<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
TEAM RENTAL GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7514 59-3227576
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
125 BASIN STREET
SUITE 210
DAYTONA BEACH, FLORIDA 32114
(904) 238-7035
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
SANFORD MILLER
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
TEAM RENTAL GROUP, INC.
125 BASIN STREET
SUITE 210
DAYTONA BEACH, FLORIDA 32114
(904) 238-7035
(Name, address, including zip code, and telephone number, including area code of
agent for service)
COPIES TO:
<TABLE>
<C> <C>
JEFFREY M. STEIN KRIS F. HEINZELMAN
KING & SPALDING CRAVATH, SWAINE & MOORE
191 PEACHTREE STREET 825 EIGHTH AVENUE
ATLANTA, GEORGIA 30303 NEW YORK, NEW YORK 10019
(404) 572-4600 (212) 474-1000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of the Registration Statement.
---------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
TITLE OF CLASS PROPOSED MAXIMUM
OF SECURITIES AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock, par value $.01 per share........... $172,500,000 $52,273
=====================================================================================================================
</TABLE>
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
TEAM RENTAL GROUP, INC.
---------------------
CROSS-REFERENCE SHEET SHOWING THE LOCATION IN THE
PROSPECTUS OF CERTAIN ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NO. LOCATION IN PROSPECTUS
-------- ----------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus.............................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................ Inside Front Cover Page; Outside
Back Cover Page; Available
Information
3. Summary Information, Risk Factors and Ratio of Earnings
to Fixed Charges...................................... Prospectus Summary; Risk Factors
4. Use of Proceeds......................................... Prospectus Summary; Use of
Proceeds
5. Determination of Offering Price......................... Outside Front Cover Page;
Underwriting
6. Dilution................................................ *
7. Selling Security Holders................................ *
8. Plan of Distribution.................................... Outside Front Cover Page;
Underwriting
9. Description of Securities to be Registered.............. Outside Front Cover Page; Dividend
Policy; Capitalization;
Prospectus Summary; Description
of Capital Stock; Shares
Eligible for Future Sale
10. Interests of Named Experts and Counsel.................. Legal Matters; Experts
11. Information with Respect to the Registrant.............. Outside Front Cover Page;
Prospectus Summary; Risk Factors;
Use of Proceeds; Dividend
Policy; Capitalization; Pro
Forma Consolidated Financial
Statements of Budget Group;
Selected Financial Data of TEAM;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations of
TEAM; Selected Financial Data of
BRACC; Management's Discussion
and Analysis of Financial
Condition and Results of
Operations of BRACC; Business of
Budget Group; The Budget
Acquisition; Management;
Principal Stockholders; Certain
Transactions; Description of
Capital Stock; Shares Eligible
for Future Sale; Financial
Statements
12. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities............................ *
</TABLE>
- ---------------
* Item is omitted because response is negative or item is inapplicable.
<PAGE> 3
EXPLANATORY NOTE
This Registration Statement contains a prospectus relating to a public
offering in the United States and Canada (the "U.S. Offering") of an aggregate
of shares of Class A Common Stock, par value $.01 per share ("Class A
Common Stock"), of Team Rental Group, Inc., together with separate prospectus
pages relating to a concurrent offering outside the United States and Canada
(the "International Offering") of an aggregate of shares of Class A
Common Stock. The complete prospectus for the U.S. Offering follows immediately
after this Explanatory Note. After such prospectus are the following alternate
pages for the International Offering: the alternate front cover page for the
International Offering, a front inside cover page and the pages containing the
captions "Risk Factors -- Shares Eligible for Future Sale," "Shares Eligible for
Future Sale" and "Subscription and Sale." All other pages of the prospectus for
the U.S. Offering are to be used for both the U.S. Offering and the
International Offering, except the outside back cover page, which will be blank
in the prospectus for the International Offering, and information appearing
under "Notice to Canadian Residents," which will not be included in the
prospectus for the International Offering.
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 12, 1997
Shares
[LOGO] TEAM RENTAL GROUP, INC.
Class A Common Stock
($.01 par value)
---------------------
The shares of Class A Common Stock of Team Rental Group, Inc. ("TEAM")
offered hereby are being sold by TEAM in connection with the acquisition by TEAM
of all the outstanding capital stock of Budget Rent a Car Corporation (the
"Budget Acquisition"). The net proceeds of the Offering, together with a portion
of the net proceeds of concurrent financing transactions, will be used to
finance the Budget Acquisition.
Of the shares of Class A Common Stock being offered, shares (the
"U.S. Shares") are initially being offered in the United States and Canada by
the U.S. Underwriters (the "U.S. Offering") and shares (the
"International Shares") are initially being concurrently offered outside the
United States and Canada by the Managers (the "International Offering" and,
together with the U.S. Offering, the "Offering"). The offering price and
underwriting discounts and commissions of the U.S. Offering and the
International Offering will be identical.
The Class A Common Stock is listed on The Nasdaq Stock Market's National Market
under the symbol "TBUD." On February 11, 1997, the last reported sale price of
the Class A Common Stock on The Nasdaq National Market was $27.375 per share.
See "Price Range of Common Stock."
TEAM has two classes of Common Stock, the Class A Common Stock, par value $.01
per share (the "Class A Common Stock"), and the Class B Common Stock, par value
$.01 per share (the "Class B Common Stock"). Holders of the Class A Common Stock
are entitled to one vote per share and holders of the Class B Common Stock are
entitled to ten votes per share.
TEAM is concurrently offering $175.0 million aggregate principal amount of its
% Senior Notes Due 2007 (the "Debt Offering"). TEAM is also concurrently
entering into new credit facilities for fleet financings (the "New Fleet
Financings") with an aggregate commitment of $1.2 billion. Consummation of the
Offering will occur concurrently with, and is conditioned upon, consummation of
the Budget Acquisition, the Debt Offering and the New Fleet Financings.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE CLASS A COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE
14 HEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS TEAM(1)
----------- ------------- -----------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total(2)............................................. $ $ $
</TABLE>
(1) Before deduction of expenses payable by the Company estimated at
$ .
(2) TEAM has granted the U.S. Underwriters and the Managers an option,
exercisable by Credit Suisse First Boston Corporation for 30 days from the
date of this Prospectus, to purchase a maximum of additional
shares of Class A Common Stock to cover over-allotments of shares. If the
option is exercised in full, the total Price to Public will be $ ,
Underwriting Discounts and Commissions will be $ and Proceeds to
TEAM will be $ .
The U.S. Shares are offered by the several U.S. Underwriters when, as and
if issued by TEAM, delivered to and accepted by the U.S. Underwriters and
subject to their right to reject orders in whole or in part. It is expected that
the U.S. Shares will be ready for delivery on or about ,
1997, against payment in immediately available funds.
CREDIT SUISSE FIRST BOSTON
ABN AMRO CHICAGO CORPORATION
ALEX. BROWN & SONS
INCORPORATED
MCDONALD & COMPANY
SECURITIES, INC.
Prospectus dated , 1997.
<PAGE> 5
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS AND THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE CLASS A COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
DURING THE OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE CLASS A COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES
10B-6 AND 10B-7 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
2
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial statements
and notes thereto appearing elsewhere in this Prospectus. As used in this
Prospectus, (i) "TEAM" refers to Team Rental Group, Inc. and its subsidiaries
prior to the Budget Acquisition; (ii) "BRACC" refers to Budget Rent a Car
Corporation and its subsidiaries prior to the Budget Acquisition; (iii) "Budget
Group" refers to the operations of TEAM (including BRACC) after giving effect to
the Budget Acquisition; and (iv) the "Budget System" or "Budget" refers to the
business of renting cars and trucks and retailing late model vehicles conducted
by BRACC and its franchisees (including TEAM). Upon completion of the Budget
Acquisition, Team Rental Group, Inc. will change its name to "Budget Group,
Inc." Consummation of the Offering will occur concurrently with, and is
conditioned upon, consummation of the Budget Acquisition, the Debt Offering and
the New Fleet Financings. The information set forth herein assumes no exercise
of the Underwriters' overallotment option. "Common Stock," as used herein,
refers collectively and without distinction to the Class A Common Stock and the
Class B Common Stock of TEAM.
BUDGET GROUP
Budget Group and its franchisees operate the third largest worldwide
general use car and truck rental system, with approximately 3,000 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. Pro
forma for the Budget Acquisition, the Budget System included 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. Budget 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.
Budget Group is also one of the largest independent retailers of late model
automobiles in the United States, operating 22 retail car sales facilities with
pro forma revenues of $187.6 million for the nine months ended September 30,
1996. Upon consummation of the Budget Acquisition, Budget Group will continue to
operate its retail car sales facilities under the name "Budget Car Sales."
BACKGROUND
On January 13, 1997, TEAM (the largest Budget franchisee in the United
States) entered into stock purchase agreements (the "Stock Purchase Agreements")
with Ford Motor Company ("Ford"), BRACC and the common stockholder of BRACC,
pursuant to which TEAM agreed to acquire the capital stock of BRACC. The total
amount of funds required by TEAM to consummate the Budget Acquisition is
expected to be approximately $275.0 million, which will be financed in part
through the sale of the Class A Common Stock offered hereby. TEAM will also
issue to Ford approximately 4,500 shares of a new series of non-voting preferred
stock (the "Series A Convertible Preferred Stock"), which does not carry a
dividend and which will be convertible into approximately 4,500,000 shares of
Class A Common Stock (subject to adjustment in certain cases). TEAM is also
obligated under the Stock Purchase Agreements to refinance approximately $822.1
million of indebtedness outstanding under BRACC's existing fleet financing
facilities. See "The Budget Acquisition" and "Use of Proceeds." For information
with respect to the operations of TEAM and BRACC prior to the Budget
Acquisition, see "Business of Budget Group."
3
<PAGE> 7
STRATEGY
Management has developed a business strategy designed to increase the
revenues and improve the profitability of Budget Group. Key elements of this
strategy are as follows:
Enhance the Budget Brand. Following the Budget Acquisition, the
Budget System will be approximately 76% company-owned in the United States,
giving Budget Group a higher percentage of company-owned locations than
many of its principal competitors. Management believes this high level of
corporate ownership is a competitive advantage in the marketplace. It
facilitates more consistent delivery of high quality services, more uniform
prices and improved operations and communications throughout the worldwide
Budget System, thereby strengthening the Budget brand name among customers.
In addition, Budget Group's structure will facilitate national advertising
and marketing programs designed to increase the public's awareness of the
Budget brand. In addition, management believes that there will be
continuing opportunities to further consolidate the Budget System by
acquiring additional franchise operations, and that such consolidation will
further strengthen the Budget brand.
Improve the Performance of Car Rental Operations. Historically, TEAM
has enhanced the profitability of its acquired franchise territories by
reducing operating costs and increasing rental revenue. Similarly, in 1996,
BRACC began initiatives that are already significantly improving the
performance of its company-owned operations. Upon completion of the Budget
Acquisition, management believes Budget Group will be able to combine key
elements of the TEAM and BRACC strategies to achieve even greater operating
efficiencies. Budget Group expects to undertake significant initiatives to
(i) enhance the performance of its U.S. car rental locations, (ii) take
advantage of the increased level of company-owned locations, (iii) increase
marketing to corporate accounts, (iv) place increased emphasis on the
leisure and local rental markets, and (v) expand and improve Budget's
international operations.
Continue to Expand Retail Car Sales Operations. The increased cost of
new cars and the improved reliability of low-mileage, late model cars have
contributed to greater market demand for late model cars in recent years.
Budget Group, with 22 retail car sales facilities and pro forma car sales
revenues of $187.6 million for the nine months ended September 30, 1996, is
one of the largest independent retailers of late model cars in the United
States. Budget Group plans to establish a nationally recognized and branded
retail car sales operation which will provide low-mileage, late model
vehicles to consumers in a new car sales environment under the Budget Car
Sales brand.
Expand Truck Rental Operations. The Budget System is unique among
major car rental systems in that it rents trucks to consumers and
commercial users in most major markets worldwide, with the fourth largest
consumer truck rental fleet in the United States. Management expects Budget
Group to add truck rental locations in various markets, particularly in
conjunction with the addition of new local market locations. Management
believes that adding truck rental locations will leverage certain fixed
costs and increase consumer awareness of the Budget brand, while favorable
pricing trends in the truck rental market are expected to provide
attractive returns on invested capital.
---------------------
Sanford Miller (Chairman and Chief Executive Officer), John P. Kennedy
(President and Chief Operating Officer) and Jeffrey D. Congdon (Chief Financial
Officer and Secretary) (collectively, the "Principal Executive Officers")
together have over 75 years of experience in the vehicle rental business and
have acquired and operated 54 Budget franchises over the past 16 years. In
addition, Messrs. Miller and Congdon together have over 25 years of experience
operating retail car sales facilities.
The principal executive offices of TEAM are located at 125 Basin Street,
Suite 210, Daytona Beach, Florida 32114, and its telephone number at that
location is (904) 238-7035.
4
<PAGE> 8
THE BUDGET ACQUISITION
On January 13, 1997, TEAM entered into the Stock Purchase Agreements,
pursuant to which TEAM agreed to acquire the capital stock of BRACC. The
consideration to be paid by TEAM pursuant to the Stock Purchase Agreements
consists of (i) approximately $275.0 million in cash (the "Cash Consideration")
and (ii) the issuance to Ford of approximately 4,500 shares of TEAM's newly
created Series A Convertible Preferred Stock (the "Equity Consideration"), each
subject to adjustment as described herein. Each share of Series A Convertible
Preferred Stock will be non-voting, will not carry a dividend and will be
convertible into 1,000 shares of Class A Common Stock. Under the Stock Purchase
Agreements, BRACC will be obligated to repay a portion of its outstanding
indebtedness to Ford, and Ford will cancel a portion of the remaining
outstanding BRACC indebtedness. The obligations of TEAM, Ford, BRACC and the
other parties to the Stock Purchase Agreements to consummate the Budget
Acquisition are subject to the satisfaction (or waiver) of certain conditions.
The consummation of the Offering will occur concurrently with, and is
conditioned upon, consummation of the Budget Acquisition, the Debt Offering and
the New Fleet Financings, and will provide a portion of the financing for the
Budget Acquisition.
The estimated sources and uses of consideration required to complete the
Budget Acquisition are presented in the following table (assuming consummation
of the Transactions (as defined in "Pro Forma Consolidated Financial Statements
of Budget Group") on February 10, 1997):
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES:
Class A Common Stock offered hereby....................... $ 140.0
% Senior Notes Due 2007.............................. 175.0
Series A Convertible Preferred Stock...................... 120.3
New Fleet Financings(a)................................... 807.1
--------
Total sources..................................... $1,242.4
========
USES:
Budget Acquisition(b)..................................... $ 395.3
Repayment of BRACC Fleet Financing Facilities(c).......... 822.1
Fees and expenses(d)...................................... 25.0
--------
Total uses........................................ $1,242.4
========
</TABLE>
- ---------------
(a) Represents the amount drawn at closing under the New Fleet Financings
assuming a fleet size for Budget Group equivalent to the combined fleet size
of TEAM and BRACC at September 30, 1996.
(b) Represents (i) $275.0 million to purchase common stock of BRACC (of which
$274.0 million will be paid to BRACC for newly issued shares of BRACC common
stock and $1.0 million will be paid to the common stockholder of BRACC) and
(ii) $120.3 million of Series A Convertible Preferred Stock to be issued to
Ford (based on the value of 4,500,000 shares of Class A Common Stock as of
February 10, 1997). BRACC will use the $274.0 million in cash that it
receives as follows: (i) $269.0 million to repay outstanding indebtedness of
BRACC to Ford and (ii) $5.0 million to redeem its outstanding Series X
Preferred Stock (the "Series X Preferred Stock"). In addition, concurrently
with the Budget Acquisition, Ford will cancel $108.7 million of additional
outstanding BRACC indebtedness.
(c) Represents (i) $386.3 million of the Budget Funding Corporation commercial
paper facility, (ii) $288.1 million of the vehicle facility provided by Ford
to finance non-Ford vehicles and (iii) $147.7 million of the vehicle
facility provided by Ford to finance Ford vehicles, net of $108.7 million to
be forgiven by Ford. See "Capitalization."
(d) Includes underwriting discounts and commissions in connection with the
Offering and the Debt Offering.
5
<PAGE> 9
THE OFFERING
<TABLE>
<S> <C> <C>
Class A Common Stock offered:
U.S. Offering.............................. shares
International Offering..................... shares
----------
Total(a)........................... shares
==========
Shares to be outstanding after the Offering:
Class A Common Stock....................... shares
Class B Common Stock....................... 1,936,600 shares
----------
Total(a)(b)........................ shares
==========
Voting rights................................ Holders of the Class A Common Stock are entitled to
one vote per share and holders of the Class B Common
Stock are entitled to ten votes per share.
Concurrent financings........................ Concurrently with the Offering, TEAM is offering
$175.0 million aggregate principal amount of its %
Senior Notes Due 2007 (the "Senior Notes"). TEAM is
also concurrently entering into new credit facilities
for fleet financings with an aggregate commitment of
$1.2 billion. Consummation of the Offering will occur
concurrently with, and is conditioned upon,
consummation of the Budget Acquisition, the Debt
Offering and the New Fleet Financings. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations of TEAM --
Liquidity and Capital Resources -- Pro Forma Liquidity
and Capital Resources of Budget Group."
Use of proceeds.............................. The proceeds from the Offering will be used to provide
a portion of the financing for the Budget Acquisition.
See "Use of Proceeds" and "The Budget Acquisition."
Nasdaq National Market symbol................ TBUD
</TABLE>
- ---------------
(a) In the event the over-allotment option is exercised in full, the total
number of shares of Class A Common Stock and the total number of shares of
Common Stock to be outstanding after the Offerings would be and
, respectively.
(b) Does not include (i) 3,986,049 shares of Class A Common Stock issuable upon
conversion of TEAM's outstanding 7.0% convertible subordinated notes due
2003 (the "Convertible Subordinated Notes"); (ii) 4,500,000 shares of Class
A Common Stock issuable upon conversion of the Series A Convertible
Preferred Stock to be issued to Ford in the Budget Acquisition; (iii)
shares of Common Stock reserved for issuance under TEAM's stock
option plans (subject to stockholder approval as described under
"Description of Capital Stock"), of which options to purchase 636,850
shares of Class A Common Stock and 164,000 shares of Class B Common Stock
have been granted; and (iv) 362,500 shares of the Class A Common Stock
reserved for issuance upon exercise of outstanding warrants. See
"Management -- Benefit Plans" and "Description of Capital
Stock -- Warrants."
6
<PAGE> 10
SUMMARY PRO FORMA FINANCIAL DATA OF BUDGET GROUP
The following table sets forth summary unaudited pro forma financial data
of the Budget Group, which data are derived from the Pro Forma Consolidated
Statement of Operations for the nine months ended September 30, 1996 and the Pro
Forma Consolidated Balance Sheet as of September 30, 1996 included elsewhere in
this Prospectus. The pro forma statement of operations data and other data give
effect to the 1996 TEAM Transaction and the Budget Acquisition Transactions
(each as defined under "Pro Forma Consolidated Financial Statements of Budget
Group") as if they each had occurred at January 1, 1996 and the pro forma
balance sheet data gives effect to the 1996 TEAM Transactions occurring after
September 30, 1996 and the Budget Acquisition Transactions as if they each had
occurred on September 30, 1996. The summary unaudited pro forma financial data
should be read in conjunction with the Pro Forma Consolidated Financial
Statements included elsewhere in this Prospectus. The summary unaudited pro
forma financial data set forth below is presented for information purposes only
and do not purport to represent what Budget Group's results of operations or
financial condition would have been had the Transactions actually occurred on
the dates indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1996
-------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue:
Vehicle rental revenue.................................... $ 922,926
Royalty fees.............................................. 41,557
Retail car sales revenue.................................. 187,570
Other..................................................... 10,684
------------
Total operating revenues........................... 1,162,737
Operating costs and expenses:
Direct vehicle and operating.............................. 121,539
Depreciation -- vehicle................................... 244,736
Depreciation -- non-vehicle............................... 21,878
Cost of car sales......................................... 159,153
Sales, general and administrative......................... 468,549
Amortization of franchise rights.......................... 6,551
------------
Total operating costs and expenses................. 1,022,405
------------
Operating income............................................ 140,331
------------
Other (income) expenses:
Vehicle interest.......................................... 74,384
Non-vehicle interest -- net............................... 23,496
Interest income -- restricted cash........................ (1,580)
------------
Total other (income) expense....................... 96,300
Income before income taxes.................................. 44,031
Provision for income taxes................................ 18,489
------------
Net income......................................... $ 25,541
============
Weighted average common shares outstanding:
Primary................................................... 20,905
Fully Diluted............................................. 25,052
Earnings per common share:
Primary................................................... $ 1.22
Fully Diluted............................................. 1.12
============
OTHER DATA:
EBITDA...................................................... 415,076
Adjusted EBITDA............................................. 95,956
Ratio of Adjusted EBITDA to non-vehicle interest expense.... 4.1x
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
------------------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Revenue earning vehicles, net............................. $1,797,986
Retail car sales inventory................................ 37,628
Total assets.............................................. 2,779,434
Fleet financing facilities................................ 1,698,834
Notes payable............................................. 317,622
Total debt................................................ 2,016,456
Stockholders' equity...................................... 331,370
</TABLE>
8
<PAGE> 12
SUMMARY OPERATING DATA FOR THE BUDGET SYSTEM
The following tables set forth summary operating data of the Budget System
for the year ended, and as of, December 31, 1996. References to revenues of the
Budget System include revenues received by BRACC and its franchisees for the
rental of cars and trucks. The respective revenue contributions of locations
owned by Budget Group or BRACC (referred to as "company-owned" locations) have
been determined by reference to the size of the vehicle fleet operated from
those locations, in that fleet size generally corresponds to revenue
contribution for any particular period. Results of operations and operating data
for franchisees set forth or reflected in system wide data are based on reports
provided to BRACC by franchisees in accordance with their franchise agreements.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996 PERCENT OF
(UNAUDITED) BUDGET SYSTEM(%)
----------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
SYSTEMWIDE DATA:
Vehicle rental revenues:
United States:
BRACC-owned......................................... $ 836,245 61.4%
TEAM-owned (pro forma).............................. 201,200 14.8
Other franchisees................................... 323,818 23.8
---------- ------
Total United States ............................. 1,361,263 100.0%
----------
International:
BRACC-owned......................................... 89,533 8.3%
Franchisees......................................... 984,368 91.7
---------- ------
Total International.............................. 1,073,901 100.0%
----------
Total Budget System............................ $2,435,164
==========
Car sales revenues:
BRACC................................................. $ 99,060
TEAM.................................................. 131,853
----------
Total Budget Group............................... $ 230,913
==========
</TABLE>
<TABLE>
<CAPTION>
AS OF PERCENT OF
DECEMBER 31, 1996 BUDGET SYSTEM(%)
----------------- ----------------
<S> <C> <C>
RENTAL LOCATIONS IN OPERATION:
United States:
BRACC-owned........................................... 304 31.8%
TEAM-owned............................................ 151 15.8
Other franchisees..................................... 500 52.4
---------- ------
Total United States ............................. 955 100.0%
==========
International:
BRACC-owned........................................... 70 3.1%
Franchisees........................................... 2,182 96.9
---------- ------
Total International.............................. 2,252 100.0%
==========
</TABLE>
9
<PAGE> 13
SUMMARY FINANCIAL DATA OF TEAM
The following tables set forth summary historical consolidated financial
data for TEAM, which data were derived from the audited Consolidated Financial
Statements of TEAM. The data for 1993 includes the separate capital structures
of corporations that were acquired in August 1994 and are presented on a
combined basis as companies under common control and, therefore, do not provide
a meaningful basis for presentation of earnings per share data. The information
below should be read in conjunction with the Consolidated Financial Statements
of TEAM and the notes thereto included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of TEAM." The results of operations for the nine months ended
September 30, 1996 are not necessarily indicative of the results expected for
the full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
---------------------------------- ---------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AND RENTAL DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue:
Vehicle rental revenue(a).......................... $ 22,321 $ 38,642 $107,067 $ 70,819 $166,531
Retail car sales revenue........................... -- -- 42,662.. 26,156 94,489
-------- -------- -------- -------- --------
Total operating revenue........................ 22,321 38,642 149,729 96,975 261,020
Vehicle depreciation expense......................... 4,358 7,382 27,476 19,824 43,983
Operating income..................................... 2,450 4,196 14,180 12,808 33,258
Vehicle interest expense............................. 2,462 3,909 13,874 8,803 18,542
Non-vehicle interest expense......................... 401 531 632 525 1,286
Income from continuing operations before income
taxes.............................................. 610 426 1,022 4,118 12,558
Net income........................................... 428 250 337 3,578 8,163
Weighted average common shares outstanding (000s):
Primary............................................ -- 3,704 6,369 6,104 8,675
Fully diluted...................................... -- 3,704 6,369 6,104 8,820
Earnings (loss) per common share:
Primary.............................................. -- $ 0.07 $ 0.05 $ 0.59 $ 0.94
Fully diluted........................................ -- 0.07 0.05 0.59 0.93
OPERATING DATA:
EBITDA(b)............................................ $ 8,212 $ 12,923 $ 45,204 $ 34,752 $ 79,752
Adjusted EBITDA(b)................................... 1,392 1,632 3,854 6,125 17,227
RENTAL DATA:(c)
Locations in operation at period end................. 19 63 133 99 155
Number of usable vehicles at period end(d)........... 2,006 5,044 11,143 12,970 17,034
Rental transactions(e)............................... 163,000 276,000 689,000 460,000 878,000
Daily dollar average(f).............................. $ 34.01 $ 37.32 $ 41.26 $ 40.38 $ 41.67
Vehicle utilization(g)............................... 77.2% 80.6% 80.0% 81.4% 81.3%
Average monthly revenue per unit(h).................. $ 791 $ 909 $ 1,007 $ 999 $ 1,033
RETAIL CAR SALES DATA:
Locations in operation at period end................. -- -- 7 4 13(i)
Average monthly vehicles sold........................ -- -- 351 215 705
Average monthly sales revenue........................ -- -- $ 4,883 $ 3,128 $ 11,964
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1996
(UNAUDITED)
------------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Revenue earning vehicles, net............................. $327,542
Retail car sales inventory................................ 22,417
Total assets.............................................. 509,213
Fleet financing facilities................................ 358,218
Other notes payable....................................... 14,082
Total debt................................................ 372,300
Common stock warrant...................................... 2,000
Stockholders' equity...................................... 95,608
</TABLE>
10
<PAGE> 14
- ---------------
(a) Includes revenue from vehicle rentals and related products (such as
insurance, refueling services and loss damage waivers).
(b) EBITDA consists of income before provision for income taxes plus (i) vehicle
interest expense, (ii) non-vehicle interest expense, (iii) vehicle
depreciation expense and (iv) non-vehicle depreciation and amortization
expenses. Adjusted EBITDA consists of income before provision for income
taxes plus (i) non-vehicle depreciation and amortization expenses and (ii)
non-vehicle interest expense. EBITDA and Adjusted EBITDA are not presented
as, and should not be considered, alternative measures of operating results
or cash flows from operations (as determined in accordance with generally
accepted accounting principles), but are presented because they are widely
accepted financial indicators of a company's ability to incur and service
debt.
(c) Does not include data from VPSI, Inc. ("Van Pool"), TEAM's van pooling
operation.
(d) Represents vehicles available for rent.
(e) Rounded to the nearest thousand.
(f) Represents rental revenue divided by the number of days that vehicles were
actually rented.
(g) Represents the number of days vehicles were actually rented divided by the
number of days vehicles were available for rent.
(h) Represents average monthly revenue divided by average monthly fleet.
(i) TEAM consolidated two retail car sales locations into other existing
locations subsequent to September 30, 1996.
11
<PAGE> 15
SUMMARY FINANCIAL DATA OF BRACC
The following tables set forth summary historical consolidated financial
data for BRACC, which data were derived from the audited Consolidated Financial
Statements of BRACC. The financial data for all periods presented has been
reclassified to conform to the financial statement presentation of TEAM. The
information below should be read in conjunction with the Consolidated Financial
Statements of BRACC and the notes thereto included elsewhere in this Prospectus
and "Management's Discussion and Analysis of Financial Condition and Results of
Operation of BRACC." The results of operations for the nine months ended
September 30, 1996 are not necessarily indicative of the results expected for
the full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
------------------------------------- ----------------------
1993 1994 1995 1995 1996
--------- ---------- ---------- --------- ---------
(DOLLARS IN THOUSANDS EXCEPT RENTAL DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating Revenue:
Vehicle rental revenue(a)......................... $ 954,188 $1,011,203 $1,034,873 $ 811,641 $ 745,521
Retail car sales revenue.......................... 63,596 77,999 83,795 61,205 71,768
Other revenue..................................... 61,903 66,564 74,802 57,636 58,079
--------- ---------- ---------- --------- ---------
Total operating revenue....................... 1,079,687 1,155,766 1,193,470 930,482 875,368
Vehicle depreciation expense........................ 206,271 257,356 323,619 252,870 197,898
Operating income.................................... 63,614 110,075 18,583 35,890 100,666
Vehicle interest expense............................ 78,205 86,127 124,758 96,723 71,536
Non-vehicle interest expense........................ 16,283 18,823 25,151 17,050 23,083
Income (loss) from continuing operations before
income taxes...................................... (30,874) 5,125 (131,326) (77,883) 6,047
Net income (loss)................................... (30,874) 1,125 (132,640) (78,763) 4,247
OPERATING DATA:
EBITDA(b)........................................... $ 308,168 $ 405,715 $ 378,728 $ 315,468 $ 330,724
Adjusted EBITDA(b).................................. 23,692 62,232 (69,649) (34,125) 61,290
RENTAL DATA:
Locations in operation at period end................ 451 447 390 405 374
Number of usable vehicles at period end(c).......... 74,326 75,467 68,148 87,487 78,261
Rental transactions(d).............................. 5,754,000 6,030,000 5,909,000 4,647,000 4,091,000
Daily dollar average(e)............................. $ 37.14 $ 38.43 $ 39.58 $ 39.29 $ 41.72
Vehicle utilization(f).............................. 76.1% 77.4% 75.1% 75.7% 77.2%
Average monthly revenue per unit(g)................. $ 860 $ 904 $ 904 $ 902 $ 980
RETAIL CAR SALES DATA:
Locations in operation at period end................ 7 8 9 9 11
Average monthly vehicles sold....................... 394 462 449 458 530
Average monthly sales revenue....................... $ 5,300 $ 6,500 $ 6,983 $ 6,801 $ 7,974
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1996
(UNAUDITED)
------------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Revenue earning vehicles, net............................. $1,470,444
Retail car sales inventory................................ 15,211
Total assets.............................................. 2,486,408
Fleet financing facilities................................ 1,498,481
Other notes payable....................................... 439,490
Total debt................................................ 1,937,971
Mandatory redeemable preferred stock...................... 5,084
Stockholders' equity...................................... 144,260
</TABLE>
12
<PAGE> 16
- ---------------
(a) Includes revenue from vehicle rentals and related products (such as
insurance, refueling services and loss damage waivers).
(b) EBITDA consists of income before provision for income taxes plus (i)
vehicle interest expense, (ii) non-vehicle interest expense, (iii) vehicle
depreciation expense and (iv) non-vehicle depreciation and amortization
expenses. Adjusted EBITDA consists of income before provision for income
taxes plus (i) non-vehicle depreciation and amortization expenses and (ii)
non-vehicle interest expense. EBITDA and Adjusted EBITDA are not presented
as, and should not be considered, alternative measures of operating results
or cash flows from operations (as determined in accordance with generally
accepted accounting principles), but are presented because they are widely
accepted financial indicators of a company's ability to incur and service
debt.
(c) Represents vehicles available for rent.
(d) Rounded to the nearest thousand.
(e) Represents rental revenue divided by the number of days that vehicles were
actually rented.
(f) Represents the number of days vehicles were actually rented divided by the
number of days vehicles were available for rent.
(g) Represents average monthly revenue divided by average monthly fleet.
FORWARD LOOKING STATEMENTS
This Prospectus contains certain forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
the financial condition, results of operations and business of TEAM and BRACC,
including statements under the captions "Pro Forma Consolidated Financial
Statements of Budget Group," "Management's Discussion and Analysis of Financial
Condition and Results of Operations of TEAM" and "Business of Budget Group."
These forward looking statements involve certain risks and uncertainties. No
assurance can be given that any of such matters will be realized. Factors that
may cause actual results to differ materially from those contemplated by such
forward looking statements include, among others, the following: (a) Budget
Group's ability to service its debt or to obtain financing for its fleet
vehicles; (b) management and integration of the operations of TEAM and BRACC
following the Budget Acquisition and the success of initiatives undertaken by
Budget Group to increase its revenues and improve its profitability; (c)
competitive pressure in the vehicle rental and retail car sales industries; and
(d) general economic conditions. For further information on other factors which
could affect the financial results of TEAM and such forward looking statements,
see "Risk Factors."
13
<PAGE> 17
RISK FACTORS
Prospective investors should consider carefully the following factors in
addition to other information included in this Prospectus before purchasing any
of the shares of Class A Common Stock.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
Following consummation of the Transactions (as defined in "Pro Forma
Consolidated Financial Statements of Budget Group"), Budget Group will have
substantial indebtedness and will have significant debt service requirements. As
of September 30, 1996, pro forma for the Transactions, Budget Group's total
indebtedness would have been approximately $2,016.5 million, of which $1,698.8
million represented senior secured indebtedness for the purchase of vehicles and
$317.7 million represented unsecured indebtedness. At September 30, 1996, on a
pro forma basis, Budget Group had $429.8 million of incremental availability
under its vehicle financing facilities to finance the purchase of fleet
vehicles. The degree to which Budget Group is leveraged will have important
consequences to holders of the Class A Common Stock, including the following:
(i) the ability of Budget Group 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 Group's cash flow from
operations will be required to be dedicated to the payment of principal and
interest on its indebtedness, thereby reducing funds available to Budget Group
for other purposes; (iii) Budget Group's flexibility in planning for or reacting
to changes in market conditions may be limited; (iv) Budget Group may be more
vulnerable in the event of a downturn in its business; and (v) because a
substantial portion of its indebtedness will bear interest at floating rates,
any increase in prevailing interest rates would result in an increase in
interest expense incurred by Budget Group, which could have an adverse effect on
its results of operations. See "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of TEAM -- Liquidity
and Capital Resources."
The ability of Budget Group 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 Group. Although
management believes that Budget Group's cash flow will be adequate to meet its
interest and principal payments, there can be no assurance that Budget Group
will continue to generate earnings in the future sufficient to cover its fixed
charges. If Budget Group 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 Group could realize therefrom. In addition, the terms of certain
indebtedness of Budget Group restrict the ability of Budget Group to sell assets
and the use of the proceeds therefrom. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations of TEAM -- Liquidity and
Capital Resources."
If for any reason, including a shortfall in anticipated operating results
or proceeds from asset sales, Budget Group 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 of 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 (if any) which, in the case of the fleet
financing facilities, consists of substantially all of Budget Group's fleet. Any
default with respect to any of Budget Group's indebtedness could result in a
default under other indebtedness or result in a bankruptcy of Budget Group.
AVAILABILITY OF FINANCING
TEAM depends upon third-party financing to purchase its fleet vehicles.
Continued availability of such financing on favorable terms will be critical to
Budget Group's operations. Since a substantial portion of such indebtedness is
incurred in connection with major vehicle manufacturers' vehicle repurchase
programs, a significant change in the credit quality of the vehicle
manufacturers, particularly Ford, would significantly affect Budget Group's
ability to obtain such financing on favorable terms. In addition, certain
events, such as a material
14
<PAGE> 18
increase in damage to vehicles, could reduce the value of the collateral
securing Budget Group's fleet financing facilities and cause the acceleration of
the repayment of such facilities. An inability of Budget Group to obtain vehicle
financing on favorable terms would have a material adverse effect on Budget
Group's financial condition and results of operations. There can be no assurance
that the sources of financing utilized by TEAM and BRACC or alternative
financing will remain or become available to Budget Group or that such financing
will be available on terms acceptable to Budget Group. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
TEAM -- Liquidity and Capital Resources -- Pro Forma Liquidity and Capital
Resources for Budget Group."
MANAGEMENT OF BUDGET GROUP
The Budget Acquisition is significantly larger than any of TEAM's previous
acquisitions and the combination and integration of the respective operations of
TEAM and BRACC will be of a substantially greater scale than previously
undertaken by either company. The difficulties of managing such combination and
integration may be 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
Group following the Budget Acquisition will depend on the ability of Budget
Group's management team to: (a) manage a significantly larger organization than
TEAM's existing business, (b) maintain and further develop relationships with
Budget franchisees and (c) conduct operations on a worldwide basis. There can be
no assurance that Budget Group'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 Group's results of operations and financial condition.
GROWTH STRATEGY
Following the Budget Acquisition, management expects Budget Group to
undertake initiatives to increase its revenues and improve its profitability.
Management expects to increase the size of Budget Group's operations by
acquiring the operations of certain franchisees, enhancing its operations
outside the United States, expanding its retail car sales operations, adding
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 Group to realize certain cost
savings and other operating efficiencies as a result of the implementation of
its business strategy. Realization of such cost savings and other operating
efficiencies could be affected by a number of factors beyond Budget Group's
control, such as general economic conditions, increased operating costs,
competitive conditions in the vehicle rental industry and regulatory
developments. See "Business of Budget Group -- Strategy." Each of these
initiatives will involve risks to Budget Group, and there can be no assurance
that Budget Group will be successful in growing its business after completion of
the Budget Acquisition or that Budget Group will achieve the expected cost
savings and other operating efficiencies.
COMPETITION
The vehicle rental industry is characterized by intense competition,
particularly with respect to price and service. In any geographic market, Budget
Group may encounter competition from national, regional and local vehicle rental
companies. Budget's main competitors in the car rental market are The Hertz
Corporation ("Hertz"), Avis, Inc. ("Avis"), Alamo Rent a Car Inc. ("Alamo"),
National Car Rental System, Inc. ("National"), Dollar Rent a Car Systems, Inc.
("Dollar") and Enterprise Rent a Car ("Enterprise"). In consumer truck rentals,
Budget faces competition from U-Haul International, Inc. ("U-Haul"), Ryder Truck
Rental Services ("Ryder") and Penske Truck Rental ("Penske"). There have been
occasions when the major vehicle rental companies have been adversely affected
by industry-wide price cutting, and TEAM and BRACC have on such occasions
lowered their prices in response. Budget Group will not generally be able to
unilaterally raise its prices or to maintain its prices in times of industry
price cutting. See "Business of Budget Group -- Competition."
The retail car sales industry also is characterized by intense competition,
consisting primarily of local new car dealerships selling new and late model
cars. Budget Group believes that competition for the customer seeking
15
<PAGE> 19
to purchase a late model car is based primarily on price and selection, while a
customer originally intending to purchase a new car may select a late-model car
based on perceived value. In addition to local dealerships, Budget Group may
face competition from retailers such as CarMax and AutoNation that compete on
the basis of large inventory size, no-haggle pricing and after-sale service.
RESTRICTIONS IMPOSED BY INDEBTEDNESS
The terms of Budget Group's indebtedness include a number of significant
covenants that, among other things, will restrict the ability of Budget Group to
dispose of assets, incur additional indebtedness, create liens, repay other
indebtedness, pay dividends, enter into 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 Group'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
Group. In addition, the terms of certain of such indebtedness will also require
Budget Group to maintain compliance with certain financial ratios. The ability
of Budget Group to comply with such covenants may be affected by events beyond
Budget Group's control. A breach of any of these covenants or the inability of
Budget Group 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 Group to apply all of its available cash to repay
such borrowings or to prevent Budget Group from making scheduled debt service
payments. If Budget Group were unable to repay any such borrowings when due, the
lenders could proceed against their collateral. If the indebtedness of Budget
Group under such collateralized indebtedness or other indebtedness were to be
accelerated, there can be no assurance that the assets of Budget Group would be
sufficient to repay such indebtedness in full. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations of TEAM -- Liquidity
and Capital Resources -- Pro Forma Liquidity and Capital Resources for Budget
Group."
POTENTIAL CHANGES IN MANUFACTURERS' REPURCHASE PROGRAMS
Approximately 85% of the vehicles purchased by TEAM and approximately 88%
of the vehicles purchased by BRACC in model year 1996 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 the vehicle rental operations of TEAM and BRACC. 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 Group could be adversely affected if automobile
manufacturers reduce the availability of Program Vehicles or related incentives.
SEASONALITY
The third quarter, during the peak summer travel months, has historically
been the strongest quarter of the year for both TEAM and BRACC. As a result, any
occurrence that disrupts travel patterns during the summer period could have a
material adverse effect on the Budget Group's annual performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of TEAM -- Seasonality."
16
<PAGE> 20
REGULATORY AND ENVIRONMENTAL MATTERS
TEAM and BRACC are subject to various foreign, federal, state and local
laws and regulations that affect the conduct of their operations, including
those relating 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
protection and clean-up. Compliance with changes in these laws and regulations
could significantly affect the operations of Budget Group, and there can be no
assurance that compliance with changes in these regulations or the adoption of
additional legislation and regulations will not require material expenditures by
Budget Group or otherwise have a material adverse effect on its results of
operations or financial condition. See "Business of Budget Group -- Regulatory
and Environmental Matters."
DEPENDENCE ON PRINCIPAL SUPPLIER
For many years, Ford has been BRACC's principal supplier of vehicles. The
number of vehicles purchased from Ford varies from year to year. In model year
1996, approximately 79% of BRACC's U.S. vehicle purchases were comprised of Ford
vehicles. Under the terms of a supply agreement to be entered into concurrently
with the Budget Acquisition, BRACC and its affiliates (including TEAM) will
agree to purchase or lease Ford vehicles in such quantity that the percentage of
new Ford vehicles purchased or leased by Budget Group in the United States,
Canada, and other countries outside the European Union represents at least 70%
of the total new vehicle purchases by Budget Group, with a minimum quantity of
at least 80,000 vehicles in the United States in each model year. See "The
Budget Acquisition -- Related Agreements -- Supply Agreement." Given the volume
of vehicles purchased from Ford by BRACC, shifting significant portions of the
fleet purchases to other manufacturers would require lead time and certain
operational changes. As a result, if Ford were unable to supply Budget Group
with the planned number and types of vehicles, it could have a material adverse
effect on Budget Group's financial condition and results of operations.
INTERNATIONAL OPERATIONS
Budget Group's international vehicle rental operations will be 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 Group's results
of operations or financial condition.
DEPENDENCE ON PRINCIPAL EXECUTIVE OFFICERS
Budget Group's existing operations and continued future development are
dependent in part on the active participation of Messrs. Miller, Kennedy and
Congdon. The loss of the services of one or more of these individuals could have
a material adverse effect on Budget Group. See "Management."
SHARES ELIGIBLE FOR FUTURE SALE
A substantial number of shares of Class A Common Stock currently
outstanding, or issuable upon conversion of TEAM's outstanding convertible notes
or convertible preferred stock, or upon exercise of stock options and stock
purchase warrants, are or will become eligible for future sale in the public
market at prescribed times pursuant to registration rights of certain security
holders or applicable regulations. Among other agreements, TEAM has agreed to
file a shelf registration statement relating to the 3,986,049 shares of Class A
Common Stock issuable upon conversion of the outstanding convertible
subordinated notes and has granted Ford certain demand and "piggyback"
registration rights for the approximately 4,500,000 shares of Class A Common
Stock issuable upon conversion of the Series A Convertible Preferred Stock.
TEAM's directors and executive officers, who in the aggregate beneficially own
2,824,305 shares of Common Stock, have agreed that for a period of 90 days after
the date of this Prospectus, and TEAM has agreed that for a period of 180 days
after the date of this Prospectus, they will not sell or otherwise dispose of
any shares of Common Stock without the prior written consent of Credit Suisse
First Boston Corporation. See "Underwriting." Significant sales of the Class A
17
<PAGE> 21
Common Stock in the public market following the Offering could adversely affect
prevailing market prices. See "Shares Eligible for Future Sale."
VOTING CONTROL BY PRINCIPAL EXECUTIVE OFFICERS
TEAM has two classes of Common Stock: Class A Common Stock, which is
entitled to one vote per share, and Class B Common Stock, which is entitled to
ten votes per share. Messrs. Miller, Kennedy and Congdon own all of the
outstanding shares of Class B Common Stock, which, following the Offering, will
represent approximately % of the combined voting power of both classes of
Common Stock. As a result, following the Budget Acquisition and prior to the
conversion of the Convertible Subordinated Notes or the Series A Convertible
Preferred Stock such officers will continue to be able to elect all of Budget
Group's Board of Directors, thereby ensuring that members elected by them will
continue to direct the business, policies and management of Budget Group. See
"Principal Stockholders."
POTENTIAL ANTI-TAKEOVER EFFECTS OF CHARTER AND BYLAW PROVISIONS; POSSIBLE
ISSUANCES OF PREFERRED STOCK
Certain provisions of Delaware law, TEAM's Amended and Restated Certificate
of Incorporation (in particular, the voting rights of the Class B Common Stock)
and TEAM'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 Group. Such provisions
could limit the price that certain investors might be willing to pay in the
future for shares of the Class A Common Stock. In addition, shares of preferred
stock may be issued by the Board of Directors without stockholder approval on
such terms and conditions, and having such rights, privileges and preferences,
as the Board of Directors may determine. The rights of the holders of the Class
A Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any preferred stock that may be issued in the future. Budget
Group has no current plans to issue any shares of preferred stock (other than
the shares of Series A Convertible Preferred Stock to be issued to Ford in
connection with the Budget Acquisition). See "Description of Capital
Stock -- Preferred Stock" and "Description of Capital Stock -- Section 203."
18
<PAGE> 22
USE OF PROCEEDS
The net proceeds to TEAM from the Offering are estimated to be
approximately $ million (approximately $ million if the
over-allotment option is exercised in full) after deducting underwriting
discounts and commissions and estimated offering expenses.
TEAM intends to use these net proceeds, together with a portion of the net
proceeds of the Debt Offering and the New Fleet Financings, to finance the
Budget Acquisition. See "The Budget Acquisition." The following table sets forth
the estimated sources and uses of consideration required to complete the Budget
Acquisition (assuming consummation of the Transactions (as defined in "Pro Forma
Consolidated Financial Statements of Budget Group") on February 10, 1997):
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES:
Class A Common Stock offered hereby....................... $ 140.0
% Senior Notes Due 2007................................. 175.0
Series A Convertible Preferred Stock...................... 120.3
New Fleet Financings(a)................................... 807.1
--------
Total sources..................................... $1,242.4
========
USES:
Budget Acquisition(b)..................................... $ 395.3
Repayment of BRACC Fleet Financing Facilities(c).......... 822.1
Fees and expenses(d)...................................... 25.0
--------
Total uses........................................ $1,242.4
========
</TABLE>
- ---------------
(a) Represents the amount drawn at closing under the New Fleet Financings
assuming a fleet size for Budget Group equivalent to the combined fleet
size of TEAM and BRACC at September 30, 1996.
(b) Represents (i) $275.0 million to purchase common stock of BRACC (of which
$274.0 million will be paid to BRACC for newly issued shares of BRACC
common stock and $1.0 million will be paid to the common stockholder of
BRACC) and (ii) $120.3 million of Series A Convertible Preferred Stock to
be issued to Ford (based on the value of 4,500,000 shares of Class A Common
Stock as of February 10, 1997). BRACC will use the $274.0 million in cash
that it receives as follows: (i) $269.0 million to repay outstanding
indebtedness to Ford and (ii) $5.0 million to redeem its outstanding Series
X Preferred Stock. In addition, concurrently with the Budget Acquisition,
Ford will cancel $108.7 million of additional outstanding BRACC
indebtedness.
(c) Represents (i) $386.3 million of the Budget Funding Corporation commercial
paper facility, (ii) $288.1 million of the vehicle facility provided by
Ford to finance non-Ford vehicles and (iii) $147.7 million of the vehicle
facility provided by Ford to finance Ford vehicles, net of $108.7 million
to be forgiven by Ford. See "Capitalization."
(d) Includes underwriting discounts and commissions in connection with the
Offering and the Debt Offering.
19
<PAGE> 23
PRICE RANGE OF COMMON STOCK
The Class A Common Stock is listed on The Nasdaq National Market under the
symbol "TBUD." The following table sets forth the high and low sale prices per
share for the Class A Common Stock as reported to TEAM by The Nasdaq National
Market for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1995
First Quarter............................................. $ 9.75 $ 8.00
Second Quarter............................................ 9.00 7.25
Third Quarter............................................. 11.375 6.50
Fourth Quarter............................................ 10.75 8.125
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 (through February 11, 1997)................. 29.00 16.50
</TABLE>
On February 11, 1997, the last sale price of the Class A Common Stock as
reported on The Nasdaq National Market was $27.375 per share. As of February 11,
1997, there were approximately 74 holders of record of the Class A Common Stock.
DIVIDEND POLICY
Although TEAM is currently able to pay dividends, subject to limitations
under the terms of its indebtedness, TEAM has never declared or paid dividends
on its Common Stock, and it is the current policy of the Board of Directors of
TEAM to retain earnings for use in the business and not to pay any cash
dividends on the Common Stock. Any declaration and payment of cash dividends on
the Common Stock will be subject to the discretion of TEAM's Board of Directors
and will be dependent upon TEAM's financial condition, results of operations,
cash requirements and future prospects, the limitations under the terms of its
indebtedness and other factors deemed relevant by TEAM's Board of Directors.
There can be no assurance that any such dividends will be declared or paid.
20
<PAGE> 24
CAPITALIZATION
The following table sets forth (i) the actual capitalization of TEAM as of
September 30, 1996; (ii) the actual capitalization of BRACC as of September 30,
1996; (iii) adjustments to the capitalization of TEAM and BRACC to give pro
forma effect to the Transactions (as defined in "Pro Forma Consolidated
Statements of Budget Group") consummated after September 30, 1996; and (iv) the
resulting pro forma capitalization of Budget Group. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of TEAM -- Liquidity and Capital Resources" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
BRACC -- Liquidity and Capital Resources."
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
------------------------------------------------------
ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL FOR BUDGET
TEAM BRACC TRANSACTIONS GROUP
---------- ---------- --------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Vehicle debt:
TEAM fleet financing facilities:
Asset-backed notes(a)............................... $145,709 -- $ 176,000 $ 321,709
New Fleet Financings(b)............................... -- -- 807,100 807,100
Other TEAM fleet obligations........................ 212,509 -- (212,509) --
BRACC fleet financing facilities:
BFC commercial paper................................ -- $ 386,276 (386,276) --
BFF term facility................................... -- 500,000 -- 500,000
Other BRACC fleet obligations....................... -- 612,205 (542,180) 70,025
-------- ---------- --------- ----------
Total vehicle debt............................. 358,218 1,498,481 (157,865) 1,698,834
Non-vehicle debt:
% Senior Notes Due 2007........................... -- -- 175,000 175,000
Convertible Subordinated Notes........................ -- -- 80,000 80,000
Other notes payable................................... 14,082 439,490 (391,618) 61,954
Capital lease obligations............................. 668 -- -- 668
-------- ---------- --------- ----------
Total non-vehicle debt......................... 14,750 439,490 (136,618) 317,622
-------- ---------- --------- ----------
Total debt................................... 372,968 1,937,971 (294,483) 2,016,456
Common Stock Warrant.................................... 2,000 -- (2,000) --
Mandatory Redeemable Series X Preferred Stock........... -- 5,084 (5,084) --
Stockholders' equity:
Series A Convertible Preferred Stock, $.01 par value,
10,000 shares authorized, no shares issued and
outstanding; 4,500 shares issued and outstanding pro
forma............................................... -- -- 105,750 105,750
Class A Common Stock, $.01 par value, one vote per
share, 17,500,000 shares authorized(c); 9,314,183
shares issued and 9,277,516 shares outstanding;
14,314,183 shares issued and 14,277,516 shares
outstanding pro forma(d)............................ 92 -- 50 142
Class B Common Stock, $.01 par value, ten votes per
share, 2,500,000 shares authorized; 1,936,600 shares
issued and outstanding.............................. 20 -- -- 20
Additional paid-in capital.............................. 89,797 555,439 (423,689) 221,547
Pension liability adjustment............................ -- (15,110) 15,110 --
Foreign currency translation adjustment................. -- (11,373) 11,373 --
Retained earnings (deficit)............................. 6,029 (384,696) 382,908 4,241
Treasury stock (at cost)................................ (330) -- -- (330)
-------- ---------- --------- ----------
Total stockholders' equity..................... 95,608 144,260 91,502 331,370
-------- ---------- --------- ----------
Total capitalization......................... $470,576 $2,087,315 $(210,065) $2,347,826
======== ========== ========= ==========
</TABLE>
21
<PAGE> 25
- ---------------
(a) Consists of the "First Fleet Financing Facility," the "Second Fleet
Financing Facility" and the "Third Fleet Financing Facility," as described
under "Management's Discussion and Analysis of Financial Conditions and
Results of Operations -- Liquidity and Capital Resources -- Historic for
TEAM."
(b) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources -- Pro Forma for the Budget
Group" for a description of the New Fleet Financings.
(c) At the 1997 Annual Meeting of Stockholders, TEAM will seek stockholder
approval to increase its authorized shares of Class A Common Stock to
35,000,000 shares.
(d) Does not include (i) 3,986,049 shares of Class A Common Stock, issuable upon
conversion of TEAM's outstanding Convertible Subordinated Notes; (ii)
4,500,000 shares of Class A Common Stock issuable upon conversion of the
Series A Convertible Preferred Stock to be issued to Ford in the Budget
Acquisition; (iii) shares of Common Stock reserved for issuance
under TEAM's stock option plans, of which options to purchase 636,850 shares
of Class A Common Stock and 164,000 shares of Class B Common Stock have been
granted; and (iv) 362,500 shares of the Class A Common Stock reserved for
issuance upon exercise of outstanding warrants. See "Management -- Benefit
Plans" and "Description of Capital Stock -- Warrants."
22
<PAGE> 26
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF BUDGET GROUP
The following unaudited pro forma consolidated financial statements (the
"Pro Forma Consolidated Financial Statements") are based on the historical
financial statements of TEAM and BRACC as of and for the nine months ended
September 30, 1996, adjusted to give effect to the transactions described below.
The Pro Forma Consolidated Statement of Operations gives effect to the following
transactions as if they had occurred on January 1, 1996: (i) certain
transactions effected by TEAM during 1996 that are more fully described below
(the "1996 TEAM 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 TEAM Transactions, the
"Transactions"). The Pro Forma Consolidated Balance Sheet gives effect to the
following transactions as if they had occurred on September 30, 1996: (i) the
1996 TEAM Transactions effected by TEAM after September 30, 1996 and (ii) the
Budget Acquisition Transactions.
The 1996 TEAM Transactions consist of the following: (i) TEAM's acquisition
of Van Pool, which was effective on February 1, 1996, TEAM's acquisition of the
Phoenix Budget franchise (the "Phoenix Acquisition"), which was effective on
March 1, 1996, and TEAM'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 Class A Common Stock by TEAM in a public
offering in July 1996 (the "July 1996 Public Offering"); (iii) the partial
refinancing of TEAM's vehicle rental fleet in December 1996 through the $176.0
million aggregate principal amount Third Fleet Financing Facility; (iv) the
private placement of the Convertible Subordinated Notes in December 1996; and
(v) the repayment of certain of TEAM'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 Offering and the application of net
proceeds thereof; (iii) the Debt Offering and the application of net proceeds
thereof; and (iv) the New Fleet Financings and the repayment of certain of
BRACC's outstanding indebtedness to Ford from the proceeds thereof. All
acquisitions, including the Budget Acquisition, have been accounted for using
the purchase method of accounting.
The Pro Forma Consolidated Financial Statements do not purport to represent
what Budget Group's results of operations or financial condition would have been
had the Transactions actually occurred on the dates indicated or to predict
Budget Group's results of operations or financial condition in the future. These
statements are qualified in their entirety by, and should be read in conjunction
with, the historical financial statements of TEAM and BRACC and the notes
thereto included elsewhere in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of TEAM" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of BRACC."
The Pro Forma Consolidated Financial Statements 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 Budget Acquisition and the
implementation of its business strategy.
23
<PAGE> 27
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS
FOR 1996 PRO FORMA FOR BUDGET PRO FORMA
HISTORICAL TEAM HISTORICAL HISTORICAL ACQUISITION BUDGET
TEAM TRANSACTIONS(A) TEAM BRACC TRANSACTIONS GROUP
---------- --------------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue:
Vehicle rental revenue............ $166,531 $10,874 $177,405 $ 745,521 $ -- $ 922,926
Royalty fees...................... -- -- -- 45,654 (4,097)(k) 41,557
Retail car sales revenue.......... 94,489 21,313 115,802 71,768 -- 187,570
Other............................. -- -- -- 12,425 (1,741)(k) 10,684
-------- ------- -------- ---------- -------- ----------
Total operating revenues... 261,020 32,187 293,207 875,368 (5,838) 1,162,737
Operating costs and expenses:
Direct vehicle and operating...... 24,392 2,372 26,764 98,553 (3,778)(k) 121,539
Depreciation -- vehicle........... 43,983 2,855 46,838 197,898 -- 244,736
Depreciation -- non-vehicle....... 1,915 343 2,258 19,620 -- 21,878
Cost of car sales................. 77,727 19,639 97,366 61,787 -- 159,153
Advertising, promotion and
selling......................... 17,101 915 18,016 66,667 (1,741)(k) 82,942
Facilities........................ 14,924 871 15,795 92,900 -- 108,695
Personnel......................... 38,239 1,955(b) 40,194 187,771 -- 227,965
General and administrative........ 8,013 3,968(c) 11,981 36,966 -- 48,947
Amortization...................... 1,468 90(d) 1,558 12,540 (7,547)(l) 6,551
-------- ------- -------- ---------- -------- ----------
Total operating costs and
expenses................. 227,762 33,008 260,770 774,702 (13,066) 1,022,406
-------- ------- -------- ---------- -------- ----------
Operating income (loss)............. 33,258 (821) 32,437 100,666 7,228 140,331
-------- ------- -------- ---------- -------- ----------
Other (income) expense:
Vehicle interest expense.......... 18,542 (2,675)(e) 15,867 66,365 (7,848)(m)(n) 74,384
Non-vehicle interest expense...... 1,286 3,059(f) 4,345 28,254 (9,103)(o)(p) 23,496
Interest income -- restricted
cash............................ (521) (978)(g) (1,499) (81)(q) (1,580)
Non-recurring bank fees........... 1,275 (1,275)(h) -- -- -- --
Related party interest............ 118 (118)(i) -- -- -- --
-------- ------- -------- ---------- -------- ----------
Total other (income)
expense.................. 20,700 (1,987) 18,713 94,619 (17,032) 96,300
Income before income taxes.......... 12,558 1,166 13,724 6,047 24,260 44,031
Provision for income taxes........ 4,395 467(j) 4,862 1,800 11,827(r) 18,489
-------- ------- -------- ---------- -------- ----------
Net income................. $ 8,163 $ 699 $ 8,862 $ 4,247 $ 12,433 $ 25,542
======== ======= ======== ========== ======== ==========
Weighted average common shares
outstanding:
Primary........................... 8,675,000 -- 11,457,045 -- -- 20,904,679
======== ======= ======== ========== ======== ==========
Fully diluted..................... 8,820,000 -- 15,639,425 -- -- 25,051,925
======== ======= ======== ========== ======== ==========
Earnings per common share:
Primary........................... $ 0.94 -- $ 0.77 -- -- $ 1.22
======== ======= ======== ========== ======== ==========
Fully diluted..................... $ 0.93 -- $ 0.73 -- -- $ 1.12
======== ======= ======== ========== ======== ==========
</TABLE>
Unaudited pro forma earnings per common share data for Budget Group are
calculated using 20,904,679 shares of Common Stock, which includes the following
(i) the sale of the Class A Common Stock offered hereby and (ii) the shares of
Series A Convertible Preferred Stock to be issued to Ford which are convertible
into 4,500,000 shares of Class A Common Stock. The grant of stock options in
connection with the Budget Acquisition to satisfy the BRACC employee bonus
provisions of the Stock Purchase Agreements, with an exercise price equal to the
fair market value of TEAM's stock on the date of grant will have no dilutive
effects on the pro forma earnings per common share data for Budget Group.
24
<PAGE> 28
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
Adjustments for 1996 TEAM 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 TEAM 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...................................... 523 217 (1,853) (1,113)
Other (income) expenses:
Vehicle interest.................................... 232 991 318 1,541
Non-vehicle interest -- net......................... (21) 2 -- (19)
------ ------ ------- -------
Total other (income) 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 to BRACC for the right to the use of
the "Budget" trade name for the ValCar retail car sales
facilities for 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>
25
<PAGE> 29
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS -- (CONTINUED)
(e) Reflects the net decrease in vehicle interest expense of $2,675 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......................... 222
Interest savings due to the refinancing of debt at
reduced interest rates under the Third Fleet Financing
Facility............................................... (4,438)
-------
Net decrease in vehicle interest expense........... $(2,675)
=======
</TABLE>
(f) Reflects the net increase in non-vehicle interest expense of $3,059
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 Convertible
Subordinated Notes..................................... 2,716
Amortization of costs incurred in connection with the
issuance of Convertible Subordinated Notes............. 145
-------
Net increase in non-vehicle interest -- net........ $ 3,059
=======
Because the Convertible Subordinated 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 Convertible Subordinated Notes, approximately
$2,400 of the interest costs incurred is attributable to funding
the fleet.
</TABLE>
(g) Reflects the $978 increase in interest income -- restricted cash earned on
restricted cash balances remaining in TEAM's restricted cash account after
application of the proceeds received from the Third Fleet Financing
Facility, the Convertible Subordinated Notes and the July 1996 Public
Offering to TEAM'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 pay down
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 TEAM and
BRACC:
<TABLE>
<S> <C>
Advertising fees paid by TEAM which were recognized as
other income by BRACC.................................. $1,741
Royalty expenses paid by TEAM which were recognized as
royalty fees by BRACC.................................. 3,397
</TABLE>
Also reflects the elimination of the current year effect of $700 BRACC
royalty fees recognized and $381 TEAM royalty expense recognized related to
the warrant to purchase shares of Class A Common Stock of TEAM held by BRACC
(the "BRACC Warrant").
