 53
UNAUDITED PRO FORMA FINANCIAL DATA
INTRODUCTION
The Combined Company Balance Sheets as of September 30, 1997, December 31,
1996 and 1995, and the Combined Company Statements of Operations for the nine
months ended September 30, 1997, and for the years ended December 31, 1996, 1995
and 1994 (together with the Combined Company Balance Sheets referred to as
"Combined Company Financial Statements"), give effect to the Merger of Budget
and Cruise America as if it had been effective throughout all periods presented.
The Pro Forma Combined Company Statements of Operations for the nine months
ended September 30, 1997, and for the year ended December 31, 1996, are based on
the Combined Company Statements of Operations for the nine months ended
September 30, 1997, and for the year ended December 31, 1996, and of BRACC for
the period from January 1, 1997, through April 29, 1997, and the year ended
December 31, 1996, adjusted to give effect to the transactions described below.
The Pro Forma Combined Company Statement of Operations for the year ended
December 31, 1996 gives effect to the following transactions as if they had
occurred on January 1, 1996: (i) certain transactions effected by Budget during
1996 that are more fully described below (the "1996 Budget Transactions") and
(ii) the Budget Acquisition and certain related transactions that are more fully
described below (the "Budget Acquisition Transactions" and, together with the
1996 Budget Transactions, the "Transactions"). The Pro Forma Combined Company
Statement of Operations for September 30, 1997, gives effect to the Budget
Acquisition Transactions as if they had occurred on January 1, 1997.
The 1996 Budget Transactions consist of the following: (i) Budget's
acquisition of Van Pool, which was effective on February 1, 1996, Budget's
acquisition of the Phoenix Budget franchise (the "Phoenix Acquisition"), which
was effective on March 1, 1996, and Budget's acquisition of ValCar Rental Car
Sales, Inc. ("ValCar"), which was effective on August 1, 1996 (the "ValCar
Acquisition"); (ii) the sale of 3,821,007 shares of Budget Common Stock by
Budget in a public offering in July 1996 (the "July 1996 Public Offering");
(iii) the partial refinancing of Budget's vehicle rental fleet in December 1996
through the $176.0 million aggregate principal amount Third Fleet Financing
Facility; (iv) the private placement of $80.0 million aggregate principal amount
of Series A Convertible Notes in December 1996; and (v) the repayment of certain
of Budget's outstanding indebtedness from the proceeds of (ii), (iii) and (iv)
above. The Budget Acquisition Transactions consist of the following: (i) the
Budget Acquisition, including the repayment, purchase and forgiveness of certain
indebtedness and the necessary purchase accounting and elimination entries; (ii)
the sale of 8,625,000 shares of Budget Common Stock by Budget in a public
offering in April 1997 (the "April 1997 Public Offering") and the application of
the net proceeds thereof; (iii) the private placement (the "Debt Placements") of
$45.0 million aggregate principal amount of Convertible Notes and $165.0 million
aggregate principal amount of 9.57% Guaranteed Senior Notes due 2007 (the
"Guaranteed Senior Notes") and the application of the net proceeds thereof; and
(iv) the April 1997 credit facilities for fleet financings (the "April 1997
Fleet Financings") with an aggregate commitment of $1.4 billion and the
application of the net proceeds thereof and the repayment of certain of BRACC's
outstanding indebtedness to Ford from the net proceeds thereof. All 1996
acquisitions, as well as the Budget Acquisition, have been accounted for using
the purchase method of accounting.
The Combined Company Financial Statements have been prepared assuming the
Merger is accounted for using the pooling of interests method of accounting,
whereby Budget will issue 0.28073 of a share of Budget Common Stock for each one
share of Cruise America Common Stock. Any valid options or warrants for Cruise
America Common Stock will be converted into options or warrants to acquire, upon
payment of the exercise price (which shall equal the exercise price per share
for the options or warrants immediately prior to the Merger, divided by the
Exchange Ratio multiplied by the number of shares to which the options or
warrants relate), the number of shares of Budget Common Stock the option or
warrant holder would have received pursuant to the Merger.
The adjustments for the Transactions reflected in the Pro Forma Combined
Company Statements of Operations have been prepared using the purchase method of
accounting, whereby the total costs of the
47
<PAGE> 54
Transactions have been allocated to the tangible and intangible assets acquired
and liabilities assumed based upon their respective fair values at the effective
date of the Transactions.
The Combined Company Financial Statements and the Pro Forma Combined
Company Statements of Operations give effect only to the adjustments set forth
in the accompanying notes and do not reflect any other benefits anticipated by
management as a result of the Merger or the Transactions and the implementation
of its business strategy or the possible effects of the Supply Agreement and
Advertising Agreement (as defined).
The Combined Company Statements of Operations and the Pro Forma Combined
Company Statements of Operations do not purport to represent what Budget's
results of operations would have been had the Merger and the Transactions
actually occurred on the dates indicated or to predict Budget's results of
operations in the future. These statements are qualified in their entirety by,
and should be read in conjunction with, the historical financial statements of
Budget, Cruise America and BRACC and the notes thereto incorporated by reference
in this Proxy Statement/Prospectus.
48
<PAGE> 55
COMBINED COMPANY BALANCE SHEET
AS OF DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA COMBINED
BUDGET CRUISE AMERICA ADJUSTMENTS COMPANY
---------- -------------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents...................... $ 50,490 $ 3,519 $ 54,009
Restricted cash................................ 66,336 -- 66,336
Trade and vehicle receivables, net............. 31,302 890 32,192
Accounts receivable, related parties........... 58 -- 58
Vehicle inventory.............................. 16,413 12,077 28,490
Revenue earning vehicles, net.................. 319,257 82,236 401,493
Prepaid expenses and other..................... -- 1,528 1,528
Property and equipment, net.................... 18,502 10,336 28,838
Other assets................................... 10,022 2,593 12,615
Other intangible assets, net................... 74,843 -- 74,843
-------- -------- -------- --------
Total assets............................ $587,223 $113,179 $700,402
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Notes payable.................................. $454,109 $ 75,787 $529,896
Capital lease obligations...................... 580 -- 580
Accounts payable............................... 14,601 3,108 17,709
Accrued and other liabilities.................. 16,526 600 17,126
Deferred income taxes.......................... 7,406 3,640 11,046
-------- -------- -------- --------
Total liabilities....................... 493,222 83,135 576,357
-------- -------- -------- --------
Common stock warrant............................. 2,000 -- 2,000
-------- -------- -------- --------
Stockholders' equity
Class A common stock........................... 93 -- 16(a) 109
Class B common stock........................... 19 -- 19
Common stock................................... -- 58 (58)(a) --
Additional paid-in capital..................... 89,856 24,993 42(a) 114,891
Retained earnings.............................. 2,363 5,713 8,076
Foreign currency translation adjustment........ -- (720) (720)
Treasury stock................................. (330) -- (330)
-------- -------- -------- --------
Total stockholders' equity.............. 92,001 30,044 122,045
-------- -------- -------- --------
Total liabilities and stockholders'
equity............................ $587,223 $113,179 $700,402
======== ======== ======== ========
</TABLE>
- ---------------
(a) Reflects the conversion of Cruise America Common Stock into Budget Common
Stock in accordance with the Merger Agreement.
49
<PAGE> 56
COMBINED COMPANY BALANCE SHEET
AS OF DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA COMBINED
BUDGET CRUISE AMERICA ADJUSTMENTS COMPANY
---------- -------------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents......................... $ 357 $ 2,416 $ 2,773
Restricted cash................................... 67,731 -- 67,731
Trade and vehicle receivables, net................ 20,928 3,812 24,740
Accounts receivable, related parties.............. 61 -- 61
Vehicle inventory................................. 8,938 14,287 23,225
Revenue earning vehicles, net..................... 219,927 63,517 283,444
Prepaid expenses and other........................ -- 3,008 3,008
Property and equipment, net....................... 12,503 10,303 22,806
Other assets...................................... 6,942 2,678 9,620
Other intangible assets, net...................... 48,936 -- 48,936
-------- -------- -------- --------
Total assets............................... $386,323 $100,021 $486,344
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Notes payable..................................... $318,233 $ 68,281 $386,514
Capital lease obligations......................... 784 -- 784
Accounts payable.................................. 14,698 2,340 17,038
Accrued and other liabilities..................... 9,315 792 10,107
Deferred income taxes............................. 1,701 1,872 3,573
-------- -------- -------- --------
Total liabilities.......................... 344,731 73,285 418,016
-------- -------- -------- --------
Common stock warrant................................ 2,000 -- 2,000
-------- -------- -------- --------
Stockholders' equity
Class A common stock.............................. 53 -- 16(a) 69
Class B common stock.............................. 19 -- 19
Common stock...................................... -- 57 (57)(a) --
Additional paid-in capital........................ 41,984 24,905 41(a) 66,930
Retained earnings (deficit)....................... (2,134) 2,459 325
Foreign currency translation adjustment........... -- (685) (685)
Treasury stock.................................... (330) -- (330)
-------- -------- -------- --------
Total stockholders' equity................. 39,592 26,736 66,328
-------- -------- -------- --------
Total liabilities and stockholders'
equity............................... $386,323 $100,021 $486,344
======== ======== ======== ========
</TABLE>
- ---------------
(a) Reflects the conversion of Cruise America Common Stock into Budget Common
Stock in accordance with the Merger Agreement.
50
<PAGE> 57
COMBINED COMPANY STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL COMBINED
BUDGET CRUISE AMERICA COMPANY
---------- -------------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Operating revenue:
Vehicle rental revenue................................... $223,250 $ 53,044 $276,294
Retail sales revenue..................................... 134,120 35,216 169,336
Other.................................................... -- 2,178 2,178
-------- -------- --------
Total operating revenue.......................... $357,370 $ 90,438 $447,808
Operating costs and expenses:
Direct vehicle and operating............................. 35,098 13,208 48,306
Depreciation -- vehicle.................................. 60,735 10,999 71,734
Depreciation -- non-vehicle.............................. 2,589 719 3,308
Cost of retail sales..................................... 113,747 32,766 146,513
Advertising, promotion and selling....................... 22,983 2,182 25,165
Facilities............................................... 20,406 981 21,387
Personnel................................................ 53,097 10,779 63,876
General and administrative............................... 11,605 6,202 17,807
Amortization............................................. 1,843 268 2,111
-------- -------- --------
Total operating costs and expenses............... $322,103 $ 78,104 $400,207
-------- -------- --------
Operating income........................................... $ 35,267 $ 12,334 $ 47,601
-------- -------- --------
Other (income) expense:
Vehicle interest expense................................. 25,336 7,069 32,405
Non-vehicle interest expense............................. 1,501 231 1,732
Interest income -- restricted cash....................... (781) -- (781)
Non-recurring bank fees.................................. 1,275 -- 1,275
Related party interest................................... 118 -- 118
-------- -------- --------
Total other (income) expense..................... $ 27,449 $ 7,300 $ 34,749
Income before income taxes................................. 7,818 5,034 12,852
Provision for income taxes............................... 3,321 1,780 5,101
-------- -------- --------
Net income....................................... $ 4,497 $ 3,254 $ 7,751
======== ======== ========
Weighted average common and common equivalent shares
outstanding (primary).................................... 9,488 5,917 11,149
======== ======== ========
Earnings per common and common equivalent share
(primary)................................................ $ 0.47 $ 0.55 $ 0.70
======== ======== ========
</TABLE>
51
<PAGE> 58
COMBINED COMPANY STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL COMBINED
BUDGET CRUISE AMERICA COMPANY
---------- -------------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Operating revenue:
Vehicle rental revenue................................... $107,067 $44,666 $151,733
Retail sales revenue..................................... 42,662 43,516 86,178
Other.................................................... -- 1,571 1,571
-------- ------- --------
Total operating revenue.......................... $149,729 $89,753 $239,482
Operating costs and expenses:
Direct vehicle and operating............................. 13,704 9,315 23,019
Depreciation -- vehicle.................................. 27,476 10,601 38,077
Depreciation -- non-vehicle.............................. 1,341 594 1,935
Cost of retail sales..................................... 38,021 38,827 76,848
Advertising, promotion and selling....................... 11,826 1,897 13,723
Facilities............................................... 11,121 1,288 12,409
Personnel................................................ 24,515 10,213 34,728
General and administrative............................... 6,686 7,637 14,323
Amortization............................................. 859 352 1,211
-------- ------- --------
Total operating costs and expenses............... $135,549 $80,724 $216,273
-------- ------- --------
Operating income........................................... $ 14,180 $ 9,029 $ 23,209
-------- ------- --------
Other (income) expense:
Vehicle interest expense................................. 13,874 6,617 20,491
Non-vehicle interest expense............................. 473 255 728
Interest income -- restricted cash....................... (1,348) -- (1,348)
Related party interest................................... 159 -- 159
-------- ------- --------
Total other (income) expense..................... $ 13,158 $ 6,872 $ 20,030
-------- ------- --------
Income before income taxes................................. 1,022 2,157 3,179
Provision for income taxes............................... 685 782 1,467
-------- ------- --------
Net income....................................... $ 337 $ 1,375 $ 1,712
======== ======= ========
Weighted average common and common equivalent shares
outstanding (primary).................................... 6,369 5,834 8,007
======== ======= ========
Earnings per common and common equivalent share
(primary)................................................ $ 0.05 $ 0.24 $ 0.21
======== ======= ========
</TABLE>
52
<PAGE> 59
COMBINED COMPANY STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL COMBINED
BUDGET CRUISE AMERICA COMPANY
---------- -------------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Operating revenue:
Vehicle rental revenue.................................... $38,642 $35,118 $ 73,760
Retail sales revenue...................................... -- 50,083 50,083
Other..................................................... -- 1,720 1,720
------- ------- --------
Total operating revenue........................... $38,642 $86,921 $125,563
Operating costs and expenses:
Direct vehicle and operating.............................. 9,439 12,263 21,702
Depreciation -- vehicle................................... 7,382 7,447 14,829
Depreciation -- non-vehicle............................... 446 658 1,104
Cost of retail sales...................................... -- 44,998 44,998
Advertising, promotion and selling........................ 3,090 2,625 5,715
Facilities................................................ 4,398 1,299 5,697
Personnel................................................. 7,947 9,425 17,372
General and administrative................................ 1,515 6,299 7,814
Amortization.............................................. 229 107 336
------- ------- --------
Total operating costs and expenses................ $34,446 $85,121 $119,567
------- ------- --------
Operating income............................................ $ 4,196 $ 1,800 $ 5,996
------- ------- --------
Other (income) expense:
Vehicle interest expense.................................. 3,909 5,452 9,361
Non-vehicle interest expense.............................. 341 242 583
Interest income -- restricted cash........................ (670) -- (670)
Related party interest.................................... 190 -- 190
------- ------- --------
Total other (income) expense...................... $ 3,770 $ 5,694 $ 9,464
Income (loss) before income taxes........................... 426 (3,894) (3,468)
Provision (benefit) for income taxes...................... 176 (672) (496)
------- ------- --------
Net income (loss)................................. $ 250 $(3,222) $ (2,972)
======= ======= ========
Weighted average common and common equivalent shares
outstanding (primary)..................................... 3,704 5,746 5,317
======= ======= ========
Earnings (loss) per common and common equivalent share
(primary)................................................. $ 0.07 $ (0.56) $ (0.56)
======= ======= ========
</TABLE>
53
<PAGE> 60
COMBINED COMPANY BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA COMBINED
BUDGET CRUISE AMERICA ADJUSTMENTS COMPANY
---------- -------------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents...................... $ 148,178 $ 5,981 $ 154,159
Restricted cash................................ 378,485 -- 378,485
Trade and vehicle receivables, net............. 275,972 6,258 282,230
Accounts receivable, related parties........... 58 -- 58
Vehicle inventory.............................. 34,168 10,145 44,313
Revenue earning vehicles, net.................. 1,989,965 102,008 2,091,973
Prepaid expenses and other..................... 79,143 3,589 82,732
Property and equipment, net.................... 131,340 8,182 139,522
Other assets................................... 49,259 2,883 52,142
Other intangible assets, net................... 395,233 -- 395,233
---------- -------- ------- ----------
Total assets............................ $3,481,801 $139,046 $3,620,847
========== ======== ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Notes payable.................................. $2,583,585 $ 89,458 $2,673,043
Capital lease obligations...................... 448 -- 448
Accounts payable............................... 467,535 4,009 471,544
Accrued and other liabilities.................. -- 11,035 11,035
Deferred income taxes.......................... 25,585 4,776 30,361
---------- -------- ------- ----------
Total liabilities....................... 3,077,153 109,278 3,186,431
---------- -------- ------- ----------
Common stock warrant............................. -- -- --
---------- -------- ------- ----------
Stockholders' equity
Convertible preferred stock.................... 105,750 -- 105,750
Class A common stock........................... 181 -- 16(a) 197
Class B common stock........................... 19 -- 19
Common stock................................... -- 58 (58)(a) --
Additional paid-in capital..................... 264,469 25,072 42(a) 289,583
Retained earnings.............................. 34,817 5,414 40,231
Foreign currency translation adjustment........ (258) (776) (1,034)
Treasury stock................................. (330) -- (330)
---------- -------- ------- ----------
Total stockholders' equity.............. 404,648 29,768 434,416
---------- -------- ------- ----------
Total liabilities and stockholders'
equity............................ $3,481,801 $139,046 $3,620,847
========== ======== ======= ==========
</TABLE>
- ---------------
(a) Reflects the conversion of Cruise America Common Stock into Budget Common
Stock in accordance with the Merger Agreement.
54
<PAGE> 61
COMBINED COMPANY STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL COMBINED
BUDGET CRUISE AMERICA COMPANY
---------- -------------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Operating revenue:
Vehicle rental revenue................................... $685,891 $51,176 $737,067
Retail sales revenue..................................... 172,623 29,274 201,897
Royalty fees............................................. 32,702 -- 32,702
Other.................................................... -- 1,670 1,670
-------- ------- --------
Total operating revenue.......................... $891,216 $82,120 $973,336
Operating costs and expenses:
Direct vehicle and operating............................. 80,938 9,833 90,771
Depreciation -- vehicle.................................. 187,842 10,569 198,411
Depreciation -- non-vehicle.............................. 12,046 506 12,552
Cost of retail sales..................................... 147,376 25,987 173,363
Advertising, promotion and selling....................... 69,064 1,880 70,944
Facilities............................................... 66,101 899 67,000
Personnel................................................ 158,340 9,590 167,930
General and administrative............................... 36,654 6,216 42,870
Contested litigation liability(1)........................ -- 10,000 10,000
Amortization............................................. 4,981 178 5,159
-------- ------- --------
Total operating costs and expenses............... $763,342 $75,658 $839,000
-------- ------- --------
Operating income........................................... $127,874 $ 6,462 $134,336
-------- ------- --------
Other (income) expense:
Vehicle interest expense................................. 63,268 5,522 68,790
Non-vehicle interest expense............................. 12,629 122 12,751
Interest income -- restricted cash....................... (3,931) -- (3,931)
-------- ------- --------
Total other (income) expense..................... $ 71,966 $ 5,644 $ 77,610
Income before income taxes................................. 55,908 818 56,726
Provision for income taxes............................... 23,454 1,117 24,571
-------- ------- --------
Net income (loss)................................ $ 32,454 $ (299) $ 32,155
======== ======= ========
Weighted average common and common equivalent shares
outstanding (primary).................................... 19,324 5,905 20,982
======== ======= ========
Earnings (loss) per common and common equivalent share
(primary)................................................ $ 1.68 $ (0.05) $ 1.53
======== ======= ========
</TABLE>
- ---------------
(1) Reflects the one-time charge of $10.0 million to establish a reserve for
damages related to ongoing litigation. See "Risk Factors -- Judgment Against
Cruise America."
55
<PAGE> 62
PRO FORMA COMBINED COMPANY STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
ADJUSTMENTS FOR HISTORICAL FOR BUDGET PRO FORMA
COMBINED 1996 BUDGET COMBINED HISTORICAL ACQUISITION COMBINED
COMPANY TRANSACTIONS(A) COMPANY BRACC TRANSACTIONS COMPANY
--------- --------------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue:
Vehicle rental revenue...... $276,294 $10,874 $287,168 $ 963,764 $ -- $1,250,932
Retail sales revenue........ 169,336 21,313 190,649 91,503 -- 282,152
Royalty fees................ -- -- -- 60,352 (7,641)(k) 52,711
Other....................... 2,178 -- 2,178 17,202 (2,509)(k) 16,871
-------- ------- -------- ---------- -------- ----------
Total operating
revenue............ $447,808 $32,187 $479,995 $1,132,821 $(10,150) $1,602,666
-------- ------- -------- ---------- -------- ----------
Operating costs and expenses:
Direct vehicle and
operating................. 48,306 2,372 50,678 121,288 (6,719)(k) 165,247
Depreciation -- vehicle..... 71,734 2,855 74,589 263,846 -- 338,435
Depreciation -- non-vehicle... 3,308 343 3,651 26,645 -- 30,296
Cost of retail sales........ 146,513 19,639 166,152 78,944 -- 245,096
Advertising, promotion and
selling................... 25,165 915 26,080 83,304 (2,509)(k) 106,875
Facilities.................. 21,387 871 22,258 114,325 -- 136,583
Personnel................... 63,876 1,955(b) 65,831 248,655 -- 314,486
General and
administrative............ 17,807 3,968(c) 21,775 54,194 -- 75,969
Amortization................ 2,111 90(d) 2,201 16,969 (6,385)(l) 12,785
-------- ------- -------- ---------- -------- ----------
Total operating costs
and expenses....... $400,207 $33,008 $433,215 $1,008,170 $(15,613) $1,425,772
-------- ------- -------- ---------- -------- ----------
Operating income (loss)....... $ 47,601 $ (821) $ 46,780 $ 124,651 $ 5,463 $ 176,894
-------- ------- -------- ---------- -------- ----------
Other (income) expense:
Vehicle interest expense.... 32,405 (4,419)(e) 27,986 92,738 (6,734)(m)(n) 113,990
Non-vehicle interest
expense................... 1,732 4,292(f) 6,024 31,444 (10,308)(o)(p) 27,160
Interest
income -- restricted
cash...................... (781) (929)(g) (1,710) -- (108)(q) (1,818)
Non-recurring bank fees..... 1,275 (1,275)(h) -- -- -- --
Related party interest...... 118 (118)(i) -- -- -- --
-------- ------- -------- ---------- -------- ----------
Total other (income)
expense............ $ 34,749 $(2,449) $ 32,300 $ 124,182 $(17,150) $ 139,332
Income before income taxes.... 12,852 1,628 14,480 469 22,613 37,562
Provision for income
taxes..................... 5,101 651(j) 5,752 3,000 4,652(r) 13,404
-------- ------- -------- ---------- -------- ----------
Net income (loss).... $ 7,751 $ 977 $ 8,728 $ (2,531) $ 17,961 $ 24,158
======== ======= ======== ========== ======== ==========
Weighted average common and
common equivalent shares
outstanding (primary)....... 11,149 26,240
======== ==========
Earnings per common and common
equivalent share
(primary)................... $ 0.70 $ 0.92
======== ==========
</TABLE>
56
<PAGE> 63
NOTES TO PRO FORMA COMBINED COMPANY STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
Adjustments for 1996 Budget Transactions:
(a) Reflects the inclusion of the operations of Van Pool, the Phoenix Budget
franchise, and ValCar from January 1, 1996, to their respective dates of
acquisition by Budget of February 1, March 1, and August 1, 1996,
respectively, as reflected in the table below.
<TABLE>
<CAPTION>
VAN POOL PHOENIX VALCAR TOTAL
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating revenue:
Vehicle rental revenue............................. $2,660 $8,214 -- $10,874
Retail car sales revenue........................... -- -- $21,313 21,313
------ ------ ------- -------
Total operating revenues...................... $2,660 $8,214 $21,313 $32,187
------ ------ ------- -------
Operating costs and expenses:
Direct vehicle and operating....................... 893 1,479 -- 2,372
Depreciation -- vehicle............................ 676 2,179 -- 2,855
Depreciation -- non-vehicle........................ 8 229 106 343
Cost of car sales.................................. -- -- 19,639 19,639
Advertising, promotion and selling................. -- 915 -- 915
Facilities......................................... 33 838 -- 871
Personnel.......................................... 379 1,913 -- 2,292
General and administrative......................... 148 436 3,421 4,005
Amortization of franchise rights................... -- 8 -- 8
------ ------ ------- -------
Total operating costs and expenses............ $2,137 $7,997 $23,166 $33,300
------ ------ ------- -------
Operating income (loss).............................. 523 217 (1,853) (1,113)
Other (income) expense:
Vehicle interest expense........................... 232 991 318 1,541
Non-vehicle interest expense (income), net......... (21) 2 -- (19)
------ ------ ------- -------
Total other expense........................... $ 211 $ 993 $ 318 $ 1,522
Income (loss) before taxes........................... 312 (776) (2,171) (2,635)
Provision (benefit) for income taxes............... 125 (310) (869) (1,054)
------ ------ ------- -------
Net income (loss).................................... $ 187 $ (466) $(1,302) $(1,581)
====== ====== ======= =======
</TABLE>
(b) Reflects the net increase in personnel expense of $1,955 attributable to:
<TABLE>
<S> <C>
Operations of purchased businesses as reflected in note
(a).................................................... $2,292
Reduction relating to salaries and bonuses previously
paid to officers of the
Phoenix Budget franchise.............................. (312)
Reduction resulting from the elimination of a retirement
plan................................................... (25)
------
Net increase in personnel expense.................. $1,955
======
</TABLE>
(c) Reflects the net increase in general and administrative expense of $3,968
attributable to:
<TABLE>
<S> <C>
Operations of purchased businesses as reflected in note
(a).................................................... $ 4,005
Elimination of management fees paid to former
shareholders of ValCar................................. (108)
Royalty payments made by ValCar to BRACC for the right
to use the "Budget" trade name for its retail car sales
facilities during the preacquisition period............ 71
-------
Net increase in general and administrative
expense........................................... $ 3,968
=======
</TABLE>
(d) Reflects the net increase in amortization expense of $90 attributable to:
<TABLE>
<S> <C>
Operations of purchased businesses as reflected in note
(a).................................................... $ 8
Amortization of franchise rights resulting from the
Phoenix Acquisition.................................... 60
Amortization of franchise rights resulting from the
ValCar Acquisition..................................... 22
-------
Net increase in amortization expense............... $ 90
=======
</TABLE>
57
<PAGE> 64
NOTES TO PRO FORMA COMBINED COMPANY STATEMENT OF OPERATIONS -- (CONTINUED)
(e) Reflects the net decrease in vehicle interest expense of $4,419
attributable to:
<TABLE>
<S> <C>
Operations of purchased businesses as reflected in note
(a).................................................... $ 1,541
Amortization of costs incurred in connection with the
Third Fleet Financing Facility......................... 260
Interest savings due to the refinancing of debt at
reduced interest rates under the Third Fleet Financing
Facility............................................... (6,220)
-------
Net decrease in vehicle interest expense........... $(4,419)
=======
</TABLE>
(f) Reflects the net increase in non-vehicle interest expense of $4,292
attributable to:
<TABLE>
<S> <C>
Operations of purchased businesses as reflected in note
(a).................................................... $ (19)
Interest expense that would have been incurred on
borrowings of $15.0 million to effect the Phoenix
Acquisition............................................ 217
Interest expense incurred on the Series A Convertible
Notes.................................................. 3,901
Amortization of costs incurred in connection with the
issuance of Series A Convertible Notes................. 193
-------
Net increase in non-vehicle interest expense....... $ 4,292
=======
Because the Series A Convertible Notes are unsecured indebtedness,
the entire interest expense is included in non-vehicle interest
expense, even though a portion of the proceeds have been used to fund
the fleet. Based on the average fleet debt outstanding during the
period that could have been funded by the Series A Convertible Notes,
approximately $3,000 of the interest cost incurred is attributable to
funding the fleet.
</TABLE>
(g) Reflects the $929 increase in interest income -- restricted cash earned on
restricted cash balances remaining in Budget's restricted cash account
after application of the proceeds received from the Third Fleet Financing
Facility, the Series A Convertible Notes and the July 1996 Public Offering
to Budget's outstanding indebtedness. Under the terms of the Third Fleet
Financing Facility, specified amounts of cash are required to be maintained
in a restricted cash account, with such amounts earning interest at a rate
of 4.5% per annum.
(h) Reflects the elimination of $1,275 in non-recurring financing fees related
to bridge loans that were repaid with the proceeds of the July 1996 Public
Offering and that would not have been incurred on a pro forma basis.
(i) Reflects the elimination of $118 of related party interest due to repayment
of the related party debt.
(j) Reflects the tax effect of the pro forma adjustments, based on an effective
tax rate of approximately 40%.
Adjustments for Budget Acquisition Transactions:
(k) Reflects the elimination of the following transactions between Budget and
BRACC:
<TABLE>
<S> <C>
Advertising fees paid by Budget which were recognized as
other revenue by BRACC................................. $2,509
Royalty expenses paid by Budget which were recognized as
royalty fees by BRACC.................................. 6,241
</TABLE>
Also reflects the elimination of the current year effect of $1,400 royalty
fees recognized by BRACC and $478 royalty expense recognized by Budget
related to the warrant to purchase shares of Budget Common Stock held by
BRACC (the "BRACC Warrant"). The BRACC Warrant was issued by Budget in
August 1994 and, following the Budget Acquisition, is no longer
outstanding.
(l) Reflects the elimination of $16,969 of amortization of BRACC's existing
goodwill and records an increase of $10,584 amortization on the net
goodwill and other intangible assets recorded through purchase accounting
adjustments.
(m) Reflects the increase in vehicle interest expense attributable to:
<TABLE>
<S> <C>
Interest expense related to the April 1997 Fleet
Financings............................................. $54,641
Amortization of costs incurred in connection with
certain of the April 1997 Fleet Financings............. 1,169
-------
Increase in vehicle interest expense............... $55,810
=======
</TABLE>
58
<PAGE> 65
NOTES TO PRO FORMA COMBINED COMPANY STATEMENT OF OPERATIONS -- (CONTINUED)
(n) Reflects the decrease in vehicle interest expense attributable to:
<TABLE>
<S> <C>
Interest savings on vehicle debt refinanced through the
April 1997 Fleet Financings............................ $54,532
Interest savings on vehicle debt to Ford paid down by
BRACC in connection with
the Budget Acquisition................................ 8,012
-------
Decrease in vehicle interest expense............... $62,544
=======
</TABLE>
(o) Reflects the increase is non-vehicle interest expense attributable to:
<TABLE>
<S> <C>
Interest expense related to the Debt Placements......... $18,873
Amortization of costs incurred in connection with
certain of the April 1997 Fleet Financings and the Debt
Placements............................................. 1,481
-------
Increase in non-vehicle interest expense........... $20,354
=======
</TABLE>
(p) Reflects the decrease in non-vehicle interest expense attributable to:
<TABLE>
<S> <C>
Elimination of interest on BRACC indebtedness to Ford
purchased by Budget through the issuance of Series A
Convertible Preferred Stock............................ $ 7,634
Elimination of interest on working capital debt of
$134,136 forgiven by Ford.............................. 10,330
Elimination of interest on BRACC indebtedness to Ford
paid down by BRACC using the proceeds from BRACC's sale
of newly issued common stock to Budget................. 12,698
-------
Decrease in non-vehicle interest expense........... $30,662
=======
</TABLE>
(q) Reflects $108 of interest income -- restricted cash on the $2,400 increase
in restricted cash resulting from the receipt of Ford's funding of the
special bonus program implemented in connection with the Budget
Acquisition.
(r) Reflects a tax provision attributable to the combined group on a pro forma
basis.
(s) Unaudited pro forma earnings per common and common equivalent share data
for Budget are calculated using 24,578,786 shares of Budget Common Stock,
which includes the 4,500,000 shares of Budget Common Stock issuable upon
conversion of the Series A Convertible Preferred Stock.
59
<PAGE> 66
PRO FORMA COMBINED COMPANY STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
HISTORICAL BRACC FOR BUDGET PRO FORMA
COMBINED THROUGH ACQUISITION COMBINED
COMPANY BUDGET ACQUISITION(A) TRANSACTIONS COMPANY
--------- --------------------- ------------ ----------
<S> <C> <C> <C> <C>
Operating revenue:
Vehicle rental revenue................... $737,067 $311,945 $ -- $1,049,012
Retail sales revenue..................... 32,702 29,146 -- 61,848
Royalty fees............................. 201,897 18,433 (2,439)(b) 217,891
Other.................................... 1,670 4,699 (1,217)(b) 5,152
-------- -------- ------- ----------
Total operating revenue........... $973,336 $364,223 $(3,656) $1,333,903
Operating costs and expenses:
Direct vehicle and operating............. 90,771 43,112 (2,439)(b) 131,444
Depreciation -- vehicle.................. 198,411 89,019 -- 287,430
Depreciation -- non-vehicle.............. 12,552 8,592 -- 21,144
Cost of retail sales..................... 173,363 25,691 -- 199,054
Advertising, promotion and selling....... 70,944 37,844 (1,217)(b) 107,571
Facilities............................... 67,000 38,937 -- 105,937
Personnel................................ 167,930 86,916 -- 254,846
General and administrative............... 42,870 20,712 -- 63,582
Contested litigation liabilities(1)...... 10,000 -- -- 10,000
Amortization............................. 5,189 5,824 (2,328)(c) 8,655
-------- -------- ------- ----------
Total operating costs and
expenses........................ $839,000 $356,647 $(5,984) $1,189,663
-------- -------- ------- ----------
Operating income........................... $134,336 $ 7,576 $ 2,328 $ 144,240
-------- -------- ------- ----------
Other (income) expense:
Vehicle interest expense................. 68,790 30,346 (1,245)(d)(e) 97,891
Non-vehicle interest expense............. 12,751 10,576 (4,067)(f)(g) 19,260
Interest income -- restricted cash....... (3,931) -- (36)(h) (3,967)
-------- -------- ------- ----------
Total other (income) expense...... $ 77,610 $ 40,922 $(5,348) $ 113,184
Income (loss) before income taxes.......... 56,726 (33,346) 7,676 31,056
Provision (benefit) for income taxes..... 24,571 (6,669) (4,764)(i) 13,138
-------- -------- ------- ----------
Net income (loss)................. $ 32,155 $(26,677) $12,440 $ 17,918
======== ======== ======= ==========
Weighted average common and common
equivalent shares outstanding
(primary)................................ 20,982 26,785
======== ==========
Earnings per common and common equivalent
share (primary).......................... $ 1.53 $ 0.67
======== ==========
</TABLE>
- ---------------
(1) Reflects the one-time charge of $10.0 million to establish a reserve for
damages related to ongoing litigation. See "Risk Factors -- Judgment Against
Cruise America."
60
<PAGE> 67
NOTES TO PRO FORMA COMBINED COMPANY STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
(a) Reflects the inclusion of the operations of BRACC from January 1, 1997 to
April 29, 1997, the date of the acquisition of BRACC by Budget.
(b) Reflects the elimination of the following transactions between Budget and
BRACC:
<TABLE>
<S> <C>
Advertising fees paid by Budget which were recognized as
other revenue by BRACC................................. $1,217
Royalty expenses paid by Budget which were recognized as
royalty fees by BRACC.................................. 1,700
</TABLE>
Also reflects the elimination of the current period effect of $739 royalty
fees recognized by BRACC and $739 royalty expense recognized by Budget
related to the BRACC Warrant.
(c) Reflects the elimination of $5,824 of amortization of BRACC's existing
goodwill and records an increase of $3,496 amortization on the net goodwill
and other intangible assets recorded through purchase accounting
adjustments.
(d) Reflects the increase in vehicle interest expense attributable to:
<TABLE>
<S> <C>
Interest expense related to the April 1997 Fleet
Financings............................................. $17,899
Amortization of costs incurred in connection with
certain of the April 1997 Fleet Financings............. 384
-------
Increase in vehicle interest expense............... $18,283
=======
</TABLE>
(e) Reflects the decrease in vehicle interest expense attributable to:
<TABLE>
<S> <C>
Interest savings on vehicle debt refinanced through the
April 1997 Fleet Financings............................ $17,696
Interest savings on vehicle debt to Ford paid down by
BRACC in connection with the Budget Acquisition........ 1,832
-------
Decrease in vehicle interest expense............... $19,528
=======
</TABLE>
(f) Reflects the increase in non-vehicle interest expense attributable to:
<TABLE>
<S> <C>
Interest expense related to the Debt Placements......... $ 6,205
Amortization of costs incurred in connection with
certain of the April 1997 Fleet Financings and the Debt
Placements............................................. 487
-------
Increase in non-vehicle interest expense........... $ 6,692
=======
</TABLE>
(g) Reflects the decrease in non-vehicle interest expense attributable to:
<TABLE>
<S> <C>
Elimination of interest on BRACC indebtedness to Ford
purchased by Budget through the issuance of Series A
Convertible Preferred Stock............................ $ 2,478
Elimination of interest on working capital debt of
$134,136 forgiven by Ford.............................. 3,353
Elimination of interest on BRACC indebtedness to Ford
paid down by BRACC using the proceeds from BRACC's sale
of newly issued common stock to Budget................. 4,928
-------
Decrease in non-vehicle interest expense........... $10,759
=======
</TABLE>
(h) Reflects $36 of interest income -- restricted cash on the $2,400 increase
in restricted cash resulting from the receipt of Ford's funding of the
special bonus program implemented in connection with the Budget
Acquisition.
(i) Reflects a tax provision attributable to the combined group on a pro forma
basis.
(j) Unaudited pro forma earnings per common and common equivalent share data
for Budget are calculated using 24,982,240 shares of Budget Common Stock,
which include the 4,500,000 shares of Budget Common Stock issuable upon
conversion of the Series A Convertible Preferred Stock.
61
<PAGE> 68
BUSINESS OF BUDGET
GENERAL
The Budget System operates the third largest worldwide general use car and
truck rental system, with approximately 3,200 locations and a peak fleet size
during 1996 of 266,000 cars and 18,000 trucks. The Budget System includes
locations in both the airport and local (downtown and suburban) markets in all
major metropolitan areas in the United States, in many other small and mid-size
U.S. markets and in more than 110 countries worldwide. The Budget System
includes approximately 455 company-owned locations in the United States at
December 31, 1996, accounting for approximately 76% of 1996 U.S. system-wide
revenues. In addition, Budget franchisees operated approximately 500
royalty-paying franchise locations in the United States at December 31, 1996.
The Budget System is one of only three vehicle rental systems that offer rental
vehicles throughout the world under a single brand name, with locations in
Europe, Canada, Latin America, the Middle East, Asia/Pacific and Africa. The
Budget System currently maintains more local market rental locations throughout
the world than its major competitors. The Budget System is also unique among
major car rental systems in that it rents trucks in most major markets
worldwide. The Budget System's consumer truck rental fleet is the fourth largest
in the United States. The Budget System had vehicle rental revenues of $2.5
billion for 1996.
Budget is also one of the largest independent retailers of late model
vehicles in the United States, with 26 retail car sales facilities and pro forma
revenues of $246.9 million for 1996. Budget operates its retail car sales
facilities under the name "Budget Car Sales."
Budget Management's long-term strategy is to create an automotive services
company which leverages the asset base and expertise of Budget. Budget assets
include a trade name that is recognized around the world; locations for the
rental, sale and maintenance of vehicles; a workforce that is proficient in
acquiring, financing, monitoring, maintaining and selling cars and trucks; and
advanced information systems to support these operations. Increasing the
utilization of these assets by acquiring automobile-related businesses would
reduce Budget's unit costs and increase profitability. In the near term,
management has developed a business strategy designed to increase the revenues
and improve the profitability of Budget. Key elements of this strategy include:
enhancing the Budget brand; improving the performance of car rental operations;
continuing to expand retail car sales operations and expanding truck rental
operations.
Sanford Miller (Chairman of the Board and Chief Executive Officer), John P.
Kennedy (Vice President) and Jeffrey D. Congdon (Vice Chairman of the Board and
President of Budget Car Sales) (collectively, the "Principal Executive
Officers") together have over 75 years of experience in the vehicle rental
business and had acquired and operated 54 Budget franchises prior to the Budget
Acquisition. In addition, Messrs. Miller and Congdon together have over 25 years
of experience operating retail car sales facilities.
THE BUDGET ACQUISITION
On April 29, 1997, Budget acquired all the capital stock of BRACC pursuant
to a series of stock purchase agreements among TEAM, Ford Motor Company and
BRACC and the common stockholder of BRACC (the "Stock Purchase Agreements"). The
consideration paid by TEAM pursuant to the Stock Purchase Agreements consisted
of approximately $275.0 million cash and the issuance to Ford of 4,500 shares of
Series a Convertible Preferred Stock. Additionally, TEAM purchased approximately
$95.2 million of the outstanding indebtedness of BRACC to Ford and Ford canceled
an additional $134.1 million of outstanding BRACC indebtedness. TEAM also
refinanced approximately $870.7 million of indebtedness outstanding primarily
under BRACC's then-existing fleet financing facilities.
Pursuant to the Stock Purchase Agreements, Ford contributed $2.4 million in
cash to Budget in connection with the establishment of a Special Bonus Program
which provides bonus payments to BRACC employees. Budget has made payments in
options and cash pursuant to the Special Bonus Program totaling approximately
$4.8 million.
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<PAGE> 69
Concurrently with the consummation of the Budget Acquisition, BRACC entered
into a supply agreement with Ford (the "Supply Agreement"). Under the terms of
the Supply Agreement, Budget agreed to purchase or lease Ford vehicles in such
quantity in the United States, Canada and other countries outside the European
Union such that the percentage of Ford vehicles purchased or leased in each
country will be at least 70% of the total number of vehicles leased or purchase
in each model year by BRACC at its affiliates.
Concurrently with the consummation of the Budget Acquisition, Budget
entered into a ten-year advertising agreement with Ford (the "Advertising
Agreement") under which Budget has undertaken to carry out promotional programs
that feature and promote the rental of Ford vehicles. Under the terms of the
Advertising Agreement, Ford will pay to Budget for such advertising and
promotional activities a stated base amount for each model year with an annual
consumer price index adjustment.
RECENT DEVELOPMENTS
On July 31, 1997 Budget acquired the fleet and certain other assets of
Premier Rental Car, Inc. ("Premier"). The purchase price consisted of $2.0
million in cash and the refinancing of approximately $85.2 million of
outstanding Premier fleet indebtedness (the "Premier Acquisition"). Premier,
based in Ohio, provides rental cars for the insurance replacement market and
owns and operates 9,000 vehicles from 101 locations in 13 major U.S. markets. In
1996, Premier had revenues of approximately $61.0 million. Premier will continue
to operate under its own trade name and Budget does not expect this acquisition
to have a material effect on its earnings in 1997. In July 1997, Budget acquired
the Budget franchise located in Chattanooga, Tennessee for $3.2 million.
On August 19, 1997, Budget Truck Rental announced that it had entered into
a four-year preferred alliance agreement with HFS Incorporated, making Budget
the exclusive provider of truck rental services promoted to customers of
Coldwell Banker, ERA and Century 21 real estate brands, as well as relocation
customers of HFS Mobility Services, Inc.
In November 1997, BRACC acquired its franchise operation in St. Louis,
Missouri, in a Budget stock transaction. Budget of St. Louis operates an average
fleet of more than 1,000 cars and trucks at six locations throughout St. Louis.
BUSINESS OF CRUISE AMERICA
GENERAL
Cruise America believes it is one of the largest companies in North America
specializing in the rental and sale of RVs. Cruise America began sales and
rental operations in Miami, Florida in 1972, with an initial strategy to locate
rental centers in metropolitan gateway cities which are destinations for large
numbers of domestic and international travelers. Since that time, Cruise America
has established 91 additional rental and/or sales locations across the United
States and Canada. At April 30, 1997, Cruise America operated a total of 16 Hub
offices, 76 Satellite offices, and a rental fleet of 2,810 recreational vehicles
across North America.
Besides rentals, Cruise America sells new and used RVs (including vehicles
retired from the rental fleet) from its Hub offices. The sales effort is
marketed under the name RV DEPOT and for the year ended April 30, 1997
represented approximately 44% of Cruise America's total revenue.
Cruise America rents a wide variety of RVs at each of its 16 Hub and 76
Satellite offices across North America. Cruise America's peak rental fleet in
the year ended April 30, 1997 consisted of 3,773 RVs, of which 2,631 were
motorhomes, 861 were truck campers, 158 were motorcycles and 123 were sport
utility vehicles, vans and buses. The majority of vehicles available for rent
were current model, one or two year old vehicles.
Over the years, Cruise America's use of rental vehicles that can easily be
disposed of after the peak summer rental season has increased significantly.
Cruise America also began in the Spring of 1993 to purchase motorhomes that are
designed such that the coach portion can be easily removed from the old chassis
and
63
<PAGE> 70
placed on a new chassis. These two changes in the rental fleet are designed to
reduce maintenance and holding costs and increase the service life of the
vehicles. Virtually the entire rental fleet is now made up of these specially
designed RVs.
Cruise America purchases its rental fleet from several manufacturers,
including Chevrolet, Ford, Fleetwood, Damon, Four Winds, Winnebago, Honda,
Triumph and individual Harley-Davidson dealers. Cruise America believes it
enjoys excellent relationships with its suppliers, most of which have been
suppliers to Cruise America for many years.
At April 30, 1997, Cruise America operated Hub offices from 16 locations in
the United States and Canada. Each office consists of full service rental
operations, new, used and fleet RV sales, fleet maintenance, and vehicle
storage. In addition, each Hub office provides management and marketing support
and other services to the Satellite offices within its respective service area.
At April 30, 1997, Cruise America operated 76 Satellite rental centers,
called Dealers. Dealers are independently owned and operated businesses that
contract to rent Cruise America's RVs. Typically, the Dealer also is engaged in
a complementary business such as car, truck or equipment rentals, or RV sales.
The Satellite office operator provides the facilities and all personnel for the
rental operation and is paid a commission on the rental revenue generated.
Cruise America provides each Dealer with vehicles, maintenance, service, forms,
supplies, advertising and management support.
PENDING LITIGATION
In October 1997, a California jury awarded damages of approximately $7.4
million against Cruise America. The judgment included a $2.6 million award of
punitive damages. In addition, in November 1997, the court awarded plaintiff's
counsel fees and expenses of $2.5 million. The management of Cruise America
believes the jury verdict is unjust and that the damages awarded are
inappropriate and excessive. Cruise America intends to vigorously pursue a
reversal of the jury decision or the elimination of the damages awarded through
the California Court of Appeal. No assurances may be given that such verdict
will be reversed or such damages will be eliminated or reduced.
The action arose out of a claim for an alleged wrongful termination by
Cruise America of a sublease agreement. The lawsuit has been pending since May
1987 and has been tried twice previously. The first trial resulted in a judgment
for the plaintiff of approximately $3.5 million that was reversed on appeal and
remanded for retrial. The second trial resulted in a net judgment for Cruise
America of $399,000, which was reduced on appeal and again remanded for a
retrial. Pending appeal, Cruise America has taken a one-time charge of $10.0
million to establish a reserve for damages in its second fiscal quarter, which
ended October 31, 1997. This one-time charge will adversely affect Cruise
America's results of operations for the six month period ended October 31, 1997
and will adversely impact the results of operations of Budget, after giving
effect to the consummation of the Merger.
In December 1997, Budget and Cruise America entered into an agreement
pursuant to which Budget will post, on behalf of Cruise America, the Bond to
stay execution of the judgment against Cruise America pending resolution of the
appeal. Cruise America will pay Budget a fee plus all costs for the posting of
the Bond and has agreed to indemnify Budget for any losses, claims or damages
arising as a result of or in connection with the posting of the Bond.
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<PAGE> 71
CRUISE AMERICA PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to Cruise America
with respect to beneficial ownership of the Cruise America Common Stock as of
this Proxy Statement/Prospectus, by (i) each stockholder who is known by Cruise
America to own beneficially more than 5% of the Cruise America Common Stock;
(ii) the Chief Executive Officer and the four other most highly compensated
executive officers of Cruise America on the date of this Proxy
Statement/Prospectus, (iii) each director; and (iv) all executive officers and
directors of Cruise America as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-------------------------------------------------------------------------------------------------
PERCENT OF TOTAL
PERCENT OF TOTAL SHARES OF BUDGET BUDGET COMMON PERCENT OF TOTAL
NUMBER OF SHARES CRUISE AMERICA COMMON STOCK TO STOCK VOTING POWER
OF CRUISE COMMON STOCK BE BENEFICIALLY OUTSTANDING OF BUDGET
AMERICA COMMON OUTSTANDING PRIOR OWNED AFTER THE AFTER COMMON STOCK
BENEFICIAL OWNERS STOCK TO THE MERGER(1) MERGER(13) THE MERGER(14) AFTER THE MERGER(15)
----------------- ---------------- ----------------- ---------------- ---------------- --------------------
<S> <C> <C> <C> <C> <C>
Robert A. Smalley(6)(7)(12)... 946,184 16.1% 265,622 1.0% 0.6%
Randall S.
Smalley(2)(6)(7)(12)........ 352,984 6.0 99,093 0.4 0.2
Robert A. Smalley,
Jr.(4)(6)(7)(12)............ 343,256 5.9 96,362 0.4 0.2
Sally Smalley
DiLucente(5)(6)(12)......... 320,085 5.5 89,857 0.4 0.2
Eric R. Bensen(7)............. 76,430 1.3 21,456 0.1 0.0
Interstate Properties(8)...... 765,600 13.2 214,927 0.8 0.5
Gruber & McBaine Capital
Management, Inc.(9)......... 505,000 8.7 141,769 0.6 0.3
First Wilshire Securities
Management, Inc.(10)........ 363,330 6.3 101,998 0.4 0.2
Dimensional Fund Advisors,
Inc.(11).................... 292,200 5.1 82,029 0.3 0.2
All directors and executive
officers as a group (six
persons, including four
persons named above)........ 1,780,285 28.9 499,779 1.9 1.1
</TABLE>
- ---------------
(1) Based on 5,783,059 shares of Cruise America common stock outstanding as of
November 21, 1997.
(2) Includes 10,400 shares held by Randall S. Smalley as custodian for Carrie
E. Smalley, Rebecca Smalley, Courtney M. Smalley and Randall S. Smalley,
Jr.
(3) Includes 10,400 shares held by Robert A. Smalley, Jr. as custodian for
Alana Shirley Smalley, Caroline Marie Smalley, Robert A. Smalley III and
Suzanne M. Smalley.
(4) Includes 8,300 shares held by Robert A. Smalley, Jr. as trustee for
Courtney Marie Smalley, Carrie Elizabeth Smalley, Steven Smalley II and
Rebecca Lynn Smalley.
(5) Includes 7,800 shares held by Sally Smalley DiLucente as custodian for
Brian L. DiLucente, Lisa M. DiLucente and Marie Irene DiLucente.
(6) Includes 43,382, 12,477, 7,400 and 7,871 shares held by the spouses of
Robert A. Smalley, Randall S. Smalley, Robert A. Smalley, Jr. and Sally
Smalley DiLucente, respectively.
(7) Includes immediately exercisable options to purchase 80,000 shares of
common stock for each of Robert A. Smalley, Robert A. Smalley, Jr. and
Randall S. Smalley and 76,100 shares for Eric R. Bensen.
(8) Information taken from the Form 4 dated February 23, 1994 of Interstate
Properties, a New Jersey partnership and Russell B. Wight, Jr. and the Form
4 of Steven Roth dated February 24, 1994. The Form 4 list shared voting and
dispositive power of 501,500 shares and sole voting and dispositive power
of 225,100 shares held by Mr. Wight. In addition, Steven Roth, a general
partner of Interstate, owns 39,000, which are included in the table above.
The address of Interstate Properties is Glenpoint Centre West, 500 Frank W.
Burr Boulevard, Teaneck, New Jersey 07666.
(9) Information taken from the Schedule 13D dated June 6, 1996 of Gruber &
McBaine Capital Management, Inc., a California corporation, Jon D. Gruber,
J. Patterson McBaine, Lagunitas Partners, L.P., a California limited
partnership, GMJ Investments, L.P., a California limited partnership,
Gruber & McBaine Capital Management International and Thomas O.
Lloyd-Butler (collectively, the "Reporting Persons"). The Schedule 13D
lists sole voting and dispositive power of 113,300 shares and shared
65
<PAGE> 72
voting and dispositive power of 391,700 shares. The address of Gruber &
McBaine Capital Management, Inc. is 50 Osgood Place, San Francisco,
California 94113.
(10) Information taken from the Schedule 13G dated July 8, 1997 of First
Wilshire Securities Management, Inc. The Schedule 13G lists sole voting and
dispositive power of 42,830 shares and shared dispositive power of 320,500
shares. The address of First Wilshire Securities Management, Inc. is 600
South Lake St., Suite 100, Pasadena, California 91106-3955.
(11) Information taken from the Schedule 13G dated February 5, 1997 of
Dimensional Fund Advisors, Inc., a Delaware corporation. The Schedule 13G
lists sole voting power of 210,400 shares and sole dispositive power of
292,200 shares. The address of Dimensional Fund Advisors, Inc. is 1299
Ocean Drive, 11th Floor, Santa Monica, California 90401.
(12) Robert A. Smalley is the father of Robert A. Smalley, Jr., Randall S.
Smalley and Sally Smalley DiLucente. The beneficial ownership of shares of
Common Stock of each of these persons and the trusts they control does not
include the shares of Common Stock beneficially owned by the others.
(13) Calculated by multiplying the number of shares of Cruise America
beneficially owned on such date by 0.28073.
(14) Based on 25,647,877 shares, consisting of 23,868,004 shares of Budget
Common Stock outstanding December 9, 1997, plus 1,779,873 shares to be
issued in the Merger.
(15) The percent of total voting power of Budget Common Stock differs from the
total Budget Common Stock outstanding because the holders of Budget Class B
Common Stock are entitled to ten votes per share and the holders of Budget
Common Stock are entitled to one vote per share.
66
<PAGE> 73
EXPERTS
The consolidated financial statements of Cruise America and subsidiaries as
of April 30, 1997 and 1996, and for each of the years in the three-year period
ended April 30, 1997, have been incorporated by reference herein in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. It is expected that a representative
of KPMG Peat Marwick LLP will be present at the Special Meeting to respond to
appropriate questions of shareholders and to make a statement if such
representative desires.
The consolidated financial statements of Budget and its subsidiaries, as of
and for the year ended December 31, 1996, incorporated by reference in Budget's
current report on Form 8-K dated December 1, 1997 have been audited by Arthur
Andersen LLP, independent certified public accountants, as indicated in their
report with respect thereto and are incorporated by reference herein in reliance
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements as of December 31, 1995 and for each
of the two years in the period ended December 31, 1995 incorporated in this
prospectus by reference from Budget's current report on Form 8-K dated December
1, 1997 and appearing in the Annual Report on Form 10-K for the year ended
December 31, 1996 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are incorporated herein by
reference, and have been incorporated in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
The consolidated financial statements of BRACC as of December 31, 1995 and
1996 and for each of the years in the three-year period ended December 31, 1996
have been incorporated by reference in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, certified public accountants,
incorporated by reference elsewhere herein and upon the authority of said firm
as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of Budget Common Stock being registered under
the Registration Statement of which this Proxy Statement/Prospectus forms a part
will be passed upon for Budget by King & Spalding, Atlanta, Georgia. Certain
legal matters in connection with the Merger will be passed upon for Cruise
America by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., Miami,
Florida.
WHERE YOU CAN FIND MORE INFORMATION
Budget and Cruise America are subject to the informational requirements of
the Exchange Act, and file annual, quarterly and special reports, proxy
statements and other information with the Commission. You may read and copy any
reports, statements or other information that the companies file at the
Commission's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from commercial document retrieval services and at the Internet web site
maintained by the Commission at http://www.sec.gov. Shares of Budget Common
Stock are listed on the NYSE, and copies filed with the Commission can be
inspected and copies at the NYSE offices at 20 Broad Street, New York, New York
10005. Shares of Cruise America Common Stock are listed on the AMEX and copies
of documents filed with the Commission can be inspected and copied at the
offices of the AMEX at 86 Trinity Place, New York, New York 10006-1881.
Budget filed the Registration Statement to register with the Commission the
Budget Common Stock to be issued to Cruise America Shareholders in the Merger.
This Proxy Statement/Prospectus is a part of that Registration Statement and
constitutes a prospectus of Budget, as well as being a proxy statement of Cruise
America for the special meeting. As allowed by Commission rules, this Proxy
Statement/Prospectus does not contain all the information you can find in the
Budget Registration Statement or the exhibits to that Registration Statement.