(l) Reflects the elimination of $12,540 of amortization of BRACC's existing
goodwill and records an increase of $4,993 amortization on the net goodwill
established through purchase accounting adjustments.
(m) Reflects the increase in vehicle interest attributable to:
<TABLE>
<S> <C>
Interest expense related to the New Fleet Financings.... $25,933
Amortization of costs incurred in connection with the
New Fleet Financings................................... 1,077
-------
Increase in vehicle interest expense............... $27,010
=======
</TABLE>
26
<PAGE> 30
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS -- (CONTINUED)
(n) Reflects the decrease in vehicle interest attributable to:
<TABLE>
<S> <C>
Interest savings on vehicle debt refinanced through the
New Fleet Financings................................... $28,240
Removal of amortization of loan costs associated with
the indebtedness of BRACC to Ford that will be forgiven
or repaid.............................................. 488
Interest savings on vehicle debt to Ford paid down by
BRACC in connection with the Budget Acquisition........ 6,130
-------
Decrease in vehicle interest expense............... $34,858
=======
</TABLE>
(o) Reflects the increase in non-vehicle interest expense attributable to:
<TABLE>
<S> <C>
Interest expense related to the Debt Offering........... $13,453
Amortization of costs incurred in connection with the
Debt Offering.......................................... 394
-------
Increase in non-vehicle interest expense........... $13,847
=======
</TABLE>
(p) Reflects the decrease in non-vehicle interest -- net expense attributable
to:
<TABLE>
<S> <C>
Elimination of interest on BRACC indebtedness to Ford
purchased by TEAM through the issuance of Series A
Convertible Preferred Stock............................... $ 7,007
Elimination of interest on working capital debt of $108,719
forgiven by Ford.......................................... 6,365
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 TEAM......................... 9,578
-------
Decrease in non-vehicle interest expense........... $22,950
=======
</TABLE>
(q) Reflects $81 of interest income -- restricted cash on the $2,400 increase
in restricted cash resulting from the receipt of Ford's funding of the
employee bonus pool to be created in connection with the Budget Acquisition.
(r) Reflects a tax provision resulting in an overall effective rate of
approximately 42% for Budget Group due to the nondeductibility of goodwill
for tax reporting purposes.
27
<PAGE> 31
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS
FOR 1996 HISTORICAL FOR BUDGET PRO FORMA
HISTORICAL TEAM PRO FORMA HISTORICAL ACQUISITION BUDGET
TEAM TRANSACTIONS TEAM BRACC TRANSACTIONS GROUP
---------- ------------ ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and short-term
investments............ $ 16,249 $ 40,713(a)(b) $ 56,962 $ 35,163 $ 6,496(c) $ 98,621
Restricted cash.......... 8,407 -- 8,407 -- -- 8,407
Trade and vehicle
receivables, net....... 38,082 -- 38,082 215,787 (5,621)(d)(e) 248,248
Accounts receivable,
related parties........ 61 -- 61 -- -- 61
Vehicle inventory........ 22,417 -- 22,417 15,211 -- 37,628
Revenue earning vehicles,
net.................... 327,542 -- 327,542 1,470,444 -- 1,797,986
Property and equipment,
net.................... 22,098 -- 22,098 113,959 -- 136,057
Franchise rights, net.... 63,028 -- 63,028 -- -- 63,028
Deferred financing fees,
net.................... 1,653 2,778(b) 4,431 1,788 11,362(c)(f) 17,581
Other assets............. 9,676 -- 9,676 102,411 (837)(d) 111,250
Investment in BRACC...... -- -- -- -- --(c)(g) --
Deferred income taxes.... -- -- -- -- 11,072(g)(h) 11,072
Intangibles -- net....... -- -- -- 531,645 (282,150)(g) 249,495
-------- -------- -------- ---------- --------- ----------
Total assets...... $509,213 $ 43,491 $552,704 $2,486,408 $(259,678) $2,779,434
======== ======== ======== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Fleet financing
facilities............. $358,218 $(36,509)(a) $321,709 $1,498,481 $(121,356)(c) $1,698,834
% Senior Notes Due
2007................... -- -- -- -- 175,000(c) 175,000
Convertible Subordinated
Notes.................. -- 80,000(a) 80,000 -- -- 80,000
Other notes payable...... 14,082 -- 14,082 439,490 (391,618)(c)(i) 61,954
(j)
Capital lease
obligations............ 668 -- 668 -- -- 668
Accounts payable......... 12,548 -- 12,548 69,378 (3,621)(e) 78,305
Income taxes payable..... -- -- -- 31 -- 31
Deferred income taxes.... 1,701 -- 1,701 -- (1,701)(h) --
Accrued and other
liabilities............ 24,388 -- 24,388 329,684 (800)(d)(g) 353,272
(k)
-------- -------- -------- ---------- --------- ----------
Total
liabilities..... 411,605 43,491 455,096 2,337,064 (344,096) 2,448,064
-------- -------- -------- ---------- --------- ----------
Common stock warrant....... 2,000 -- 2,000 -- (2,000)(d) --
-------- -------- -------- ---------- --------- ----------
Mandatory redeemable series
X preferred stock........ -- -- -- 5,084 (5,084)(c)(g) --
-------- -------- -------- ---------- --------- ----------
Stockholders' equity
Common stock............. 112 -- 112 -- 50(c)(g) 162
Preferred stock.......... -- -- -- -- 105,750(c)(i) 105,750
Additional
paid-in-capital........ 89,797 -- 89,797 555,439 (423,689)(c)(g) 221,547
Pension liability
adjustment............. -- -- -- (15,110) 15,110(g) --
Foreign currency
translation
adjustment............. -- -- -- (11,373) 11,373(g) --
Retained earnings
(deficit).............. 6,029 -- 6,029 (384,696) 382,908(f)(g) 4,241
Treasury stock........... (330) -- (330) -- -- (330)
-------- -------- -------- ---------- ----------
---------
Total
stockholders'
equity.......... 95,608 -- 95,608 144,260 91,502(j) 331,370
-------- -------- -------- ---------- --------- ----------
Total liabilities
and
stockholders'
equity.......... $509,213 $ 43,491 $552,704 $2,486,408 $(259,678) $2,779,434
======== ======== ======== ========== ========= ==========
</TABLE>
28
<PAGE> 32
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Adjustments for 1996 TEAM Transactions:
(a)Reflects the following transactions associated with the Third Fleet Financing
Facility and Convertible Subordinated Notes:
<TABLE>
<S> <C>
Proceeds from:
Third Fleet Financing Facility.............................. $176,000
Convertible Subordinated Notes.............................. 80,000
--------
Total cash received................................. $256,000
========
Use of Proceeds:
Application of a portion of the proceeds from the Third
Fleet Financing Facility and Convertible Subordinated
Notes to the existing debt of TEAM........................ $212,509
========
</TABLE>
(b)Cash payment of $2,778 for the estimated 1% loan costs associated with the
Third Fleet Financing Facility and the Convertible Subordinated Notes.
Adjustments for Budget Acquisition Transactions:
(c)Reflects the cash effects of certain Budget Acquisition Transactions:
<TABLE>
<CAPTION>
CASH
---------
<S> <C>
Investment in BRACC--
Purchase by TEAM of 2,740,000 newly issued shares of BRACC
common stock............................................ $(274,000)
Purchase by TEAM of 2.31 shares of BRACC Series X
Cumulative Preferred Stock from Ford.................... (2)
Receipt of funding from Ford for the employee bonus
pool.................................................... 2,400
Purchase of 10,000 shares of BRACC common stock........... (1,000)
---------
(272,602)
---------
Deferred financing fees--
Reduction in proceeds from Debt Offering for expenses of
issuance of 3% of gross Debt Offering proceeds.......... (5,250)
Payment of costs incurred in connection with the New Fleet
Financings.............................................. (7,900)
---------
(13,150)
---------
Fleet financing facilities--
Repayment of certain BRACC indebtedness to Ford from
proceeds received by BRACC from issuance of common stock
to TEAM................................................. (106,382)
Receipt of proceeds from the New Fleet Financings......... 807,100
Repayment of Ford indebtedness by BRACC from proceeds
received from New Fleet Financings...................... (822,074)
---------
(121,356)
---------
% Senior Notes Due 2007--
Receipt of gross proceeds from Debt Offering.............. 175,000
---------
Other notes payable--
Repayment of certain BRACC indebtedness to Ford from
proceeds received by BRACC from issuance of common stock
to TEAM................................................. (162,614)
---------
Stockholders' equity--
Sale of 2,740,000 newly issued shares of BRACC common
stock (par value of $.01 per share) to TEAM............. 274,000
Public offering of 5,000,000 shares of TEAM Class A Common
Stock (par value of $.01 per share), net of $7,700 of
offering expenses estimated at 5.5% of gross proceeds... 132,300
Redemption of 5,004.15 shares of Series X Cumulative
Preferred Stock of BRACC plus cumulative dividends...... (5,082)
---------
401,218
---------
$ 6,496
=========
</TABLE>
(d)Reflects the elimination of the BRACC Warrant, including the related prepaid
royalty and unearned revenue balances of $837.
(e)Reflects the elimination of the payable and receivable arising from the
royalty fees charged by BRACC to TEAM and amounts arising from fee sharing
arrangements that were unpaid at September 30, 1996.
29
<PAGE> 33
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET -- (CONTINUED)
(f)Reflects the write-off of the deferred loan costs of $1,788 related to
BRACC's indebtedness to Ford refinanced through the New Fleet Financings.
(g)Reflects the elimination of TEAM's investment in Budget of $272,602 against
BRACC's fully adjusted stockholders' equity as of September 30, 1996, which
was applied as follows:
<TABLE>
<S> <C>
Preferred stock............................................. $ (2)
Common stock................................................ (27)
Paid-in-capital............................................. (829,412)
Accumulated deficit......................................... 302,460
</TABLE>
Additionally, to record the $267,615 reduction in BRACC's intangibles as a
result of certain purchase accounting adjustments, a $12,773 deferred income
tax asset of BRACC which was previously offset by a valuation allowance and
the elimination of $463 of unearned revenue related to the BRACC Warrant.
(h)Reflects the aggregation of Budget Group's deferred income taxes.
(i)Reflects the forgiveness by Ford of $108,719 of indebtedness due from BRACC.
(j)Reflects the reduction in BRACC's indebtedness to Ford attributable to the
issuance of 4,500 shares of Series A Convertible Preferred Stock of TEAM. The
fair market value of the debt purchased of $120,285 was determined in
accordance with the terms of the Stock Purchase Agreements and is based on
the underlying value of the 4,500,000 shares of Class A Common Stock into
which the Series A Convertible Preferred Stock is convertible. Under the
Stock Purchase Agreements, the underlying value of the shares of Class A
Common Stock is determined based on the preceding ten day average stock price
as of the closing date (assumed to be February 10, 1997 for computational
purposes). However, generally accepted accounting principles that address the
determination of the market value of securities issued in a purchase business
combination require that the value assigned to such securities be determined
using the market price for a reasonable period before and after the date the
terms of the acquisition are agreed to and publicly announced. Accordingly,
the market value of the underlying 4,500,000 shares of Class A Common Stock
for the three-day period surrounding January 13, 1997 (the date the Budget
Acquisition was publicly announced) was used to determine the value of
$105,750 to be assigned to the Series A Convertible Preferred Stock. The
difference between the value assigned to the debt purchased and the value
assigned to the Series A Convertible Preferred Stock will be treated as a
reduction in goodwill.
(k)Reflects an accrual for the estimated costs to register the shares of Class A
Common Stock that the Series A Convertible Preferred Stock is convertible
into.
30
<PAGE> 34
SELECTED FINANCIAL DATA OF TEAM
The following table sets forth selected consolidated statement of
operations data and selected consolidated balance sheet data of TEAM for the
five years ended December 31, 1995. Such data were derived from the audited
Consolidated Financial Statements of TEAM. The audited Consolidated Financial
Statements and notes thereto of TEAM for each of the three years in the period
ended December 31, 1995 are included elsewhere in this Prospectus. The following
table also sets forth selected consolidated statement of operations data of TEAM
for the nine months ended September 30, 1995 and 1996 and selected consolidated
balance sheet data of TEAM as of September 30, 1996. Such data were derived from
the unaudited Consolidated Financial Statements of TEAM included elsewhere in
this Prospectus, which unaudited Consolidated Financial Statements, in the
opinion of TEAM's management, include all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the financial
position and results of operations for such periods. The results of operations
for the nine months ended September 30, 1996 are not necessarily indicative of
results that may be expected for the entire year. The selected consolidated
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
TEAM" and the Consolidated Financial Statements and notes thereto of TEAM
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
------------------------------------------------ -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue:
Vehicle rental revenue(a)........... $15,105 $21,968 $22,321 $38,642 $107,067 $70,819 $166,531
Retail car sales revenue............ -- -- -- -- 42,662 26,156 94,489
------- ------- ------- ------- -------- ------- --------
Total operating revenues..... 15,105 21,968 22,321 38,642 149,729 96,975 261,020
Operating costs and expenses:
Direct vehicle and operating........ 3,903 5,989 5,452 9,439 13,704 9,120 24,392
Depreciation -- vehicle............. 1,939 2,832 4,358 7,382 27,476 19,824 43,983
Depreciation -- nonvehicle.......... 227 212 229 446 1,341 872 1,915
Cost of car sales................... -- -- -- -- 38,021 20,655 77,727
Advertising, promotion and
selling........................... 1,066 1,477 1,658 3,090 11,826 6,493 17,101
Facilities.......................... 2,020 2,662 2,695 4,398 11,121 7,397 14,924
Personnel........................... 3,741 4,292 4,537 7,947 24,515 15,798 38,239
General and administrative.......... 935 736 790 1,515 6,686 3,398 8,013
Amortization of franchise rights.... 170 151 152 229 859 610 1,468
------- ------- ------- ------- -------- ------- --------
Total operating costs and
expenses................... 14,001 18,351 19,871 34,446 135,549 84,167 227,762
Operating income...................... 1,104 3,617 2,450 4,196 14,180 12,808 33,258
Other (income) expense:
Vehicle interest expense............ 1,867 2,440 2,462 3,909 13,874 8,803 18,542
Non-vehicle interest expense
(income), net..................... 503 619 401 (139) (716) (113) 883
Nonrecurring expense (income)....... -- -- (1,023) -- -- -- 1,275
------- ------- ------- ------- -------- ------- --------
Total other (income)
expense.................... 237 3,059 1,840 3,770 13,158 8,690 20,700
Income (loss) before provision for
income taxes........................ (1,266) 558 610 426 1,022 4,118 12,558
Provision for income taxes............ -- -- 182 176 685 540 4,395
------- ------- ------- ------- -------- ------- --------
Net income (loss)..................... $(1,266) $ 558 $ 428 $ 250 $ 337 $ 3,578 $ 8,163
======= ======= ======= ======= ======== ======= ========
Weighted average common shares
outstanding:
Primary............................. -- -- -- 3,704 6,369 6,104 8,675
Fully diluted....................... -- -- -- 3,704 6,369 6,104 8,820
Earnings per common share:
Primary............................. -- -- -- $ 0.07 $ 0.05 $ 0.59 $ 0.94
Fully diluted....................... -- -- -- 0.07 0.05 0.59 0.93
======= ======= ======= ======= ======== ======= ========
</TABLE>
31
<PAGE> 35
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
------------------------------ -------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT RENTAL DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
EBITDA(b)........................................... $ 8,212 $ 12,923 $ 45,204 $ 34,752 $ 79,752
Adjusted EBITDA(b).................................. 1,392 1,632 3,854 6,125 17,227
RENTAL DATA:(C)
Locations in operation at period end................ 19 63 133 99 155
Number of usable vehicles at period end(d).......... 2,006 5,044 11,143 12,970 17,034
Rental transactions(e).............................. 163,000 276,000 689,000 460,000 878,000
Daily dollar average(f)............................. $ 34.01 $ 37.32 $ 41.26 $ 40.38 $ 41.67
Vehicle utilization(g).............................. 77.2% 80.6% 80.0% 81.4% 81.3%
Average monthly revenue per unit(h)................. $ 791 $ 909 $ 1,007 $ 999 $ 1,033
RETAIL CAR SALES DATA:
Locations in operation at period end................ -- -- 7 4 13(i)
Average monthly vehicles sold....................... -- -- 351 215 705
Average monthly sales revenue....................... -- -- $ 4,883 $ 3,128 $ 11,964
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------- AS OF SEPTEMBER 30, 1996
1991 1992 1993 1994 1995 (UNAUDITED)
------- ------- ------- -------- -------- ------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Revenue earning vehicles, net.... $26,870 $23,343 $23,577 $ 97,127 $219,927 $327,542
Retail car sales inventory....... -- -- -- 943 8,938 22,417
Total assets..................... 36,800 32,027 33,325 162,991 386,323 509,213
Secured vehicle debt............. 28,380 28,390 23,857 123,779 295,647 358,218
Notes payable.................... 5,924 3,795 1,824 2,785 22,586 14,082
Total debt....................... 34,531 27,880 28,533 127,187 319,017 372,300
Redeemable preferred stock....... -- 2,747 2,747 -- -- --
Common stock warrant............. -- -- -- 2,000 2,000 2,000
Stockholders' equity (deficit)... (1,737) (1,344) (1,251) 26,748 39,592 95,608
</TABLE>
- ---------------
(a) Includes revenue from vehicle rentals and related products (such as
insurance, refueling services and loss damage waivers).
(b) EBITDA consists of income before provision for income taxes plus (i) vehicle
interest expense, (ii) non-vehicle interest expense, (iii) vehicle
depreciation expense and (iv) non-vehicle depreciation and amortization
expenses. Adjusted EBITDA consists of income before provision for income
taxes plus (i) non-vehicle depreciation and amortization expenses and (ii)
non-vehicle interest expense. EBITDA and Adjusted EBITDA are not presented
as, and should not be considered, an alternative measure of operating
results or cash flows from operations (as determined in accordance with
generally accepted accounting principles), but are presented because they
are widely accepted financial indicators of a company's ability to incur and
service debt.
(c) Does not include data from Van Pool, TEAM's van pooling operation.
(d) Represents vehicles available for rent.
(e) Rounded to the nearest thousand.
(f) Represents rental revenue divided by the number of days that vehicles were
actually rented.
(g) Represents number of days vehicles were actually rented divided by the
number of days vehicles were available for rent.
(h) Represents the average monthly revenue divided by average monthly fleet.
(i) TEAM consolidated two retail car sales locations subsequent to September 30,
1996.
32
<PAGE> 36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF TEAM
GENERAL
Team Rental Group, Inc. is the largest Budget franchisee in the United
States and is one of the largest independent retailers of late model automobiles
in the United States. In 1994, TEAM embarked on a strategy to significantly
expand its Budget franchise base and to develop a branded retail car sales
operation within its Budget franchise territories. This strategy both leverages
management's experience and creates certain operating efficiencies between these
complementary businesses. Through its 151 vehicle rental locations, TEAM had pro
forma 1996 vehicle rental revenues of $177.4 million and, through its 11 retail
car sales facilities, TEAM had pro forma 1996 sales revenue of $71.8 million.
TEAM estimates it will purchase approximately 150,000 vehicles over the next
twelve months, consisting of new automobiles and trucks for its Budget rental
operations, late model automobiles for its retail car sales operations and new
passenger vans for its van pooling operations.
The results of operations for 1993 reported herein reflect the consolidated
accounts of the San Diego, California, Richmond, Virginia and Albany and
Rochester, New York Budget franchises (collectively, the "1993 Operations"),
which had been operated as separate businesses, but were affiliated through
common ownership and control. The 1994 results of operations reported herein
include the 1993 Operations and the acquired operations of the Pittsburgh and
Philadelphia, Pennsylvania, Cincinnati, Ohio and Fort Wayne, Indiana Budget
franchises from their respective acquisition dates through December 31, 1994.
The 1995 results of operations reported herein include the consolidated
operations of the entities comprising TEAM at December 31, 1994 and the acquired
operations of the Dayton, Ohio, Charlotte, North Carolina, Hartford,
Connecticut, and Los Angeles, California Budget franchises from their respective
acquisition dates through December 31, 1995. Results of operations for the nine
months ended September 30, 1995 reported herein include the acquired operations
of the Budget franchises for Dayton, Ohio, Charlotte, North Carolina and
Hartford, Connecticut from their respective acquisition dates through September
30, 1995. Results of operations for the nine months ended September 30, 1996
reported herein include the acquired operations of the Phoenix Budget franchise,
Van Pool and ValCar from their respective acquisition dates through September
30, 1996.
On January 13, 1997, TEAM entered into the Stock Purchase Agreements,
pursuant to which TEAM agreed to acquire the stock of BRACC. The consideration
to be paid by TEAM pursuant to the Stock Purchase Agreements consists of (i)
approximately $275.0 million in cash and (ii) the issuance to Ford of 4,500
shares of TEAM's newly created Series A Convertible Preferred Stock (subject to
adjustment), which does not carry a dividend and which will be convertible into
4,500,000 shares of Class A Common Stock.
33
<PAGE> 37
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
operating revenues represented by certain items in TEAM's consolidated
statements of operations.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
----------------------- -------------------
1993 1994 1995 1995 1996
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Vehicle rental revenue........................ 100.0% 100.0% 71.5% 73.0% 63.8%
Retail car sales revenue...................... -- -- 28.5 27.0 36.2
----- ----- ----- ----- -----
Total operating revenue..................... 100.0 100.0 100.0 100.0 100.0
Direct vehicle and operating expenses......... 24.5 24.4 9.2 9.4 9.3
Cost of car sales............................. -- -- 25.4 21.3 29.8
Vehicle depreciation expense.................. 19.5 19.1 18.4 20.4 16.9
Non-vehicle depreciation expense.............. 1.0 1.2 0.9 0.9 0.7
Advertising, promotion and selling............ 7.4 8.0 7.9 6.7 6.6
Facilities.................................... 12.1 11.4 7.4 7.6 5.7
Personnel..................................... 20.3 20.6 16.3 16.3 14.6
General and administrative expenses........... 3.6 3.9 4.5 3.5 3.0
Amortization of franchise rights.............. 0.7 0.6 0.5 0.6 0.6
----- ----- ----- ----- -----
Operating income.............................. 10.9 10.8 9.5 13.2 12.7
Vehicle interest expense...................... 11.0 10.1 9.3 9.1 7.1
Non-vehicle interest expense (income), net.... 1.8 (0.4) (0.5) (0.1) 0.3
Nonrecurring expense (income)................. (4.6) -- -- -- 0.5
----- ----- ----- ----- -----
Income before income taxes.................... 2.7 1.1 0.7 4.2 4.8
Provision for income taxes.................... 0.8 0.5 0.5 0.6 1.7
----- ----- ----- ----- -----
Net income.................................... 1.9% 0.6% 0.2% 3.7% 3.1%
===== ===== ===== ===== =====
</TABLE>
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September
30, 1995.
General Operating Results. Net income for the first nine months of 1996
increased $0.35 per share, or 59%, from $0.59 for the first nine months of 1995
to $0.94 for the first nine months of 1996. Income before provisions for income
taxes increased over three times from $4.1 million in the first nine months of
1995 to $12.6 million for the first nine months of 1996. This increase was due
to TEAM's acquisition activity and the growth of TEAM's car sales operations
from five locations at September 30, 1995 to 13 locations at September 30, 1996.
Operating income for the first nine months of 1996 increased $20.5 million, or
160%, to $33.3 million, due primarily to an increase in the vehicle fleet
resulting from the acquisitions of the Budget franchises in Arizona and Southern
California and Van Pool.
Operating Revenues. Vehicle rental revenues for the first nine months of
1996 increased $95.7 million from $70.8 million in 1995 to $166.5 million in the
first nine months of 1996. The increase in rental revenues is due primarily to
the increase in the size of TEAM from operating 99 rental locations in 11
franchise areas at September 30, 1995 to operating 155 locations in 13 franchise
territories at September 30, 1996, and to the acquisition of Van Pool in
February 1996. Revenues from TEAM's retail car sales operations increased $68.3
million from $26.2 million in the first nine months of 1995 to $94.5 million in
the first nine months of 1996, due to the expansion of TEAM's car sales
facilities from four locations at September 30, 1995 to 13 locations at
September 30, 1996.
Operating Expenses. Operating expenses increased approximately $143.6
million, or 171%, to $227.8 million for the first nine months of 1996 as
compared to $84.2 million for the first nine months of 1995. The growth of
TEAM's vehicle rental operations through the acquisitions discussed above was
the principal cause of all of the increases in TEAM's operating expenses.
Vehicle depreciation increased approximately $24.2 million, or $122%, in the
first nine months of 1996 due to an increase in fleet of 7,800 vehicles.
Personnel costs increased approximately 142% in the first nine months of 1996 as
compared to the first nine months of 1995 due to an
34
<PAGE> 38
increase of approximately 1,300 employees since September 30, 1995. Advertising
expenses increased from $6.5 million to $17.1 million for the first nine months
of 1996 due to the increase in the size of the rental operations and due to the
growth of the retail car sales operations from five markets at September 30,
1995 to 13 markets at September 30, 1996. The retail car sales business
typically incurs greater advertising expense than the car rental business.
Facilities' expense increased $7.5 million, or 102%, in the first nine months of
1996 as compared to the first nine months of 1995 due to the addition of 56
locations since September 30, 1995. Other operating expense increases were due
to the increased volume of rental business resulting from the 1995 and 1996
acquisitions.
Other (Income) Expense, Net. Interest expense, net of interest income,
increased from $8.7 million for the first nine months of 1995 to $20.7 million
for the first nine months of 1996. Vehicle interest expense increased
approximately $9.7 million in the first nine months of 1996 due to the increase
in the size of TEAM's rental fleet from approximately 7,800 vehicles at
September 30, 1995 to approximately 15,600 vehicles at September 30, 1996.
Non-vehicle interest and other expense, net of interest income, increased
approximately $0.2 million in the first nine months of 1995 to $1.9 million in
the first nine months of 1996. This increase was primarily due to approximately
$1.3 million in nonrecurring bank fees in the form of cash and stock warrants
paid to a bank for a bridge financing that was repaid in July 1996 with proceeds
from TEAM's issuance of common stock.
Provision for Income Taxes. The provision for income taxes increased $3.9
million from $0.5 million for the first nine months of 1995 to $4.0 million for
the first nine months of 1996. The tax provision is calculated at a rate of 35%.
The increase in provision is due to the enhanced profitability of TEAM in the
first nine months of 1996 as compared to the first nine months of 1995.
Year Ended December 31, 1995 Compared to the Year Ended December 31, 1994.
General Operating Results. Net income for 1995 increased $87,000, or
34.8%, to $337,000 from $250,000 in 1994. Income before income taxes more than
doubled to $1.0 million in 1995 from $426,000 in 1994. The increase in pre-tax
income was due to an increase in operating income of $10.0 million resulting
from the growth of TEAM's retail car sales operations from one facility at
December 31, 1994 to seven facilities at December 31, 1995 and the acquisition
of four additional Budget vehicle rental operations, which was offset by
increases in interest expense of $9.4 million, due primarily to the increased
size of the fleet throughout 1995 as a result of the acquisitions occurring
between August 1994 and October 1995, described above. The provision for income
taxes increased from $176,000 in 1994 to $685,000 in 1995 due to the enhanced
profitability of TEAM, nondeductible amortization expense, and state income
taxes.
Operating Revenues. Operating revenues increased 287.8% in 1995 to $149.7
million from $38.6 million in 1994. This increase was primarily due to the
acquisitions discussed above and to an increased volume of vehicle rental
business in 1995, resulting in an increase in the number of rental revenue days
to 2,590,000 days in 1995 from 1,027,000 days in 1994. The daily average rental
rate increased 11% from $37.32 in 1994 to $41.26 in 1995; the average rental
term experienced a slight decrease from 3.82 days in 1994 to 3.76 days in 1995.
Operating Expenses. Operating expenses increased approximately $101.1
million, or 293.5%, to $135.5 million for 1995 from $34.5 million in 1994. This
increase was due in large measure to the growth of TEAM's retail car sales
operations, which included $38.0 million of cost of sales for which there was no
significant comparable expense in 1994, as well as to increases resulting from
the increase in fleet and personnel due to the four acquisitions occurring
during 1995. Direct vehicle and operating expense increased $4.3 million or
45.2% to $13.7 million from $9.4 million, due to the increase in the size of the
fleet from 5,044 vehicles at December 31, 1994 to 11,144 vehicles at December
31, 1995. The increased costs for vehicle maintenance recorded to direct vehicle
and operating expenses were partially offset by a decrease in the number of
leased vehicles during the period, as expenses for owned vehicles are charged to
both vehicle depreciation and interest expense, whereas leased vehicles are
charged to direct vehicle and operating expense. Vehicle depreciation expense
increased $20.1 million or 272.2% to $27.5 million due to an increase in fleet
size of 121% to 11,144 vehicles at December 31, 1995. Personnel expenses
increased 208.5% to $24.5 million due to the 226% increase in the employee base
from 525 employees at December 31, 1994 to 1,709 employees at December 31, 1995.
The number of locations from which TEAM rented vehicles increased from 63
locations at December 31, 1994 to 133 locations at December 31, 1995.
35
<PAGE> 39
Other Income and Expense. Other expense-net increased approximately $9.4
million, or 249.0%, in 1995 due primarily to interest expense on the increased
vehicle fleet operated by TEAM in 1995. Vehicle interest increased $10.0 million
due to the increased size of the vehicle fleet throughout 1995. This increase
was offset by an increase in interest income earned on cash restricted for
acquiring vehicles under TEAM's existing fleet financing facilities of $0.7
million.
Provision for Income Taxes. The provision for income taxes increased
289.2% to $685,000 in 1995 from $176,000 in 1994. TEAM's effective tax rate
increased from 41.3% in 1994 to 67.0% in 1995. The increase in the tax provision
was due to the enhanced profitability of TEAM in 1995, certain amortization
expense that was not deductible for income taxes purposes, and state income
taxes.
Year Ended December 31, 1994 Compared to the Year Ended December 31, 1993.
General Operating Results. Income before income taxes increased to
$426,000 in 1994 from a loss of $413,000, exclusive of the $1.0 million in
nonrecurring income from a vehicle manufacturer in 1993. The 1994 acquisitions
and TEAM's strategy to reduce financing costs through the First Fleet Financing
Facility (as defined below) had a favorable impact on income before income taxes
in 1994. Operating income for 1994 increased $1.7 million due to the 1994
acquisitions. Interest expense, net of interest income, increased in 1994 by
$907,000 due to the larger fleet relative to 1993. This increase was offset in
part by lower effective interest rates from the First Fleet Financing Facility.
Operating Revenues. Operating revenues increased 73.1% in 1994 to $38.6
million from $22.3 million in 1993. These increases were primarily due to the
acquisitions in August and November 1994 discussed above and an increased volume
of rental business in 1994, resulting in an increase in the number of rental
revenue days to 1,027,000 days in 1994 from 656,000 days in 1993. The daily
average rental rate increased from $34.02 in 1993 to $35.01 in 1994, which was
partially offset by a decrease in the average rental term from 4.02 days in 1993
to 3.82 days in 1994.
Operating Expenses. Operating expenses increased approximately $14.6
million, or 73.3%, in 1994 as compared to 1993. This increase was primarily due
to the 1994 acquisitions. Direct vehicle and operating expense increased $4.0
million or 73.1% to $9.4 million from $5.5 million due to an increase in the
volume of business from the 1994 acquisitions and an increase in the number of
leased vehicles during the year. Expenses for owned vehicles are charged to both
vehicle depreciation and interest expense, whereas leased vehicles are charged
to direct vehicle and operating expense. Vehicle depreciation expense increased
$3.0 million or 69.4% to $7.4 million due to an increase in fleet size of 151.4%
from 2,006 vehicles at December 31, 1993 to 5,044 vehicles at December 31, 1994.
Personnel expenses increased 75.2% to $7.9 million due to the 232% increase in
rental car locations from 19 locations at December 31, 1993 to 63 locations at
December 31, 1994.
Other Income and Expense. Other expense-net increased approximately $1.9
million in 1994 due to the absence of $1.0 million of nonrecurring income in
1994 as discussed above and the additional fleet financing costs from the
increased number of vehicles in the fleet. The increases were offset in part by
the decreased interest costs under the First Fleet Financing Facility and the
repayment in August 1994 of all notes outstanding to certain related parties.
The interest savings under the First Fleet Financing Facility resulted in
increased vehicle interest costs, net of interest income on restricted cash, of
only 31.6% in 1994 as compared to 1993, significantly less than the 69.4%
increase in vehicle depreciation expense that resulted from the same fleet
acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
Historic for TEAM
Historically, TEAM's operations have been funded by cash provided from
operating activities and by financing provided under asset-backed notes issued
under the First, Second and Third Fleet Financing Facilities (collectively, the
"Fleet Financing Facilities") and by banks, automobile manufacturers' captive
finance companies and leasing companies. TEAM intends to continue to fund its
operations through these sources and other similar sources and from the proceeds
of the Offering.
36
<PAGE> 40
Net cash provided by operating activities for the nine months ended
September 30, 1996 increased 56.6% to $36.4 million from $23.2 million in the
comparable period in 1995. Net cash provided by operating activities for 1995
increased 341.2% to $16.1 million from $3.7 million in 1994. Net cash provided
by operating activities for 1994 decreased 27.5% to $3.7 million fro $5.0
million in 1993. In each period, TEAM experienced increases in cash received
from rentals which were offset to some extent by increases in cash paid to
vendors and employees and in interest expenses.
Net cash used in investing activities is primarily attributable to cash
paid to suppliers of revenue vehicles and, to a lesser extent, capital
expenditures. This cash use is mainly offset by cash received from the sale of
vehicles (most of which sales were pursuant to manufacturers vehicle repurchase
programs). Cash received from the sale of vehicles was $293.9 million, $73.7
million, $48.5 million, $189.6 million and $111.7 million for 1995, 1994 and
1993 and the nine months ended September 30, 1996 and 1995, respectively. Cash
paid to suppliers of revenue vehicles was $315.9 million, $155.2 million, $52.8
million, $341.2 million and $200.6 million for 1995, 1994 and 1993 and the nine
months ended September 30, 1996 and 1995, respectively. The decrease in cash
paid to suppliers of revenue vehicles during the nine months ended September 30,
1996 was a result of more 1996 model year vehicles being infleeted in the fourth
quarter of 1995 and fewer vehicles being purchased in total due to the extended
vehicle holding periods referred to above. Payment for acquisitions, net of
assets acquired, amounted to $6.5 million and $5.7 million for 1995 and 1994,
respectively.
Net cash provided by financing activities for the nine months ended
September 30, 1996 increased 63.4% to $98.4 million from $60.2 million in the
comparable period in 1995. Net cash provided by operating activities for 1995
decreased 75.1% to $29.6 million from $119.0 million in 1994. Net cash provided
by financing activities for 1994 increased 18,268.9% to $119.0 million from
($655,000) million in 1993. The fluctuations in both periods were primarily due
to the issuance of common stock and the private placement of $105.7 million of
debt utilized for fleet financing occurring in August 1994 for which there were
no comparable transactions in 1995 or 1993.
Fleet Financing Facilities. At December 31, 1996, amounts outstanding
under the Fleet Financing Facilities were comprised of $105.7 million of
asset-backed notes issued by TEAM's special purpose finance subsidiary, Team
Fleet Financing Corporation ("TFFC"), in August 1994 (the "First Fleet Financing
Facility"), $40.0 million of asset-backed notes assumed by TEAM in connection
with the acquisition of the Los Angeles, California Budget franchise in October
1995 (the "Second Fleet Financing Facility") and $176.0 million of asset-backed
notes issued by TFFC in December 1996 (the "Third Fleet Financing Facility").
These facilities have been utilized to finance Program Vehicles. Proceeds from
these facilities that are temporarily unutilized for vehicle financing are
maintained in restricted cash accounts with the trustee and are not available
for other purposes. The notes issued under these facilities are collateralized
by the financed vehicles and the restricted cash accounts, with the vehicles
being leased to TEAM's operating subsidiaries.
The First Fleet Financing Facility is comprised of senior and subordinated
notes. The senior notes require monthly interest payments at an annual rate of
average LIBOR, as defined, plus 0.75% (6.4% at December 31, 1996). Monthly
principal payments of $16,667,000 commence in June 1999 with the last payment
due in November 1999. The subordinated notes included in the First Fleet
Financing Facility require monthly interest payments at an annual rate of
average LIBOR, as defined, plus 1.30% (6.9% at December 31, 1996) and are
payable in full in December 1999.
The Second Fleet Financing Facility is comprised of senior and subordinated
notes. The senior notes require monthly interest payments at an annual rate of
average LIBOR, as defined, plus 0.60% (6.2% at December 31, 1996). Monthly
principal payments of $4,812,000 commence in November 1997 with the last payment
due in June 1998. The subordinated notes included in the Second Fleet Financing
Facility require monthly interest payments at an annual rate of average LIBOR,
as defined, plus 1.0% (6.6% at December 31, 1996) and are payable in full in
July 1998.
The Third Fleet Financing Facility is comprised of senior and subordinated
notes. The senior notes require monthly interest payments at an annual rate of
6.65%. Monthly principal payments of $13,833,334 commence in 2001 with the last
payment due in 2002. The subordinated notes included in the Third Fleet
Financing Facility
37
<PAGE> 41
require monthly interest payments at an annual rate of 7.10% and are payable in
full in June 2002. Up to $100 million of the Third Fleet Financing may be used
to finance vehicles that are not Program Vehicles.
Convertible Subordinated Notes. In December 1996, TEAM issued $80.0
million aggregate principal amount of 7.0% Convertible Subordinated Notes due
2003. At a conversion price of $20.07, the Convertible Subordinated Notes are
convertible into 3,986,049 shares of Class A Common Stock.
Vehicle Obligations. Vehicle obligations consist of outstanding lines of
credit to purchase rental vehicles and retail car sales inventory.
Collateralized lines of credit at December 31, 1996 consist of $203 million for
rental vehicles and $26 million for retail car sales inventory with maturity
dates ranging from October 1996 to October 1997. Vehicle obligations are
collateralized by revenue earning vehicles financed under these credit
facilities and proceeds from the sale, lease or rental of rental vehicles and
retail car sales inventory.
Vehicle obligations relating to the rental fleet are generally amortized
over 5 to 15 months with monthly principal payments ranging from 2% to 3% of the
capitalized vehicle cost. When rental vehicles are sold, the related unpaid
obligation is due. Interest payments for rental fleet facilities are due monthly
at annual interest rates ranging from 6.2% to 8.5% at December 31, 1996.
Management expects vehicle obligations will generally be repaid within one year
with proceeds received from either the repurchase of the vehicles by the
manufacturers in accordance with the terms of the manufacturers' rental fleet
programs or from the sale of the vehicles.
In November 1996, Team Fleet Services Corporation ("TFSC"), a wholly owned
subsidiary of TEAM, entered into a Revolving Credit Agreement with NationsBank,
National Association (South), as Agent (the "Agent") for the lenders party
thereto, providing for up to $150.0 million financing for the acquisition of
Program Vehicles (the "Revolving Credit Facility"). The interest rates of loans
under the Revolving Credit Facility are, at the option of TFSC and up to certain
amounts, based on the Agent's prime rate, LIBOR or CD rates.
Monthly payments of interest only on obligations relating to retail car
sales inventory are required at the prime rate (8.25% at December 31, 1996).
Retail car sales inventory obligations are paid when the inventory is sold but
in no event later than 120 days after the date of purchase.
Working Capital Facilities. At December 31, 1996, TEAM had an unutilized
working capital facility of $10.0 million, which requires monthly interest
payments on the outstanding balance at LIBOR plus 2.50% (8.125% at December 31,
1996). This facility, which expires in February 1997, is collateralized by
accounts receivable, inventory, equipment, general intangibles, investments and
all other personal property of TEAM and guarantees of certain TEAM subsidiaries.
This agreement is subject to certain covenants, the most restrictive of which
requires TEAM to maintain certain financial ratios and minimum tangible net
worth and prohibits the payment of cash dividends.
Pro Forma Liquidity and Capital Resources for the Budget Group
Budget Group's operations will be funded by cash provided from operating
activities and by financing provided under (a) existing TEAM facilities, (b)
BRACC facilities assumed by TEAM, (c) new Budget Group fleet financing
facilities, and (d) new Budget Group term facilities.
Existing TEAM Facilities. Asset-backed notes issued under the Fleet
Financing Facilities, as well as the Convertible Subordinated Notes, will
continue to be in place following the consummation of the Budget Acquisition.
See "-- Liquidity and Capital Resources -- Historic for TEAM".
BRACC Facilities Assumed by TEAM
Budget Fleet Finance Corporation Notes -- The Budget Fleet Finance
Corporation Notes are comprised of $500 million of senior notes requiring
monthly interest payments at an annual rate of LIBOR, as defined, plus
0.50% (6.125% at December 31, 1996). Six monthly principal payments of
$83.3 million commence in April 1999 with the last payment due in September
1999.
The WizCom Note -- Budget Group will assume a $36.9 million note
payable to WizCom International, Ltd. ("WizCom"), a wholly owned subsidiary
of HFS Incorporated, which finances BRACC's acquisition
38
<PAGE> 42
of a limited perpetual license to use the WizCom reservations system.
Interest is payable monthly at an annual rate of 6.20% through December
1998.
New Budget Group Fleet Financing Facilities
In addition to TEAM's existing fleet financing facilities and BRACC fleet
financing facilities to be assumed by Budget Group upon consummation of the
Budget Acquisition, TEAM is conducting discussions with a limited number of
major commercial and investment banks with regard to the New Fleet Financing
Facilities. It is anticipated that the New Fleet Financing Facilities will
provide financing for $1.3 billion of vehicles. The New Fleet Financing
Facilities will likely consist of an $800 million commercial paper facility, an
additional $400 million financing facility that may either be a structured
finance facility or a bank revolving line of credit, and a $100 million bank
revolving line of credit for financing rental vehicles in foreign countries.
New Budget Group Term Facility. TEAM will issue $175 million principal
amount of Senior Notes in the Debt Offering. The Senior Notes are expected to
bear interest at an annual rate of 9.5% to 10.5% and to mature in 2007.
INFLATION
The increased acquisition cost of vehicles is the primary inflationary
factor affecting TEAM's operations. Many of TEAM's other operating expenses are
inflation sensitive, with increases in inflation generally resulting in
increased costs of operations. The effect of inflation-driven cost increases on
TEAM's overall operating costs is not expected to be greater for TEAM than for
its competitors.
SEASONALITY
Generally, in the vehicle rental industry, revenues increase in the spring
and summer months (with the exception of resort destinations) due to the overall
increase in business and leisure travel during this season. TEAM increases the
size of its fleet and work force in the spring and summer to accommodate
increased rental activity during these periods and decreases its fleet and work
force in the fall and winter. However, many of TEAM's operating expenses (such
as rent, insurance and administrative personnel) are fixed and cannot be reduced
during the fall and winter. The retail car sales business is subject to seasonal
effects, with lower sales during the winter months.
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<PAGE> 43
SELECTED FINANCIAL DATA OF BRACC
The following table sets forth selected consolidated statement of
operations data and selected consolidated balance sheet date of BRACC for the
five years ended December 31, 1995. Such data were derived from the audited
Consolidated Financial Statements of BRACC. The financial data for all periods
presented has been adjusted to conform to the financial statement presentation
of TEAM. The audited Consolidated Financial Statements and notes thereto of
BRACC for each of the three years in the period ended December 31, 1995 are
included elsewhere in this Prospectus. The following table also sets forth
selected consolidated statement of operations data of BRACC for the nine months
ended September 30, 1995 and 1996 and selected consolidated balance sheet data
of BRACC as of September 30, 1996. Such data were derived from the unaudited
Consolidated Financial Statements of BRACC included elsewhere in this
Prospectus, which unaudited Consolidated Financial Statements, in the opinion of
BRACC's management, include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the financial position and
results of operations for such periods. The results of operations for the nine
months ended September 30, 1996 are not necessarily indicative of results that
may be expected for the entire year. The selected consolidated financial data
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations of BRACC" and the
consolidated financial statements and notes thereto of BRACC included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
-------------------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating Revenue:
Vehicle rental
revenue(a).............. $1,019,855 $1,080,700 $ 954,188 $1,011,203 $1,034,873 $811,641 $745,521
Retail car sales
revenue................. 63,442 72,253 63,596 77,999 83,795 61,205 71,768
Other revenue............. 54,450 61,435 61,903 66,564 74,802 57,636 58,079
---------- ---------- ---------- ---------- ---------- -------- --------
Total operating
revenues......... 1,137,747 1,214,388 1,079,687 1,155,766 1,193,470 930,482 875,368
Operating costs and
expenses:
Direct vehicle and
operating............... 132,333 221,239 176,252 134,126 153,081 121,838 98,553
Depreciation -- vehicle... 223,534 278,344 206,271 257,356 323,619 252,870 197,898
Depreciation -- non-vehicle... 19,152 25,297 20,431 21,410 19,520 14,079 19,620
Cost of car sales......... 56,620 64,639 54,969 67,314 72,416 52,419 61,787
Advertising, promotion and
selling................. 73,687 108,978 99,879 99,738 106,446 82,120 66,667
Facilities................ 113,539 125,527 117,146 119,091 121,126 93,012 92,900
Personnel................. 259,562 274,081 248,947 269,370 280,901 208,111 187,771
General and
administrative.......... 63,362 75,253 74,326 60,412 80,772 57,514 36,966
Intangible amortization... 16,306 17,223 17,852 16,874 17,006 12,629 12,540
---------- ---------- ---------- ---------- ---------- -------- --------
Total operating
costs and
expenses......... 958,095 1,190,581 1,016,073 1,045,691 1,174,887 894,592 774,702
Operating income............ 179,652 23,807 63,614 110,075 18,583 35,890 100,666
Other (income) expense:
Vehicle interest
expense................. 128,701 101,032 78,205 86,127 124,758 96,723 71,536
Non-vehicle interest
expense................. 25,700 18,923 16,283 18,823 25,151 17,050 23,083
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before
provision for income
taxes..................... 25,251 (96,148) (30,874) 5,125 (131,326) (77,883) 6,047
Provision for income
taxes..................... 17,340 (4,900) -- 4,000 1,314 900 1,800
---------- ---------- ---------- ---------- ---------- -------- --------
Net income (loss)........... $ 7,911 $ (91,248) $ (30,874) $ 1,125 $ (132,640) $(78,783) $ 4,247
========== ========== ========== ========== ========== ======== ========
</TABLE>
40
<PAGE> 44
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
------------------------------------ -----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT RENTAL DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
EBITDA(b).................................... $ 308,168 $ 405,715 $ 378,728 $ 315,468 $ 330,724
Adjusted EBITDA(b)........................... 23,692 62,232 (69,649) (34,125) 61,290
RENTAL DATA:
Locations in operation at period end.........
Number of usable vehicles at period end(c)... 74,326 75,467 68,148 87,487 78,261
Rental transactions(d)....................... 5,754,000 6,030,000 5,909,000 4,647,000 4,091,000
Daily dollar average(e)...................... $ 37.14 $ 38.43 $ 39.58 $ 39.29 $ 41.72
Vehicle utilization(f)....................... 76.14% 77.37% 75.14% 75.68% 77.15%
Average monthly revenue per unit(g).......... $ 860 $ 904 $ 904 $ 902 $ 980
RETAIL CAR SALES DATA:
Locations in operation at period end......... 7 8 9 9 11
Average monthly vehicles sold................ 394 462 449 458 530
Average monthly sales revenue................ $ 5,300 $ 6,500 $ 6,983 $ 6,801 $ 7,974
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
-------------------------------------------------------------- 1996
1991 1992 1993 1994 1995 (UNAUDITED)
---------- ---------- ---------- ---------- ---------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Revenue earning vehicles,
net...................... $1,506,207 $1,362,548 $1,339,000 $1,543,661 $1,353,989 $1,470,444
Retail car sales
inventory................ 4,152 5,753 7,396 9,674 11,758 15,211
Total assets............... 2,762,464 2,590,002 2,405,204 2,602,374 2,488,115 2,486,408
Fleet financing
facilities............... 1,700,851 1,628,190 1,462,783 1,614,247 1,465,472 1,498,481
Notes payable.............. 328,754 216,326 245,714 268,039 452,475 439,490
Total debt................. 2,029,605 1,844,516 1,708,497 1,882,286 1,917,947 1,937,971
Mandatory redeemable
preferred stock............ 191,250 206,250 221,250 236,250 251,250 5,084
Stockholders' equity....... 98,807 111,934 59,558 49,909 (106,102) 144,260
</TABLE>
- ---------------
(a) Includes revenue from vehicle rentals and related products (such as
insurance, refueling services and loss damage waivers).
(b) EBITDA consists of income before provision for income taxes plus (i) vehicle
interest expense, (ii) non-vehicle interest expense, (iii) vehicle
depreciation expense and (iv) non-vehicle depreciation and amortization
expenses. Adjusted EBITDA consists of income before provision for income
taxes plus (i) non-vehicle depreciation and amortization expenses and (ii)
non-vehicle interest expense. EBITDA and Adjusted EBITDA are not presented
as, and should not be considered, alternative measures of operating results
or cash flows from operations (as determined in accordance with generally
accepted accounting principles), but are presented because they are widely
accepted financial indicators of a company's ability to incur and service
debt.
(c) Represents vehicles available for rent.
(d) Rounded to the nearest thousand.
(e) Represents rental revenue divided by the number of days that vehicles were
actually rented.
(f) Represents the number of days vehicles were actually rented divided by the
number of days vehicles were available for rent.
(g) Represents average monthly revenue divided by average monthly fleet.
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<PAGE> 45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF BRACC
GENERAL
Budget Rent a Car Corporation is the owner of the "Budget" trademark on a
worldwide basis and is the international franchisor of the Budget System, which
is the third largest worldwide general use car and truck rental system with
approximately 3,000 locations.
BRACC was established in 1958 as a vehicle rental company serving the
downtown and suburban markets of cities in the United States and Canada. In
1960, BRACC began its franchising activities and positioned itself as the value
leader among the competing car rental companies. BRACC remained primarily a
franchise system until the 1980s when it undertook a strategic shift to acquire
franchisees with a view to becoming an operating company. Management believes
that company-owned locations provide enhanced customer service and earnings on a
long-term basis. Additionally, BRACC believes that its identification as a lower
cost provider of rental vehicles may protect its competitive position in the
event of negative economic developments.
For the year ended December 31, 1996, BRACC had 304 company-owned locations
which accounted for more than 60% of the Budget System's U.S. fleet.
Additionally, BRACC has expanded its operating strategy to international markets
and has company-owned locations in the United Kingdom, France, Switzerland,
Australia and New Zealand which account for more than 8% of the Budget System's
international rental revenue.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
operating revenues represented by certain items in BRACC's combined statements
of operations.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------- -------------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Vehicle rental revenue........................ 88.4% 87.5% 86.7% 87.2% 85.2%
Royalty fee revenue........................... 4.4 4.6 4.9 4.8 5.2
Retail car sales revenue...................... 5.9 6.7 7.0 6.6 8.2
Other revenue................................. 1.3 1.2 1.4 1.4 1.4
----- ----- ----- ----- -----
Total operating revenue............. 100.0 100.0 100.0 100.0 100.0
Direct vehicle and operating expenses......... 16.3 11.6 12.8 13.1 11.3
Depreciation -- vehicles...................... 19.1 22.3 27.1 27.2 22.6
Depreciation -- non-vehicle................... 1.9 1.9 1.6 1.5 2.2
Cost of vehicles sold at retail............... 5.1 5.8 6.1 5.6 7.1
Advertising, promotion and selling expenses... 9.3 8.6 8.9 8.8 7.6
Facilities.................................... 10.8 10.3 10.2 10.0 10.6
Personnel..................................... 23.1 23.3 23.5 22.4 21.5
General and administrative expenses........... 6.9 5.2 6.8 6.2 4.2
Intangible amortization....................... 1.6 1.5 1.4 1.4 1.4
----- ----- ----- ----- -----
Earnings before interest and income taxes..... 5.9 9.5 1.6 3.8 11.5
Interest expense.............................. 8.7 9.1 12.6 12.2 10.8
----- ----- ----- ----- -----
Income (loss) before income taxes............. (2.8) 0.4 (11.0) (8.4) 0.7
Provision for income taxes.................... -- 0.3 0.1 0.1 0.2
----- ----- ----- ----- -----
Net income (loss)............................. (2.9)% 0.1% (11.1)% (8.5)% 0.5%
===== ===== ===== ===== =====
</TABLE>
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September
30, 1995
General Operating Results. Net income increased to $4.2 million for the
nine months ended September 30, 1996 from a net loss of $78.8 million for the
nine months ended September 30, 1995. Income before income taxes increased to
$6.0 million for the nine months ended September 30, 1996 from a loss of $77.9
million for the nine months ended September 30, 1995. This improvement reflects
the changes BRACC implemented during 1996 by placing a greater focus on cost
reductions, profitability, customer service and operational consistency.
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<PAGE> 46
Operating Revenues. Operating revenues decreased $55.1 million, or 5.9%,
to $875.4 million for the nine months ended September 30, 1996 from $930.5
million for the nine months ended September 30, 1995. Vehicle rental revenues
decreased $66.1 million, or 8.1%, to $745.5 million for the nine months ended
September 30, 1996 from $811.6 million in the nine months ended September 30,
1995, primarily due to BRACC's elimination of unprofitable segments of its
business including selected low margin government and tour businesses. The daily
average rental rate increased to $41.72 in the nine months ended September 30,
1996 from $39.29 in the nine months ended September 30, 1995, an increase of
6.1%, partly reflective of the elimination of low margin business and an upward
movement in the daily rental prices. Royalty fees increased $1.5 million, or
3.4%, to $45.6 million in the nine months ended September 30, 1996 from $44.1
million in the nine months ended September 30, 1995 due to growth in
international markets. Retail car sales revenue increased $10.6 million, or
17.3%, to $71.8 million for the nine months ended September 30, 1996 from $61.2
million for the nine months ended September 30, 1995 largely due to a 15.7%
increase in the number of units sold.
Operating Expenses. Operating expenses decreased $119.9 million, or 13.4%,
to $774.7 million for the nine months ended September 30, 1996 from $894.6
million for the nine months ended September 30, 1995. Vehicle depreciation
expense decreased $55.0 million, or 21.7%, to $197.9 million for the nine months
ended September 30, 1996 from $252.9 million for the nine months ended September
30, 1995, as a result of more closely aligning fleet mix with customer demand, a
lower depreciation rate on purchased risk vehicles reflective of fair market
wholesale values for vehicles to be sold and lower fleet requirements due to a
14.3% reduction in rental volume. Direct vehicle and operating expenses
decreased $23.3 million, or 19.1%, to $98.5 million in the nine months ended
September 30, 1996 from $121.8 million in the nine months ended September 30,
1995, due to a 16.2% reduction in average fleet size, the change in fleet mix
which reduced the number of higher priced luxury and specialty vehicles and
continued improvement in risk management expenses reflecting continued efforts
to minimize the exposure to higher risk renters. Non-vehicle depreciation
expense increased $5.5 million, or 39.4% to $19.6 million for the nine months
ended September 30, 1996 from $14.1 million for the nine months ended September
30, 1995, due to amortization of a new reservation system installed in the
fourth quarter of 1995. Cost of vehicles sold at retail increased $9.4 million,
or 17.9% to $61.8 million for the nine months ended September 30, 1996 from
$52.4 million for the nine months ended September 30, 1995 largely due to the
higher number of units sold. Advertising, promotion and selling expenses
decreased $15.5 million, or 18.8%, to $66.7 million in the nine months ended
September 30, 1996 from $82.1 million in the nine months ended September 30,
1995, due to the improvement in marketing focus to fewer programs with stronger
impact. Facilities expenses remained relatively constant for the nine months
ended September 30, 1996 and the nine months ended September 30, 1995. Personnel
expenses decreased $20.3 million, or 9.8%, to $187.8 million in the nine months
ended September 30, 1996 from $208.1 million in the nine months ended September
30, 1995, due to a substantial reduction in the U.S. salaried workforce
initiated in late 1995 as well as the reduction in rental volume and
corresponding variable labor costs. General and administrative expenses
decreased $20.5 million, or 35.7%, to $37.0 million in the nine months ended
September 30, 1996 from $57.5 million in the nine months ended September 30,
1995, due to the reduction in salaried headcount and a continued emphasis on
controlling discretionary expenses. Intangible amortization expense remained
relatively constant for the nine months ended September 30, 1996 and the nine
months ended September 30, 1995.
Interest Expense. Interest expense decreased $19.2 million, or 16.8%, to
$94.6 million for the nine months ended September 30, 1996 from $113.8 million
in the nine months ended September 30, 1995 due to a reduction in average fleet
size, the impact of the change in fleet mix to reduce the number of higher
priced luxury and specialty vehicles and a slight improvement in the average
borrowing rate.
Provision for Income Taxes. The provision for income taxes increased to
$1.8 million for the nine months ended September 30, 1996 from $900,000 from the
nine months ended September 30, 1995 due to higher foreign income taxes,
primarily in the United Kingdom.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
General Operating Results. BRACC suffered a net loss of $132.6 million for
1995 compared to net income of $1.1 million for 1994. Loss before income taxes
was $131.3 million for 1995 compared to income before
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income taxes of $5.1 million for 1994. These losses were due to substantially
higher operating costs and greater interest expense which were not fully offset
through higher revenue.
Operating Revenues. Operating revenues increased by $37.7 million, or
3.3%, to $1,193.5 million in 1995 from $1,155.8 million in 1994. Vehicle rental
revenues increased $23.7 million, or 2.3% to $1,034.9 million in 1995 from
$1,011.2 million in 1994. This increase was due to a 3.0% increase in the daily
average rental rate, partially offset by a 1.1% reduction in vehicle rental
days. Car sales revenue increased $5.8 million, or 7.4%, to $83.8 million for
1995 from $78.0 million for 1994, primarily due to the greater proportion of
higher priced vehicles sold. Royalty fees increased $4.7 million, or 8.9%, to
$57.9 million in 1995 from $53.2 million in 1994, primarily due to growth in
international markets. Other revenues increased $3.5 million, or 26.3%, to $16.9
million in 1995 from $13.4 million in 1994 largely due to improvements in credit
card processing income. The daily average rental rate increased to $39.58 in
1995 from $38.43 in 1994, an increase of 3.0%.
Operating Expenses. Operating expenses increased $129.2 million, or 12.4%
to $1,174.9 million in 1995 from $1,045.7 million in 1994. Vehicle depreciation
expense increased $66.3 million, or 25.8%, to $323.6 million in 1995 from $257.3
million in 1994, due to higher manufacturer depreciation rates for program
vehicles, a change in fleet mix to include more specialty vehicles and a 1.8%
increase in average fleet size. Direct vehicle and operating expenses increased
$19.0 million, or 14.1%, to $153.1 million in 1995 from $134.1 million in 1994,
primarily due to higher salvage/wreck and theft expense, the change in fleet mix
to include more luxury and specialty vehicles and a higher average fleet size.
Non-vehicle depreciation decreased $1.9 million, or 8.8%, to $19.5 million in
1995 from $21.4 million in 1994. Cost of vehicles sold at retail increased $5.1
million, or 7.6%, to $72.4 million in 1995 from $67.3 million in 1994 reflecting
a more costly mix of vehicles. Advertising, promotion and selling expenses
increased $6.7 million, or 6.7%, to $106.4 million in 1995 from $99.7 million in
1994, primarily due to higher selling costs associated with higher revenues, the
cost of frequent flyer programs, and marketing costs for credential reissuance
in conjunction with the new corporate logo. Facilities expenses increased $2.0
million, or 1.7%, to $121.1 million in 1995 from $119.1 million in 1994, due to
minor increases in several areas, such as repairs and maintenance and lease
expense for rental and administrative facilities. Personnel expenses increased
$11.5 million, or 4.3%, to $280.9 million in 1995 from $269.4 million in 1994,
due to a $9.3 million one-time charge taken in 1995 in conjunction with the
reduction in the U.S. salaried workforce and the centralization of accounting
functions. General and administrative expenses increased $20.4 million, or
33.7%, to $80.8 million in 1995 from $60.4 million in 1994, due to a $5.3
million one-time restructuring charge related to a reduction in BRACC'S
workforce in 1995 and centralization of accounting functions, the non-recurrence
of a legal settlement in 1994 related to a contract dispute regarding the failed
attempt to design and build a multi-user reservation processing system, and
increases in other general expenses. Intangible amortization expenses remained
relatively constant for 1995 and 1994.
Interest Expense. Interest expense increased $44.9 million, or 42.8%, to
$149.9 million for 1995 from $105.0 million in 1994 due to an increase in the
average borrowing rate, the change in fleet mix in 1995, and an increase in
average fleet size.
Provision for Income Taxes. The provision for income taxes decreased to
$1.3 million for 1995 from $4.0 million in 1994 primarily due to lower deferred
federal and foreign income taxes.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
General Operating Results. Net income increased to $1.1 million for 1994
from a net loss of $30.9 million for 1993. Income before income taxes increased
to $5.1 million for 1994 from a net loss of $30.9 million for 1993. This
improvement was due to higher revenues in 1994 which more than offset higher
operating costs and interest expense.
Operating Revenues. Operating revenues increased $76.1 million, or 7.0%,
to $1,155.8 million for 1994 from $1,079.7 million for 1993. Vehicle rental
revenues increased $57.0 million, or 6.0%, to $1,011.2 million for 1994 from
$954.2 million in 1993. This reflects an increased daily average rental rate and
a 2.2% increase in rental revenue days. Retail car sales revenue increased $14.4
million, or 22.6%, to $78.0 million for 1994 from $63.6 million for 1993, due to
a 17.3% increase in the number of units sold and a change in mix of vehicles
sold to higher priced units. Royalty fees increased $5.0 million, or 10.4%, to
$53.2 million in 1994 from $48.2 million
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in 1993, primarily due to improvements in franchisee operations outside the
United States. The daily average rental rate increased to $38.43 in 1994 from
$37.14 in 1993, an increase of 3.5%.
Operating Expenses. Operating expenses increased $29.6 million, or 2.9% to
$1,045.7 million in 1994 from $1,016.1 million in 1993. Direct vehicle and
operating expenses decreased $42.1 million, or 23.9%, to $134.1 million in 1994
from $176.2 million in 1993, due to a reduction in insurance costs, including
prior year adjustments, and an improvement in profits on the sale of vehicles at
wholesale. Vehicle depreciation expense increased $51.1 million, or 24.8%, to
$257.3 million in 1994 from $206.2 million in 1993, due to higher manufacturer
depreciation rates for program vehicles. Non-vehicle depreciation expense
increased $979,000, or 4.8%, to $21.4 million in 1994 from $20.4 million in
1993. Cost of vehicles sold at retail increased $12.3 million, or 22.5%, to
$67.3 million in 1994 from $55.0 million in 1993 reflecting a 7.3% increase in
the number of units sold. Advertising, promotion and selling expenses remained
relatively constant for 1994 and 1993. Facilities expenses increased $1.9
million, or 1.7%, to $119.1 million in 1994 from $117.2 million in 1993, due to
higher airport concessions fees based on revenue. Personnel expenses increased
$20.4 million, or 8.2%, to $269.4 million in 1994 from $249.0 million in 1993,
primarily due to higher bonus and pension expense in 1994. General and
administrative expenses decreased $13.9 million, or 18.7%, to $60.4 million in
1994 from $74.3 million in 1993, due to non-recurring legal expenses in
conjunction with litigation related to a contract dispute incurred in 1993
regarding the failed attempt to design and build a multi-user reservation
processing system, a legal settlement in 1994 related to the same dispute, plus
improvements in other general expenses. Intangible amortization expenses
decreased $978,000, or 5.5%, to $16.9 million in 1994 from $17.9 million in
1993.
Interest Expense. Interest expense increased $10.5 million, or 11.1%, to
$105.0 million for 1994 from $94.5 million in 1993 primarily due to an increase
in the average borrowing rate.
Provision for Income Taxes. The provision for income taxes increased to
$4.0 million for 1994 due to higher deferred federal and foreign income taxes.
LIQUIDITY AND CAPITAL RESOURCES OF BRACC
Historically, BRACC's operations have been funded by cash provided from
operating activities and by financing provided by banks, automobile
manufacturers' captive finance companies and leasing companies. BRACC's existing
indebtedness at September 30, 1996 is $1,938.0 million and has interest rates
ranging from 5.30% to 10.00%. Below is a general description of the debt
facilities which BRACC currently utilizes.
Vehicle Asset Backed Facilities
Medium Term Notes. The Medium Term notes include notes issued by Budget
Fleet Finance Corporation ("BFFC") in June 1994. BFFC is a special purpose
bankruptcy remote corporation. The BFFC notes are comprised of medium term notes
requiring monthly interest payments at a floating rate of LIBOR, as defined,
plus 0.50%. The BFFC notes total $500 million and have a maturity of five years
from the inception of the facility. Monthly principal payments of $83.3 million
commence in April 1999 with the last payment due in September 1999.
Commercial Paper. The commercial paper program, which was established in
July 1993, is an $845 million program with a 90 day maximum maturity on all
commercial paper issued. The commercial paper is sold through Budget Funding
Corporation ("BFC"), which is a special purpose bankruptcy remote corporation.
Interest is payable monthly at the market rate when the commercial paper is
issued. The average interest rate through September 1996 was 5.45%.
Other Vehicle Debt
Ford Vehicle Facility. This facility was established with Ford Motor
Credit Company ("FMCC") to finance program and risk vehicles and light and
medium duty trucks which are all manufactured by Ford. There is $500 million
available under this facility and interest is paid monthly at the one-month
commercial paper rate plus 2.00%. The collateral for this facility is all
vehicles financed plus all revenue streams and proceeds from sales.
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Non-Ford Vehicle Facility. This facility was established with FMCC to
finance program and risk vehicles and light and medium duty trucks which are not
manufactured by Ford. $500 million is available under this facility and interest
is paid quarterly at the one-month commercial paper rate plus 2.25%. The
collateral for this facility is all vehicles financed plus all revenue streams
and proceeds from sales.
The amount outstanding under these facilities cannot exceed $800 million.
Other Debt
Working Capital Facility. The working capital facility of $525 million is
funded by FMCC. This facility is primarily used to provide cash for daily
operating activities. Interest is paid quarterly to FMCC based upon a monthly
commercial paper interest rate plus 2.50%.
Other Notes Payable. Other notes payable consist primarily of the Wizcom
note, which had a balance of $36.9 million and an interest rate of 6.20% at
September 30, 1996. The entire note will be paid in full by December 1998.
In addition, BRACC's international operations have debt facilities with
certain financial institutions and vehicle manufacturers. The majority of these
debt facilities are fleet related where the vehicles are used as collateral. As
of September 30, 1996, fleet obligations were $70.0 million.
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BUSINESS OF BUDGET GROUP
GENERAL
Budget Group and its franchisees operate the third largest worldwide
general use car and truck rental system, with approximately 3,000 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. Pro
forma for the Budget Acquisition, the Budget System included 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
franchises operated approximately 500 royalty-paying franchisee locations in the
United States at December 31, 1996. Budget 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.
Budget Group is also one of the largest independent retailers of late model
automobiles in the United States, operating 22 retail car sales facilities with
pro forma revenues of $187.6 million for the nine months ended September 30,
1996. Upon consummation of the Budget Acquisition, Budget Group will continue to
operate its retail car sales facilities under the name "Budget Car Sales."
BACKGROUND
BRACC. BRACC was established in 1960 as a franchisor of car and truck
rental operations serving the downtown and suburban areas of cities in the
United States and Canada. Budget established its first major airport location in
1967, but maintained a marketing strategy of offering good value to
price-sensitive personal renters. Historically, BRACC has operated the broadest
distribution system in the industry, with more full-service local market
locations in the United States and worldwide than its major competitors and the
largest integrated system offering both cars and trucks in most markets
worldwide. During the 1980's, BRACC undertook a strategic shift from being
structured as a franchising company to functioning as an operating company.
For the year ended December 31, 1996, BRACC's 304 company-owned locations
in the United States accounted for approximately 61.4% of the Budget System's
U.S. revenues, while its 70 company-owned locations outside the United States
accounted for approximately 8.3% of the Budget System's international revenues.
For the year ended December 31, 1996, BRACC's company-owned locations accounted
for approximately 38.0% of total worldwide Budget System revenues. At December
31, 1996, Budget franchisees (including TEAM) maintained an additional 651
locations in the United States and an additional 2,182 locations
internationally.
TEAM. TEAM is the largest U.S. Budget franchisee and is one of the largest
independent retailers of late model automobiles in the United States. TEAM was
formed in August 1994, with 23 locations in four franchise territories, and
embarked on a strategy to significantly expand its Budget franchise base by
further consolidating Budget franchise operations and to develop a branded
retail car sales operation within its Budget franchise territories. Since that
time, TEAM has pursued an aggressive growth strategy in both its vehicle rental
and retail car sales operations. Since its formation, TEAM has added an
additional nine Budget franchise territories. With 151 locations as of December
31, 1996, TEAM accounted for approximately 14.8% of the Budget System's 1996
U.S. revenues. Concurrently with the development of its Budget franchise
business, TEAM has developed or acquired its first 11 retail car sales
facilities.
Sanford Miller (Chairman and Chief Executive Officer), John P. Kennedy
(President and Chief Operating Officer) and Jeffrey D. Congdon (Chief Financial
Officer and Secretary) together have over 75 years of experience in the vehicle
rental business and have acquired and operated 54 Budget franchises over the
past 15 years. In addition, Messrs. Miller and Congdon together have over 25
years of experience operating retail car sales facilities.
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Budget Group. Upon completion of the Budget Acquisition, Budget Group will
consist of 455 company-owned locations in the United States, with these
locations including 21 of the 25 largest airport rental markets in the United
States and accounting for approximately 76% of the Budget System's 1996 U.S.
system-wide revenues. Accordingly, the Budget Acquisition will mark a
significant furtherance of the initiative undertaken by BRACC approximately 10
years ago to make the transition from being a franchising company to being an
operating company as well as furtherance of TEAM's strategy of further
consolidating the Budget System. Budget Group believes that its increased level
of company-owned operations will enable it to improve the performance of the
Budget System and to compete more effectively in both the corporate and consumer
segments of the vehicle rental industry. Budget Group will be managed by
officers having significant experience with BRACC and TEAM, who will utilize
operating strategies and systems that have proven most effective for BRACC and
TEAM.
STRATEGY
Management has developed a business strategy designed to increase the
revenues and improve the profitability of Budget Group. Key elements of this
strategy are as follows:
- Enhance the Budget brand
- Improve the performance of car rental operations
- Continue to expand retail car sales operations
- Expand truck rental operations
Enhance the Budget Brand
Following the Budget Acquisition, the Budget System will be approximately
76% company-owned in the United States, giving Budget Group a higher percentage
of company-owned locations than many of its principal competitors. Management
believes this high level of corporate ownership is a competitive advantage in
the marketplace. It facilitates more consistent delivery of high quality
services, more uniform prices and improved operations and communications
throughout the worldwide Budget System, thereby strengthening the Budget brand
name among customers. Improved "front counter" systems will be designed to
present a more consistent image to Budget customers, both corporate and
individual, with an increased emphasis on quality of service and customer
satisfaction. Budget Group's structure will facilitate national advertising and
marketing programs designed to increase the public's awareness of the Budget
brand. In addition, management believes that there will be continuing
opportunities to further consolidate the Budget System by acquiring additional
franchise operations, and that such consolidation will further strengthen the
Budget brand.
Improve the Performance of Car Rental Operations
Historically, TEAM has enhanced the profitability of its acquired franchise
territories by reducing operating costs and increasing rental revenue.
Similarly, in 1996, BRACC began initiatives that are already significantly
improving the performance of its company-owned operations. Upon completion of
the Budget Acquisition, management believes Budget Group will be able to combine
key elements of the TEAM and BRACC strategies to achieve even greater operating
efficiencies. Budget Group expects to undertake significant initiatives to (i)
enhance the performance of its U.S. car rental operations, (ii) take advantage
of the increased level of company-owned operations, (iii) increase marketing to
corporate accounts, (iv) place increase emphasis on the leisure and local rental
markets, and (v) expand and improve Budget's international operations.
Enhance the Performance of U.S. Car Rental Operations. TEAM and BRACC have
each successfully enhanced the profitability of their operations by implementing
cost reduction strategies. These strategies have included centralizing certain
corporate functions (such as credit card and warranty processing), extending
their fleet management practices in order to improve fleet utilization and per
unit cost versus yield, improving the timing and processing of fleet deliveries
and dispositions, reducing fleet downtime, and improving fleet make/model
composition to better match customer demand. TEAM and BRACC have each also
implemented cost management practices to reduce overall personnel costs, lower
vehicle maintenance expense and damage
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repair costs and increase the effectiveness of their servicing procedures. In
order to increase revenues of its acquired operations, TEAM and BRACC have
utilized various yield management models to optimize pricing and fleet
utilization (for example, by tracking demand patterns and allowing local
managers to shift fleet inventory between locations). The Budget Group believes
that it will be able to utilize various elements of these operating strategies
to enhance the performance of the combined TEAM/BRACC operations.
Take Advantage of Increased Level of Company-Owned Locations. Management
believes that the addition of the 151 locations that TEAM operates in its 13
franchise territories to the 304 locations operated by BRACC in the United
States will significantly improve the car rental operations of Budget Group in
the United States. Specifically, the increased level of company-owned operations
will facilitate a more consistent delivery of services, uniform prices and
communications to customers and allow Budget Group to improve its yields and
fleet utilization in many of its locations. Management believes that the
combination of TEAM and BRACC operations in contiguous markets will
significantly improve the marketing programs and operating efficiency of the
combined company. For example, Budget Group will be able to achieve increased
efficiencies by integrating BRACC's operations at Los Angeles International
Airport with TEAM's operations throughout Southern California, BRACC's
operations in the New York City area with TEAM's operation in Philadelphia, and
BRACC's operation in Boston with TEAM's operation in Hartford. Combining the
operations of TEAM and BRACC, Budget Group will operate in 21 of the 25 largest
airport rental markets in the United States. Budget Group will seek to manage
the combined companies more efficiently by integrating critical management
information systems, developing more comprehensive customer data and combining
the two companies' regional management organizations.
Increase Marketing to Corporate Accounts. For the year ended December 31,
1996, approximately one-half of Budget Group's car rental revenue was derived
from corporate accounts, with this customer base accounting for approximately
one-half of Budget Group's rentals from airport locations. Management believes
that it will be able to increase the contribution from corporate accounts, both
in absolute dollars and as a percentage of its car rental revenues, by
significantly increasing its marketing efforts to corporate accounts.
Specifically, management believes that middle market companies (companies that
would have accounts in the $500,000 to $1.0 million annual revenue range)
provide usage and yield characteristics that are favorable for Budget Group.
Management expects to broaden Budget Group's marketing effort to this targeted
customer base by adding additional marketing personnel and believes that the
improved consistency of service and pricing throughout the Budget System, driven
in significant part by the number of company-owned locations, will be
particularly important in marketing to this customer base.
Place Increased Emphasis on the Leisure and Local Markets. Budget Group
intends to place an increased emphasis on the leisure and local markets upon
completion of the Budget Acquisition. Budget's success in the leisure market has
been driven by its reputation for offering vacation travelers favorable rates on
high quality cars and the strength of its operations at airports in travel
destinations. Management believes that corporate ownership of Budget's
operations in Florida, Hawaii, Southern California and Phoenix will improve
Budget Group's ability to market Budget's services to tour operators, travel
agents, travel wholesalers and cruise lines.
The local segment of the car rental industry consists of facilities located
near downtown or suburban areas and is directed toward individuals renting cars
while their automobiles are being repaired, for out of town travel or for
special occasions, and toward businesses seeking automobiles or vans for
occasional local use. Budget was founded in 1958 in order to serve this segment,
enhanced its position through an affiliation with Sears, Roebuck & Co. ("Sears")
in 1970 (which allows Budget to rent cars and trucks under the Sears name
("Sears Car and Truck Rental") at over 900 locations throughout the United
States), and currently maintains more full-service local-market locations
worldwide than its major competitors. Maintaining a strong position in the local
market significantly improves Budget's fleet utilization, as cars may be
shuttled from airports to downtown and suburban locations for weekend use.
Management believes that it will be able to improve its performance in the local
market segment by adding local locations in certain existing Budget Group
markets. The addition of such locations should allow Budget Group to generate
additional revenues with relatively small increases in administrative overhead,
and such locations typically have less intense rate competition and fewer
corporate customers utilizing negotiated rate structures.
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Expand and Improve International Operations. Budget is one of only three
systems that offers rental vehicles throughout the world under a single brand
name and Budget is recognized as a market leader in several key foreign markets,
including Canada, Germany and many Latin American and Caribbean countries.
Management believes that the strength of the Budget System in foreign markets
has important value in name recognition and serving the needs of local customers
and international travelers. For the year ended December 31, 1996, approximately
44.1% of the Budget System's worldwide revenues were derived from its 2,252
locations in more than 110 countries. Company-owned operations at international
locations, including the United Kingdom, France, Australia and New Zealand,
accounted for approximately 8.3% of the Budget System's 1996 international
revenues, with the remainder attributable to the operations of approximately
2,182 franchised locations. Management believes that it will be able to improve
Budget Group's international operations by implementing programs through which
underperforming franchisees will be able to improve their operating results.
Management also believes that certain emerging markets provide growth
opportunities for the Budget System, and that it will be able to add locations
in these markets, either directly or through franchisees.
Continue to Expand Retail Car Sales Operations
The increased cost of new cars and the improved reliability of low-mileage,
late model cars have contributed to greater market demand for late model cars in
recent years. Notwithstanding this growth, the retail car sales market remains
highly fragmented, with most late model cars being sold through the used car
operations of local or regional new car dealerships. Management believes that
the market for late model cars is currently undergoing significant changes, with
the emergence of companies retailing late model cars on a national or regional
basis.
TEAM's Principal Executive Officers have more than 25 years of experience
in acquiring and selling low-mileage, late model cars. Budget Group, with 22
retail car sales facilities and pro forma car sales revenues of $187.6 million
for the nine months ended September 30, 1996, is one of the largest independent
retailers of late model cars in the United States. Management believes that it
will be able to improve the performance of the acquired BRACC retail sales
facilities by incorporating certain systems that TEAM has utilized in its retail
car sales operations and that it will be able to achieve efficiencies by
combining and centralizing certain functions.
Budget Group plans to establish a nationally recognized and branded retail
car sales operation which will provide low mileage, late model cars to consumers
in a new car sales environment under the Budget Car Sales brand. Management
expects Budget Group to establish multiple sales facilities in many of its
markets, which will allow Budget Group to benefit from shared administration and
marketing programs with its vehicle rental business.
Expand Truck Rental Operations
The Budget System is unique among major car rental systems in that it rents
trucks to consumers and commercial users in most major markets worldwide, with
the fourth largest consumer truck rental fleet in the United States. Budget has
long been considered an innovator in the truck rental market, having introduced
the first all-diesel-equipped and all-automatic-transmission fleets for consumer
use, as well as four-door versions of moving trucks that provide seating for a
family or moving crew. TEAM has implemented a strategy of expanding its truck
rental operations in its franchised territories, and management believes Budget
Group will be able to significantly expand Budget's truck rental business
following the Budget Acquisition. Management expects Budget Group to add truck
rental locations in various markets, particularly in conjunction with the
addition of new local market locations. Management believes that adding truck
rental locations will leverage certain fixed costs and increase consumer
awareness of the Budget brand, while favorable pricing trends in the truck
rental market are expected to provide attractive returns on invested capital.
THE BUDGET SYSTEM
BRACC provides consistent system-wide services, a state-of-the-art
reservation system and other opportunities to all vehicle rental locations
within the Budget System. For the year ended December 31, 1996, pro forma for
the consummation of the Budget Acquisition, Budget Group provided approximately
76% of the U.S. revenues of the Budget System.
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System-Wide Services. BRACC provides the Budget System with: (i) national
promotion, advertising and public relations; (ii) reservations and information
systems; (iii) data processing support; (iv) marketing programs with hotels and
airlines; (v) Sears Car and Truck Rental concessions; (vi) a sales staff for
marketing to corporate customers and the travel community; (vii) credit card
services for commercial customers; (viii) training in local marketing
techniques; (ix) operation, training and support; (x) fleet purchasing programs;
and (xi) a company-owned fleet of cars and trucks for one-way rentals. In
general, pursuant to its agreements with its franchisees, BRACC is required to
expend a certain percentage of franchise royalties that it receives on
advertising and promotion. In addition, BRACC negotiates with automobile
manufacturers to develop vehicle acquisition and disposition programs that are
available to franchisees as well as to company-owned locations.
BRACC facilitates one-way car rentals between approximately 325 selected
company-owned and franchised locations in the United States. This one-way
program is also in place for truck rentals at approximately 325 locations. A
limited fleet of vehicles owned by BRACC is dedicated to supplement the one-way
vehicle rental capacity of the participating locations. This program enables the
Budget System to operate more fully as an integrated network of locations.
Reservations System. BRACC operates a state-of-the-art computerized
reservation system through WizCom. Budget's main reservation facility is located
in the Dallas metropolitan area and has over 400 employees. Auxiliary centers
are located in Toronto, Canada, the United Kingdom, Australia and New Zealand.
These centers are linked with the major airline and travel industry reservation
systems through the worldwide Budget reservation network. The main reservation
facility accepts inquiries and reservations for Budget System locations
worldwide on a 24-hour basis, 365 days a year. The reservation centers utilize
an extensive database maintained on rates and vehicles available for nearly all
Budget System locations, a special file of pertinent information on frequent
renters and other information that facilitates the Budget System's business.
Sears Car and Truck Rental. In 1970, BRACC established a contractual
relationship with Sears which allows Budget operating locations to provide car
and truck rental under the Sears name. Sears Car and Truck Rental customers may
use their Sears charge card for payment of rental charges. Sears Car and Truck
Rental is available at approximately 900 Budget locations in the United States.
MANAGEMENT STRUCTURE
Budget Group will be managed by a combination of managers from TEAM and
BRACC. Sanford Miller, the Chairman and Chief Executive Officer of TEAM, will be
the Chairman and Chief Executive Officer of Budget Group. The existing
managements of TEAM and BRACC will be integrated to create an effective and
experienced management team for Budget Group which draws upon the knowledge and
strengths of the two organizations. TEAM management anticipates that the
majority of BRACC's corporate functions will continue to be managed by existing
BRACC personnel.
TEAM maintains decentralized management of day-to-day rental operations.
Many costs incurred by TEAM are dependent on local market conditions, including
real property rents, collision and damage repair costs and labor costs. TEAM
believes that decentralized management can manage these costs better than
corporate headquarters staff. Decentralization also allows local managers to
continue to identify potential customer bases in their territories, to respond
to competitive situations within their territories in a flexible way and to
adjust fleet size in response to local market conditions. Consequently, TEAM
relies substantially on the quality and initiative of its local management. Each
of TEAM's territories is under the direction of a general manager, who is an
owner of shares of Class A Common Stock and/or a participant in TEAM's 1994
Incentive Stock Option Plan (the "1994 Option Plan"). See "Management -- Benefit
Plans -- 1994 Option Plan." The general managers employed by TEAM typically have
significant experience in the vehicle rental business.
TEAM coordinates vehicle purchases among its franchised territories to
enable it to benefit from volume purchases of vehicles. TEAM handles billing and
collection on a decentralized basis, but employs centralized cash management to
permit optimal use of its financial resources. TEAM's corporate staff manages
the acquisition and financing of new operating locations and general managers
develop local vehicle rental markets.
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RENTAL OPERATIONS
Budget rents a wide variety of automobiles and trucks, most of which
consist of the current and immediately preceding model years. Vehicle rentals
are generally made on an daily, weekly or monthly basis and generally include
unlimited mileage. Rental charges are computed on the basis of the length of the
rental or on the length of the rental plus a mileage charge. Rates vary at
different locations depending on the type of vehicle rented, the local market
and competitive and cost factors. Most rentals are made utilizing rate plans
under which the customer is responsible for gasoline used during the rental.
Budget also generally offers its customers the convenience of leaving a rented
vehicle at a Budget location in a city other than the one in which it was
rented, although, consistent with industry practices, a drop-off charge or
special intercity rate may be imposed.
The following table sets forth for the periods indicated the number of
owned and franchised locations of Budget in North America and at international
locations and certain other data of Budget Group:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1995 1996
------- -------
<S> <C> <C>
Locations in operation at end of period:
United States:
BRACC-owned............................................ 311 304
TEAM-owned............................................. 133 151
Other franchisees...................................... 560 500
------- -------
Total U.S......................................... 1,004 955
International:
BRACC-owned............................................ 79 70
Franchisees............................................ 2,027 2,182
------- -------
Total International............................... 2,106 2,252
------- -------
Budget System................................ 3,110 3,207
Average fleet size(a)....................................... 233,081 235,874
</TABLE>
- ---------------
(a) Average fleet size is the number of vehicles (both cars and trucks) owned or
leased by Budget each day of the period divided by the number of days in the
period.
North American Operations
At December 31, 1996, BRACC owned and operated 304 Budget locations in the
United States, and franchisees (including TEAM) owned and operated 651 Budget
locations in the United States and 390 Budget locations in Canada. Of the U.S.
facilities, nearly 300 primarily serve airport business and more than 650 serve
local market (downtown and suburban) locations. Budget's mix of business
consists of approximately 65% in the airport segment and 35% in the local
segment. In addition, BRACC rents trucks at 137 of its company-owned locations.
Budget is in many cases one of five to seven vehicle concessionaires at the
airports in which it operates. In general, concession fees for airport locations
are based on a percentage of total commissionable revenues (as determined by
each airport authority), subject to minimum annual guaranteed amounts.
Concessions are typically awarded by airport authorities every three to five
years based upon competitive bids. Budget's concession arrangements with the
various airport authorities generally impose certain minimum operating
requirements, provide for relocation in the event of future construction and
provide for abatement of the minimum annual guarantee in the event of extended
low passenger volume.
International Operations
At December 31, 1996, BRACC owned and operated 70 international Budget
locations, consisting of 36 European locations (including the Middle East and
Africa) and 34 locations in the Asia/Pacific region, and franchisees owned and
operated 2,182 international Budget locations, consisting of 1,140 European
locations, (including the Middle East and Africa), 263 Latin American locations
and 389 locations in the Asia/Pacific
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region. Budget locations can be found in more than 110 countries outside the
United States. Budget is recognized as a market leader in Canada, Germany and
many Latin American and Caribbean countries.
Van Pooling Operations
Van Pool, TEAM's commuter van pooling subsidiary, was acquired by TEAM in
February 1996 and maintains offices in 21 cities located in 15 states and the
District of Columbia. Founded in 1977, Van Pool provides van pooling services to
individuals, corporations and municipalities. Pursuant to van pool agreements
between TEAM and either the volunteer driver, corporation or municipality (the
"contracting party"), the contracting party agrees to drive or arrange a van
pool which travels a fixed route set by TEAM. TEAM sets the fees, which are
collected by the driver and remitted to TEAM. Van Pool employs approximately 40
individuals at its home office in Troy, Michigan and approximately 40
individuals in its local markets, and at December 31, 1996 operated a fleet of
approximately 3,250 passenger vans.
RENTAL VEHICLE PURCHASING
Budget participates in a variety of vehicle purchase programs with major
domestic and foreign vehicle manufacturers. On average during model year 1996,
79% of BRACC's vehicle purchases consisted of Ford vehicles, 5% of Toyota
vehicles, and the remaining 16% of General Motors, Mazda and Chrysler vehicles.
These percentages vary among BRACC's operations and will most likely change from
year to year. The average price for automobiles purchased by BRACC in 1996 for
its rental fleet was approximately $18,300. TEAM also participates in a variety
of vehicle purchase programs with major domestic and foreign manufacturers. On
average during 1996, 42% of the automobile purchases consisted of Ford vehicles,
15% of Chrysler vehicles and 21% of Mazda vehicles. The average price for
automobiles purchased by TEAM in 1996 for its rental fleet was approximately
$18,100.
Budget's principal relationship has historically been with Ford, with an
emphasis on products from the Lincoln-Mercury Division of Ford. In 1988, Budget
entered into a ten-year supply agreement with Ford, which committed Budget to
acquire 70% of its vehicle requirements for company-owned rental locations from
Ford. Under this agreement, Ford agreed to remain competitive in products and
vehicle programs offered to Budget. Concurrently with the Budget Acquisition,
Budget Group will enter into a new ten-year Supply Agreement with Ford. Under
the new Supply Agreement, Budget Group will agree (i) to purchase or lease at
least 70% of the total number of vehicles leased or purchased by it in each
model year from Ford and (ii) to purchase or lease at least 80,000 new Ford
vehicles in the United States in each model year.
FLEET UTILIZATION AND SEASONALITY
Budget's business is subject to seasonal variations in customer demand,
with the summer vacation period representing the peak season for vehicle
rentals. The general seasonal variation in demand, along with more localized
changes in demand at each of BRACC's locations, causes BRACC to vary its fleet
size over the course of the year. For the year ended December 31, 1996, BRACC's
average monthly fleet size ranged from a low of 64,400 vehicles in January to a
high of 88,600 vehicles in August. Fleet utilization, which is based on the
average number of days vehicles are rented compared to the total number of days
vehicles are available for rental, ranged from 73% in January to 83% in August
and averaged 77% for the year ended December 31, 1996.
In 1996, (excluding Van Pool), TEAM's average monthly fleet size ranged
from a low of 10,694 vehicles in January to a high of 18,870 vehicles in July.
Fleet utilization ranged from 79% in June to 85% in August and averaged 81% for
the year ended December 31, 1996.
RENTAL RELATED PRODUCTS
Although the dominant source of Budget Group's total revenue is time and
mileage charges from the rental of vehicles and franchise payments from its
franchisees, Budget Group also generates revenue from rental related products
such as loss damage waivers, personal accident insurance, personal effects
protection, additional liability insurance, other travel related insurance
coverages and travel related products. The travel related products from
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which Budget Group generates revenue include vehicle upgrades, gasoline sales,
intercity drop-off charges and miscellaneous items such as baby seats, ski
racks, cellular phones and additional driver fees.
MARKETING
BRACC's promotional and marketing activities are designed to promote Budget
as a value service provider and to promote brand loyalty. BRACC has a sales
force of approximately 200 employees worldwide. Budget's national advertising
program is implemented through a variety of media, including national and local
television, radio, newspapers, magazines, airline ticket jackets, airline
in-flight magazines and strategically located billboards, an Internet site,
counter and store collateral and merchandise. BRACC also has cooperative
advertising arrangements with airlines, hotels, travel agency consortia and
others in the travel industry. Budget participates in a number of airline
frequent flyer programs (including United Airlines, Southwest Airlines, Alaska
Airlines, Aeromexico and Lufthansa), as well as certain hotel programs, theme
park programs and credit card affinity programs. Budget also has a frequent
renter program, Awards Plus, which gives renters a strong incentive to bring all
of their car rental business to Budget. In addition, BRACC has contracts with a
number of airlines, hotels and other organizations pursuant to which such
organizations agree to recommend Budget's services during their reservation
calls and to transfer interested customers to a Budget reservation agent. In
addition, in connection with the Budget Acquisition BRACC will undertake to
carry out promotional programs that feature and promote the rental of Ford
vehicles. See "The Budget Acquisition -- Related Agreements -- Advertising
Agreement."
CUSTOMER SERVICE
Budget's commitment to delivering a consistently high level of customer
service is a critical element of its success strategy. Each month, over 3,000
Budget customers are randomly surveyed to measure service levels by location.
Budget identifies specific areas of achievement and opportunity from these
surveys. Areas of improvement are addressed on a system-wide level and standard
methods and measures are developed. To drive improvement, the service standards
are audited routinely by management and service delivery standards accessors.
The major areas of these assessments include: (i) speed of rental/return process
including busing where applicable, (ii) vehicle condition and availability,
(iii) customer interaction including helpfulness and courtesy and (iv) location
image. In addition, Budget utilizes a toll-free "800" number that allows
customers to report problems directly to the Customer Relations department.
Monthly reports of the types and number of complaints received are used in
conjunction with the customer satisfaction reports by location management as
feedback of customer service delivery. Furthermore, Budget participates in the
annual J.D. Power and Associates survey process to ensure that competitive
levels of performance are achieved.
INFORMATION TECHNOLOGY
BRACC's information technology is designed to provide Budget worldwide with
high quality, cost effective systems and services on a timely basis. In late
1995, BRACC implemented its state-of-the-art reservation system, which consists
of a highly integrated mainframe system with an intelligent workstation
component for reservation agents, allowing them to access pertinent information
in a fast and user-friendly manner. The reservation system has direct interfaces
to the airline system and captures key corporate and customer information.
BRACC's rental counter and back-office system, BEST I, supports both
company-owned and franchisee operations. BRACC's fleet system supports fleet
finance, dealership accounting and ordering for all brands of vehicles including
direct ordering lines to Ford, Toyota, Nissan and Mazda. BRACC's human resource,
benefits and payroll interface is supported by a client server system that
automatically feeds to an outsourced payroll system. In 1997 and 1998, Budget
Group intends to continue to enhance and consolidate its information technology
systems allowing Budget to deliver consistent customer service at all of its
locations.
VEHICLE RENTAL FACILITIES
TEAM and BRACC lease substantially all of their U.S. airport and local
vehicle rental facilities and operated from 455 rental locations at December 31,
1996. The airport facilities are located on airport property
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owned by airport authorities or located near the airport in locations convenient
for bus transport of customers to the airport. Each airport facility includes
vehicle storage areas, a vehicle maintenance facility, a car wash, a refueling
station and rental and return facilities. Local facilities generally consist of
a limited parking facility and a rental and return desk and are generally
subject to fixed-term leases with renewal options. Certain of these leases also
have purchase options at the end of their terms.
FRANCHISING
Of Budget's 3,207 locations at December 31, 1996, 2,833 are owned and
operated by franchisees with franchisees representing 62% of 1996 system-wide
revenues. As of December 31, 1996, BRACC maintained over 800 separate franchise
agreements with almost 600 franchisees (including TEAM). BRACC has franchise
locations in more than 110 countries worldwide. Franchised locations range from
large operations in major airport markets with fleet sizes in excess of 4,000
vehicles and franchise territories within an entire country to operations in
small markets with fleets of fewer than 50 vehicles.
BRACC considers its relationships with its franchisees to be excellent. It
works closely with franchise advisory councils (which have historically included
TEAM management) in formulating and implementing sales, advertising and
promotion, and operating strategies and meets regularly with these advisors and
other franchisees at regional, national and international meetings. BRACC has an
ongoing growth strategy of adding new franchises worldwide when opportunities
arise. Incremental franchises provide BRACC with a source of high margin revenue
as there are relatively few additional fixed costs associated with fees paid by
new franchisees to BRACC.
BRACC's relationship with each Budget franchisee is governed by franchise
agreements (the "Franchise Agreements"), which grant to the franchisees certain
exclusive territories in which to operate the Budget vehicle rental business.
The Franchise Agreements provide BRACC with significant rights regarding the
business and operations of each franchise and impose restrictions on the
transfer of the franchise and on the transfer of the franchisee's capital stock
without the consent of BRACC. Each franchisee is required to operate each of its
franchises in accordance with certain standards contained in the Budget
operating manual (the "Operating Manual"). BRACC has the right to monitor the
operations of franchisees and any default by a franchisee under a Franchise
Agreement or the Operating Manual may give BRACC the right to terminate the
underlying franchise.
In general, the Franchise Agreements grant the franchisees the exclusive
right to operate a Budget Rent a Car and/or Budget Rent a Truck business in a
particular geographic area for a stated period. Franchise Agreements generally
provide for an unlimited number of renewal terms. Upon renewal, the terms and
conditions of Franchise Agreements (other than with respect to royalty fees) may
be amended from those contained in the existing Franchise Agreements. The
standard royalty fee payable to BRACC under Franchise Agreements is 7.5% of
gross rental revenues in the United States and 5% of gross rental revenues in
international markets, but certain of the BRACC franchisees have franchise
agreements with different royalty fee structures.
Pursuant to each Franchise Agreement, the franchisee must meet certain
guidelines relating to the number of rental offices in the franchised territory,
the number of vehicles maintained for rental and the amount of advertising and
promotion expenditures. In general, each Franchise Agreement provides that the
franchisee shall not engage in any other vehicle rental business within the
franchise territory during the term of such agreement and for 12 months
thereafter. In addition, franchisees agree not to use the word "Budget" or any
other Budget trademark other than in their vehicle rental business.
RENTAL VEHICLE DISPOSITION
BRACC's operating strategy is to maintain its fleet at an average age of
four months or less, and TEAM's operating strategy has been to maintain its
fleet at an average age of six months or less. Approximately 88% of the vehicles
purchased by BRACC and approximately 85% of the vehicles purchased by TEAM in
model year 1996 were Program Vehicles. These programs currently require that
TEAM and BRACC maintain Program Vehicles in their fleets for a minimum number of
months and impose numerous return conditions, including those related to mileage
and repair condition. More than 97% of the Program Vehicles purchased by the
Budget Group and scheduled to be returned in 1996 were eligible for return. At
the time of return to the manufacturer, BRACC
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and TEAM receive the price guaranteed at the time of purchase and are thus
protected from fluctuations in the prices of previously-owned vehicles in the
wholesale market at the time of disposition. The future percentages of Program
Vehicles in the Budget Group's fleet will be dependent on the availability and
attractiveness of the manufacturer's repurchase programs, over which the Budget
Group has no control. See "Risk Factors -- Potential Changes in Manufacturers'
Repurchase Programs."
In addition to manufacturers' repurchase programs, BRACC and TEAM dispose
of their rental fleet through automobile auctions, sales to wholesalers and
internal retail car sales operations. While the disposal of rental vehicles
through internal retail car sales operation has been limited to date, management
believes that such dispositions may increase as Budget retail car sales
operation continue to grow and as management evaluates the mix of the Budget
Group's Program Vehicles and vehicles not subject to manufacturers' repurchase
programs.
RETAIL CAR SALES OPERATIONS
As of December 31, 1996, TEAM operated 11 retail car sales facilities,
establishing TEAM as one of the largest independent retailers of late model cars
in the United States, with 1996 revenues of approximately $131.9 million. As of
December 31, 1996, BRACC operated 11 retail car sales facilities, with 1996
revenues of approximately $99.0 million. TEAM and BRACC sell cars, sport utility
vehicles and trucks through their retail car sales facilities.
Retail Car Sales Inventory. In 1996, the vehicles sold at Budget retail
car sales facilities consisted primarily of 1996 model automobiles and passenger
vans, with some 1995 models and very few 1994 models. TEAM and BRACC have
historically acquired most of their retail car sales inventory at auctions,
although they have acquired some cars from their rental fleets. In the future,
the Budget Group expects to increase its acquisitions of cars from the
disposition of cars used in its rental fleet and to purchase a smaller portion
from auctions. TEAM and BRACC coordinate car purchases among their retail car
sales locations to enable them to benefit from volume purchases of cars.
Trademarks. TEAM and BRACC operates their retail car sales operations
under the name "Budget Car Sales" and Budget Group intends to continue to
operate its retail car sales facilities under that name after the Budget
Acquisition.
Vehicle Pricing and Financing. While many cars display stickers indicating
their "blue book" value, customers are permitted to negotiate pricing terms with
the sales managers. Various local enterprises provide financing to customers of
TEAM and BRACC on a non-exclusive basis. To supplement its sale of vehicles,
TEAM and BRACC sell extended service contracts and related consumer products to
its customers.
Retail Car Sales/Service Facilities. Each of TEAM's retail car sales
facilities consists of a showroom and an outdoor display area, which together
accommodate the on-site display of at least 100 cars, and a service area.
Although certain of TEAM's retail car sales facilities have been converted from
facilities that were used in other businesses, TEAM prefers to build its own
retail car sales facilities and believes that such facilities can be built at an
average cost of approximately $1.2 million. The service departments operated at
each retail car sales facility are responsible for inspecting a car's condition
and for providing necessary reconditioning and maintenance services before sale.
These services are provided uniformly for its retail car sales facilities in
accordance with an inspection checklist developed by TEAM. Service departments
also provide after-sale service for TEAM's customers. BRACC's retail car sales
facilities are typically smaller than TEAM's car sales facilities and do not
include service departments.
COMPETITION
The vehicle rental industry is characterized by intense competition,
particularly with respect to price and service. In any geographic market, Budget
Group may encounter competition from national, regional and local vehicle rental
companies. Budget's main competitors in the rental market are Hertz, Avis,
Alamo, National, Dollar and Enterprise. In consumer truck rentals, Budget faces
competition from U-Haul, Ryder and Penske. There have been occasions when the
major vehicle rental companies have been adversely affected by industry-wide
price cutting, and TEAM and BRACC have on such occasions lowered their prices in
response. The Budget
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Group will not generally be able to unilaterally raise its prices or to maintain
its prices in times of industry price cutting.
The retail car sales business is also characterized by intense competition
from a range of regional and local car dealerships and other retailers of
previously-owned vehicles. Management believes that Budget Group competes
primarily against new car dealers retailing previously-owned cars. Budget
Group's retail car sales facilities are located among similar facilities and, in
some instances, together with Budget Group's rental operations. The entry of
large, well-capitalized retailers of late model previously-owned cars may
provide Budget Group with significant additional competition. See "Risk
Factors -- Competition."
INSURANCE
TEAM currently has insurance coverage in an amount of up to $1.0 million,
with a $500,000 retention per occurrence, with respect to personal injury and
damage claims arising from the use of its vehicles, except with respect to
vehicles rented through its Los Angeles, San Diego and Phoenix operations. Under
California law, vehicle rental customers are primarily liable for damages
arising from the use of rental vehicles. Vehicle rental companies are
secondarily liable for such damages up to an amount limited by California law to
$35,000 per occurrence, unless the vehicle rental company has negligently
maintained the vehicle or has "negligently entrusted" the vehicle to a rental
customer. In addition, a vehicle rental company can be held liable for damages
arising from use of its vehicles by its employees. TEAM's Phoenix operations are
self-insured, with a $300,000 retention. TEAM's workers compensation insurance
coverage is subject to a $500,000 retention. TEAM's general liability coverage
is $1.0 million per occurrence, $2.0 million aggregate coverage with no
retention.
BRACC currently has excess liability insurance coverage in an amount of up
to $3.0 million excess of a $2.0 million self-insured retention on a per
occurrence basis in the United States and a $1.0 million retention in the United
Kingdom with respect to general liability claims and with respect to personal
injury and property damage claims arising from the use of vehicles rented from
company-owned locations. There is no self-insured retention for the BRACC
operation in France and only a $1,000 and $5,000 self-insured retention for
Australia and New Zealand operations, respectively. Claims resulting from
accidents occurring in the U.S. are administered by BRACC employees, while
claims resulting from accidents occurring at any international BRACC locations
are administered by third-party claim handling services. BRACC has worker's
compensation insurance with a $500,000 self-insurance retention, as well as $100
million property insurance coverage subject to a $1.0 million aggregate
deductible with $250,000 per occurrence maintenance deductibles.
REGULATORY AND ENVIRONMENTAL MATTERS
TEAM and BRACC are subject to federal, state and local laws and
regulations, including those relating to taxing and licensing of vehicles,
franchising, consumer credit, environmental protection, retail vehicle sales and
labor matters.
Matters Affecting the Vehicle Rental Industry
Approximately 7.1% and 6.4% of the 1996 car rental revenues of TEAM and
BRACC, respectively, were generated from the sale of loss damage waivers. The
United States House of Representatives has from time to time contemplated
legislation that would regulate the conditions under which loss damage waivers
may be sold by car rental companies. For example, in January 1995, a bill was
introduced in the United States House of Representatives which seeks to prohibit
the imposition of liability on renters for loss of, or damage to, rented
vehicles, except in certain circumstances, and, if passed, would prohibit the
sale of loss damage waivers. To date, no action has been taken on this bill. In
addition, approximately 40 states have considered legislation affecting the sale
of loss damage waivers. To date, 18 of those states have enacted legislation
requiring disclosure to each customer at the time of rental that a loss damage
waiver may not be necessary; certain states have enacted legislation limiting
rental car companies' right to offer loss damage waivers for sale and limiting
potential customer liability to specified amounts; and other states have capped
the rates that may be charged for loss damage waivers to stated amounts per day.
Adoption of national or additional state legislation limiting the sale, or
capping the rates, of loss damage waivers could further restrict sales of this
product, and additional limitations on
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potential customer liability could increase costs to the Budget Group. Certain
states currently make vehicle owners (including vehicle rental companies)
vicariously liable for the actions of any person lawfully driving an owned
vehicle, regardless of fault. Vehicle rental companies are also subject to
various federal, state and local consumer protection laws and regulations
including those relating to advertising and disclosure of charges to customers.
The National Association of Attorneys General has promulgated suggested
guidelines for car rental advertisements.
Environmental Matters
The principal environmental regulatory requirements applicable to TEAM and
BRACC operations relate to the ownership or use of tanks for the storage of
petroleum products, such as gasoline, diesel fuel and waste oils; the treatment
or discharge of waste waters; and the generation, storage, transportation and
off-site treatment or disposal of waste materials. TEAM and BRACC operate at
approximately 170 locations where petroleum products are stored in underground
or aboveground tanks. TEAM and BRACC each maintain environmental compliance
programs designed to maintain compliance with applicable technical and
operational requirements, including periodic integrity testing of underground
storage tanks and providing financial assurance for remediation of spills or
releases. TEAM and BRACC believe that their respective operations currently are
in compliance, in all material respects, with such regulatory requirements.
However, there are several technical specifications regarding underground
storage tanks applicable to the TEAM and BRACC facilities in the United States,
many of which will become effective in 1998. Although the exact cost of
complying with those requirements has not been estimated, such expenditures
could, in the aggregate, be significant.
The historical and current uses of the TEAM and BRACC facilities may have
resulted in spills or releases of various hazardous substances or petroleum
products which now, or in the future, could require remediation. TEAM and BRACC
also may be subject to requirements related to the remediation of, or the
liability for remediation of, hazardous substances that have been released to
the environment at properties they own or operate or at properties to which they
send hazardous substances for treatment or disposal. Such remediation
requirements generally are imposed without regard to fault and liability for any
required environmental remediation, and can be substantial. BRACC and TEAM may
be eligible for reimbursement or payment of remediation costs associated with
releases from registered underground storage tanks in states that have
established funds to assist in the payment of such remediation costs. Subject to
certain deductibles, the availability of funds, compliance status of the tanks
and the nature of the release, these tank funds may be available to TEAM and
BRACC for use in remediating releases from their tank systems.
TEAM Locations. Certain of the TEAM locations have been the subject of
environmental remediation as a consequence of leaks or spills and continue to
have some level of environmental impairment that may require further
remediation. In connection with the acquisition of franchise territories in
Philadelphia, Pittsburgh and Cincinnati, the seller, Chrysler Credit
Corporation, Inc. ("CCC"), agreed to provide up to $873,750 through 1997 for
remediation activities at sites in those areas shown to be impaired by
assessments performed under the supervision of TEAM. Although the ultimate cost
of these remediation activities is currently unknown, management believes that
the amount of funding to be provided by CCC will be sufficient to cover the cost
of these remediation activities.
BRACC Locations. Approximately 140 of BRACC-owned rental facilities
contain underground storage tanks. In connection with the Budget Acquisition,
Ford has agreed to indemnify TEAM against losses arising out of or resulting
from breaches by BRACC of BRACC representations and warranties in its Stock
Purchase Agreement (including those relating to environmental matters) incurred
by TEAM, to the extent such losses are not covered by an insurance policy or a
reserve established by BRACC, relating to any action by a third party in
connection with environmental matters. However, Ford is not required to
indemnify TEAM unless such loss individually exceeds $15,000 and the breach of
all representations and warranties (including those relating to environmental
matters) has resulted in aggregate losses in excess of $2.0 million, except that
Ford will not be required to pay the first $2.0 million of aggregate losses
(including those relating to environmental matters). See "Risk
Factors -- Regulatory and Environmental Matters." Although the potential cost of
any necessary remediation at those facilities is not precisely known, it is not
expected to exceed $10 million over the next three to five years.
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Franchise Matters
As a franchisor, BRACC is subject to federal, state and foreign laws
regulating various aspects of franchise operations and sales. These laws impose
registration and disclosure requirements on franchisors in the offer and sale of
franchises and, in certain states, also apply substantive standards to the
relationship between the franchisor and the franchisee, including those
pertaining to default, termination and non-renewal of franchises.
Other Matters
Regulations enacted by various federal and state authorities affect Budget
Group's businesses. The financing activities of Budget Group's retail car sales
operations are subject to federal truth in lending, consumer leasing and equal
credit opportunity regulations, as well as state and local motor vehicle finance
laws, installment finance laws, insurance laws, usury laws, installment sales
laws and other consumer protection regulations.
LEGAL MATTERS
From time to time, TEAM and BRACC are subject to routine litigation
incidental to their businesses. Neither TEAM nor BRACC is currently involved in
any legal proceeding which it believes would have a material adverse effect upon
its financial condition or operations.
EMPLOYEES
TEAM had approximately 2,000 employees at December 31, 1996, including
part-time and "on call" employees who shuttle vehicles between locations. At
December 31, 1996, 50 employees in San Diego, 50 employees in Pittsburgh and 46
employees in Philadelphia were subject to collective bargaining agreements. The
collective bargaining agreement covering the San Diego employees expires in
October 1997, the collective bargaining agreement covering the Pittsburgh
employees expires in November 1998 and the collective bargaining agreement
covering the Philadelphia employees expires in October 1998. TEAM believes that
its employee relations are good.
BRACC had approximately 9,800 employees at December 31, 1996, including
part-time and "on call" employees who shuttle vehicles between locations. At
December 31, 1996, 76 employees in Des Plaines, Illinois, Chicago and New York
and 945 employees in various locations throughout the United States were subject
to collective bargaining agreements with various local unions. The collective
bargaining agreement covering the 945 employees expires between 1997 and 1999
and the collective bargaining agreement covering the 76 employees expires in
1997. BRACC believes that its employee relations are good.
HEADQUARTERS
TEAM's headquarters facility consists of 2,500 square feet of leased space
in Daytona Beach, Florida. BRACC's headquarters facility consists of 149,088
square feet of leased office space plus 11,400 square feet of space for a data
center in Lisle, Illinois, a suburb of Chicago. Other significant BRACC
properties include a 69,300 square foot reservations center in Carrollton,
Texas, which is owned by BRACC, a 61,168 square foot leased administrative
center in Orlando, Florida, and a 21,600 square foot leased international
headquarters facility in Hemel Hempstead, England (a suburb of London).
Management believes that these facilities are sufficient for the needs of Budget
Group.
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THE BUDGET ACQUISITION
GENERAL
On January 13, 1997, TEAM entered into the Stock Purchase Agreements with
Ford, BRACC and the common stockholder of BRACC, pursuant to which, upon the
terms and subject to the conditions thereof, TEAM will acquire the capital stock
of BRACC. Consummation of the Offering will occur concurrently with, and is
conditioned upon, consummation of the Budget Acquisition, the Debt Offering and
the New Fleet Financings, and will provide a portion of the financing for the
Budget Acquisition.
TERMS OF THE STOCK PURCHASE AGREEMENT
Consideration. The consideration to be paid by TEAM pursuant to the Stock
Purchase Agreements consists of (i) approximately $275.0 million of Cash
Consideration and (ii) the issuance to Ford of the Equity Consideration, which
will consist of the greater of (i) 4,500 shares of the newly created Series A
Convertible Preferred Stock and (ii) a number of shares of the Series A
Convertible Preferred Stock equal to the product of (x) .001 and (y) the
quotient obtained by dividing 75,000,000 by the average of the closing prices of
the Class A Common Stock on The Nasdaq National Market for the ten consecutive
trading days immediately preceding the second trading day prior to the closing
date of the Budget Acquisition. Each share of Series A Convertible Preferred
Stock will be non-voting, will not carry a dividend and will be convertible into
1,000 shares of Class A Common Stock. In addition, TEAM is obligated under the
Stock Purchase Agreements to purchase approximately $120.3 million of the
currently outstanding indebtedness of BRACC to Ford and Ford will cancel an
additional $108.7 million of outstanding BRACC indebtedness (assuming
consummation of the Transactions on February 10, 1997). See "Use of Proceeds."
Special Bonus Program. Pursuant to the Stock Purchase Agreements,
concurrently with the consummation of the Budget Acquisition, each of Ford and
BRACC shall contribute $2.4 million in cash to establish a special bonus program
(the "Special Bonus Program"), providing for bonus payments to BRACC employees
with an aggregate value equal to $4.8 million. The Special Bonus Program will be
on such terms as Ford and TEAM agree after good faith negotiations and, in any
event, will provide for broad participation by employees of BRACC. TEAM may, at
its option, fund its portion of the Special Bonus Program with stock options of
TEAM. TEAM currently plans to satisfy a portion of its obligations with respect
to the Special Bonus Program by issuing options under TEAM's 1994 Option Plan.
Conditions to the Closing. The obligations of the parties to the Stock
Purchase Agreements to consummate the Budget Acquisition are subject to the
satisfaction or, where legally permitted, waiver of certain conditions,
including among others (i) the absence of any temporary restraining order,
preliminary or permanent injunction or other order or other legal restraint or
prohibition preventing the consummation of the transactions contemplated by the
Stock Purchase Agreements, (ii) the expiration or termination of the waiting
period applicable to the consummation of the Budget Acquisition under the
Hart-Scott-Rodino Anti-Trust Improvement Act of 1976, as amended, (iii)
redemption by BRACC of its outstanding Series X Preferred Stock, and (iv)
termination of the existing stockholders' agreement between Ford and the common
stockholder of BRACC. The closing of each of the transactions contemplated by
the Stock Purchase Agreements is conditioned upon the concurrent consummation of
all of the transactions contemplated by the Stock Purchase Agreements.
Stockholder Approval. Simultaneously with the execution of the Stock
Purchase Agreements, the holders of all of the outstanding Class B Common Stock
of TEAM executed a written consent action approving the issuance of the Equity
Consideration. No other approval of the stockholders of TEAM is required in
connection with the Budget Acquisition.
Termination. The Stock Purchase Agreements may be terminated under certain
circumstances, including, among others, if the closing of the transactions
contemplated by the Stock Purchase Agreements shall not have occurred on or
prior to October 15, 1997 or by mutual written agreement of the parties to the
Stock Purchase Agreements.
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Indemnification. Under the terms of the Stock Purchase Agreements, subject
to certain limitations, Ford has agreed to indemnify TEAM against losses arising
out of or resulting from (a) any breach by Ford of a representation or warranty
contained in the Stock Purchase Agreements, (b) any breach by BRACC of any BRACC
representation or warranty (subject to certain limited exceptions), (c) any
breach by the common stockholder of BRACC of a representation, warranty or
covenant contained in its Stock Purchase Agreement, or (d) any failure by Ford
to perform any agreement or covenant contained in the Stock Purchase Agreements.
Ford will not be required to indemnify TEAM for any losses except to the extent
that (i) the breach of the particular representations and warranties as to which
indemnification is sought has resulted in losses, individually, in excess of
$15,000 and (ii) the breach of all such representations and warranties as to
which indemnification is sought has resulted in aggregate losses in excess of $2
million (subject to limited exceptions with respect to tax and environmental
matters). Ford will not, in any event, be required to pay (x) the first $2
million of losses incurred by TEAM or (y) any losses of TEAM under the Stock
Purchase Agreements or otherwise to the extent that the aggregate amount of
losses incurred by TEAM theretofore paid by Ford exceeds $40 million (subject to
certain limited exceptions).
TEAM has agreed to indemnify Ford against, and agreed to protect, save and
keep harmless Ford from payment of, and assumed liability for the payment of,
all losses arising out of or resulting from (i) any breach by TEAM of a
representation or warranty contained in the Stock Purchase Agreements or (ii)
any failure by TEAM to perform any agreement or covenant contained in the Stock
Purchase Agreements.
INTEREST OF CERTAIN PERSONS IN THE BUDGET ACQUISITION
Series A Convertible Preferred Stock. Upon consummation of the Budget
Acquisition and the Offering, Ford will beneficially own an aggregate of
approximately % of the total outstanding shares of the Company's Class A
Common Stock (assuming conversion of all of the shares of Series A Convertible
Preferred Stock into shares of Class A Common Stock, but assuming no conversion
of any outstanding stock options, warrants, Convertible Notes or shares of Class
B Common Stock into Class A Common Stock). The Series A Convertible Preferred
Stock to be issued to Ford as the Equity Consideration will be automatically
converted into 4,500,000 shares of Class A Common Stock in the event that the
beneficial or record ownership of such shares of Series A Convertible Preferred
Stock is transferred to or held by any person or entity that is not Ford or an
affiliate of Ford. Ford may elect to transfer the Series A Convertible Preferred
Stock and thereby effect a conversion of the Series A Convertible Preferred
Stock into Class A Common Stock at any time. See "Description of Capital Stock."
Preferred Stockholders Agreement. In connection with the consummation of
the Budget Acquisition, Ford and TEAM will enter into the Preferred Stockholders
Agreement (the "Preferred Stockholders Agreement"). Pursuant to the terms of the
Preferred Stockholders Agreement, Ford will agree that, during the period
commencing on the closing date of the Budget Acquisition and terminating on the
first anniversary of such closing date, Ford and its affiliates (i) will not,
directly or indirectly, purchase or otherwise acquire, or propose or offer to
purchase or otherwise acquire, any equity securities of TEAM if, immediately
after such purchase or acquisition, Ford's equity interest in TEAM would equal
or exceed the equity interest of Ford in TEAM as of the closing date of the
Budget Acquisition, or (ii) directly or indirectly propose or offer to enter
into certain business combinations (the "Standstill Agreement"). The Standstill
Agreement will not apply during any period in which Ford's equity interest in
TEAM is less than ten percent, to any issuance and sale of new equity securities
by TEAM to Ford or any Ford affiliate, or to certain other permitted acquisition
transactions. Additionally, Ford will agree that it will not, directly or
indirectly, sell, transfer or otherwise dispose of any equity securities of TEAM
beneficially owned by Ford except pursuant to a registered underwritten public
offering, pursuant to an applicable exemption from the registration requirements
of the Securities Act, to TEAM or a subsidiary thereof, or to a Ford affiliate.
TEAM will agree that, during the period beginning on the date of the Preferred
Stockholders Agreement and ending on the earliest of (i) nine months following
the date thereof, (ii) the date on which Ford's equity interest in TEAM is less
than 50% of its equity interest as of the closing date of the Budget Acquisition
and (iii) in certain circumstances, the eight month anniversary of the closing
date of the Budget Acquisition, TEAM will not (x) issue or sell TEAM equity
securities (subject to certain exceptions), (y) acquire control of any person or
assets or business for cash consideration in excess of $20 million or (z) make
any acquisition in a transaction involving TEAM equity securities (subject to
certain exceptions) without the written consent of Ford. Pursuant to
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the Preferred Stockholders Agreement, TEAM will grant to Ford certain
registration rights with respect to the equity securities of TEAM held by Ford
and its affiliates. See "Description of Capital Stock -- Registration Rights."
RELATED AGREEMENTS
Supply Agreement. Concurrently with the consummation of the Budget
Acquisition, BRACC will enter into a supply agreement with Ford (the "Supply
Agreement"). Under the terms of the Supply Agreement, BRACC and its affiliates
(which term includes TEAM but does not include other Budget franchisees) will
agree to purchase or lease Ford vehicles in such quantity in the United States,
Canada and other countries outside the European Union so 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 purchased in each model year by BRACC and its
affiliates. In the United States, BRACC and its affiliates and franchisees will
purchase or lease at least 80,000 Ford vehicles in each model year. Under the
terms of the Supply Agreement, Ford and its affiliates will agree to offer to
BRACC and its affiliates and franchisees, for each model year, vehicles and
fleet programs that are generally competitive with the vehicles and fleet
programs of other automotive manufacturers. Ford also will agree to make
reasonable allocations of Ford vehicles available to BRACC and its affiliates
and franchisees, and such allocation in the United States in any model year must
be at least 80,000 vehicles. The Supply Agreement will be effective from
September 1, 1997 through August 31, 2007, and is subject to exceptions and
revisions upon the occurrence of force majeure events.
Under the terms of the Supply Agreement, the Budget Group has agreed to pay
Ford, on September 1, 1998 and on each anniversary through September 1, 2004, an
annual royalty equal to the greater of (i) one percent of net vehicle revenue of
BRACC for the prior model year, or (ii) a specified minimum amount (equal to
$9.9 million for the September 1, 1998 annual royalty payment and subject to
adjustment for each annual period thereafter, based upon changes in the consumer
price index). The minimum royalty payable with respect to each model year will
be reduced by a stated amount for each Ford vehicle purchased by BRACC and its
affiliates and franchisees in excess of 123,000 Ford vehicles. The aggregate of
all royalties paid to Ford over the term of the Supply Agreement is subject to a
limit of $100 million.
Advertising Agreement. Concurrently with the consummation of the Budget
Acquisition, BRACC will enter into a 10-year advertising agreement with Ford
(the "Advertising Agreement") under which BRACC will undertake to carry out
promotional programs that feature and promote the rental of Ford vehicles. Such
promotional programs include a wide variety of advertising and promotional
activities to promote Ford products. 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. The base amount is fixed for the first five model years
(beginning with model year 1998) and Ford and Budget agree to negotiate in good
faith to determine the base amount for the last five years of the Advertising
Agreement. Ford will not be required to pay the amount specified under the
Advertising Agreement for any model year if the percentage of Ford vehicles
acquired during the model year falls below 55%, subject to certain exceptions
set forth in the Advertising Agreement, and will be required to pay more than
the base amount if the percentage of Ford vehicles acquired during the model
year exceeds 55%. Payments by Ford under the Advertising Agreement are also
subject to reduction if the total of Ford vehicles acquired in any model year
falls below the total of Ford vehicles acquired in model year 1997.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers, directors and significant employees of TEAM are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
<S> <C> <C>
Sanford Miller.................................. 44 Chairman of the Board of Directors, Chief
Executive Officer and Director
John P. Kennedy................................. 52 President, Chief Operating Officer and Director
Jeffrey D. Congdon.............................. 54 Chief Financial Officer, Secretary and Director
Ronald D. Agronin............................... 59 Director
James F. Calvano................................ 60 Director
Martin P. Gregor................................ 33 Director
Alan D. Liker................................... 59 Director
Jeffrey R. Mirkin............................... 44 Director
Dr. Stephen L. Weber............................ 55 Director
Scott R. White.................................. 33 Executive Vice President -- Corporate
Development
Donald J. Norwalk............................... 32 Vice President and Treasurer
Scott Tiemann................................... 38 Vice President and Corporate Controller
Jeffrey D. Widholm.............................. 34 Vice President -- Corporate Development
</TABLE>
Directors are elected annually to serve until the next annual meeting of
stockholders and until their successors are elected and qualified. Officers are
elected by and serve at the discretion of the Board of Directors.
Sanford Miller has been the Chairman of the Board of Directors and Chief
Executive Officer of TEAM since April 1994. From August 1991 until August 1994,
he was Vice President of Tranex Rental of New York, Inc. ("Tranex"), which
operated the Albany and Rochester Budget franchises, and from December 1991
until August 1994, was Vice President of Capital City Leasing, Inc. ("Capital
City"), which operated the Richmond, Virginia Budget franchise. Between 1989 and
1991, Mr. Miller served as Director of Marketing, Special Accounts for BRACC.
From 1981 to 1989, Mr. Miller was an executive officer and principal stockholder
of corporations that owned and operated 30 Budget franchises that were sold to
BRACC in 1989. From 1979 to 1981, he was a North East Regional Field Operations
Manager for BRACC. Mr. Miller served as President of the American Car Rental
Association, a nation-wide industry trade association, in 1993 and as Chairman
of the Licensee Local Market Advisory Board of the Budget System in 1989 and
1990. Mr. Miller is also a director of MoneyGram Payment Systems, Inc.
("MoneyGram") and Tomoka State Bank.
John P. Kennedy has been President, Chief Operating Officer and a director
of TEAM since April 1994. From November 1991 until August 1994, he was President
of Metro West, Inc., whose wholly owned subsidiary owned TEAM's San Diego
airport operations. From September 1989 until October 1991, he was an
independent consultant to the vehicle rental industry. From July 1985 to August
1989, he served as President of NYRAC, Inc. d/b/a Budget Rent a Car of Kennedy
and La Guardia Airports. From 1968 to 1984, he served in various capacities with
Avis, including the position of Vice President of Operations.