67
<PAGE> 74
The Commission allows us to "incorporate by reference" information into
this Proxy Statement/Prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the Commission. The information incorporated by reference is deemed to be part
of this Proxy Statement/Prospectus, except for any information superseded by
information contained directly in the Proxy Statement/Prospectus. This Proxy
Statement/Prospectus incorporates by reference the documents set forth below
that we have previously filed with the Commission. These documents contain
important information about our companies and their financial condition.
BUDGET SEC FILINGS (FILE NO. 0-23962)
(i) Budget's Annual Report on Form 10-K for the year ended December 31,
1996;
(ii) Budget's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997;
(iii) Budget's Current Reports on Form 8-K dated April 29, 1997 and
December 1, 1997; and
(iv) The description of the Budget Common Stock included in Budget's
Registration Statement on Form 8-A, dated April 15, 1997.
CRUISE AMERICA SEC FILINGS (FILE NO. 1-9471)
(i) Cruise America's Annual Report on Form 10-K for the year ended April
30, 1997;
(ii) Cruise America's Quarterly Reports on Form 10-Q for the quarters ended
July 31, 1997 and October 31, 1997; and
(iii) Cruise America's Current Reports on Form 8-K dated October 3, 1997
and December 5, 1997.
We incorporate by reference additional documents Cruise America and Budget
may file with the Commission from the date of this Proxy Statement/Prospectus to
the date of the Special Meeting. These include periodic reports, such as Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K, as well as proxy statements filed with the Commission from the date of this
Proxy Statement/Prospectus to the date of the consummation of the Merger.
Budget has supplied all information contained or incorporated by reference
in this Proxy Statement/Prospectus relating to Budget, and Cruise America has
supplied all such information relating to Cruise America.
If you are a stockholder of either Budget or Cruise America, we may have
sent you some of the documents incorporated by reference, but you can obtain any
of them through us, the Commission or the Commission's Internet web site as
described above. Documents incorporated by reference are available from us
without charge, excluding all exhibits unless we have specifically incorporated
by reference an exhibit in this Proxy Statement/Prospectus. Stockholders may
obtain documents incorporated by reference in this Proxy Statement/Prospectus by
requesting them in writing or by telephone from the appropriate company at the
following addresses:
BUDGET GROUP, INC.
Attention: Secretary
4225 Naperville Road
Lisle, IL 60532-3662
(630) 955-1900
CRUISE AMERICA, INC.
Attention: Secretary
11 West Hampton Avenue
Mesa, Arizona 85210-5258
(602) 464-7300
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<PAGE> 75
If you would like to request documents from us, please do so by five
business days prior to the date of the Special Meeting to receive them before
the Special Meeting. If you request any incorporated documents from us we will
mail them to you by first-class mail, or other equally prompt means, within one
business day of receipt of your request.
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<PAGE> 76
ANNEX A
PLAN AND AGREEMENT OF MERGER
AMONG
BUDGET GROUP, INC.,
CA ACQUISITION CORPORATION
AND
CRUISE AMERICA, INC.
NOVEMBER 25, 1997
<PAGE> 77
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 PLAN OF MERGER.............................................. A-1
1.1 The Merger.................................................. A-1
1.2 Conversion of Shares........................................ A-2
1.3 Exchange of Certificates.................................... A-2
1.4 Dividends................................................... A-3
1.5 Escheat Laws................................................ A-4
1.6 Closing of Company Transfer Books........................... A-4
ARTICLE 2 CLOSING..................................................... A-4
2.1 Time and Place of Closing................................... A-4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF COMPANY................... A-4
3.1 Disclosure Letter; Material Adverse Effect on Company....... A-4
3.2 Organization, Good Standing and Power....................... A-4
3.3 Capitalization.............................................. A-5
3.4 Company Subsidiaries; Voting Trusts......................... A-5
3.5 Authority; Enforceability................................... A-5
3.6 Non-Contravention; Consents................................. A-6
3.7 SEC Reports; Company Financial Statements................... A-6
3.8 Absence of Certain Changes.................................. A-7
3.9 Tax Matters................................................. A-7
3.10 Litigation.................................................. A-8
3.11 Material Contracts.......................................... A-9
3.12 Registration Statement, Etc. ............................... A-10
3.13 Employee Benefit Plans...................................... A-10
3.14 Property.................................................... A-11
3.15 Trademarks, Etc. ........................................... A-12
3.16 Labor Relations............................................. A-12
3.17 No Violation of Law......................................... A-13
3.18 Environmental Matters....................................... A-13
3.19 Insurance Policies.......................................... A-15
3.20 Major Suppliers; Tour Organizers and Travel Arrangers....... A-15
3.21 Notes and Accounts Receivable............................... A-16
3.22 Transactions with Affiliates................................ A-16
3.23 Fairness Opinion............................................ A-16
3.24 Antitakeover Statutes....................................... A-16
3.25 Board Recommendations....................................... A-16
3.26 Amendment to Rights Plan.................................... A-16
3.27 Brokers and Finders......................................... A-17
3.28 Merger...................................................... A-17
3.29 Pooling..................................................... A-17
3.30 Voting Requirements; Dissenters' Rights..................... A-17
3.31 No Existing Discussions..................................... A-17
3.32 Disclosure.................................................. A-17
3.33 No Aggregate Material Adverse Effect........................ A-17
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT.................... A-18
4.1 Organization, Good Standing and Power....................... A-18
4.2 Capitalization.............................................. A-18
4.3 Authority; Enforceability................................... A-18
4.4 Non-Contravention; Consents................................. A-18
4.5 SEC Reports; Parent Financial Statements.................... A-19
</TABLE>
i
<PAGE> 78
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.6 Absence of Certain Changes or Events........................ A-19
4.7 Registration Statement, Etc................................. A-19
4.8 Litigation.................................................. A-20
4.9 No Violation of Law......................................... A-20
4.10 Brokers and Finders......................................... A-20
4.11 Merger...................................................... A-20
4.12 Pooling..................................................... A-20
ARTICLE 5 CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; CERTAIN... A-20
5.1 Access and Information...................................... A-20
5.2 Conduct of Business Pending Merger.......................... A-21
5.3 Fiduciary Duties............................................ A-23
5.4 Certain Fees................................................ A-24
5.5 Takeover Statutes........................................... A-24
5.6 Consents.................................................... A-24
5.7 Reasonable Efforts; Further Assurances; Cooperation......... A-25
5.8 NYSE Listing................................................ A-25
5.9 Notice...................................................... A-26
5.10 Registration Statement; Stockholder Approvals............... A-26
5.11 Expenses.................................................... A-26
5.12 Press Releases; Filings..................................... A-26
5.13 Indemnification of Officers and Directors................... A-26
5.14 Tax Treatment............................................... A-27
5.15 Stock Options............................................... A-27
5.16 Company Affiliates.......................................... A-28
5.17 Employment Agreements....................................... A-28
5.18 Company Expenses............................................ A-28
5.19 Pooling of Interest Accounting.............................. A-28
5.20 Treatment of Warrants....................................... A-28
ARTICLE 6 CONDITIONS PRECEDENT TO MERGER.............................. A-28
6.1 Conditions to Each Party's Obligations...................... A-28
6.2 Conditions to Obligations of Company........................ A-29
6.3 Conditions to Obligations of Parent......................... A-30
ARTICLE 7 TERMINATION AND ABANDONMENT OF THE MERGER................... A-31
7.1 Termination................................................. A-31
7.2 Specific Performance and Other Remedies..................... A-32
7.3 Effect of Termination and Abandonment....................... A-32
ARTICLE 8 MISCELLANEOUS............................................... A-32
8.1 Waiver and Amendment........................................ A-32
8.2 Non-Survival of Representations, Warranties and
Agreements.................................................. A-32
8.3 Notices..................................................... A-33
8.4 Descriptive Headings; Interpretation........................ A-33
8.5 Counterparts................................................ A-33
8.6 Entire Agreement............................................ A-33
8.7 Governing Law............................................... A-33
8.8 Severability................................................ A-34
8.9 Knowledge................................................... A-34
8.10 Assignment.................................................. A-34
</TABLE>
ii
<PAGE> 79
PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER (this "Agreement"), dated as of November 25,
1997, among BUDGET GROUP, INC., a Delaware corporation ("Parent"), CA
ACQUISITION CORPORATION, a Florida corporation and direct or indirect wholly
owned subsidiary of Parent ("Sub"), and CRUISE AMERICA, INC., a Florida
corporation ("Company").
WHEREAS, Parent has formed Sub as a direct or indirect wholly owned
subsidiary corporation under the Florida Business Corporation Act (the "FBCA")
for the purpose of Sub merging with and into Company pursuant to the applicable
provisions of the FBCA (the "Merger") so that Company will continue as the
surviving corporation of the Merger and will become a direct or indirect wholly
owned subsidiary of Parent;
WHEREAS, the respective Boards of Directors of Company, Parent and Sub have
approved and declared advisable the Merger, the terms and provisions of this
Agreement and the transactions contemplated hereby and the Board of Directors of
Company has recommended that the stockholders of Company approve the Merger upon
the terms of this Agreement;
WHEREAS, the respective Boards of Directors of Parent and Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is fair to and in the best
interests of their respective stockholders;
WHEREAS, concurrently with the execution and delivery of this Agreement,
each of Robert A. Smalley, Randall S. Smalley, Robert A. Smalley, Jr. and Sally
Smalley DiLucente (collectively, the "Identified Shareholders") has duly
executed and delivered to Parent an irrevocable proxy agreement in the form
attached hereto as Exhibit 1.1 (the "Proxy Agreements");
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, as amended (the "Code"), and this Agreement is intended
to be and is adopted as a plan of reorganization; and
WHEREAS, the Merger described herein is subject to the approval of the
shareholders of Company and satisfaction of certain other conditions described
in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
ARTICLE 1
PLAN OF MERGER
1.1 The Merger. (a) Upon the terms and subject to the conditions of this
Agreement, at the Effective Time and in accordance with the provisions of this
Agreement and the FBCA, Sub shall be merged with and into Company, which shall
be the surviving corporation (sometimes referred to hereinafter as the
"Surviving Corporation") in the Merger, and the separate corporate existence of
Sub shall cease. Subject to the provisions of this Agreement, articles of merger
(the "Articles of Merger") shall be duly prepared, executed and acknowledged by
Company, on behalf of the Surviving Corporation, and thereafter delivered to the
Secretary of State of the State of Florida for filing as provided in the FBCA on
the Closing Date (as defined in Section 2.1). The Merger shall become effective
immediately upon the filing of the Articles of Merger with the Secretary of
State of the State of Florida or at such time thereafter as is provided in the
Articles of Merger (the "Effective Time").
(b) From and after the Effective Time, the Merger shall have all the
effects set forth in the FBCA. Without limiting the generality of the foregoing,
and subject thereto, by virtue of the Merger and in accordance with the FBCA,
all of the properties, rights, privileges, powers and franchises of Company and
Sub shall vest in the Surviving Corporation and all of the debts, liabilities
and duties of Company and Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
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(c) The Articles of Incorporation of Company in effect immediately prior to
the Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended in accordance with the provisions thereof
and the FBCA.
(d) The Bylaws of Company in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation until altered, amended or
repealed as provided therein, in the Articles of Incorporation of the Surviving
Corporation and the FBCA.
(e) The officers and directors of Sub immediately prior to the Effective
Time shall be the initial officers and directors of the Surviving Corporation,
in each case until their respective successors are duly elected and qualified.
1.2 Conversion of Shares. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder thereof:
(a) Each share of capital stock of Sub that is issued and outstanding
immediately prior to the Effective Time shall be converted into and become
one fully paid and nonassessable share of Common Stock, par value $.01 per
share, of the Surviving Corporation.
(b) All shares of common stock, par value $.01 per share, of Company
("Company Common Stock") or other capital stock of Company that are owned
by Company as treasury stock or by any wholly owned Company Subsidiary (as
defined in Section 3.4) shall be canceled and retired and shall cease to
exist and no stock of Parent or other consideration shall be delivered in
exchange therefor.
(c) Subject to Section 1.3(c), each share of Company Common Stock that
is issued and outstanding immediately prior to the Effective Time (other
than shares to be canceled in accordance with Section 1.2(b)) shall be
converted into a right to receive 0.28073 (the "Exchange Ratio") shares of
Class A Common Stock, par value $.01 per share, of Parent ("Parent Class A
Common Stock"). All such shares of Company Common Stock, when so converted,
shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each certificate previously
representing any such shares (a "Certificate") shall thereafter represent
the right to receive that number of shares of Parent Class A Common Stock
into which such shares of Company Common Stock have been converted.
Certificates previously representing shares of Company Common Stock shall
be exchanged for certificates representing whole shares of Parent Class A
Common Stock, and cash in lieu of any fractional share, issued in
consideration therefor upon the surrender of such certificates in
accordance with Section 1.3, without interest.
(d) If after the date hereof and prior to the Effective Time, Parent
shall have declared a stock split (including a reverse split) of Parent
Class A Common Stock or a dividend payable in Parent Class A Common Stock
or effected any recapitalization or reclassification of its common stock or
any other similar transaction, then the Exchange Ratio shall be
appropriately adjusted to reflect such stock split, dividend,
recapitalization, reclassification or similar transaction.
1.3 Exchange of Certificates. (a) As of the Effective Time, Parent shall
deposit with Chase Mellon Shareholder Services, or such other bank or trust
company reasonably designated by Parent (the "Exchange Agent"), for the benefit
of the holders of shares of Company Common Stock, for exchange in accordance
with this Article 1 through the Exchange Agent, certificates representing the
shares of Parent Class A Common Stock (such shares of Parent Class A Common
Stock, together with any dividends or distributions with respect thereto or cash
deposited by Parent in accordance with this Section 1.3, being hereinafter
referred to as the "Exchange Fund") issuable pursuant to Section 1.2 in exchange
for outstanding shares of Company Common Stock, together with cash to be paid in
lieu of fractional shares. The aggregate number of shares of Parent Class A
Common Stock which shall be issuable shall be a number of such shares equal to
the Exchange Ratio multiplied by the total number of outstanding shares of
Company Common Stock as of the Effective Time, subject to adjustments for
non-issuance of fractional shares as provided herein.
(b) As soon as practicable after the Effective Time, Parent and the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
record of a Certificate or Certificates (i) a letter of transmittal
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(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent accompanied by a properly executed letter of transmittal and
shall be in such form and have such other provisions as Parent may reasonably
specify), and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Class A
Common Stock. Upon the surrender to the Exchange Agent of one or more
Certificates for cancellation, together with such letter of transmittal, duly
executed, the holder will be entitled to receive certificates representing that
number of whole shares of Parent Class A Common Stock to be issued in respect of
the aggregate number of such shares of Company Common Stock previously
represented by the stock certificates surrendered based upon the Exchange Ratio
and cash in lieu of fractional shares as provided in Section 1.3(c).
(c) No certificate or scrip representing fractional shares of Parent Class
A Common Stock shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests will not entitle the owner thereof to vote
or to any rights as a stockholder of Parent. All fractional shares of Parent
Class A Common Stock that a holder of Company Common Stock would otherwise be
entitled to receive as a result of the Merger shall be aggregated and if a
fractional share results from such aggregation, such holder shall be entitled to
receive, in lieu thereof, an amount in cash determined by multiplying (i) the
Fair Market Value at the Effective Time (as defined below) of one share of
Parent Class A Common Stock, by (ii) the fraction of a share of Parent Class A
Common Stock to which such holder would otherwise have been entitled. Parent
shall timely make available to the Exchange Agent any cash necessary to make
payments in lieu of fractional shares as aforesaid. No such cash in lieu of
fractional shares of Parent Class A Common Stock shall be paid to any holder of
Company Common Stock until Certificates are surrendered and exchanged in
accordance with Section 1.3(a). The term "Fair Market Value at the Effective
Time" of one share of Parent Class A Common Stock shall be the average of the
high and low prices per share of Parent Class A Common Stock on the New York
Stock Exchange ("NYSE") during the 20 trading days immediately preceding the
last business day before the date of the Effective Time.
(d) If a certificate for Parent Class A Common Stock is to be sent to a
person other than the person in whose name the Certificates for shares of
Company Common Stock surrendered for exchange are registered, it shall be a
condition of the exchange that the person requesting such exchange shall pay to
the Exchange Agent any transfer or other taxes required by reason of the
delivery of such Certificate to a person other than the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable.
(e) The cash paid and shares of Parent Class A Common Stock issued upon the
surrender of Certificates in accordance with the terms hereof shall be deemed to
have been paid and issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock.
1.4 Dividends. No dividends or other distributions that are declared or
made after the Effective Time with respect to Parent Class A Common Stock
payable to holders of record thereof after the Effective Time shall be paid to a
Company shareholder entitled to receive certificates representing Parent Class A
Common Stock until such shareholder has properly surrendered such shareholder's
Certificates. Upon such surrender, there shall be paid to the shareholder in
whose name the certificates representing such Parent Class A Common Stock shall
be issued any dividends which shall have become payable with respect to such
Parent Class A Common Stock between the Effective Time and the time of such
surrender, without interest. After such surrender, there shall also be paid to
the shareholder in whose name the certificates representing such Parent Class A
Common Stock shall be issued any dividend on such Parent Class A Common Stock
that shall have a record date subsequent to the Effective Time and prior to such
surrender and a payment date after such surrender; provided that such dividend
payments shall be made on such payment dates. In no event shall the shareholders
entitled to receive such dividends be entitled to receive interest on such
dividends. Any portion of the Exchange Fund which remains undistributed to the
shareholders of Company for one year after the Effective Time pursuant to this
Section 1.4 shall be returned by the Exchange Agent to Parent which shall
thereafter act as Exchange Agent, subject to the rights of holders of
unsurrendered Certificates under this Article 1.
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1.5 Escheat Laws. Notwithstanding any other provision of this Article 1,
none of Parent, Sub, Company, the Surviving Corporation, the Exchange Agent or
any other party hereto shall be liable to any holder of Company Common Stock for
any Parent Class A Common Stock, or dividends or distributions thereon or cash
in lieu of fractional shares, delivered to a public official pursuant to any
applicable abandoned property, escheat or similar laws.
1.6 Closing of Company Transfer Books. At the Effective Time, the stock
transfer books of Company shall be closed and no transfer of Company Common
Stock shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall, when accompanied by proper
documentation, be exchanged for Parent Class A Common Stock in the manner
provided in this Article 1.
ARTICLE 2
CLOSING
2.1 Time and Place of Closing. Unless otherwise mutually agreed upon in
writing by Parent and Company, the closing of the Merger (the "Closing") will be
held at 10:00 a.m., Eastern time, on the second business day following the date
that all of the conditions precedent specified in this Agreement have been (or
can be at the Closing) satisfied or waived by the party or parties permitted to
do so (such date being referred to hereinafter as the "Closing Date"). The place
of Closing shall be at the offices of King & Spalding, 191 Peachtree Street,
N.E., Atlanta, Georgia 30303, or at such other place as may be agreed between
Parent and Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent and Sub as follows:
3.1 Disclosure Letter; Material Adverse Effect on Company. (a) Prior to
the execution and delivery of this Agreement, Company and Parent have delivered
to each other a letter (the "Disclosure Letter") setting forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in this Agreement or as
an exception to one or more of such party's representations, warranties or
covenants contained in this Agreement.
(b) As used in this Agreement, the phrase "Material Adverse Effect on
Company" means:
(i) as to matters which can reasonably be quantified in economic
terms, any effect or effects which have resulted in or would reasonably be
expected to result in, with respect to Company and the Company Subsidiaries
taken as a whole, a decrease in the value of assets (net of any
corresponding decrease in liabilities), an increase in liabilities or
obligations (net of any corresponding increase in assets), a decrease in
profits or cash flow, an increase in losses or expenses, an adverse change
in the business or financial condition, or any combination thereof,
involving, individually or in the aggregate, more than $1,250,000;
(ii) as to matters which cannot reasonably be quantified in economic
terms, a material adverse effect on the financial condition, business,
assets, liabilities or results of operations of Company and the Company
Subsidiaries taken as a whole; or
(iii) a material adverse effect on the ability of Company to
consummate the transactions contemplated by this Agreement.
3.2 Organization, Good Standing and Power. (a) Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Company has delivered to Parent complete and correct copies of its Articles of
Incorporation and all amendments thereto to the date hereof and its Bylaws as
amended to the date hereof.
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(b) Company is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties make such qualification or licensing
necessary, except where the failure to be so qualified or licensed or to be in
good standing does not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
3.3 Capitalization. The authorized capital stock of Company consists of
15,000,000 shares of Common Stock, par value $.01 per share, of which as of
November 21, 1997, 5,783,059 shares were issued and outstanding, and 1,000,000
shares of Preferred Stock, par value $1.00 per share, of which as of the date
hereof no shares are issued and outstanding. All outstanding shares of Company
Common Stock are, and all shares which may be issued prior to the Effective Time
pursuant to any outstanding Company Stock Options will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to any
preemptive rights. Except as set forth above, as of November 21, 1997, there
were no shares of capital stock or other equity securities of Company
outstanding, and, except as set forth in Section 3.3 of the Disclosure Letter,
there are no outstanding options, warrants or rights to purchase or acquire from
Company any capital stock of Company, there are no existing registration
covenants with Company with respect to outstanding shares of Company Common
Stock, and there are no convertible securities or other contracts, commitments,
agreements, understandings, arrangements or restrictions by which Company is
bound to issue any additional shares of its capital stock or other securities.
3.4 Company Subsidiaries; Voting Trusts. Section 3.4 of the Disclosure
Letter sets forth a correct and complete list of each corporation, association,
subsidiary, partnership, limited liability company or other entity of which
Company owns or controls, directly or indirectly, 50% or more of the outstanding
equity interests (such entities are hereinafter referred to as "Company
Subsidiaries"). Except as set forth in Section 3.4 of the Disclosure Letter,
there is no corporation, association, subsidiary, partnership, limited liability
company or other entity of which Company owns or controls, directly or
indirectly, more than 20% of the outstanding equity interests. Except as
disclosed in Section 3.4 of the Disclosure Letter, Company owns, directly or
indirectly, all of the equity interests of each Company Subsidiary, free and
clear of all liens, charges, pledges, security interests or other encumbrances.
All of the capital stock of each Company Subsidiary has been duly authorized and
is validly issued, fully paid and nonassessable, and not subject to any
preemptive rights. There are no outstanding options or rights to subscribe to,
or any contracts or commitments to issue or sell any shares of the capital stock
or other equity interests or any securities or obligations convertible into or
exchangeable for, or giving any person any right to acquire, any shares of the
capital stock or other equity interests of any Company Subsidiary to which
Company or any Company Subsidiary is a party. There are no voting trusts or
other agreements or understandings with respect to the voting of capital stock
or other equity interests of Company or any Company Subsidiary to which Company
or any Company Subsidiary is a party. Each Company Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has the power and authority necessary for it
to own or lease its properties and assets and to carry on its business as it is
now being conducted. Each Company Subsidiary is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, except where the failure to be so qualified or licensed
or to be in good standing does not have and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Company.
3.5 Authority; Enforceability. Company has the corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject to the approval of this Agreement by the
shareholders of Company. Subject to such approval, the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Company,
and this Agreement has been duly executed and delivered by Company and
constitutes the valid and binding obligation of Company, enforceable against it
in accordance with its terms, except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to the
enforcement of creditors' rights generally and subject to general principles of
equity.
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3.6 Non-Contravention; Consents. (a) Except as set forth in Section 3.6(a)
of the Disclosure Letter, neither the execution, delivery and performance by
Company of this Agreement, nor the consummation by Company of the transactions
contemplated hereby, nor compliance by Company with any of the provisions
hereof, will:
(i) violate, conflict with, result in a breach of any provision of,
constitute a default (or an event that, with notice or lapse of time or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination
or acceleration, or the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Company or any Company
Subsidiary, under any of the terms, conditions or provisions of, (x) its
Articles of Incorporation or Bylaws or the governing documents of any
Company Subsidiary, or (y) any note, bond, mortgage, indenture, deed of
trust, license, lease, contract, agreement or other instrument or
obligation to which Company or any of the Company Subsidiaries is a party,
or by which Company or any of the Company Subsidiaries may be bound, or to
which Company or any of the Company Subsidiaries or the properties or
assets of any of them may be subject and that has or would reasonably be
expected to have, in any such event specified in this clause (y),
individually or in the aggregate, a Material Adverse Effect on Company; or
(ii) subject to compliance with the statutes and regulations referred
to in Section 3.6(b), violate any valid and enforceable judgment, ruling,
order, writ, injunction, decree, or any statute, rule or regulation
applicable to Company or any of the Company Subsidiaries or any of their
respective properties or assets where such violation has or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company.
(b) Except as set forth in Section 3.6(b) of the Disclosure Letter and
other than notices, filings, authorizations, exemptions, consents or approvals,
the failure of which to give or obtain does not have and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company, no notice to, filing with, authorization of, exemption by, or consent
or approval of, any governmental authority or other regulatory body is necessary
for the consummation by Company of the transactions contemplated by this
Agreement.
3.7 SEC Reports; Company Financial Statements. (a) Since May 1, 1995,
Company has timely filed all reports, registration statements, proxy statements
or information statements and all other documents, together with any amendments
required to be made thereto, required to be filed with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933 (the "Securities
Act") or the Securities Exchange Act of 1934 (the "Exchange Act") (collectively,
the "Company Reports"). Company has heretofore made available to Parent true
copies of all the Company Reports, together with all exhibits thereto. Included
in such Company Reports are (i) audited consolidated balance sheets of Company
and its subsidiaries at April 30, 1995, 1996 and 1997 and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended, and the notes thereto and (ii) the unaudited consolidated
balance sheet of Company and its subsidiaries at July 31, 1997 (the "Interim
Balance Sheet") and the related unaudited consolidated statements of income,
stockholders' equity and cash flows for the periods then ended and the notes
thereto.
(b) All of the financial statements included in the Company Reports (which
are collectively referred to herein as the "Company Consolidated Financial
Statements") fairly presented the consolidated financial position of Company and
its subsidiaries as of the dates mentioned and the consolidated results of
operations, changes in stockholders' equity and cash flows for the periods then
ended in conformity with generally accepted accounting principles applied on a
consistent basis (subject to any exceptions as to consistency specified therein
or as may be indicated in the notes thereto or in the case of the unaudited
statements, as may be permitted by Form 10-Q of the SEC and subject, in the case
of unaudited statements, to normal, recurring audit adjustments). The Company
Reports complied in all material respects with all applicable rules and
regulations promulgated by the SEC and taken as a whole did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Except as set
forth in the
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Company Reports, neither Company nor any Company Subsidiary has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) required by generally accepted accounting principles to be set forth
on a consolidated balance sheet of Company and its consolidated subsidiaries or
in the notes thereto, other than liabilities or obligations which, individually
or in the aggregate, do not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
3.8 Absence of Certain Changes. (a) Since May 1, 1997, except as set forth
in Section 3.8(a) of the Disclosure Letter, there has not been (i) any adverse
change in the assets (net of any corresponding decrease in liabilities),
liabilities (net of any corresponding increase in assets), results of
operations, financial condition or business of Company or any Company Subsidiary
which has or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company (other than operating losses
between October 1, 1997 and the Closing Date which are attributable to seasonal
changes in the business of Company and the Company Subsidiaries and which in the
aggregate do not exceed the amounts set forth in Section 3.8(a) of the
Disclosure Letter), (ii) any damage, destruction, loss or casualty to property
or assets of Company or any Company Subsidiary involving amounts in excess of
$400,000 in the aggregate not adequately covered by insurance, which property or
assets are material to the operations or business of Company or any Company
Subsidiary, (iii) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) in respect of the capital
stock or other equity interests of Company or any Company Subsidiary, any
redemption or other acquisition by Company or any Company Subsidiary of any of
the capital stock or other equity interests of Company or any Company Subsidiary
or any split, combination or reclassification of shares of capital stock or
other equity interests declared or made by Company or any Company Subsidiary or
(iv) any agreement to do any of the foregoing.
(b) Since May 1, 1997, except as set forth in Section 3.8(b) of the
Disclosure Letter, there have not been in respect of Company or any Company
Subsidiary (i) any extraordinary losses suffered involving amounts in excess of
$200,000 in the aggregate, (ii) any assets with a value in excess of $200,000 in
the aggregate which have been mortgaged, pledged or made subject to any lien,
charge or other encumbrance, except for the incurrence in the ordinary course of
business consistent with past practice of liens on vehicles owned by Company or
any Company Subsidiary, (iii) any material liability or obligation (absolute,
accrued or contingent) incurred or any material bad debt, contingency or other
reserve increase suffered, except, in each such case, in the ordinary course of
business and consistent with past practice, (iv) any claims, liabilities or
obligations (absolute, accrued or contingent) paid, discharged or satisfied,
other than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of claims, liabilities and
obligations reflected or reserved against in the Company Consolidated Financial
Statements or incurred in the ordinary course of business and consistent with
past practice, (v) any material guaranteed checks, notes or accounts receivable
written off as uncollectible, except write-offs in the ordinary course of
business and consistent with past practice, (vi) any write down (under Statement
of Financial Accounting Standards No. 121 or otherwise) of the value of any
asset or investment on Company's books or records involving amounts in excess of
$200,000 in the aggregate, except for depreciation and amortization taken in the
ordinary course of business and consistent with past practice, (vii) any
cancellation of any material debts or waiver of any material claims or rights of
substantial value, or sale, transfer or other disposition (except for the
disposition of vehicles in the ordinary course of business consistent with past
practice) of, any material properties or assets (real, personal or mixed,
tangible or intangible) of substantial value, except, in each such case, in
transactions in the ordinary course of business and consistent with past
practice and which in any event, do not exceed $200,000 individually, (viii)
capital expenditures and commitments in the ordinary course of business in
excess of $200,000 individually for additions to property or equipment,
excluding vehicle purchases in the ordinary course of business consistent with
past practice, (ix) any material transactions entered into other than in the
ordinary course of business, or (x) any agreements to do any of the foregoing.
3.9 Tax Matters. (a) For purposes of this Agreement, "Taxes" shall mean
all taxes (including any tax attributable to Company or any Company Subsidiary
ceasing to be a member of an affiliated group as defined in Section 1504(a) of
the Code), assessments, charges, duties, fees, levies or other governmental
charges (including interest, penalties or additions associated therewith)
including federal, state, city, county, foreign or
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other income, franchise, capital stock, real property, personal property,
tangible, withholding, FICA, unemployment compensation, disability, transfer,
sales, use, excise, gross receipts and all other taxes of any kind for which
Company or any Company Subsidiary may have any liability imposed by the United
States or any state, county, city, country or foreign government or subdivision
or agency thereof, whether disputed or not.
(b) Except as otherwise disclosed in Section 3.9(b) of the Disclosure
Letter: (i) all returns, including estimated returns and reports of every kind
with respect to Taxes, which are due to have been filed in accordance with any
applicable law, have been duly filed, except where the failure to file does not
have and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company; (ii) all Taxes, deposits or
other payments for which Company or any Company Subsidiary may have any
liability through the date hereof have been paid in full or are accrued as
liabilities for Taxes on the books and records of Company or the Company
Subsidiaries, as applicable, except for such Taxes as are not required by
generally accepted accounting principles to be accrued or are immaterial in
amount; (iii) there are not now any extensions of time in effect with respect to
the dates on which any returns or reports with respect to any federal Taxes (or
with respect to any other Taxes involving amounts in excess of $5,000) were or
are due to be filed; (iv) all deficiencies involving amounts in excess of $5,000
asserted as a result of any examination of any return or report of Taxes have
been paid in full, or are being contested in good faith with appropriate
accruals on the books of each of Company and the Company Subsidiaries, or are
finally settled; (v) no claims have been asserted and no proposals or
deficiencies for any Taxes involving amounts in excess of $5,000 are being
asserted, proposed or, to the knowledge of Company, threatened, and no audit or
investigation of any return or report of Taxes is currently underway, pending
or, to the knowledge of Company, threatened; (vi) there are no outstanding
waivers or agreements by Company or any Company Subsidiary for the extension of
time for the assessment of any federal Taxes or deficiency thereof (or for any
other Taxes or deficiencies thereof involving amounts in excess of $5,000), nor
are there any requests for rulings, outstanding subpoenas or requests for
information or any other matter pending between Company or any Company
Subsidiary and any taxing authority; and (vii) there are no liens for Taxes upon
any property or assets of Company or any Company Subsidiary involving amounts in
excess of $5,000 except liens for current Taxes not yet due, nor are there any
liens involving amounts in excess of $5,000 which, to the knowledge of Company,
are pending or threatened.
(c) Company has delivered to Parent true and complete copies of all federal
and state income tax returns (together with any Revenue Agent's Reports)
relating to the operations of Company and the Company Subsidiaries for the
taxable years ended since 1991.
(d) None of Company or the Company Subsidiaries has filed a consent
pursuant to Section 341(f) of the Code. None of Company, the Company
Subsidiaries or any predecessor in interest of such party, has filed, or may be
deemed to have filed, any election under Section 338 of the Code.
(e) Except as set forth in Section 3.9(f) of the Disclosure Letter, neither
Company nor any Company Subsidiary has made any payment which constitutes an
"excess parachute payment" within the meaning of Section 280G of the Code, and
no payment by Company or any Company Subsidiary required to be made under any
contract will, if made, constitute an "excess parachute payment" within the
meaning of Section 280G of the Code.
(f) None of Company and the Company Subsidiaries is a party to any tax
allocation or tax sharing agreement.
(g) None of Company and the Company Subsidiaries has been a member of an
affiliated group (within the meaning of Section 1504(a) of the Code) filing a
consolidated federal income tax return (other than a group the common parent of
which was Company).
3.10 Litigation. (a) Section 3.10(a) of the Disclosure Letter (i) sets
forth all litigation, claims, suits, actions, investigations, indictments or
informations, or administrative, arbitration or other proceedings pending, or,
to the knowledge of Company, threatened (including grand jury investigations,
actions or proceedings and product liability and workers' compensation suits,
actions or proceedings) against Company
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or any Company Subsidiary involving amounts in excess of $10,000 and (ii)
indicates which of such matters are being defended by an insurance carrier, and
which of the matters being so defended are being defended under a reservation of
rights.
(b) Except as set forth in Section 3.10(b) of the Disclosure Letter, there
are no judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court, administrative agency, or by arbitration, pursuant to a
grievance or other procedure) currently in effect against or relating to Company
or any Company Subsidiary. To the knowledge of Company, there are no events,
facts or circumstances giving rise to any claim for indemnification from Company
or any Company Subsidiary by any present or former officer or director of
Company or any Company Subsidiary related to any act or omission prior to the
Closing by such present or former officer or director.
3.11 Material Contracts. Section 3.11 of the Disclosure Letter contains a
correct and complete list of the following (the "Material Contracts"):
(a) all bonds, debentures, notes, loans, credit or loan agreements or
loan commitments, mortgages, indentures or guarantees involving amounts in
excess of $25,000 to which Company or any Company Subsidiary is a party or
by which any of its properties or assets (real, personal or mixed, tangible
or intangible) is bound;
(b) all leases to which Company or any Company Subsidiary is a party
or by which any of its properties or assets (real, personal or mixed,
tangible or intangible) is bound involving an annual rental payment in
excess of $25,000 individually;
(c) all contracts or agreements which limit or restrict Company, any
Company Subsidiary or, to the knowledge of Company, any of the officers or
key employees of Company from engaging in any business in any jurisdiction;
(d) all contracts or agreements requiring Company or any Company
Subsidiary to register its capital stock or securities under federal or
state securities law;
(e) all repurchase agreements with vehicle manufacturers to which
Company or any Company Subsidiary is a party;
(f) all agreements with travel arrangers and tour organizers to which
Company or any Company Subsidiary is a party;
(g) all franchising agreements to which Company or any Company
Subsidiary is a party; and
(h) all existing contracts and commitments (other than those described
in subparagraphs (a), (b), (c), (d), (e), (f) and (g) of this Section 3.11,
the Company Benefit Plans and other than agreements and purchase orders
relating to the purchase of vehicles in the ordinary course of business) to
which Company or any Company Subsidiary is a party or by which its
properties or assets are bound involving an annual commitment or annual
payment by Company or any Company Subsidiary of more than $50,000
individually.
True and complete copies of all Material Contracts, including all
amendments, have been made available to Parent. The Material Contracts are
valid and enforceable in accordance with their respective terms with
respect to Company and valid and, to the knowledge of Company, enforceable
in accordance with their respective terms with respect to any other party
to a Material Contract, in each case to the extent material to the business
and operations of Company and subject to applicable bankruptcy, insolvency
and other similar laws affecting the enforceability of creditors' rights
generally, general equitable principles and the discretion of courts in
granting equitable remedies. Except for events or occurrences, the
consequences of which, individually or in the aggregate, do not have and
would not be reasonably expected to have, individually or in the aggregate,
a Material Adverse Effect on Company, there is not under any of the
Material Contracts any existing breach, default or event of default by
Company or any Company Subsidiary or event that with notice or lapse of
time or both would constitute a breach, default or event of default by
Company or any Company Subsidiary, nor has Company received
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notice of, or made a claim with respect to, any breach or default by any
other party to a Material Contract.
3.12 Registration Statement, Etc. None of the information supplied or to
be supplied by Company for inclusion or incorporation by reference in (a) the
Registration Statement to be filed by Parent with the SEC in connection with the
Parent Class A Common Stock to be issued in the Merger (the "Registration
Statement"), and (b) the Proxy Statement (the "Proxy Statement") to be mailed to
Company's shareholders in connection with the meeting (the "Shareholders'
Meeting") to be called to consider the Merger, will, at the respective times
such documents are filed and, in the case of the Registration Statement, when it
becomes effective or at the time any amendment or supplement thereto becomes
effective, cause such document to contain any untrue statement of a material
fact, or omit to state any material fact necessary in order to make the
statements therein not misleading; or, in the case of the Proxy Statement, when
first mailed to the shareholders of Company, or in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meeting, cause the Proxy Statement or any amendment thereof or
supplement thereto to contain any untrue statement of a material fact, or omit
to state any material fact required to be stated therein necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. All documents that Company is responsible for filing with
the SEC and any other regulatory agency in connection with the Merger will
comply as to form in all material respects with the provisions of applicable law
and any applicable rules or regulations thereunder, except that no
representation is made by Company with respect to statements made therein based
on information supplied by Parent or with respect to information concerning
Parent or Sub which is incorporated by reference in the Registration Statement
or the Proxy Statement.
3.13 Employee Benefit Plans. (a) For purposes of this Section 3.13, the
term "Company Benefit Plan" means any plan, program, arrangement, fund, policy,
practice or contract which, through which, under which or with respect to which
Company or any Company ERISA Affiliate (as defined in Section 3.13(b)) provides
or has an obligation to provide benefits or compensation to or on behalf of
employees or former employees of Company or any Company ERISA Affiliate, whether
formal or informal, whether or not written. Each and every Company Benefit Plan
is identified in Section 3.13 of the Disclosure Letter.
(b) For purposes of this Section 3.13, the term "Company ERISA Affiliate"
means each trade or business (whether or not incorporated) which together with
Company is treated as a single employer under Section 414(b), (c), (m) or (o) of
the Code.
(c) Company, each Company ERISA Affiliate and each Company Benefit Plan is
in compliance with the requirements prescribed by all statutes, orders and
governmental rules and regulations with respect to and applicable to Company
Benefit Plans, and each Company Benefit Plan has been administered according to
its terms and applicable law.
(d) Neither Company nor any Company ERISA Affiliate maintains, or has at
any time established or maintained, or has at any time been obligated to make,
or made, contributions to or under any defined benefit plan (as defined in
Section 3(35) of ERISA) or any multi-employer plan (as defined in Section 3(37)
and Section 4001(a)(3) of ERISA).
(e) Company does not maintain, nor has at any time established or
maintained, nor has at any time been obligated to make, or made, contributions
to or under any plan which provides post-retirement medical or health benefits
with respect to former employees of Company.
(f) Company has made available to Parent a true and complete copy of the
following documents, if applicable, with respect to each Company Benefit Plan
identified in Section 3.13 of the Disclosure Letter: (1) all documents,
including any insurance contracts and trust agreements, setting forth the terms
of each Company Benefit Plan, or if there are no such documents evidencing a
Company Benefit Plan, a full description of such Company Benefit Plan, (2) the
ERISA summary plan description and any other summary of plan provisions provided
to participants or beneficiaries for each such Company Benefit Plan, (3) the
annual reports filed for the most recent three plan years and most recent
financial statements or periodic accounting or related plan assets with respect
to each Company Benefit Plan, (4) each favorable determina-
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tion letter, opinion or ruling from the Internal Revenue Service (the "IRS") for
each Company Benefit Plan, the assets of which are held in trust, to the effect
that such trust is exempt from federal income tax, including any outstanding
request for a determination letter and (5) each opinion or ruling from the
Department of Labor with respect to any such Company Benefit Plan.
(g) There are no audits or claims which are pending or, to the knowledge of
Company, threatened against any Company Benefit Plan, any fiduciary of any of
the Company Benefit Plans with respect to the Company Benefit Plans or against
the assets of any of the Company Benefit Plans, except claims for benefits made
in the ordinary course of the operation of such plans.
(h) The assets of all the Company Benefit Plans which are required under
applicable laws to be held in trust are in fact held in trust, and the assets of
each such Company Benefit Plan equal or exceed the liabilities of each such
plan. The liabilities of each other Company Benefit Plan are properly and
accurately reported on the financial statements and records of Company to the
extent required by generally accepted accounting principles. The assets of each
trust which is a part of a Company Benefit Plan are reported at their fair
market value on the books and records of such trust or plan.
(i) No payment required to be made to any employee associated with Company
or any Company Subsidiary as a result of the transactions contemplated hereby
under any contract or otherwise will, if made, constitute an "excess parachute
payment" within the meaning of Section 280G of the Code.
3.14 Property. (a) Company and the Company Subsidiaries have good and
valid title to or valid leasehold interests in its properties reflected in the
Interim Balance Sheet or acquired after July 31, 1997 (other than properties
sold or otherwise disposed of in the ordinary course of business), and all of
such properties are held free and clear of all liens, encumbrances and
restrictions, except, with respect to all such properties, (a) mortgages and
liens securing debt reflected as liabilities on the Interim Balance Sheet and
(b) (i) liens for current taxes and assessments not in default, (ii) mechanics',
carriers', workmen's, repairmen's, statutory or common law liens either not
delinquent or being contested in good faith, and (iii) liens, mortgages,
encumbrances, covenants, rights of way, building or use restrictions, easements,
exceptions, variances, reservations and other matters or limitations of any
kind, if any, which either individually or in the aggregate do not have a
material adverse effect on Company's or any of the Company Subsidiaries' use of
the property affected, taken as a whole.
(b) Section 3.14 of the Disclosure Letter sets forth a true and complete
list of all leases and agreements of Company or the Company Subsidiaries
granting possession of or rights to real or personal property and involving an
annual commitment or annual payment of more than $25,000 individually in the
case of any real property and $25,000 individually in the case of any personal
property (the "Disclosed Leases"). All such Disclosed Leases are in full force
and effect and constitute the legal, valid, binding and enforceable obligations
of Company or the Company Subsidiaries and, to the knowledge of Company, are
legal, valid, binding and enforceable in accordance with their respective terms
with respect to each other party to a Disclosed Lease, in each case to the
extent material to the business and operations of Company and subject in each
case to applicable bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally, general equitable principles and the
discretion of courts in granting equitable remedies. Company or one of the
Company Subsidiaries has physical possession of all real property, equipment and
other assets which are covered by Disclosed Leases. Except for events and
occurrences, the consequences of which, individually or in the aggregate, do not
have and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company, there are no existing defaults
of Company or the Company Subsidiaries with respect to such Disclosed Leases or,
to the knowledge of Company, any of the other parties to such Disclosed Leases
(or events or conditions which, with notice or lapse of time, or both, would
constitute a default).
(c) To the knowledge of Company, the structures and equipment owned or
leased by each of Company and the Company Subsidiaries are structurally sound,
are in good and safe operating condition and repair and are adequate for the
uses to which they are being put, except for maintenance performed in the
ordinary course of business and any such circumstances which, individually or in
the aggregate, do not have or would not reasonably be expected to have,
individually or in the aggregate, Material Adverse Effect on Company.
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(d) Except as otherwise does not have and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Company,
the rights, properties and other assets presently owned, leased or licensed by
each of Company and the Company Subsidiaries and reflected on the Interim
Balance Sheet include all rights, properties and other assets necessary to
permit Company and the Company Subsidiaries to conduct their businesses in the
same manner as such businesses are presently conducted, without any need for
replacement, refurbishment or extraordinary repair except in the ordinary course
of business consistent with past practice.
3.15 Trademarks, Etc. (a) Company has previously delivered to Parent a
complete and accurate list and description of (i) all United States and foreign
patents, trademarks, trade names, service marks, copyrights and applications
therefor owned by Company or any Company Subsidiary (hereinafter the "Patent and
Trademark Rights") and (ii) all United States and foreign patents, trademarks,
trade names, service marks, copyrights and applications therefor licensed to
Company or any Company Subsidiary (hereinafter the "Licensed Rights"). Company
represents and warrants that (i) the Patent and Trademark Rights are free of any
liens, claims or encumbrances; are not subject to any license (royalty bearing
or royalty free) and are not subject to any other arrangement requiring any
payment to any person or the obligation to grant rights to any person in
exchange, (ii) the Licensed Rights are free and clear of any liens, claims,
encumbrances, royalties or other obligations, and (iii) the Patent and Trademark
Rights and the Licensed Rights are all those material rights necessary to the
conduct of the business of each of Company and the Company Subsidiaries as
currently being conducted. The validity of the Patent and Trademark Rights and
title thereto, and the validity of the Licensed Rights, (i) have not been
questioned in any prior litigation; (ii) are not being questioned in any pending
litigation; and (iii) to the knowledge of Company, are not the subject(s) of any
threatened or proposed litigation. The business of each of Company and the
Company Subsidiaries as now conducted, to the knowledge of Company, does not
conflict with and has not been alleged to conflict with any patents, trademarks,
trade names, service marks or copyrights of others. The consummation of the
transactions contemplated hereby will not result in the loss or impairment of
any of the Patent and Trademark Rights or any of the Licensed Rights. Company
does not know of any use by others of any of the Patent and Trademark Rights or
the Licensed Rights material to the business of Company and the Company
Subsidiaries as presently conducted.
(b) Each of Company and the Company Subsidiaries owns, or possesses valid
license rights to, all computer software programs that are material to the
conduct of the business of Company and the Company Subsidiaries. There are no
infringement suits, actions or proceedings pending or, to the knowledge of
Company, threatened against Company or any Company Subsidiary with respect to
any software owned or licensed by Company or any Company Subsidiary.
3.16 Labor Relations. Except to the extent set forth in Section 3.16 of
the Disclosure Letter:
(a) Neither Company nor any Company Subsidiary is a party to or bound
by any and, to the knowledge of Company there are no, agreements or
arrangements on behalf of any officer, director or employee providing for
payment or other benefits to such person contingent upon the execution of
this Agreement or the Closing. There are no collective bargaining
agreements to which Company or any Company Subsidiary is a party.
(b) During the five years immediately preceding the date hereof, none
of Company or the Company Subsidiaries has experienced any organized slow
down, work interruption, strike or work stoppage. There are no existing or,
to Company's knowledge, threatened labor disputes. None of Company or the
Company Subsidiaries has failed to pay when due any wages, bonuses,
commissions, taxes, penalties or assessments, owed to, or arising out of
the employment of, any officer, director or employee, except where the
failure to so pay when due does not have and would not be reasonably
expected to have, individually or in the aggregate, a Material Adverse
Effect on Company.
(c) Each of Company and the Company Subsidiaries is in compliance in
all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages and hours,
occupational safety and health, and is not engaged in any unfair labor or
unfair employment practices.
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(d) There is no unfair labor practice charge or complaint or any other
matter against (or to the knowledge of Company, involving) Company or any
Company Subsidiary pending or, to the knowledge of Company, threatened
before the National Labor Relations Board or any other governmental
authority.
(e) No certification or decertification question relating to
collective bargaining units at the premises of Company or any of the
Company Subsidiaries exists or has existed within the past five years.
(f) To the knowledge of Company, there are no investigations,
administrative proceedings or formal complaints of discrimination
(including discrimination based upon sex, age, marital status, race,
national origin, sexual preference, handicap or veteran status) pending or
threatened before the Equal Employment Opportunity Commission or any
federal, state or local agency or court against or involving Company or any
Company Subsidiary.
(g) To the knowledge of Company, there are no citations,
investigations, administrative proceedings or formal complaints of
violations of local, state or federal occupational safety and health laws
pending or threatened before the Occupational Safety and Health Review
Commission or any federal, state or local agency or court against or
involving Company or any Company Subsidiary (excluding traffic citations).
(h) Section 3.16(h) of the Disclosure Letter sets forth a true and
correct list of all full-time employees employed by each of Company and the
Company Subsidiaries as of November 8, 1997 (in the case of employees in
the United States) and as of November 1, 1997 (in the case of employees in
Canada), together with their respective job titles, dates of hire and
compensation. None of Company and the Company Subsidiaries pays or provides
any benefits (other than wages) to part-time employees in the ordinary
course of business.
(i) No agreement, arbitration or court decision or governmental order
to which Company or any Company Subsidiary is a party or by which any of
them or their respective assets are bound in any way limits or restricts
any of Company, any Company Subsidiary or Parent from relocating or closing
any of the operations of Company or any of the Company Subsidiaries.
3.17 No Violation of Law. The business and operations of Company and the
Company Subsidiaries have been conducted in compliance with all applicable laws,
ordinances, regulations and orders of all governmental entities and other
regulatory bodies (including, without limitation, laws, ordinances, regulations
and orders relating to zoning, environmental matters and the safety and health
of employees), except where the failure to do so does not and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company. Except as set forth in Section 3.17 of the Disclosure
Letter, (i) neither Company nor any Company Subsidiary has been charged with or,
to the knowledge of Company, is now under investigation with respect to, a
violation of any applicable law, regulation, ordinance, order or other
requirement of a governmental entity or other regulatory body that has or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company, (ii) neither Company nor any Company Subsidiary is a
party to or bound by any order, judgment, decree or award of a governmental
entity or other regulatory body; and (iii) Company and the Company Subsidiaries
have filed all reports required to be filed with any governmental entity or
other regulatory body on or before the date hereof, except where the failure to
do so does not and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Company. Company and the Company
Subsidiaries have all permits, certificates, licenses, approvals and other
governmental authorizations required in connection with the operation of the
business of Company and the Company Subsidiaries, except for permits,
certificates, licenses, approvals and other governmental authorizations the
failure of which to have does not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
3.18 Environmental Matters. Except as set forth in Section 3.18 of the
Disclosure Letter:
(a) Each of Company and the Company Subsidiaries possesses, and is in
compliance with, all permits, licenses and government authorizations and
has filed all notices that are required under local, state and federal laws
and regulations relating to protection of the environment, pollution
control, product registration and Hazardous Materials (as defined below in
this Section 3.18) ("Environmental Laws"), except where the failure to do
so does not and would not reasonably be expected to have, individually or
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in the aggregate, a Material Adverse Effect on Company; and is in
compliance with all applicable limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in those laws or contained in any law, regulation,
code, plan, order, decree, judgment, notice, permit or demand letter
issued, entered, promulgated or approved thereunder, except where the
failure to do so does not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company;
(b) Neither Company nor any Company Subsidiary has received notice of
any actual or threatened liability under the Federal Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA") or any
similar state or local statute or ordinance from any governmental agency or
any third party and, to the knowledge of Company, there are no facts or
circumstances which could form the basis for the assertion of any claim
against Company or any Company Subsidiary under any Environmental Laws
including, without limitation, CERCLA or any similar local, state or
foreign law with respect to any on-site or off-site location which has or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company;
(c) Neither Company nor any Company Subsidiary has entered into or
agreed to nor do any of them contemplate entering into or agreeing to any
consent decree or order, and neither Company nor any Company Subsidiary is
subject to any judgment, decree or judicial or administrative order
relating to compliance with, or the cleanup of Hazardous Materials under,
any Environmental Laws;
(d) Neither Company nor any Company Subsidiary has received any notice
of violation or been subject to any administrative or judicial proceeding
alleging violation of applicable Environmental Laws which has or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company;
(e) Neither Company nor any Company Subsidiary is subject to any
claim, obligation, liability, loss, damage or expense of any kind or
nature, contingent or otherwise, incurred or imposed or based upon any
provision of any Environmental Law and arising out of any act or omission
of Company or any Company Subsidiary, or any of their employees, agents or
representatives or arising out of the ownership, use, control or operation
by Company or any Company Subsidiary of any plant, facility, site, area or
property (including, without limitation, any plant, facility, site, area or
property currently or previously owned or leased by Company or any Company
Subsidiary) from which any Hazardous Materials were released into the
environment (the term "release" meaning any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment, and the term "environment"
meaning any surface or ground water, drinking water supply, soil, surface
or subsurface strata or medium, or the ambient air) which has or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company;
(f) Company has provided Parent with true, correct and complete copies
of all material documents of Company and the Company Subsidiaries relating
to environmental matters. Neither Company nor any Company Subsidiary has
paid any fines, penalties or assessments for violations of Environmental
Laws;
(g) To the knowledge of Company, none of the real property owned,
leased or occupied by Company or any Company Subsidiary or any other
assets, improvements or equipment of Company or any Company Subsidiary
contains any asbestos-containing material which is or may be friable (other
than floor tile, roofing material and drywall material), PCBs or
underground storage tanks;
(h) Company has provided Parent with copies of all work place or
worker exposure measurements made by or on behalf of Company or any Company
Subsidiary, including, without limitation, all work place or worker
exposure measurements for particulates, OSHA hazardous chemicals and
Hazardous Materials. Company has established and is in full compliance with
its OSHA Hazard Communication Program; and
(i) There is not now on, in or at any real property owned, leased or
occupied by Company or any Company Subsidiary, or any portion thereof any:
(1)Article surface impoundment, lagoon or other
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containment facility, past or present, for the temporary or permanent
storage, treatment or disposal of Hazardous Materials, or (2) landfill or
solid waste disposal area.
As used in this Section 3.18, the term "Hazardous Materials" means any
waste, pollutant, hazardous substance, toxic, ignitable, reactive or
corrosive substance, hazardous waste, special waste, industrial substance,
by-product, process intermediate product or waste, petroleum or
petroleum-derived substance or waste, chemical liquids or solids, liquid or
gaseous products, or any constituent of any such substance or waste, the
use, handling or disposal of which by Company or any Company Subsidiary is
in any way governed by or subject to any applicable law, rule or regulation
of any governmental or regulatory authority.
3.19 Insurance Policies. Company has delivered to Parent prior to the date
hereof a complete and accurate list of all insurance policies in force naming
Company, any Company Subsidiary or employees thereof as an insured or
beneficiary or as a loss payable payee or for which Company or any Company
Subsidiary has paid or is obligated to pay all or part of the premiums. Neither
Company nor any of the Company Subsidiaries has received notice of any pending
or threatened cancellation or premium increase (retroactive or otherwise) with
respect thereto, and each of Company and the Company Subsidiaries is in
compliance in all material respects with all conditions contained therein. There
are no pending claims against such insurance by Company or any Company
Subsidiary as to which insurers are defending under reservation of rights or
have denied liability, and there exists no material claim under such insurance
that has not been properly filed by Company or any Company Subsidiary. To the
knowledge of Company, except for the self-insurance retentions or deductibles
set forth in the policies contained in the afore-mentioned list, the policies
are adequate in scope and amount to cover all prudent and reasonably foreseeable
risks which may arise in the conduct of the business of Company and the Company
Subsidiaries.
3.20 Major Suppliers, Tour Organizers and Travel Arrangers. (a) Section
3.20(a) of the Disclosure Letter sets forth a list of each supplier of goods or
services to Company and the Company Subsidiaries to whom Company and the Company
Subsidiaries paid in the aggregate more than $100,000 during the 10-month period
ended October 31, 1997, together with in each case the amount paid during such
period. Neither Company nor any Company Subsidiary is engaged in any material
dispute with any of such suppliers and, to the knowledge of Company, no such
supplier intends to terminate, limit or reduce its business relations with
Company or any Company Subsidiary. Company does not believe that the
consummation of the transactions contemplated hereunder will have any material
adverse effect on the business relationship of Company or any Company Subsidiary
with any such supplier. None of the officers or directors of Company or any
Company Subsidiary, or any "affiliate" or "associate" (as such terms are defined
in Rule 12b-2 under the Exchange Act) of any officer or director of Company or
any Company Subsidiary, or any company or other organization in which any
officer or director of Company or any Company Subsidiary or any "affiliate" or
"associate" of any officer or director of Company or any Company Subsidiary has
a direct or indirect financial interest, has any financial interest in any
supplier of Company or any Company Subsidiary (other than a publicly held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by any such persons).