Jeffrey D. Congdon has been the Chief Financial Officer, Secretary and a
director of TEAM since April 1994. Since December 1990, he has been Secretary
and Treasurer of Tranex Credit Corporation, which provides financing for
purchases of previously-owned vehicles. From 1980 to 1989, he was an executive
officer and principal stockholder of corporations that owned and operated 30
Budget franchises that were sold to BRACC in 1989. From 1982 to 1996, Mr.
Congdon owned and operated retail new and/or previously-owned car sales
operations in Indianapolis, Indiana.
Ronald D. Agronin was elected as a director of TEAM in April 1994. Since
1993, Mr. Agronin has served as Vice Chairman of Black Clawson Company, a
manufacturer of paper making machinery, and as President and Chief Executive
Officer of United Container Machinery, Inc., a container manufacturer. He served
as Executive Vice President and Chief Operating Officer of Black Clawson from
1987 until 1993. He serves as a director of both of these companies. Mr. Agronin
is the first cousin of Mr. Miller.
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James F. Calvano was elected as a director of TEAM in August 1994. Since
October 1996, Mr. Calvano has been the Chairman and Chief Executive Officer of
MoneyGram, a provider of electronic money transfer services and from February
1996 until October 1996 he was President and Chief Executive Officer of
MoneyGram. From February 1995 until February 1996, Mr. Calvano was Executive
Vice President of Marketing for Travelers Group, a subsidiary of Travelers, Inc.
From November 1993 until February 1996, he was Chief Administrative Officer of
Travelers Insurance Companies. From June 1991 until May 1993, Mr. Calvano was
President and Chief Operating Officer of New Valley Corp. Two months before he
assumed this position, New Valley Corp. suspended payments on its publicly held
debt. An involuntary bankruptcy petition under Title 11 of the U.S. Code was
filed against New Valley Corp. in November 1991 and a voluntary bankruptcy
petition under Title 11 was filed by New Valley Corp. in March 1993. From
January 1989 until December 1990, Mr. Calvano was President and Chief Executive
Officer of Carlson Travel Group and Executive Vice President of Carlson
Companies Inc. From November 1986 until December 1988, he served as President of
Commercial Credit Corp. and Executive Vice President of Primerica Corp. Mr.
Calvano served American Express Travel Related Services Co., Inc. as its Vice
Chairman, President of Payment Systems Division, USA and President of Consumer
Financial Services Division, USA between October 1981 and November 1986. From
1972 to 1981, Mr. Calvano was employed by Avis and served in various capacities,
including President and Chief Executive Officer, Executive Vice President and
Chief Operating Officer and Group Vice President, Western Hemisphere.
Martin P. Gregor was elected as a director of TEAM in December 1996. Since
December 1989, Mr. Gregor has served as Senior Vice President and Resident
Manager of McDonald & Company Securities, Inc.
Alan D. Liker was elected as a director of TEAM in October 1995. He has
served as a business advisor to a number of individuals and companies during the
past five years, including as Vice President of Budget Rent-A-Car of Southern
California ("SoCal") since February 1992. Mr. Liker is also a director of
Herbalife International. Mr. Liker was a director of Shaklee Corporation and its
Japanese affiliate, Shaklee KK until their sale in 1989. From 1976 to 1980, he
was a principal of Xerox Development Corporation, a strategic planning unit of
Xerox Corporation. Mr. Liker was previously a law professor at Harvard
University, University of California (Los Angeles) and University of Southern
California. Previously he was a director of First Charter Bank and Shop
Television Network. See "Certain Transactions."
Jeffrey R. Mirkin was elected as a director of TEAM in October 1995. Since
1985, Mr. Mirkin has been the Chief Executive Officer of SoCal, a licensee of
BRACC and through its wholly owned subsidiary, an operator of Budget locations
in Southern California. See "Certain Transactions."
Dr. Stephen L. Weber was elected as a director of TEAM in April 1994. Since
June 1996, Dr. Weber has been the President of San Diego State University. From
August 1995 to June 1996, he was the Interim Provost at the State University of
New York System Office. From 1988 until June 1996, he was President of State
University of New York at Oswego.
Scott R. White has been Executive Vice President -- Corporate Development
of TEAM since February 1997. From May 1992 to February 1997, he served in
various capacities at Credit Suisse First Boston Corporation, most recently as a
Vice President in the Investment Banking Department. Mr. White received his J.D.
degree from the University of Texas School of Law in May 1992, after having been
a Financial Analyst in the Investment Banking Department of Credit Suisse First
Boston Corporation from July 1986 through July 1989.
Donald J. Norwalk has been Vice President and Treasurer of TEAM since July
1994. From January 1994 until July 1994, he was the SEC Reporting and Compliance
Officer for FFLC Bancorp, Inc., a bank holding company. From January 1989 to
January 1994, he was an auditor for Deloitte & Touche LLP serving clients
primarily in the financial, manufacturing and real estate industries.
Scott Tiemann has been Vice President and Controller of TEAM since July
1994. From March 1992 until July 1994, he was employed by BRACC as the Business
Manager for its Philadelphia, Pittsburgh and Cincinnati operations. From
November 1989 until March 1992, he was a city controller for BRACC.
Jeffrey D. Widholm has been Vice President -- Corporate Development of TEAM
since August 1995. From January 1987 until August 1995, he was a corporate
banking officer for BankOne, Indianapolis, N.A., where he was responsible for a
loan portfolio of middle market and large corporate clients.
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TEAM's Board of Directors has a Compensation Committee and an Audit/Finance
Committee. The Compensation Committee, composed of Mr. Agronin and Dr. Weber,
establishes salaries, incentives and other forms of compensation for directors,
officers and other employees of TEAM, administers various incentive compensation
and benefit plans and recommends policies relating to such plans. The
Audit/Finance Committee, composed of Messrs. Agronin and Calvano, reviews TEAM's
accounting practices, internal accounting controls and financial results and
oversees the engagement of TEAM's independent auditors. Nonemployee directors
receive an annual retainer of $12,000 and participate in the 1994 Directors'
Stock Option Plan (as hereinafter defined). TEAM also pays the reasonable
out-of-pocket expenses of each director in connection with his attendance at
each Board or committee meeting.
In connection with TEAM's acquisition of the Los Angeles, California Budget
franchise (the "Los Angeles Acquisition"), TEAM and the Principal Executive
Officers agreed that for so long as SoCal and its general partners own 500,000
or more shares of the Class A Common Stock received in the Los Angeles
Acquisition, TEAM and the Principal Executive Officers will nominate and use
their best efforts to elect to TEAM's Board of Directors two persons designated
by SoCal and further, for so long as SoCal and its general partners own less
than 500,000 but more than 250,000 shares of Class A Common Stock, TEAM and the
Principal Executive Officers agreed to nominate to TEAM's Board of Directors one
person designated by SoCal. Following the Los Angeles Acquisition, Messrs.
Mirkin and Liker were designated by SoCal and thereafter elected to the Board of
Directors of TEAM.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES TO BE ADDED IN CONNECTION WITH THE
BUDGET ACQUISITION
In connection with the Budget Acquisition, certain executive officers and
significant employees of BRACC are expected to join the management team of
Budget Group.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation paid by TEAM
during the last three fiscal years to the Chief Executive Officer and certain
other executive officers of TEAM (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ---------------------
OTHER ANNUAL SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS
--------------------------- ---- -------- ------------- ---------------------
<S> <C> <C> <C> <C>
Sanford Miller........................... 1996 $208,250 $ -- 60,000
Chairman of the Board and Chief 1995 $183,667 $ -- 30,000
Executive Officer 1994 $ 91,108(1) $14,067(2) --
John P. Kennedy.......................... 1996 $197,500 $ -- 52,000
President and Chief Operating Officer 1995 $173,333 $ -- 25,000
1994 $ 94,558 $ -- --
Jeffrey D. Congdon....................... 1996 $197,292 $ -- 52,000
Chief Financial Officer and Secretary 1995 $173,333 $ -- 25,000
1994 $ 26,250(3) $ -- --
</TABLE>
- ---------------
(1) Does not include $6,924 of cash dividends paid by Tranex and Capital City to
Mr. Miller in 1994.
(2) Other annual compensation consists of $12,476 of payments made by TEAM with
respect to vehicles used by Mr. Miller in 1994, and $1,591 of gasoline
expenses in connection with the use of these vehicles in 1994.
(3) Represents salary for the period from August 24, 1994 through December 31,
1994.
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OPTION GRANTS DURING FISCAL 1996
The following tables describe the stock options granted to the Named
Executive Officers of TEAM in the last fiscal year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ------------------------------------------------------------------------------------- ------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(A) FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- ---------------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Miller................. 60,000 13.3% $11.25 04/15/06 $424,504 $1,075,776
Mr. Kennedy................ 52,000 10.4 $11.25 04/15/06 367,906 932,314
Mr. Congdon................ 52,000 10.4 $11.25 04/15/06 367,906 932,314
</TABLE>
- ---------------
(a) Represents options to purchase shares of Class B Common Stock.
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS AT DECEMBER 31, 1996
---------------------------------
NAME EXERCISABLE(A) UNEXERCISABLE(B)
---- -------------- ----------------
<S> <C> <C>
Mr. Miller......................................... 30,000 60,000
Mr. Kennedy........................................ 25,000 52,000
Mr. Congdon........................................ 25,000 52,000
</TABLE>
- ---------------
(a) Represents options to purchase shares of Class A Common Stock.
(b) Represents options to purchase shares of Class B Common Stock.
No options were exercised in 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee is composed of Mr. Agronin and Dr. Weber,
neither of whom has ever been an officer or employee of TEAM or any of its
subsidiaries or entered into a related-party transaction with TEAM.
BENEFIT PLANS
1994 Option Plan. The 1994 Option Plan provides for the grant to selected
key employees of TEAM and its subsidiaries of either incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986 (the
"Code") or nonqualified options (intended not to qualify as incentive stock
options) to purchase Common Stock. The 1994 Option Plan is administered by the
Compensation Committee of the Board of Directors. The maximum number of shares
of Common Stock that may be made subject to options granted pursuant to the 1994
Option Plan is (subject to stockholder approval as described under
"Shares Eligible for Future Sale"), and the maximum number of shares for which
an employee may be granted options in any three-year period is 75,000, subject,
in each case, to adjustments for certain changes in TEAM's capitalization. The
price per share of a stock option must be at least the fair market value per
share as of the date of grant. In the case of an employee who owns more than 10%
of the voting power of TEAM, the price per share under an incentive stock option
must be at least 110% of the fair market value per share as of the date of
grant. No option may be exercised within six months from the date of grant,
except that an option will be immediately exercisable upon the occurrence of
certain events, including a "change in control" of TEAM as defined in the 1994
Option Plan. Except in the event of the death or disability of a holder of
nonqualified stock options, no option may be exercised more than 10 years after
its date of grant (and, in the case of an employee who owns more than 10% of the
voting power of TEAM, an incentive stock option held by such employee may not be
exercised more than five years after its date of grant). Unless sooner
terminated, the 1994 Option Plan terminates on April 24, 2004. As of the date of
this prospectus, 730,850 options have been granted under the 1994 Option Plan
(including 164,000 options to purchase shares of Class B Common Stock).
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1994 Directors' Stock Option Plan. TEAM's 1994 Directors' Stock Option
Plan (the "1994 Directors' Plan") provides for the grant to directors of TEAM
who are not employees of TEAM of options to purchase Class A Common Stock. The
1994 Directors' Plan is administered by the Board of Directors. The maximum
number of shares of the Class A Common Stock subject to options granted pursuant
to the 1994 Directors' Plan is 125,000, subject to stockholder approval of an
amendment to the plan. The exercise price per share under an option is the fair
market value per share as of the date of grant. The options are exercisable in
full beginning six months after the date of grant, except that an option will be
immediately exercisable upon the occurrence of certain events, including a
"change in control" of TEAM as defined in the 1994 Directors' Plan. Except in
the event of a holder's death or disability, no option may be exercised more
than 10 years after its date of grant. Unless sooner terminated, the 1994
Directors' Plan will terminate on April 24, 2004. As of the date of this
Prospectus, 70,000 options have been granted under the 1994 Directors' Plan
(subject to stockholder approval as described under "Shares Eligible for Future
Sale").
CERTAIN TRANSACTIONS
Concurrently with the completion of TEAM's initial public offering in
August 1994, the Principal Executive Officers and certain current and former
employees of TEAM (the "Exchange Stockholders"), who were the stockholders of
certain of the corporations that owned the Albany and Rochester, New York,
Richmond, Virginia and San Diego, California Budget franchises, exchanged all of
their shares of these corporate entities for an aggregate of 563,400 shares of
the Class A Common Stock and 1,936,450 shares of the Class B Common Stock (the
"Share Exchange"). The Principal Executive Officers thereby acquired 100% of the
shares of the Class B Common Stock that have been issued by TEAM. Upon
consummation of the Share Exchange and the redemption of the preferred stock of
TEAM's subsidiary that operates the San Diego airport franchise, all of the
Albany, Rochester, Richmond and San Diego operating companies became wholly
owned subsidiaries of TEAM. See "Shares Eligible for Future Sale."
Pursuant to an agreement dated as of November 1, 1994, Team Rental of Ft.
Wayne, Inc. a wholly owned subsidiary of TEAM, purchased all of the shares of
capital stock of Ft. Wayne Rental Group, Inc. ("Ft. Wayne"). Ft. Wayne, which
was owned by Mr. Miller and others, including a former TEAM employee, acquired
the assets comprising the Ft. Wayne business in June 1993 for approximately
$26,000, plus the assumption of approximately $66,000 of liabilities. The total
purchase price for the stock of Ft. Wayne was 18,500 shares of the Class A
Common Stock valued at approximately $200,000 (plus a de minimis amount of cash
to prevent the issuance of fractional shares of stock). Mr. Miller received
7,400 shares of Class A Common Stock in exchange for his shares of Ft. Wayne
stock. Prior to the acquisition of Ft. Wayne, Tranex, which became a subsidiary
of TEAM in the Share Exchange, leased vehicles to Ft. Wayne. The aggregate
payments under this lease amounted to approximately $366,000 in 1994.
The Principal Executive Officers have guaranteed the performance of the
obligations of some or all of TEAM's subsidiaries under their respective
Franchise Agreements. In connection with TEAM's initial public offering, TEAM's
franchisors agreed to release these individuals from their guarantees under the
Franchise Agreements and substitute TEAM's guarantee therefor, provided that
TEAM maintains a net worth of at least $15 million. In the event that TEAM's net
worth falls below this level, TEAM has the option to provide the franchisors
with a $5 million letter of credit that could be drawn on in the event of a
monetary default under the Franchise Agreements or, in the alternative, to allow
the personal guarantees to be reinstated. In connection with the Budget
Acquisition, these franchise agreements will be eliminated.
TEAM's Richmond, Virginia airport facility is leased from a partnership
formed by Mr. Miller and an employee of TEAM (the "Richmond Partnership"). This
lease terminates in 1998, subject to renewal. Rental payments under the lease
agreement amounted to approximately $95,000, $97,000 and $100,000 in 1994, 1995
and 1996, respectively. The monthly base rent under this lease (approximately
$7,900, $8,100 and $8,300 in 1994, 1995 and 1996, respectively) escalates by
approximately 3% per annum. TEAM has entered into another lease for a
non-airport facility located in Chesterfield County, Virginia that is owned by
the Richmond Partnership. This lease commenced in June 1994 and terminates in
May 1999, subject to renewal. Rental payments under the lease agreement amounted
to approximately $24,000, $33,000 and $43,000 in 1994, 1995
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and 1996, respectively. The monthly base rent under this lease was approximately
$3,400, $3,500 and $3,600 in 1994, 1995 and 1996, respectively and escalates by
approximately 3% per annum. TEAM's Rochester, New York airport facility is
leased from a partnership formed by Mr. Miller and a former employee of TEAM.
This lease terminates in 2003, subject to renewal. The monthly base rent under
this lease (approximately $6,700, $6,800 and $7,000 in 1994, 1995 and 1996,
respectively) escalated by 5% per annum until August 30, 1996, and thereafter
annual increases will be the higher of 5% or the amount of the increase in the
consumer price index. Rental payments under the lease amounted to $75,000,
$81,000 and $84,000 in 1994, 1995 and 1996, respectively. All of these leases
are on a triple net basis (i.e., TEAM is responsible for the payment of taxes
and insurance, utilities and for the general maintenance of these facilities in
addition to its obligations to pay base rent). All of these leases provide for
an initial term of ten years and two five-year renewal terms. TEAM believes that
these leases are on terms no less favorable to TEAM than could be obtained from
unaffiliated third parties.
TEAM's Philadelphia, Pennsylvania retail vehicle sales facility, regional
administrative headquarters and vehicle maintenance facility are leased from MCK
Real Estate Corporation ("MCK"), which is owned by the Principal Executive
Officers. This lease terminates in September 2002, subject to renewal. Rental
payments under the lease were approximately $168,000 and $316,000 for 1995 and
1996, respectively. The monthly base rent (approximately $26,000 per month in
1995) escalates by 3% per annum. TEAM's Richmond, Virginia retail car sales
facility is leased from MCK. This lease terminates in October 2000, subject to
renewal. Rental payments under this lease were approximately $10,000 and $10,300
for 1995 and 1996, respectively. The monthly base rent under this lease
(approximately $10,000 per month in 1995) escalates by 3% per annum. TEAM's
second Dayton, Ohio retail car sales facility, which opened in April 1996, is
leased from MCK. This lease terminates in March 2001, subject to renewal. The
monthly base rent under this lease (approximately $10,000 per month in 1996)
escalates by 3% per annum. All of these leases are on a triple net basis. TEAM
believes that these leases are on terms no less favorable than could be obtained
from unaffiliated third parties.
Prior to TEAM's initial public offering, TEAM's subsidiaries funded their
operations in part through loans from TEAM's executive officers. From December
1989 to June 1994, TEAM was provided loans by the Principal Executive Officers,
all of which, together with accrued interest, were repaid upon the completion of
TEAM's initial public offering. At that time, TEAM repaid loans previously made
by Mr. Miller in the aggregate principal amount of $1,052,257 with a weighted
average interest rate of 12.7%, loans previously made by Mr. Congdon in the
aggregate principal amount of $1,156,257 with a weighted average interest rate
of 12.4%, and loans previously made by Mr. Kennedy in the aggregate principal
amount of $690,000 with a weighted average interest rate of 13.3%.
In addition, in order to finance the organizational expenses incurred by
TEAM prior to its initial public offering, Messrs. Miller, Congdon and Kennedy
advanced the following amounts: Mr. Miller -- $41,289 at prime plus 1.5%;
$3,300, non-interest bearing; Mr. Congdon -- $14,266 at prime plus 1.5%; $1,800,
non-interest bearing; and Mr. Kennedy -- $14,266 at prime plus 1.5%; $1,800,
non-interest bearing. All of these advances, together with accrued interest,
were repaid upon completion of the initial public offering.
In connection with the Los Angeles Acquisition, TEAM entered into a
franchise agreement with SoCal, under which TEAM agreed to pay to the seller,
SoCal, a royalty of 5% of the monthly gross rental revenues derived from those
operations, subject to a minimum amount. In addition, TEAM issued a note to
SoCal in the principal amount of approximately $4,750,000 (the "SoCal Note"),
assumed the obligations of SoCal under a note in the principal amount of
approximately $4,700,000 which was secured by the personal guaranty of Jeffrey
R. Mirkin (the "SoCal Bank Note") and assumed certain other indebtedness that
was personally guaranteed by Mr. Mirkin. Mr. Mirkin is the Chief Executive
Officer and a general partner of SoCal and upon consummation of the Los Angeles
Acquisition became a director of TEAM. TEAM operates as a sub-franchisee of
SoCal in the San Diego territory and pays royalty fees to SoCal based on rental
revenues for vehicles other than trucks. In 1994, 1995 and 1996, TEAM paid SoCal
approximately $1,000,000, $1,200,000 and $3,700,000 in royalty fees,
respectively. Except as described above, prior to the Los Angeles Acquisition,
there was no material relationship between TEAM and SoCal. The SoCal Note,
together with accrued interest of $103,906, and the SoCal Bank Note were repaid
in April 1996. There was approximately $700,000 of other indebtedness payable by
TEAM to SoCal at December 31, 1996.
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In connection with the acquisition of ValCar in August 1996, TEAM assumed
an unsecured note payable to Jeffrey D. Congdon in the amount of $1.5 million.
The note is due on demand and bears interest at the prime rate plus 2%. Pursuant
to this note, TEAM made payments to Mr. Congdon in 1996 in the amount of
$64,449.
Sanford Miller is a member of the board of directors of Tomoka State Bank
in Ormond Beach, Florida. TEAM maintains a checking account at that bank with an
average balance of $100,000.
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<PAGE> 73
PRINCIPAL STOCKHOLDERS
The table below sets forth, as of February 1, 1997, certain information
with respect to the beneficial ownership of Common Stock by (i) each person who
is known by TEAM to be the beneficial owner of more than 5% of the Common Stock
of TEAM and (ii) each of the directors and Named Executive Officers of TEAM and
all directors and executive officers as a group. As of that date, TEAM had
outstanding 9,314,183 shares of Class A Common Stock and 1,936,600 shares of
Class B Common Stock. This table also gives effect to shares that may be
acquired pursuant to options, convertible notes and convertible preferred stock,
as described in the footnotes below.
<TABLE>
<CAPTION>
PERCENT OF SHARES
BENEFICIALLY OWNED PERCENT OF TOTAL
NUMBER OF ---------------------------- VOTING POWER OF
SHARES BENEFICIALLY PRIOR TO AFTER COMMON STOCK
DIRECTORS AND EXECUTIVE OFFICERS OWNED(A) THE OFFERING THE OFFERING AFTER THE OFFERING
-------------------------------- ------------------- ------------ ------------- ------------------
<S> <C> <C> <C> <C>
Sanford Miller(b)....................... 952,500 8.7%
Jeffrey D. Congdon(c)................... 560,350 5.0
John P. Kennedy(d)...................... 548,500 4.9
Ronald D. Agronin(e).................... 14,500 * * *
James Calvano(e)........................ 12,500 * * *
Martin P. Gregor........................ 8,305 * * *
Alan D. Liker(f)........................ 71,003 * * *
Jeffrey R. Mirkin(g).................... 662,500 6.1
Dr. Stephen L. Weber(e)................. 15,600 * * *
All directors and executive officers as
a group (12 persons)(h)............... 2,824,305 24.7
OTHER FIVE PERCENT STOCKHOLDERS(I)
- --------------------------
Metropolitan Life Insurance
Company(j)............................ 1,245,640 10.0
John Hancock Mutual Life Insurance
Company(k)............................ 1,245,640 10.0
The Equitable Companies
Incorporated(l)....................... 1,127,500 10.0
New York Life Insurance Company(m)...... 996,512 8.1
</TABLE>
- ---------------
* Less than 1%.
(a) In determining the number and percent of shares beneficially owned by each
person, shares that may be acquired by such person pursuant to options,
convertible notes or convertible preferred stock exercisable or convertible
within 60 days of the date hereof are deemed outstanding for purposes of
determining the total number of outstanding shares for such person and are
not deemed outstanding for such purpose for all other stockholders. To the
best of TEAM's knowledge, except as otherwise indicated, beneficial
ownership includes sole voting and dispositive power with respect to all
shares.
(b) Includes (i) 905,800 shares of Class A Common Stock issuable upon conversion
of Class B Common Stock, (ii) 30,000 shares of Class A Common Stock issuable
upon exercise of options and (iii) 4,000 shares of Class A Common Stock
owned by Mr. Miller's children. Mr. Miller's address is 125 Basin Street,
Dayton Beach, Florida 32114.
(c) Includes (i) 515,400 shares of Class A Common Stock issuable upon conversion
of Class B Common Stock and (ii) 25,000 shares of Class A Common Stock
issuable upon exercise of options. Mr. Congdon's address is 2445 Directors
Row, Suite K, Indianapolis, Indiana 46241.
(d) Includes (i) 515,400 shares of Class A Common Stock issuable upon conversion
of Class B Common Stock and (ii) 25,000 shares of Class A Common Stock
issuable upon exercise of options. Mr. Kennedy's address is 18 King's
Highway, Westport, Connecticut 06880.
(e) Includes 12,500 shares of Class A Common Stock issuable upon exercise of
options.
(f) Includes (i) 46,003 shares of Class A Common Stock that may be acquired by
Mr. Liker pursuant to an option granted by SoCal to Mr. Liker and (ii)
12,500 shares of Class A Common Stock issuable upon exercise of options.
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(g) Represents (i) 650,000 shares of Class A Common Stock beneficially owned by
SoCal, a general partnership, of which Mr. Mirkin is a general partner and
the trustee of certain trusts which are general partners of SoCal and (ii)
12,500 shares of Class A Common Stock issuable upon exercise of options.
Mr. Mirkin's address is 150 South Doheny Drive, Beverly Hills, California
90211.
(h) Includes 166,500 shares issuable upon the exercise of options.
(i) In connection with the Budget Acquisition, Ford will acquire 4,500 shares
of Series A Convertible Preferred Stock, which will be convertible into an
aggregate of 4,500,000 shares of Class A Common Stock.
(j) Represents shares of Class A Common Stock issuable upon conversion of
Convertible Subordinated Notes. Metropolitan Life Insurance Company's
address is 334 Madison Avenue, Convent Station, New Jersey 07961.
(k) Represents shares of Class A Common Stock issuable upon conversion of
Convertible Subordinated Notes. John Hancock Mutual Life Insurance
Company's address is John Hancock Place, 200 Clarendon Street, Boston,
Massachusetts 02117.
(l) Represents shares of Class A Common Stock owned by subsidiaries of The
Equitable Companies Incorporated ("The Equitable") as follows: (i) 7,900
shares of Class A Common Stock held by The Equitable Life Assurance Society
of the United States, (ii) 1,089,600 shares of Class A Common Stock held by
Alliance Capital Management L.P. and (iii) 30,000 shares of Class A Common
Stock held by Donaldson Lufkin & Jenrette Securities Corporation. This
information is included in reliance upon a Schedule 13D filed by The
Equitable with the Securities and Exchange Commission on December 10, 1996.
The Equitable's address is 787 Seventh Avenue, New York, New York 10019.
(m) Represents shares of Class A Common Stock issuable upon conversion of
Convertible Subordinated Notes. New York Life Insurance Company's address is
51 Madison Avenue, New York, New York 10010.
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<PAGE> 75
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of TEAM consists of 17,500,000 shares of the
Class A Common Stock, 2,500,000 shares of the Class B Common Stock and 250,000
shares of the preferred stock, $.01 par value per share (the "Preferred Stock").
At the 1997 Annual Meeting of Stockholders, the stockholders will vote upon a
proposal to amend TEAM's Amended and Restated Certificate of Incorporation to,
among other things, increase the number of shares of Class A Common Stock TEAM
is authorized to issue to 35,000,000 shares. Immediately prior to the date of
this Prospectus, there were 9,314,183 shares of the Class A Common Stock,
1,936,600 shares of the Class B Common Stock and no shares of the Preferred
Stock outstanding. All of the outstanding shares of Class B Common Stock are
held by the Principal Executive Officers.
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
Voting Rights. Each share of the Class A Common Stock is entitled to one
vote and each share of the Class B Common Stock is entitled to ten votes on all
matters submitted to a vote of the stockholders. The Class A Common Stock and
the Class B Common Stock vote together as a single class on all matters
presented for a vote of the stockholders, except as noted below. Immediately
following the Offering, the holders of the Class B Common Stock will have
approximately % of the combined voting power of the outstanding Class A and
Class B Common Stock. As a result, following the Budget Acquisition and prior to
the conversion of the Convertible Subordinated Notes or the Series A Convertible
Preferred Stock, the Principal Executive Officers will continue to be able to
elect all of the Budget Group's Board of Directors, thereby ensuring that
members elected by them will continue to direct the business, policies and
management of the Budget Group.
TEAM's Amended and Restated Certificate of Incorporation requires a vote of
60% of the number of shares of the Class B Common Stock outstanding, voting
separately as a class, and a majority of the shares of the Class A Common Stock,
voting separately as a class, to approve any modification to the rights and
privileges of the Class A Common Stock or the Class B Common Stock or any
reclassification or recapitalization of TEAM's outstanding capital stock.
Dividends. Each share of the Class A Common Stock is entitled to receive
dividends if, as and when declared by the Board of Directors of TEAM out of
funds legally available therefor. Identical dividends, if any, must be paid on
both the Class A Common Stock and the Class B Common Stock at any time that
dividends are paid on either, except that stock dividends payable on shares of
the Class B Common Stock are payable only in shares of the Class B Common Stock
and stock dividends payable on shares of the Class A Common Stock are payable
only in shares of the Class A Common Stock. If a dividend or distribution
payable in the Class A Common Stock is made on the Class A Common Stock, TEAM
must also make a pro rata and simultaneous dividend or distribution of shares of
Class B Common Stock on the Class B Common Stock. If a dividend or distribution
payable in Class B Common Stock is made on the Class B Common Stock, TEAM must
also make a pro rata and simultaneous dividend or distribution of shares of
Class A Common Stock on the Class A Common Stock.
Convertibility. Each share of the Class B Common Stock is convertible at
any time at the option of the holder into the Class A Common Stock on a
share-for-share basis. Shares of the Class B Common Stock will be automatically
converted into shares of the Class A Common Stock on a share-for-share basis in
the event that the record or beneficial ownership of such shares of the Class B
Common Stock shall be transferred (including, without limitation, by way of
gift, settlement, will or intestacy) to any person or entity that was not a
holder of Class B Common Stock at the time of transfer. Therefore, the shares of
Class B Common Stock will only exist so long as they are held by one or more of
the Principal Executive Officers. Shares of the Class A Common Stock are not
convertible.
Liquidation Rights. In the event of the dissolution of TEAM, after
satisfaction of amounts payable to creditors and distribution to the holders of
outstanding Preferred Stock, if any, of amounts to which they may be
preferentially entitled, holders of the Class A Common Stock and the Class B
Common Stock are entitled to share ratably in the assets available for
distribution to the stockholders.
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Other Provisions. There are no preemptive rights to subscribe for any
additional securities which TEAM may issue and there are no redemption
provisions or sinking fund provisions applicable to the Class A Common Stock or
the Class B Common Stock, nor is either class subject to calls or assessments by
TEAM. All outstanding shares of Common Stock are, and all shares to be
outstanding upon completion of the Offering will be, legally issued, fully paid
and nonassessable.
PREFERRED STOCK
General
The Board of Directors of TEAM has the authority, without further action by
the stockholders, to cause TEAM to issue up to 250,000 shares of Preferred Stock
in one or more series and to fix the rights, preferences, privileges and
restrictions granted to or imposed upon any unissued shares of Preferred Stock
and to fix the number of shares comprising any series and the designations of
such series. The issuance of Preferred Stock, while providing flexibility in
connection with possible financings, acquisitions and other corporate
transactions, could, among other things, adversely affect the voting power of
the holders of Common Stock and, under certain circumstances, make it more
difficult for a third party to gain control of TEAM, deny stockholders the
receipt of a premium on their Common Stock and have an adverse effect on market
price of the Common Stock.
Series A Convertible Preferred Stock
In January 1997, the Board of Directors authorized the issuance of 10,000
shares of preferred stock, par value $0.01 per share, designated as the "Series
A Convertible Preferred Stock." In connection with the Budget Acquisition, 4,500
shares of Series A Convertible Preferred Stock will be issued to Ford as the
Equity Consideration.
Rank. The Series A Convertible Preferred Stock ranks, with respect to
dividend rights and rights on liquidation, prior to the Common Stock.
Voting Rights. The holders of the Series A Convertible Preferred Stock
will not be entitled to any voting rights, except as otherwise provided by law
or as noted below. The affirmative vote of a majority of the shares of Series A
Convertible Preferred Stock, voting as a separate class, will be required to
amend the Amended and Restated Certificate of Incorporation if such amendment
affects materially and adversely the specified rights, preferences, privileges
or voting rights of the Series A Convertible Preferred Stock.
Dividends. Each share of the Series A Convertible Preferred Stock is
entitled to receive dividends if, as and when declared by the Board of Directors
of TEAM out of funds legally available therefor. Each share of Series A
Convertible Preferred Stock is also entitled to receive cumulative cash
dividends in respect of each share of Series A Convertible Preferred Stock in
such amount as the holder thereof would receive if such share were converted
into a share of Class A Common Stock immediately prior to the record date for
payment of any cash dividend on the Class A Common Stock. No dividends may be
declared by the Board of Directors on the Common Stock or any other class of
stock ranking junior to the Series A Convertible Preferred Stock unless full
cumulative dividends have been or contemporaneously are declared and paid with
respect to the Series A Convertible Preferred Stock.
Convertibility. Each share of Series A Convertible Preferred Stock will
automatically be converted into 1,000 shares of Class A Common Stock (subject to
adjustment in the case of stock dividends, subdivisions, reverse stock splits or
reclassifications of outstanding Class A Common Stock) in the event that the
record ownership of such Series A Convertible Preferred Stock is transferred to
any person other than Ford or an affiliate of Ford.
Liquidation Rights. In the event of the dissolution, liquidation or
winding up of the affairs of TEAM, after satisfaction of amounts payable to
creditors, holders of shares of Series A Convertible Preferred Stock are
entitled to receive distributions in the same amount that such holders would
receive if such shares were converted into shares of Class A Common Stock
immediately prior to the dissolution, liquidation or winding up of the affairs
of TEAM, in preference to any payment to holders of Common Stock or any other
securities ranking junior to the Series A Convertible Preferred Stock.
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Other Provisions. There are no preemptive rights to subscribe for any
additional securities which TEAM may issue and there are no redemption
provisions or sinking fund provisions applicable to the Series A Convertible
Preferred Stock, nor is the Series A Convertible Preferred Stock subject to
calls or assessments by TEAM.
CONVERTIBLE SUBORDINATED NOTES
In December 1996, TEAM issued $80.0 million aggregate principal amount of
Convertible Subordinated Notes. The Convertible Subordinated Notes are
convertible, at the option of the holders, into Class A Common Stock at a
conversion price of $20.07 per share. The outstanding Convertible Subordinated
Notes are convertible into an aggregate of 3,986,049 shares of Class A Common
Stock.
WARRANTS
In connection with TEAM's initial public offering and acquisition of the
Budget operations in Philadelphia, Pittsburgh and Cincinnati, TEAM issued to
BRACC a warrant to purchase 175,000 shares of the Class A Common Stock at the
price of the shares in the initial public offering ($9.50 per share). The BRACC
Warrant is exercisable commencing August 1996 and expires in August 1999. After
August 24, 1998 and prior to August 24, 1999, the holder of the BRACC Warrant
will have the right to cause TEAM to repurchase the BRACC Warrant for $2.0
million. In connection with financing provided to TEAM in April 1996, TEAM
issued to NationsBank, National Association (South) a warrant (the "NationsBank
Warrant") to purchase 187,500 shares of Class A Common Stock at the then current
market price ($10.87 per share). The NationsBank Warrant is exercisable from the
date of its issuance and expires in April 2001.
BYLAW PROVISIONS
TEAM's Bylaws provide that special meetings of the stockholders may be
called only by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer, the President or Secretary of TEAM, or by one or more
stockholders holding shares entitled to cast not less than a majority of the
aggregate votes entitled to be cast at such meeting. The Bylaws also provide
that any action which may be taken at any meeting of stockholders may be taken
without a meeting and without prior notice if written consents approving the
action are signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to take such action at a meeting
of stockholders. These provisions will make it more difficult for a third party
to gain control of TEAM.
REGISTRATION RIGHTS
Concurrently with completion of the initial public offering, TEAM and the
Exchange Stockholders entered into the registration rights agreement (the
"Registration Rights Agreement") granting such holders registration rights with
respect to the shares of Common Stock received by them as a result of the Share
Exchange. The Registration Rights Agreement provided that the holders of at
least 33% of the outstanding shares received in the Share Exchange may require
TEAM to register such shares under the Securities Act of 1933 (the "Securities
Act") on two occasions; provided that the aggregate offering price of the shares
so registered is not less than $1 million on each occasion. The Registration
Rights Agreement also provided that at any time Class A Common Stock is to be
registered by TEAM under the Securities Act, TEAM must notify the Exchange
Stockholders to allow their participation in the registration, subject to
certain conditions. TEAM has agreed to refrain from selling its securities
during the ten-day period prior to, and the 180-day period following, the
consummation of each underwritten offering made pursuant to the Registration
Rights Agreement. TEAM has also agreed to pay the costs and expenses of each
registration effected under the Registration Rights Agreement, other than
underwriting discounts and commissions. The Registration Rights Agreement was
amended in November 1, 1994 to include the signatories to the Ft. Wayne stock
purchase agreement.
The holders of shares issuable upon the exercise of the BRACC Warrant are
also entitled to two demand and unlimited "piggyback" registration rights with
respect to the shares issuable upon its exercise, and the holders of shares
issuable upon the NationsBank Warrant are entitled to one demand and unlimited
"piggyback"
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registration rights. TEAM will bear the expenses of registering such shares,
other than underwriting discounts and commissions. In addition, in connection
with the Los Angeles Acquisition, TEAM and SoCal entered into a registration
rights agreement granting SoCal and its affiliated entities unlimited
"piggyback" registration rights subject to certain conditions. TEAM will bear
the expenses of registering such shares, other than underwriting discounts and
commissions.
In connection with the sale of Convertible Subordinated Notes in December
1996, TEAM entered into a registration rights agreement (the "Notes Registration
Rights Agreement") granting holders registration rights with respect to the
shares of Common Stock into which the notes are convertible. The Notes
Registration Rights Agreement provides that TEAM will file a shelf registration
statement on or before May 15, 1997. The holders may require TEAM to effect an
underwritten public offering pursuant to the shelf registration statement. TEAM
may prohibit offers and sales of securities pursuant to the shelf registration
statement under certain circumstances. TEAM has also agreed to pay the costs and
expenses of each registration effected under the Notes Registration Rights
Agreement, other than underwriting discounts and commissions.
Concurrently with the consummation of the Budget Acquisition, TEAM and Ford
entered into the Preferred Stockholders Agreement, pursuant to which
registration rights were granted to Ford with respect to any Series A
Convertible Preferred Stock or Class A Common Stock issued to Ford as part of
the Equity Consideration (the "Ford Registrable Securities"). The Preferred
Stockholders Agreement provides that the holders of Ford Registrable Securities
may, at any time after the date of the Preferred Stockholders Agreement, require
TEAM to register such shares under the Securities Act; provided that such
requesting holders have a good faith intention to offer and sell at least 33% of
the Ford Registrable Securities held by such holders (subject to certain limited
exceptions). The holders of Ford Registrable Securities may also, at any time
that TEAM is eligible to file a registration statement on Form S-3, request TEAM
to file a shelf registration statement to effect the registration and offering
of the Ford Registrable Securities. The Preferred Stockholders Agreement also
provides that at any time Common Stock is to be registered by TEAM under the
Securities Act, TEAM must notify the holders of Ford Registrable Securities to
allow their participation in the registration, subject to certain conditions.
TEAM may defer the registration of the Ford Registrable Securities pursuant to a
request for registration under certain circumstances. Notwithstanding the
foregoing, TEAM will not be required (i) to cause to be declared effective any
registration of Ford Registrable Securities prior to the date three months after
the date of the Preferred Stockholders Agreement and (ii) subject to certain
limited exceptions, to effect any registration of Ford Registrable Securities
during the period starting with the date of filing by TEAM of, and ending on a
date 90 days following the effective date of, any other registration statement
filed to effect a demand registration or shelf registration of Ford Registrable
Securities or any other registration statement in which holders of Ford
Registrable Securities were entitled to participate pursuant to their incidental
registration rights. TEAM will not be required to file more than four demand
registration statements for the registration of Ford Registrable Securities.
TEAM has agreed to pay the costs and expenses incurred in connection with each
incidental registration and the first three demand registrations, other than
underwriting discounts and commissions.
INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, TEAM's Amended and
Restated Certificate of Incorporation provides that directors of TEAM will not
be personally liable to TEAM or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to TEAM or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, relating to prohibited dividends, distributions and repurchases or
redemptions of stock, or (iv) for any transaction from which the director
derives an improper personal benefit. TEAM's Bylaws provide that TEAM shall
indemnify its directors, officers, employees and other agents, to the fullest
extent provided by Delaware law. TEAM has also entered into indemnification
agreements with certain of its executive officers and directors. The
indemnification agreements require TEAM, 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
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result of any proceeding against them as to which they could be indemnified.
TEAM maintains directors' and officers' insurance against certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling TEAM pursuant to
the arrangements described above, TEAM has been advised that in the opinion of
the Securities and Exchange Commission (the "Commission"), such indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable.
At present, there is no pending material litigation or proceeding involving
any director, officer, employee or agent of TEAM where indemnification will be
required or permitted.
SECTION 203
TEAM is subject to Section 203 of the Delaware General Corporation Law,
which prohibits a publicly held Delaware corporation from consummating a
"business combination," except under certain circumstances, with an "interested
stockholder" for a period of three years after the date such person became an
"interested stockholder" unless the business combination is approved in a
prescribed manner. An "interested stockholder" generally is defined as a person
who, together with affiliates and associates, owns (or, within the prior three
years, owned) 15% or more of a corporation's outstanding voting stock. A
"business combination" includes mergers, asset sales and certain other
transactions resulting in a financial benefit to an interested stockholder.
TRANSFER AGENT
The transfer agent and registrar for the Class A Common Stock is
ChaseMellon Shareholder Services.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, TEAM will have outstanding
shares of the Class A Common Stock and 1,936,600 shares of the Class B Common
Stock (assuming the over-allotment option described below is not exercised). The
Class B Common Stock is convertible on a share-for-share basis into Class A
Common Stock and must be converted to effect any public sale of such stock. Of
these shares, shares, including the shares of Class A Common
Stock sold in the Offering, will be freely tradeable without restriction under
the Securities Act, except for any shares purchased by an "affiliate" of TEAM
(as that term is defined in the Securities Act), which will be subject to the
resale limitations of Rule 144 under the Securities Act.
The remaining shares of the Class A Common Stock, all shares of
the Class B Common Stock and all shares of the Series A Convertible Preferred
Stock are "restricted" securities within the meaning of Rule 144 and may not be
resold in a public distribution, except in compliance with the registration
requirements of the Securities Act or pursuant to Rule 144. Of these shares,
495,383 shares of Class A Common Stock and all of the Class B Common Stock are
eligible for sale under Rule 144, and 151,067 and 713,962 shares of Class A
Common Stock will become eligible for sale under Rule 144 in March 1997 and
October 1997, respectively. All of the shares of Series A Convertible Preferred
Stock will become eligible for sale under Rule 144 two years after the issuance
of those shares in the Budget Acquisition. TEAM's directors and executive
officers, who in the aggregate beneficially own 2,823,805 shares of Common
Stock, have agreed that they will not sell, contract or offer to sell or
otherwise dispose of, directly or indirectly, any shares of capital stock of
TEAM for a period of 90 days from the date of this Prospectus without the prior
written consent of Credit Suisse First Boston Corporation, on behalf of the
Underwriters. See "Underwriting." After such date, certain of these stockholders
have the right to demand that TEAM register their shares under the Securities
Act in accordance with agreements between such holders and TEAM and may be able
to dispose of their shares in a registered public offering effected thereunder.
In addition, certain stockholders and holders of the stock purchase warrants
possess certain demand and/or "piggyback" registration rights. See "Description
of Capital Stock -- Registration Rights" and "Management -- Benefit Plans."
Subject to stockholder approval of amendments to TEAM's option plans at the
1997 Annual Meeting of Stockholders, TEAM has reserved shares of
Common Stock for issuance under the 1994 Option Plan (which may be either Class
A Common Stock or Class B Common Stock) and 150,000 shares of Class A
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<PAGE> 80
Common Stock for issuance under the 1994 Directors' Plan. There are 636,850
stock options currently issued or outstanding under the 1994 Option Plan and
70,000 stock options issued and outstanding under the 1994 Directors' Plan. TEAM
filed a Form S-8 Registration Statement under the Securities Act to register
760,000 shares of the Common Stock issuable under the 1994 Option Plan and
25,000 of the shares of Class A Common Stock issuable under the 1994 Directors'
Plan. Shares issued upon the exercise of stock options after the effective date
of the Form S-8 registration statement became eligible for resale in the public
market without restriction, subject to Rule 144 limitations applicable to
affiliates and the lock-up agreements applicable to certain shares subject to
options as described in the preceding paragraph. TEAM expects to file a Form S-8
Registration Statement with respect to the remaining 133,150 shares of Common
Stock issuable under the 1994 Option Plan and 80,000 shares of Class A Common
Stock issuable under the 1994 Directors' Plan. TEAM has further reserved 362,500
shares of the Class A Common Stock for issuance upon the exercise of stock
purchase warrants.
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<PAGE> 81
CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S.
HOLDERS OF CLASS A COMMON STOCK
GENERAL
The following is a general discussion of U.S. Federal income and estate tax
consequences of the ownership and disposition of Class A Common Stock by a
Non-U.S. Holder (as defined below). This discussion does not address all aspects
of U.S. Federal income and estate taxes and does not address any foreign, state
or local tax consequences. Furthermore, this discussion is based on provisions
of the Code, existing, temporary and proposed regulations promulgated thereunder
and administrative and judicial interpretations thereof, all as in effect or
proposed on the date hereof and all of which are subject to change, possibly
with retroactive effect, or different interpretations. Each prospective
purchaser of Class A Common Stock is advised to consult a tax advisor with
respect to current and possible future U.S. Federal income and estate tax
consequences of holding and disposing of Class A Common Stock as well as any tax
consequences that may arise under the laws of any state, local, foreign or other
taxing jurisdiction. For purposes of this summary, a "U.S. Holder" with respect
to Class A Common Stock is (i) an individual who is a citizen or resident of the
United States, (ii) a corporation or other entity taxable as a corporation
created or organized in the United States or under the laws of the United States
or of any state thereof (including the District of Columbia), (iii) an estate or
trust the income of which is includable in gross income for U.S. Federal income
tax purposes regardless of its source or (iv) a person otherwise subject to U.S.
Federal income taxation with respect to income from the Class A Common Stock on
a net income basis; and a "Non-U.S. Holder" is any person other than a U.S.
Holder.
DISTRIBUTIONS
Distributions on the shares of Class A Common Stock (other than
distributions in redemption of the shares of Class A Common Stock subject to
Section 302(b) of the Code) will constitute dividends for U.S. Federal income
tax purposes to the extent paid from current or accumulated earnings and profits
of TEAM (as determined under U.S. Federal income tax principles). Dividends paid
to a Non-U.S. Holder of Class A Common Stock that are not effectively connected
with a U.S. trade or business of the Non-U.S. Holder will be subject to U.S.
withholding tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. Under the terms of the tax treaty between Canada
and the United States (the "Treaty"), dividends paid to a Non-U.S. Holder owning
less than 10% of TEAM's Class A Common Stock is subject to withholding tax at
the reduced rate of 15%, provided that such Non-U.S. Holder is entitled to the
benefits of the Treaty. Moreover, under United States Treasury regulations which
are currently in effect, withholding is generally imposed on the gross amount of
the distribution, without regard to whether the corporation has sufficient
earnings and profits to cause the distribution to be a dividend for U.S. Federal
income tax purposes. Dividends that are effectively connected with the conduct
of a trade or business within the United States or, if a tax treaty applies, are
attributable to a U.S. permanent establishment of a Non-U.S. Holder, are exempt
from U.S. Federal withholding tax but are subject to U.S. Federal income tax on
a net income basis at applicable graduated individual or corporate rates. Any
such dividends effectively connected with the conduct of a trade or business
within the United States or attributable to a U.S. permanent establishment
received by a foreign corporation may, under certain circumstances, be subject
to an additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. Certain certification and
disclosure requirements must be complied with in order to be exempt from
withholding under the effectively connected income or permanent establishment
exemptions.
Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country for purposes of the withholding discussed above, and, under the current
interpretation of United States Treasury regulations, for purposes of
determining the applicability of a tax treaty rate. Under proposed United States
Treasury regulations (the "Proposed Regulations") not currently in effect,
however, a Non-U.S. Holder of Class A Common Stock would be required to satisfy
applicable certification and other requirements to qualify for withholding at an
applicable treaty rate. The Proposed Regulations would require a Non-U.S. Holder
to file a beneficial owner withholding certification, e.g., a Form W-8, to
obtain the lower treaty rate. The Proposed Regulations would apply to dividends
paid after December 31, 1997, subject to certain transitional rules.
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<PAGE> 82
A Non-U.S. Holder of Class A Common Stock may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the Internal
Revenue Service (the "IRS").
GAIN ON DISPOSITION OF CLASS A COMMON STOCK
A Non-U.S. Holder will generally not be subject to U.S. Federal income tax
with respect to gain recognized on a sale or other disposition of Class A Common
Stock unless (i) the gain is effectively connected with a trade or business of
the Non-U.S. Holder in the United States, (ii) in the case of a Non-U.S. Holder
who is an individual and holds Class A Common Stock as a capital asset, such
holder is present in the United States for 183 or more days in the taxable year
of the sale or other disposition and certain other conditions are met, or (iii)
TEAM is or has been a "U.S. real property holding corporation" for U.S. Federal
income tax purposes at any time during the five-year period ending on the date
of the disposition, or, if shorter, the period during which the Non-U.S. Holder
held the Class A Common Stock (the "applicable period"), and the Non-U.S. Holder
owns, actually or constructively, at any time during the applicable period more
than five percent of the Class A Common Stock. Management believes that it is
not currently a "U.S. real property holding corporation" for U.S. Federal income
tax purposes.
FEDERAL ESTATE TAX
Common Stock held by an individual Non-U.S. Holder at the time of death
will be included in such holder's gross estate for U.S. Federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Under Treasury regulations, TEAM must report annually to the IRS and to
each Non-U.S. Holder the amount of dividends paid to such holder and the tax
withheld with respect to such dividends. These information reporting
requirements apply even if withholding was not required because the dividends
were effectively connected with a U.S. trade or business in the United States of
the Non-U.S. Holder or withholding was reduced or eliminated by an applicable
income tax treaty. Copies of the information returns reporting such dividends
and withholding may also be made available to the tax authorities in the country
in which the Non-U.S. Holder resides under the provisions of an applicable
income tax treaty.
Backup withholding (which generally is a withholding tax imposed at the
rate of 31% on certain payments to persons who fail to furnish certain
information under the U.S. information reporting requirements) will generally
not apply to dividends paid to Non-U.S. Holders that either are subject to the
U.S. withholding tax, whether at 30% or a reduced treaty rate, or that are
exempt from such withholding of effectively connected income. As a general
matter, information reporting and backup withholding will not apply to a payment
by or through a foreign office of a foreign broker of the proceeds of a sale of
Class A Common Stock effected outside the United States. However, information
reporting requirements (but not backup withholding) will apply to a payment by
or through a foreign office of a broker of the proceeds of a sale of Class A
Common Stock effected outside the United States where that broker (i) is a U.S.
person, (ii) is a foreign person that derives 50% or more of its gross income
for certain periods from the conduct of a trade or business in the United States
or (iii) is a "controlled foreign corporation" as defined in the Code
(generally, a foreign corporation controlled by certain U.S. shareholders,
unless the broker has documentary evidence in its records that the holder is a
Non-U.S. Holder and certain conditions are met or the holder otherwise
establishes an exemption. Payment by a U.S. office of a broker of the proceeds
of a sale of Class A Common Stock is subject to both backup withholding and
information reporting unless the holder certifies to the payor in the manner
required as to its non-U.S. status under penalties of perjury or otherwise
establishes an exemption.
Amounts withheld under the backup withholding rules do not constitute a
separate U.S. Federal income tax. Rather, any amounts withheld under the backup
withholding rules will be refunded or allowed as a credit against the holder's
U.S. Federal income tax liability, if any, provided the required information or
appropriate claim for refund is filed with the IRS.
THE FOREGOING DISCUSSION IS A SUMMARY OF THE PRINCIPAL U.S. FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES OF THE OWNERSHIP, SALE OR OTHER DISPOSITION OF THE CLASS
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<PAGE> 83
A COMMON STOCK BY NON-U.S. HOLDERS. ACCORDINGLY, INVESTORS ARE URGED TO CONSULT
WITH THEIR TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES
OF THE OWNERSHIP AND DISPOSITION OF CLASS A COMMON STOCK INCLUDING THE
APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING
JURISDICTION.
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<PAGE> 84
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1997 among TEAM and the U.S. Underwriters (the
"Underwriting Agreement"), the underwriters named below (the "U.S.
Underwriters") have severally but not jointly agreed to purchase from TEAM the
following respective numbers of U.S. Shares:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
ABN AMRO Chicago Corporation................................
Alex. Brown & Sons Incorporated.............................
McDonald & Company Securities, Inc..........................
---------
Total.............................................
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all the U.S. Shares (other than those
U.S. Shares covered by the over-allotment option described below) if any are
purchased. The Underwriting Agreement provides that, in the event of a default
by a U.S. Underwriter, in certain circumstances the purchase commitments of
non-defaulting U.S. Underwriters may be increased or the Underwriting Agreement
may be terminated.
TEAM has entered into a Subscription Agreement (the "Subscription
Agreement") with the Managers of the International Offering (the "Managers")
providing for the concurrent offer and sale of the International Shares outside
the United States and Canada. The closing of the U.S. Offering is a condition to
the closing of the International Offering and vice versa.
TEAM has granted to the U.S. Underwriters and the Managers an option
exercisable by Credit Suisse First Boston Corporation, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
additional shares of the Class A Common Stock at the public offering
price less underwriting discounts and commissions, all as set forth on the cover
page of this Prospectus. Such option may be exercised only to cover
over-allotments, if any, in the sale of the shares of Class A Common Stock. To
the extent such option is exercised, each U.S. Underwriter and each Manager will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of additional shares being sold to the U.S. Underwriters and the
Managers as the number of U.S. Shares set forth next to such U.S. Underwriter's
name in the preceding table and as the number set forth next to such Manager's
name in the corresponding table in the Prospectus relating to the International
Offering bears to the total number of shares of Class A Common Stock in such
tables.
TEAM has been advised by the U.S. Underwriters that the U.S. Underwriters
propose to offer the U.S. Shares in the United States and Canada to the public
initially at the public offering price set forth on the cover page of this
Prospectus and, through the U.S. Underwriters, to certain dealers at such price
less a concession of $ per share, and the U.S. Underwriters and such dealers
may allow a discount of $ per share on sales to certain other dealers. After
the public offering, the public offering price, concession and discount to
dealers may be changed by the U.S. Underwriters.
The public offering price, the aggregate underwriting discounts and
commissions per share and the per share concession and discount to dealers for
the U.S. Offering and the concurrent International Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and the Managers (the
"Intersyndicate Agreement") relating to the Offering, changes in the public
offering price, the aggregate underwriting discounts and commissions per share
and the per share concession and discount to dealers will be made only upon the
mutual agreement of Credit Suisse First Boston Corporation, on behalf of the
U.S. Underwriters, and Credit Suisse First Boston (Europe) Limited, on behalf of
the Managers.
Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or
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<PAGE> 85
sell, directly or indirectly, any shares of Class A Common Stock or distribute
any prospectus relating to the Class A Common Stock to any person outside the
United States or Canada or to any other dealer who does not so agree. Each of
the Managers has agreed or will agree that, as part of the distribution of the
International Shares and subject to certain exceptions, it has not offered or
sold, and will not offer or sell, directly or indirectly, any shares of Class A
Common Stock or distribute any prospectus relating to the Class A Common Stock
in the United States or Canada or to any other dealer who does not so agree. The
foregoing limitations do not apply to stabilization transactions or to
transactions between the U.S. Underwriters and the Managers pursuant to the
Intersyndicate Agreement. As used herein, "United States" means the United
States of America (including the States and the District of Columbia), its
territories, possessions and other areas subject to its jurisdiction. "Canada"
means Canada, its provinces, territories, possessions and other areas subject to
its jurisdiction, and an offer or sale shall be in the United States or Canada
if it is made to (i) an individual resident in the United States or Canada or
(ii) a corporation, partnership, pension, profit-sharing or other trust or other
entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with the purchase
is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
U.S. Underwriters and the Managers of such number of shares of Class A Common
Stock as may be mutually agreed. The price of any shares so sold shall be the
public offering price, less such amount as may be mutually agreed upon by Credit
Suisse First Boston Corporation, on behalf of the U.S. Underwriters, and Credit
Suisse First Boston (Europe) Limited, on behalf of the Managers, but not
exceeding the selling concession applicable to such shares. To the extent there
are sales between the U.S. Underwriters and the Managers pursuant to the
Intersyndicate Agreement, the number of shares of Class A Common Stock initially
available for sale by the U.S. Underwriters or by the Managers may be more or
less than the amount appearing on the cover page of this Prospectus. Neither the
U.S. Underwriters nor the Managers are obligated to purchase from the other any
unsold shares of Class A Common Stock.
This Prospectus may be used by underwriters and dealers in connection with
sales of International Shares to persons located in the United States, to the
extent such sales are permitted by the contractual limitations on sales
described above.
In connection with this offering, the U.S. Underwriters and their
respective affiliates may engage in passive market making transactions in the
Class A Common Stock on the Nasdaq National Market in accordance with Rule
10b-6A under the Securities Exchange Act of 1934 (the "Exchange Act"), during a
period before commencement of offers or sales of the shares offered hereby. The
passive market making transactions must comply with applicable volume and price
limits and be identified as such.
TEAM and its officers and directors and certain other holders of Class A
Common Stock have agreed that they will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or, in the case of TEAM,
file with the Commission a registration statement under the Securities Act
relating to any additional shares of TEAM's Common Stock or securities
convertible into or exchangeable or exercisable for any shares of TEAM's Common
Stock, or disclose the intention to make any such offer, sale, pledge, disposal
or filing, without the prior written consent of Credit Suisse First Boston
Corporation, in the case of TEAM's officers and directors, for a period of 90
days and, in the case of TEAM, for a period of 180 days, after the date of this
Prospectus, except issuances pursuant to the exercise of stock options granted
under the 1994 Option Plan.
TEAM has agreed to indemnify the U.S. Underwriters and the Managers against
certain liabilities, including civil liabilities under the Securities Act, or to
contribute to payments which the U.S. Underwriters and the Managers may be
required to make in respect thereof.
Credit Suisse First Boston Corporation has acted as placement agent in
connection with each of the Fleet Financing Facilities, as placement agent in
connection with the offering of the Convertible Subordinated Notes and as
underwriter for TEAM's initial public offering and its equity offering in July
1996. In addition, Credit Suisse First Boston Corporation acted as placement
agent for a fleet financing by SoCal shortly before it was acquired by TEAM.
Credit Suisse First Boston Corporation is acting as financial advisor to TEAM in
connection with the Budget Acquisition.
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<PAGE> 86
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Class A Common Stock in Canada is being made only
on a private placement basis exempt from the requirement that TEAM prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of Class A Common Stock are effected. Accordingly, any resale of
the Class A Common Stock in Canada must be made in accordance with applicable
securities laws which will vary depending on the relevant jurisdiction, and
which may require resales to be made in accordance with available statutory
exemptions or pursuant to a discretionary exemption granted by the applicable
Canadian securities regulatory authority. Purchasers are advised to seek legal
advice prior to any resale of the Class A Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Class A Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to TEAM and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Class A Common Stock
without the benefit of a prospectus qualified under such securities laws, (ii)
where required by law, such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. Federal securities laws.
All of TEAM's directors and officers as well as the experts named herein
may be located outside of Canada and, as a result, it may not be possible for
Ontario purchasers to effect service of process within Canada upon the issuer or
such persons. All or a substantial portion of the assets of TEAM and such
persons may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against TEAM or such persons in Canada or to
enforce a judgment obtained in Canadian courts against TEAM or such persons
outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Class A Common Stock to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Class A Common Stock acquired by such purchaser pursuant to the Offering.
Such report must be in the form attached to British Columbia Securities
Commission Blanket Order BOR #95/17, a copy of which may be obtained from TEAM.
Only one such report must be filed in respect of Class A Common Stock acquired
on the same date and under the same prospectus exemption.
LEGAL MATTERS
The validity of the shares of the Class A Common Stock offered hereby will
be passed upon for TEAM by King & Spalding, Atlanta, Georgia. The U.S.
Underwriters and the Managers have been represented by Cravath, Swaine & Moore,
New York, New York.
EXPERTS
The consolidated financial statements of Team Rental Group, Inc. as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995 included in this Prospectus and the related financial
statement schedules included elsewhere in the Registration Statement have been
audited by Deloitte & Touche LLP ("D&T"), independent auditors, as stated in
their reports appearing herein and elsewhere in the
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<PAGE> 87
Registration Statement and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
On November 26, 1996, TEAM appointed Arthur Andersen LLP as its independent
accounting firm for the remainder of 1996. TEAM's Audit Committee recommended
the appointment, which was approved by the Board of Directors. Concurrently, the
Board of Directors elected to dismiss D&T, TEAM's former independent accounting
firm. The report of D&T on TEAM's financial statements for the two years ended
December 31, 1995 contained no adverse opinion or disclaimer of opinion, and was
not qualified or modified as to uncertainty, audit scope or accounting
principles. Since TEAM's inception, D&T's reports on TEAM's financial statements
have not contained an adverse opinion or a disclaimer of opinion, nor were the
opinions qualified or modified as to uncertainty, audit scope or accounting
principles, nor were there any events of the type requiring disclosure under
Item 304(a)(1)(v) of Regulation S-K under the Securities Act.