(b) Section 3.20(b) of the Disclosure Letter sets forth a list of each
travel arranger and tour organizer which accounted for net revenues to Company
and the Company Subsidiaries in the aggregate of more than $100,000 during the
10-month period ended October 31, 1997, together with in each case the amount of
net revenue produced during such period. Neither Company nor any Company
Subsidiary is engaged in any material dispute with any of such travel arrangers
or tour organizers and, to the knowledge of Company, no such travel arranger or
tour organizer intends to terminate, limit or reduce its business relations with
Company or any Company Subsidiary. Company does not believe that the
consummation of the transactions contemplated hereunder will have any material
adverse effect on the business relationship of Company or any Company Subsidiary
with any such travel arranger or tour organizer. None of the officers or
directors of Company or any Company Subsidiary, or any "affiliate" or
"associate" of any officer or director of Company or any Company Subsidiary, or
any company or other organization in which any officer or director of Company or
any Company Subsidiary or any "affiliate" or "associate" of any officer or
director of the Company or any Company Subsidiary has a direct or indirect
financial interest, has any financial interest in any travel arranger
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or tour organizer of Company or any Company Subsidiary (other than a publicly
held corporation whose stock is traded on a national securities exchange or in
the over-the-counter market and less than 1% of the stock of which is
beneficially owned by any such persons).
3.21 Notes and Accounts Receivable. (a) All notes receivable of Company or
any Company Subsidiary owing by any director, officer, stockholder or employee
of Company or any Company Subsidiary or any affiliate or associate of any such
person (including those notes receivable reflected on the Interim Balance Sheet
and those incurred since the date of the Interim Balance Sheet) have been paid
in full prior to the date hereof or shall have been paid in full prior to the
Closing Date.
(b) All accounts receivable of Company and the Company Subsidiaries which
are reflected on the Interim Balance Sheet (i) are valid, existing and
collectible in a manner consistent with Company's past practice without resort
to legal proceedings or collection agencies, except where the failure to be so
valid, existing and collectible does not have and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company, (ii) represent monies due for goods sold and delivered or services
rendered in the ordinary course of business and (iii) are not subject to any
refunds or adjustments or any defenses, rights of set-off, assignment,
restrictions, security interests or other encumbrances of a material nature.
Except as shown in Section 3.21 of the Disclosure Letter, all such accounts
receivable are current, and there are no material disputes regarding the
collectibility of any such accounts receivable. Neither Company nor any Company
Subsidiary has factored any of its accounts receivable since May 1, 1994.
3.22 Transactions with Affiliates. Except as set forth in Section 3.22 of
the Disclosure Letter, no director, officer or other "affiliate" or "associate"
(as such terms are defined in Rule 12b-2 under the Exchange Act) of Company or
any Company Subsidiary or any entity in which any such director, officer or
other affiliate or associate, owns any beneficial interest (other than a
publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 1% of the stock of
which is beneficially owned by any such persons) has any interest in: (i) any
contract, arrangement or understanding with, or relating to, the business or
operations of Company or any Company Subsidiary; (ii) any loan, arrangement,
understanding, agreement or contract for or relating to indebtedness of Company
or any Company Subsidiary; or (iii) any property (real, personal or mixed),
tangible, or intangible, used or currently intended to be used in, the business
or operations of Company or any Company Subsidiary.
3.23 Fairness Opinion. The Board of Directors of Company has received an
opinion dated the date hereof from Peacock, Hislop, Staley & Given, Inc. to the
effect that as of such date the consideration to be received by the shareholders
of Company pursuant to the Merger is fair to such shareholders from a financial
point of view.
3.24 Antitakeover Statutes. Each of Company and the Board of Directors of
Company has taken all action required to be taken by it in order to exempt this
Agreement and the Proxy Agreements and the transactions contemplated hereby and
thereby from, and this Agreement and the Proxy Agreements and the transactions
contemplated hereby are exempt from the requirements of, any "moratorium",
"control share", "fair price", "affiliate transaction", "business combination"
or other antitakeover laws and regulations of any state, including, without
limitation, the provisions of Sections 607.0901 and 607.0902 of the FBCA.
3.25 Board Recommendations. The Board of Directors of Company, at a
meeting duly called and held, has (i) determined that this Agreement and the
transactions contemplated hereby (including the Merger) are fair to and in the
best interests of the stockholders of Company, and (ii) resolved to recommend
that the holders of the shares of capital stock of Company entitled to vote
thereon approve this Agreement and the transactions contemplated hereby
(including the Merger).
3.26 Amendment to Rights Plan. The Board of Directors of Company has
amended the Rights Agreement dated as of March 8, 1989 between Company and
Mellon Securities Trust Company (the "Rights Plan") so that (i) Parent will not
become an "Acquiring Person" as a result of the execution and delivery of this
Agreement or the Proxy Agreements or the consummation of the transactions
contemplated by this Agreement or the Proxy Agreements, (ii) no "Stock
Acquisition Date" or "Distribution Date" (as such terms are defined in the
Rights Plan) will occur as a result of the execution and delivery of this
Agreement or the
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Proxy Agreements or the consummation of the transactions contemplated by this
Agreement or the Proxy Agreements, and (iii) all outstanding Company Common
Stock Purchase Rights (the "Company Rights") issued and outstanding under the
Rights Plan will expire immediately prior to the Effective Time.
3.27 Brokers and Finders. Neither Company nor any of the Company
Subsidiaries, nor any of their respective officers, directors or employees, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for Company or any of the Company
Subsidiaries, in connection with this Agreement, the Proxy Agreements or any of
the transactions contemplated hereby or thereby, except that Company has
retained Peacock, Hislop, Staley & Given, Inc. as its financial advisor, whose
fees and expenses will be paid by Company.
3.28 Merger. Neither Company nor any Company Subsidiary has taken any
action or failed to take any action which action or failure to take action would
jeopardize the Merger as a reorganization within the meaning of Section 368(a)
of the Code.
3.29 Pooling. KPMG Peat Marwick LLP has advised Company as of the date
hereof that based upon inquiries and its examination of the financial statements
of Company, it is not aware of any conditions relating to Company that would
preclude the use of "pooling of interests" accounting in connection with the
Merger.
3.30 Voting Requirements; Dissenters' Rights. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock with
respect to this Agreement and the Merger is the only vote of the holders of any
class or series of Company's capital stock necessary to approve this Agreement,
the Merger and the transactions contemplated by this Agreement and the Merger.
No holder of any of Company's capital stock is entitled under the FBCA to
exercise dissenter's rights or appraisal rights in connection with the Merger.
3.31 No Existing Discussions. As of the date hereof, Company is not
engaged, directly or indirectly, in any negotiations or discussions with any
other party with respect to an Acquisition Proposal (as defined in Section 5.2).
3.32 Disclosure. None of the representations and warranties by Company in
this Agreement and no statement on the part of Company contained in the
Disclosure Letter contains or will contain as to the applicable representation
and warranty any untrue statement of material fact or omits or will omit to
state any material fact necessary in order to make any of the statements herein
or therein, in light of the circumstances under which it was made, not
misleading.
3.33 No Aggregate Material Adverse Effect. Assuming that the provisions
that contain exceptions for "Material Adverse Effect on Company" in the
representations and warranties set forth in Sections 3.2 through 3.32 did not
contain such exceptions, except for facts, circumstances and events which have
arisen or may hereafter arise in the ordinary course of business and which are
consistent with the historical experience of Company and the Company
Subsidiaries during the five years preceding the date of this Agreement as
reflected in the Company's financial statements to the extent required by
generally accepted accounting principles, the failure of one or more of such
representations and warranties (without giving effect to any such "Material
Adverse Effect on Company" exception but taking into account the items set forth
in the Disclosure Letter and any other exception or limitation contained
therein) to be true and correct would not have and would not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company. For purposes of this Section 3.33, the Altman Litigation (as defined in
Section 5.2(c)) shall be deemed not to be in the ordinary course of business.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Company as follows:
4.1 Organization, Good Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Parent is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties make such qualification or licensing necessary, except where the
failure to be so qualified or licensed or to be in good standing does not and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent (as defined below). Parent has delivered to
Company complete and correct copies of its certificate of incorporation and
bylaws and all amendments thereto to the date hereof. As used in this Agreement,
the phrase "Material Adverse Effect on Parent" means a material adverse effect
on (a) the financial condition, business, assets, liabilities or results of
operations of Parent and its subsidiaries on a consolidated basis or (b) the
ability of Parent or Sub to consummate the transactions contemplated by this
Agreement.
4.2 Capitalization. The authorized capital stock of Parent consists of
35,000,000 shares of Class A Common Stock, par value $.01 per share, of which as
of November 21, 1997, 23,866,404 shares were issued and outstanding; 2,500,000
shares of Class B Common Stock, par value $.01 per share, of which as of
November 21, 1997, 1,936,600 shares were issued and outstanding; and 250,000
shares of Preferred Stock, par value $.01 per share, of which as of the date
hereof no shares are issued and outstanding. All of the shares of Parent Class A
Common Stock to be issued in exchange for Company Common Stock at the Effective
Time in accordance with this Agreement will be, when so issued, duly authorized,
validly issued, fully paid and nonassessable and, except as set forth in Section
4.2 of the Disclosure Letter, free of preemptive rights. Except as set forth
above, as of November 21, 1997, there were no shares of capital stock or other
equity securities of Parent outstanding, and, except as set forth in Section 4.2
of the Disclosure Letter, there are no outstanding options, warrants or rights
to purchase or acquire from Parent any capital stock of Parent, and there are no
convertible securities or other contracts, commitments, agreements,
understandings, arrangements or restrictions by which Parent is bound to issue
any additional shares of its capital stock or other equity securities.
4.3 Authority; Enforceability. Each of Parent and Sub has the corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of each of Parent and
Sub, and this Agreement has been duly executed and delivered by Parent and Sub
and constitutes the valid and binding obligation of each such party, enforceable
against it in accordance with its terms, except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to the
enforcement of creditors' rights generally and subject to general principles of
equity.
4.4 Non-Contravention; Consents. (a) Except as set forth in Section 4.4(a)
of the Disclosure Letter, neither the execution, delivery and performance by
Parent or Sub of this Agreement, nor the consummation by Parent or Sub of the
transactions contemplated hereby, nor compliance by Parent or Sub with any of
the provisions hereof, will:
(i) violate, conflict with, result in a breach of any provision of,
constitute a default (or an event that, with notice or lapse of time or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination
or acceleration, or the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Parent or Sub, under
any of the terms, conditions or provisions of, (x) its respective
organizational documents, or (y) any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to
which Parent or any of its subsidiaries is a party, or by which Parent or
any of its subsidiaries may be bound, or to which Parent or any of its
subsidiaries or the properties or assets of any of them may
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be subject, and that has or would reasonably be expected to have, in any
such event specified in this clause (y), individually or in the aggregate,
a Material Adverse Effect on Parent; or
(ii) subject to compliance with the statutes and regulations referred
to in Section 4.4(b), violate any valid and enforceable judgment, ruling,
order, writ, injunction, decree, or any statute, rule or regulation
applicable to Parent or any of its subsidiaries or any of their respective
properties or assets where such violation has or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Parent.
(b) Except as set forth in Section 4.4(b) of the Disclosure Letter and
other than notices, filings, authorizations, exemptions, consents or approvals,
the failure of which to give or obtain does not have and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Parent, no notice to, filing with, authorization of, exemption by, or consent or
approval of, any governmental authority or other regulatory body is necessary
for the consummation by Parent or Sub of the transactions contemplated by this
Agreement.
4.5 SEC Reports; Parent Financial Statements. (a) Since January 1, 1995,
Parent has timely filed all reports, registration statements, proxy statements
or information statements and all other documents, together with any amendments
required to be made thereto, required to be filed with the SEC under the
Securities Act or the Exchange Act (collectively, the "Parent Reports"). Parent
has heretofore made available to Company true copies of all the Parent Reports,
together with all exhibits thereto, that Company has requested. Included in such
Parent Reports are (i) audited consolidated balance sheets of Parent and its
subsidiaries at December 31, 1994, 1995 and 1996 and the related consolidated
statements of income, stockholders' equity and cash flows for the years then
ended, and the notes thereto and (ii) the unaudited consolidated balance sheets
of Parent and its subsidiaries at March 31, 1997 and June 30, 1997 and the
related unaudited consolidated statements of income, stockholders' equity and
cash flows for the periods then ended and the notes thereto.
(b) All of the financial statements included in the Parent Reports fairly
presented the consolidated financial position of Parent and its subsidiaries as
of the dates mentioned and the consolidated results of operations, changes in
stockholders' equity and cash flows for the periods then ended in conformity
with generally accepted accounting principles (subject to any exceptions as to
consistency specified therein or as may be indicated in the notes thereto or in
the case of the unaudited statements, as may be permitted by Form 10-Q of the
SEC and subject, in the case of unaudited statements, to normal, recurring audit
adjustments). As of their respective dates, the Parent Reports complied in all
material respects with all applicable rules and regulations promulgated by the
SEC and did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except as set forth in the Parent Reports, neither Parent nor
any subsidiary of Parent has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be set forth on a consolidated balance sheet
of Parent and its consolidated subsidiaries or in the notes thereto, other than
liabilities or obligations which, individually or in the aggregate, do not have
and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Company.
4.6 Absence of Certain Changes or Events. Except as disclosed in Section
4.6 of the Disclosure Letter and the Parent Reports and except for the
transactions contemplated by this Agreement, since December 31, 1996, there has
not been (i) any change in the business, financial condition or results of
operations of Parent and its subsidiaries which has or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Parent, or (ii) any split, combination or reclassification of any of Parent's
outstanding capital stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for shares
of Parent's outstanding capital stock.
4.7 Registration Statement, Etc. None of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference in (a) the
Registration Statement and (b) the Proxy Statement will, at the respective times
such documents are filed, and, in the case of the Registration Statement, when
it becomes effective or at the time any amendment or supplement thereto becomes
effective, cause such document to
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contain any untrue statement of a material fact, or omit to state any material
fact necessary in order to make the statements therein not misleading, or, in
the case of the Proxy Statement, when first mailed to the shareholders of
Company, or in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Shareholders' Meeting, cause the Proxy
Statement or any amendment thereof or supplement thereto to contain any untrue
statement of a material fact, or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All documents that Parent is responsible for
filing with the SEC and any other regulatory agency in connection with the
Merger will comply as to form in all material respects with the provisions of
applicable law and any applicable rules or regulations thereunder, except that
no representation is made by Parent with respect to statements made therein
based on information supplied by Company or with respect to information
concerning Company which is incorporated by reference in the Registration
Statement or the Proxy Statement.
4.8 Litigation. Except as set forth in the Parent Reports, there are no
litigation, claims, suits, actions, investigations, indictments or informations,
or administrative, arbitration or other proceedings pending, or, to the
knowledge of Parent, threatened, against Parent or any subsidiary of Parent
which has or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. Except as set forth in the
Parent Reports or in Section 4.8 of the Disclosure Letter, there are no
judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court, administrative agency, or by arbitration, pursuant to a
grievance or other procedure) currently in effect against or relating to Parent
which have or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
4.9 No Violation of Law. Except as set forth in the Parent Reports, the
business and operations of Parent and its subsidiaries have been conducted in
compliance with all applicable laws, ordinances, regulations and orders of all
governmental entities and other regulatory bodies (including, without
limitation, laws, ordinances, regulations and orders relating to zoning,
environmental matters and the safety and health of employees), except where the
failure to be in compliance does not have and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Parent.
Except as set forth in the Parent Reports or in Section 4.9 of the Disclosure
Letter, (i) neither Parent nor any Subsidiary of Parent has been charged with
or, to the knowledge of Parent, is now under investigation with respect to, a
violation of any applicable law, regulation, ordinance, order or other
requirement of a governmental entity or other regulatory body that has or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent, and (ii) Parent has filed all reports required to be
filed with any governmental entity or other regulatory body on or before the
date hereof, except where the failure to do so does not and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent.
4.10 Brokers and Finders. Neither Parent nor any of its subsidiaries, nor
any of their respective officers, directors or employees, has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions, or finder's fees, and no broker or finder has acted
directly or indirectly for Parent or any of its subsidiaries, in connection with
this Agreement or any of the transactions contemplated hereby.
4.11 Merger. Neither Parent nor any of its subsidiaries has taken any
action or failed to take any action which action or failure to take action would
jeopardize the Merger as a reorganization within the meaning of Section 368(a)
of the Code.
4.12 Pooling. Arthur Andersen LLP has advised Parent as of the date hereof
that based upon inquiries and its examination of the financial statements of
Parent, it is not aware of any conditions relating to Parent that would preclude
the use of "pooling of interests" accounting in connection with the Merger.
ARTICLE 5
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; CERTAIN COVENANTS
5.1 Access and Information. Upon reasonable notice, each of Company and
Parent shall (and shall cause each of their respective subsidiaries to) give to
the other and to the respective accountants, counsel and
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other representatives of such other party reasonable access during normal
business hours throughout the period prior to the Effective Time to all of its
and its subsidiaries' properties, books, contracts, commitments and records
(including tax returns and insurance policies) and shall permit them to consult
with its and its subsidiaries' respective officers, employees, auditors,
attorneys and agents; provided, however, that any such investigation shall be
conducted in such a manner as not to interfere unreasonably with the business or
operations of the other party or its subsidiaries. All confidential information
provided pursuant to this Section 5.1 will be subject to the Confidentiality
Agreements dated as of October 28, 1997 (the "Confidentiality Agreements"), each
between Company and Parent.
5.2 Conduct of Business Pending Merger. (a) Company agrees that from the
date hereof to the Effective Time, except as contemplated by this Agreement or
to the extent that Parent shall otherwise consent in writing, Company and the
Company Subsidiaries will operate their businesses only in the ordinary course
in the same manner as previously conducted and not engage in any new line of
business or enter into any agreement, transaction or activity or make any
commitment except in the ordinary course of business or as expressly permitted
by this Section 5.2; and, consistent with such operation, will use all
commercially reasonable efforts consistent with past practices to preserve their
business organizations intact, to keep available to them the goodwill of their
customers, suppliers, tour organizers, travel arrangers and others with whom
business relationships exist to the end that their goodwill and ongoing business
shall not be materially impaired at the Effective Time, and will further
exercise all commercially reasonable efforts to maintain their existing
relationships with their employees in general.
(b) Company agrees that from the date hereof to the Effective Time, except
as otherwise consented to by Parent in writing, neither it nor any Company
Subsidiary will (i) change any provision of its Articles of Incorporation or
Bylaws or similar governing documents; (ii) make, declare or pay any dividend or
other distribution; or (iii) make any distribution or directly or indirectly
sell, issue, redeem, purchase or otherwise acquire, any shares of its
outstanding capital stock, change the number of shares of its authorized or
issued capital stock or issue, grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to its
authorized or issued capital stock or any securities convertible into shares of
such stock or otherwise make any change in its capital structure, except for the
issuance of capital stock upon exercise of presently outstanding stock options
in accordance with the existing terms of such options.
(c) Company agrees that from the date hereof to the Effective Time it will
not take, or permit any Company Subsidiary to take, any of the following
actions, except to the extent consented to by Parent in writing.
(i) (A) create, incur or assume any long-term debt (including
obligations in respect of capital leases which individually involve annual
payments in excess of $25,000) other than vehicle financing in the ordinary
course of business consistent with past practice, (B) except in the
ordinary course of business under existing lines of credit, create, incur
or assume any short-term debt for borrowed money, (C) create, incur or
assume any debt having a maturity of in excess of four years relating to
vehicle financing, (D) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person, except in the ordinary course of business
and consistent with past practice, (E) make any loans or advances to any
other person, except in the ordinary course of business and consistent with
past practice, (F) make any capital contributions to, or investments in,
any person involving amounts in excess of $200,000 in the aggregate, or (G)
excluding vehicle purchases in the ordinary course of business, make
capital expenditures involving in excess of $500,000 in the aggregate;
(ii) mortgage or pledge any of its properties or assets involving
amounts in excess of $200,000 in the aggregate, except for the incurrence
in the ordinary course of business consistent with past practice of liens
on vehicles owned by Company or any Company Subsidiary pursuant to fleet
financing agreements in existence on the date hereof or amendments to or
renewals thereof on substantially similar terms;
(iii) take any action to (i) amend or terminate any Company Benefit
Plan, (ii) increase the compensation of any of its executive officers,
(iii) materially increase the level of compensation of its
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employees, or (iv) adopt any other plan, program, arrangement or practice
providing new or increased benefits or compensation to its employees;
(iv) amend or cancel or agree to the amendment or cancellation of any
Material Contract or enter into any new Material Contract;
(v) enter into any negotiation with respect to any collective
bargaining agreement;
(vi) make any change in any accounting methods or systems of internal
accounting controls, except as may be appropriate to conform to changes in
generally accepted accounting principles;
(vii) pay, loan or advance (other than the payment of compensation,
directors' fees or reimbursements of expenses in the ordinary course of
business) any amount to, or sell, transfer or lease any properties or
assets (real, personal or mixed, tangible or intangible) to, or enter into
any agreement or arrangement with, any of its officers or directors or any
"affiliate" or "associate" of any of its officers or directors (as such
terms are defined in Rule 405 promulgated under the Securities Act);
(viii) acquire, form or commence the operations of any business or any
corporation, partnership, joint venture, business association or other
business organization or division thereof;
(ix) make any tax election (other than in the ordinary course of
business consistent with past practice) or settle or compromise any tax
liability involving amounts in excess of $25,000 in the aggregate;
(x) pay, discharge, settle or satisfy any claims, litigation,
liabilities or obligations (whether absolute, accrued, asserted or
unasserted, contingent or otherwise) involving amounts in excess of
$200,000 in the aggregate, other than the payment, discharge or
satisfaction of liabilities (i) reflected or reserved against in, or
contemplated by, the financial statements (or the notes thereto) of Company
included in the Company Reports or (ii) in the ordinary course of business
consistent with past practice;
(xi) pay, discharge, settle or satisfy any claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent
or otherwise) arising out of, or relating to, that certain litigation
styled as Altman's America, et al. v. American Land Cruisers of California
Incorporated, et al. in the Superior Court of the State of California for
the County of Los Angeles (the "Altman Litigation") other than the payment
of court costs and attorney's fees and expenses to counsel for Company;
(xii) fail to perform in all material respects all of its obligations
under all Material Contracts (except those being contested in good faith);
(xiii) fail to use all commercially reasonable efforts to maintain in
full force and effect and in the same amounts policies of insurance
comparable in amount and scope of coverage to that now maintained by
Company and the Company Subsidiaries;
(xiv) fail to manage its fleet in the ordinary course of business
consistent with past practice;
(xv) fail to use all commercially reasonable efforts to continue to
collect its accounts payable in the ordinary course of business and
consistent with past practice;
(xvi) fail to prepare and file all material federal, state, local and
foreign returns for Taxes and other material Tax reports, filings and
amendments thereto required to be filed by it, or fail to allow Parent, at
its request, to review all such returns, reports, filings and amendments at
Company offices prior to the filing thereof, which review shall not
interfere with the timely filing of such returns; or
(xvii) enter into any agreement to take any of the actions described
in Section 5.2(b) or elsewhere in this Section 5.2(c).
(d) In connection with the continued operation of the business of Company
and the Company Subsidiaries between the date of this Agreement and the
Effective Time, Company shall communicate in good faith on a regular and
frequent basis with one or more representatives of Parent designated in writing
with respect to the ongoing operations of Company. Company acknowledges that
Parent does not and will not
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waive any rights it may have under this Agreement as a result of such
communications. Without limiting the generality of the foregoing, Company shall
(i) keep Parent fully informed regarding the status of the Altman Litigation,
promptly apprise Parent of any developments relating to the Altman Litigation,
and provide Parent promptly with all motions, briefs, orders, judgments,
decisions, papers and other documents relating to the Altman Litigation, (ii)
consult and confer with Parent on a regular and frequent basis regarding the
Altman Litigation, and (iii) not file any motions, briefs or other papers or
documents or take any other material action relating to the Altman Litigation
without the review and consent of Parent.
(e) Parent agrees that from the date hereof to the Effective Time, except
as contemplated by this Agreement or to the extent that Company shall otherwise
consent in writing, it will not take, and will cause each of its subsidiaries
not to take, any action which would materially and adversely affect the ability
of Parent to perform its covenants and agreements under this Agreement.
(f) Company shall not, nor shall it permit any Company Subsidiary to, nor
shall it authorize or permit any officer, director or employee of, or any
investment banker, attorney or other advisor or representative or agent of,
Company or any Company Subsidiary to, directly or indirectly, (i) solicit,
initiate or encourage the submission of any Acquisition Proposal (as hereinafter
defined) or (ii) enter into or encourage any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to encourage or facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that nothing contained in this Section
5.2(f) shall prohibit the Board of Directors of Company from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes an unsolicited Acquisition Proposal if, and only to the extent
that (A) the Board of Directors of Company after consultation with outside
counsel determines in good faith that in order for the Board of Directors of
Company to comply with its fiduciary duties to stockholders under applicable law
it is required to take such action, (B) prior to taking such action, Company
receives from such person or entity an executed agreement in reasonably
customary form relating to the confidentiality of information to be provided to
such person or entity, and (C) the Board of Directors of Company concludes in
good faith that the Acquisition Proposal contains an offer of consideration that
is superior to the consideration set forth herein. Notwithstanding anything in
this Agreement to the contrary, Company shall (i) promptly advise Parent orally
and in writing of (A) the receipt by it (or any of the other entities or persons
referred to above) after the date hereof of any Acquisition Proposal, or any
inquiry which could reasonably be expected to lead to any Acquisition Proposal,
(B) the material terms and conditions of such Acquisition Proposal or inquiry,
and (C) the identity of the person making any such Acquisition Proposal or
inquiry and (ii) keep Parent reasonably informed of the status and details of
any such Acquisition Proposal or inquiry. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the first
sentence of this Section 5.2(f) by any officer or director of Company or any
Company Subsidiary or any investment banker, attorney or other advisor,
representative or agent of Company or any Company Subsidiary, acting on behalf
of or at the request of the Board of Directors of the Company, shall be deemed
to be a breach of this Section 5.2(f) by Company. For purposes of this
Agreement, "Acquisition Proposal" means any bona fide proposal with respect to a
merger, consolidation, share exchange, joint venture, business combination or
similar transaction involving Company or any Company Subsidiary, or any purchase
of all or any significant portion of the assets of Company or any Company
Subsidiary.
5.3 Fiduciary Duties. The Board of Directors of Company shall not (i)
withdraw or modify in a manner materially adverse to Parent, the approval or
recommendation by such Board of Directors of this Agreement or the Merger, or
(ii) approve, recommend or cause Company to enter into any agreement with
respect to any Acquisition Proposal (an "Alternative Transaction") unless
Company receives an unsolicited Acquisition Proposal and the Board of Directors
of Company determines in good faith after consultation with outside counsel that
it is required to do so in order to comply with its fiduciary duties to
stockholders under applicable law, in which event the Board of Directors may (w)
withdraw or modify its approval or recommendation of this Agreement and the
Merger, (x) approve or recommend such Acquisition Proposal, (y) cause Company to
enter into an agreement with respect to such Acquisition Proposal and/or (z)
terminate this Agreement pursuant to Section 7.1(b)(v). If (i) the Board of
Directors of Company takes any action described in clause (y) or (z) of the
preceding sentence, (ii) Parent exercises its right to terminate this Agreement
under
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Section 7.1(c) based on the Board of Directors of Company having taken any
action described in clause (w) or (x) of the preceding sentence or (iii) the
Agreement is terminated as a result of the failure to receive the requisite vote
for approval of this Agreement and the Merger at the Shareholders' Meeting and
at the time of such meeting a bona fide Acquisition Proposal involving Company
shall have been announced, Company shall, concurrently with the taking of such
action or such termination (a "Fee Payment Event"), as applicable, pay to Parent
the Section 5.4 Fee (as hereinafter defined).
5.4 Certain Fees. Company shall pay to Parent upon demand $1.8 million
upon the occurrence of a Fee Payment Event (the "Section 5.4 Fee"), payable in
same-day funds, as liquidated damages and not as a penalty, if the Section 5.4
Fee is payable pursuant to Section 5.3 to reimburse and compensate Parent for
its time, expenses and lost opportunity costs of pursuing the Merger. In
addition, if Company enters into an agreement with respect to, or consummates,
an Alternative Transaction within one year of the payment by Company of the
Section 5.4 Fee, Company shall pay to Parent an additional fee (the "Topping
Fee"), payable in same-day funds, as liquidated damages and not as a penalty,
concurrently with the consummation of such Alternative Transaction. The Topping
Fee shall be equal to the product obtained by multiplying (a) 25% by (b) the
Incremental Value (as hereinafter defined), but in no case shall the Topping Fee
be less than $1.2 million. The "Incremental Value" shall be equal to the amount
by which the "Alternative Transaction Value" shall exceed the "Merger
Transaction Value" (each as hereinafter defined). The "Alternative Transaction
Value" shall mean the aggregate value of the Alternative Transaction to the
stockholders of Company, valued as of the date of the agreement relating to such
Alternative Transaction and calculated in accordance with generally recognized
and accepted valuation methodologies employed by nationally recognized
investment banking firms for valuing comparable transactions. The "Merger
Transaction Value" shall mean the aggregate value of the Merger to the
stockholders of Company, valued as of the date of the termination of this
Agreement and calculated in accordance with generally recognized and accepted
valuation methodologies employed by nationally recognized investment banking
firms for valuing comparable transactions. If the parties do not agree as to the
Alternative Transaction Value or the Merger Transaction Value, Company and
Parent shall negotiate with one another in good faith for a period of ten days
to resolve such dispute. If, after the expiration of such ten-day period, the
parties do not agree as to the Alternative Transaction Value or the Merger
Transaction Value, Company and Parent shall each engage a nationally recognized
investment banking firm to calculate the Alternative Transaction Value or the
Merger Transaction Value, or both, as the case may be. If such investment
banking firms do not agree as to such disputed valuation(s) after 30 days, such
firms shall together appoint a third nationally recognized investment banking
firm to resolve such dispute by calculating the disputed valuation(s). The
calculation of such third investment banking firm shall be conclusive as to the
disputed valuation(s). Each party shall bear the costs and expenses of the
investment banking firm engaged by it pursuant to this Section 5.4, and the
costs and expenses of a third investment banking firm, if necessary, shall be
borne equally by Company and Parent. If Company fails promptly to pay to Parent
any amounts due under this Section 5.4, Company shall pay the costs and expenses
(including reasonable legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the publicly
announced prime rate of Citibank, N.A. in effect from time to time from the date
such fee was required to be paid.
5.5 Takeover Statutes. If any "fair price," "moratorium," "control share
acquisition," "business combination," "stockholder protection" or similar
antitakeover statute or regulation enacted under state or Federal law shall
become applicable to the Merger, the Proxy Agreements or any of the other
transactions contemplated hereby, Company and the Board of Directors of Company
shall grant such approvals and take all such actions as are within its authority
so that the Proxy Agreements shall be in full force and effect and so that the
Merger and the other transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise use all
commercially reasonable efforts to eliminate or minimize the effects of such
statute or regulation on the Merger, the Proxy Agreements and the other
transactions contemplated hereby.
5.6 Consents. Company and Parent will use all commercially reasonable
efforts to obtain the written consent or approval of each and every governmental
authority and other regulatory body, the consent or
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approval of which shall be required in order to permit Parent, Sub and Company
to consummate the transactions contemplated by this Agreement. Company will use
all commercially reasonable efforts to obtain the written consent or approval,
in form and substance reasonably satisfactory to Parent, of each person whose
consent or approval shall be required in order to permit Parent, Sub and Company
to consummate the transactions contemplated by this Agreement, except for any
contracts of Company as to which the failure to obtain any required written
consent or approval thereunder would not individually or in the aggregate result
in, or be reasonably likely to result in, a Material Adverse Effect on Company.
Parent will use all commercially reasonable efforts to obtain the written
consent or approval, in form and substance reasonably satisfactory to Company,
of each person whose consent or approval shall be required in order to permit
Parent, Sub and Company to consummate the transactions contemplated by this
Agreement, except for any contracts of Parent as to which the failure to obtain
any required written consent or approval thereunder would not individually or in
the aggregate result in, or be reasonably likely to result in, a Material
Adverse Effect on Parent.
5.7 Reasonable Efforts; Further Assurances; Cooperation. Subject to the
other provisions of this Agreement, the parties hereto shall each use all
commercially reasonable efforts to perform their obligations herein and to take,
or cause to be taken or do, or cause to be done, all things necessary, proper or
advisable under applicable law to obtain all regulatory approvals, including
notices and approvals under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and satisfy all conditions to the obligations
of the parties under this Agreement and to cause the Merger and the other
transactions contemplated by this Agreement to be effected as soon as reasonably
practicable in accordance with the terms of this Agreement and shall cooperate
fully with each other and their respective officers, directors, employees,
agents, counsel, accountants and other designees in connection with any steps
required to be taken as a part of their respective obligations under this
Agreement, including without limitation:
(a) Company and Parent shall promptly make their respective filings
and submissions and shall take, or cause to be taken, all actions and do,
or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to obtain any required approval of any
other federal, state or local governmental agency or regulatory body with
jurisdiction over the transactions contemplated by this Agreement.
(b) If any claim, action, suit, investigation or other proceeding by
any governmental body or other person is commenced which questions the
validity or legality of the Merger, the Proxy Agreements or any of the
other transactions contemplated by this Agreement or the Proxy Agreements
or seeks damages in connection with this Agreement or the Proxy Agreements,
the parties agree to cooperate and use all commercially reasonable efforts
to defend against such claim, action, suit, investigation or other
proceeding and, if an injunction or other order is issued in any such
action, suit or other proceeding, to use all commercially reasonable
efforts to have such injunction or other order lifted, and to cooperate
reasonably regarding any other impediment to the consummation of the
transactions contemplated by this Agreement or the Proxy Agreements.
(c) Each party shall give prompt written notice to the other of (i)
the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any of such party's representations or
warranties contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the
Effective Time and (ii) any failure of such party to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement.
(d) Without the prior written consent of Parent, Company will not
terminate any employee if such termination would result in the payment of
any amounts pursuant to "change in control" provisions of any employment
agreement or arrangement.
5.8 NYSE Listing. Parent will use all commercially reasonable efforts to
cause to be approved for listing on the NYSE, subject to official notice of
issuance, a sufficient number of shares of Parent Common Stock to be issued in
the Merger and pursuant to Company Stock Options (as defined in Section 5.15).
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5.9 Notice. Each of Company and Parent shall promptly notify the other of
any material change in the normal course of its business or in the operation of
its properties and of the receipt by it or any of its subsidiaries of notice of
any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or the receipt by it or any of its
subsidiaries of a notice of the institution or the threat of litigation
involving it or any of its subsidiaries which in any such case, individually or
in the aggregate, has or would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company or a Material Adverse
Effect on Parent, as the case may be, and will keep the other party fully
informed with respect to such events.
5.10 Registration Statement; Shareholder Approvals. (a) As soon as is
reasonably practicable after the execution of this Agreement, Parent shall
prepare and file with the SEC the Registration Statement (in which the Proxy
Statement will be included as a prospectus) and Company shall prepare and file
with the SEC the Proxy Statement. Parent shall use all commercially reasonable
efforts to cause the Registration Statement to become effective under the
Securities Act as promptly as practicable after such filing and shall take all
commercially reasonable actions required to be taken under any applicable state
blue sky or securities laws in connection with the issuance of the shares of
Parent Common Stock pursuant to this Agreement. Each party hereto shall furnish
all information concerning it and the holders of its capital stock as the other
party hereto may reasonably request in connection with such actions.
(b) Company shall call a Shareholders' Meeting to be held as soon as
practicable after the date hereof for the purpose of voting upon the Merger and
this Agreement. In connection with the Shareholders' Meeting, Company and Parent
shall prepare and file the Proxy Statement with the SEC. Company shall mail the
Proxy Statement to its stockholders, the Board of Directors of Company, subject
to Section 5.3, shall recommend to its stockholders the approval of the Merger
and this Agreement, and Company shall use commercially reasonable efforts to
obtain such stockholder approval. Without limiting the generality of the
foregoing, Company agrees that, subject to its right to terminate this Agreement
pursuant to Section 7.1(b)(v), its obligations pursuant to this Section 5.10(b)
shall not be affected by the commencement, public proposal, public disclosure or
communication to Company of any Acquisition Proposal.
5.11 Expenses. Subject to Sections 5.3 and 5.4, if this Agreement is
terminated for any reason without breach by any party, each party hereto shall
pay its own expenses incident to preparing for, entering into, and carrying out
this Agreement and to consummating the Merger (including all attorneys' fees
incurred by such party in connection therewith), except that Company and Parent
shall divide equally the following expenses: (a) the costs incurred in
connection with the printing and mailing of the Registration Statement, the
Proxy Statement and related documents; and (b) all filing or registration fees
paid by Company or Parent, including state securities laws filing or
registration fees, if any (but excluding attorneys' fees).
5.12 Press Releases; Filings. Without the consent of the other parties,
none of the parties shall issue any press release or make any public
announcement with regard to this Agreement or the Merger or any of the
transactions contemplated hereby or thereby; provided, however, that (i) nothing
in this Section 5.12 shall be deemed to prohibit any party hereto from making
any disclosure which its counsel deems necessary or advisable in order to
fulfill such party's disclosure obligations imposed by law or the rules of any
national securities exchange or automated quotation system so long as such party
uses all commercially reasonable efforts to consult with the other parties prior
to such disclosure, and (ii) if this Agreement is terminated, then each party
may make such disclosure as it deems reasonably appropriate so long as such
party uses all commercially reasonable efforts to consult with the other parties
prior to such disclosure. Each of Company and Parent shall promptly notify the
other of each report, schedule and other document filed by it or any of its
respective subsidiaries with the SEC and of any other document pertaining to the
transactions contemplated hereby filed with any other governmental authorities.
5.13 Indemnification of Officers and Directors. (a) For a period of six
years after the Effective Time, the Surviving Corporation shall provide with
respect to each present or former director and officer of Company and its
subsidiaries (both present and past) (the "Indemnified Parties"), the
indemnification rights (including any rights to advancement of expenses) which
such Indemnified Parties had, whether from Company or such
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subsidiary, immediately prior to the Merger, whether under the FBCA or the
bylaws of Company or such subsidiary or otherwise.
(b) Immediately following the Effective Time, Parent shall cause to remain
in effect the current policies of directors' and officers' liability insurance
maintained by Company or any Company Subsidiary (provided Parent may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
facts or events which occurred at or before the Effective Time, and Parent shall
maintain such coverage for a period of six years after the Effective Time;
provided, however, that in no event shall Parent be required to expend pursuant
to this Section 5.13(b) on an annual basis more than an amount equal to 150% of
the current annual premiums paid by Company and the Company Subsidiaries for
such insurance and, in the event the cost of such coverage shall exceed that
amount, Parent shall purchase as much coverage as possible for such amount.
(c) This Section 5.13 shall survive the Closing and is intended to benefit
Company, the Surviving Corporation and each of the Indemnified Parties and his
or her heirs and representatives (each of whom shall be entitled to enforce this
Section 5.13 against Parent or the Surviving Corporation to the extent specified
herein) and shall be binding on all successors and assigns of Parent and the
Surviving Corporation.
5.14 Tax Treatment. Parent and Company agree to treat the Merger as a
reorganization within the meaning of Section 368(a) of the Code. During the
period from the date of this Agreement through the Effective Time, unless the
parties shall otherwise agree in writing, none of Parent, Company or any of
their respective subsidiaries shall knowingly take or fail to take any action
which action or failure to act would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
5.15 Stock Options. (a) At the Effective Time, each outstanding option to
purchase shares of Company Common Stock (a "Company Stock Option") issued
pursuant to any incentive or stock option program of Company (the "Company
Plan"), whether vested or unvested, shall be assumed by Parent. From and after
the Effective Time, each Company Stock Option shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Company Stock Option, a number of shares of Parent Class A Common Stock
equal to (x) the number of shares of Company Common Stock covered by such
Company Stock Option, multiplied by (y) the Exchange Ratio, at a price per share
equal to (A) the exercise price of such Company Stock Option multiplied by (B)
(1) one divided by (2) the Exchange Ratio; provided, however, that in the case
of any option to which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code ("incentive stock options"), the
option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order to
comply with Section 424(a) of the Code.
(b) As soon as practicable after the Effective Time, Parent shall deliver
to the holders of Company Stock Options appropriate notices setting forth such
holders' rights pursuant to the Company Plan and the agreements evidencing the
grants of such Company Stock Options shall continue in effect on the same terms
and conditions (subject to the adjustments required by this Section 5.15 after
giving effect to the Merger and the assumption by Parent as set forth above). If
necessary, Parent shall comply with the terms of the Company Plan and ensure, to
the extent required by, and subject to the provisions of, such Plan, that
Company Stock Options which qualified as incentive stock options prior to the
Effective Time continue to qualify as incentive stock options of Parent after
the Effective Time.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Class A Common Stock for
delivery upon exercise of Company Stock Options assumed by it in accordance with
this Section 5.15. As soon as practicable after the Effective Time and in no
event later than 30 days after the Effective Time, Parent shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), or another appropriate form with respect
to the shares of Parent Class A Common Stock subject to such options and shall
use all commercially reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
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5.16 Company Affiliates. Company shall deliver to Parent a letter
identifying all persons who are, at the time the Merger is submitted to a vote
of the stockholders of Company, possible "affiliates" of Company for purposes of
Rule 145 under the Securities Act. Company shall cause each person who is
identified as a possible "affiliate" in such letter to deliver to Parent on or
prior to the Effective Time a written statement in the form of Exhibit 5.16 (the
"Affiliates Letter"). Parent shall be entitled to place legends on any
certificates of Parent Class A Common Stock issued to such possible affiliates
to restrict transfer of such shares as set forth above.
5.17 Employment Agreements. Concurrently with the execution and delivery
of this Agreement, Company shall enter into an employment agreement
substantially in the form of the agreement contained in Exhibit 5.17(a) (the
"Employment Agreements") with each of the persons listed on Exhibit 5.17(b).
Prior to the earlier to occur of the Effective Time or the termination of this
Agreement, Company shall not amend or terminate any of the Employment
Agreements. Prior to the Effective Time, Company will use its best efforts to
cause each of the persons listed on Exhibit 5.17(c) to enter into employment
agreements substantially in the form of the agreements contained in Exhibits
5.17(d)-1 and 5.17(d)-2.
5.18 Company Expenses. Company agrees that the Anticipated Company
Transactional Expenses (as defined below) will be reasonable and customary for
transactions of this type and in any event shall not exceed $1,000,000. At least
thirty (30) days prior to the Effective Time, the Chief Financial Officer of
Company shall provide Parent with a written certificate setting forth and
certifying to the best of such Chief Financial Officer's knowledge and belief
the aggregate amount of fees, costs and expenses anticipated to be incurred by
Company in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, the anticipated fees, costs and expenses
of financial advisors, accountants and counsel (the "Anticipated Company
Transactional Expenses"). Parent shall have full and complete access to the
books, records and other documents of Company and to the employees of Company
for purposes of confirming and auditing the size and nature of the Anticipated
Company Transactional Expenses.
5.19 Pooling of Interests Accounting. Except for other actions
specifically permitted to be taken hereunder, from and after the date of this
Agreement and until the Effective Time, unless Parent otherwise determines that
the acquisition will not be accounted for as a "pooling of interests", neither
Company nor Parent nor any of their respective subsidiaries or other affiliates
shall take, or fail to take, any action that would jeopardize the treatment of
Parent's acquisition of Company as a "pooling of interests" for accounting
purposes.
5.20 Treatment of Warrants. Prior to the Effective Time, Parent shall
enter into an agreement with the holder of the warrants (the "Warrantholder")
issued pursuant to the Warrant Agreement dated as of April 26, 1994 by and among
Company and Teachers Insurance and Annuity Association of America (the "Warrant
Agreement") to assume the warrants issued pursuant to the Warrant Agreement and
the obligations of Company under the warrants and the Warrant Agreement upon
substantially the same terms as set forth in the Warrant Agreement, together
with such changes as shall be agreed to by the Warrantholder and Parent.
ARTICLE 6
CONDITIONS PRECEDENT TO MERGER
6.1 Conditions to Each Party's Obligations. The respective obligations of
each party to effect the Merger shall be subject to the satisfaction on or prior
to the Closing Date of each of the following conditions:
(a) This Agreement and the Merger shall have been approved and adopted
by the affirmative vote or consent of the holders of at least a majority of
the outstanding shares of Company Common Stock.
(b) All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental authority or other regulatory body
required in connection with the execution, delivery and performance of this
Agreement, the failure to obtain which would prevent the consummation of
the Merger or have a Material Adverse Effect on Company or a Material
Adverse Effect on Parent, shall
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have been obtained without the imposition of any condition having a
Material Adverse Effect on Company or a Material Adverse Effect on Parent.
(c) All authorizations, consents, waivers and approvals from parties
to contracts or other agreements to which any of Company or Parent (or
their respective subsidiaries) is a party, or by which either is bound, as
may be required to be obtained by them in connection with the performance
of this Agreement, the failure to obtain which would prevent the
consummation of the Merger or have, individually or in the aggregate, a
Material Adverse Effect on Company or, individually or in the aggregate, a
Material Adverse Effect on Parent, shall have been obtained.
(d) Early termination shall have been granted or applicable waiting
periods shall have expired under the HSR Act.
(e) No governmental authority or other regulatory body (including any
court of competent jurisdiction) shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of making illegal, materially
restricting or in any way preventing or prohibiting the Merger or the
transactions contemplated by this Agreement.
(f) The Registration Statement shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such
purpose, or under the proxy rules of the SEC pursuant to the Exchange Act
and with respect to the transactions contemplated hereby, shall be pending
before or threatened by the SEC. At the effective date of the Registration
Statement, the Registration Statement shall not contain any untrue
statement of a material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading, and, at the mailing
date of the Proxy Statement and the date of the Shareholders' Meeting, the
Proxy Statement shall not contain any untrue statement of a material fact,
or omit to state any material fact necessary in order to make the
statements therein not misleading.
(g) Parent and Company each shall have obtained a written opinion of
King & Spalding, counsel to Parent, reasonably acceptable to Parent and
Company (the "Tax Opinion"), to the effect that the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Code and that
the exchange in the Merger of Parent Common Stock for Company Common Stock
will not give rise to gain or loss to the stockholders of Company with
respect to such exchange (except to the extent of any cash paid in lieu of
fractional shares). The Tax Opinion will be addressed to each of Parent and
Company.
(h) The shares of Parent Common Stock to be issued pursuant to this
Agreement and pursuant to the Company Stock Options shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
6.2 Conditions to Obligations of Company. The obligations of Company to
effect the Merger shall be subject to the satisfaction on or prior to the
Closing Date of each of the following conditions unless waived by Company:
(a) The representations and warranties of Parent set forth in this
Agreement shall be true and correct in all material respects at and as of
the date of this Agreement and at and as of the Closing Date as though made
at and as of the Closing Date, except to the extent such representations
and warranties (i) speak as of a specified date (which representations and
warranties shall be true and correct as of such date) and except to the
extent contemplated by this Agreement; or (ii) are already qualified by
materiality, in which event such representations and warranties shall be
true and correct in all respects.
(b) Parent and Sub each shall have performed in all material respects
all covenants and agreements required to be performed by them under this
Agreement at or prior to the Closing Date.
(c) Parent shall furnish Company with a certificate of its appropriate
officers as to compliance with the conditions set forth in Sections 6.2(a)
and (b).
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(d) Company shall have received from KPMG Peat Marwick LLP and Arthur
Andersen LLP letters dated (i) the effective date of the Registration
Statement and (ii) the Closing Date, with respect to certain financial
information regarding Parent included in the Registration Statement, in
each case in form and substance reasonably satisfactory to Company and
customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to
the Registration Statement.
(e) Company shall have received an opinion, dated the Closing Date, of
King & Spalding, in form and substance reasonably satisfactory to Company,
with respect to the matters set forth in Exhibit 6.2(e).
(f) No suit, investigation, action or other proceeding shall be
overtly threatened or pending against Parent before any court or
governmental agency which (i) would result in the restraint or prohibition
of Parent, or the obtaining of damages or other relief from Parent, in
connection with this Agreement or the consummation of the transactions
contemplated hereby or thereby which would in any such case, individually
or in the aggregate, have a Material Adverse Effect on Parent or (ii) any
orders restricting Parent from conducting its business as now being
conducted which, individually or in the aggregate, would have a Material
Adverse Effect on Parent.
6.3 Conditions to Obligations of Parent. The obligations of Parent to
effect the Merger shall be subject to the satisfaction on or prior to the
Closing Date of each of the following conditions unless waived by Parent:
(a) (i) the representations and warranties of Company set forth in
Sections 3.2, 3.3, 3.4, 3.5, 3.6, 3.23, 3.24, 3.25, 3.26, 3.27, 3.28, 3.29,
3.30 and 3.31 of this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the
Closing Date as though made at and as of the Closing Date, except to the
extent such representations and warranties speak as of a specified date
(which representations and warranties shall be true and correct as of such
date); (ii) the representations and warranties of Company set forth in
Sections 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17,
3.18, 3.19, 3.20, 3.21, 3.22 and 3.32 of this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement;
and (iii) the representation and warranty set forth in Section 3.33 of this
Agreement shall be true and correct in all respects at and as of the date
of this Agreement and at and as of the Closing Date as though made at and
as of the Closing Date.
(b) Company shall have performed in all material respects all
covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing Date.
(c) Company shall furnish Parent with a certificate of its appropriate
officers as to compliance with the conditions set forth in Sections 6.3(a)
and (b).
(d) Parent shall have received from KPMG Peat Marwick LLP letters
dated (i) the date of the Proxy Statement and (ii) the Closing Date, with
respect to certain financial information regarding Company included in the
Proxy Statement, in each case in form and substance reasonably satisfactory
to Parent and customary in scope and substance for letters delivered by
independent public accountants in connection with proxy statements similar
to the Proxy Statement.
(e) Parent shall have received an Affiliates Letter from each possible
"affiliate" described in Section 5.16.
(f) Parent shall have received an opinion, dated the Closing Date, of
Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., counsel to Company,
in form and substance reasonably satisfactory to Parent, with respect to
the matters set forth in Exhibit 6.3(f).
(g) No suit, investigation, action or other proceeding shall be
overtly threatened or pending against Parent, Company or any of the Company
Subsidiaries before any court or governmental agency which (i) would result
in the restraint or prohibition of any such party, or the obtaining of
damages or other relief from any such party, in connection with this
Agreement or the consummation of the transactions contemplated hereby or
thereby which would in any such case, individually or in the aggregate,
have a Material Adverse Effect on Parent or a Material Adverse Effect on
Company, or (ii) any orders restricting Company or any Company Subsidiary
or Parent from conducting its business as now being
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conducted which, individually or in the aggregate, would have a Material
Adverse Effect on Company or a Material Adverse Effect on Parent.
(h) Each of the directors of Company requested by Parent to do so
shall have tendered to Parent resignation letters in form and substance
reasonably acceptable to Parent on or prior to the Closing Date, such
resignations to be effective at the Effective Time.
(i) Each of the persons identified in Exhibit 5.17(c) shall have
executed and delivered their respective employment agreement in
substantially the form of the agreements contained as Exhibits 5.17(d)-1
and 5.17(d)-2 hereto.
ARTICLE 7
TERMINATION AND ABANDONMENT OF THE MERGER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the approval by the stockholders of
Company:
(a) by the mutual written consent of Parent and Company;
(b) by Company if:
(i) the Merger is not consummated on or before May 31, 1998, unless
the failure of such occurrence shall be due to the failure of Company to
perform or observe the covenants, agreements and conditions hereof to be
performed or observed by it at or before the Effective Time;
(ii) events occur which render impossible the satisfaction of one
or more of the conditions set forth in Sections 6.1 and 6.2 and such
conditions are not waived by Company, unless the failure of such
occurrence shall be due to the failure of Company to perform or observe
the covenants, agreements and conditions hereof to be performed or
observed by it at or before the Effective Time;
(iii) Company is enjoined or restrained by any governmental
authority or other regulatory body (including any court), such
injunction or restraining order prevents the performance by Company of
its obligations hereunder and such injunction shall not have been
withdrawn by the earlier to occur of the date 60 days after the date on
which such injunction was first issued or May 31, 1998;
(iv) the shareholders of Company do not approve this Agreement and
the Merger at the Shareholders' Meeting;
(v) the Board of Directors of Company, subject to and in compliance
with Section 5.3, shall have withdrawn or materially modified in a
manner adverse to Parent its recommendation of this Agreement and the
Merger or the Board of Directors shall have approved or recommended
another Acquisition Proposal, provided that prior to and as a condition
to such termination Company has paid the Section 5.4 Fee and, if then
payable, the Topping Fee to Parent;
(c) by Parent if:
(i) the Merger is not consummated on or before May 31, 1998, unless
the failure of such occurrence shall be due to the failure of Parent or
Sub to perform or observe the covenants, agreements and conditions
hereof to be performed or observed by them at or before the Effective
Time;
(ii) events occur which render impossible the satisfaction of one
or more of the conditions set forth in Sections 6.1 and 6.3 and such
conditions are not waived by Parent, unless the failure of such
occurrence shall be due to the failure of Parent or Sub to perform or
observe the covenants, agreements and conditions hereof to be performed
or observed by them at or before the Effective Time;
(iii) Parent is enjoined or restrained by any governmental
authority or other regulatory body (including any court), such
injunction or restraining order prevents the performance by Parent of
its
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obligations hereunder and such injunction shall not have been withdrawn
by the earlier to occur of the date 60 days after the date on which such
injunction was first issued or May 31, 1998;
(iv) the shareholders of Company do not approve this Agreement and
the Merger at the Shareholders' Meeting;
(v) the Board of Directors of Company shall have withdrawn or
materially modified in a manner adverse to Parent its recommendation of
this Agreement and the Merger or the Board of Directors shall have
approved or recommended another Acquisition Proposal; or
(vi) the Anticipated Company Transactional Expenses exceed
$1,000,000.
7.2 Specific Performance and Other Remedies. The parties each acknowledge
that the rights of each party to consummate the transactions contemplated by
this Agreement are special, unique and of extraordinary character, and that, if
any party violates or fails or refuses to perform any covenant or agreement made
by it in this Agreement, the non-breaching party may be without an adequate
remedy at law. The parties each agree, therefore, that if either party violates
or fails or refuses to perform any covenant or agreement made by such party in
this Agreement, the non-breaching party or parties may, subject to the terms of
this Agreement seek remedies at law, including an action for damages arising
from such violation or failure, and in addition to any remedies at law for
damages or other relief, institute and prosecute an action in any court of
competent jurisdiction to enforce specific performance of such covenant or
agreement or seek any other equitable relief.
7.3 Effect of Termination and Abandonment. If the termination and
abandonment of this Agreement under Section 7.1, this Agreement shall become
void and have no effect, without any liability on the part of any party or its
directors, officers or stockholders except (i) as provided in the second
sentence of Section 5.1, and in Sections 5.3, 5.4, 5.11 and 5.12 and (ii) to the
extent that such termination results from the breach by any party hereto of any
material representation, warranty or covenant hereunder.
ARTICLE 8
MISCELLANEOUS
8.1 Waiver and Amendment. Any term or provision of this Agreement may be
waived in writing at any time by the party which is, or whose stockholders are,
entitled to the benefits thereof, and any term or provision of this Agreement
may be amended or supplemented at any time by action of the respective Boards of
Directors (or its authorized representative) of Parent or Company without action
of the shareholders, whether before or after the Shareholders' Meeting;
provided, however, that after approval of the shareholders of Company no such
amendment shall reduce the amount or change the form of the consideration to be
delivered to Company's shareholders as contemplated by this Agreement or
otherwise materially adversely affect the interests of such shareholders unless
such amendment is approved by Company's shareholders. No amendment to this
Agreement shall be effective unless it has been executed by Company, Parent and
Sub.
8.2 Non-Survival of Representations, Warranties and Agreements. Except for
the agreements contained in Sections 1.2, 1.3, 1.4, 1.5, 1.6, 5.12, 5.13 and
5.15 and Article 8, none of the representations, warranties and agreements of
Company, Parent or Sub in this Agreement, or in any instrument or certificate
delivered pursuant to this Agreement, shall survive the Merger nor shall their
respective stockholders, directors or officers have any liability to the other
parties hereto after the Effective Time on account of any breach of warranty or
failure or the incorrectness of any of the representations or warranties
contained herein or in any certificate or other instrument delivered pursuant to
this Agreement. The sole right and remedy arising from a misrepresentation or
breach of warranty, from the failure of any of the conditions of the Merger to
be met, or from the failure to perform any promise or discharge any obligation
in this Agreement shall be termination of this Agreement by the aggrieved party
and the remedies provided in Sections 5.4, 7.2 and 7.3.