With regard to Item 304(a)(1)(iv) of Regulation S-K, TEAM has previously
reported the following: (i) On February 2, 1996, TEAM announced that it would
restate its financial statements for all periods since its initial public
offering in 1994. This restatement resulted from a change in the accounting
treatment of the BRACC Warrant concurrently with TEAM's initial public offering
in August 1994. This change in accounting treatment was the subject of numerous
discussions between officers of TEAM and representatives of D&T (including
discussions between D&T and the Audit Committee of the Company's Board of
Directors, which occurred in January 1996), and was approved by the Audit
Committee and announced to the public on February 2, 1996. TEAM believes this
matter was resolved to the satisfaction of D&T. In late 1995, TEAM received
funds from a vehicle manufacturer that it accounted for in a manner similar to
funds it had received from a vehicle manufacturer in 1993. In March 1996, D&T
advised TEAM that it did not deem the 1995 transaction analogous to the 1993
transaction. D&T discussed this matter with officers of TEAM, and TEAM issued
its financial statements in accordance with the recommendation of D&T. In
connection with the resolution of the matter described in this paragraph,
neither the Board of Directors nor any committee thereof formally discussed this
matter with D&T. TEAM believes that this matter was resolved to the satisfaction
of D&T.
TEAM has provided D&T with a copy of the disclosures contained herein and
D&T has indicated in a letter to the Commission that it agrees with these
disclosures. A copy of such letter is filed as an exhibit to the registration
statement. Neither TEAM nor anyone acting on its behalf consulted with Arthur
Andersen LLP regarding any of the matters referred to in Item 304(a)(2) of
Regulation S-K prior to its appointment.
The consolidated financial statements of BRACC as of December 31, 1994 and
1995 and for each of the three years in the period ended December 31, 1995 have
been included in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein and upon the authority of said firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
TEAM is subject to the informational requirements of the Exchange Act and,
in accordance therewith, files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information filed
by TEAM with the Commission can be inspected and copied at the public reference
section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, or at its Regional Offices located at 7 World Trade Center, Suite 1300,
New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a World Wide Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants such as TEAM which file electronically
with the Commission.
TEAM has filed with the Commission a Registration Statement on Form S-1
under the Securities Act with respect to the Class A Common Stock offered
hereby. This Prospectus, which is a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement. For
further information with respect to TEAM and the Class A Common Stock, reference
is made to the Registration Statement and the
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<PAGE> 88
exhibits and schedules filed as a part thereof. Statements made herein
concerning the provisions of any documents are not necessarily complete, and in
each instance reference is made to the copy of such document filed as an exhibit
to the Registration Statement. Each such statement is qualified in its entirety
by such reference. The Registration Statement and the exhibits and schedules
thereto may be inspected, without charge, at the public reference section or
regional offices of the Commission at the addresses indicated above. Copies of
the Registration Statement can be obtained from the public reference section of
the Commission upon payment of prescribed fees.
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<PAGE> 89
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TEAM RENTAL GROUP, INC.
- ---------------------------
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets -- December 31, 1994 and 1995... F-3
Consolidated Statements of Operations for Each of the Three
Years in the Period Ended December 31, 1995............... F-4
Consolidated Statements of Stockholders' Equity (Deficiency)
for Each of the Three Years in the Period Ended December
31, 1995.................................................. F-5
Consolidated Statements of Cash Flows for Each of the Three
Years in the Period Ended December 31, 1995............... F-6
Notes to Consolidated Financial Statements.................. F-7
Consolidated Balance Sheets -- December 31, 1995 and
(unaudited) September 30, 1996............................ F-20
Consolidated Statements of Operations (unaudited) for the
Nine Months Ended September 30, 1995 and 1996............. F-21
Consolidated Statements of Stockholders' Equity (unaudited)
for the Nine Months Ended September 30, 1996.............. F-22
Consolidated Statements of Cash Flows (unaudited) for the
Nine Months Ended September 30, 1995 and 1996............. F-23
Notes to Unaudited Consolidated Financial Statements........ F-24
BUDGET RENT A CAR CORPORATION
- -----------------------------------
Independent Auditors' Report................................ F-26
Consolidated Balance Sheets -- December 31, 1994 and 1995... F-27
Consolidated Statements of Operations for Each of the Three
Years in the Period Ended December 31, 1995............... F-28
Consolidated Statements of Stockholders' Equity for Each of
the Three Years in the Period Ended December 31, 1995..... F-29
Consolidated Statements of Cash Flows for Each of the Three
Years in the Period Ended December 31, 1995............... F-30
Notes to Consolidated Financial Statements.................. F-31
Consolidated Balance Sheets -- December 31, 1995 and
September 30, 1996 (unaudited)............................ F-42
Consolidated Statements of Operations for the Nine Months
Ended September 30, 1995 and 1996 (unaudited)............. F-43
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1994 and 1995 and for the Nine
Months Ended September 30, 1996 (unaudited)............... F-44
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1995 and 1996 (unaudited)............. F-45
Notes to Consolidated Financial Statements (unaudited)...... F-46
</TABLE>
F-1
<PAGE> 90
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Team Rental Group, Inc.:
We have audited the consolidated balance sheets of Team Rental Group, Inc.
as of December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity (deficiency) and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Team Rental Group, Inc. as of
December 31, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
April 12, 1996
F-2
<PAGE> 91
TEAM RENTAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 878 $ 357
Restricted cash and cash equivalents........................ 32,691 67,731
Trade and vehicle receivables, net of allowance for doubtful
accounts of $501 and $2,297............................... 5,501 20,928
Accounts receivable, related parties........................ 59 61
Vehicle inventory........................................... 943 8,938
Revenue earning vehicles, net............................... 97,127 219,927
Other property and equipment, net........................... 5,243 12,503
Deferred financing fees, net of accumulated amortization of
$102 and $425............................................. 1,512 2,266
Franchise rights, net of accumulated amortization of $641
and $1,500................................................ 13,953 46,670
Other assets................................................ 5,084 6,942
-------- --------
Total............................................. $162,991 $386,323
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Notes payable (including amounts to related parties of
$5,792 in 1995)........................................ $126,564 $318,233
Capital lease obligations................................. 623 784
Accounts payable.......................................... 1,366 14,698
Accrued and other liabilities............................. 4,529 9,315
Deferred income taxes..................................... 1,161 1,701
-------- --------
Total liabilities................................. 134,243 344,731
-------- --------
COMMITMENTS (Notes 8 and 12)
COMMON STOCK WARRANT........................................ 2,000 2,000
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 250,000 shares
authorized, no shares issued........................... -- --
Class A common stock, $.01 par value, one vote per share,
17,500,000 shares authorized, 4,036,300 and 5,257,116
shares issued.......................................... 40 52
Class B common stock, $.01 par value, ten votes per share,
2,500,000 shares authorized, 1,936,600 shares issued
and outstanding........................................ 20 20
Additional paid-in capital................................ 29,159 41,984
Accumulated deficit....................................... (2,471) (2,134)
Treasury stock at cost (36,667 shares of Class A common
stock)................................................. -- (330)
-------- --------
Total stockholders' equity........................ 26,748 39,592
-------- --------
Total............................................. $162,991 $386,323
======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 92
TEAM RENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1994 1995
------- ------- --------
<S> <C> <C> <C>
OPERATING REVENUE:
Vehicle rental revenue.................................... $22,321 $38,642 $107,067
Retail car sales revenue.................................. -- -- 42,662
------- ------- --------
Total operating revenue........................... 22,321 38,642 149,729
------- ------- --------
OPERATING COSTS AND EXPENSES:
Direct vehicle and operating.............................. 5,452 9,439 13,704
Depreciation -- vehicles.................................. 4,358 7,382 27,476
Depreciation -- non-vehicle............................... 229 446 1,341
Cost of vehicle sales..................................... -- -- 38,021
Advertising, promotion and selling........................ 1,658 3,090 11,826
Facilities................................................ 2,695 4,398 11,121
Personnel................................................. 4,537 7,947 24,515
General and administrative................................ 790 1,515 6,686
Amortization of franchise rights.......................... 152 229 859
------- ------- --------
Total operating costs and expenses................ 19,871 34,446 135,549
------- ------- --------
Operating income............................................ 2,450 4,196 14,180
------- ------- --------
OTHER (INCOME) EXPENSE:
Interest expense -- vehicles.............................. 2,462 3,909 13,874
Interest expense -- other................................. 181 341 473
Interest income -- restricted cash........................ -- (670) (1,348)
Interest expense -- related party......................... 220 190 159
Nonrecurring income....................................... (1,023) -- --
------- ------- --------
Other expense -- net................................... 1,840 3,770 13,158
------- ------- --------
Income before income taxes.................................. 610 426 1,022
Provision for income taxes.................................. 182 176 685
------- ------- --------
Net income.................................................. $ 428 $ 250 $ 337
======= ======= ========
Weighted average common shares outstanding.................. -- 3,704 6,369
Earnings per common share................................... -- $ 0.07 $ 0.05
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 93
TEAM RENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDERS'
COMMON PAID-IN ACCUMULATED TREASURY EQUITY
STOCK CAPITAL DEFICIT STOCK (DEFICIENCY)
------ ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1993................. $ 15 $ 514 $(1,873) -- $(1,344)
Net income................................ -- -- 428 -- 428
Distributions on redeemable preferred
stock.................................. -- (275) -- -- (275)
Dividends to common stockholders.......... -- -- (60) -- (60)
---- ------- ------- ----- -------
Balances at December 31, 1993............... 15 239 (1,505) -- (1,251)
Net income................................ -- -- 250 -- 250
Distributions on redeemable preferred
stock.................................. -- (183) -- -- (183)
Dividends to common stockholders.......... -- -- (47) -- (47)
Net proceeds from initial public
offering............................... 45 28,903 -- -- 28,948
Deferred taxes due to a change in tax
status................................. -- -- (1,169) -- (1,169)
Shares issued in business combinations.... -- 200 -- -- 200
---- ------- ------- ----- -------
Balances at December 31, 1994............... 60 29,159 (2,471) -- 26,748
Net income................................ -- -- 337 -- 337
Shares issued in business combinations.... 12 12,825 -- -- 12,837
Class A common stock acquired for
treasury............................... -- -- -- $(330) (330)
---- ------- ------- ----- -------
Balances at December 31, 1995............... $ 72 $41,984 $(2,134) $(330) $39,592
==== ======= ======= ===== =======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 94
TEAM RENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 428 $ 250 $ 337
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation............................................ 4,587 7,828 28,817
Amortization............................................ 152 534 1,761
Deferred income tax provision........................... -- (8) 540
Provision for doubtful accounts......................... (112) (282) 1,796
Discount on acquisition note............................ 58 -- --
Changes in certain assets and liabilities, net of effects
of acquisitions:
Receivables............................................. (297) (871) (11,189)
Other assets............................................ (323) (1,788) 387
Vehicle inventory....................................... -- -- (7,995)
Accounts payable........................................ 247 (2,259) 9,484
Accrued and other liabilities........................... 305 256 (7,790)
-------- --------- ---------
Net cash provided by operating activities.......... 5,045 3,660 16,148
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash........................................... -- (32,691) (13,271)
Proceeds from sale of revenue earning vehicles............ 48,516 73,728 293,905
Proceeds from sale of other property and equipment........ -- 51 --
Purchases of revenue earning vehicles..................... (52,767) (155,176) (315,863)
Purchases of other property and equipment................. (229) (637) (4,562)
Purchase of franchise rights.............................. -- (1,839) --
Payment for acquisitions, net of cash acquired............ -- (5,727) (6,507)
-------- --------- ---------
Net cash used in investing activities.............. (4,480) (122,291) (46,298)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net................ -- 28,948 --
Net increase (decrease) in vehicle obligations............ (33) (5,760) 20,947
Proceeds from notes payable:
Medium term notes....................................... -- 105,682 --
Working capital facilities.............................. -- -- 6,890
Related party........................................... 559 1,392 --
Other................................................... -- 2,610 3,399
Principal payments:
Related party........................................... (33) (3,200) (276)
Capital leases.......................................... (66) (410) (666)
Other................................................... (747) (5,665) (259)
Deferred financing fees................................... -- (1,614) (76)
Distributions on redeemable preferred stock............... (275) (183) --
Repayment of redeemable preferred stock................... -- (2,747) --
Dividends to common stockholders.......................... (60) (47) --
Purchase of treasury stock................................ -- -- (330)
-------- --------- ---------
Net cash provided by (used in) financing
activities....................................... (655) 119,006 29,629
-------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (90) 375 (521)
CASH AND CASH EQUIVALENTS, beginning of year................ 593 503 878
-------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year...................... $ 503 $ 878 $ 357
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 95
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Team Rental Group, Inc. (the "Company") is engaged in the business of the
daily rental of vehicles, including cars, trucks and passenger vans, and the
retail sale of used vehicles. The Company operates Budget Rent a Car ("Budget")
franchises granted by Budget Rent a Car Corporation ("BRAC") through its
operating subsidiaries serving twelve metropolitan regions in the U.S. including
Philadelphia and Pittsburgh, Pennsylvania; San Diego, California; Southern
California (excluding San Diego); Cincinnati and Dayton, Ohio; Albany and
Rochester, New York; Charlotte, North Carolina; Richmond, Virginia; Hartford,
Connecticut and Fort Wayne, Indiana. MCK Realty, Inc. ("MCK") is owned by the
Company's principal stockholders. Because MCK is controlled by the Company's
principal stockholders and the Company has guaranteed the lease payments
assigned to a bank, MCK is included in the consolidated financial statements.
Basis of Presentation
The 1993 financial statements consist of companies affiliated through
common ownership and control and reflect the consolidated accounts of each
company. Concurrent with the initial public offering (Note 2), the Company
exchanged 563,400 shares of Class A common stock and 1,936,450 shares of Class B
common stock for all of the outstanding common stock of the combined companies,
which accordingly, became wholly owned subsidiaries (the "Share Exchange"). The
1994 and 1995 consolidated financial statements include the accounts of Team
Rental Group, Inc. and its wholly owned subsidiaries. All significant
intercompany accounts have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management of the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments including money market
funds, commercial paper and time deposits purchased with an original maturity of
three months or less to be cash equivalents.
Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents consists of Medium Term Notes proceeds
not currently invested in eligible revenue earning vehicles. Under the terms of
the Medium Term Notes Indentures, the Company is required to invest the proceeds
in either restricted cash investments, as defined by the indenture, or revenue
earning vehicles.
Revenue Earning Vehicles
Revenue earning vehicles are stated at cost, after deducting related
discounts and manufacturers' incentives, and are depreciated over their
estimated economic lives or at rates corresponding to manufacturers' repurchase
program guidelines, where applicable. Depreciation rates range from .5% to 3%
per month. Management periodically reviews depreciable lives and rates based on
a variety of factors including general economic conditions and estimated holding
periods of the vehicles. Gains and losses upon the sale of revenue earning
vehicles are recorded as an adjustment to depreciation expense.
F-7
<PAGE> 96
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
Advertising, Promotion and Selling
Advertising, promotion and selling expense are charged to expense as
incurred. The Company incurred advertising expense of $275, $412 and $2,347 in
1993, 1994 and 1995, respectively.
Retail Car Sales Inventory
Retail car sales inventory is stated at the lower of cost (first-in,
first-out method) or market.
Other Property and Equipment
Other property and equipment is recorded at cost. Depreciation is being
provided on the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings............................... 10 - 23 years
Equipment, furniture and fixtures....... 3 - 10 years
Capital leases and leasehold
improvements.......................... Lesser of estimated useful lives or
terms of related leases
</TABLE>
Deferred Financing Fees
Direct costs incurred in connection with the Company's borrowings have been
deferred and are being amortized over the terms of the related loan agreements
on the straight-line basis.
Prepaid Royalty Fees
Prepaid royalty fees of $1,797 and $1,217 (net of accumulated amortization
of $203 and $783) at December 31, 1994 and 1995, respectively, are related to
the abatement of fees at the Company's Philadelphia operations through June 15,
1999 and are recorded in other assets. The prepaid fees are being amortized
using an accelerated method over the royalty abatement period of five years.
Franchise Rights
Franchise agreements are renewable for an unlimited number of one- and
five-year periods, subject to certain terms and conditions. Franchise rights are
amortized using the straight-line method over forty years. The Company believes
that the vehicle rental industry and, therefore, vehicle rental franchises have
an expected life in excess of forty years and the industry will continue as long
as the automobile is an accepted method of transportation. The specific markets
the Company serves are considered to be stable and are locations which are major
national or regional commercial centers that attract business and leisure
travelers who need rental vehicles. Circumstances that would indicate possible
impairment to franchise rights include the failure of BRAC to maintain its
international network of rental car franchisers, the termination of the
Company's presence in one or more major airport markets, or a significant
permanent decline in cash flows from rental operations. The impairment would be
measured as the amount by which the carrying value of the related asset exceeds
the present value of estimated annual discounted cash flows generated by the
franchise operations utilizing an appropriate discount rate. Effective January
1, 1995, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amounts of these assets may
not be recoverable. There was no material effect on the Company's consolidated
financial statements upon adoption of SFAS No. 121 in 1995.
F-8
<PAGE> 97
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
Income Taxes
Deferred tax assets and liabilities are computed based on differences
between the financial statement and income tax bases of assets and liabilities
using enacted tax rates. Deferred income tax expense or benefit is based on the
change in deferred tax assets and liabilities from period to period, subject to
an ongoing assessment of realization.
Earnings Per Common Share
Earnings per common share for the year ended December 31, 1994 was computed
assuming all of the outstanding common stock of the combined companies (which
totaled 2,500,000 shares) was outstanding the entire year and the shares issued
in connection with the initial public offering and the Fort Wayne acquisition
were outstanding from the dates issued. Earnings per common share for the year
ended December 31, 1995 was based on the weighted average number of common
shares outstanding during the year considering the 1995 acquisitions and the
purchase of treasury stock. The assumed issuance of the shares for the common
stock warrant to BRAC and the exercise of stock options does not have a
materially dilutive effect.
Retention of Self Insured Risks
At December 31, 1995, the Company has automobile liability insurance
coverage of up to $1,000, with a $500 retention per occurrence with respect to
personal injury and damage claims arising from the use of its vehicles. The
Company provides reserves on reported claims and claims incurred but not
reported at each balance sheet date based on actuarial estimates. The
actuarially determined reserves are necessarily based on estimates, and while
management believes that the amounts are adequate, the ultimate liability may be
in excess of, or less than, the amounts provided. Such estimates are reviewed
and evaluated in light of emerging claim experience and existing circumstances.
Any changes in estimates from this review process are reflected in operations
currently.
Stock Options
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation, which encourages, but does not
require, companies to adopt the fair value based method of accounting for
stock-based employee compensation plans. Under the fair value method,
compensation cost is measured at the grant date based on the fair value of the
award and is recognized over the service period, which is usually the vesting
period. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25, but would be
required to disclose on a pro forma basis, net income and, if presented,
earnings per share, as if the fair value based method of accounting had been
applied.
The accounting requirements of the new method are effective for financial
statements for fiscal years beginning after December 15, 1995. The Company has
not yet determined if it will elect to change to the fair value based method,
nor has it determined the effect the new standard will have on net income and
earning per share should it elect to make such a change. Adoption of the new
standard will not have an effect on the Company's cash flows.
Reclassifications
Certain reclassifications have been made to the 1993 and 1994 consolidated
financial statements to conform with the 1995 presentation.
2. INITIAL PUBLIC OFFERING AND MEDIUM TERM NOTES
The Company sold 3,300,000 shares of Class A common stock on August 25,
1994 and 154,400 shares of Class A common stock on September 19, 1994 at $9.50
per share to investors in an initial public offering
F-9
<PAGE> 98
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
resulting in gross proceeds of $32,800 to the Company. Net proceeds to the
Company after offering expenses were $28,948. The net proceeds were used to
acquire certain assets (certain liabilities were also assumed) of Freedom River,
Inc. ("Freedom River"), capitalize Team Fleet Finance Corporation ("TFFC"), a
wholly owned subsidiary, acquire vehicles under operating leases, redeem the
outstanding redeemable preferred stock, acquire the Budget Rent a Truck
franchise rights for San Diego, California, repay loans and accrued interest to
related and non-related third parties, and purchase equipment leased from
related parties.
Concurrent with the initial public offering, TFFC issued senior and
subordinated asset-backed notes ("Medium Term Notes") of $100,000 and $5,682,
respectively, in a private placement pursuant to an Indenture between TFFC and
Bankers Trust Company, as Trustee. The proceeds of the Medium Term Notes are
available to finance the purchase of rental fleet vehicles subject to
manufacturers' repurchase programs sponsored by Chrysler, General Motors and
Ford.
3. ACQUISITIONS
During 1994, 1995 and in February 1996, the Company acquired certain Budget
franchise and van pool operations. The acquisitions have been accounted for
under the purchase method of accounting and, accordingly, the Company has
allocated the cost of the acquisitions on the basis of the estimated fair value
of the assets acquired and liabilities assumed. The 1995 allocations are based
on preliminary estimates and may be revised at a later date. The accompanying
consolidated statements of operations and cash flows reflect the operations of
the acquired companies from their respective acquisition dates through the years
ended December 31, 1994 and 1995.
1994 ACQUISITIONS
Freedom River
Concurrent with the initial public offering, the Company acquired certain
assets and assumed certain operating liabilities of Freedom River from Chrysler
Credit Corporation ("CCC"), a secured creditor of Freedom River, pursuant to a
private foreclosure sale conducted by CCC. The assets acquired consisted of the
Budget vehicle rental operations in the Philadelphia and Pittsburgh,
Pennsylvania and Cincinnati, Ohio metropolitan areas. Substantially all of
Freedom River's assets, other than its fleet, were purchased for approximately
$10,600.
Fort Wayne Franchise
In November 1994, the Company exchanged 18,500 shares of Class A common
stock with a value of $200 for all of the outstanding common stock of Fort Wayne
Rental Group, Inc. located in Fort Wayne, Indiana. A principal stockholder and
director of the Company, who was a stockholder of Fort Wayne Rental Group, Inc.,
received 7,400 shares of Class A common stock with a value of $80 in this
transaction.
1995 ACQUISITIONS
Dayton Franchise
In January 1995, the Company purchased all of the outstanding stock of Don
Kremer, Inc., located in Dayton, Ohio, for $1,300. The acquisition funding
consisted of $650 cash and two notes totaling $650.
Charlotte Franchise
In January 1995, the Company purchased all of the outstanding stock of
MacKay Car & Truck Rentals, Inc., located in Charlotte, North Carolina, for
approximately $8,405 consisting of cash of $8,277 and 13,483 shares of Class A
common stock.
F-10
<PAGE> 99
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
Hartford Franchise
In March 1995, the Company purchased all of the outstanding stock of Rental
Car Resources, Inc., located in Hartford, Connecticut, for approximately $1,475
by issuing 157,333 shares of Class A common stock.
OPCO Franchise
In October 1995, the Company purchased all of the outstanding stock of
BRAC-OPCO, Inc., which operates Budget franchises in the greater Los Angeles
area, excluding the vehicle rental operations at Los Angeles International
Airport of Southern California and certain other territories as set forth in the
franchise agreement, for approximately $11,234 by issuing 1,050,000 shares of
Class A common stock.
The Company's results of operations as shown in the following table are
presented as if the acquisitions had occurred at the beginning of 1994. The
unaudited pro forma results are not necessarily indicative of the actual results
of operations that would have occurred had the acquisitions actually been made
at the beginning of 1994.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1994 1995
-------- --------
<S> <C> <C>
Operating revenue........................................... $155,343 $199,743
Income (loss) before provision for income taxes............. 3,634 (271)
Net income (loss)........................................... 1,781 (516)
Earnings (loss) per common share............................ 0.25 (0.07)
</TABLE>
Subsequent to December 31, 1995, the Company made two acquisitions as
listed below. The acquisitions will be accounted for under the purchase method
of accounting and, accordingly, the Company will allocate the cost of the
acquisitions on the basis of the estimated fair value of assets acquired and
liabilities assumed. Franchise rights acquired will be amortized over forty
years. The Company's consolidated statement of operations will not include the
revenues and expenses of the acquired businesses until 1996.
1996 ACQUISITIONS
Van Pool Operations
In February 1996, the Company purchased for a nominal amount all of the
outstanding stock of VPSI, Inc. ("VPSI") located in Detroit, Michigan. The
Company borrowed $36,700 under a new financing facility to finance the van
fleet. VPSI provides commuter van pooling services to business commuters in 22
states.
Phoenix Franchise
In February 1996, the Company purchased all of the outstanding stock of
Arizona Rent-A-Car Systems, Inc. located in Phoenix, Arizona for approximately
$18,000 consisting of cash of approximately $5,000, a promissory note of $10,000
and 272,727 shares of Class A common stock.
4. REVENUE EARNING VEHICLES
Revenue earning vehicles consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
-------- --------
<S> <C> <C>
Revenue earning vehicles.................................... $102,014 $245,849
Less accumulated depreciation and amortization.............. (4,887) (25,922)
-------- --------
$ 97,127 $219,927
======== ========
</TABLE>
F-11
<PAGE> 100
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
Depreciation expense was adjusted for losses of $111, $24 and $90 upon the
sale of revenue earning vehicles during the years ended December 31, 1993, 1994
and 1995, respectively.
5. OTHER PROPERTY AND EQUIPMENT
Other property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------- -------
<S> <C> <C>
Buildings................................................... $ 4,632 $10,160
Leasehold improvements...................................... 1,055 3,994
Furniture, fixtures and office equipment.................... 2,913 7,069
------- -------
8,600 21,223
Less accumulated depreciation and amortization.............. (3,357) (8,720)
------- -------
$ 5,243 $12,503
======= =======
</TABLE>
Included in other property and equipment at December 31, 1994 and 1995 are
$256 and $827, respectively, of assets held under capital leases.
6. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
-------- --------
<S> <C> <C>
Medium Term Notes:
Senior.................................................... $100,000 $138,500
Subordinated.............................................. 5,682 7,182
Vehicle obligations......................................... 18,097 149,965
Working capital facilities.................................. 2,610 9,500
Related party obligations................................... -- 5,792
Other notes payable......................................... 175 7,294
-------- --------
$126,564 $318,233
======== ========
</TABLE>
Medium Term Notes
Medium term notes are comprised of notes issued by TFFC in August 1994
("TFFC notes") and notes assumed in the acquisition of BRAC-OPCO, Inc. in
October 1995 ("OPCO notes").
The TFFC notes are comprised of senior notes requiring monthly interest
payments at average LIBOR, as defined, plus 0.75% (6.75% at December 31, 1995).
Monthly principal payments of $16,667 commence in June 1999 with the last
payment due in November 1999. The subordinated notes require monthly interest
payments at average LIBOR, as defined, plus 1.30% per annum (7.3% at December
31, 1995) and are payable in full in December 1999.
The OPCO notes are comprised of senior notes requiring monthly interest
payments at average LIBOR, as defined, plus 0.60% (6.60% at December 31, 1995).
Monthly principal payments of $4,812 commence in November 1997 with the last
payment due in June 1998. The subordinated notes require monthly interest
payments at average LIBOR, as defined, plus 1.0% per annum (7.0% at December 31,
1995) and are payable in full in December 1998.
F-12
<PAGE> 101
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
The Company has two consolidated subsidiaries that have net assets totaling
$10.3 million which are restricted from transfer or distribution to the parent
company. These net assets are restricted in accordance with terms of the Medium
Term Notes.
Vehicle obligations
Vehicle obligations consist of outstanding lines of credit to purchase
rental fleet and used vehicle inventory. Available collateralized lines of
credit at December 31, 1995 consist of $150,000 for rental vehicles and $25,700
for used vehicle inventory with maturity dates ranging from February 1996 to
April 1997. Vehicle obligations are collateralized by revenue earning vehicles
financed under these credit facilities and proceeds from the sale, lease or
rental of vehicles and used vehicle inventory.
Rental vehicle obligations are generally amortized over 5 to 15 months
resulting in monthly principal payments ranging from 2% to 3% of the capitalized
vehicle cost. When rental vehicles are sold, the related unpaid obligation is
due. Interest payments for rental fleet facilities are due monthly at annual
interest rates ranging from 8.0% to 9.75% at December 31, 1995. Management
expects vehicle obligations will generally be repaid within one year from the
balance sheet date with proceeds received from either the repurchase of the
vehicles by the manufacturers in accordance with the terms of the manufacturers'
rental fleet programs or from the sale of the vehicles.
Monthly payments of interest only for used vehicle inventory obligations
are required at annual interest rates ranging from 8.25% to 9.75% at December
31, 1995. Used vehicle inventory obligations are paid when the inventory is sold
but in no event later than 120 days after the date of purchase.
Working capital facilities
Working capital facilities of up to $13,000 are available for the purchase
of used vehicle inventory and working capital, require monthly interest payments
on the outstanding balance at LIBOR plus 1.85% (7.53% at December 31, 1995) and
expire November 1996. The facilities are collateralized by accounts receivable,
inventory, equipment, general intangibles, investments and all other personal
property of the Company and guarantees of the respective subsidiaries. Under the
terms of one of the agreements, the Company is required to pay commitment fees
quarterly equal to 0.125% per annum on the maximum amount of credit available
under the credit facility and an annual agent fee of $50 as long as the facility
has an outstanding balance. This agreement is subject to certain covenants, the
most restrictive of which requires the Company to maintain certain financial
ratios and minimum tangible net worth and prohibits the payment of cash
dividends. At December 31, 1995, the Company was not in compliance with certain
debt requirements and obtained waivers of such covenants. In February 1996,
certain covenants were amended and the Company is in compliance with the amended
terms of the agreement.
Related party obligations
At December 31, 1995, related party obligations due to stockholders related
primarily to the acquisition of certain franchise territories and consist of an
unsecured promissory note bearing interest at 8.75% per annum due January 1996;
an unsecured promissory note bearing interest at 9% per annum, payable in
monthly installments of $4.3 plus interest, due March 2000; and two unsecured
promissory notes bearing interest at 8% per annum, payable in quarterly
installments of $6.5 and $32.5 plus interest and due October 1999 and October
1997, respectively.
F-13
<PAGE> 102
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
Other notes payable
Other notes payable consist primarily of a secured promissory note that
bears interest at 8% per annum payable in annual installments of $750, due
August 1999, collateralized by personal guarantees from the previous owners of
Southern California operations; a business credit note due November 1996 bearing
interest at prime (8.75% December 31, 1995) collateralized by real estate
property and secured by personal guarantees of certain stockholders of the
Company; a collateralized promissory note bearing interest at 8% per annum,
payable in monthly installments of $7 plus interest, due September 2010,
collateralized by real estate property and personal guarantees of certain
stockholders of the Company; a mortgage note bearing interest at 9.10% per
annum, payable in monthly installments ranging from $5.4 to $7.8 plus interest,
due September 2000 with an option to extend to September 2005, collateralized by
real estate property; and a mortgage note bearing interest at 7.5% per annum,
payable in monthly installments of $8.3 plus interest, due June 1998,
collateralized by real estate property.
Future principal payments at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
------------ --------
<S> <C>
1996...................................................... $165,147
1997...................................................... 1,304
1998...................................................... 41,183
1999...................................................... 106,796
2000...................................................... 3,086
Thereafter................................................ 717
--------
$318,233
========
</TABLE>
7. RELATED PARTY TRANSACTIONS
The Company leases facilities from certain stockholders. Operating lease
payments for the years ended December 31, 1993, 1994 and 1995 were $33, $196 and
$220, respectively. Capital lease payments for the year ended December 31, 1993
were $31. There were no capital lease payments to the stockholders during 1994
or 1995. MCK has assigned lease payments from the Company to a bank.
At December 31, 1995, the Company was leasing approximately $2,001 of
revenue earning vehicles to Arizona Rent-A-Car Systems, a franchise the Company
acquired in 1996 (see Note 3).
Prior to the acquisition of the Fort Wayne operations (see Note 3), the
Company leased revenue earning vehicles to Fort Wayne Rental Group, Inc. for
approximately $60 and $366 for the years ended December 31, 1993 and 1994,
respectively.
At December 31, 1994, the Company was leasing approximately $1,200 of
revenue earning vehicles to the Dayton Budget franchise which the Company
acquired in 1995 (see Note 3) and had trade vehicle receivables of $43 at that
date from the Dayton franchise.
At December 31, 1994 and 1995, the Company has non-interest bearing notes
receivable totaling $59 and $61, respectively, due from a stockholder and
director which are payable on demand.
Approximately $635 and $564 of cash and cash equivalents are on deposit
with or are being held as agent for the Company with a bank at December 31, 1994
and 1995, respectively. A stockholder and director of the Company serves on the
bank's board of directors.
F-14
<PAGE> 103
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
8. LEASES
The Company leases revenue earning vehicles and facilities under leases
that expire at various dates through August 2013. Generally, the facility leases
are subject to payment increases based on cost of living indices and require the
Company to pay taxes, maintenance, insurance and certain other operating
expenses. Certain facility leases require the Company to pay fixed amounts plus
contingent rentals based on gross rental revenues, as defined, and gasoline
sales.
Future minimum payments under noncancellable leases at December 31, 1995
are as follows:
<TABLE>
<CAPTION>
OPERATING LEASES
---------------------
YEAR ENDING CAPITAL RELATED NON-RELATED
DECEMBER 31, LEASES PARTIES PARTIES
------------ ------- ------- -----------
<S> <C> <C> <C>
1996....................................................... $280 $ 186 $ 6,743
1997....................................................... 214 193 5,427
1998....................................................... 170 164 3,191
1999....................................................... 166 99 2,234
2000....................................................... 125 102 2,283
Thereafter................................................. -- 1,247 4,928
---- ------ -------
955 1,991 24,806
Less amounts representing interest......................... 171 -- --
---- ------ -------
$784 $1,991 $24,806
==== ====== =======
</TABLE>
Rent expense consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Revenue earning vehicles.................................... $ 905 $3,121 $ 1,518
Facilities:
Minimum rentals........................................... 878 1,990 5,914
Contingent rentals........................................ 1,649 1,923 3,502
------ ------ -------
Total....................................................... $3,432 $7,034 $10,934
====== ====== =======
</TABLE>
9. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Current:
Federal................................................... $ 21 $184 $ --
State..................................................... 161 -- $145
Deferred:
Federal................................................... -- (23) 470
State..................................................... -- 15 70
---- ---- ----
Total....................................................... $182 $176 $685
==== ==== ====
</TABLE>
F-15
<PAGE> 104
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
The provision for income taxes differs from the amount computed using the
statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1993 1994 1995
----- ----- ----
<S> <C> <C> <C>
Income tax provision at federal statutory rate.............. $ 208 $ 130 $348
Effect of (earnings) losses of nontaxable (subchapter S)
companies................................................. (199) 645 --
Deductible preferred stock dividends........................ (110) -- --
Nondeductible portion of amortization of franchise rights... 40 12 94
State tax provision, net of federal benefit................. 161 30 215
Benefit of net operating loss carryforwards................. -- (645) --
Tax loss carryforwards not recognized....................... 57 -- --
Other....................................................... 25 4 28
----- ----- ----
$ 182 $ 176 $685
===== ===== ====
</TABLE>
The effects of temporary differences that give rise to the Company's
deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $1,048 $13,195
Non-deductible reserves................................... 292 2,267
Alternative minimum tax credit carryfoward................ 197 197
Valuation allowance....................................... -- (7,378)
------ -------
1,537 8,281
------ -------
Deferred tax liabilities:
Difference between book and tax bases of revenue earning
vehicles and other property and equipment.............. 2,613 8,690
Franchise rights.......................................... 85 1,292
------ -------
2,698 9,982
------ -------
Net deferred tax liability................................ $1,161 $ 1,701
====== =======
</TABLE>
Concurrent with the Share Exchange, the nontaxable status of the commonly
owned companies was terminated and a deferred tax liability of approximately
$1,169 was recorded with a corresponding charge to the accumulated deficit. The
change in the deferred tax liability after the Share Exchange has been reflected
as a deferred income tax provision for the years ended December 31, 1994 and
1995.
At December 31, 1995, the Company and its subsidiaries have federal tax
loss carryforwards of approximately $36,942 expiring between December 2005 and
December 2010. The Company has recorded a valuation allowance for a portion of
the acquired net operating loss carryforwards due to the uncertainty of their
ultimate realization. Any subsequently recognized tax benefits attributed to the
change in the valuation allowance will reduce franchise rights.
The Internal Revenue Code places limitations on the utilization of net
operating losses and similar tax attributes by a corporation in the event of a
stock ownership change aggregating more than 50% over a specified time period.
Net operating loss carryforwards in existence when ownership changes occur are
subject to an annual utilization limitation that may restrict the future
utilization of the net operating losses. Similarly,
F-16
<PAGE> 105
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
utilization of losses generated during years when separate returns have been
filed may be limited in the future. Such limitations have been considered in the
determination of deferred income taxes.
10. BENEFIT PLANS
Stock Options
On April 25, 1994, the Company adopted the 1994 Incentive Stock Option Plan
(the "ISO Plan") and the 1994 Directors' Stock Option Plan (the "Directors'
Plan").
The ISO Plan provides for the issuance of up to 260,000 shares of Class A
common stock to key employees. The ISO Plan stock options may be either
incentive stock options or nonqualified options and expire ten years after the
date of grant. The exercise price of incentive stock options may not be less
than the fair market value of the underlying shares at the date of grant. The
exercise price for nonqualified options may not be less than 85% of the fair
market value of the underlying shares or, if greater, the book value of the
underlying shares at the date of grant.
The Directors' Plan provides for the issuance of 25,000 shares of Class A
common stock to selected directors of the Company. The Directors' Plan stock
options are nonqualified and expire ten year after the date of grant. The
exercise price of the nonqualified options under the Directors' Plan is the fair
market value of the underlying shares at the date of grant.
The Company has reserved 285,000 shares of Class A common stock for the
stock option plans. The following is an analysis of stock option activity for
each of the three years in the period ended December 31, 1995 and the stock
options outstanding at December 31, 1995:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS SHARES PRICE
------- -------- --------
<S> <C> <C>
Outstanding, January 1, 1993 to December 31, 1994........... 15,000 $9.50
Granted during 1995......................................... 202,600 9.50
--------
Outstanding, December 31, 1995.............................. 217,600 9.50
========
</TABLE>
At December 31, 1995, none of the outstanding stock options were
exercisable prior to September 1, 1996 and expire March 1, 2005. The options are
nontransferable and will be forfeited upon termination of employment, as
defined.
Profit Sharing Plan
The Company adopted a Profit Sharing Plan with a 401(k) arrangement under
the Internal Revenue Code effective January 1, 1996. Employees are eligible to
participate after completing one year of service and attaining age 21.
Participants may contribute 1%-15% of their gross compensation. The Company may
make discretionary contributions not to exceed 15% of the total plan
compensation. There were no contributions made during 1995.
11. COMMON STOCK WARRANT
Concurrently with the Freedom River acquisition and in consideration of the
abatement of certain future royalty fees to BRAC with respect to Freedom River's
Philadelphia vehicle rental operation and other consideration received from
BRAC, the Company issued a warrant to BRAC (the "BRAC Warrant") to purchase
175,000 shares of Class A common stock at the initial public offering price. The
warrant cannot be exercised prior to August 24, 1996 and expires on August 24,
1999. Subsequent to August 24, 1998 and prior to August 24, 1999, BRAC will have
the right to cause the Company to repurchase the BRAC Warrant for $2,000. The
Company has reserved Class A common stock for the BRAC Warrant.
F-17
<PAGE> 106
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
12. COMMITMENTS
Franchise Agreements
The Company has various franchise agreements with BRAC which require the
payment of monthly royalty fees. These fees vary from a flat fee of $13.25 per
car per month to 7.5% of gross rental revenues, as defined in the franchise
agreements. The above franchise agreements are generally renewable for an
unlimited number of five-year periods, subject to certain terms and conditions.
Concurrent with the initial public offering, the Company purchased for
$1,750 the direct franchise rights for Budget Rent a Truck facilities to operate
in certain geographic locations in San Diego County and Imperial County,
California. This reduced substantially all truck rental royalty fees to 5% of
gross rental revenues, as defined. Prior to the purchase of the direct franchise
rights, the Company paid royalty fees of 12% of gross rental revenues.
The Company also participates in a "One-Way" truck rental program in San
Diego County and Imperial County, California sponsored by BRAC whereby trucks
owned by BRAC are stationed at the Company's facilities for one-way rental by
outside parties. The Company retains fees for BRAC "One-Way" truck rental
revenue of 20%. Revenues from the "One-Way" truck rental program for the years
ended December 31, 1993, 1994 and 1995 were $301, $558 and $1,027, respectively.
Sublicense Agreements
The Company has sublicense agreements with Budget of Southern California
which entitle the Company to operate Budget car rental facilities in Southern
California. Sublicense fees to Budget of Southern California range from 5% to
6.5% of gross revenues as defined in the sublicense agreements.
The Company also has a sublicense agreement with Transportation Storage
Associates ("TSA") for the right to rent trucks in and around Los Angeles
County. Fees to TSA are 12% of gross revenues as defined in the sublicense
agreement.
Royalty and sublicense fees expensed by the Company for the years ended
December 31, 1993, 1994 and 1995 were $1,498, $2,348 and $5,715, respectively.
Budget reservation fees expensed by the Company for the years ended December 31,
1993, 1994 and 1995 were $1,023, $1,574 and $3,904, respectively.
13. FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosure About Fair Value of Financial Instruments. The estimated fair value
amounts are determined by the Company, using available market information and
appropriate valuation methodologies. However, considerable judgment is required
in interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts the
Company could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amount.
Cash and Cash Equivalents, Receivables, Accounts Payable and Notes Payable
The carrying amounts of these items are reasonable estimates of their fair
value.
F-18
<PAGE> 107
TEAM RENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
BRAC Warrant
The estimated fair value is based on a pricing model which considers stock
volatilities and the put feature of the BRAC Warrant. The estimated fair value
was $2,000 and, $1,900 at December 31, 1994 and 1995, respectively.
14. NONRECURRING INCOME
In 1993, the Company ordered revenue earning vehicles from a vehicle
manufacturer pursuant to the manufacturer's repurchase program. Such vehicles
were not delivered by the manufacturer. The Company recognized as nonrecurring
income cash received of $1,023 for the non-delivery of the vehicles.
15. SUPPLEMENTAL CASH FLOW DISCLOSURE
In 1995, the Company issued approximately $12,837 of Class A common stock
and notes payable of $650 for the 1995 acquisitions. Equipment financed through
capital leases in 1995 totaled approximately $827.
In 1994, $525 of revenue earning vehicles and property and equipment were
financed through capital leases. The terms of a capital lease with certain
stockholders and a director were modified and, therefore, the capital lease
asset and obligation of $536 were eliminated. The net book value of the facility
lease and capital lease obligation of $536 was deducted from proceeds from the
sale of property and equipment and principal payments of capital lease
obligations, respectively. The Company also issued $200 of Class A common stock
to acquire the Fort Wayne franchise. In addition, property and equipment of
$4,441 were acquired and notes payable of $4,016 were assumed in connection with
the Freedom River acquisition.
In 1994, the Company recorded prepaid royalty fees and the BRAC Warrant of
$2,000 for the abatement of certain fees and other consideration received from
BRAC (see Note 11).
In 1993, a $92 note was issued to the lessor of the Albany, New York
facility in satisfaction of an agreement to share leasehold improvement costs
and a corresponding asset was recorded. Facilities and equipment financed
through capital leases in 1993 totaled $916.
The Company paid interest of $2,756, $4,091 and $13,764 in 1993, 1994 and
1995, respectively.
Income taxes of $182 and $346 were paid in 1994 and 1995, respectively.
16. SEGMENT INFORMATION
The Company is engaged in the business of the daily rental of vehicles,
principally cars, trucks, and passenger vans, and the retail sale of used cars.
Segment information for the year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
RETAIL CAR VEHICLE
SALES RENTAL ELIMINATIONS CONSOLIDATED
---------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers............ $42,662 $107,067 -- $149,729
Intersegment sales......................... -- 4,655 $(4,655) --
Operating revenue.......................... 42,662 111,722 (4,655) 149,729
Depreciation and amortization.............. 193 29,483 -- 29,676
Income before income taxes................. 1,869 (847) -- 1,022
Identifiable assets........................ 30,196 356,127 -- 386,323
</TABLE>
The Company operated in only the rental segment for the years ended
December 31, 1993 and 1994. No one customer represented more than 10% of the
Company's consolidated net sales for the years ended December 31, 1993, 1994 and
1995.
F-19
<PAGE> 108
TEAM RENTAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 357 $ 16,249
Restricted cash............................................. 67,731 8,407
Trade and vehicle receivables, net.......................... 20,928 38,082
Accounts receivable, related parties........................ 61 61
Vehicle inventory........................................... 8,938 22,417
Revenue earning vehicles, net............................... 219,927 327,542
Property and equipment, net................................. 12,503 22,098
Franchise rights, net....................................... 46,670 63,028
Deferred financing fees, net................................ 2,266 1,653
Other assets................................................ 6,942 9,676
-------- --------
Total assets...................................... $386,323 $509,213
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Notes payable............................................. $318,233 $372,300
Capital lease obligations................................. 784 668
Accounts payable.......................................... 14,698 12,548
Deferred income taxes..................................... 1,701 1,701
Accrued and other liabilities............................. 9,315 24,388
-------- --------
Total liabilities................................. 344,731 411,605
COMMON STOCK WARRANT........................................ 2,000 2,000
STOCKHOLDERS' EQUITY
Common stock................................................ 72 112
Additional paid-in-capital.................................. 41,984 89,797
Retained earnings (accumulated deficit)..................... (2,134) 6,029
Treasury stock.............................................. (330) (330)
-------- --------
Total stockholders' equity........................ 39,592 95,608
-------- --------
Total liabilities and stockholders' equity........ $386,323 $509,213
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-20
<PAGE> 109
TEAM RENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE-MONTHS ENDED
SEPTEMBER 30,
-----------------------
1995 1996
---------- ----------
<S> <C> <C>
OPERATING REVENUE:
Rental revenue............................................ $ 70,819 $ 166,531
Sales revenue............................................. 23,234 94,489
Other revenue............................................. 2,922 0
---------- ----------
Total operating revenue........................... 96,975 261,020
OPERATING EXPENSES:
Direct vehicle and operating.............................. 9,120 24,392
Depreciation -- vehicles.................................. 19,824 43,983
Depreciation -- nonvehicle................................ 872 1,915
Cost of car sales......................................... 20,655 77,275
Advertising, promotion and selling........................ 6,493 17,101
Facilities................................................ 7,397 14,924
Personnel................................................. 15,798 38,239
General and administrative................................ 3,398 8,013
Amortization.............................................. 610 1,468
---------- ----------
Total operating expenses.......................... 84,167 227,762
---------- ----------
Operating income.......................................... 12,808 33,258
---------- ----------
OTHER (INCOME) EXPENSE:
Vehicle interest.......................................... 8,803 18,542
Other interest, net....................................... 525 1,286
Interest income -- restricted cash........................ (638) (521)
Non-recurring bank fees................................... 0 1,275
Related party interest.................................... 0 118
---------- ----------
Total other (income) expense...................... 8,690 20,700
Income before provision for income taxes.................. 4,118 12,558
Provision for income taxes................................ 540 4,395
---------- ----------
Net income................................................ $ 3,578 $ 8,163
========== ==========
Net income per common share:
Primary................................................... $ 0.59 $ 0.94
========== ==========
Fully diluted............................................. 0.59 0.93
========== ==========
Weighted average shares outstanding:
Primary................................................... 6,104,000 8,675,000
========== ==========
Fully diluted............................................. 6,104,000 8,820,000
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-21
<PAGE> 110
TEAM RENTAL GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS TOTAL
COMMON PAID-IN (ACCUMULATED TREASURY STOCKHOLDERS'
STOCK CAPITAL DEFICIT) STOCK EQUITY
------ ----------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1995..... $ 72 $41,984 $(2,134) $(330) $39,592
Shares issued in conjunction with
acquisition of Arizona Rent A
Car Systems, Inc................ 2 2,725 2,727
Warrants issued in conjunction
with financing.................. 686 686
Proceeds from stock offering...... 38 44,402 44,440
Net income........................ 8,163 8,163
---- ------- ------- ----- -------
Balances at September 30, 1996.... $112 $89,797 $ 6,029 $(330) $95,608
==== ======= ======= ===== =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-22
<PAGE> 111
TEAM RENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1995 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 3,578 $ 8,163
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 20,696 45,898
Amortization........................................... 1,059 2,767
Deferred income tax provision.......................... (83) 0
Changes in operating assets and liabilities:
Accounts receivable.................................. (10,196) (17,154)
Other assets......................................... (577) (2,734)
Vehicle inventory.................................... (13,479)
Accounts payable..................................... 8,460 (2,150)
Other liabilities.................................... 290 15,073
--------- ---------
Total adjustments................................. 19,649 28,221
--------- ---------
Net cash provided by operating activities................... 23,227 36,384
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in restricted cash................................. 15,593 59,324
Proceeds from sale of revenue-earning vehicles............ 111,860 189,646
Purchases of revenue-earning vehicles..................... (200,628) (341,244)
Purchase of rental vehicle franchise rights............... (7,490) (15,099)
Purchases of equipment and improvements................... (3,510) (11,510)
--------- ---------
Net cash used in investing activities............. (84,175) (118,883)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from vehicle financing........................... 82,564 152,901
Repayment of vehicle financing............................ (30,616) (90,295)
Proceeds from borrowings under notes payable.............. 10,734 26,074
Proceeds from stock issuance.............................. 44,440
Acquisition of Treasury Stock............................. (330)
Principal payments:
Capital leases......................................... (142) (116)
Notes payable.......................................... (2,000) (34,613)
--------- ---------
Net cash provided by financing activities......... 60,210 98,391
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... (738) 15,892
CASH AND CASH EQUIVALENTS, beginning of period.............. 878 357
--------- ---------
CASH AND CASH EQUIVALENTS, end of period.......... $ 140 $ 16,249
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-23
<PAGE> 112
TEAM RENTAL GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Team Rental
Group, Inc. (the "Company") for the nine-month periods ended September 30, 1996
and 1995 reflect all adjustments (consisting of normal recurring adjustments)
which, in the opinion of management, are necessary to present fairly the
Company's consolidated financial condition, results of operations and cash flows
for the periods presented. Operating results for the nine-month periods ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1996.
The consolidated financial statements for the nine-month periods ended
September 30, 1995 give effect to the Company's acquisition of all of the
outstanding stock of the Budget franchises in Dayton, Ohio, Charlotte, North
Carolina, and Hartford, Connecticut. The accompanying statement of operations
and statement of cash flows only give effect to these operations for the period
from their respective dates of acquisition through September 30, 1995. The
consolidated financial statements as of September 30, 1996 and for the
nine-month periods then ended give effect to the Company's acquisition of all of
the outstanding stock of the Budget franchise in Phoenix, Arizona and VPSI,
Inc., both of which were acquired in February 1996, and to the Company's
acquisition of all of the outstanding stock of ValCar Rental Car Sales, Inc.,
which was acquired in August 1996. The accompanying statement of operations and
statement of cash flows only give effect to these operations for the period from
their respective dates of acquisition through the end of the period presented.
2. NON-RECURRING BANK FEES
On July 9, 1996, the Company utilized proceeds from its secondary stock
offering to repay a $10 million bridge financing facility it had obtained from a
bank in the second quarter of 1996. In conjunction with this financing, the
Company had issued warrants valued at $0.7 million, and had paid additional fees
approximating $1.0 million. As a result of this repayment, the Company has
written off all unamortized fees related to this financing, totaling $1.3
million, in the third quarter.
3. ACQUISITIONS
Dayton Franchise -- In January 1995, the Company purchased all of the
outstanding stock of Don Kremer, Inc. located in Dayton, Ohio for $1.3 million.
The acquisition funding consisted of $650,000 cash and two notes totaling
$650,000.
Charlotte Franchise -- In January 1995, the Company purchased all of the
outstanding stock of MacKay Car & Truck Rentals, Inc. located in Charlotte,
North Carolina for approximately $8.4 million consisting of cash of $8.3 million
and 13,483 shares of Class A common stock.
Hartford Franchise -- In March 1995, the Company purchased all of the
outstanding stock of Rental Car Resources, Inc. located in Hartford, Connecticut
for approximately $1.5 million by issuing 157,333 shares of Class A common
stock.
OPCO Franchise -- In October 1995, the Company purchased all of the
outstanding stock of BRAC-OPCO, Inc., which operates Budget franchises in the
greater Los Angeles area, excluding the vehicle rental operations at Los Angeles
International Airport, for approximately $11.2 million by issuing 1,050,000
shares of Class A common stock.
Acquisition of Van Pool Operations -- In February 1996, the Company
purchased for a nominal amount all of the outstanding stock of VPSI, Inc.
("VPSI") located in Detroit, Michigan. VPSI provides commuter van pooling
services to business commuters in 22 states, operating a rental fleet of
approximately 3,300 vans as of March 31, 1996.
F-24
<PAGE> 113
TEAM RENTAL GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE)
Acquisition of Phoenix Franchise -- In February 1996, the Company purchased
all of the outstanding stock of Arizona Rent-A-Car Systems, Inc. located in
Phoenix, Arizona for approximately $18 million consisting of cash of
approximately $5.0 million, a promissory note of $10.0 million and 272,727
shares of Class A common stock.
Acquisition of ValCar Rental Car Sales, Inc. -- On August 1, 1996, the
Company acquired all of the outstanding stock of ValCar Rental Car Sales, Inc.
for $400,000 cash. ValCar owns and operates four retail vehicle sales facilities
in Indianapolis, Indiana, and was formerly owned by a director and officer of
Team Rental Group.
If the acquisitions had occurred at the beginning of 1995, the Company's
results of operations would be as shown in the following table. These unaudited
pro forma results are not necessarily indicative of the actual results of
operations that would have occurred had the acquisitions actually been made at
the beginning of the respective periods.
<TABLE>
<CAPTION>
NINE-MONTH PERIODS ENDED
SEPTEMBER 30,
------------------------
1995 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Operating revenue........................................... $256,151 $293,370
Income before provision for income taxes.................... 3,874 7,424
Net income.................................................. 2,518 4,790
Earnings per common share................................... $ 0.34 $ 0.55
</TABLE>
4. FINANCING TRANSACTIONS
On July 9, 1996, TEAM sold 3,821,007 shares of Class A Common Stock at
$13.00 per share to investors in a public offering yielding net proceeds of
approximately $44,440,000.
In December 1996, TEAM issued $80 million aggregate principal amount of
7.0% convertible subordinated notes due 2003. The convertible subordinated notes
have a conversion price of $20.07 and are currently convertible into an
aggregate of 3,986,049 shares of TEAM's Class A Common Stock.
In December 1996, TEAM entered into the Third Fleet Financing Facility,
which is comprised of senior notes requiring monthly interest payments at an
annual fixed rate of 6.68%. Monthly principal payments of $13,833,334 commence
May 1, 2001, with the last payment due May 1, 2002.
F-25
<PAGE> 114
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors of
Budget Rent a Car Corporation:
We have audited the accompanying consolidated balance sheets of Budget Rent
a Car Corporation and subsidiaries as of December 31, 1994 and 1995 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Budget Rent
a Car Corporation and subsidiaries as of December 31, 1994 and 1995 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
February 22, 1996
F-26
<PAGE> 115
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
---------- ----------
(IN THOUSANDS
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 67,205 $ 95,872
Receivables:
Vehicle rental and sales, less allowance of $25,344 in
1994 and $29,040 in 1995................................ 79,331 90,800
Royalty fees and other amounts due from franchisees, less
allowance of $5,040 in 1994 and $4,552 in 1995.......... 34,171 42,634
Installment notes, $704 in 1994 and $617 in 1995, due
within one year......................................... 6,326 6,758
Vehicle related programs -- Ford.......................... 89,588 89,283
Vehicle related programs -- other......................... 12,314 5,292
Other..................................................... 4,885 6,265
---------- ----------
226,615 241,032
Prepaid expenses and taxes, inventories and deposits........ 56,162 53,452
Vehicles held for sale...................................... 9,674 11,756
Vehicles, at cost........................................... 1,673,658 1,498,060
Less accumulated depreciation............................. (129,997) (144,071)
---------- ----------
1,543,661 1,353,989
Property and equipment, at cost:
Land...................................................... 33,364 31,990
Buildings and leasehold improvements...................... 113,685 113,863
Furniture and equipment................................... 93,434 102,991
Construction in progress.................................. 2,012 3,068
---------- ----------
242,495 251,912
Less accumulated depreciation and amortization.......... (127,946) (140,030)
---------- ----------
114,549 111,882
Other assets................................................ 23,731 75,920
Intangibles, including goodwill, less accumulated
amortization of $92,740 in 1994 and $109,746 in 1995...... 560,777 544,212
---------- ----------
$2,602,374 $2,488,115
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses, including outstanding
checks of $26,219 in 1994 and $31,840 in 1995............. $ 241,212 $ 246,694
Accounts payable -- Ford.................................... 22,199 22,909
Current income taxes payable................................ 434 93
Self-insurance liability.................................... 170,084 155,324
Notes payable -- Ford....................................... 927,500 984,357
Notes payable -- other...................................... 954,786 933,590
Mandatory Redeemable Preferred Stock:
Series A, 10% cumulative, redeemable, par value $.01,
stated value $1,000; 150,000 shares authorized, issued
and outstanding, including $86,250 ($575 per share) in
1994 and $101,250 ($675 per share) in 1995 of dividends
in arrears.............................................. 236,250 251,250
Stockholders' equity:
Preferred stock:
Series B, cumulative, participating, par value $.01,
stated value $1,000; 309,000 shares authorized, issued
and outstanding in 1994 and 1995...................... 309,000 309,000
Common stock, par value $.01; 10,000 shares authorized,
issued and outstanding.................................. -- --
Additional paid-in capital................................ 1,000 1,000
Costs incurred for raising equity capital................. (9,555) (9,555)
Pension liability adjustment.............................. (6,244) (15,110)
Foreign currency translation adjustment................... (11,817) (11,322)
Accumulated deficit....................................... (232,475) (380,115)
---------- ----------
49,909 (106,102)
---------- ----------
$2,602,374 $2,488,115
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE> 116
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Vehicle rental........................................... $ 954,188 $1,011,203 $1,034,873
Retail car sales......................................... 63,596 77,999 83,795
Royalty fees............................................. 48,141 53,147 57,861
Other.................................................... 13,762 13,417 16,941
---------- ---------- ----------
1,079,687 1,155,766 1,193,470
---------- ---------- ----------
Expenses:
Direct vehicle and operating............................. 176,252 134,126 153,081
Depreciation -- vehicles................................. 206,271 257,356 323,619
Depreciation -- nonvehicle............................... 20,431 21,410 19,520
Cost of vehicles sold at retail.......................... 54,969 67,314 72,416
Advertising, promotion and selling....................... 99,879 99,738 106,446
Facilities............................................... 117,146 119,091 121,126
Personnel................................................ 248,947 269,370 280,901
General and administrative............................... 74,326 60,412 80,772
Intangible amortization.................................. 17,852 16,874 17,006
---------- ---------- ----------
1,016,073 1,045,691 1,174,887
---------- ---------- ----------
Earnings before interest and income taxes.................. 63,614 110,075 18,583
Interest expense........................................... 94,488 104,950 149,909
---------- ---------- ----------
Income (loss) before income taxes.......................... (30,874) 5,125 (131,326)
Provision for income taxes................................. -- 4,000 1,314
---------- ---------- ----------
Net income (loss).......................................... $ (30,874) $ 1,125 $ (132,640)
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE> 117
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
COSTS
INCURRED FOREIGN
ADDITIONAL FOR RAISING PENSION CURRENCY
PREFERRED COMMON PAID-IN EQUITY LIABILITY TRANSLATION ACCUMULATED
STOCK STOCK CAPITAL CAPITAL ADJUSTMENT ADJUSTMENT DEFICIT
--------- -------- ---------- ------------ ---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992.................. $309,000 $ -- $1,000 $(9,555) $ (3,538) $(12,247) $(172,726)
Dividends in
arrears............ -- -- -- -- -- -- (15,000)
Net loss.............. -- -- -- -- -- -- (30,874)
Pension liability
adjustment......... -- -- -- -- (2,850) -- --
Foreign currency
translation........ -- -- -- -- -- (3,652) --
-------- -------- ------ ------- -------- -------- ---------
Balance at December 31,
1993.................. 309,000 -- 1,000 (9,555) (6,388) (15,899) (218,600)
Dividends in
arrears............ -- -- -- -- -- -- (15,000)
Net income............ -- -- -- -- -- -- 1,125
Pension liability
adjustment......... -- -- -- -- 144 -- --
Foreign currency
translation........ -- -- -- -- -- 4,082 --
-------- -------- ------ ------- -------- -------- ---------
Balance at December 31,
1994.................. 309,000 -- 1,000 (9,555) (6,244) (11,817) (232,475)
Dividends in
arrears............ -- -- -- -- -- -- (15,000)
Net loss.............. -- -- -- -- -- -- (132,640)
Pension liability
adjustment......... -- -- -- -- (8,866) -- --
Foreign currency
translation........ -- -- -- -- -- 495 --
-------- -------- ------ ------- -------- -------- ---------
Balance at December 31,
1995.................. $309,000 $ -- $1,000 $(9,555) $(15,110) $(11,322) $(380,115)
======== ======== ====== ======= ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE> 118
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities:
Net income (loss)..................................... $ (30,874) $ 1,125 $ (132,640)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization...................... 226,702 278,766 343,140
Intangible amortization............................ 17,852 16,874 17,006
Gain on sale of vehicles and equipment............. (10,987) (25,389) (20,333)
Provision for losses on accounts receivable........ 9,039 9,205 9,581
Equity in (earnings) loss of equity investees...... (660) 61 (1,665)
Changes in operating assets and liabilities, net of
effects from franchise acquisitions:
Receivables...................................... 55,747 (12,537) (23,998)
Prepaid expenses and taxes, inventories and
deposits...................................... 9,755 (3,065) 2,710
Vehicles held for sale........................... (1,643) (2,278) (2,082)
Accounts payable and accrued expenses............ (24,045) 34,458 (2,674)
Current income taxes payable..................... -- 434 (341)
Estimated self-insurance liability............... 12,642 (16,861) (14,760)
----------- ------------ -----------
Net cash provided by operating activities............... 263,528 280,793 173,944
----------- ------------ -----------
Investing activities:
Purchase of vehicles.................................. (2,659,754) (2,841,717) (2,783,295)
Proceeds from sale of vehicles........................ 2,484,083 2,402,724 2,666,523
Purchase of property and equipment.................... (15,819) (14,692) (19,144)
Proceeds from the sale of property and equipment...... 8,353 8,846 8,940
Changes in other assets............................... (2,849) 33,029 (53,962)
----------- ------------ -----------
Net cash used in investing activities................... (185,986) (411,810) (180,938)
----------- ------------ -----------
Financing activities:
Proceeds from revolving credit facility and other
notes payable...................................... 2,861,635 2,130,732 2,101,462
Principal payments on revolving credit facility and
other notes payable................................ (2,832,248) (2,108,407) (1,917,026)
Proceeds from fleet lender notes...................... 2,071,888 2,021,290 1,739,199
Principal payments on fleet lender notes.............. (2,719,747) (2,114,124) (1,833,544)
Proceeds from commercial paper........................ 2,419,970 10,098,459 7,777,064
Principal payments on commercial paper................ (1,797,517) (10,354,161) (7,831,494)
Proceeds from notes payable to other vehicle
lenders............................................ 175,000 500,000 --
Principal payments on notes payable to other vehicle
lenders............................................ (315,000) -- --
----------- ------------ -----------
Net cash provided by financing activities............... (136,019) 173,789 35,661
Increase (decrease) in cash and cash equivalents........ (58,477) 42,772 28,667
Cash and cash equivalents at beginning of year.......... 82,910 24,433 67,205
----------- ------------ -----------
Cash and cash equivalents at end of year................ $ 24,433 $ 67,205 $ 95,872
=========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE> 119
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
(1) SIGNIFICANT ACCOUNTING POLICIES
General
On March 30, 1989, pursuant to an agreement and plan of merger, as amended,
Budget Rent a Car Corporation (the Company) became a wholly owned subsidiary of
Beech Holdings Corp. (Holdings). Effective December 31, 1995, Holdings was
merged with and into the Company (the Merger). All shares of Holdings stock
outstanding prior to the Merger were retired and new shares of Company stock,
with rights and preferences similar to the retired Holdings shares, were issued
to the stockholders of Holdings. The accompanying financial statements are
presented as if the Merger had taken place on January 1, 1993. The most
significant impact of the Merger on the consolidated financial statements of the
Company was to increase intangible assets (and amortization expense) and to
increase stockholders' equity.