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8.3 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
telecopied (if confirmed) or sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to Company:
Cruise America, Inc.
11 West Hampton Avenue
Mesa, Arizona 85210-5258
Attention: Mr. Randall S. Smalley, President
Telecopy No.: (602) 464-7302
With a copy to:
Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Mr. Kenneth C. Hoffman
Telecopy No.: (305) 579-0717
If to Parent or Sub:
Budget Group, Inc.
4225 Naperville Road
Lisle, Illinois 60532
Attention: Mr. Robert L. Aprati,
Executive Vice President, General Counsel and Secretary
Telecopy No.: (630) 955-7810
With a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Mr. C. William Baxley
Telecopy No.: (404) 572-5100
8.4 Descriptive Headings; Interpretation. The descriptive headings are for
convenience of reference only and shall not control or affect the meaning or
construction of any provision of this Agreement. When a reference is made in
this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available.
8.5 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement. This Agreement shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties, it
being understood that the parties need not sign the same counterpart.
8.6 Entire Agreement. This Agreement and the Confidentiality Agreements
contain the entire agreement between Parent, Sub and Company with respect to the
Merger, and supersede all prior arrangements or understandings with respect to
the subject matter hereof, including the Letter of Intent dated October 20,
1997. Except as otherwise contemplated in the covenants listed in Sections 5.13,
5.15 and 5.21 (which covenants shall be enforceable by the person or persons
affected thereby following the Effective Time), this Agreement is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder.
8.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Florida (without regard to any
applicable conflicts of Law provisions thereof).
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8.8 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in a mutually acceptable manner in order that
the transactions be consummated as originally contemplated to the fullest extent
possible.
8.9 Knowledge. As used in this Agreement, (i) the phrases "to the
knowledge of Company," "known to Company" and similar phrases shall mean the
knowledge of any of the executive officers of Company, and (ii) the phrases "to
the knowledge of Parent," "known to Parent" and similar phrases shall mean the
knowledge of any of the executive officers of Parent.
8.10 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, and any attempt to make any such assignment without such consent shall
be null and void. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered by its respective duly authorized officers, all as of
the date first above written.
BUDGET GROUP, INC.
By: /s/ SCOTT R. WHITE
------------------------------------
Name: Scott R. White
Title: Executive Vice President
CA ACQUISITION CORPORATION
By: /s/ SCOTT R. WHITE
------------------------------------
Name: Scott R. White
Title: President
CRUISE AMERICA, INC.
By: /s/ RANDALL SMALLEY
------------------------------------
Name: Randall Smalley
Title: President
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ANNEX B
FAIRNESS OPINION
[PHS&G LETTERHEAD]
November 25, 1997
The Board of Directors
CRUISE AMERICA, INC.
11 W. Hampton Avenue
Mesa, AZ 85210-5258
Gentlemen:
Cruise America, Inc. ("Cruise America" or the "Company") proposes to enter
into an Agreement and Plan of Merger (the "Agreement") with Budget Group, Inc.
("Budget") and CA Acquisition Corporation ("Sub"). Pursuant to the Agreement, at
the Effective Time (as defined in the Agreement), Sub will be merged with and
into the Company (the "Merger") and each outstanding share of Cruise America
Common Stock, par value $0.01 per share ("Cruise America Common Stock"), of the
Company will be converted solely into the right to receive 0.28073 shares (the
"Exchange Ratio") of Budget Class A Common Stock $0.01 par value per share
("Budget Common Stock") and cash in lieu of fractional shares, as determined in
accordance with the terms of the Agreement (the "Merger Consideration"). The
Exchange Ratio was based on Budget average Common Stock per share of $33.84
based on the 30 days prior to the Merger announcement on October 20, 1997 and
implies a value for the Cruise America Common Stock as of that date of $9.50 per
share. To the extent Budget Common Stock is higher or lower than $33.84 a share
when the Merger becomes effective, every $1 increase or decrease in Budget
Common Stock will translate into a $0.28073 increase or decrease in the value of
the Merger consideration. The Merger is intended to be a tax-free reorganization
within the meaning of Section 368(a) of the United States Internal Revenue Code
of 1986, as amended, and to be accounted for as a pooling of interests pursuant
to Opinion No. 16 of the Accounting Principles Board. The terms and conditions
of the Merger are more fully set forth in the Agreement. We note that the Merger
has not yet been consummated and that our opinion is as of the date hereof.
You have requested our opinion as to the fairness of the Merger
Consideration, from a financial point of view, to the shareholders of Cruise
America.
Peacock, Hislop, Staley & Given, Inc. ("PHS&G"), as part of its investment
banking business, is engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions,
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<PAGE> 114
The Board of Directors
CRUISE AMERICA, INC.
11 W. Hampton Avenue
Mesa, AZ 85210-5258
Page 2
negotiated underwritings, competitive bidding, secondary distribution of listed
and unlisted securities, private placements, and valuations for estate,
corporate and other purposes.
In conducting our investigation and analysis and in arriving at our opinion
herein, we have reviewed such information and taken into account such financial
and economic factors as we have deemed relevant under the circumstances. In that
connection, we have among other things: (i) reviewed certain internal
information, primarily financial in nature, including projections concerning the
business of operations of the Company and Budget furnished to us for purposes of
our analysis, as well as publicly available information, including, but not
limited to, the Company's and Budget's recent filings with the Securities and
Exchange Commission and equity analysis research reports prepared by various
investment banking firms; (ii) reviewed the draft Agreement in the form
presented to the Company's Board of Directors; (iii) compared the historical
market prices and trading activity of Cruise America Common Stock and the Budget
Common Stock with those of certain other publicly traded companies we deemed
relevant; (iv) compared the financial position and operating results of the
Company and Budget with those of other publicly traded companies we deemed
relevant; (v) compared the proposed financial terms of the Merger with the
financial terms of certain other business combination transactions that we
deemed relevant; and (vi) reviewed the potential pro forma effects of the Merger
on Budget. We have held discussions with members of the Company's and Budget's
respective senior management concerning the Company's and Budget's historical
and current financial condition and operating results, as well as the future
prospects of the Company and Budget, respectively. We have also considered other
information such as financial studies, analysis and investigations and
financial, economic and market criteria which we deemed relevant for the
preparation of this opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of all of the financial and other information that was publicly
available or provided to us by or on behalf of the Company and Budget, and have
not been engaged to independently verify any such information. We have assumed,
with your consent, (i) that all material assets and liabilities (contingent or
otherwise, known or unknown) of the Company and Budget are as set forth in the
Company's and Budget's respective financial statements, (ii) the Merger will be
accounted for as a pooling of interests pursuant to Opinion No. 16 of the
Accounting Principles Board and (iii) the Merger will be consummated in
accordance with the terms of the Agreement without any amendment thereto or
waiver by the Company or Budget of any condition to their respective
obligations. We have also assumed that the financial forecasts examined by us
were reasonably prepared on bases reflecting the best available estimates and
good faith judgments of the Company's and Budget's respective senior management
as to the future performance of the Company and Budget, respectively.
In conducting our review, we have not undertaken nor obtained an
independent evaluation or appraisal of any of the assets or liabilities,
contingent or otherwise, of the Company or Budget, nor have we made a physical
inspection of the properties or facilities of the Company or Budget. Our opinion
necessarily is based upon economic, monetary and market conditions as they exist
and can be evaluated on the date hereof, and does not predict or take into
account any changes which may occur, or information, which may become available,
after the date hereof. Furthermore, we express no opinion as to the price or
trading range at which the Company's or Budget's securities will trade following
the date hereof.
Our opinion has been prepared at the request and for the information of the
Board of Directors of the Company, and shall not be used for any other purpose
or disclosed to any other party without the prior written consent of PHS&G;
provided, however, that this letter may be reproduced in full in the Proxy
Statement-Prospectus to be provided to the shareholders of Cruise America Common
Stock in connection with the Merger.
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The Board of Directors
CRUISE AMERICA, INC.
11 W. Hampton Avenue
Mesa, AZ 85210-5258
Page 3
This opinion does not address the relative merits of the Merger and any
other potential transactions or business strategies considered by the Company's
Board of Directors, and does not constitute a recommendation to any shareholder
of the Company as to how any such shareholder should vote with respect to the
Merger. We have not been requested to, and did not: (i) participate in the
structuring or negotiating of the Merger and the Merger Agreement; or (ii)
solicit third party indications of interest in acquiring all or any part of
Cruise America. PHS&G will receive a fee for rendering this opinion. In the
past, we never provided investment banking services to the Company nor Budget,
and will earn no other fees, contingent or otherwise, in connection with this
Merger.
In the ordinary course of our business we may, from time to time, trade the
securities of the Company or Budget for our own account or the accounts of our
customers and, accordingly, may at any time hold long or short positions in such
securities.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Merger Consideration is fair, from a financial point of
view, to the shareholders of Cruise America.
Very truly yours,
PEACOCK, HISLOP, STALEY & GIVEN, INC.
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<PAGE> 116
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The following summary is qualified in its entirety by reference to the
complete statute, Certificate of Incorporation, Bylaws and agreement referred to
below.
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 interest 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
indemnify 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 Registrant filed herewith (the "Restated
Certificate of Incorporation") provides that no director shall be liable to the
Registrant 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 Registrant 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 Registrant's Bylaws provide indemnification of the Registrant's
directors and officers, both past and present, to the fullest extent permitted
by the DGCL, and allow the Registrant 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 Registrant's Bylaws will also authorize the Registrant to 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 Registrant would have the power to indemnify him against such liability
under the provisions of the Restated Certificate of Incorporation or Section 145
of the DGCL.
The Registrant has entered into indemnification agreements with each of its
directors and certain of its executive officers. The indemnification agreements
require the Registrant, 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.
II-1
<PAGE> 117
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1 -- Merger Agreement dated as of November 25, 1997, by and among
Registrant, CA Acquisition Corporation and Cruise America,
Inc. (included as Annex A to the Proxy Statement/Prospectus
which forms a part of this Registration Statement).
2.2 -- Common Stock Purchase Agreement, dated as of January 13,
1997, between John J. Nevin and the Registrant (incorporated
by reference to Exhibit 2.7 to the Registrant's Registration
Statement on Form S-1, File No. 333-21691, dated February
12, 1997).
2.3 -- Budget Stock Purchase Agreement, dated as of January 13,
1997, between Budget Rent-a-Car Corporation and Team Rental
Group, Inc. (currently known as Budget Group, Inc.)
(incorporated by reference to Exhibit 2.8 to the
Registrant's Registration Statement on Form S-1, File No.
333-21691, dated February 12, 1997).
2.4 -- Preferred Stock Purchase Agreement, dated as of January 13,
1997, between Ford Motor Company and the Registrant
(incorporated by reference to Exhibit 2.9 to the
Registrant's Registration Statement on Form S-1, File No.
333-21691, dated February 12, 1997).
2.5 -- Preferred Stockholders Agreement between Ford Motor Company
and the Registrant (incorporated by reference to Exhibit
2.10 to the Registrant's Registration Statement on Form S-1,
File No. 333-34799, dated September 26, 1997).
3.1 -- Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 to
Registrant's Registration Statement on Form S-1, File No.
33-78274, dated April 28, 1994).
3.2 -- Amendment to Amended and Restated Certificate of
Incorporation of the Registrant (incorporated by reference
to Exhibit 3.2 to Amendment No. 2 to the Registrant's
Registration Statement on Form S-1, File No. 333-4507, dated
June 28, 1996).
3.3 -- Amendment to Amended and Restated Certificate of
Incorporation of the Registrant (incorporated by reference
to Exhibit 3.3 to the Registrant's Registration Statement on
Form S-1, File No. 333-34799, dated September 26, 1997).
3.4 -- Registrant's Series A Preferred Stock Certificate of
Designations (incorporated by reference to Exhibit 3.4 to
the Registrant's Registration Statement on Form S-1, File
No. 333-34799, dated September 26, 1997).
3.5 -- By-Laws of the Registrant (incorporated by reference to
Exhibit 3.2 to the Registrant'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 Registrant's Registration Statement on
Form S-1, File No. 333-34799, dated September 26, 1997).
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 Registrant'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
Registrant'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
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
</TABLE>
II-2
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
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
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
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, as Trustee (incorporated by reference to Exhibit
4.7 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
4.8 -- Registration Rights Agreement, dated as of August 25, 1994,
among the Registrant, Brian Britton, Jeffrey Congdon,
Richard Hinkle, John Kennedy, Sanford Miller and Richard
Sapia (incorporated by reference to Exhibit 10.23 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994).
4.9 -- First Amendment to Registration Rights Agreement, dated as
of November 1, 1994, among the Registrant, Brian Britton,
Jeffrey Congdon, Richard Hinkle, John Kennedy, Sanford
Miller and Richard Sapia (incorporated by reference to
Exhibit 10.24 to the Registrant'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 Registrant 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 Registrant's Annual Report on Form
10-K for the year ended December 31, 1994).
4.11 -- 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
4.12 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
4.12 -- Registration Rights Agreement, dated as of December 1, 1996,
between Team Rental Group, Inc. and the holders of the
Convertible Subordinated Notes (incorporated by reference to
Exhibit 4.12 to the Registrant's Registration Statement on
Form S-1, File No. 333-21691, dated February 12, 1997).
4.13 -- 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 Registrant, issued to Budget Rent-a-Car
Corporation (incorporated by reference to Exhibit 10.26 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994).
4.14 -- NationsBank Warrant dated as of April 26, 1996 (incorporated
by reference to Exhibit 4.14 to the Registrant's
Registration Statement on Form S-1, File No. 333-21691,
dated February 12, 1997).
4.15 -- Amended and Restated Base Indenture dated as of December 1,
1996 among Team Fleet Financing Corporation, as Issuer, Team
Rental Group, Inc., as Servicer and Team Interestholder, and
Bankers Trust Registrant, as Trustee (incorporated by
reference to Exhibit 4.15 to the Registrant's Registration
Statement on Form S-1, File No. 333-21691, dated February
12, 1997).
4.16 -- Series 1996-1 Supplement to the Amended and Restated Base
Indenture dated as of December 1, 1996 among Team Fleet
Financing Corporation, as Issuer, Team Rental Group, Inc.,
as Servicer and Team Interestholder, and Bankers Trust
Company, as Trustee (incorporated by reference to Exhibit
4.16 to the Registrant's Registration Statement on Form S-1,
File No. 333-21691, dated February 12, 1997).
</TABLE>
II-3
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
4.17 -- Amended and Restated Master Motor Vehicle Lease Agreement
dated as of December 1, 1996 among Team Fleet Financing
Corporation, as Lessor, Team Rental Group, Inc., as
Guarantor, and certain subsidiaries of Team Rental Group,
Inc., as lessees (incorporated by reference to Exhibit 4.17
to the Registrant's Registration Statement on Form S-1, File
No. 333-21691, dated February 12, 1997).
4.18 -- Motor Vehicle Lease Agreement Series 1996-1 dated as of
December 1, 1996 among Team Fleet Financing Corporation, as
Lessor, Team Rental Group, Inc., as Guarantor, and certain
subsidiaries of Team Rental Group, Inc., as lessees
(incorporated by reference to Exhibit 4.18 to the
Registrant's Registration Statement on Form S-1, File No.
333-21691, dated February 12, 1997).
4.19 -- Registration Rights Agreement, dated as of November 6, 1997,
among the Registrant and the Stockholders of Budget
Rent-a-Car of St. Louis, Inc. (incorporated by reference to
Exhibit 4.7 of the Registrant's Registration Statement on
Form S-3, File No. 333-41093, dated November 26, 1997).
*5.1 -- Opinion of King & Spalding regarding the legality of the
securities being registered.
*8.1 -- Opinion of King & Spalding regarding certain tax matters.
10.1 -- 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 Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.2 -- 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
Registrant's Registration Statement on Form S-1, File No.
33-78274, dated August 12, 1994).
10.3 -- Lease Agreement dated June 1, 1994 between Miller and
Hinkle, a Florida general partnership, and Capital City
Leasing, Inc. (Chesterfield County, Virginia) (incorporated
by reference to Exhibit 10.25 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-1, File No.
333-4507, dated June 13, 1996).
10.4 -- 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 Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.5 -- 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
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.6 -- Supply Agreement among Ford Motor Company, Team Rental
Group, Inc. and Budget Rent-a-Car Corporation (incorporated
by reference to Exhibit 10.6 to the Registrant's
Registration Statement on Form S-1, File No. 333-21691,
dated February 12, 1997).
10.7 -- Advertising Agreement between Ford Motor Company and Budget
Rent-a-Car Corporation (incorporated by reference to Exhibit
10.7 to the Registrant's Registration Statement on Form S-1,
File No. 333-21691, dated February 12, 1997).
10.8 -- 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 Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
</TABLE>
II-4
<PAGE> 120
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.9 -- First Amendment to BankOne Credit Agreement dated November
1, 1995 (incorporated by reference to Exhibit 10.43 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.10 -- Second Amendment to BankOne Credit Agreement dated February
2, 1996 (incorporated by reference to Exhibit 10.44 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.11 -- Form of World Omni, Inc. Term Note (incorporated by
reference to Exhibit 10.45 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.12 -- Promissory Note, dated October 20, 1995, 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 Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.13 -- Promissory Note, dated February 27, 1996, from the
Registrant to Katzin Investments L.C. in the aggregate
principal amount of $10,000,000 (incorporated by reference
to Exhibit 10.47 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995).
10.14 -- Term Note dated February 27, 1996 from NationsBank, N.A.
(South) to the Registrant (incorporated by reference to
Exhibit 10.40 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.15 -- Amendment No. 1 to Term Note dated April 2, 1996 from
NationsBank, N.A. (South) to the Registrant (incorporated by
reference to Exhibit 10.2 to Form 10-Q for the quarter ended
March 31, 1996).
10.16 -- Amendment No. 2 to Term Note dated May 27, 1996 from
NationsBank, N.A. (South) to the Registrant (incorporated by
reference to Exhibit 10.47 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-1, File No.
333-4507, dated June 13, 1996).
10.17 -- 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
Registrant's Form 10-Q for the quarter ended March 31,
1996).
10.18 -- Amendment and Waiver No. 1 to the 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 Registrant's Form 10-Q
for the quarter ended March 31, 1996).
10.19 -- Revolving Credit Agreement dated as of May 31, 1996 among
Team Fleet Services Corporation, NationsBank, N.A. (South)
and certain Lenders (incorporated by reference to Exhibit
10.50 to Amendment No. 1 to the Registrant's Registration
Statement on Form S-1, File No. 333-4507, dated June 13,
1996).
10.20 -- Subordinated Notes Purchase Agreement, dated as of December
1, 1996, by and between the Registrant and the investors
listed therein (incorporated by reference to Exhibit 10.20
of the Registrant's Registration Statement on Form S-1, File
No. 333-21691, dated February 12, 1997).
10.21 -- 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 Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.22 -- 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 Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
</TABLE>
II-5
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.23 -- 1994 Incentive Stock Option Plan (incorporated by reference
to Exhibit 10.27 to the Registrant's Registration Statement
on Form S-1, File No. 33-78274, dated April 28, 1994).
10.24 -- Amendment No. 1 to 1994 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.54 to Amendment No.
2 to the Registrant's Registration Statement on Form S-1,
File No. 333-4507, dated June 28, 1996).
10.25 -- 1994 Director's Plan (incorporated by reference to Exhibit
10.28 to the Registrant's Registration Statement on Form
S-1, File No. 33-78274, dated April 28, 1994).
10.26 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and Sanford Miller (incorporated by reference to
Exhibit 10.29 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.27 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and John Kennedy (incorporated by reference to
Exhibit 10.30 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.28 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and Jeffrey Congdon (incorporated by reference to
Exhibit 10.31 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.29 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and Ronald Agronin (incorporated by reference to
Exhibit 10.32 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.30 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and Stephen Weber (incorporated by reference to
Exhibit 10.33 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
16.1 -- Letter re: Change in Certifying Accountant (incorporated by
reference to Exhibit 16 to the Registrant's Current Report
on Form 8-K dated November 26, 1996, as amended).
*21.1 -- Subsidiaries of the Registrant.
*23.1 -- Consent of KPMG Peat Marwick LLP.
*23.2 -- Consent of Arthur Andersen LLP.
*23.3 -- Consent of Deloitte & Touche LLP.
*23.4 -- Consent of KPMG Peat Marwick LLP.
*23.5 -- Consent of King & Spalding (included as part of its opinions
in Exhibits 5.1 and 8.1).
*23.6 -- Consent of Peacock, Hislop, Staley & Given, Inc.
24.1 -- Power of attorney of the officers and directors of
Registrant signing this Registration Statement (appears at
page II-8).
99.1 -- Opinion of Peacock, Hislop, Staley & Given, Inc. (included
as Annex B to the Proxy Statement).
*99.2 -- Form of Proxy Card.
</TABLE>
- ---------------
* Filed Herewith
b. Financial Statement Schedules.
None.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's
II-6
<PAGE> 122
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement 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.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant 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 registrant 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 Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE> 123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Lisle, State of Illinois,
on December 16, 1997.
Budget Group, Inc.
By: /s/ ROBERT L. APRATI
------------------------------------
Robert L. Aprati
Executive Vice President
and General Counsel
We, the undersigned directors and officers of Budget Group, Inc. do hereby
constitute and appoint Robert L. Aprati and Scott R. White, and each or any of
them, our true and lawful attorneys-in-fact and agents, to do any and all acts
and things in our names and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our name in the
capacities indicated below, which said attorneys and agents, or any of them, may
deem necessary or advisable to enable said Corporation to comply with the
Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this registration
statement, or any registration statement for this offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
including specifically, but without limitation, power and authority to sign for
us or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto; and we do hereby ratify
and confirm all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on December 16, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ SANFORD MILLER Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer (Principal Executive Officer) and
Sanford Miller Director
/s/ JOHN KENNEDY Vice Chairman and Director
- -----------------------------------------------------
John Kennedy
/s/ JEFFREY CONGDON Vice Chairman and Director
- -----------------------------------------------------
Jeffrey Congdon
/s/ MICHAEL CLAUER Chief Financial Officer (Principal Financial
- ----------------------------------------------------- Officer)
Michael Clauer
/s/ THOMAS KRAM Vice President -- Controller (Principal
- ----------------------------------------------------- Accounting Officer)
Thomas Kram
/s/ RONALD D. AGRONIN Director
- -----------------------------------------------------
Ronald D. Agronin
/s/ STEPHEN L. WEBER Director
- -----------------------------------------------------
Stephen L. Weber
</TABLE>
II-8
<PAGE> 124
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
Director
- -----------------------------------------------------
Jeffrey Mirkin
Director
- -----------------------------------------------------
Alan Liker
/s/ JAMES F. CALVANO Director
- -----------------------------------------------------
James F. Calvano
/s/ MARTIN P. GREGOR Director
- -----------------------------------------------------
Martin P. Gregor
</TABLE>
II-9
<PAGE> 125
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1 -- Merger Agreement dated as of November 25, 1997, by and among
Registrant, CA Acquisition Corporation and Cruise America,
Inc. (included as Annex A of the Proxy Statement/Prospectus
which forms a part of this Registration Statement).
2.2 -- Common Stock Purchase Agreement, dated as of January 13,
1997, between John J. Nevin and the Registrant (incorporated
by reference to Exhibit 2.7 to the Registrant's Registration
Statement on Form S-1, File No. 333-21691, dated February
12, 1997).
2.3 -- Budget Stock Purchase Agreement, dated as of January 13,
1997, between Budget Rent-a-Car Corporation and Team Rental
Group, Inc. (currently known as Budget Group, Inc.)
(incorporated by reference to Exhibit 2.8 to the
Registrant's Registration Statement on Form S-1, File No.
333-21691, dated February 12, 1997).
2.4 -- Preferred Stock Purchase Agreement, dated as of January 13,
1997, between Ford Motor Company and the Registrant
(incorporated by reference to Exhibit 2.9 to the
Registrant's Registration Statement on Form S-1, File No.
333-21691, dated February 12, 1997).
2.5 -- Preferred Stockholders Agreement between Ford Motor Company
and the Registrant (incorporated by reference to Exhibit
2.10 to the Registrant's Registration Statement on Form S-1,
File No. 333-34799, dated September 26, 1997).
3.1 -- Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 to
Registrant's Registration Statement on Form S-1, File No.
33-78274, dated April 28, 1994).
3.2 -- Amendment to Amended and Restated Certificate of
Incorporation of the Registrant (incorporated by reference
to Exhibit 3.2 to Amendment No. 2 to the Registrant's
Registration Statement on Form S-1, File No. 333-4507, dated
June 28, 1996).
3.3 -- Amendment to Amended and Restated Certificate of
Incorporation of the Registrant (incorporated by reference
to Exhibit 3.3 to the Registrant's Registration Statement on
Form S-1, File No. 333-34799, dated September 26, 1997).
3.4 -- Registrant's Series A Preferred Stock Certificate of
Designations (incorporated by reference to Exhibit 3.4 to
the Registrant's Registration Statement on Form S-1, File
No. 333-34799, dated September 26, 1997).
3.5 -- By-Laws of the Registrant (incorporated by reference to
Exhibit 3.2 to the Registrant'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 Registrant's Registration Statement on
Form S-1, File No. 333-34799, dated September 26, 1997).
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 Registrant'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
Registrant'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
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
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
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
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, as Trustee (incorporated by reference to Exhibit
4.7 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
4.8 -- Registration Rights Agreement, dated as of August 25, 1994,
among the Registrant, Brian Britton, Jeffrey Congdon,
Richard Hinkle, John Kennedy, Sanford Miller and Richard
Sapia (incorporated by reference to Exhibit 10.23 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994).
4.9 -- First Amendment to Registration Rights Agreement, dated as
of November 1, 1994, among the Registrant, Brian Britton,
Jeffrey Congdon, Richard Hinkle, John Kennedy, Sanford
Miller and Richard Sapia (incorporated by reference to
Exhibit 10.24 to the Registrant'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 Registrant 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 Registrant's Annual Report on Form
10-K for the year ended December 31, 1994).
4.11 -- 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
4.12 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
4.12 -- Registration Rights Agreement, dated as of December 1, 1996,
between Team Rental Group, Inc. and the holders of the
Convertible Subordinated Notes (incorporated by reference to
Exhibit 4.12 to the Registrant's Registration Statement on
Form S-1, File No. 333-21691, dated February 12, 1997).
4.13 -- 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 Registrant, issued to Budget Rent-a-Car
Corporation (incorporated by reference to Exhibit 10.26 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994).
4.14 -- NationsBank Warrant dated as of April 26, 1996 (incorporated
by reference to Exhibit 4.14 to the Registrant's
Registration Statement on Form S-1, File No. 333-21691,
dated February 12, 1997).
4.15 -- Amended and Restated Base Indenture dated as of December 1,
1996 among Team Fleet Financing Corporation, as Issuer, Team
Rental Group, Inc., as Servicer and Team Interestholder, and
Bankers Trust Registrant, as Trustee (incorporated by
reference to Exhibit 4.15 to the Registrant's Registration
Statement on Form S-1, File No. 333-21691, dated February
12, 1997).
4.16 -- Series 1996-1 Supplement to the Amended and Restated Base
Indenture dated as of December 1, 1996 among Team Fleet
Financing Corporation, as Issuer, Team Rental Group, Inc.,
as Servicer and Team Interestholder, and Bankers Trust
Company, as Trustee (incorporated by reference to Exhibit
4.16 to the Registrant's Registration Statement on Form S-1,
File No. 333-21691, dated February 12, 1997).
</TABLE>
<PAGE> 127
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
4.17 -- Amended and Restated Master Motor Vehicle Lease Agreement
dated as of December 1, 1996 among Team Fleet Financing
Corporation, as Lessor, Team Rental Group, Inc., as
Guarantor, and certain subsidiaries of Team Rental Group,
Inc., as lessees (incorporated by reference to Exhibit 4.17
to the Registrant's Registration Statement on Form S-1, File
No. 333-21 691, dated February 12, 1997).
4.18 -- Motor Vehicle Lease Agreement Series 1996-1 dated as of
December 1, 1996 among Team Fleet Financing Corporation, as
Lessor, Team Rental Group, Inc., as Guarantor, and certain
subsidiaries of Team Rental Group, Inc., as lessees
(incorporated by reference to Exhibit 4.18 to the
Registrant's Registration Statement on Form S-1, File No.
333-21691, dated February 12, 1997).