Description of Business
The Company is engaged in the business of vehicle rental through both owned
and franchised operations. Company owned vehicle rental operations are located
primarily throughout the United States and Western Europe. The largest
concentration (approximately 25%) of vehicle rental assets is located in the
highly competitive Florida market. Franchised vehicle operations are located
worldwide. Customers are mainly business and leisure travelers. No customer
accounts for more than 10% of the Company's revenues.
Principles of Consolidation
The consolidated financial statements include the accounts and operations
of the Company and its majority-owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation. Investments in
less than majority-owned entities are accounted for using the equity method,
under which the Company's share of operating results are reflected in income as
earned and dividends are credited against the investment when received.
Cash and Cash Equivalents
Cash equivalents include all highly liquid investments with an original
maturity of three months or less.
Computer Software Systems
License fees related to the Company's purchased reservation system and
associated applications and databases are capitalized and amortized over ten
years. Costs associated with the internal development of other computer software
systems and system enhancements are capitalized and amortized over three years.
Intangibles, Including Goodwill
Costs in excess of the fair value of net assets acquired as a result of the
acquisition of the Company and in conjunction with acquisitions of franchise
vehicle rental operations are capitalized and amortized over 40 years on the
straight-line method.
The carrying value of goodwill is reviewed whenever events or changes in
circumstances indicate that the carrying value may not be recoverable through
projected undiscounted future operating cash flows. Although no impairment is
indicated at December 31, 1995, the assessment of recoverability will be
impacted if estimated projected undiscounted operating cash flows are not
achieved.
F-31
<PAGE> 120
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other Revenues
Other revenues largely consist of income before interest and taxes for
insurance and credit card processing operations, the Company's share of
operating results of equity investees and revenues generated from miscellaneous
services provided to the Company's franchisees.
Vehicle Dispositions
Repurchase programs with vehicle manufacturers require the manufacturers to
repurchase the vehicles after varying time frames at agreed upon prices (subject
to defined condition and mileage standards). Vehicles subject to these programs
are capitalized and depreciated such that no gain or loss is realized upon
disposition.
Gains or losses realized on vehicles sold through the wholesale market are
recorded as adjustments to depreciation expense.
Depreciation and Amortization
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets. Estimated useful lives range from 25 years
for buildings to three to seven years for furniture and equipment. Costs of
leasehold improvements are amortized on the straight-line method over the
shorter of the lease term or the estimated useful life of the related assets.
Vehicles are depreciated at rates ranging from 1.0% to 2.5% per month, depending
on vehicle type.
Advertising, Promotion and Selling
Advertising, promotion and selling costs are expensed as incurred. The
Company incurred advertising expenses of $31,521, $33,326 and $38,552 in 1993,
1994 and 1995, respectively.
Environmental Costs
Environmental remediation costs are recorded in accrued expenses based on
estimates of known environmental remediation exposures when it becomes probable
that a liability has been incurred. Environmental exposures are largely related
to underground storage tanks.
Expenditures are expected to be made over the next three years. A
receivable is recorded for amounts recoverable from third-parties when
collection becomes probable.
Self-insurance Liability
The Company is self-insured with respect to personal and property liability
claims up to specified limits. Third-party insurance is maintained for claims in
excess of the limits. A liability is recorded for known claims and for incurred
but not reported incidents based on actuarially computed estimates of expected
loss. The liability recorded as a result of these actuarially computed estimates
may experience material changes from year to year as incurred but not reported
incidents become known and known claims are settled.
The Company maintains unused letters of credit amounting to $103,998 and
$122,324 at December 31, 1994 and 1995, respectively, largely in support of its
insurance liability in certain states and supporting the reimbursement of claims
paid by third-party claims administrators.
Income Taxes
Deferred taxes are recognized to the extent they are expected to be payable
upon distribution of earnings of foreign and unconsolidated subsidiaries. The
Company uses a September 30 fiscal year for U.S. Federal income tax purposes.
F-32
<PAGE> 121
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company uses the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of assets
and liabilities, as measured by the enacted tax rates which will be in effect
when those temporary differences are expected to be recovered or settled.
Deferred tax expense is the result of changes in the net deferred tax assets and
liabilities. The effect of a change in tax rates is recognized in the period
that includes the enactment date.
Translation of Foreign Financial Statements
The financial statements of the Company's foreign affiliates have been
translated into U.S. dollars in accordance with SFAS No. 52. Accordingly, assets
and liabilities of foreign operations are translated at period-end rates of
exchange, with any resultant translation adjustments reported as a separate
component of stockholders' equity. Income statement accounts are translated at
average exchange rates for the period and gains and losses from foreign currency
transactions are included in net income.
Derivatives
Premiums paid for purchased interest rate cap agreements are amortized to
interest expense over the terms of the cap. Unamortized premiums are included in
prepaid expenses in the balance sheet. Accounts receivable under cap agreements
are accrued as a reduction of interest expense.
Gains and losses on foreign exchange contracts and futures related to
qualifying hedges of firm commitments or anticipated transactions are deferred
and are recognized in income when the hedged transaction occurs. The Company
does not engage in speculation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Changes in Accounting Estimates
During 1994 and 1995, the Company recorded adjustments related to prior
year actuarial estimates of self-insurance liability. The effect of these
adjustments was to increase income before taxes by approximately $8,000 in 1994
and to decrease income before taxes by approximately $15,000 in 1995. The effect
of these adjustments was not significant in 1993.
(2) VEHICLES, AT COST
Vehicles, at cost largely represent revenue earning cars and trucks. At
December 31, 1995 the net book value of vehicles subject to repurchase programs
was approximately $1,077,000.
(3) REORGANIZATION AND CENTRALIZATION
The accompanying financial statements for 1995 include charges and accruals
of approximately $14,600 ($9,300 in personnel expense and $5,300 in general and
administrative expense) related to a reorganization and centralization primarily
of the finance and administrative functions of the Company (the
"Reorganization"). In conjunction with the Reorganization, approximately 450
employees will be terminated, primarily in finance and operations management. As
of December 31, 1995, approximately 225 employees have been terminated and will
receive benefits largely beginning in 1996.
F-33
<PAGE> 122
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) OTHER ASSETS
Other assets include purchased software and capitalized software systems
development costs, net of accumulated amortization, which amount to
approximately $14,715 and $65,351 at December 31, 1994 and 1995, respectively.
In addition, other assets includes the Company's 50% investment in Compass
Computer Services, Inc. (Compass) and a 20% investment in a foreign rental
operation. Compass provides, among other services, reservation data processing.
At December 31, 1994 and 1995, the amount of accumulated losses of the
investees included in consolidated accumulated deficit is approximately $1,901
and $449, respectively. The combined revenues of the Company's investees during
1993, 1994 and 1995 amount to less than 10% of consolidated revenues.
(5) NOTES PAYABLE
Notes payable at December 31 consist of the following:
<TABLE>
<CAPTION>
FINAL
INTEREST RATE MATURITY 1994 1995
----------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Fleet lender revolving notes... 7.68% to 8.71% 1996 $ 694,686 $ 598,710
Commercial paper payable....... 5.68% to 5.82% 1996 366,750 312,320
Vehicle lender term notes...... 6.33% 1999 500,000 500,000
Revolving credit facility...... 8.18% 1996 242,847 392,718
Foreign notes.................. 4.80% to 8.06% 1996 to 2001 58,790 58,893
Note payable to vendor......... 9.02% 2005 -- 39,975
Notes payable to former owners
of franchises purchased by
the Company.................. 10.00% to 12.00% 1996 to 1999 11,453 2,038
Other.......................... 5.64% to 10.00% 1996 to 2004 7,760 13,293
----------------- ------------ ---------- ----------
$1,882,286 $1,917,947
========== ==========
</TABLE>
Fleet lender revolving notes: The fleet lender revolving notes are secured
by the applicable vehicles and vehicle program receivables. The notes bear
interest at rates that vary with commercial paper rates or the prime rate. The
Company makes monthly principal payments based on depreciation of the related
vehicles adjusted for net additions or disposals. It is the Company's intention
and ability to renew the fleet lender revolving notes or to obtain financing
under similar terms when the present agreements expire.
Commercial paper payable: The commercial paper payable (the "paper") is
secured by the applicable vehicles and vehicle program receivables. Under
limited circumstances the paper may be repaid by draws under a related, bank
provided liquidity facility ($725,000) or a related letter of credit ($120,000).
The paper is issued periodically with maturities up to 90 days. It is the
Company's intention and ability to renew the liquidity facility and letter of
credit when the present agreements expire in July 1996 and July 1997,
respectively.
Vehicle lender term notes: The vehicle lender term notes (the "notes") are
secured by the applicable vehicles and vehicle program receivables. Under
limited circumstances the notes may be repaid by draws under a related letter of
credit ($25,000).
Revolving credit facility: The revolving credit facility, which provides
funding of working capital, bears interest at rates that vary with commercial
paper rates. The unused and available commitment of the credit facility was
$128,155 and $57,282 at December 31, 1994 and 1995, respectively.
Foreign notes: The foreign notes primarily provide financing for vehicle
purchases and the funding of working capital. At December 31, 1994 and 1995,
approximately $52,812 and $53,917, respectively, relate to
F-34
<PAGE> 123
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
vehicle debt while $5,978 and $4,976, respectively, relate to the funding of
working capital and various other debt.
Notes payable to vendor: The note payable to vendor relates to the
Company's license agreement for the reservation system and associated
applications and databases.
Substantially all of the Company's assets serve as collateral under the
various credit agreements. The fleet lender revolving notes, liquidity facility,
vehicle lender term notes and revolving credit facility each contain restrictive
covenants relating to, among other things, incurring liens, paying dividends or
selling certain assets. Additionally, the revolving credit facility has specific
covenants relating to net worth, leverage and capital expenditures. Compliance
with these covenants has been waived and the covenants are expected to be
renegotiated.
Maturities: Scheduled aggregate maturities of notes payable at December 31
are as follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
1995.................................................. $1,361,955 $ --
1996.................................................. 8,179 1,375,455
1997.................................................. 671 4,629
1998.................................................. 2,964 7,977
1999.................................................. 502,240 505,159
2000.................................................. 467 4,567
Thereafter............................................ 5,810 20,160
---------- ----------
$1,882,286 $1,917,947
========== ==========
</TABLE>
Interest payments amounted to $94,357 ($66,007 to Ford), $105,214 ($63,038
to Ford) and $149,219 ($83,627 to Ford) in the years ended December 31, 1993,
1994 and 1995, respectively. In 1995 the Company capitalized $1,233 of interest
costs incurred.
(6) FINANCIAL INSTRUMENTS
Interest Rate Caps: The Company enters into interest rate cap agreements
to limit its exposure to increases in interest rates. Under these agreements,
the Company will receive payment in the event that 30 day commercial paper rates
exceed levels varying from 4.75% to 5.75%.
The Company had interest rate cap agreements outstanding in the notional
amount of $1,000,000 and $500,000 at December 31, 1994 and 1995, respectively.
In 1995, fees of approximately $3,390 have been paid to the counterparties
(major banks) and are amortized on the straight-line method to interest expense
over the protection period (through December 1996). At December 31, 1994 and
1995, the unamortized fees amounted to approximately $8,041 and $3,390,
respectively.
The Company is exposed to credit-related loss, to the extent of the fair
value of the contracts, in the event of nonperformance by the counterparties to
the agreements, but believes this risk to be minimal given the high credit
ratings of the counterparties.
Foreign exchange contracts: The Company employs forward foreign exchange
contracts to limit its exposure to currency fluctuations on certain intercompany
loans between foreign operations. Under these agreements, the Company is
obligated to sell either Australian Dollars or French Francs in exchange for
British Sterling at dates several months into the future. These contracts are
subject to the creditworthiness of the counterparties (large banks), but the
Company believes this risk to be minimal given the high credit ratings of the
counterparties. At December 31, 1994, the Company had approximately $13,583 in
forward foreign exchange contracts outstanding and had deferred approximately
$473 in losses. At December 31, 1995, no foreign exchange contracts were
outstanding.
F-35
<PAGE> 124
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) PENSION AND OTHER BENEFIT PLANS
Substantially all employees of the United Kingdom and certain employees in
the U.S. are covered under noncontributory pension plans. Plan benefits are
based on final average compensation. The Company's funding policy for the
domestic pension plan is to contribute the minimum ERISA contribution required
under the projected unit credit actuarial cost method. Effective December 31,
1991, the Company suspended its domestic defined benefit pension plan. As a
result of this suspension, employees will earn no additional benefits under the
plan.
The domestic plan is supplemented by an unfunded, nonqualified plan
providing benefits (as computed under the benefit formula) in excess of limits
imposed by Federal tax law. The Company has recognized an additional liability
of $6,244 and $7,198 in 1994 and 1995, respectively, related to the supplemental
plan (the remaining additional liability relates to the funded plan) as the
unfunded liability recognized as accrued pension cost is less than the
actuarially determined accumulated benefit obligation. The excess of the
additional liability over unrecognized prior service cost is reported as a
pension liability adjustment in stockholders' equity and an increase in accounts
payable and accrued expenses. At December 31, 1994 and 1995, the projected
benefit obligation (all vested) and the accrued pension cost for this plan
totaled $8,901 and $9,846, respectively. The cost of the supplemental plan was
approximately $1,042, $1,009 and $1,053 in 1993, 1994 and 1995, respectively.
The Company also maintains a Savings Plus Plan. Under this plan, an
eligible employee of the Company, or its participating subsidiaries, who has
completed one year of continuous service and enrolls in the plan may elect to
defer from 1% to 15% of specified compensation under a "cash or deferred
arrangement" under Section 401(k) of the Internal Revenue Code, subject to
certain limitations. The Company contributes varying amounts (25% to 75%) on the
first 6% of each participating employee's eligible salary deferrals to various
funds established by the plan. The cost of the plan was approximately $2,253,
$2,436 and $2,657 in 1993, 1994 and 1995, respectively.
To replace the defined benefit plan, the Company established a defined
contribution benefit plan covering all employees eligible under the Savings Plus
Plan. The amount of funds contributed to the plan each year, if any, is at the
discretion of the Board of Directors, based on a percentage of an employee's
total cash compensation, as defined. The cost of the plan was approximately
$2,300, $5,368 and $3,096 in 1993, 1994 and 1995, respectively.
The following table sets forth the domestic (including the supplemental
plan) and foreign pension plans' funded status and amounts recognized in the
Company's consolidated financial statements at December 31:
<TABLE>
<CAPTION>
1994 1995
------------------ ------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
PLANS PLAN PLANS PLAN
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits.............................. $(19,777) $(2,501) $(27,328) $(3,123)
Nonvested benefits........................... (1,187) (85) (1,033) (52)
-------- ------- -------- -------
Accumulated benefit obligation................. $(20,964) $(2,586) $(28,361) $(3,175)
======== ======= ======== =======
Projected benefit obligation for service
rendered to date............................. (20,964) (2,658) (28,361) (3,920)
Plan assets at fair value, primarily
participation in common trust funds.......... 12,387 4,719 14,650 6,185
-------- ------- -------- -------
Excess (deficiency) of plan assets over
projected benefit obligation................. (8,577) 2,061 (13,711) 2,265
Unrecognized net asset at transition........... -- (3) -- (3)
Unrecognized net loss (gain)................... 9,992 (534) 15,110 (200)
Adjustment required to recognize minimum
liability.................................... (6,244) -- (15,110) --
-------- ------- -------- -------
Prepaid (accrued) pension cost................. $ (4,829) $ 1,524 $(13,711) $ 2,062
======== ======= ======== =======
</TABLE>
F-36
<PAGE> 125
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1993 1994 1995
------------------ ------------------ ------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN DOMESTIC FOREIGN
PLANS PLAN PLANS PLAN PLANS PLAN
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Service cost for benefits earned
during the period.............. $ -- $ 181 $ -- $ 149 $ -- $ 158
Interest cost on projected
benefit obligation............. 1,585 217 1,639 224 1,809 253
Return on plan assets............ (1,126) (376) 334 (520) (2,728) (526)
Net amortization and deferral.... 175 (3) (1,141) (43) 1,996 (3)
------- ----- ------- ----- ------- -----
Pension expense (income)......... $ 634 $ 19 $ 832 $(190) $ 1,077 $(118)
======= ===== ======= ===== ======= =====
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation for 1994 and 1995 was 8.7% and
6.8%, respectively. No compensation increase has been assumed as no additional
benefits will be earned under the plan. The expected long-term rate of return on
plan assets was 10%.
(8) INCOME TAXES
The provision for income taxes for the years ended December 31 consists of
the following:
<TABLE>
<CAPTION>
1993 1994 1995
---- ------ ------
<S> <C> <C> <C>
Current:
State..................................................... $-- $ 823 $ 448
Foreign................................................... -- 1,676 866
--- ------ ------
-- 2,499 1,314
Deferred.................................................... -- 1,501 --
--- ------ ------
$-- $4,000 $1,314
=== ====== ======
</TABLE>
Net income tax payments (refunds) amounted to $(1,880), $102 and $1,640 in
the years ended December 31, 1993, 1994 and 1995, respectively.
Reconciliations of the statutory U.S. Federal income tax rate and the
effective tax rate for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Statutory rate.............................................. (35)% 35% (35)%
Intangible amortization and adjustments..................... 19 75 5
Provision for state taxes net of federal benefit............ -- 10 --
Change in the beginning of the year valuation allowance for
deferred tax assets allocated to income tax expense....... 20 (26) 34
Effect of tax rate changes.................................. (4) -- --
Effect of foreign operations................................ -- (23) (2)
Other....................................................... -- 7 (1)
--- --- ---
--% 78% 1%
=== === ===
</TABLE>
Income (loss) before income tax expense from foreign sources was $(402),
$5,216 and $7,049 for the years ended December 31, 1993, 1994 and 1995,
respectively.
F-37
<PAGE> 126
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant components of deferred income tax expense for the years
ended December 31 are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- --------
<S> <C> <C> <C>
Deferred tax expense (benefit) (arising from changes in
deferred tax assets and liabilities).................... $(5,553) $ 2,845 $(47,010)
Amount credited to equity................................. (721) -- --
Increase (decrease) in beginning-of-the-year balance of
the valuation allowance for deferred tax assets......... 6,274 (1,344) 47,010
------- ------- --------
$ -- $ 1,501 $ --
======= ======= ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31
relate to the following:
<TABLE>
<CAPTION>
1994 1995
-------- ---------
<S> <C> <C>
Deferred tax assets:
Estimated self-insurance liability........................ $ 65,027 $ 59,859
Accrued expenses -- pension............................... 1,563 (217)
Accounts receivable, principally due to allowance for
doubtful accounts...................................... 4,618 5,600
Accrued salaries and bonuses.............................. 4,763 4,225
Accrued expenses -- other................................. 881 881
Net operating loss carryforwards.......................... 48,818 87,952
Business tax credit carryforwards......................... 5,603 5,881
Alternative minimum tax credit carryforwards.............. 2,811 2,811
Foreign tax credit carryforwards.......................... 4,450 3,035
Foreign tax assets and net operating loss carryforwards... 2,755 245
Other..................................................... 479 479
-------- ---------
Total gross deferred tax assets........................ 141,768 170,751
Less valuation allowance............................... (65,687) (112,697)
-------- ---------
Net deferred tax assets................................ 76,081 58,054
Deferred tax liabilities:
Vehicles, principally due to differences in
depreciation........................................... (42,404) (19,515)
Other assets, principally due to research and
development............................................ (19,663) (23,196)
Intangibles, principally due to amortization of
identifiable items..................................... (11,579) (12,483)
Other..................................................... (2,435) (2,860)
-------- ---------
Total gross deferred tax liabilities................... (76,081) (58,054)
-------- ---------
Net deferred tax asset................................. $ -- $ --
======== =========
</TABLE>
At December 31, 1995, the Company has net operating loss carryforwards for
federal income tax purposes of $237,711 which are available to offset future
federal taxable income through 2010. The Company's business tax credit
carryforwards for federal income tax purposes are available to reduce future
federal income taxes through 2010 and the Company's alternative minimum tax
credit carryforwards are available to reduce future federal regular income
taxes, if any, over an indefinite period. The foreign tax credits, available to
reduce future federal income taxes, if any, expire from 1996 through 2000.
F-38
<PAGE> 127
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Subsequently recognized tax benefits relating to the valuation allowance
for deferred tax assets as of December 31, 1995 will be allocated as follows:
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Income tax benefit that would be reported in the
consolidated statements of operations..................... $ 94,253
Intangibles, including goodwill............................. 18,444
--------
$112,697
========
</TABLE>
(9) LITIGATION
The Company was a defendant in a lawsuit (in which it filed counterclaims)
that sought unspecified damages for alleged breach of contract related to its
interest in the INTRICO Partnership (a joint venture partnership, which was
created to develop a new state of the art hotel and vehicle rental reservation
system). In January 1994 the Company reached a settlement in this matter.
Amounts received in the settlement were sufficient to reimburse the Company for
its investment in the partnership, capitalized expenditures and capitalized
interest and had no other material impact on the Company's consolidated
financial condition.
Other litigation arising in the normal course of business is pending
against the Company. Management believes that the Company has meritorious
defenses to all significant litigation and that the ultimate outcome of the
litigation will not have a material adverse effect on the Company's consolidated
financial position or results of operations.
(10) LEASES AND AIRPORT CONCESSION FEES
Expenses for operating leases and airport concession fees for the years
ended December 31 amount to:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Minimum fees.............................................. $78,983 $73,401 $66,439
Contingent fees........................................... 16,794 24,855 32,113
------- ------- -------
$95,777 $98,256 $98,552
======= ======= =======
</TABLE>
Vehicle leasing expenses of $24,692, $20,154 and $20,937 for the years
ended December 31, 1993, 1994 and 1995, respectively, are not included in the
table above.
Contingent fees are largely based on a percentage of revenues at certain
locations. The Company is required by most of the leases for its operating
facilities to pay real estate taxes, insurance and other occupancy expenses. In
addition, the Company guarantees airport concession fees on behalf of certain
franchisees.
Future minimum commitments as of December 31, 1995 for noncancelable leases
and concession agreements are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
1996........................................................ $ 61,112
1997........................................................ 44,986
1998........................................................ 31,393
1999........................................................ 21,541
2000........................................................ 15,317
Thereafter.................................................. 67,653
--------
$242,002
========
</TABLE>
Several of the Company's leases include renewal options for varying
periods.
F-39
<PAGE> 128
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) MANDATORY REDEEMABLE PREFERRED STOCK
Series A preferred stock (Series A): The Series A is entitled to cumulative
dividends, payable quarterly, when and if declared by the Board of Directors, at
an annual rate of 10% of its stated value. The Series A is subject to mandatory
redemption in March 2004 at its then liquidation value (stated value plus any
unpaid accumulated dividends). The Series A ranks prior to all other equity
securities of the Company with respect to dividend rights and rights upon
liquidation.
The Series A stockholders may vote only with respect to matters which would
alter or change the powers, preferences or special rights of the shares
including authorization to issue any stock ranking equal or prior to the Series
A. A majority of Series A shares are required to approve any matters brought to
a vote. The affirmative vote of the original purchaser is required to approve
these matters as long as the original purchaser owns shares of Series A and
Series B preferred stock which collectively have an aggregate stated value of at
least $25,000.
(12) STOCKHOLDERS' EQUITY
Series B preferred stock (Series B): The Series B is entitled to cumulative
dividends, payable quarterly, when and if declared by the Board of Directors,
equal to 100% of earnings, after deduction of dividends on the Series A, up to a
maximum annual dividend of $25,000. The Series B ranks prior to the common stock
with respect to rights upon liquidation.
The Series B stockholders may vote only with respect to matters which would
alter or change the powers, preferences or special rights of the shares
including authorization to issue any stock ranking equal or prior to the Series
B. A majority of Series B shares is required to approve any matters brought to a
vote.
(13) ENVIRONMENTAL MATTERS
The Company has recorded amounts which, in management's best estimate, will
be sufficient to satisfy anticipated costs of known remediation requirements. At
December 31, 1995 the Company has accrued $4,600 for estimated environmental
remediation costs and expects to expend approximately $3,600 during 1996.
Amounts receivable from third parties for reimbursement of remediation
expenditures is not significant.
Due to factors such as continuing changes in environmental laws and
regulatory requirements, the availability and application of technology, the
identification of presently unknown remediation sites and changes in the extent
of expected remediation efforts, estimated costs for future environmental
compliance and remediation are subject to uncertainty and it is difficult to
predict the amount or timing of future remediation requirements. The Company
does not expect such future costs to have a material adverse effect on the
Company's consolidated financial position or results of operations.
(14) RELATED-PARTY TRANSACTIONS
Ford Motor Company and its affiliates (Ford) hold all of the outstanding
preferred stock of the Company. Ford and the Company are parties to a vehicle
supply agreement, effective through August 1998, pursuant to which owned
locations are to acquire at least 70% of their annual vehicle purchases from
Ford. The agreement provides that Ford vehicles will be competitive with
vehicles of other manufacturers in terms of price and other factors. A related
agreement between Ford and the Company, effective through August 1996, provides
for certain incentives to be paid by Ford to the Company dependent on the
attainment of certain volume purchase requirements. Ford represents the
Company's largest debtor and creditor at December 31, 1994 and 1995.
(15) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, receivables and accounts payable and accrued
expenses: The carrying amounts approximate fair value due to the short maturity
of these instruments.
F-40
<PAGE> 129
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Notes payable: The carrying amounts approximate fair value as a majority
of the obligations incur interest at a floating, market rate that is reset
monthly. In addition, the significant terms of fixed rate obligations do not
differ materially from those currently available to the Company.
Interest rate cap agreements: As described in note 6 to the consolidated
financial statements, the Company has recorded capitalized fees related to
various interest rate cap agreements. The fair value of these agreements at
December 31, 1995, based on a sampling of financial institutions' and brokers'
quotes is approximately $1,630.
(16) GEOGRAPHICAL SEGMENT INFORMATION
The Company operates in two major geographical areas, North America and
International.
Information by area for the years ended December 31 is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenue
North America.................................... $ 971,214 $1,040,847 $1,064,182
International.................................... 108,473 114,919 129,288
---------- ---------- ----------
Total.................................... $1,079,687 $1,155,766 $1,193,470
========== ========== ==========
Income Before Taxes:
North America.................................... $ (34,267) $ (3,209) $ (140,921)
International.................................... 3,393 8,334 9,595
---------- ---------- ----------
Total.................................... $ (30,874) $ 5,125 $ (131,326)
========== ========== ==========
Identifiable Assets:
North America.................................... $2,282,209 $2,440,040 $2,318,120
International.................................... 122,995 162,334 169,995
---------- ---------- ----------
Total.................................... $2,405,204 $2,602,374 $2,488,115
========== ========== ==========
</TABLE>
F-41
<PAGE> 130
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(IN THOUSANDS EXCEPT SHARE
DATA)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 95,872 $ 35,163
Receivables:
Vehicle rental and sales, less allowance of $29,040 in
1995 and $37,305 in 1996................................ 90,800 89,523
Royalty fees and other amounts due from franchisees, less
allowance of $4,552 in 1995 and $4,263 in 1996.......... 42,634 39,945
Installment notes, $617 in 1995 and $825 in 1996 due
within one year......................................... 6,758 7,861
Vehicle related programs -- Ford.......................... 89,283 46,157
Vehicle related programs -- other......................... 5,292 22,210
Other..................................................... 6,265 10,091
---------- ----------
241,032 215,787
Prepaid expenses and taxes, inventories and deposits........ 53,452 48,090
Vehicles held for sale...................................... 11,756 15,211
Vehicles, at cost........................................... 1,498,060 1,614,246
Less accumulated depreciation............................. (144,071) (143,802)
---------- ----------
1,353,989 1,470,444
Property and equipment, at cost:
Land...................................................... 31,990 32,891
Buildings and leasehold improvements...................... 113,863 120,891
Furniture and equipment................................... 102,991 108,759
Construction in progress.................................. 3,068 3,183
---------- ----------
251,912 265,724
Less accumulated depreciation and amortization............ (140,030) (151,765)
---------- ----------
111,882 113,959
Other assets................................................ 75,920 56,109
Intangibles, including goodwill, less accumulated
amortization of $109,746 in 1995 and $122,286 in 1996..... 544,212 531,645
---------- ----------
$2,488,115 $2,486,408
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses, including outstanding
checks of $31,840 in 1995 and $26,554 in 1996............. $ 246,694 $ 237,254
Accounts payable -- Ford.................................... 22,909 10,363
Current income taxes payable................................ 93 31
Self-insurance liability.................................... 155,324 151,445
Notes payable -- Ford....................................... 984,357 929,539
Notes payable -- other...................................... 933,590 1,008,432
Mandatory Redeemable Preferred Stock:
Series A, 10% cumulative, redeemable, par value $.01,
stated value $1,000; 150,000 shares authorized; 150,000
shares issued and outstanding, including $101,250 ($675
per share) in 1995 of dividends in arrears.............. 251,250 --
Series X, 7.5% cumulative, redeemable, par value $.01,
stated value $1,000; 291,000 shares authorized, 5,006.46
shares issued and outstanding, including $78 ($16 per
share) in 1996 of dividends in arrears.................. -- 5,084
Stockholders' equity:
Preferred stock:
Series B, cumulative, participating, par value $.01,
stated value $1,000; 309,000 shares authorized; 309,000
issued and outstanding in 1995......................... 309,000 --
Common stock, par value $.01; 10,000 shares authorized,
issued and outstanding.................................. -- --
Additional paid-in capital................................ 1,000 564,994
Costs incurred for raising equity capital................. (9,555) (9,555)
Pension liability adjustment.............................. (15,110) (15,110)
Foreign currency translation adjustment................... (11,322) (11,373)
Accumulated deficit....................................... (380,115) (384,696)
---------- ----------
(106,102) 144,260
---------- ----------
$2,488,115 $2,486,408
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
F-42
<PAGE> 131
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Vehicle rental............................................ $811,641 $745,521
Retail car sales.......................................... 61,205 71,768
Royalty fees.............................................. 44,144 45,654
Other..................................................... 13,492 12,425
-------- --------
930,482 875,368
-------- --------
Expenses:
Direct vehicle and operating.............................. 121,838 98,553
Depreciation -- vehicles.................................. 252,870 197,898
Depreciation -- nonvehicle................................ 14,079 19,620
Cost of vehicles sold at retail........................... 52,419 61,787
Advertising, promotion and selling........................ 82,120 66,667
Facilities................................................ 93,012 92,900
Personnel................................................. 208,111 187,771
General and administrative................................ 57,514 36,966
Intangible amortization................................... 12,629 12,540
-------- --------
894,592 774,702
-------- --------
Earnings before interest and income taxes................... 35,890 100,666
Interest expense............................................ 113,773 94,619
-------- --------
Income (loss) before income taxes........................... (77,883) 6,047
Provision for income taxes.................................. 900 1,800
-------- --------
Net income (loss)........................................... $(78,783) $ 4,247
======== ========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
F-43
<PAGE> 132
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COSTS
INCURRED
FOR FOREIGN
ADDITIONAL RAISING PENSION CURRENCY
PREFERRED COMMON PAID-IN EQUITY LIABILITY TRANSLATION ACCUMULATED
STOCK STOCK CAPITAL CAPITAL ADJUSTMENT ADJUSTMENT DEFICIT
--------- ------ ---------- ----------- ---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993.................. $ 309,000 -- $ 1,000 $(9,555) $ (6,388) $(15,899) $(218,600)
Dividends in arrears.... -- -- -- -- -- -- (15,000)
Net income.............. -- -- -- -- -- -- 1,125
Pension liability
adjustment............ -- -- -- -- 144 -- --
Foreign currency
translation........... -- -- -- -- -- 4,082 --
--------- --- -------- ------- -------- -------- ---------
Balance at December 31,
1994.................. 309,000 -- 1,000 (9,555) (6,244) (11,817) (232,475)
Dividends in arrears.... -- -- -- -- -- -- (15,000)
Net loss................ -- -- -- -- -- -- (132,640)
Pension liability
adjustment............ -- -- -- -- (8,866) -- --
Foreign currency
translation........... -- -- -- -- -- 495 --
--------- --- -------- ------- -------- -------- ---------
Balance at December 31,
1995.................. 309,000 -- 1,000 (9,555) (15,110) (11,322) (380,115)
--------- --- -------- ------- -------- -------- ---------
Dividends in arrears
(Series A)............ -- -- -- -- -- -- (8,750)
Dividends in arrears
(Series X)............ -- -- -- -- -- -- (78)
Exchange of preferred
stock................. (309,000) -- 563,994 -- -- -- --
Net income.............. -- -- -- -- -- -- 4,247
Foreign currency
translation........... -- -- -- -- -- (51) --
--------- --- -------- ------- -------- -------- ---------
Balance at September 30,
1996.................. $ -- -- $564,994 $(9,555) $(15,110) $(11,373) $(384,696)
========= === ======== ======= ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
F-44
<PAGE> 133
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Operating activities:
Net income (loss)......................................... $ (78,783) $ 4,247
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 266,949 217,518
Intangible amortization................................ 12,629 12,540
Gain on sale of vehicles and equipment................. (16,606) (12,195)
Provision for losses on accounts receivable............ 5,190 4,523
Equity in (earnings) loss of equity investees.......... (968) 0
Changes in operating assets and liabilities, net of
effects from franchise acquisitions:
Receivables.......................................... (66,943) 22,149
Prepaid expenses and taxes, inventories and
deposits............................................ 3,459 5,362
Vehicles held for sale............................... (4,418) (3,455)
Accounts payable and accrued expenses................ 25,774 (21,986)
Current income taxes payable......................... 1,574 (62)
Estimated self-insurance liability................... (3,344) (3,879)
----------- -----------
Net cash provided by operating activities................... 144,513 224,762
----------- -----------
Investing activities:
Purchase of vehicles...................................... (2,359,425) (1,803,720)
Proceeds from sale of vehicles............................ 1,970,048 1,493,838
Purchase of property and equipment........................ (15,369) (17,617)
Proceeds from the sale of property and equipment.......... 6,986 10,075
Changes in other assets................................... (19,094) 11,904
----------- -----------
Net cash used in investing activities....................... (416,854) (305,520)
----------- -----------
Financing activities:
Proceeds from revolving credit facility and other notes
payable................................................ 1,776,482 635,552
Principal payments on revolving credit facility and other
notes payable.......................................... (1,711,834) (648,537)
Proceeds from fleet lender notes.......................... 1,331,501 1,795,823
Principal payments on fleet lender notes.................. (1,379,496) (1,836,770)
Proceeds from commercial paper............................ 6,395,522 7,571,860
Principal payments on commercial paper.................... (6,120,630) (7,497,879)
----------- -----------
Net cash provided by financing activities................... 291,545 20,049
Increase (decrease) in cash and cash equivalents............ 19,204 (60,709)
Cash and cash equivalents at beginning of period............ 67,205 95,872
----------- -----------
Cash and cash equivalents at end of period.................. $ 86,409 $ 35,163
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
F-45
<PAGE> 134
BUDGET RENT A CAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
(IN THOUSANDS)
(1) Interim financial information as of September 30, 1996 and for the nine
months ended September 30, 1995 and 1996 is unaudited. Management believes
that the unaudited, interim financial statements reflect all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation
of the Company's consolidated financial position as of September 30, 1996
and the consolidated results of operations and cash flows for the nine
months ended September 30, 1995 and 1996. Information for the interim
periods is not necessarily indicative of results to be expected for the full
year.
(2) On July 16, 1996, pursuant to a Recapitalization Plan approved by the
Company's Board of Directors and stockholders, the Company exchanged all
previously issued and outstanding shares of Preferred A and Preferred B
stock for 5,006.46 shares of a new series (Series X) of mandatory redeemable
preferred stock. As a result of the exchange, additional paid-in capital
increased $563,994, while Series B preferred stock, at stated value,
decreased $309,000 and mandatory redeemable preferred stock (Series A) was
reduced by $260,000. The Series X is to be redeemed on March 30, 2004 for
stated value ($1,000 per share) plus accrued and unpaid dividends.
F-46
<PAGE> 135
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY TEAM OR ANY U.S. UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF TEAM SINCE
SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................
Risk Factors..........................
Use of Proceeds.......................
Price Range of Common Stock...........
Dividend Policy.......................
Capitalization........................
Pro Forma Consolidated Financial
Statements of Budget Group..........
Selected Financial Data of TEAM.......
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of TEAM...............
Selected Financial Data of BRACC......
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of BRACC..............
Business of Budget Group..............
The Budget Acquisition................
Management............................
Certain Transactions..................
Principal Stockholders................
Description of Capital Stock..........
Shares Eligible for Future Sale.......
Certain U.S. Tax Consequences to Non-
U.S. Holders of Class A Common
Stock...............................
Underwriting..........................
Notice to Canadian Residents..........
Legal Matters.........................
Experts...............................
Additional Information................
Index to Financial Statements.........
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
[LOGO]
Shares
Class A Common Stock
($.01 par value)
PROSPECTUS
Credit Suisse First Boston
ABN AMRO Chicago Corporation
Alex. Brown & Sons
Incorporated
McDonald & Company
Securities, Inc.
- ------------------------------------------------------
<PAGE> 136
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED FEBRUARY 12, 1997
Shares
[LOGO] TEAM RENTAL GROUP, INC.
Class A Common Stock
($.01 par value)
---------------------
The shares of Class A Common Stock of Team Rental Group, Inc. ("TEAM")
offered hereby are being sold by TEAM in connection with the acquisition by
TEAM of all the outstanding capital stock of
Budget Rent a Car Corporation (the "Budget Acquisition"). The net proceeds
of the
Offering, together with a portion of the net proceeds of concurrent
financing
transactions, will be used to finance the Budget Acquisition.
Of the shares of Class A Common Stock being offered, shares (the
"International Shares") are initially being offered outside the United States
and Canada by the Managers (the "International Offering") and
shares (the "U.S. Shares") are initially being concurrently offered in
the United States and Canada by the U.S. Underwriters (the "U.S.
Offering" and, together with the International Offering, the
"Offering"). The offering price and underwriting discounts and
commissions of the International Offering and the U.S.
Offering will be identical.
The Class A Common Stock is listed on The Nasdaq Stock Market's National Market
under the symbol "TBUD." On February 11, 1997, the last reported sale price
of the Class A Common Stock on The Nasdaq National Market was $27.375
per share. See "Price Range of Common Stock."
TEAM has two classes of Common Stock, the Class A Common Stock, par value $.01
per share (the "Class A Common Stock"), and the Class B Common Stock, par value
$.01 per share (the 'Class B Common Stock"). Holders of the Class A Common Stock
are entitled to one vote per share and holders of the Class B Common Stock are
entitled to ten votes per share.
TEAM is concurrently offering $175.0 million aggregate principal amount of its
% Senior Notes Due 2007(the "Debt Offering"). TEAM is also concurrently
entering into new credit facilities for fleet financings (the "New Fleet
Financings") with an aggregate commitment of $1.2 billion. Consummation of the
Offering will occur concurrently with, and is conditioned upon, consummation of
the Budget Acquisition, the Debt Offering and the New Fleet Financings.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE CLASS A COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE
14 HEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS TEAM(1)
----------- ------------- -----------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total(2)............................................. $ $ $
</TABLE>
(1) Before deduction of expenses payable by TEAM estimated at $ .
(2) TEAM has granted the Managers and the U.S. Underwriters an option,
exercisable by Credit Suisse First Boston Corporation for 30 days from the
date of this Prospectus, to purchase a maximum of additional
shares of Class A Common Stock to cover over-allotments of shares. If the
option is exercised in full, the total Price to Public will be $ ,
Underwriting Discounts and Commissions will be $ and Proceeds TEAM
will be $ .
The International Shares are offered by the several Managers when, as and
if issued by TEAM, delivered to and accepted by the Managers and subject to
their right to reject orders in whole or in part. It is expected that the
International Shares will be ready for delivery on or about
, 1997, against payment in immediately available funds.
CREDIT SUISSE FIRST BOSTON
ABN AMRO CHICAGO CORPORATION
ALEX. BROWN & SONS
INTERNATIONAL
MCDONALD & COMPANY
SECURITIES, INC.
Prospectus dated , 1997.
<PAGE> 137
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY TEAM OR ANY MANAGER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF TEAM SINCE
SUCH DATE.
In this Prospectus, references to "dollars" and "$" are to United States
dollars.
IN CONNECTION WITH THIS OFFERING, CREDIT SUISSE FIRST BOSTON CORPORATION,
ON BEHALF OF THE MANAGERS AND THE U.S. UNDERWRITERS, MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS AND THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE CLASS A COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"SUBSCRIPTION AND SALE."
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN SHARES OF THE CLASS A COMMON STOCK PURSUANT TO EXEMPTIONS
FROM RULES 10B-6 AND 10B-7 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
TEAM intends to furnish its shareholders with annual reports containing
consolidated financial statements audited by an independent public accounting
firm and quarterly reports for the first three quarters of each fiscal year
containing unaudited interim financial information.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..........................................
Risk Factors................................................
Use of Proceeds.............................................
Price Range of Common Stock.................................
Dividend Policy.............................................
Capitalization..............................................
Pro Forma Consolidated Financial Statements of Budget
Group.....................................................
Selected Financial Data of TEAM.............................
Management's Discussion and Analysis of Financial Condition
and Results of Operations of TEAM.........................
Selected Financial Data of BRACC............................
Management's Discussion and Analysis of Financial Condition
and Results of Operations of BRACC........................
Business of Budget Group....................................
The Budget Acquisition......................................
Management..................................................
Certain Transactions........................................
Principal Stockholders......................................
Description of Capital Stock................................
Shares Eligible for Futures Sale............................
Certain United States Tax Consequences to Non-U.S.
Holders...................................................
Subscription and Sale.......................................
Legal Matters...............................................
Experts.....................................................
Additional Information......................................
Index to Financial Statements............................... F-1
</TABLE>
ALT-2
<PAGE> 138
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
REGULATORY AND ENVIRONMENTAL MATTERS
TEAM and BRACC are subject to various foreign, federal, state and local
laws and regulations that affect the conduct of their operations, including
those relating 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
protection and clean-up. Compliance with changes in these laws and regulations
could significantly affect the operations of Budget Group, and there can be no
assurance that compliance with changes in these regulations or the adoption of
additional legislation and regulations will not require material expenditures by
Budget Group or otherwise have a material adverse effect on its results of
operations or financial condition. See "Business of Budget Group -- Regulatory
and Environmental Matters."
DEPENDENCE ON PRINCIPAL SUPPLIER
For many years, Ford has been BRACC's principal supplier of vehicles. The
number of vehicles purchased from Ford varies from year to year. In model year
1996, approximately 79% of BRACC's U.S. vehicle purchases were comprised of Ford
vehicles. Under the terms of a supply agreement to be entered into concurrently
with the Budget Acquisition, BRACC and its affiliates (including TEAM) will
agree to purchase or lease Ford vehicles in such quantity that the percentage of
new Ford vehicles purchased or leased by Budget Group in the United States,
Canada, and other countries outside the European Union represents at least 70%
of the total new vehicle purchases by Budget Group, with a minimum quantity of
at least 80,000 vehicles in the United States in each model year. See "The
Budget Acquisition -- Related Agreements -- Supply Agreement." Given the volume
of vehicles purchased from Ford by BRACC, shifting significant portions of the
fleet purchases to other manufacturers would require lead time and certain
operational changes. As a result, if Ford were unable to supply Budget Group
with the planned number and types of vehicles, it could have a material adverse
effect on Budget Group's financial condition and results of operations.
INTERNATIONAL OPERATIONS
Budget Group's international vehicle rental operations will be 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 Group's results
of operations or financial condition.
DEPENDENCE ON PRINCIPAL EXECUTIVE OFFICERS
Budget Group's existing operations and continued future development are
dependent in part on the active participation of Messrs. Miller, Kennedy and
Congdon. The loss of the services of one or more of these individuals could have
a material adverse effect on Budget Group. See "Management."
SHARES ELIGIBLE FOR FUTURE SALE
A substantial number of shares of Class A Common Stock currently
outstanding, or issuable upon conversion of TEAM's outstanding convertible notes
or convertible preferred stock, or upon exercise of stock options and stock
purchase warrants, are or will become eligible for future sale in the public
market at prescribed times pursuant to registration rights of certain security
holders or applicable regulations. Among other agreements, TEAM has agreed to
file a shelf registration statement relating to the 3,986,049 shares of Class A
Common Stock issuable upon conversion of the outstanding convertible
subordinated notes and has granted Ford certain demand and "piggyback"
registration rights for the approximately 4,500,000 shares of Class A Common
Stock issuable upon conversion of the Series A Convertible Preferred Stock.
TEAM's directors and executive officers, who in the aggregate beneficially own
2,824,305 shares of Common Stock, have agreed that for a period of 90 days after
the date of this Prospectus, and TEAM has agreed that for a period of 180 days
after the date of this Prospectus, they will not sell or otherwise dispose of
any shares of Common Stock without the prior written consent of Credit Suisse
First Boston Corporation. See "Subscription and Sale." Significant sales of the
Class A
ALT-3
<PAGE> 139
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
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.
TEAM maintains directors' and officers' insurance against certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling TEAM pursuant to
the arrangements described above, TEAM has been advised that in the opinion of
the Securities and Exchange Commission (the "Commission"), such indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable.
At present, there is no pending material litigation or proceeding involving
any director, officer, employee or agent of TEAM where indemnification will be
required or permitted.
SECTION 203
TEAM is subject to Section 203 of the Delaware General Corporation Law,
which prohibits a publicly held Delaware corporation from consummating a
"business combination," except under certain circumstances, with an "interested
stockholder" for a period of three years after the date such person became an
"interested stockholder" unless the business combination is approved in a
prescribed manner. An "interested stockholder" generally is defined as a person
who, together with affiliates and associates, owns (or, within the prior three
years, owned) 15% or more of a corporation's outstanding voting stock. A
"business combination" includes mergers, asset sales and certain other
transactions resulting in a financial benefit to an interested stockholder.
TRANSFER AGENT
The transfer agent and registrar for the Class A Common Stock is
ChaseMellon Shareholder Services.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, TEAM will have outstanding
shares of the Class A Common Stock and 1,936,600 shares of the Class B Common
Stock (assuming the over-allotment option described below is not exercised). The
Class B Common Stock is convertible on a share-for-share basis into Class A
Common Stock and must be converted to effect any public sale of such stock. Of
these shares, shares, including the shares of Class A Common
Stock sold in the Offering, will be freely tradeable without restriction under
the Securities Act, except for any shares purchased by an "affiliate" of TEAM
(as that term is defined in the Securities Act), which will be subject to the
resale limitations of Rule 144 under the Securities Act.
The remaining shares of the Class A Common Stock, all shares of
the Class B Common Stock and all shares of the Series A Convertible Preferred
Stock are "restricted" securities within the meaning of Rule 144 and may not be
resold in a public distribution, except in compliance with the registration
requirements of the Securities Act or pursuant to Rule 144. Of these shares,
495,383 shares of Class A Common Stock and all of the Class B Common Stock are
eligible for sale under Rule 144, and 151,067 and 713,962 shares of Class A
Common Stock will become eligible for sale under Rule 144 in March 1997 and
October 1997, respectively. All of the shares of Series A Convertible Preferred
Stock will become eligible for sale under Rule 144 two years after the issuance
of those shares in the Budget Acquisition. TEAM's directors and executive
officers, who in the aggregate beneficially own 2,823,805 shares of Common
Stock, have agreed that they will not sell, contract or offer to sell or
otherwise dispose of, directly or indirectly, any shares of capital stock of
TEAM for a period of 90 days from the date of this Prospectus without the prior
written consent of Credit Suisse First Boston Corporation, on behalf of the
Underwriters. See "Subscription and Sale." After such date, certain of these
stockholders have the right to demand that TEAM register their shares under the
Securities Act in accordance with agreements between such holders and TEAM and
may be able to dispose of their shares in a registered public offering effected
thereunder. In addition, certain stockholders and holders of the stock purchase
warrants possess certain demand and/or "piggyback" registration rights. See
"Description of Capital Stock -- Registration Rights" and "Management -- Benefit
Plans."
ALT-4
<PAGE> 140
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
Subject to stockholder approval of amendments to TEAM's option plans at the
1997 Annual Meeting of Stockholders, TEAM has reserved shares of
Common Stock for issuance under the 1994 Common Stock in the public market
following the Offering could adversely affect prevailing market prices. See
"Shares Eligible for Future Sale."
VOTING CONTROL BY PRINCIPAL EXECUTIVE OFFICERS
TEAM has two classes of Common Stock: Class A Common Stock, which is
entitled to one vote per share, and Class B Common Stock, which is entitled to
ten votes per share. Messrs. Miller, Kennedy and Congdon own all of the
outstanding shares of Class B Common Stock, which, following the Offering, will
represent approximately % of the combined voting power of both classes of
Common Stock. As a result, following the Budget Acquisition and prior to the
conversion of the Convertible Subordinated Notes or the Series A Convertible
Preferred Stock such officers will continue to be able to elect all of Budget
Group's Board of Directors, thereby ensuring that members elected by them will
continue to direct the business, policies and management of Budget Group. See
"Principal Stockholders."
POTENTIAL ANTI-TAKEOVER EFFECTS OF CHARTER AND BYLAW PROVISIONS; POSSIBLE
ISSUANCES OF PREFERRED STOCK
Certain provisions of Delaware law, TEAM's Amended and Restated Certificate
of Incorporation (in particular, the voting rights of the Class B Common Stock)
and TEAM'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 Group. Such provisions
could limit the price that certain investors might be willing to pay in the
future for shares of the Class A Common Stock. In addition, shares of preferred
stock may be issued by the Board of Directors without stockholder approval on
such terms and conditions, and having such rights, privileges and preferences,
as the Board of Directors may determine. The rights of the holders of the Class
A Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any preferred stock that may be issued in the future. Budget
Group has no current plans to issue any shares of preferred stock (other than
the shares of Series A Convertible Preferred Stock to be issued to Ford in
connection with the Budget Acquisition). See "Description of Capital
Stock -- Preferred Stock" and "Description of Capital Stock -- Section 203."
ALT-5
<PAGE> 141
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBSCRIPTION AND SALE
The institutions named below (the "Managers") have, pursuant to a
Subscription Agreement dated , 1997 (the "Subscription Agreement"),
severally and not jointly, agreed with TEAM to subscribe and pay for the
following respective numbers of International Shares as set forth opposite their
names:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
ABN AMRO Chicago Corporation (UK) Ltd.......................
Alex. Brown & Sons Incorporated.............................
McDonald & Company Securities, Inc..........................
---------
Total.............................................
=========
</TABLE>
The Subscription Agreement provides that the obligations of the Managers
are subject to certain conditions precedent, the Managers will be obligated to
purchase all the International Shares (other than those International Shares
covered by the over-allotment option described below) if any are purchased. The
Subscription Agreement provides that, in the event of a default by a Manager, in
certain circumstances, the purchase commitments of non-defaulting Managers may
be increased or the Subscription Agreement may be terminated.
TEAM has entered into an Agreement (the "Underwriting Agreement") with the
U.S. Underwriters of the U.S. Offering (the "U.S. Underwriters") providing for
the concurrent offer and sale of the U.S. Shares in the United States and
Canada. The closing of the U.S. Offering is a condition to the closing of the
International Offering and vice versa.
TEAM has granted to the Managers and the U.S. Underwriters an option
exercisable by Credit Suisse First Boston Corporation, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
additional shares of the Class A Common Stock at the public offering
price less underwriting discounts and commissions, all as set forth on the cover
page of this Prospectus. Such option may be exercised only to cover
over-allotments, if any, in the sale of the shares of Class A Common Stock
offered hereby. To the extent such option is exercised, each Manager and each
U.S. Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of additional shares being sold to
the Managers and the U.S. Underwriters as the number of International Shares set
forth next to such Manager's name in the preceding table and as the number set
forth next to such U.S. Underwriters's name in the corresponding table in the
Prospectus relating to the U.S. Offering bears to the total number of shares of
Class A Common Stock in such tables.
TEAM has been advised by Credit Suisse First Boston (Europe) Limited, on
behalf of the Managers, that the Managers propose to offer the International
Shares outside the United States and Canada initially at the public offering
price set forth on the cover page of this Prospectus and, through the Managers,
to certain dealers at such price less a commission of $ per share and
that the Managers may reallow a commission of $ per share on sales to
certain other dealers. After the public offering, the public offering price and
commission and reallowance may be changed.
The public offering price, the aggregate underwriting discounts and
commissions per share and the per share commission and re-allowance to dealers
for the International Offering and the concurrent U.S. Offering will be
identical. Pursuant to an Agreement between the U.S. Underwriters and the
Managers (the "Intersyndicate Agreement") relating to the Offering, changes in
the public offering price, the aggregate underwriting discounts and commissions
per share and the per share concession and re-allowance to dealers will be made
only upon the mutual agreement of Credit Suisse First Boston Corporation, on
behalf of the Managers, and Credit Suisse First Boston Corporation, on behalf of
the U.S. Underwriters.
Pursuant to the Intersyndicate Agreement, each of the Managers has agreed
that, as part of the distribution of the International Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Class A Common Stock or distribute any
prospectus relating to the Class A Common Stock in the United States or Canada
or to any other dealer who does not so agree. Each of the U.S.
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<PAGE> 142
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
Underwriters has agreed that, as part of the distribution of the U.S. Shares and
subject to certain exceptions, it has not offered or sold, and will not offer or
sell, directly or indirectly, any shares of Class A Common Stock or distribute
any prospectus relating to the Class A Common Stock to any person outside the
United States or Canada or to any other dealer who does not so agree. The
foregoing limitations do not apply to stabilization transactions or to
transactions between the Managers and the U.S. Underwriters pursuant to the
Intersyndicate Agreement. As used herein, "United States" means the United
States of America (including the States and the District of Columbia), its
territories, possessions and other areas subject to its jurisdiction. "Canada"
means Canada, its provinces, territories, possessions and other areas subject to
its jurisdiction, and an offer or sale shall be in the United States or Canada
if it is made to (i) an individual resident in the United States or Canada or
(ii) a corporation, partnership, pension, profit-sharing or other trust or other
entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with the purchase
is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
Managers and the U.S. Underwriters of such number of shares of Class A Common
Stock as may be mutually agreed. The price of any shares so sold shall be the
public offering price, less such amount as may be mutually agreed upon by Credit
Suisse First Boston (Europe) Limited, on behalf of the Managers, and Credit
Suisse First Boston Corporation, on behalf of the U.S. Underwriters, but not
exceeding the selling concession applicable to such shares. To the extent there
are sales between the Managers and the U.S. Underwriters pursuant to the
Intersyndicate Agreement, the number of shares of Class A Common Stock initially
available for sale by the Managers or by the U.S. Underwriters may be more or
less than the amount appearing on the cover page of this Prospectus. Neither the
Managers nor the U.S. Underwriters are obligated to purchase from the other any
unsold shares of Class A Common Stock.
Each of the Managers and the U.S. Underwriters severally represents and
agrees that (i) it has not offered or sold, and prior to the date six months
after the date of issuance of the Shares offered hereby will not offer or sell,
any shares of Class A Common Stock to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act of 1986 with
respect to anything done by it in relation to the Class A Common Stock in, from
or otherwise involving the United Kingdom; and (iii) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Class A Common Stock to a
person who is of a kind described in Article 11(3) of the Financial Services Act
of 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to
whom such document may otherwise lawfully be issued or passed on.
Purchasers of shares of Class A Common Stock outside the United States may
be required to pay stamp taxes and other charges in accordance with the laws and
practices of the country of purchase in addition to the price to Public set
forth on the cover page of this Prospectus.
TEAM and its officers and directors and certain other holders of Class A
Common Stock have agreed that they will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or, in the case of TEAM,
file with the Commission a registration statement under the Securities Act
relating to any additional shares of TEAM's Common Stock or securities
convertible into or exchangeable or exercisable for any shares of TEAM's Common
Stock, or disclose the intention to make any such offer, sale, pledge, disposal
or filing, without the prior written consent of Credit Suisse First Boston
Corporation, in the case of the Company's officers and directors, for a period
of 90 days and, in the case of the Company, for a period of 180 days, after the
date of this Prospectus, except issuances pursuant to the exercise of stock
options granted under the 1994 Option Plan.
TEAM has agreed to indemnify the Managers and the U.S. Underwriters against
certain liabilities, including civil liabilities under the Securities Act, or to
contribute to payments which the Managers and the U.S. Underwriters may be
required to make in respect thereof.
The Managers and the U.S. Underwriters have informed TEAM that they do not
expect discretionary sales by the Managers and the U.S. Underwriters to exceed
5% of the Shares offered hereby.
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<PAGE> 143
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
Credit Suisse First Boston Corporation has acted as placement agent in
connection with each of the existing Fleet Financings, as placement agent in
connection with the offering of the Convertible Subordinated Notes and as
underwriter for TEAM's initial public offering and its equity offering in July
1996. In addition, Credit Suisse First Boston Corporation acted as placement
agent for a fleet financing by Budget Rent a Car of Southern California shortly
before it was acquired by TEAM. Credit Suisse First Boston Corporation is acting
as financial advisor to TEAM in connection with the Budget Acquisition.
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<PAGE> 144
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. Except
for the SEC registration fee and NASD filing fee, all amounts are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $52,273
NASD filing fee and expenses................................ 17,750
Nasdaq National Market listing fee.......................... *
Blue Sky qualification fees and expenses.................... *
Transfer agents' fees....................................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Miscellaneous............................................... *
-------
Total............................................. $ *
=======
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the General Corporation Law of the State of Delaware
("DGCL") provides that a corporation has the power to indemnify any director or
officer, or former director or officer, who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) against the expenses,
(including attorneys' fees), judgments, fines or amounts paid in settlement
actually and reasonably incurred by them in connection with the defense of any
action by reason of being or having been directors or officers, if such person
shall have acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, provided that such person had no reasonable cause
to believe his conduct was unlawful, except that, if such action shall be in the
right of the corporation, no such indemnification shall be provided as to any
claim, issue or matter as to which such person shall have been judged to have
been liable to the corporation unless and to the extent that the Court of
Chancery of the State of Delaware, or any court in which such suit or action was
brought, shall determine upon application that, in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as such court shall deem proper.
As permitted by Section 102(b)(7) of the DGCL, the Amended and Restated
Certificate of Incorporation of the Company (filed herewith as Exhibit 3.2) (the
"Restated Certificate of Incorporation") provides that no director shall be
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director other than (i) for breaches of the director's duty
of loyalty to the Company and its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for the unlawful payment of dividends or unlawful stock purchases or
redemptions under Section 174 of the DGCL, and (iv) for any transaction from
which the director derived an improper personal benefit.
The Company's Bylaws provide indemnification of the Company's directors and
officers, both past and present, to the fullest extent permitted by the DGCL,
and allow the Company to advance or reimburse litigation expenses upon
submission by the director or officer of an undertaking to repay such advances
or reimbursements if it is ultimately determined that indemnification is not
available to such director or officer pursuant to the Bylaws. The Company's
Bylaws will also authorize the Company 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
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<PAGE> 145
not the Company 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 Company has entered into indemnification agreements with each of its
directors and certain of its executive officers. The indemnification agreements
require the Company, among other things, to indemnify such directors and
officers against certain liabilities that may arise by reason of their status or
service as directors or officers (other than liabilities arising from willful
misconduct of a culpable nature), and to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified.
The Underwriting Agreement filed herewith as Exhibit 1.1 provides for the
indemnification by the Underwriters of directors and certain officers of the
Company against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On April 21, 1994, Messrs. Miller, Kennedy and Congdon each subscribed for
50 shares of the Class B Common Stock, at a price per share of $2.00 per share
(the "Initial Share Subscription").
The Initial Share Subscription has been effected pursuant to the exemption
from registration under Section 4(2) of the Securities Act in reliance, in part,
on each of the subscribers' representations and warranties set forth in their
respective subscription agreements and based on their status as the Principal
Executive Officers of the Company.
The Company and the Exchange Stockholders entered into the Exchange
Agreement providing for the exchange of all of the shares of common stock of the
corporations that owned the Albany and Rochester, New York, Richmond, Virginia
and San Diego, California Budget franchise operations for shares of Common
Stock. Pursuant to the Exchange Agreement, the Exchange Stockholders received
the following shares of Common Stock:
<TABLE>
<CAPTION>
STOCKHOLDER SHARES
----------- ------
<S> <C>
Sanford Miller........................................ 905,750 Class B Common Stock
Jeffrey Congdon....................................... 515,350 Class B Common Stock
John Kennedy.......................................... 515,350 Class B Common Stock
Brian Britton......................................... 215,000 Class A Common Stock
Richard Hinkle........................................ 150,000 Class A Common Stock
Richard Sapia......................................... 198,400 Class A Common Stock
</TABLE>
The Share Exchange was effected pursuant to the exemption from registration
under Section 4(2) of the Securities Act in reliance, in part, on each of the
Exchange Stockholders' representations and warranties set forth in the Exchange
Agreement and based on their status as executive managers of the Company.
In November 1994, the Company issued an aggregate of 18,500 shares of Class
A Common Stock to the stockholders of Fort Wayne Rental Group, Inc. ("Fort
Wayne") in exchange for all of the outstanding shares of capital stock of Fort
Wayne (the "Fort Wayne Acquisition"). The Class A Common Stock issued in the
Fort Wayne Acquisition were issued to the following persons: Sanford
Miller -- 7,400 shares, Richard Sapia -- 6,475 shares, and Andrew Klein -- 4,625
shares. Such shares of Class A Common Stock were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act in
reliance, in part, on the representations and warranties set forth in the Fort
Wayne Acquisition agreement.
In January 1995, the Company issued 13,483 shares of Class A Common Stock
to MacKay Car & Truck Rentals, Inc. in partial consideration for all of the
outstanding shares of capital stock of McKay Car & Truck Rentals, Inc. (the
"Charlotte Acquisition"). The shares of Class A Common Stock issued in the
Charlotte Acquisition were issued pursuant to the exemption registration under
Section 4(2) of the Securities Act in reliance, in part, upon the
representations and warranties set forth in the Charlotte Acquisition agreement.
In March 1995, the Company issued 157,333 shares of Class A Common Stock to
the shareholders of Rental Car Resources, Inc. ("Resources") in exchange for all
of the outstanding shares of Rental Car Resources, Inc. (the "Hartford
Acquisition"). The shares of Class A Common Stock issued in the Hartford
Acquisition were
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<PAGE> 146
issued pursuant to the exemption from registration under Section 4(2) of the
Securities Act in reliance, in part, on the representations and warranties set
forth in the Hartford Acquisition agreement.
In October 1995, the Company issued 1,050,000 shares of Class A Common
Stock to Budget Rent a Car of Southern California ("SoCal") in exchange for all
of the outstanding shares of BRAC-OPCO, Inc. (the "Los Angeles Acquisition").
The shares of Class A Common Stock issued in the Los Angeles Acquisition were
issued pursuant to the exemption from registration under Section 4(2) of the
Securities Act in reliance, in part, on SoCal's representations and warranties
set forth in the Los Angeles Acquisition agreement.
In February 1996, the Company issued 272,727 shares of Class A Common Stock
to Katzin Investments L.C. in partial consideration for all of the outstanding
shares of capital stock of Arizona Rent-A-Car Systems, Inc. (the "Phoenix
Acquisition"). The shares of Class A Common Stock issued in the Phoenix
Acquisition were issued pursuant to the exemption from registration under
Section 4(2) of the Securities Act in reliance, in part, upon the
representations and warranties set forth in the Phoenix Acquisition agreement.
In December 1996, the Company issued $80,000,000 of 7.0% Convertible
Subordinated Notes due 2003 (the "Convertible Subordinated Notes") in a private
transaction to certain insurance companies. The Convertible Subordinated Notes
are convertible into 3,986,049 shares of Class A Common Stock of the Company.
The Convertible Subordinated Notes were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act in reliance, in part, upon
the representations and warranties set forth in the Note Purchase Agreement.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- -----------
<C> <C> <S>
**1.1 -- Form of Underwriting Agreement.
2.1 -- Share Exchange Agreement dated April 25, 1994 among Team
Rental Group, Inc., Sanford Miller, Jeffrey Congdon, John
Kennedy, Brian Britton, Richard Hinkle and Richard Sapia
(incorporated by reference to Exhibit 10.24 to the Company's
Registration Statement on Form S-1, File No. 33-78274, dated
April 28, 1994).
2.2 -- First Amendment to Share Exchange Agreement dated June 13,
1994 among Team Rental Group, Inc., Sanford Miller, Jeffrey
Congdon, John Kennedy, Brian Britton, Richard Hinkle and
Richard Sapia (incorporated by reference to Exhibit 10.36 to
Amendment No. 1 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated June 17, 1994).
2.3 -- Second Amendment to Share Exchange Agreement dated July 5,
1994 among Team Rental Group, Inc., Sanford Miller, Jeffrey
Congdon, John Kennedy, Brian Britton, Richard Hinkle and
Richard Sapia (incorporated by reference to Exhibit 10.38 to
Amendment No. 2 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated July 7, 1994).
2.4 -- Agreement, dated October 20, 1995, among Team Rental Group,
Inc., Team Rental of Southern California, Inc., BRAC-OPCO,
Inc., and Budget Rent-A-Car of Southern California
(incorporated by reference to Exhibit 2.5 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995).
2.5 -- Stock Purchase Agreement, dated as of December 21, 1995, by
and among the Company, Arizona Rent-A-Car Systems, Inc.,
David Katzin, Michael Katzin, Jon David Katzin, Gabrielle De
Lavigne, the David Katzin Irrevocable Trust (dated November
17, 1989) and Katzin Investments L.C. (incorporated by
reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K dated December 21, 1995).
2.6 -- Stock Purchase Agreement, dated as of November 1, 1994, by
and between Team Rental of Ft. Wayne, Inc., Sanford Miller,
Richard Sapia and Andrew Klein (incorporated by reference to
Exhibit 10.38 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994).
</TABLE>
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<PAGE> 147
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- -----------
<C> <C> <S>
*2.7 -- Common Stock Purchase Agreement, dated as of January 13,
1997, between John J. Nevin and Team Rental Group, Inc.
*2.8 -- Budget Stock Purchase Agreement, dated as of January 13,
1997, between Budget Rent A Car Corporation and Team Rental
Group, Inc.
*2.9 -- Preferred Stock Purchase Agreement, dated as of January 13,
1997, between Ford Motor Company and Team Rental Group, Inc.
*2.10 -- Form of Preferred Stockholders Agreement between Ford Motor
Company and Team Rental Group, Inc.
3.1 -- Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1, File No.
33-78274, dated April 28, 1994).
3.2 -- Amendment to Amended and Restated Certificate of
Incorporation of the Company (incorporated by reference to
Exhibit 3.2 to Amendment No. 2 to the Company'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 Company.
*3.4 -- Form of Team Rental Group, Inc. Series A Preferred Stock
Certificate of Designations.
3.5 -- By-Laws of the Company (incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-1,
File No. 33-78274, dated April 28, 1994).
4.1 -- Specimen Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995).
4.2 -- Base Indenture between Team Fleet Financing Corporation, as
Issuer, TEAM Rental Group, Inc., as Servicer and Team
Interestholder, and Bankers Trust Company, as Trustee,
relating to Rental Car Asset Backed Notes (incorporated by
reference to Exhibit 4.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
4.3 -- Supplemental Indenture relating to Rental Car Asset Backed
Notes (incorporated by reference to Exhibit 4.2 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
4.4 -- Base Indenture among BRAC SOCAL Funding Corporation, as
Issuer, BRAC-OPCO, Inc., as Servicer and Retained
Interestholder, and Bankers Trust Company, as Trustee
(incorporated by reference to Exhibit 4.5 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995)
4.5 -- Series 1995-1 Supplement to Base Indenture among BRAC SOCAL
Funding Corporation, as Issuer, BRAC-OPCO, Inc., as Servicer
and Retained Interestholder, and Bankers Trust Company, as
Trustee (incorporated by reference to Exhibit 4.6 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
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 Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
**4.7 -- Third Fleet Financing Documents
4.8 -- Registration Rights Agreement, dated as of August 25, 1994,
among the Company, Brian Britton, Jeffrey Congdon, Richard
Hinkle, John Kennedy, Sanford Miller and Richard Sapia
(incorporated by reference to Exhibit 10.23 to the Company'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 Company, Brian Britton,
Jeffrey Congdon, Richard Hinkle, John Kennedy, Sanford
Miller and Richard Sapia (incorporated by reference to
Exhibit 10.24 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994).
4.10 -- Letter Agreement, dated as of November 1, 1994, between
Andrew Klein and the Company acknowledging that Andrew Klein
is a party to the Registration Rights Agreement, dated as of
August 25, 1994, as amended (incorporated by reference to
Exhibit 10.25 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994).
</TABLE>
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<PAGE> 148
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- -----------
<C> <C> <S>
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 Company'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
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 Company, issued to Budget Rent-A-Car
Corporation (incorporated by reference to Exhibit 10.26 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
*4.14 -- NationsBank Warrant dated as of April 26, 1996.
**5.1 -- Opinion of King & Spalding.
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 Company'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
Company'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
Company'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 Company'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
Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
+**10.6 -- Form of Supply Agreement among Ford Motor Company, Team
Rental Group, Inc. and Budget Rent A Car Corporation.
+**10.7 -- Form of Advertising Agreement between Ford Motor Company and
Budget Rent A Car Corporation.
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 Company's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.9 -- First Amendment to BankOne Credit Agreement dated November
1, 1995 (incorporated by reference to Exhibit 10.43 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.10 -- Second Amendment to BankOne Credit Agreement dated February
2, 1996 (incorporated by reference to Exhibit 10.44 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.11 -- Form of World Omni, Inc. Term Note (incorporated by
reference to Exhibit 10.45 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.12 -- 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 Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
</TABLE>
II-5
<PAGE> 149
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- -----------
<C> <C> <S>
10.13 -- Promissory Note, dated February 27, 1996, from the Company
to Katzin Investments L.C. in the aggregate principal amount
of $10,000,000 (incorporated by reference to Exhibit 10.47
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.14 -- Term Note dated February 27, 1996 from NationsBank, N.A.
(South) to the Company (incorporated by reference to exhibit
10.48 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.15 -- Amendment No. 1 to Term Note dated April 2, 1996 from
NationsBank, N.A. (South) to the Company (incorporated by
reference to exhibit 10.2 to Form 10-Q for the quarter ended
March 31, 1996).
10.16 -- Amendment No. 2 to Term Note dated May 27, 1996 from
NationsBank, N.A. (South to the Company (incorporated by
reference to Exhibit 10.47 to Amendment No. 1 to the
Company'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 Company'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 Company'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 Company'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 Company and the investors listed
therein.
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 Company'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 Company's Annual Report on Form 10-K for the
year ended December 31, 1995)
10.23 -- 1994 Incentive Stock Option Plan (incorporated by reference
to Exhibit 10.27 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.24 -- Amendment No. 1 to 1994 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.54 to Amendment No.
2 to the Company'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 Company'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
Company and Sanford Miller (incorporated by reference to
Exhibit 10.29 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.27 -- Indemnification Agreement dated April 25, 1994 between the
Company and John Kennedy (incorporated by reference to
Exhibit 10.30 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.28 -- Indemnification Agreement dated April 25, 1994 between the
Company and Jeffrey Congdon (incorporated by reference to
Exhibit 10.31 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
10.29 -- Indemnification Agreement dated April 25, 1994 between the
Company and Ronald Agronin (incorporated by reference to
Exhibit 10.32 to the Company's Registration Statement on
Form S-1, File No. 33-78274, dated April 28, 1994).
</TABLE>
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<PAGE> 150
<TABLE>
<C> <C> <S>
10.30 -- Indemnification Agreement dated April 25, 1994 between the Company and Stephen Weber (incorporated by
reference to Exhibit 10.33 to the Company's Registration Statement on Form S-1, File No. 33-78274,
dated April 28, 1994).
**11.1 -- Statement re computation of per share earnings.
16.1 -- Letter re Change in Certifying Accountant (incorporated by reference to Exhibit 16 to the Company's
Current Report on Form 8-K dated November 26, 1996, as amended).
*21.1 -- Subsidiaries of the Company.
**23.1 -- Consent of Deloitte & Touche LLP.
*23.2 -- Consent of KPMG Peat Marwick LLP.
**23.3 -- Consent of King & Spalding (included in Exhibit 5).
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
+ The Company has applied for confidential treatment of portions of this
Exhibit. Accordingly, portions thereof have been omitted and filed
separately.
(b) Financial Statement Schedules of TEAM Rental Group, Inc. and
Subsidiaries:
All schedules are omitted because the information is not required or
because the information is included in the combined financial statements or
notes thereto.
ITEM 17. UNDERTAKINGS.
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 that:
1. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 151
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 Atlanta, State of Georgia
on February 12, 1997.
TEAM RENTAL GROUP, INC.
By: /s/ JOHN KENNEDY
------------------------------------
John Kennedy
President and Chief Operating
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Sanford Miller and John Kennedy, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments to this Registration
Statement or any registration statement for this offering that is to be
effective upon the filing pursuant to rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on this 12th day of February, 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 President, Chief Operating Officer and
- ----------------------------------------------------- Director
John Kennedy
/s/ JEFFREY CONGDON Chief Financial Officer (Principal Financial
- ----------------------------------------------------- and Accounting Officer) and Director
Jeffrey Congdon
/s/ RONALD D. AGRONIN Director
- -----------------------------------------------------
Ronald D. Agronin
/s/ STEPHEN L. WEBER Director
- -----------------------------------------------------
Stephen L. Weber
/s/ JEFFREY MIRKIN Director
- -----------------------------------------------------
Jeffrey Mirkin
/s/ ALAN LIKER Director
- -----------------------------------------------------
Alan Liker
</TABLE>
II-8
<PAGE> 152
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
Director
/s/ JAMES F. CALVANO
- -----------------------------------------------------
James F. Calvano
/s/ MARTIN P. GREGOR Director
- -----------------------------------------------------
Martin P. Gregor
</TABLE>
II-9
<PAGE> 1
EXHIBIT 2.7
COMMON STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 13, 1997
BETWEEN
JOHN J. NEVIN
AND
TEAM RENTAL GROUP, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
SALE OF STOCK................................................ 2
SECTION 1.1 Sale and Purchase......................................................................... 2
SECTION 1.2 Purchase Price............................................................................ 2
ARTICLE II
THE CLOSING................................................. 2
SECTION 2.1 Closing................................................................................... 2
SECTION 2.2 Delivery of Shares by Seller to Buyer..................................................... 3
SECTION 2.3 Delivery of Purchase Price by Buyer to
Seller...................................................................... 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES........................................ 3
SECTION 3.1 Representations and Warranties of Seller.................................................. 3
SECTION 3.2 Representations and Warranties of Buyer................................................... 6
SECTION 3.3 Representations and Warranties of Seller
and Buyer................................................................... 9
SECTION 3.4 Disclosure on Schedules................................................................... 10
ARTICLE IV
COVENANTS OF THE PARTIES........................................... 10
SECTION 4.1 Further Assurances........................................................................ 10
SECTION 4.2 Termination of Stockholders Agreement...................................................... 12
ARTICLE V
CLOSING CONDITIONS.............................................. 13
SECTION 5.1 Conditions to Each Party's Obligations.................................................... 13
SECTION 5.2 Conditions to the Obligations of Buyer.................................................... 13
SECTION 5.3 Conditions to the Obligations of Seller................................................... 14
SECTION 5.4 No Closing Unless All Transactions Occur.................................................. 16
ARTICLE VI
TERMINATION................................................. 17
SECTION 6.1 Termination............................................................................... 17
SECTION 6.2 Effect of Termination..................................................................... 17
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE VII
SURVIVAL; LIMITATION OF REMEDIES....................................... 17
SECTION 7.1 Survival.................................................................................. 17
SECTION 7.2 Limitation of Remedies.................................................................... 18
SECTION 7.3 Exclusivity............................................................................... 18
ARTICLE VIII
MISCELLANEOUS................................................ 19
SECTION 8.1 Notices................................................................................... 19
SECTION 8.2 Publicity................................................................................. 21
SECTION 8.3 Costs and Expenses........................................................................ 21
SECTION 8.4 Amendment and Modification................................................................ 21
SECTION 8.5 Waivers and Extensions.................................................................... 22
SECTION 8.6 Interpretation............................................................................ 22
SECTION 8.7 Entire Agreement; Third Party
Beneficiaries; Assignment................................................... 23
SECTION 8.8 Severability.............................................................................. 24
SECTION 8.9 Governing Law............................................................................. 24
SECTION 8.10 Specific Performance...................................................................... 24
SECTION 8.11 Resolution of Disputes.................................................................... 25
SECTION 8.12 Consent to Jurisdiction; Waiver of Jury
Trial....................................................................... 25
SECTION 8.13 Counterparts............................................................................. 27
</TABLE>
SCHEDULES
Schedule 3.1(b) Seller Required Filings, Consents, etc.
Schedule 3.2(c) Buyer Required Filings, Consents, etc.
-ii-
<PAGE> 4
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Advertising Agreement .............................................................................. 2
Agreement .......................................................................................... 1
BCorp Stock Purchase Agreement ..................................................................... 1
Business day ....................................................................................... 3
Buyer .............................................................................................. 1
Buyer Designator ................................................................................... 1
Closing ............................................................................................ 2
Closing Date ....................................................................................... 3
Common Stock ....................................................................................... 1
Company ............................................................................................ 1
Governmental Entity ................................................................................ 4
HSR Act ............................................................................................ 4
Include ............................................................................................ 23
Includes ........................................................................................... 23
Including .......................................................................................... 23
Indemnification Agreement .......................................................................... 16
Person ............................................................................................. 23
Preferred Stock Purchase Agreement ................................................................. 1
Purchase Price ..................................................................................... 2
Securities Act ..................................................................................... 8
Seller ............................................................................................. 1
Series X Preferred Stock ........................................................................... 1
Shares ............................................................................................. 1
Stockholders Agreement ............................................................................. 1
Supply Agreement ................................................................................... 2
Transactions ....................................................................................... 2
</TABLE>
-iii-
030350\0017\02252\971635CE.SPA
<PAGE> 5
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of
January 13, 1997 between JOHN J. NEVIN ("Seller") and TEAM RENTAL
GROUP, INC., a Delaware corporation ("Buyer").
RECITALS
A. Seller owns 10,000 shares (the "Shares") of common stock,
par value $.01 per share ("Common Stock"), constituting, as of the date hereof,
all of the issued and outstanding shares of Common Stock of Budget Rent A Car
Corporation, a Delaware corporation (the "Company").
B. Pursuant to an agreement among the stockholders of the
Company, dated as of June 28, 1996 (the "Stockholders Agreement"), Ford Motor
Company, a Delaware corporation ("Buyer Designator"), has the right to cause
Seller, as the holder of the Shares, to sell the Shares to a purchaser
designated by Buyer Designator, and Buyer Designator has designated Buyer as
such a purchaser.
C. Buyer wishes to purchase the Shares and has agreed,
pursuant to a separate stock purchase agreement dated as of the date hereof (the
"Preferred Stock Purchase Agreement") between Buyer Designator and Buyer, to
purchase the Series X Cumulative Preferred Stock, par value $.01 per share, with
a stated value of $1,000 per share (the "Series X Preferred Stock"), of the
Company owned by Buyer Designator, and, pursuant to a separate stock purchase
agreement dated as of the date hereof (the "BCorp. Stock Purchase Agreement")
between the Company and Buyer, to purchase 2,740,000 newly issued shares of
Common Stock from the Company.
<PAGE> 6
The Preferred Stock Purchase Agreement contemplates that, concurrently with and
as a condition to the Closing (as defined in Section 2.1), Buyer Designator or
one of its affiliates will enter into a supply agreement (the "Supply
Agreement") and an advertising agreement (the "Advertising Agreement") with the
Company. For purposes of this Agreement, the term "Transactions" means the
transactions contemplated by this Agreement, the Preferred Stock Purchase
Agreement, the BCorp. Stock Purchase Agreement, the Supply Agreement and the
Advertising Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
SALE OF STOCK
SECTION 1.1 Sale and Purchase. On the Closing Date (as defined
in Section 2.1), Seller shall sell, convey and transfer to Buyer the Shares.
SECTION 1.2 Purchase Price. The purchase price to be paid by
Buyer to Seller for the Shares shall be $1,000,000 (the "Purchase Price"), which
shall be payable in cash and in immediately available (federal) funds at the
Closing.
ARTICLE II
THE CLOSING
SECTION 2.1 Closing. Subject to the conditions set forth in
Article V, the closing of the sale and purchase of the Shares (the "Closing")
shall take place at 10:00 a.m., Eastern
-2-
<PAGE> 7
time, at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New
York, New York, on March 31, 1997, or at such other time or on such other date,
or at such other place, as the parties shall agree in writing (the date of the
Closing, the "Closing Date").
SECTION 2.2 Delivery of Shares by Seller to Buyer. At the
Closing, Seller will deliver to Buyer a certificate or certificates representing
the Shares, duly endorsed in blank or accompanied by stock transfer powers duly
executed in blank, with all necessary stock transfer tax stamps attached thereto
and canceled.
SECTION 2.3 Delivery of Purchase Price by Buyer to Seller. At
the Closing, Buyer will deliver to Seller the Purchase Price, by intra-bank
transfer at Morgan Guaranty Trust Company of New York of cash in U.S. dollars
and in immediately available (federal) funds to an account specified to Buyer by
Seller in writing no later than the business day prior to the Closing Date. For
purposes of this Agreement, "business day" means any day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York or Dearborn,
Michigan are authorized or required by law to be closed.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of Seller. Seller
represents and warrants to Buyer as follows:
(a) Validity of Agreement. This Agreement has been
duly executed and delivered by Seller and, assuming due
-3-
<PAGE> 8
authorization, execution and delivery by Buyer, constitutes a legal, valid and
binding obligation of Seller enforceable against Seller in accordance with its
terms, except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding in equity or at law).
(b) Consents and Approvals; No Violations. Except as set forth
on Schedule 3.1(b) and for all filings, permits, authorizations, consents and
approvals as may be required under, and other applicable requirements of, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), state and foreign competition, antitrust and takeover laws, including
applicable laws of Australia, Brazil, Canada, Ireland, Mexico, New Zealand and
Portugal and applicable regulations of the European Union, as to which the
Seller makes no representation, the execution, delivery or performance of this
Agreement by Seller will not (i) require Seller to make any filing with, or
Seller to obtain any permit, authorization, consent or approval of, any court,
arbitral tribunal, administrative agency or commission or other governmental or
other regulatory authority, commission or agency (a "Governmental Entity"), (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, guarantee,
-4-
<PAGE> 9
other evidence of indebtedness, lease, license, contract, agreement or other
instrument or obligation to which Seller is a party or by which Seller or any of
Seller's properties or assets may be bound or (iii) violate any order, writ,
injunction or decree, or to Seller's knowledge, any statute, rule or regulation,
in each case applicable to Seller or any of Seller's properties or assets,
except, in the case of clauses (i), (ii) and (iii), for failures to make
filings, or to obtain permits, authorizations, consents or approvals, or
violations, breaches, defaults, or rights of termination, amendment,
cancellation or acceleration, which would not prevent or materially hinder or
delay the ability of Seller to perform Seller's obligations under this
Agreement.
(c) Litigation. There is no action, suit or proceeding before
or by any Governmental Entity, domestic or foreign, now pending or, to Seller's
knowledge, threatened against Seller which, if adversely determined, would
prevent or materially hinder or delay the ability of Seller to perform Seller's
obligations under this Agreement.
(d) Good Title to Shares. Upon consummation of the purchase
and sale of the Shares at the Closing, as contemplated by this Agreement, Seller
will deliver to Buyer good title to the Shares, free and clear of any liens,
charges, security interests, options, claims or encumbrances of any nature
whatsoever.
(e) Finders' Fees. Seller has not retained, and is not subject
to the valid claim of, any finder, broker, consultant or financial advisor in
connection with this Agreement who might
-5-
<PAGE> 10
be entitled to a fee or commission from Buyer in connection with this Agreement.
SECTION 3.2 Representations and Warranties of Buyer. Buyer
represents and warrants to Seller as follows:
(a) Due Organization of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing as a domestic corporation under
the laws of the state of its organization with all requisite corporate power and
authority to execute, deliver and perform this Agreement and to consummate the
Transactions.
(b) Validity of Agreement. Buyer has all necessary corporate
power and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the Transactions. The execution, delivery and
performance of this Agreement by Buyer and the consummation by Buyer of the
Transactions have been duly authorized by all necessary corporate action on the
part of Buyer. This Agreement has been duly executed and delivered by Buyer and,
assuming execution and delivery by Seller, constitutes a legal, valid and
binding obligation of Buyer enforceable against it in accordance with its terms,
except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding in equity or at law).
(c) Consents and Approvals; No Violations. Except as set forth
on Schedule 3.2(c) and for all filings, permits,
-6-
<PAGE> 11
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the HSR Act, state and foreign competition,
antitrust and takeover laws, including applicable laws of Australia, Brazil,
Canada, Ireland, Mexico, New Zealand and Portugal and applicable regulations of
the European Union, neither the execution, delivery or performance of this
Agreement by Buyer nor the consummation by Buyer of the Transactions will (i)
conflict with or result in any breach of any provision of the certificate of
incorporation or by-laws of Buyer, (ii) require Buyer to make any filing with,
or Buyer to obtain any permit, authorization, consent or approval of, any
Governmental Entity, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, lease, license, contract, agreement
or other instrument or obligation to which Buyer or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
or (iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Buyer, any of its subsidiaries or any of their properties or
assets, except, in the case of clauses (ii), (iii) and (iv), for failures to
make filings, or to obtain permits, authorizations, consents or approvals, or
violations, breaches, defaults, or rights of termination, amendment,
cancellation or acceleration, which would not prevent or materially hinder or
-7-
<PAGE> 12
delay the ability of Buyer to perform its obligations under this Agreement and
to consummate the Transactions.
(d) Litigation. There is no action, suit or proceeding before
or by any Governmental Entity, domestic or foreign, now pending or, to Buyer's
knowledge, threatened against Buyer which, if adversely determined, would
prevent or materially hinder or delay the ability of Buyer to perform its
obligations under this Agreement or to consummate the Transactions.
(e) Available Funds. Buyer has sufficient funds, or has
obtained binding written commitments (copies of which have been furnished to
Seller and to Buyer Designator) from responsible banks and/or other financial
institutions to provide any required financing to pay the Purchase Price, which
funds will be available at the Closing to pay the Purchase Price.
(f) No Registration. Buyer is aware that the Shares have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or under any state securities laws. Buyer is not an underwriter (within
the meaning of such term under the Securities Act) with respect to the Shares
and is purchasing the Shares solely for investment, for its own account with no
present intention to distribute any such Shares to any person, and Buyer will
not sell or otherwise dispose of such Shares except in compliance with the
registration requirements under the Securities Act and the rules and regulations
promulgated thereunder, and other applicable securities laws, or pursuant to
exemptions therefrom.
-8-
<PAGE> 13
(g) Finders' Fees. Buyer has not retained, and is not subject
to the valid claim of, any finder, broker, consultant or financial advisor in
connection with the Transactions who might be entitled to a fee or commission
from Seller in connection with the Transactions, other than Credit Suisse First
Boston Corporation. Buyer will be solely responsible for paying all fees and
expenses that become due and payable to Credit Suisse First Boston Corporation
in connection with the Transactions.
(h) Buyer's Investigation. The Buyer has conducted such
investigation of the Company and its business and operations as it has deemed
necessary in order to make an informed decision concerning the purchase of the
Shares pursuant to this Agreement and the consummation of the Transactions. The
Buyer acknowledges that it has been given access to the facilities, books and
records of the Company and has had the opportunity to ask questions of
management. In all matters related to the Company, financial or otherwise, the
Buyer has not relied upon any information furnished by Seller, except for the
representations contained in Section 3.1 of this Agreement.
SECTION 3.3 Representations and Warranties of Seller and
Buyer. Each of Seller and Buyer represents and warrants to the other that it is
the explicit intent of each party hereto that Seller is making no representation
or warranty whatsoever, express or implied, including any implied warranty as to
condition, merchantability or suitability, as to the properties, assets or
future prospects or performance of the Company or any of the Company Entities
(as defined in the BCorp. Stock Purchase
-9-
<PAGE> 14
Agreement) or such properties or assets, and that Buyer is taking the Company
Entities "as is" and "where is," except for the express representations and
warranties of the Company in the BCorp. Stock Purchase Agreement or in any
schedule or exhibit thereto, or in any certificate, document or other instrument
contemplated thereby and delivered in connection with therewith. Seller shall
have no responsibility for or liability with respect to any representation,
warranty or covenant of the Company or the Buyer Designator.
SECTION 3.4 Disclosure on Schedules. Disclosure of any fact or
item in any Schedule or Exhibit referenced by a particular Section of this
Agreement shall, should the existence of the fact or item be relevant to any
other Section of this Agreement, be deemed to be disclosed with respect to such
other Section whether or not a specific cross reference appears. Disclosure of
any fact or item in any Schedule or Exhibit shall not necessarily mean that such
fact or item, individually, would prevent or materially hinder or delay the
ability of Seller or Buyer, as the case may be, to perform its obligations under
this Agreement.
ARTICLE IV
COVENANTS OF THE PARTIES
SECTION 4.1 Further Assurances. (a) Subject to Section 4.1(b),
each of Seller and Buyer shall use reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective
-10-
<PAGE> 15
the Closing. In furtherance and without limiting the foregoing, Seller agrees to
take any and all actions necessary or appropriate to cause the authorization of
the shares of Common Stock to be issued and sold by the Company pursuant to the
BCorp.
Stock Purchase Agreement.
(b) (i) Notwithstanding anything to the contrary herein, Buyer
shall, and shall cause its affiliates to, (A) promptly effect all necessary
registrations and filings, including, but not limited to, filings under the HSR
Act and submissions of information requested by any Governmental Entity,
domestic or foreign, to secure antitrust clearance for the consummation of the
Transactions and (B) promptly take all steps (including executing agreements and
submitting to judicial or administrative orders) required by the Federal Trade
Commission or its staff, the Assistant Attorney General in charge of the
Antitrust Division of the Department of Justice or such person's staff, any
state attorney general or its staff, or any similar foreign Governmental Entity,
to secure antitrust clearance for the consummation of the Transactions
(including by avoiding or setting aside any injunction or other order of any
court of competent jurisdiction or other Governmental Entity), including all
steps to make arrangements for, or to effect the sale or other disposition of,
particular assets or categories of assets or businesses of Buyer or any of its
affiliates, or assets or businesses of the Company Entities, and to hold
separate (including pursuant to arrangements which restrict, limit or
-11-
<PAGE> 16
prohibit access to) the assets or businesses of the Company Entities pending any
such sale or other disposition.
(ii) Notwithstanding anything to the contrary herein, Seller
shall effect promptly all necessary registrations and filings, including, but
not limited to, filings under the HSR Act and submissions of information
requested by any Governmental Entity, domestic or foreign, to secure antitrust
clearance for the consummation of the Transactions.
(iii) All the actions to be taken by Buyer or its affiliates
or by Seller pursuant to this Section 4.1(b) will be consistent with their
respective obligations under applicable law or any agreement to which any of
such persons is a party. Buyer and Seller agree promptly to inform each other of
any communication made by such party to, or received by such party from, the
Federal Trade Commission, the Antitrust Division of Department of Justice or any
other Governmental Entity regarding any of the Transactions.
(c) If at any time after the Closing Date any further action
is reasonably necessary to carry out the purposes of this Agreement, the parties
hereto shall take or cause to be taken all necessary action, including the
execution and delivery of such further instruments and documents as may be
reasonably requested by the other party for such purposes or otherwise to
consummate and give effect to the Transactions.
SECTION 4.2 Termination of Stockholders Agreement.
Seller shall consent to the termination of the Stockholders
-12-
<PAGE> 17
Agreement, such consent to be effective concurrently with the Closing.
ARTICLE V
CLOSING CONDITIONS
SECTION 5.1 Conditions to Each Party's Obligations. The
respective obligations of each party to effect the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
(a) No preliminary or permanent injunction or other order
prohibiting the consummation of the Transactions shall have been issued
by any court of competent jurisdiction or by any governmental or
regulatory body and still be in effect; nor shall any statute, rule,
regulation or executive order have been promulgated or enacted by any
Governmental Entity which enjoins or otherwise prohibits the
consummation of the Transactions;
(b) All applicable waiting periods under the HSR Act
(including any extensions thereof) shall have expired or been
terminated;
(c) The closing of the transactions contemplated by the
Preferred Stock Purchase Agreement shall have been consummated; and
(d) The closing of the transactions contemplated by the BCorp.
Stock Purchase Agreement shall have been consummated.
SECTION 5.2 Conditions to the Obligations of Buyer.
The obligation of Buyer to effect the Closing is subject to the
-13-
<PAGE> 18
satisfaction, at or prior to the Closing, of each of the following conditions:
(a) The representations and warranties of Seller shall be true
and accurate as of the Closing Date as if made at and as of such date
(except for those representations and warranties that address matters
only as of a particular date or only with respect to a specific period
of time which need only be true and accurate as of such date or with
respect to such period), except where the failure of such
representations and warranties to be so true and correct (without
giving effect to any exception contained therein for matters that would
or would not, as the case may be, prevent or materially hinder or delay
the ability of Seller to perform Seller's obligations under this
Agreement and to consummate the Transactions), would not, individually
or in the aggregate, prevent or materially hinder or delay the ability
of Seller to perform Seller's obligations under this Agreement and to
consummate the Transactions;
(b) Seller shall have performed in all material respects
Seller's obligations hereunder required to be performed by Seller at or
prior to the Closing; and
(c) Seller shall have delivered to Buyer and to Buyer
Designator a certificate, duly executed by Seller, to the effect set
forth in Sections 5.2(a) and 5.2(b).
SECTION 5.3 Conditions to the Obligations of Seller. The
obligation of Seller to effect the Closing is subject to the
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<PAGE> 19
satisfaction, at or prior to the Closing, of each of the following conditions:
(a) The representations and warranties of Buyer shall be true
and accurate as of the Closing Date as if made at and as of such date
(except for those representations and warranties that address matters
only as of a particular date or only with respect to a specific period
of time which need only be true and accurate as of such date or with
respect to such period), except where the failure of such
representations and warranties to be so true and correct (without
giving effect to any exception contained therein for matters that would
or would not, as the case may be, prevent or materially hinder or delay
the ability of Buyer to perform its obligations under this Agreement
and to consummate the Transactions), would not, individually or in the
aggregate, prevent or materially hinder or delay the ability of Buyer
to perform its obligations under this Agreement and to consummate the
Transactions;
(b) Buyer shall have performed in all material
respects its obligations hereunder required to be performed
by it at or prior to the Closing;
(c) Buyer shall have delivered to Seller and to Buyer
Designator a certificate, duly executed by its Chief Executive Officer
or Chief Financial Officer, to the effect set forth in Sections 5.3(a)
and 5.3(b);
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<PAGE> 20
(d) The Stockholders Agreement and the Consulting Agreement,
dated as of January 1, 1992 between the Company and an affiliate of the
Seller, shall have been terminated;
(e) The Company shall have entered to an indemnification
agreement (the "Indemnification Agreement") with the Seller pursuant to
which the Company and each of the other Company Entities shall
indemnify, defend and hold harmless the Seller with respect to any
claims or actions brought against the Seller in any capacity related to
or arising from the business or operations of any Company Entity or any
of the Transactions, except for any breach by Seller of the
representations and warranties contained herein or any of Seller's
covenants contained herein; and
(f) Seller shall have received written releases and waiver of
claims or causes of action which Buyer Designator or any of the Company
Entities has or may have against Seller for certain actions, events or
occurrences prior to the Closing, pursuant to a release instrument
substantially in the form previously agreed.
SECTION 5.4 No Closing Unless All Transactions Occur.
Notwithstanding anything to the contrary in this Agreement or elsewhere, the
Closing shall be deemed not to have occurred (and any actions taken by any party
hereunder in connection with the Closing shall be unwound), unless all of the
conditions to closing contained in each of the Preferred Stock Purchase
Agreement and the BCorp. Stock Purchase Agreement shall have been satisfied (or
waived in accordance with the terms and conditions
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<PAGE> 21
of such agreements) and such closings under such agreements shall have been
consummated in accordance with the terms of such agreements.
ARTICLE VI
TERMINATION
SECTION 6.1 Termination. This Agreement shall be terminated
and the transactions contemplated hereby shall be abandoned if, prior to the
Closing, the Preferred Stock Purchase Agreement shall have been terminated.
SECTION 6.2 Effect of Termination. In the event of the
termination of this Agreement as provided in Section 6.1, this Agreement shall
forthwith become null and void, and there shall be no liability on the part of
Seller or Buyer, except for Seller's or Buyer's, as the case may be, breach of
this Agreement and except that the provisions of Article VII and Article VIII
shall survive any such termination.
ARTICLE VII
SURVIVAL; LIMITATION OF REMEDIES
SECTION 7.1 Survival. The respective representations and
warranties, covenants and agreements of Seller and Buyer contained in this
Agreement shall survive the Closing (subject, with respect to remedies for
breach thereof, to Section 7.2), to, but not including, the first anniversary of
the Closing Date, and thereafter shall terminate and be of no further force or
effect, except to the extent that, prior to such first anniversary of the
Closing Date, written notice of the breach shall have been given (which written
notice shall specify with particularity the nature
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<PAGE> 22
of the alleged breach and the particular facts underlying each such allegation),
in the case of an alleged breach by Seller, to Seller (with a copy to Buyer
Designator), or, in the case of an alleged breach by Buyer, to Buyer (with a
copy to Buyer Designator). Notwithstanding the immediately preceding sentence,
the representations and warranties of Seller contained in Sections 3.1(a) and
3.1(d) shall survive the Closing (subject, with respect to remedies for breach
thereof, to Section 7.2), to but not including the third anniversary of the
Closing Date and from and after the third anniversary of the Closing Date the
representations and warranties of Seller contained in Sections 3.1(a) and 3.1(d)
shall terminate and be of no further force or effect, except to the extent that,
prior to such third anniversary of the Closing Date, written notice of the
breach of such representation and warranty shall have been given in the same
manner and to the same person as set forth in the preceding sentence.
SECTION 7.2 Limitation of Remedies. In no event shall any
party hereto be liable to the other (or to any other person) for consequential,
punitive or special damages arising out of any breach of the provisions of this
Agreement. In any event, Seller's maximum liability to Buyer or Buyer Designator
for indemnification or any breach of or claim under this Agreement shall not
exceed an aggregate amount equal to the Purchase Price.
SECTION 7.3 Exclusivity. The parties agree that the provisions
of this Agreement governing claims for breach hereof and remedies with respect
thereto are exclusive and shall be in
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<PAGE> 23
lieu of all other indemnification, contribution, liability and remedies which
may be available with respect to the purchase and sale of the Shares, whether
under common law or otherwise. To the maximum extent permitted by law, the
parties hereby irrevocably and unconditionally waive any and all other rights,
remedies and causes of action for breach of this Agreement or claims related to
the sale of Shares contemplated hereby. The provisions with respect to this
Section 7.3 shall not apply to the agreements and arrangements contemplated by
the Release and the Indemnification Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. All notices, requests, demands or other
communications provided herein shall be made in writing and shall be deemed to
have been duly given (unless otherwise specifically provided in any Section of
this Agreement) if delivered as follows:
If to Seller:
Mr. John J. Nevin
5 Steeplechase Lane
Northfield, IL 60093
Tel: (847) 446-9444
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<PAGE> 24
with copies to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Attention: Robert E. Bouma, Esq.
Tel: (312) 984-7718
Fax: (312) 984-7700
-and-
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: David J. Sorkin, Esq.
Fax: (212) 455-2502
Tel: (212) 455-2000
-and-
Ford Motor Company
The American Road
Dearborn, Michigan 48121
Attention: Secretary
Fax: (313) 337-9591
Tel: (313) 323-2260
If to Buyer:
Team Rental Group, Inc.
125 Basin Street
Suite 210
Daytona Beach, Florida 32114
Attention: Chief Executive Officer
Fax: (904) 238-7461
Tel: (904) 238-7035
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: John J. Kelley III, Esq.
Fax: (404) 572-5100
Tel: (404) 572-4600
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on (i) the date of delivery
if sent by messenger, (ii)
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<PAGE> 25
on the business day following the business day on which delivered to a
recognized courier service if sent by overnight courier, or (iii) on the fifth
business day after the mailing thereof if sent by mail. Notices may also be
delivered by fax, provided that any such notice also is delivered in a manner
contemplated by clause (i), (ii) or (iii) above.
SECTION 8.2 Publicity. The parties hereto agree that, without
the prior written consent of Buyer Designator, they will not issue any press
release or otherwise make any public announcement with respect to this Agreement
or the Transactions, except as may be required by applicable law (including
federal securities laws) if such party determines in good faith that it is
appropriate to do so and provides prompt prior written notice to Buyer
Designator.
SECTION 8.3 Costs and Expenses. All costs and expenses
incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such expenses, provided that
Seller's reasonable out-of-pocket costs and expenses shall be paid by the Buyer
Designator.
SECTION 8.4 Amendment and Modification. This Agreement may be
amended, modified and supplemented in any and all respects by written agreement
of the parties hereto; provided, however, that no amendment, modification or
supplement shall be effective without the prior written consent of Buyer
Designator.
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<PAGE> 26
SECTION 8.5 Waivers and Extensions. Each party to this
Agreement may waive any right, breach or default of the other party to this
Agreement or conditions to its own obligations; provided that such waiver will
not be effective against the waiving party unless it is in writing, is signed by
such party and specifically refers to this Agreement; provided, further, that
(i) no waiver by the Seller shall be effective without the prior written consent
of Buyer Designator and (ii) no waiver by Buyer shall be effective without the
prior written consent of Buyer Designator, unless such waiver by Buyer includes
an absolute and unconditional release of Buyer Designator from any and all
Losses that may arise out of or result from the right, breach, default or
condition waived by Buyer. Waivers may be made in advance or after the right
waived has arisen or the breach or default waived has occurred. Any waiver may
be conditional. No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach thereof
nor of any other agreement or provision herein contained. No waiver or extension
of time for performance of any obligations or acts shall be deemed a waiver or
extension of the time for performance of any other obligations or acts.
SECTION 8.6 Interpretation. (a) When a reference is made in
this Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section, Exhibit or Schedule of this Agreement unless otherwise indicated.
Titles and headings of
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<PAGE> 27
sections of this Agreement are for convenience only and shall not affect the
construction of any provision of this Agreement.
(b) Whenever the words "include", "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation".
(c) The term "person" means an individual, corporation,
partnership, limited liability company, association, trust, incorporated
organization, Governmental Entity or other entity.
SECTION 8.7 Entire Agreement; Third Party Beneficiaries;
Assignment. This Agreement (including the exhibits hereto and the documents,
including the Preferred Stock Purchase Agreement and the BCorp. Stock Purchase
Agreement, and the instruments referred to herein): (a) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, and (b)
is not intended to confer upon any person, other than the parties hereto, any
rights or remedies hereunder, except that Buyer Designator shall be a third
party beneficiary of, and entitled to enforce, the representations, warranties,
covenants, conditions and other terms and provisions of this Agreement. 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 party and Buyer
Designator. This Agreement will be binding upon the parties and their respective
successors and assigns.
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<PAGE> 28
SECTION 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 is 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
hereto shall negotiate in good faith to modify this Agreement in accordance with
Section 8.4 so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby may be consummated as originally contemplated to the fullest
extent possible.
SECTION 8.9 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Michigan without
giving effect to the principles of conflicts of law thereof.
SECTION 8.10 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any material provision of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to the remedy of specific performance of the material
terms hereof, subject to Section 7.2, in addition to any other remedy at law or
equity.
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<PAGE> 29
SECTION 8.11 Resolution of Disputes. If a dispute arises
between the parties relating to this Agreement, then the parties hereto (and
Buyer Designator, as a third party beneficiary of the provisions of this
Agreement) shall implement the procedures set forth in Section 8.11 of the
Preferred Stock Purchase Agreement, subject to the provisions thereof.
SECTION 8.12 Consent to Jurisdiction; Waiver of Jury Trial.
(a) Subject to Section 8.11, each of the parties hereto:
(i) consents to submit itself to the personal
jurisdiction of (A) the United States District Court for the Eastern
District of Michigan in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement to
the extent such court would have jurisdiction with respect to such
dispute and (B) the Courts of the State of Michigan otherwise;
(ii) agrees that it will not attempt to deny or defeat
such personal jurisdiction or venue by motion or other request for
leave from any such court;
(iii) agrees that it will not bring any action relating
to this Agreement or any of the transactions contemplated by this
Agreement in any court other than such courts; and
(iv) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by registered
or certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address set forth in Section 8.1 or at
such other address of which
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<PAGE> 30
the other party shall have been notified pursuant thereto; and
(v) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction.
(B) EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING IN
RELATION TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
[Continued on next page.]
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<PAGE> 31
SECTION 8.13 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement with legal and binding effect as of the date first
above written.
JOHN J. NEVIN
/s/ John J. Navin
---------------------------------
TEAM RENTAL GROUP, INC.
By:
------------------------------
Name:
Title:
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<PAGE> 32
SECTION 8.13 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement with legal and binding effect as of the date first
above written.
JOHN J. NEVIN
/s/ John J. Nevin
---------------------------------
TEAM RENTAL GROUP, INC.
By: /s/ Sanford Miller
------------------------------
Name: Sanford Miller
Title:Chairman &
Chief Executive
Officer
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<PAGE> 1
EXHIBIT 2.8
BUDGET STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 13, 1997
BETWEEN
BUDGET RENT A CAR CORPORATION
AND
TEAM RENTAL GROUP, INC.
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
SALE OF STOCK................................2
SECTION 1.1 Sale and Purchase...........................................2
SECTION 1.2 Purchase Price..............................................2
ARTICLE II
THE CLOSING.................................2
SECTION 2.1 Closing.....................................................2
SECTION 2.2 Delivery of Shares by the Company to
Buyer....................................................3
SECTION 2.3 Delivery of Purchase Price by Buyer to
the Company..............................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES........................3
SECTION 3.1 Representations and Warranties of the
Company..................................................3
SECTION 3.2 Representations and Warranties of Buyer................... 21
SECTION 3.3 Representations and Warranties of the
Company and Buyer...................................... 24
SECTION 3.4 Disclosure on Schedules................................... 25
ARTICLE IV
COVENANTS OF THE PARTIES......................... 25
SECTION 4.1 Access to Information Concerning
Properties and Records;
Confidentiality........................................ 25
SECTION 4.2 Conduct of the Company Business........................... 26
SECTION 4.3 Further Assurances........................................ 29
SECTION 4.4 No Solicitation by Company................................ 31
SECTION 4.5 Repayment of Buyer Designator
Indebtedness........................................... 32
SECTION 4.6 Net Income Adjustment..................................... 33
SECTION 4.7 Special Bonus Program..................................... 34
ARTICLE V
CLOSING CONDITIONS............................ 35
SECTION 5.1 Conditions to Each Party's Obligations.................... 35
SECTION 5.2 Conditions to the Obligations of Buyer.................... 36
SECTION 5.3 Conditions to the Obligations of the
Company................................................ 37
SECTION 5.4 No Closing Unless All Transactions
Occur.................................................. 38
ARTICLE VI
TERMINATION............................... 39
SECTION 6.1 Termination............................................... 39
SECTION 6.2 Effect of Termination..................................... 39
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<PAGE> 3
Page
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
LIMITATION OF REMEDIES..................... 39
SECTION 7.1 Survival of Representations and
Warranties........................................ 39
SECTION 7.2 Limitation of Remedies............................... 41
ARTICLE VIII
MISCELLANEOUS......................... 41
SECTION 8.1 Notices.............................................. 41
SECTION 8.2 Publicity............................................ 43
SECTION 8.3 Costs and Expenses................................... 43
SECTION 8.4 Amendment and Modification........................... 43
SECTION 8.5 Waivers and Extensions............................... 44
SECTION 8.6 Interpretation....................................... 44
SECTION 8.7 Entire Agreement; Third Party
Beneficiaries; Assignment......................... 45
SECTION 8.8 Severability......................................... 46
SECTION 8.9 Governing Law........................................ 47
SECTION 8.10 Specific Performance................................. 47
SECTION 8.11 Resolution of Disputes............................... 47
SECTION 8.12 Consent to Jurisdiction; Waiver of Jury
Trial............................................. 47
SECTION 8.13 Counterparts......................................... 49
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<PAGE> 4
INDEX OF DEFINED TERMS
Term Page
Agreement ....................................................1
Benefit Arrangement..................................................15
Business day ....................................................3
Buyer ....................................................1
Buyer Designator ....................................................1
Closing ....................................................2
Closing Date ....................................................3
Code ...................................................17
Common Stock ....................................................1
Common Stock Purchase Agreement.......................................2
Common Stockholder....................................................2
Company ....................................................1
Company Agreement ....................................................9
Company Entities ....................................................4
Company Material Adverse Effect.......................................4
Confidentiality Agreement............................................26
Consistent with past practice........................................45
Debt Instruments ....................................................9
DGCL ....................................................5
Employee Benefit Programs............................................15
Environmental Law ...................................................19
ERISA ...................................................14
Facilities ...................................................32
Financial Statements.................................................10
First Quarter Income Statement.......................................33
FMCC ....................................................1
Foreign Employees ...................................................15
Foreign Plan ...................................................15
Governmental Entity...................................................9
Hazardous Substance..................................................19
HSR Act ....................................................8
Include ...................................................45
Includes ...................................................45
Including ...................................................45
Liens ....................................................8
Losses ...................................................41
Material Company Agreement...........................................12
Material Licensed Intellectual Property..............................20
Material Owned Intellectual Property.................................19
Other Arrangements...................................................33
Other Indebtedness...................................................32
Permitted Liens ...................................................12
Person ...................................................45
Plan ...................................................15
Preferred Stock ....................................................6
Preferred Stock Purchase Agreement....................................1
Properties ...................................................18
Purchase Price .................................................1, 2
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<PAGE> 5
Term Page
Required Payments ...................................................23
Securities Act.......................................................23
Series X Preferred Stock..............................................1
Share Increase Amendment..............................................5
Shares ...............................................................1
Special Bonus Program................................................34
Subsidiaries .........................................................3
Tax Return ..........................................................17
Taxes................................................................17
To the Company's knowledge...........................................45
Transactions .........................................................4
U.S. Corporation......................................................4
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<PAGE> 6
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of
January 13, 1997 between BUDGET RENT A CAR CORPORATION, a Delaware corporation
(the "Company"), and TEAM RENTAL GROUP, INC., a Delaware corporation ("Buyer").
RECITALS
A. Subject to the terms and conditions hereof, Buyer wishes to
purchase from the Company, and the Company wishes to issue and sell to Buyer,
2,740,000 shares (the "Shares") of common stock, par value $.01 per share
("Common Stock"), of the Company, for an aggregate purchase price equal to $274
million, payable in cash (the "Purchase Price").
B. Concurrently with the Closing (as defined in Section 2.1),
pursuant to a separate stock purchase agreement dated as of the date hereof (the
"Preferred Stock Purchase Agreement") between Ford Motor Company ("Buyer
Designator") and Buyer, Buyer has agreed, among other things, (i) to purchase
the Series X Cumulative Preferred Stock, par value $.01 per share, with a stated
value of $1,000 per share (the "Series X Preferred Stock"), of the Company owned
by Buyer Designator, (ii) to purchase certain indebtedness of the Company to
Buyer Designator and/or its affiliates, including Ford Motor Credit Company
("FMCC"), as further described herein and in the Preferred Stock Purchase
Agreement, (iii) to cause the Company to use the proceeds from the sale of the
Shares to Buyer, first, to redeem the Series X Preferred Stock and, second, to
repay a portion of the indebtedness of the Company to Buyer Designator and/or
its
<PAGE> 7
affiliates, including FMCC, and (iv) otherwise to pay or cause the Company to
repay certain other indebtedness of the Company, as further described herein and
in the Preferred Stock Purchase Agreement.
C. Concurrently with the Closing, pursuant to a separate stock
purchase agreement dated as of the date hereof (the "Common Stock Purchase
Agreement") between John J. Nevin (the "Common Stockholder") and Buyer, Buyer
has agreed, among other things, to purchase the 10,000 shares of Common Stock
owned by the Common Stockholder.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
SALE OF STOCK
SECTION 1.1 Sale and Purchase. On the Closing Date, the
Company shall issue and sell to Buyer the Shares.
SECTION 1.2 Purchase Price. The purchase price to be paid by
Buyer to the Company for the Shares shall be $274 million (the "Purchase
Price"), which shall be payable in cash and in immediately available funds at
the Closing.
ARTICLE II
THE CLOSING
SECTION 2.1 Closing. Subject to the conditions set forth in
Article V, the closing of the sale and purchase of the Shares (the "Closing")
shall take place at 10:00 a.m., Eastern
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<PAGE> 8
time, at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New
York, New York, on March 31, 1997, or at such other time or on such other date,
or at such other place, as the parties shall agree in writing (the date of the
Closing, the "Closing Date").
SECTION 2.2 Delivery of Shares by the Company to Buyer. At the
Closing, the Company will deliver to Buyer a certificate or certificates
representing the Shares.
SECTION 2.3 Delivery of Purchase Price by Buyer to the
Company. At the Closing, Buyer will deliver to the Company the Purchase Price,
by intra-bank transfer at Morgan Guaranty Trust Company of New York of cash in
U.S. dollars and in immediately available (federal) funds to an account
specified to Buyer by the Company in writing no later than the business day
prior to the Closing Date. For purposes of this Agreement, "business day" means
any day other than a Saturday, Sunday or other day on which commercial banks in
New York, New York or Dearborn, Michigan are authorized or required by law to be
closed.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. The
Company represents and warrants to Buyer as follows:
(a) Due Organization of the Company and Subsidiaries. Each of
the Company and each corporation, partnership or business entity 50% or more of
the equity interests of which are owned by the Company (its "Subsidiaries" and,
together with the Company,
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<PAGE> 9
the "Company Entities") is a business entity duly organized, validly existing,
and, with respect to those Subsidiaries of the Company organized under the laws
of one of the states of the United States of America or the District of Columbia
(a "U.S. Corporation"), is in good standing as a domestic business entity under
the laws of the state of its organization with all requisite corporate power and
authority to own, lease and operate its properties and to conduct its business
as presently conducted. Each Company Entity which is a U.S. Corporation is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, except where the
failure to be so qualified as required would not have a Company Material Adverse
Effect (as defined below). Schedule 3.1(a) lists each Subsidiary and each other
corporation, partnership or business entity in which the Company has any equity
interest.
For purposes of this Agreement, "Company Material Adverse
Effect" means a material adverse effect on the business, results of operations
or financial condition of the Company Entities taken as a whole, excluding any
effect resulting from (i) general economic conditions, (ii) any occurrence or
condition affecting the vehicle rental industry generally or (iii) any
occurrence or condition arising out of the execution, delivery or performance of
this Agreement and the consummation of the Transactions (as defined below) or
the public announcement of any thereof. For purposes of this Agreement,
"Transactions" means the transactions contemplated by this Agreement, the
Preferred
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<PAGE> 10
Stock Purchase Agreement, the Common Stock Purchase Agreement, the Consent
Agreement (as defined in the Preferred Stock Purchase Agreement), the Supply
Agreement (as defined in the Preferred Stock Purchase Agreement) and the
Advertising Agreement (as defined in the Preferred Stock Purchase Agreement).
(b) Validity of Agreement. The Company has all necessary
corporate power and authority to enter into this Agreement and, subject to the
filing of a Certificate of Amendment to the Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 10,000 to
3,500,000 shares (the "Share Increase Amendment") with the Secretary of State of
the State of Delaware pursuant to the General Corporation Law of the State of
Delaware (the "DGCL"), to perform its obligations hereunder and to consummate
the Transactions. Subject to the filing of the Share Increase Amendment with the
Secretary of State of the State of Delaware pursuant to the DGCL, the execution,
delivery and performance of this Agreement by the Company, the consummation by
the Company of the Transactions and the redemption of the shares of Series X
Preferred Stock owned by Commerzbank Aktiengesellschaft (the "Bank") have been
duly authorized by all necessary corporate action on the part of the Company.
This Agreement has been duly executed and delivered by the Company and, assuming
due authorization, execution and delivery by Buyer, constitutes a legal, valid
and binding obligation of the Company enforceable against it in accordance with
its terms, except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization,
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<PAGE> 11
moratorium and other similar laws relating to or affecting creditors' rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law).
(c) Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 10,000 shares of Common Stock and
750,000 shares of preferred stock, par value $.01 per share (the "Preferred
Stock"), and, as of the Closing Date, the authorized capital stock of the
Company will consist of 3,500,000 shares of Common Stock and 750,000 shares of
Preferred Stock. As of the date hereof, (i) 10,000 shares of Common Stock are
issued and outstanding, (ii) no shares of Common Stock are held in the treasury
of the Company, (iii) no options to acquire shares of Common Stock have been
issued by the Company and are outstanding, (iv) 5,006.46 shares of Series X
Preferred Stock are issued and outstanding, (v) no shares of Preferred Stock are
held in the treasury of the Company and (vi) no options to acquire shares of
Preferred Stock have been issued by the Company and are outstanding. Immediately
prior to the Closing, (i) 10,000 shares of Common Stock will be issued and
outstanding, (ii) no shares of Common Stock will be held in the treasury of the
Company, (iii) no options to acquire shares of Common Stock will have been
issued by the Company and be outstanding, (iv) 5,006.46 shares of Series X
Preferred Stock will be issued and outstanding, (v) no shares of Preferred Stock
will be held in the treasury of the Company and (vi) no options to acquire
shares of Preferred Stock will have been issued by the Company and be
outstanding. All the outstanding shares of the Company's capital stock are duly
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<PAGE> 12
authorized, validly issued, fully paid and non-assessable. When issued and paid
for by Buyer as provided in this Agreement, the Shares will be duly authorized,
validly issued, fully paid and non-assessable. Except as set forth above, there
are no shares of capital stock of the Company authorized, issued or outstanding.
Except for rights and obligations of the parties to the Stockholders Agreement
or as set forth on Schedule 3.1(c), there are no existing options, warrants,
calls, preemptive rights, subscriptions or other rights, convertible securities,
agreements, arrangements or commitments of any character, relating to the issued
or unissued capital stock of the Company obligating any Company Entity to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock of, or other equity interest in, any Company Entity or securities
convertible into or exchangeable for such shares or equity interests or
obligations of any Company Entity to grant, extend or enter into any such
option, warrant, call, subscription or other right, convertible security,
agreement, arrangement or commitment. Except for the Stockholders Agreement or
as set forth on Schedule 3.1(c), there are no agreements or arrangements
regarding the voting or transfer of any capital stock of any Company Entity.
Except as set forth on Schedule 3.1(c), all of the outstanding shares of capital
stock of each of the Company's Subsidiaries are beneficially owned by the
Company, directly or indirectly, and all such shares have been duly authorized,
validly issued and are fully paid and nonassessable and are owned by a Company
Entity free and clear of all liens, charges,
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<PAGE> 13
security interests, options, claims or encumbrances of any nature
whatsoever (collectively, "Liens").
The Shares will, upon issuance, represent all of the issued
and outstanding shares of capital stock of the Company except for (i) the 10,000
shares of Common Stock to be purchased from the Common Stockholder pursuant to
the Common Stock Purchase Agreement, (ii) the 2.31 shares of Series X Preferred
Stock to be purchased from the Buyer Designator pursuant to the Preferred Stock
Purchase Agreement and (iii) the 5004.15 shares of Series X Preferred Stock
owned by the Bank, all which 5006.46 shares of Series X Preferred Stock will be
redeemed immediately after the Closing with a portion of the proceeds from the
sale of the Shares.
(d) Consents and Approvals; No Violations. Except as set forth
on Schedule 3.1(d) and except for the filing of the Share Increase Amendment
with the Secretary of State of the State of Delaware pursuant to the DGCL and
for all filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), state and
foreign competition, antitrust and takeover laws, including applicable laws of
Australia, Brazil, Canada, Ireland, Mexico, New Zealand and Portugal and
applicable regulations of the European Union, none of the execution, delivery or
performance of this Agreement by the Company, the consummation by the Company of
the Transactions or the redemption of the shares of Series X Preferred Stock
owned by the Bank will (i) conflict
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<PAGE> 14
with or result in any breach of any provision of the certificate of
incorporation or by-laws or similar organizational documents of any Company
Entity, (ii) require any Company Entity to make any filing with, or any Company
Entity to obtain any permit, authorization, consent or approval of, any court,
arbitral tribunal, administrative agency or commission or other governmental or
other regulatory authority, commission or agency (a "Governmental Entity"),
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, guarantee,
other evidence of indebtedness (collectively, the "Debt Instruments"), lease,
airport concession agreement, franchise agreement, license, contract, agreement
or other instrument or obligation to which any of the Company Entities is a
party or by which any of them or any of their properties or assets may be bound
(a "Company Agreement") or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to any of the Company Entities or any of
their properties or assets, except, in the case of clauses (ii), (iii) and (iv),
for failures to make filings, or to obtain permits, authorizations, consents or
approvals, or violations, breaches, defaults, or rights of termination,
amendment, cancellation or acceleration, which would not have a Company Material
Adverse Effect.
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<PAGE> 15
(e) Financial Statements. The Company has heretofore delivered
to Buyer audited consolidated financial statements of the Company and its
Subsidiaries at and for the fiscal year ended December 31, 1995 and unaudited
consolidated financial statements of the Company and its Subsidiaries at and for
the ten month period ended October 31, 1996 (the "Financial Statements"). The
Financial Statements, together with the notes thereto, present fairly in all
material respects the financial position of the Company as of the dates thereof
and the results of operations for the periods indicated in accordance with
United States generally accepted accounting principles consistent with past
practice, except as disclosed in the Financial Statements or in the notes
thereto, subject, in the case of the unaudited consolidated financial statements
of the Company and its Subsidiaries, to normal year-end adjustments.
(f) Absence of Changes. Since October 31, 1996, except as may
be disclosed in this Agreement or in Schedules hereto, there has not occurred
any material adverse change in the business, financial condition or results of
operations of the Company Entities taken as a whole, excluding any effect
resulting from (i) general economic conditions, (ii) any occurrence or condition
affecting the vehicle rental industry generally or (iii) any occurrence or
condition arising out of the execution, delivery or performance of this
Agreement and the consummation of the Transactions or the public announcement of
any thereof.