4.19 -- Registration Rights Agreement, dated as of November 6, 1997,
among the Registrant and the Stockholders of Budget
Rent-a-Car of St. Louis, Inc. (incorporated by reference to
Exhibit 4.7 of the Registrant's Registration Statement on
Form S-3, File No. 333-41093, dated November 26, 1997).
*5.1 -- Opinion of King & Spalding regarding the legality of the
securities being registered.
*8.1 -- Opinion of King & Spalding regarding certain tax matters.
10.1 -- 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 Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.2 -- 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
Registrant's Registration Statement on Form S-1, File No.
33-78274, dated August 12, 1994).
10.3 -- Lease Agreement dated June 1, 1994 between Miller and
Hinkle, a Florida general partnership, and Capital City
Leasing, Inc. (Chesterfield County, Virginia) (incorporated
by reference to Exhibit 10.25 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-1, File No.
333-4507, dated June 13, 1996).
10.4 -- 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 Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.5 -- 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
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.6 -- Supply Agreement among Ford Motor Company, Team Rental
Group, Inc. and Budget Rent-a-Car Corporation (incorporated
by reference to Exhibit 10.6 to the Registrant's
Registration Statement on Form S-1, File No. 333-21691,
dated February 12, 1997).
10.7 -- Advertising Agreement between Ford Motor Company and Budget
Rent-a-Car Corporation (incorporated by reference to Exhibit
10.7 to the Registrant's Registration Statement on Form S-1,
File No. 333-21691, dated February 12, 1997).
10.8 -- 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 Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.9 -- First Amendment to BankOne Credit Agreement dated November
1, 1995 (incorporated by reference to Exhibit 10.43 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.10 -- Second Amendment to BankOne Credit Agreement dated February
2, 1996 (incorporated by reference to Exhibit 10.44 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.11 -- Form of World Omni, Inc. Term Note (incorporated by
reference to Exhibit 10.45 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.12 -- Promissory Note, dated October 20, 1995, 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 Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.13 -- Promissory Note, dated February 27, 1996, from the
Registrant to Katzin Investments L.C. in the aggregate
principal amount of $10,000,000 (incorporated by reference
to Exhibit 10.47 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995).
10.14 -- Term Note dated February 27, 1996 from NationsBank, N.A.
(South) to the Registrant (incorporated by reference to
Exhibit 10.40 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.15 -- Amendment No. 1 to Term Note dated April 2, 1996 from
NationsBank, N.A. (South) to the Registrant (incorporated by
reference to Exhibit 10.2 to Form 10-Q for the quarter ended
March 31, 1996).
10.16 -- Amendment No. 2 to Term Note dated May 27, 1996 from
NationsBank, N.A. (South) to the Registrant (incorporated by
reference to Exhibit 10.47 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-1, File No.
333-4507, dated June 13, 1996).
10.17 -- 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
Registrant's Form 10-Q for the quarter ended March 31,
1996).
10.18 -- Amendment and Waiver No. 1 to the 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 Registrant's Form 10-Q
for the quarter ended March 31, 1996).
10.19 -- Revolving Credit Agreement dated as of May 31, 1996 among
Team Fleet Services Corporation, NationsBank, N.A. (South
and certain Lenders (incorporated by reference to Exhibit
10.50 to Amendment No. 1 to the Registrant's Registration
Statement on Form S-1, File No. 333-4507, dated June 13,
1996).
10.20 -- Subordinated Notes Purchase Agreement, dated as of December
1, 1996, by and between the Registrant and the investors
listed therein (incorporated by reference to Exhibit 10.20
of the Registrant's Registration Statement on Form S-1, File
No. 333-21691, dated February 12, 1997).
10.21 -- 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 Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.22 -- 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 Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.23 -- 1994 Incentive Stock Option Plan (incorporated by reference
to Exhibit 10.27 to the Registrant's Registration Statement
on Form S-1, File No. 33-78274, dated April 28, 1994).
10.24 -- Amendment No. 1 to 1994 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.54 to Amendment No.
2 to the Registrant's Registration Statement on Form S-1,
File No. 333-4507, dated June 28, 1996).
10.25 -- 1994 Director's Plan (incorporated by reference to Exhibit
10.28 to the Registrant's Registration Statement on Form
S-1, File No. 33-78274, dated April 28, 1994).
10.26 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and Sanford Miller (incorporated by reference to
Exhibit 10.29 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.27 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and John Kennedy (incorporated by reference to
Exhibit 10.30 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.28 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and Jeffrey Congdon (incorporated by reference to
Exhibit 10.31 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.29 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and Ronald Agronin (incorporated by reference to
Exhibit 10.32 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.30 -- Indemnification Agreement dated April 25, 1994 between the
Registrant and Stephen Weber (incorporated by reference to
Exhibit 10.33 to the Registrant's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
16.1 -- Letter re: Change in Certifying Accountant (incorporated by
reference to Exhibit 16 to the Registrant's Current Report
on Form 8-K dated November 26, 1996, as amended).
*21.1 -- Subsidiaries of the Registrant.
*23.1 -- Consent of KPMG Peat Marwick LLP.
*23.2 -- Consent of Arthur Andersen LLP.
*23.3 -- Consent of Deloitte & Touche LLP.
*23.4 -- Consent of KPMG Peat Marwick LLP.
*23.5 -- Consent of King & Spalding (included as part of its opinions
in Exhibits 5.1 and 8.1).
*23.6 -- Consent of Peacock, Hislop, Staley & Given, Inc.
24.1 -- Power of attorney of the officers and directors of
Registrant signing this Registration Statement (appears at
page II-8).
99.1 -- Opinion of Peacock, Hislop, Staley & Given, Inc. (included
as Annex B to the Proxy Statement).
*99.2 -- Form of Proxy Card.
</TABLE>
- ---------------
* Filed Herewith.
<PAGE> 1
EXHIBIT 5.1
KING & SPALDING
191 PEACHTREE STREET
ATLANTA, GEORGIA 30303
December 16, 1997
Budget Group, Inc.
125 Basin Street, Suite 210
Daytona Beach, Florida 32114
Re: Budget Group, Inc. -- Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel for Budget Group, Inc., a Delaware corporation
(the "Company") in connection with the preparation and filing of a Registration
Statement on Form S-4 (the "Registration Statement") filed on the date hereof
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, relating to the merger (the "Merger") of CA Acquisition Corporation, a
Florida corporation ("Sub"), with and into Cruise America, Inc., a Florida
corporation and wholly owned subsidiary of the Company ("Cruise America"), as
set forth in the Proxy Statement/Prospectus contained in the Registration
Statement and in accordance with the Merger Agreement (the "Merger Agreement"),
dated as of November 25, 1997, among the Company, Sub and Cruise America,
attached as Annex A to the Proxy Statement/Prospectus.
In our capacity as such counsel, we have reviewed the Registration
Statement and the Merger Agreement. We also have reviewed such matters of law
and examined original, certified, conformed or photostatic copies of such other
documents, records, agreements and certificates as in our judgment are necessary
or appropriate to form the basis for the opinions hereinafter set forth. In all
such examinations, we have assumed the genuineness of signatures on original
documents and the conformity to such original documents of all copies submitted
to us as certified, conformed or photographic copies, and as to certificates of
public officials, we have assumed the same to have been properly given and to be
accurate. As to matters of fact material to this opinion, we have relied upon
statements and representations of representatives of the Company and of public
officials and have assumed the same to have been properly given and to be
accurate.
This opinion is limited in all respects to the federal laws of the United
States and the General Corporation Law of the State of Delaware, and no opinion
is expressed with respect to the laws of any other jurisdiction or any effect
which such laws may have on the opinions expressed herein. This opinion is
limited to the matters stated herein, and no opinion is implied or may be
inferred beyond the matters expressly stated herein.
Based upon and subject to the foregoing, we are of the opinion that the
shares of Class A Common Stock, $.01 par value per share, of the Company to be
issued in connection with the Merger have been duly authorized and, when issued
in accordance with the terms of the Merger Agreement, will be validly issued,
fully paid and nonassessable.
This opinion is given as of the date hereof, and we assume no obligation to
advise you after the date hereof of facts or circumstances that come to our
attention or changes in law that occur which could affect the opinions contained
herein. This letter is being rendered solely for the benefit of the Company in
connection with the matters addressed herein. This opinion may not be furnished
to or relied upon by any person or entity for any purpose without prior written
consent.
<PAGE> 2
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Proxy Statement/Prospectus that is included in the Registration
Statement.
Very truly yours,
/s/ King & Spalding
------------------
<PAGE> 1
EXHIBIT 8.1
December 16, 1997
Budget Group, Inc.
125 Basin Street, Suite 210
Daytona Beach, Florida 32114
Cruise America, Inc.
11 West Hampton Avenue
Mesa, Arizona 85210-5258
Re: Federal Income Tax Consequences of Merger of CA Acquisition
Corporation, a Direct or Indirect Wholly Owned Subsidiary of
Budget Group, Inc., with and into Cruise America, Inc.
Ladies and Gentlemen:
We have acted as counsel to Budget Group, Inc. ("Budget") in
connection with the merger (the "Merger") of CA Acquisition Corporation ("Sub"),
a direct or indirect wholly owned subsidiary of Budget, with and into Cruise
America, Inc. ("Cruise America"), pursuant to the Plan and Agreement of Merger
dated as of November 25, 1997 (the "Agreement") by and among Budget, Sub, and
Cruise America. You have requested our opinion, in our capacity as counsel to
Budget, regarding certain of the federal income tax consequences of the Merger.
We understand that our opinion will be referred to in the Proxy
Statement/Prospectus that forms part of the Registration Statement on Form S-4
filed with the Securities and Exchange Commission in connection with the Merger.
We hereby consent to such use of our opinion.
All capitalized terms used herein without definition have the
respective meanings specified in the Agreement.
INFORMATION RELIED ON
In rendering the opinion expressed herein, we have examined such
documents as we have deemed appropriate, including the Agreement and the Proxy
Statement/Prospectus. In our examination of documents, we have assumed, with
your consent, that all documents submitted to us as photocopies or telecopies
faithfully reproduce the originals thereof, that such originals are authentic,
that all such documents have been or will be duly executed to the extent
required, and that all statements set forth in such documents are accurate. We
also have obtained such additional information and representations as we have
deemed relevant and necessary. However, we have not yet obtained written
certificates from Budget, Cruise America or any stockholders of Cruise America
to verify certain facts that we have assumed in rendering this opinion. Before
rendering our opinion
<PAGE> 2
Budget Group, Inc.
Cruise America, Inc.
December 16, 1997
Page 2
in connection with the closing of the Merger, we intend to obtain appropriate
written certificates to confirm certain material facts that we have assumed
herein.
In view of the foregoing, we have assumed that the following statements
are true on the date hereof and will be true at the time of the Merger:
(1) The Merger will be consummated in compliance with the
material terms of the Agreement and none of the material terms and conditions
therein have been waived or modified and neither Budget nor Cruise America has
any plan or intention to waive or modify any such material term or condition.
(2) The fair market value of the Budget Common Stock and other
consideration received by each Cruise America stockholder will be approximately
equal to the fair market value of the Cruise America Common Stock surrendered by
such stockholder in the Merger.
(3) There is no plan or intention by the stockholders of Cruise
America who own five percent or more of the Cruise America Common Stock, and to
the best of the knowledge of the management of Cruise America, there is no plan
or intention on the part of the remaining stockholders of Cruise America, to
sell, exchange, or otherwise dispose of a number of shares of Budget Common
Stock received in the Merger that would reduce the Cruise America stockholders'
ownership of Budget Common Stock to a number of shares having a value, as of the
date of the Merger, of less than 50 percent of the value of all of the formerly
outstanding Cruise America Common Stock as of the same date. For purposes of
this representation, shares of Cruise America Common Stock exchanged for cash or
other property, surrendered by dissenters, or exchanged for cash in lieu of
fractional shares of Budget Common Stock will be treated as outstanding Cruise
America Common Stock on the date of the Merger. Moreover, shares of Cruise
America Common Stock and shares of Budget Common Stock held by Cruise America
stockholders and otherwise sold, redeemed, or disposed of prior or subsequent to
the Merger will be considered in making this representation.
(4) Following the Merger, Cruise America will hold at least 90
percent of the fair market value of its net assets and at least 70 percent of
the fair market value of its gross assets and at least 90 percent of the fair
market value of Sub's net assets and at least 70 percent of the fair market
value of Sub's gross assets held immediately prior to the Merger. For purposes
of this representation, amounts paid by Cruise America or Sub to dissenters,
amounts paid by Cruise America or Sub to stockholders who receive cash or other
property, amounts used by Cruise America or Sub to pay reorganization expenses,
and all redemptions and distributions (except for regular, normal dividends)
made by Cruise America or Sub will be included as assets of Cruise America or
Sub, respectively, held immediately prior to the Merger.
<PAGE> 3
Budget Group, Inc.
Cruise America, Inc.
December 16, 1997
Page 3
(5) Prior to the Merger, all of the outstanding shares of stock
of Sub will be owned solely by Budget or will be owned solely by Budget Rent a
Car Corporation ("BRACC"), a corporation all of the outstanding shares of stock
of which are and will be owned solely by Budget.
(6) Cruise America has no plan or intention to issue additional
shares of its stock that would result in Budget (or BRACC) acquiring or owning
after the Merger less than 80 percent of the total combined voting power of all
classes of Cruise America stock entitled to vote and at least 80 percent of the
total number of shares of all other classes of Cruise America stock.
(7) Neither Budget nor BRACC has any plan or intention to cause
Cruise America to issue additional shares of Cruise America stock that would
result in Budget or BRACC owning after the Merger less than 80 percent of the
total combined voting power of all classes of Cruise America stock entitled to
vote and at least 80 percent of the total number of shares of all other classes
of Cruise America stock.
(8) Neither Budget nor BRACC has any plan or intention to
reacquire any of the shares of Budget Common Stock issued in the Merger.
(9) Neither Budget nor BRACC has any plan or intention to
liquidate Cruise America; to merge Cruise America with or into another
corporation; to sell or otherwise dispose of any of the Cruise America Common
Stock, except for transfers of stock to corporations controlled by Budget or
BRACC; or to cause Cruise America to sell or otherwise dispose of any of its
assets or any of the assets acquired from Sub, except for dispositions made in
the ordinary course of business.
(10) Sub will have no liabilities at the time of the Merger, and
will not transfer to Cruise America any assets subject to liabilities in the
transaction.
(11) Following the Merger, Cruise America will continue its
historic business or use a significant portion of its historic business assets
in a business.
(12) Budget, Sub, BRACC, Cruise America, and the stockholders of
Cruise America will pay their respective expenses, if any, incurred in
connection with the Merger.
(13) There is no intercorporate indebtedness existing between
Budget and Cruise America or between Sub and Cruise America that was or will be
issued, acquired, or settled at a discount.
<PAGE> 4
Budget Group, Inc.
Cruise America, Inc.
December 16, 1997
Page 4
(14) In the Merger, Budget (or BRACC) will acquire shares of
Cruise America Common Stock representing at least 80 percent of the total
combined voting power of all classes of Cruise America stock entitled to vote
and at least 80 percent of the total number of shares of all other classes of
Cruise America stock, solely in exchange for voting stock of Budget. For
purposes of this representation, shares of Cruise America Common Stock exchanged
for cash or other property originating with Budget (or BRACC) will be treated as
outstanding Cruise America Common Stock on the date of the Merger.
(15) At the time of the Merger, Cruise America will not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire stock in Cruise America that,
if exercised or converted, would affect Budget's (or BRACC's) acquisition or
retention of Cruise America Common Stock representing at least 80 percent of the
total combined voting power of all classes of Cruise America stock entitled to
vote and at least 80 percent of the total number of shares of all other classes
of Cruise America stock.
(16) Neither Budget nor any subsidiary of Budget owns, directly
or indirectly, nor has any such corporation owned during the past five years,
directly or indirectly, any capital stock of Cruise America.
(17) None of Cruise America, Budget, Sub or BRACC is a regulated
investment company, a real estate investment trust, or a corporation 50 percent
or more of the value of whose total assets (excluding cash, cash items,
receivables and U.S. government securities) are stock or securities and 80
percent or more of the value of whose total assets are assets held for
investment. For purposes of the 50 percent and 80 percent determinations under
the preceding sentence, stock and securities in any subsidiary corporation shall
be disregarded, and the parent corporation shall be deemed to own its ratable
share of the subsidiary's assets. A corporation shall be considered a subsidiary
for purposes of this paragraph if the parent owns 50 percent or more of the
combined voting power of all classes of stock entitled to vote, or 50 percent or
more of the total value of shares of all classes of stock outstanding.
(18) On the date of the Merger, the fair market value of the
assets of Cruise America will exceed the sum of its liabilities, plus the amount
of liabilities, if any, to which the assets are subject.
(19) Cruise America is not under the jurisdiction of a court in
a case under Title 11 of the United States Code or a receivership, foreclosure,
or similar proceeding in a federal or state court.
<PAGE> 5
Budget Group, Inc.
Cruise America, Inc.
December 16, 1997
Page 5
(20) None of the compensation received by any
stockholder-employees of Cruise America in contemplation of or as a result of
the Merger will be separate consideration for, or allocable to, any of their
shares of Cruise America Common Stock; none of the shares of Budget Common Stock
received by any stockholder-employees of Cruise America in exchange for Cruise
America Common Stock in the Merger will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
stockholder-employees pursuant to the Merger will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
(21) The payment of cash in lieu of fractional shares of Budget
Common Stock is solely for the purpose of avoiding the expense and inconvenience
to Budget of issuing fractional shares and does not represent separately
bargained-for consideration. The total cash consideration that will be paid in
the Merger to the Cruise America stockholders instead of issuing fractional
shares of Budget Common Stock will not exceed one percent of the total
consideration that will be issued in the Merger to the Cruise America
stockholders in exchange for their shares of Cruise America Common Stock. The
fractional share interests of each Cruise America stockholder will be aggregated
and no Cruise America stockholder will receive cash in an amount equal to or
greater than the value of one full share of Budget Common Stock.
(22) Budget (or BRACC) will acquire Cruise America Common Stock
solely in exchange for Budget Common Stock. No Cruise America Common Stock will
be redeemed for cash or other property furnished by Budget (or BRACC). Further,
no liabilities of Cruise America or the Cruise America stockholders will be
assumed by Budget (or BRACC), nor will any of the Cruise America Common Stock be
subject to any liabilities.
(23) Cruise America will pay its dissenting stockholders, if
any, the value of their stock out of its own funds. No funds will be supplied
for that purpose, directly or indirectly, by Budget (or BRACC), nor will Budget
(or BRACC) directly or indirectly reimburse Cruise America for any payments to
dissenters.
(24) Budget (and BRACC) will pay or assume only those expenses
of Cruise America that are solely and directly related to the transaction in
accordance with the guidelines established in Rev. Rul. 73-54, 1973-1 C.B. 187.
<PAGE> 6
Budget Group, Inc.
Cruise America, Inc.
December 16, 1997
Page 6
OPINION
Based upon the foregoing, it is our opinion that:
(1) The Merger will constitute a "reorganization" within
the meaning of Section 368(a) of the Code;
(2) The exchange in the Merger of Cruise America Common
Stock for Budget Common Stock will not give rise to gain or loss to the Cruise
America stockholders;
(3) The tax basis of the Budget Common Stock received in
the Merger by a Cruise America stockholder (including any fractional share
interest) will be the same as the tax basis of the Cruise America Common Stock
exchanged for such Budget Common Stock;
(4) The holding period for the Budget Common Stock
received in the Merger by a Cruise America stockholder will include the holding
period of such stockholder in the Cruise America Common Stock exchanged for such
Budget Common Stock, provided that the Cruise America Common Stock is held as a
capital asset at the Effective Time of the Merger; and
(5) A Cruise America stockholder who receives cash in lieu
of a fractional share of Budget Common Stock will recognize gain or loss equal
to the difference between such cash amount and the stockholder's basis in the
fractional share interest.
The opinion expressed herein is based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinion is based solely on the documents
that we have examined, the additional information that we have obtained, and the
statements set out herein that we have assumed to be true on the day hereof and
at the time of the Merger. Our opinion cannot be relied upon if any of the
material facts contained in such documents or in any such additional information
is, or later becomes, inaccurate or if any of the material statements set out
herein is, or later becomes, inaccurate. Our opinion does not address
stockholders who are subject to special tax rules, such as stockholders, if any,
who received their shares upon the exercise of employee stock options or
otherwise as compensation, and stockholders that are insurance companies,
securities dealers, financial institutions or foreign persons. Finally, our
opinion is limited to the tax matters specifically covered thereby, and we have
not been asked to address herein, nor have we addressed herein, any other tax
consequences of the Merger.
Very truly yours,
KING & SPALDING
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF BUDGET GROUP, INC.
<TABLE>
<CAPTION>
NAME UNDER WHICH
SUBSIDIARY STATE OF INCORPORATION IT DOES BUSINESS
- ---------- ---------------------- ----------------
<S> <C> <C>
Budget Rent A Car Corporation.................. Delaware
Reservation Services, Inc...................... Texas
Team Realty Services, Inc...................... Delaware
Budget Rent a Car of Canada Limited............ Canada
Team Fleet Services Corporation................ Delaware
Team Fleet Financing Corporation............... Delaware
Budget Rent A Car Systems, Inc................. Delaware
Tranex Rentals of New York, Inc................ New York Budget Rent a Car of Albany
BRAC SOCAL Funding Corporation................. Delaware
VPSI, Inc...................................... Delaware
Budget Fleet Finance Corporation............... Delaware
Budget Funding Corporation..................... Delaware
Team Claims Services, Inc...................... Delaware
BRAC of New York, Inc.......................... Delaware
NYRAC, Inc..................................... New York
Long Island Car & Truck Rental Group, Inc...... Delaware
Dayton Auto Lease Company, Inc................. Delaware
Mosiant Car Sales, Inc......................... Louisiana
Team Rental of Arkansas, Inc................... Delaware
200-214 N. Michigan Avenue, Inc................ Illinois
BRAC Reinsurance Company....................... Bermuda
Control Risk Corporation....................... Illinois
Philip Jacobs Insurance Agency, Inc............ California
BRAC Credit Corporation........................ Delaware
Compass Computer Services, Inc................. Delaware
Budget Car Sales, Inc.
(formally known as Team Car Sales, Inc.)..... Indiana
ValCar Rental Car Sales, Inc................... Indiana
IN Motors VI, LLC.............................. Indiana Budget Car Sales
TSC Properties, LLC............................ Indiana
Team Car Sales of Philadelphia, Inc............ Delaware Budget Car Sales
Team Car Sales of Richmond, Inc................ Delaware Budget Car Sales
Team Car Sales of San Diego, Inc............... Delaware
Team Car Sales of Dayton, Inc.................. Delaware Budget Car Sales
Team Car Sales of Charlotte, Inc............... Delaware Budget Car Sales
Team Car Sales of Southern California, Inc..... Delaware
Budget Sales Corporation....................... Delaware
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
NAME UNDER WHICH
SUBSIDIARY STATE OF INCORPORATION IT DOES BUSINESS
- ---------- ---------------------- ----------------
<S> <C> <C>
Budget Rent a Car International, Inc........... Delaware
Budget Rent a Car Espana, S.A.................. Spain
Budget Rent a Car, Ltd., Ireland............... England
BRACRENT, S.A.................................. Spain
BTI (U.K.) plc................................. England
BTI (Gatwick) Limited.......................... England
BTI (Stansted) Limited......................... England
BTI (London) Limited........................... England
BTI (Marble Arch) Limited...................... England
BTI (Slough) Limited........................... England
BTI (Heathrow) Limited......................... England
Budget Locacao de Veiculos Ltda................ Brazil
Budget Rent a Car Limited...................... New Zealand
Budget Rent a Car Operations (N.Z.) Pty
Limited...................................... Australia
Target Rent a Car Limited...................... New Zealand
Budget Lease Management (Car Sales) Limited.... New Zealand
Budget Rent a Car of Japan, Inc.
(formally BRAC of Japan, Inc.)............... Delaware
Budget Rent a Car Asia-Pacific, Inc. (formally
BRAC RPS, Inc., formally Budget Leasing
Corporation)................................. Delaware
BRAC Australia Pty. Ltd........................ Australia
Budget Rent a Car Pty. Limited................. Australia
Societe Financiere et de Participation......... France
Budget France, S.A............................. France
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors of
Budget Rent a Car Corporation:
We consent to the incorporation by reference in this Registration Statement
of Budget Group, Inc. on Form S-4 dated December 15, 1997, of our report dated
February 18, 1997, from Budget Group, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1996, and to the reference to our firm under the heading
"Experts" in this Registration Statement.
KPMG PEAT MARWICK LLP
December 15, 1997
Chicago, Illinois
<PAGE> 1
EXHIBIT 23.2
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report on the
consolidated financial statements of Budget Group, Inc. and subsidiaries
(formerly known as Team Rental Group, Inc.) as of and for the year ended
December 31, 1996, dated March 14, 1997 (except with respect to certain matters
discussed in Note 16 as to which the dates are April 22, April 29, July 10 and
July 31, 1997), included in Budget Group, Inc.'s current report on Form 8-K
dated December 1, 1997, and to all references to our firm included in or made a
part of this Registration Statement.
ARTHUR ANDERSEN LLP
December 15, 1997
Orlando, Florida
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Budget Group, Inc. on Form S-4 of our reports dated April 12, 1996 appearing
in Budget Group, Inc.'s current report on Form 8-K dated December 1, 1997 and
appearing in the Annual Report on Form 10-K of Budget Group, Inc. for the year
ended December 31, 1996 and to the reference to us under the heading "Experts"
in the Proxy Statement/Prospectus, which is a part of this Registration
Statement.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
December 15, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF KPMG PEAT MARWICK LLP
THE BOARD OF DIRECTORS OF
CRUISE AMERICA, INC.:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the Proxy
Statement/Prospectus of Budget Group, Inc.
KPMG PEAT MARWICK LLP
Phoenix, Arizona
December 15, 1997
<PAGE> 1
EXHIBIT 23.6
CONSENT OF PEACOCK, HISLOP, STALEY & GIVEN, INC.
We hereby consent to the use of our opinion letter dated November 25, 1997,
to the Board of Directors of Cruise America included as "Annex B" to the Proxy
Statement/Prospectus which forms a part of the Registration Statement on Form
S-4 relating to the proposed merger of CA Acquisition Corporation, a wholly
owned subsidiary of Budget Group, Inc. with and into Cruise America and to the
references to such opinion in such Proxy Statement/Prospectus under the captions
"Summary -- Opinion of Financial Advisor," "The Merger -- Opinion of Financial
Advisor," "The Merger -- Background of the Merger" and "The Merger -- Reasons
for the Merger" and to the inclusion of the foregoing opinion as "Annex B" to
the Proxy Statement/Prospectus.
PEACOCK, HISLOP, STALEY & GIVEN, INC.
Phoenix, Arizona
December 15, 1997
<PAGE> 1
CRUISE AMERICA, INC.
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF SHAREHOLDERS ON JANUARY , 1998
The undersigned hereby appoints Randall S. Smalley and Eric R. Bensen, and
each of them, proxies, with full power of substitution and resubstitution, for
and in the name of the undersigned, to vote all shares of common stock of Cruise
America, Inc. (Cruise America), which the undersigned would be entitled to vote
if personally present at the Special Meeting of Shareholders to be held on
January , 1998, at a.m., at the Cruise America's corporate headquarters
located at 11 West Hampton Avenue, Mesa, Arizona, and at any adjournment or
postponement thereof, upon the matters described in the accompanying Notice of
Special Meeting of Shareholders and Proxy Statement, receipt of which is hereby
acknowledged, and upon any other business that may properly come before the
meeting or any adjournment or postponement thereof. Said proxies are directed to
vote on the matters described in the Notice of Special Meeting and Proxy
Statement as follows, and otherwise in their discretion upon such other business
as may properly come before the meeting or any adjournment or postponement
thereof.
1. To consider and vote upon a proposal to approve the Plan and Agreement of
Merger, dated as of November 25, 1997, by and among Cruise America, Budget
Group, Inc. and CA Acquisition Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In the discretion of the proxies, on any other matter that may properly
come before the meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THE
PROXY WILL BE VOTED FOR THE PROPOSAL SET FORTH ABOVE.
Date: , 1998
---------------------
--------------------------------
--------------------------------
Please sign exactly as your
name or names appear hereon.
Where more than one owner is
shown above, each should sign.
When signing in a fiduciary or
representative capacity, please
give full title. If this proxy
is submitted by a corporation,
it should be executed in the
full corporate name by a duly
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. IF YOU ATTEND
THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY.