(g) Litigation. Except as set forth on Schedule
3.1(g) (which shall be deemed to include a list, if any, of false
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<PAGE> 16
imprisonment litigation and claims, furnished to Buyer no later than January 20,
1997) and except for litigation and claims arising in the ordinary course of
conducting the vehicle rental business such as claims for personal injury,
property damage and workers' compensation (but excluding litigation and claims
for sexual harassment, unlawful employment practices, racial or other
discrimination involving employment or business practices and extraordinary and
non-ordinary course litigation and claims), as of the date hereof, there is no
action, suit or proceeding before or by any Governmental Entity, domestic or
foreign, now pending or, to the Company's knowledge, threatened against any
Company Entity or with respect to any properties or assets of any Company Entity
which, if adversely determined, would have a Company Material Adverse Effect.
(h) Title to Properties; Liens and Encumbrances. Except for
assets disposed of since October 31, 1996 in the ordinary course of business,
one of the Company Entities has marketable title to or a valid leasehold
interest in all of the tangible assets (i) capitalized on or included in the
consolidated balance sheet of the Company and its Subsidiaries at October 31,
1996 included in the Financial Statements, and (ii) acquired by a Company Entity
after October 31, 1996 and which would be capitalized on or included in such a
balance sheet prepared as of the date hereof, subject only to (A) statutory
Liens arising or incurred in the ordinary course of the Company's and its
Subsidiaries' businesses, (B) Liens disclosed or reflected in the Financial
Statements, (C) Liens for Taxes (as
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<PAGE> 17
defined in Section 3.1(l)) not yet delinquent or the validity of which is being
contested in good faith by appropriate proceedings, (D) Liens which constitute
valid leases or subleases from a Company Entity to a third party, (E) Liens and
defects of title set forth in Schedule 3.1(h) and (F) Liens and defects of title
that do not have a Company Material Adverse Effect (Liens of the types
identified in clauses (A) through (F) above being referred to as "Permitted
Liens").
(i) Material Contracts. Schedule 3.1(i) sets forth, as of the
date hereof, each written Company Agreement which is material to the business or
operations of the Company Entities taken as a whole, including any agreement
limiting the ability of the Company to engage in business in any geographical
area (each, a "Material Company Agreement"). Each Material Company Agreement is
valid and binding (except to the extent that the invalidity or nonbinding nature
of any Material Company Agreement would not have a Company Material Adverse
Effect), and no Company Entity is in default in the performance of its
obligations under any such Material Company Agreement, except for defaults which
would not have a Company Material Adverse Effect. The Company Entities have no
material unwritten agreements.
Material Company Agreements include the following contracts
and other agreements to which a Company Entity is a party or by or to which a
Company Entity or any of their respective assets or properties is bound or
subject as of the date hereof:
(i) the ten agreements between a Company Entity
and a Franchisee, or other agreements relating to the
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<PAGE> 18
franchise business operations, providing for the
greatest payments to or by the Company Entities per
agreement per calendar year;
(ii) advertising, market research and other marketing
agreements providing for payments by any Company Entity of more than
$1,500,000 per agreement per calendar year;
(iii) employment, severance, consulting or other
agreements with any current stockholder, director, officer or employee
which provide for the continuing obligation on the part of the Company
Entities to pay compensation in excess of $100,000 per calendar year;
(iv) agreements outside the ordinary course of business
relating to (x) the sale or lease (as lessor) by a Company Entity of
any assets or properties in excess of $1,500,000 per agreement per
calendar year, (y) the acquisition or lease (as lessee) by the Company
Entity of any assets or properties in excess of $1,500,000 per
agreement per calendar year or (z) any airport concession;
(v) agreements restricting the ability of the
Company Entities to incur indebtedness
("Indebtedness");
(vi) agreements relating to any guarantee of
Indebtedness by the Company Entities (other than indemnities made in
the ordinary course of business which are not material to the Company
Entities taken as a whole);
(vii) agreements relating to the making of any loan or
advance by a Company Entity other than (x) intercompany loans among the
Company Entities and (y) those made in the ordinary course of business
consistent with past practice;
(viii) agreements relating to Indebtedness, factoring
arrangements, sale and leaseback transactions and other similar
financing transactions providing for payments of more than $1,500,000
per agreement;
(ix) agreements providing for the indemnification by a
Company Entity thereof of any person, except those entered into in the
ordinary course of business and those which are not material to the
Company Entities taken as a whole;
(x) agreements with any Government Entity except
those entered into in the ordinary course of business
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<PAGE> 19
and those which are not material to the Company
Entities taken as a whole;
(xi) joint venture, partnership or similar
documents or agreements which are material to the
Company Entities taken as a whole; and
(xii) other agreements, contracts or commitments not made
in the ordinary course of business which are material to the Company
Entities taken as a whole.
(j) Labor Matters. Except as set forth on Schedule 3.1(j), no
labor dispute with employees of any Company Entity exists or, to the Company's
knowledge, is threatened, which would have a Company Material Adverse Effect.
Except as set forth on Schedule 3.1(j), (i) no material
charges with respect to or relating to any Company Entity are pending before the
Equal Employment Opportunity Commission or any other agency responsible for the
prevention of unlawful employment practices, which, if adversely determined
against any Company Entity, would have a Company Material Adverse Effect; and
(ii) the Company has not received written notice of the intent of any federal,
state, local or foreign agency responsible for the enforcement of labor or
employment laws to conduct an investigation with respect to or relating to any
Company Entity and, to the Company's knowledge, no such investigation is in
progress.
(k) Employee Programs. Schedule 3.1(k) sets forth, as
of the date of this Agreement:
(i) Each "employee benefit plan" as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), that is covered by ERISA and that is
maintained or otherwise contributed to
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<PAGE> 20
by the Company Entities for the benefit of the employees of the Company
Entities (each a "Plan"), copies or descriptions of which have been
furnished or made available to Buyer (together with the most recent
Annual Report on Form 5500 required to be filed by the Company Entities
in connection with any Plan);
(ii) Each material plan or arrangement not subject to
ERISA maintained, or otherwise contributed to, by the Company Entities
for the benefit of its U.S. employees and providing for deferred
compensation, bonuses, stock options, employee insurance coverage or
any similar compensation or welfare benefit plan (each a "Benefit
Arrangement"), copies or descriptions of which have been furnished or
made available to Buyer;
(iii) Each material plan or arrangement not subject to
ERISA maintained, or otherwise contributed to, by the Company Entities
for the benefit of non-U.S. employees ("Foreign Employees"), other than
plans or arrangements required to be maintained, or otherwise
contributed to, pursuant to applicable laws or regulations of non-U.S.
jurisdictions, that provides for retirement benefits, termination
benefits, deferred compensation, bonuses, stock options, employee
insurance coverage or any similar compensation or welfare benefit plan
(each a "Foreign Plan" and, together with the Plans and Benefit
Arrangements, the "Employee Benefit Programs"), copies or descriptions
of which have been furnished or made available to Buyer;
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<PAGE> 21
(iv) Each "multiemployer plan" (as such term is defined
in Section 3(37) of ERISA) that is contributed to by the Company
Entities, copies or descriptions of which have been furnished or made
available to Buyer; and
(v) Each written agreement with any employee of any Company
Entity involving an amount which in the aggregate involves in excess of
$100,000 and each collective bargaining agreement to which any Company
Entity is a party.
(l) Taxes. Except as set forth on Schedule 3.1(l), each
Company Entity and any consolidated, combined or unitary group for Tax (as
defined below) purposes of which the Company or any of its Subsidiaries is or
has been a member has timely filed all Tax Returns required to be filed by it,
has paid all Taxes due, has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid to employees, independent
contractors or other third parties, or has provided adequate reserves in its
Financial Statements for (or otherwise has adequately provided for) any Taxes
that have not been paid except where the failure to make such filings, pay such
Taxes or provide for such reserves or Taxes would not have a Company Material
Adverse Effect. Except as set forth on Schedule 3.1(l), (i) there is no claim
concerning any liability of any Company Entity for Taxes made by any Taxing
authority in writing which has not been fully resolved, (ii) the Company is not
under audit for any Tax year, (iii) no Company Entity has in effect a waiver of
any statute of limitations with respect to Taxes, and (iv) no Company Entity is
obligated to make any payments for which a
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<PAGE> 22
deduction will be disallowed under Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"). To the extent any discharge of indebtedness by
FMCC on or before the Closing Date is not excluded from income, the Company will
have available net operating loss carryforwards (taking into account the
limitations under Section 382 of the Code) at least equal to the amount of any
such nonexcluded income.
As used herein, "Taxes" shall mean any taxes of any kind,
including but not limited to those on or measured by or referred to as income,
gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
value added, property or windfall profits taxes, customs, duties or similar
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
governmental authority, domestic or foreign. As used herein, "Tax Return" shall
mean any return, report or statement required to be filed with any governmental
authority with respect to Taxes.
(m) Government Licenses, Permits and Related Approvals. Except
as set forth in Schedule 3.1(m), the Company Entities have each license, permit,
consent, approval, authorization, qualification and order of any Governmental
Entity necessary to enable the Company Entities to conduct their respective
businesses as presently conducted and are in compliance with the requirements
thereunder, except where the failure to have any such license, permit, consent,
approval,
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<PAGE> 23
authorization, qualification or order, or to be in compliance therewith, does
not have a Company Material Adverse Effect.
(n) Compliance. Except as set forth in Schedule 3.1(n), no
Company Entity is in violation of any law, rule, regulation, order, judgment or
decree applicable to any of the Company Entities or by which any of their
respective properties are bound or affected, except for any such violations
which do not have a Company Material Adverse Effect.
(o) Environmental Liability. Except as disclosed (i) in the
Financial Statements or the notes thereto, (ii) in the environmental reports
listed on Schedule 3.1(o) or (iii) on Schedule 3.1(o), and except for such
matters that, alone or in the aggregate, do not have a Company Material Adverse
Effect, to the Company's knowledge, (i) the Company Entities are in compliance
with all applicable Environmental Laws (as defined below); (ii) the properties
owned or operated by the Company Entities (including soil, groundwater or
surface features) (the "Properties") do not contain any Hazardous Substances (as
defined below) at a level which requires remedial activity under applicable
Environmental Law where the Hazardous Substance resulted from activity of the
Company Entities; (iii) no Company Entity has received written notice of any
claims or written demands alleging that the Company is in violation of, or
liable under, any Environmental Law; and (iv) the Company Entities are not
subject to liability for any off-site disposal or contamination.
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<PAGE> 24
For purposes of this Agreement, "Environmental Law" means any
current law, regulation, order or decree relating to pollution, contamination,
wastes, Hazardous Substances or the environment, including any regulation
pertaining to underground storage tanks and cleanup of releases from such tanks;
and "Hazardous Substance" means any substance, chemical or material that is
listed, classified under or regulated as hazardous or toxic or as a pollutant by
any Governmental Entity pursuant to any Environmental Law, including petroleum
and petroleum products.
Buyer acknowledges and agrees that the representation and
warranty contained in this Section 3.1(o) is the only representation and
warranty made by the Company or any other person to Buyer with respect to the
subject matter of this Section 3.1(o), no other representation or warranty
contained in this Agreement shall apply to such subject matter and no other
representation or warranty, express or implied, is being made by the Company or
any other person with respect to such subject matter.
(p) Intellectual Property. Schedule 3.1(p) sets forth a true
and correct list of (i) each patent, trademark, trade name and registered
copyright owned by any Company Entity and which is material to the business or
operations of the Company Entities taken as a whole ("Material Owned
Intellectual Property") and (ii) each patent, trademark, trade name, registered
copyright, technology and process used by any Company Entity which is used
pursuant to a license or other right granted by a third party and
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<PAGE> 25
which is material to the business or operations of the Company Entities taken as
a whole ("Material Licensed Intellectual Property"). The Company Entities own or
have the right to use pursuant to valid and effective agreements all Material
Owned Intellectual Property and Material Licensed Intellectual Property, except
to the extent that the failure to own or have the right to use such Material
Owned Intellectual Property or Material Licensed Intellectual Property would not
have a Company Material Adverse Effect. No claims are pending against any
Company Entity with respect to the use of any Material Owned Intellectual
Property or Material Licensed Intellectual Property or challenging or
questioning the validity or effectiveness of any license agreement relating to
the same, and the use by the Company Entities of the Material Owned Intellectual
Property and Material Licensed Intellectual Property does not infringe upon the
rights of any third party, except to the extent that any such claim or
infringement would not have a Company Material Adverse Effect.
(q) Other Transactions. Except (i) as disclosed in the
Schedules to this Agreement or (ii) as are not material to the Company Entities
taken as a whole, there are no transactions between a Company Entity, on the one
hand, and the Buyer Designator and/or its subsidiaries, on the other hand,
including all contracts, agreements, arrangements, understandings or loans.
(r) Finders' Fees. The Company has not retained, and
is not subject to the valid claim of, any finder, broker,
consultant or financial advisor in connection with the
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Transactions who might be entitled to a fee or commission from Buyer in
connection with the Transactions.
SECTION 3.2 Representations and Warranties of Buyer. Buyer
represents and warrants to the Company as follows:
(a) Due Organization of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing as a domestic corporation under
the laws of the state of its organization with all requisite corporate power and
authority to execute, deliver and perform this Agreement and to consummate the
Transactions.
(b) Validity of Agreement. Buyer has all necessary corporate
power and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the Transactions. The execution, delivery and
performance of this Agreement by Buyer and the consummation by Buyer of the
Transactions have been duly authorized by all necessary corporate action on the
part of Buyer. This Agreement has been duly executed and delivered by Buyer and,
assuming due authorization, execution and delivery by the Company, constitutes a
legal, valid and binding obligation of Buyer enforceable against it in
accordance with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
(c) Consents and Approvals; No Violations. Except as
set forth on Schedule 3.2(c) and for all filings, permits,
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authorizations, consents and approvals as may be required under, and other
applicable requirements of, the HSR Act, state and foreign competition,
antitrust and takeover laws, including applicable laws of Australia, Brazil,
Canada, Ireland, Mexico, New Zealand and Portugal and applicable regulations of
the European Union, neither the execution, delivery or performance of this
Agreement by Buyer nor the consummation by Buyer of the Transactions will (i)
conflict with or result in any breach of any provision of the certificate of
incorporation or by-laws of Buyer, (ii) require Buyer to make any filing with,
or Buyer to obtain any permit, authorization, consent or approval of, any
Governmental Entity, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, lease, license, contract, agreement
or other instrument or obligation to which Buyer or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
or (iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Buyer, any of its subsidiaries or any of their properties or
assets, except, in the case of clauses (ii), (iii) and (iv), for failures to
make filings, or to obtain permits, authorizations, consents or approvals, or
violations, breaches, defaults, or rights of termination, amendment,
cancellation or acceleration, which would not prevent or materially hinder or
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<PAGE> 28
delay the ability of Buyer to perform its obligations under this Agreement and
to consummate the Transactions.
(d) Litigation. There is no action, suit or proceeding before
or by any Governmental Entity, domestic or foreign, now pending or, to Buyer's
knowledge, threatened against Buyer which, if adversely determined, would
prevent or materially hinder or delay the ability of Buyer to perform its
obligations under this Agreement or to consummate the Transactions.
(e) Available Funds. At the Closing, Buyer will have
sufficient funds to pay the following (collectively, the "Required Payments"):
(i) the Purchase Price, (ii) the Share Purchase Price (as defined in the
Preferred Stock Purchase Agreement), (iii) the Purchase Price (as defined in the
Common Stock Purchase Agreement), and (iv) the amount of Other Indebtedness (as
defined in Section 4.5) and all accrued but unpaid interest through the Closing
Date to be repaid pursuant to Section 4.5, which funds will be available at the
Closing to make the Required Payments. Buyer has obtained a binding written
commitment from Credit Suisse First Boston Corporation to obtain $225 million
pursuant to the commitment letter attached as Exhibit E to the Preferred Stock
Purchase Agreement.
(f) No Registration. Buyer is aware that the Shares have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or under any state securities laws. Buyer is not an underwriter (within
the meaning of such term under the Securities Act) with respect to the Shares
and is purchasing the Shares solely for investment, with no present
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intention to distribute any such Shares to any person, and Buyer will not sell
or otherwise dispose of such Shares except in compliance with the registration
requirements under the Securities Act and the rules and regulations promulgated
thereunder, and other applicable securities laws, or pursuant to exemptions
therefrom.
(g) Finders' Fees. Buyer has not retained, and is not subject
to the valid claim of, any finder, broker, consultant or financial advisor in
connection with the Transactions who might be entitled to a fee or commission
from the Company in connection with the Transactions, other than Credit Suisse
First Boston Corporation. Buyer will be solely responsible for paying all fees
and expenses that become due and payable to Credit Suisse First Boston
Corporation in connection with the Transactions.
SECTION 3.3 Representations and Warranties of the Company and
Buyer. Each of the Company and Buyer represents and warrants to the other that
it is the explicit intent of each party hereto that the Company is making no
representation or warranty whatsoever, express or implied, including any implied
warranty as to condition, merchantability or suitability, as to the properties,
assets or future prospects or performance of the Company Entities or such
properties or assets and that Buyer is taking the Company Entities "as is" and
"where is," except for the express representations and warranties of the Company
in this Agreement or in any Schedule or Exhibit, or in any certificate, document
or other instrument contemplated hereby and delivered in connection with
herewith.
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SECTION 3.4 Disclosure on Schedules. Disclosure of any fact or
item in any Schedule or Exhibit referenced by a particular Section of this
Agreement shall, should the existence of the fact or item be relevant to any
other Section of this Agreement, be deemed to be disclosed with respect to such
other Section whether or not a specific cross reference appears. Disclosure of
any fact or item in any Schedule or Exhibit shall not necessarily mean that such
fact or item, individually, is material to the Company Entities taken as a whole
or to the business or financial condition of the Company Entities taken as a
whole.
ARTICLE IV
COVENANTS OF THE PARTIES
SECTION 4.1 Access to Information Concerning Properties and
Records; Confidentiality. (a) During the period commencing on the date hereof
and ending on the Closing Date, the Company shall, and shall cause the other
Company Entities to, upon reasonable request, afford to Buyer, its counsel,
accountants and other authorized representatives reasonable access during normal
business hours to the properties, books and records of the Company Entities, in
order that Buyer may have the opportunity to make such reasonable investigations
as it shall desire to make of the business and affairs of the Company Entities.
The Company will, and will cause the other Company Entities and their respective
officers, employees, accountants and other agents to, furnish to Buyer such
additional financial and operating data and information as Buyer may from time
to time
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<PAGE> 31
reasonably request. Buyer will hold any such information which is nonpublic in
confidence in accordance with the provisions of the existing confidentiality
agreement among the Company, Buyer Designator and Buyer (the "Confidentiality
Agreement").
SECTION 4.2 Conduct of the Company Business. Except as
contemplated by this Agreement and in connection with the Transactions, except
with the prior written consent of Buyer (which consent shall not be unreasonably
withheld or delayed) and except as set forth on Schedule 4.2, the Company
agrees, during the period from the date hereof until the Closing Date, that:
(a) the businesses of the Company Entities shall be conducted
in the ordinary and usual course consistent with past practice and each
Company Entity shall use reasonable efforts to preserve its business
organization intact and maintain its existing relations with material
customers, employees, creditors and business partners, and with all
persons or entities with which the Company has entered into franchise
agreements, airport concession agreements and material leases;
(b) the Company shall not, directly or indirectly,
split, combine or reclassify the outstanding Common Stock or
Preferred Stock;
(c) no Company Entity shall: (i) amend its certificate of
incorporation or by-laws or similar organizational documents; (ii)
declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to its capital stock other than
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dividends declared and paid by the Company's Subsidiaries to the
Company or its Subsidiaries; (iii) issue, sell, transfer, pledge,
dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital
stock of any class of the Company or its Subsidiaries; (iv) transfer,
lease, license, sell, mortgage, pledge, dispose of or encumber any
assets that are material to the Company Entities taken as a whole,
other than (A) in the ordinary course of business consistent with past
practice, (B) pursuant to agreements in effect on the date hereof, (C)
when such assets become worn out, unserviceable or no longer useful to
the businesses of the Company Entities taken as a whole or (D) pursuant
to Permitted Liens; or (v) redeem, purchase or otherwise acquire
directly or indirectly any of its capital stock, other than shares of
Series X Preferred Stock in accordance with the terms thereof;
(d) no Company Entity shall: (i) grant any increase in the
compensation payable or to become payable by any Company Entity to any
executive officer other than scheduled annual increases in the ordinary
course of business consistent with past practice; or (ii) except to the
extent currently required under applicable law or the terms of the
applicable agreement or arrangement, adopt or enter into any new (or
amend or otherwise increase, or accelerate the payment or vesting of
the amounts payable or to become
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payable under any existing) bonus, incentive compensation, deferred
compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan,
agreement or arrangement, other than the Special Bonus Program (as
defined in Section 4.7);
(e) no Company Entity shall: (i) incur or assume any debt
except for borrowings under existing credit facilities in the ordinary
course of business consistent with past practice; (ii) 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 consistent with past
practice; (iii) make any loans, advances or capital contributions to,
or investments in, any other person, other than to wholly owned
Subsidiaries of the Company or in the ordinary course of business
consistent with past practice; or (iv) make any material capital
expenditure other than in the ordinary course of business consistent
with past practice;
(f) no Company Entity shall enter into any agreement,
contract, commitment or arrangement which would be a Material Company
Agreement, other than in the ordinary course of business consistent
with past practice, or amend any existing loan agreement or credit
facility;
(g) no Company Entity shall adopt a plan of complete
or partial liquidation, dissolution, merger, consolidation,
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restructuring, recapitalization or other material
reorganization of the Company or any of its Subsidiaries;
(h) no Company Entity shall pay, discharge or satisfy any
claim, liability or obligation (including contingent claims,
liabilities and obligations), other than in the ordinary course of
business consistent with past practice or as required by applicable law
or regulation or by any Governmental Entity; and
(i) no Company Entity shall enter into an agreement, contract,
commitment or arrangement to do any of the foregoing, or authorize any
of the foregoing.
SECTION 4.3 Further Assurances. (a) Subject to Section 4.3(b),
each of the Company and Buyer shall use reasonable efforts to take, or cause to
be taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the Transactions on the Closing Date. Without limiting the generality
of the foregoing, the Company shall, upon request, provide reasonable
cooperation to Buyer in Buyer's efforts to obtain any necessary consents of
third parties to the consummation of the Transactions (provided, however, that
in no event shall the Company be required to make any expenditure to any third
party from whom a consent is required in connection with obtaining any such
consent) and in connection with the Buyer's financing for the consummation of
the Transactions, including, upon reasonable request, providing financial
information to Buyer and attending meetings with potential
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financing sources of Buyer. In addition, in connection with Buyer's preparation
of any Information Statement or Proxy Statement (each as defined in the
Preferred Stock Purchase Agreement), the Company shall cooperate with Buyer in
the preparation thereof and shall furnish all information concerning it required
to be included therein.
(b) Notwithstanding anything to the contrary herein, Buyer
shall, and shall cause its affiliates to, (i) promptly effect all necessary
registrations and filings, including, but not limited to, filings under the HSR
Act and submissions of information requested by any Governmental Entity,
domestic or foreign, to secure antitrust clearance for the consummation of the
Transactions and (ii) promptly take all steps (including executing agreements
and submitting to judicial or administrative orders) required by the Federal
Trade Commission or its staff, the Assistant Attorney General in charge of the
Antitrust Division of the Department of Justice or such person's staff, any
state attorney general or its staff, or any similar foreign Governmental Entity,
to secure antitrust clearance for the consummation of the Transactions
(including by avoiding or setting aside any injunction or other order of any
court of competent jurisdiction or other Governmental Entity), including all
steps to make arrangements for, or to effect the sale or other disposition of,
particular assets or categories of assets or businesses of Buyer or any of its
affiliates, or assets or businesses of the Company Entities, and to hold
separate (including pursuant to arrangements which restrict, limit or
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prohibit access to) the assets or businesses of the Company Entities pending any
such sale or other disposition. All the actions to be taken by Buyer or its
affiliates pursuant to this Section 4.3(b) will be consistent with their
respective obligations under applicable law or any agreement to which any of
such persons is a party. Each party agrees promptly to inform the other party of
any communication received by such party from the Federal Trade Commission, the
Antitrust Division of Department of Justice or any other Governmental Entity
regarding any of the Transactions.
(c) If at any time after the Closing Date any further action
is reasonably necessary to carry out the purposes of this Agreement, the parties
hereto shall take or cause to be taken such action, including the execution and
delivery of such further instruments and documents as may be reasonably
requested by the other party for such purposes or otherwise to consummate and
give effect to the Transactions.
(d) The Company hereby consents to the issuance by Buyer of
(i) the Series A Preferred Stock and the underlying Class A Common Stock and
(ii) additional shares of capital stock or securities convertible into capital
stock in connection with the consummation and financing of the Transactions.
SECTION 4.4 No Solicitation by Company. None of the Company
Entities will solicit, initiate or encourage the submission of any proposal or
offer from any person or engage in discussions with any person or enter into any
agreement with any person relating to the acquisition of capital stock or a
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substantial portion of the assets of the Company Entities taken as a whole or
any merger, consolidation, share exchange or other similar transaction involving
any Company Entity. The Company will notify Buyer promptly if any person makes
any proposal, offer or inquiry with respect to any of the foregoing.
SECTION 4.5 Repayment of Buyer Designator
Indebtedness. At the Closing, the Company shall:
(a) immediately upon its receipt of the Purchase Price, use
the entire proceeds thereof, first, to redeem the Series X Preferred
Stock held by the Bank and, second, to repay to Buyer Designator and/or
its affiliates, respectively, including FMCC, a portion of the
outstanding principal amount of indebtedness of the Company to such
persons under the credit facilities set forth on Schedule 4.6 to the
Preferred Stock Purchase Agreement, as such persons shall direct;
(b) repay all indebtedness owed to Buyer Designator or any
affiliate or affiliates of Buyer Designator, including FMCC (as
specified in written notice delivered by the Buyer Designator to the
Company at least two days prior to the Closing) under the credit
facilities set forth on Schedule 4.6 to the Preferred Stock Purchase
Agreement (collectively, the "Facilities"), except for an amount of
such indebtedness equal to the Cancellation Amount (as defined in
Section 5.2(d) of the Preferred Stock Purchase Agreement) (the "Other
Indebtedness") and all accrued but unpaid interest through the Closing
Date;
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(c) cause the obligations of Buyer Designator and/or its
affiliates, respectively, including FMCC, to make further extensions of
credit under each of the Facilities to be terminated; and
(d) cause the other obligations of Buyer Designator and/or its
affiliates, respectively, including FMCC, in respect of the Facilities,
including all obligations pursuant to each letter of credit, support
agreement and other agreement or arrangement referred to on Schedule
4.6 to the Preferred Stock Purchase Agreement (collectively, the "Other
Arrangements"), to be terminated and replaced by a substitute
arrangement, except for the $25 million letter of credit issued in
support of the Budget Fleet Finance asset- backed medium term note
program, which shall be fully collateralized by a letter of credit, in
form satisfactory to FMCC, issued for the benefit of FMCC by Credit
Suisse or another financial institution acceptable to Seller in its
sole discretion.
SECTION 4.6 Net Income Adjustment. (a) No later than May 15,
1997, the Company shall prepare and deliver to each of Buyer Designator and
Buyer an income statement of the Company for the period from and including
January 1, 1997 through the close of business on March 31, 1997 prepared in
accordance with United States generally accepted accounting principles (the
"First Quarter Income Statement"). The First Quarter Income Statement shall be
prepared by the Company, prior to the Closing Date, in consultation with Coopers
& Lybrand LLP, Buyer Designator's
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independent accountants, or, after the Closing Date, in consultation with Arthur
Andersen LLP, Buyer's independent accountants. Thereafter, the Company shall
cooperate with each of Buyer Designator and Buyer in providing responses to
information requests from each of them in connection with their review of the
First Quarter Income Statement. In addition, the Company shall cooperate with
the Neutral Auditors (as defined in the Preferred Stock Purchase Agreement) in
providing responses to information requests from the Neutral Auditors.
(b) If the Adjustment Payment Date (as defined in the
Preferred Stock Purchase Agreement) is the Closing Date, then each of the
Company and Buyer shall enter into an amendment to this Agreement, on terms to
be negotiated in good faith among the Company, Buyer and Buyer Designator,
providing for (i) if there is a Buyer Adjustment Amount (as defined in the
Preferred Stock Purchase Agreement), an increase in the amount of the Purchase
Price by the Buyer Adjustment Amount or (B) if there is a Seller Adjustment
Amount (as defined in the Preferred Stock Purchase Agreement), a reduction in
the amount of the Purchase Price by the Seller Adjustment Amount, as the case
may be, and, unless the parties otherwise agree (with the consent of Buyer
Designator), in each case, as appropriate, an adjustment in the number of
Shares.
SECTION 4.7 Special Bonus Program. The Company shall establish
a special bonus program (the "Special Bonus Program") providing for bonus
payments to Company employees with an aggregate value equal to $4,800,000;
provided that Buyer
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Designator shall, upon such terms as shall have been agreed as provided below,
have funded $2,400,000 thereof in cash to the Company or Buyer at the Closing,
as Buyer shall direct. The Special Bonus Program shall be on such terms as Buyer
Designator and Buyer shall agree after good faith negotiations and, in any
event, shall provide for broad participation by employees of the Company (it
being understood that it is the intent of the parties that the Special Bonus
Program provide incentive to approximately 1,400 employees of the Company and
that, subject to agreement between Buyer Designator and Buyer, all or a portion
of the benefits under such Special Bonus Program may be stock options issued by
Buyer); provided that Buyer may, at its option, fund one-half of the Special
Bonus Program in stock options of Buyer with a value of $2,400,000.
ARTICLE V
CLOSING CONDITIONS
SECTION 5.1 Conditions to Each Party's Obligations. The
respective obligations of each party to effect the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or other legal restraint or prohibition
preventing the consummation of the Transactions shall have been issued
by any court of competent jurisdiction or by any governmental or
regulatory body and still be in effect; nor shall any statute, rule,
regulation or executive order have been promulgated or
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enacted by any Governmental Entity which enjoins or otherwise prohibits
or makes illegal the consummation of the Transactions.
(b) All applicable waiting periods under the HSR Act
(including any extensions thereof) shall have expired or been
terminated, and all applicable approvals and clearances under any other
applicable merger control law or regulation shall have been obtained,
except those for which the failure to obtain such approval or clearance
would not result in a Company Material Adverse Effect.
(c) The closing of the transactions contemplated by the
Preferred Stock Purchase Agreement shall have been consummated.
(d) The closing of the transactions contemplated by the Common
Stock Purchase Agreement shall have been consummated.
SECTION 5.2 Conditions to the Obligations of Buyer. The
obligation of Buyer to effect the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions:
(a) The representations and warranties of the Company shall be
true and accurate as of the Closing Date as if made at and as of such
date (except for those representations and warranties that address
matters only as of a particular date or only with respect to a specific
period of time which need only be true and accurate as of such date or
with respect to such period), except where the failure of such
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representations and warranties to be so true and correct (without
giving effect to any limitation contained therein as to "materiality"
or "Company Material Adverse Effect"), would not, individually or in
the aggregate, have a Company Material Adverse Effect.
(b) The Company shall have performed in all material respects
the Company's obligations hereunder required to be performed by the
Company at or prior to the Closing.
(c) The Company shall have delivered to Buyer and to Buyer
Designator a certificate, duly executed by the Company, to the effect
set forth in Sections 5.2(a) and 5.2(b).
(d) Since October 31, 1996, except as may be disclosed in this
Agreement or in the Schedules hereto, there shall not have occurred any
material adverse change in the business, financial condition or results
of operations of the Company Entities taken as a whole, excluding any
effect resulting from (i) general economic conditions, (ii) any
occurrence or condition affecting the vehicle rental industry generally
or (iii) any occurrence or condition arising out of the execution,
delivery or performance of this Agreement and the consummation of the
Transactions or the public announcement of any thereof.
SECTION 5.3 Conditions to the Obligations of the Company. The
obligation of the Company to effect the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions:
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(a) The representations and warranties of Buyer shall be true
and accurate as of the Closing Date as if made at and as of such date
(except for those representations and warranties that address matters
only as of a particular date or only with respect to a specific period
of time which need only be true and accurate as of such date or with
respect to such period), except where the failure of such
representations and warranties to be so true and correct (without
giving effect to any limitation contained therein as to "materiality"
or exception contained therein for matters that would or would not, as
the case may be, prevent or materially hinder or delay the ability of
Buyer to perform its obligations under this Agreement and to consummate
the Transactions), would not, individually or in the aggregate, prevent
or materially hinder or delay the ability of Buyer to perform its
obligations under this Agreement and to consummate the Transactions.
(b) Buyer shall have performed in all material respects its
obligations hereunder required to be performed by it at or prior to the
Closing.
(c) Buyer shall have delivered to the Company and to Buyer
Designator a certificate, duly executed by its Chief Executive Officer
or Chief Financial Officer, to the effect set forth in Sections 5.3(a)
and 5.3(b).
SECTION 5.4 No Closing Unless All Transactions Occur.
Notwithstanding anything to the contrary in this Agreement or
elsewhere, the Closing shall be deemed not to have occurred (and
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any actions taken by any party hereunder in connection with the Closing shall be
unwound) unless all of the conditions to closing contained in each of the
Preferred Stock Purchase Agreement and the Common Stock Purchase Agreement shall
have been satisfied (or waived in accordance with the terms and conditions of
such agreements) and such closings under such agreements shall have been
consummated in accordance with the terms of such agreements.
ARTICLE VI
TERMINATION
SECTION 6.1 Termination. This Agreement shall be terminated
and the transactions contemplated hereby shall be abandoned if, prior to the
Closing, the Preferred Stock Purchase Agreement shall have been terminated.
SECTION 6.2 Effect of Termination. In the event of the
termination of this Agreement as provided in Section 6.1, this Agreement shall
forthwith become null and void, and there shall be no liability on the part of
the Company or Buyer except for the Company's or Buyer's, as the case may be,
breach of this Agreement and except that the provisions of the last sentence of
Section 4.1, Article VII and Article VIII shall survive any such termination.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
LIMITATION OF REMEDIES
SECTION 7.1 Survival of Representations and Warranties. The
respective representations and warranties of the Company and Buyer contained in
Article III shall survive the
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Closing (subject, with respect to remedies for breach thereof, to Section 7.2),
to but not including the first anniversary of the Closing Date and from and
after the first anniversary of the Closing Date the respective representations
and warranties of the Company and Buyer contained in Article III shall terminate
and be of no further force or effect, except to the extent that, prior to such
first anniversary of the Closing Date, written notice of the breach of such
representation and warranty shall have been given (which written notice shall
specify the particular representation and warranty the breach of which is
alleged and the particular facts underlying each such allegation), in the case
of an alleged breach of a representation and warranty by the Company, to the
Company (with a copy to Buyer Designator), or, in the case of an alleged breach
of a representation and warranty by Buyer, to Buyer (with a copy to Buyer
Designator). Notwithstanding the immediately preceding sentence, the
representations and warranties of the Company contained in Sections 3.1(a),
3.1(b), 3.1(c), 3.1(k), 3.1(l) and 3.1(o) shall survive the Closing (subject,
with respect to remedies for breach thereof, to Section 7.2), to but not
including the third anniversary of the Closing Date and from and after the third
anniversary of the Closing Date the representations and warranties of the
Company contained in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(k), 3.1(l) and 3.1(o)
shall terminate and be of no further force or effect, except to the extent that,
prior to such third anniversary of the Closing Date, written notice of the
breach of such representation and warranty shall have been given
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in the same manner and to the same person as set forth in the
preceding sentence.
SECTION 7.2 Limitation of Remedies. (a) The provisions of
Article VII of the Preferred Stock Purchase Agreement, subject to the
limitations and exclusions thereof, shall be the sole and exclusive remedy, at
law or in equity, of Buyer for any liabilities, obligations, losses, damages,
claims, actions, suits, judgments or settlements, including costs, expenses and
disbursements, including reasonable attorneys' fees and expenses (collectively,
"Losses"), arising out of or resulting from any breach by the Company of a
representation or warranty contained in Section 3.1, and the Company shall have
no liability for any such Losses, except to the extent any such Loss arises out
of or results from fraud or willful misrepresentation on the part of the
Company.
(b) In no event shall any party hereto be liable to the other
(or to any other person) for consequential, punitive or special damages arising
out of any breach of the provisions of this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. All notices, requests, demands or other
communications provided herein shall be made in writing and shall be deemed to
have been duly given (unless otherwise specifically provided in any Section of
this Agreement) if delivered as follows:
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If to the Company:
Budget Rent A Car Corporation
4225 Naperville Road
Lisle, IL 60532
Attention: Chief Executive Officer
Fax: 630-955-7517
with copies to:
Ford Motor Company
The American Road
Dearborn, MI 48121
Attention: Secretary
Fax: (313) 337-9591
Tel: (313) 323-2260
-and-
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: David J. Sorkin, Esq.
Fax: (212) 455-2502
Tel: (212) 455-2000
If to Buyer:
Team Rental Group, Inc.
125 Basin Street, Suite 210
Daytona Beach, FL 32114
Attention: Chief Executive Officer
Fax: 904-238-7461
Tel: 904-238-7035
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: John J. Kelley III, Esq.
Fax: (404) 572-5100
Tel: (404) 572-4600
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on (i) the date of delivery
if sent by messenger, (ii) on the business day following the business day on
which delivered
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to a recognized courier service if sent by overnight courier, or (iii) on the
fifth business day after the mailing thereof if sent by mail. Notices may also
be delivered by fax, provided that any such notice also is delivered in a manner
contemplated by clause (i), (ii) or (iii) above.
SECTION 8.2 Publicity. The parties hereto agree that, without
the prior written consent of Buyer Designator, they will not issue any press
release or otherwise make any public announcement with respect to this Agreement
or the Transactions, except as may be required by applicable law (including
federal securities laws) if such party determines in good faith that it is
appropriate to do so and provides prompt prior written notice to Buyer
Designator. The Company agrees that, without the prior written consent of Buyer,
it will not issue any such press release or otherwise make any such public
announcement with respect to this Agreement or the Transactions.
SECTION 8.3 Costs and Expenses. All costs and expenses
incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such expenses.
SECTION 8.4 Amendment and Modification. This Agreement may be
amended, modified and supplemented in any and all respects by written agreement
of the parties hereto; provided, however, that no amendment, modification or
supplement shall be effective without the prior written consent of Buyer
Designator.
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SECTION 8.5 Waivers and Extensions. Each party to this
Agreement may waive any right of such party or any breach or default of the
other party to this Agreement or conditions to its own obligations; provided
that such waiver will not be effective against the waiving party unless it is in
writing, is signed by such party and specifically refers to this Agreement;
provided, further, that (i) no waiver by the Company shall be effective without
the prior written consent of Buyer Designator and (ii) no waiver by Buyer shall
be effective without the prior written consent of Buyer Designator unless such
waiver by Buyer includes an absolute and unconditional release of Buyer
Designator from any and all Losses that may arise out of or result from the
right, breach, default or condition waived by Buyer. Waivers may be made in
advance or after the right waived has arisen or the breach or default waived has
occurred. Any waiver may be conditional. No waiver of any breach of any
agreement or provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof nor of any other agreement or provision
herein contained. No waiver or extension of time for performance of any
obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
SECTION 8.6 Interpretation. (a) When a reference is made in
this Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section, Exhibit or Schedule of this Agreement unless otherwise indicated.
Titles and headings of sections of this Agreement are for convenience only and
shall not
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affect the construction of any provision of this Agreement. The term "Schedules"
or "Schedule" means the schedules included in disclosure schedules delivered to
Buyer or Seller, as the case may be, to the other concurrently with the
execution and delivery hereof.
(b) Whenever the words "include", "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation".
(c) Whenever the phrase "to the Company's knowledge" is used
in this Agreement, such phrase means the actual knowledge of the persons listed
on Schedule 8.6(c).
(d) Whenever the phrase "consistent with past practice" or any
similar phrase is used in this Agreement with respect to any Company Entity,
such phrase shall be deemed to mean past practice of the Company Entities taken
as a whole since October 1995.
(e) The term "person" means an individual, corporation,
partnership, limited liability company, association, trust, incorporated
organization, Governmental Entity or other entity.
SECTION 8.7 Entire Agreement; Third Party Beneficiaries;
Assignment. This Agreement and the Confidentiality Agreement (including the
exhibits hereto and the documents, including the Preferred Stock Purchase
Agreement and the Common Stock Purchase Agreement, and the instruments referred
to herein and therein): (a) constitute the entire agreement and supersede all
prior agreements and understandings, both written
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and oral, among the parties with respect to the subject matter hereof, and (b)
are not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder, except that Buyer Designator shall be a third
party beneficiary of, and entitled to enforce, the representations, warranties,
covenants, conditions and other terms and provisions of this Agreement. 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 party and Buyer
Designator. This Agreement will be binding upon the parties and their respective
successors and assigns.
SECTION 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 is 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
hereto shall negotiate in good faith to modify this Agreement in accordance with
Section 8.4 so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby may be consummated as originally contemplated to the fullest
extent possible.
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SECTION 8.9 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Michigan without
giving effect to the principles of conflicts of law thereof.
SECTION 8.10 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any material provision of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to the remedy of specific performance of the material
terms hereof, subject to Section 7.2, in addition to any other remedy at law or
equity.
SECTION 8.11 Resolution of Disputes. If a dispute arises
between the parties relating to this Agreement, then the parties hereto (and
Buyer Designator, as a third party beneficiary of the provisions of this
Agreement) shall implement the procedures set forth in Section 8.11 of the
Preferred Stock Purchase Agreement, subject to the provisions thereof.
SECTION 8.12 Consent to Jurisdiction; Waiver of Jury
Trial. (a) Subject to Section 8.11, each of the parties hereto:
(i) consents to submit itself to the personal
jurisdiction of (A) the United States District Court for the Eastern
District of Michigan in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement to
the extent such court would have jurisdiction with respect to such
dispute and (B) the Courts of the State of Michigan otherwise;
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(ii) agrees that it will not attempt to deny or defeat
such personal jurisdiction or venue by motion or other request for
leave from any such court;
(iii) agrees that it will not bring any action relating
to this Agreement or any of the transactions contemplated by this
Agreement in any court other than such courts; and
(iv) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by registered
or certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address set forth in Section 8.1 or at
such other address of which the other party shall have been notified
pursuant thereto; and
(v) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction.
(B) EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING IN RELATION TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
[Continued on next page.]
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<PAGE> 54
SECTION 8.13 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Agreement with legal and binding effect as of
the date first above written.
BUDGET RENT A CAR CORPORATION
By: /s/ Jack Frazee
-------------------------------------
Name: Jack Frazee
Title: Chairman
TEAM RENTAL GROUP, INC.
By: /s/ Sanford Miller
-------------------------------------
Name: Sanford Miller
Title: Chairman and Chief Executive
Officer
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<PAGE> 1
EXHIBIT 2.9
PREFERRED STOCK PURCHASE AGREEMENT
dated as of JANUARY 13, 1997
between
FORD MOTOR COMPANY
and
TEAM RENTAL GROUP, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
SALE OF STOCK AND PURCHASE DEBT;
DESIGNATION AS PURCHASER . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.1 Sale and Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.2 Share Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.3 Sale and Purchase of Purchase Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.4 Purchase Price for Purchase Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.5 Designation as Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 1.6 Net Income Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.2 Delivery of Shares and Purchase Debt by Seller to Buyer . . . . . . . . . . . . . . . . . . 10
SECTION 2.3 Delivery of Share Purchase Price and Equity Consideration by Buyer to Seller . . . . . . . 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.1 Representations and Warranties of Seller . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.2 Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.3 Representations and Warranties of Seller and Buyer . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.4 Disclosure on Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IV
COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.1 Performance by Common Stockholder Under Common Stock Purchase Agreement . . . . . . . . . . 33
SECTION 4.2 Certain Obligations of Buyer With Respect to Common Stock Purchase Agreement and
Budget Stock Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.3 Information Statement; Stockholders Meeting; Proxy Statement . . . . . . . . . . . . . . . 34
SECTION 4.4 Insurance Other than Workers' Compensation . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.6 Repayment of Seller Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.7 Access to Information Concerning Buyer's Properties and Records; Confidentiality . . . . . 41
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SECTION 4.8 Conduct of the Buyer Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.9 No Solicitation by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.10 Listing of Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.11 No Registration of Certain Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.12 Special Bonus Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.13 Cancellation of Certain Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE V
CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.1 Conditions to Each Party's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.2 Conditions to the Obligations of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 5.3 Conditions to the Obligations of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.4 No Closing Unless All Transactions Occur. . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VI
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VII
SURVIVAL; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 51
SECTION 7.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 7.2 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.3 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.4 Procedures for Certain Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.5 Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.6 Exclusivity of Remedy; Satisfaction of Indemnity Obligations . . . . . . . . . . . . . . . 60
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.2 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.3 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.4 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.5 Waivers and Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.6 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.7 Entire Agreement; Third Party Beneficiaries; Assignment . . . . . . . . . . . . . . . . . . 66
SECTION 8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.10 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.11 Resolution of Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
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SECTION 8.12 Consent to Jurisdiction; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
EXHIBITS
- --------
Exhibit A -- Form of Supply Agreement
Exhibit B -- Form of Advertising Agreement
Exhibit C -- Form of Preferred Stockholders Agreement
Exhibit D -- Form of Certificate of Designations
Exhibit E -- Financing Commitments
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INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Adjustment Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Average Buyer Stock Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Benefit Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Budget Stock Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Buyer Adjustment Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Buyer Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Buyer Class A Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Buyer Class B Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Buyer Debt Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Buyer Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Buyer Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Buyer Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Buyer SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Buyer Stock Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Cancellation Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Certificate of Designations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Common Stock Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Common Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Conclusive Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Consent Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Controlled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Controlling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
CPR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Cut-off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Employee Benefit Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Equity Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Establishment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
First Quarter Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
FMCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Foreign Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Foreign Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Include . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Includes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Including . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Information Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Initial Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Material Buyer Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Neutral Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Notice Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Other Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Preferred Stockholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Purchase Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Required Buyer Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Required Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Resolution Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Seller Adjustment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Seller Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Series X Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Share Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Special Bonus Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Stockholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Tax Arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Third Party Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
U.S. Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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<PAGE> 7
PREFERRED STOCK PURCHASE AGREEMENT
PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") dated as
of January 13, 1997 between FORD MOTOR COMPANY, a Delaware corporation
("Seller"), and TEAM RENTAL GROUP, INC., a Delaware corporation ("Buyer").
RECITALS
A. Seller owns 2.31 shares (the "Shares") of Series X
Cumulative Preferred Stock, par value $.01 per share, with a stated value of
$1,000 per share ("Series X Preferred Stock"), of Budget Rent A Car Corporation,
a Delaware corporation (the "Company").
B. Commerzbank Aktiengesellschaft (the "Bank") is the owner of
5,004.15 shares of Series X Preferred Stock.
C. The Certificate of Designations of the Company authorizing
the Series X Preferred Stock will be amended to provide that all of the issued
and outstanding shares of Series X Preferred Stock shall be redeemed by the
Company at the Closing (as defined in Section 2.1) (immediately following the
purchase and sale of the Shares pursuant to this Agreement) for a redemption
price equal to the stated value thereof, plus accrued but unpaid dividends
thereon to the date of redemption.
D. Pursuant to a separate stock purchase agreement dated as of
the date hereof (the "Budget Stock Purchase Agreement") between the Company and
Buyer, subject to the terms and conditions thereof, Buyer has agreed to purchase
from the Company 2,740,000 newly issued shares of common stock, par value
<PAGE> 8
$.01 per share ("Common Stock"), of the Company, for an aggregate purchase
price equal to $274 million, payable in cash.
E. Pursuant to an agreement among the stockholders of the
Company dated as of June 28, 1996 (the "Stockholders Agreement"), Seller has
the right to cause the holder (the "Common Stockholder") of the outstanding
shares of Common Stock to sell the Common Stockholder's shares of Common Stock
to a purchaser designated by Seller.
F. Buyer desires (i) to purchase the Shares from Seller, (ii)
to purchase an aggregate principal amount of indebtedness under the agreements
and instruments listed on Schedule 4.6 (the "Purchase Debt"), of the Company to
Seller and/or its affiliates, respectively, including Ford Motor Credit Company
("FMCC"), equal to the product of (x) the Buyer Stock Price (as defined herein),
(y) 1,000 and (z) and the number of shares comprising the Equity Consideration
(as defined herein) in consideration of the receipt by Seller of the Equity
Consideration and (iii) to be designated as the purchaser of the issued and
outstanding shares of Common Stock.
G. The Board of Directors of Buyer has (i) approved this
Agreement and the transactions contemplated hereby, including (x) the issuance
of the Equity Consideration and the shares of Class A Common Stock, par value
$.01 per share ("Buyer Class A Stock"), of Buyer issuable upon conversion of the
Equity Consideration and (y) the Consent Agreement (as defined herein) and (ii)
resolved to recommend approval of the issuance of the
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<PAGE> 9
shares of Buyer Class A Stock issuable upon conversion of the Equity
Consideration by the stockholders of Buyer.
H. In connection with the purchase of the Purchase Debt and the
issuance of the Equity Consideration to Seller, Buyer and Seller will enter into
a Preferred Stockholders Agreement dated the date of the Closing (as defined
herein) (the "Preferred Stockholders Agreement") pursuant to which, among other
things, Buyer has granted certain registration rights with respect to the shares
of Buyer Class A Stock issuable upon conversion of the Equity Consideration for
resale by Seller pursuant to the Securities Act of 1933, as amended (the
"Securities Act").
I. As a condition and inducement to Seller's entering into this
Agreement and incurring the obligations set forth herein, concurrently with the
execution and delivery of this Agreement, Seller is entering into a Consent
Agreement (the "Consent Agreement") with each of Sanford Miller, John P. Kennedy
and Jeffrey D. Congdon (collectively, the "Stockholders"), pursuant to which the
Stockholders, severally and not jointly, have agreed, among other things, to
deliver written consents with respect to the shares of Class B Common Stock, par
value $.01 per share ("Buyer Class B Stock"), of Buyer owned by them in favor of
the issuance of the shares of Buyer Class A Stock issuable upon conversion of
the Equity Consideration.
J. Pursuant to a separate stock purchase agreement dated as of
the date hereof (the "Common Stock Purchase Agreement") between the Common
Stockholder and Buyer, Buyer has
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<PAGE> 10
agreed to purchase from the Common Stockholder all the shares of Common Stock
owned by the Common Stockholder.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
SALE OF STOCK AND PURCHASE DEBT;
DESIGNATION AS PURCHASER
SECTION 1.1 Sale and Purchase of Shares. On the Closing Date
(as defined in Section 2.1), Seller shall sell, convey and transfer to Buyer
the Shares.
SECTION 1.2 Share Purchase Price. The purchase price to be
paid by Buyer to Seller for the Shares shall be $2,310.00 (the "Share Purchase
Price"), which shall be payable in cash and in immediately available (federal)
funds at the Closing (as defined in Section 2.1).
SECTION 1.3 Sale and Purchase of Purchase Debt. On the Closing
Date, Seller shall sell, convey and transfer, or shall cause its affiliates to
sell, convey and transfer, to Buyer the Purchase Debt.
SECTION 1.4 Purchase Price for Purchase Debt. The consideration
to be paid by Buyer to Seller for the Purchase Debt shall be the issuance of the
greater of (i) 4,500 shares of Series A Convertible Preferred Stock, par value
$.01 per share (the "Series A Preferred Stock"), of Buyer established pursuant
to the Certificate of Designations thereof in the form attached
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<PAGE> 11
as Exhibit D (the "Certificate of Designations") and (ii) a number of shares of
Series A Preferred Stock (rounded up to the nearest whole share) equal to the
product of (x) 0.001 multiplied by (y) the quotient obtained by dividing (A)
$75,000,000 by (B) the Buyer Stock Price (as defined below) (the "Equity
Consideration"). All of the shares of Series A Preferred Stock delivered as
part of the Equity Consideration, upon delivery as provided herein, shall have
been duly authorized, validly issued, fully paid and non-assessable, and shall
be delivered at the Closing. For purposes of this Agreement, "Buyer Stock
Price" means the average of the closing prices of the Buyer Class A Stock on
The New York Stock Exchange, Inc. (the "NYSE"), for each trading day in the
10-consecutive trading day period referred to below on which the Buyer Class A
Stock is listed on the NYSE, or The Nasdaq National Market, for each trading
day in the 10-consecutive trading day period referred to below on which the
Buyer Class A Stock is not listed on the NYSE but is listed on The Nasdaq
National Market, in each case as reported in The Wall Street Journal, for the
10 consecutive trading days immediately preceding the second trading day prior
to the Closing Date.
SECTION 1.5 Designation as Purchaser. Seller hereby designates
Buyer as the purchaser of the issued and outstanding shares of Common Stock
held by the Common Stockholder, such purchase and sale to be consummated on the
terms and subject to the conditions set forth in the Common Stock Purchase
Agreement.
SECTION 1.6 Net Income Adjustment. (a) No later than May 15,
1997, the Company shall, pursuant to its obligations
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<PAGE> 12
under Section 4.6 of the Budget Stock Purchase Agreement, prepare and deliver
to each of Seller and Buyer an income statement of the Company for the period
from and including January 1, 1997 through the close of business on March 31,
1997 prepared in accordance with United States generally accepted accounting
principles (the "First Quarter Income Statement"). The First Quarter Income
Statement shall be prepared by the Company, if prior to the Closing Date, in
consultation with Coopers & Lybrand LLP, Seller's independent accountants, or,
if after the Closing Date, in consultation with Arthur Andersen LLP, Buyer's
independent accountants.
(b) After receipt by Seller and Buyer of the First Quarter
Income Statement, each of them will have 20 business days to review the First
Quarter Income Statement, together with the workpapers used in its preparation.
Unless either party delivers written notice to the other on or prior to the
20th business day after their receipt of the First Quarter Income Statement,
both parties will be deemed to have accepted and agreed to the First Quarter
Income Statement, and such agreement will be final and binding. If either party
so notifies the other of its objection to the First Quarter Income Statement,
Buyer and Seller will, within 20 business days following the notice (the
"Resolution Period"), attempt to resolve their differences. Any resolution by
Buyer and Seller during the Resolution Period as to any disputed amounts will
be final, binding and conclusive. If Buyer and Seller do not resolve all
disputed items by the end of the Resolution Period, then all items remaining in
dispute will be
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<PAGE> 13
submitted within ten days after the expiration of the Resolution Period to an
independent accounting firm of national reputation mutually acceptable to Buyer
and Seller (the "Neutral Auditors"). All fees and expenses relating to the
work, if any, to be performed by the Neutral Auditors will be borne equally by
Buyer and Seller. The Neutral Auditors will deliver to Buyer and Seller a
written determination (such determination to include a work sheet setting forth
all material calculations used in arriving at such determination and to be
based solely on information provided to the Neutral Auditors by Buyer and
Seller, or by the Company) of the disputed items within 30 days of receipt of
the disputed items, which determination will be final, binding and conclusive.
The final, binding and conclusive First Quarter Income Statement, which either
is agreed upon by Buyer and Seller or is delivered by the Neutral Auditors in
accordance with this Section, will be the "Conclusive Income Statement" and the
date on which a First Quarter Income Statement becomes a Conclusive Income
Statement will be the "Establishment Date".
(c) (i) If the Net Income (as defined below) is greater than
$(15,000,000) (i.e., negative $15,000,000), then, on the later of (A) the second
business day following the Establishment Date and (B) the Closing Date (such
later date, the "Adjustment Payment Date"), Buyer shall pay to Seller, by
intra-bank transfer at Morgan Guaranty Trust Company of New York of cash in U.S.
dollars and in immediately available (federal) funds to an account specified to
Buyer by Seller in writing no later than the business day prior to the
Adjustment Payment Date, an
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<PAGE> 14
amount equal to the amount by which the Net Income exceeds $(15,000,000) (the
"Buyer Adjustment Payment").
(ii) If the Net Income is less than $(15,000,000) (i.e.,
negative $15,000,000), then, on the Adjustment Payment Date, Seller shall pay
to Buyer, by intra-bank transfer at Morgan Guaranty Trust Company of New York
of cash in U.S. dollars and in immediately available (federal) funds to an
account specified to Seller by Buyer in writing no later than the business day
prior to the Adjustment Payment Date, an amount equal to the amount by which
the Net Income is less than $(15,000,000) (the "Seller Adjustment Amount").
(iii) Notwithstanding Section 1.6(c)(i) and Section
1.6(c)(ii), if the Adjustment Payment Date is the Closing Date, then, in lieu of
payment by Buyer of the Buyer Adjustment Amount as provided in Section 1.6(c)(i)
or payment by Seller of the Seller Adjustment Amount as provided in Section
1.6(c)(ii), as the case may be, the Budget Stock Purchase Agreement shall be
amended, (A) if there is a Buyer Adjustment Amount, to increase the amount of
the Purchase Price (as defined in the Budget Stock Purchase Agreement) by the
Buyer Adjustment Amount and to make corresponding adjustments to the number of
Shares to be acquired by Buyer pursuant thereto or (B) if there is a Seller
Adjustment Amount, to reduce the amount of the Purchase Price (as defined in the
Budget Stock Purchase Agreement) by the Seller Adjustment Amount and to make
corresponding adjustments to the number of Shares to be acquired by Buyer
pursuant thereto, as the case may be.
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<PAGE> 15
(d) For purposes of this Agreement:
"business day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York or Dearborn,
Michigan are authorized or required by law to be closed;
"Net Income" means the net income (loss) of the Company set
forth on the Conclusive Income Statement, determined without giving
effect to the Special Bonus Program (as defined below), plus, if and
to the extent incurred prior to March 31, 1997, expenses incurred by
the Company (a) with respect to payments under employment agreements
of the Company listed on Schedule 3.1(k) to the Budget Stock Purchase
Agreement and (b) in connection with the Transactions (provided that
the fees of J.P. Morgan Securities Inc. and Simpson Thacher & Bartlett
and any special payments to Jack A. Frazee in connection with the
Transactions shall be paid by Ford.
ARTICLE II
THE CLOSING
SECTION 2.1 Closing. Subject to the conditions set forth in
Article V, the closing of the transactions contemplated hereby (the "Closing")
shall take place at 10:00 a.m., Eastern time, at the offices of Simpson Thacher
& Bartlett, 425 Lexington Avenue, New York, New York, on March 31, 1997, or at
such other time or on such other date, or at such other place, as the parties
shall agree in writing (the date of the Closing, the "Closing Date").
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<PAGE> 16
SECTION 2.2 Delivery of Shares and Purchase Debt by Seller to
Buyer. (a) At the Closing, Seller will deliver to Buyer a certificate or
certificates representing the Shares, duly endorsed in blank or accompanied by
stock transfer powers duly executed in blank, with all necessary stock transfer
tax stamps attached thereto and canceled.
(b) At the Closing, Seller will deliver to Buyer one or more
instruments evidencing the Purchase Debt, duly endorsed in blank or accompanied
by appropriate instruments of transfer duly executed in blank by Seller and/or
its affiliate to which the Purchase Debt is owed.
SECTION 2.3 Delivery of Share Purchase Price and Equity
Consideration by Buyer to Seller. (a) At the Closing, Buyer will deliver to
Seller the Share Purchase Price, by intra-bank transfer at Morgan Guaranty
Trust Company of New York of cash in U.S. dollars and in immediately available
(federal) funds to an account specified to Buyer by Seller in writing no later
than the business day prior to the Closing Date.
(b) At the Closing, Buyer will deliver to Seller a certificate
or certificates, registered in such name or names as Seller shall have specified
in writing to Buyer no later than the business day prior to the Closing Date,
evidencing the Equity Consideration, all of which, upon issuance, shall have
been duly authorized, validly issued, fully paid and non-assessable.
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<PAGE> 17
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of Seller. Seller
represents and warrants to Buyer as follows:
(a) Due Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing as a domestic corporation under
the laws of the state of Delaware with all requisite corporate power and
authority to execute, deliver and perform this Agreement and to consummate the
Transactions (as defined below) to be consummated by it. For purposes of this
Agreement, "Transactions" means the transactions contemplated by this Agreement,
the Budget Stock Purchase Agreement and the Common Stock Purchase Agreement.
(b) Validity of Agreement. Seller has all necessary corporate
power and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the Transactions. The execution, delivery and
performance of this Agreement by Seller and the consummation by Seller of the
Transactions have been duly authorized by all necessary corporate action on the
part of Seller. This Agreement has been duly executed and delivered by Seller
and, assuming due authorization, execution and delivery by Buyer, constitutes a
legal, valid and binding obligation of Seller enforceable against it in
accordance with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally
-11-
<PAGE> 18
and general equitable principles (whether considered in a proceeding in equity
or at law).
(c) Consents and Approvals; No Violations. Except as set forth
on Schedule 3.1(c) and for all filings, permits, authorizations, consents and
approvals as may be required under, and other applicable requirements of, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), state and foreign competition, antitrust and takeover laws, including
applicable laws of Australia, Brazil, Canada, Ireland, Mexico, New Zealand and
Portugal and applicable regulations of the European Union, neither the
execution, delivery or performance of this Agreement by Seller nor the
consummation by Seller of the Transactions will (i) conflict with or result in
any breach of any provision of the certificate of incorporation or by-laws of
Seller, (ii) require Seller to make any filing with, or Seller to obtain any
permit, authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority, commission or agency (a "Governmental Entity"), (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, guarantee, other evidence of
indebtedness, lease, license, contract, agreement or other instrument or
obligation to which Seller or any of its subsidiaries is a party or by which
Seller, any of its
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<PAGE> 19
subsidiaries or any of their respective properties or assets may be bound or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller, any of its subsidiaries or any of their respective
properties or assets, except, in the case of clauses (ii), (iii) and (iv), for
failures to make filings, or to obtain permits, authorizations, consents or
approvals, or violations, breaches, defaults, or rights of termination,
amendment, cancellation or acceleration, which would not prevent or materially
hinder or delay the ability of Seller to perform its obligations under this
Agreement or to consummate the Transactions.
(d) Litigation. There is no action, suit or proceeding before
or by any Governmental Entity, domestic or foreign, now pending or, to Seller's
knowledge, threatened against Seller which, if adversely determined, would
prevent or materially hinder or delay the ability of Seller to perform its
obligations under this Agreement or to consummate the Transactions.
(e) Power to Designate Common Stock Purchaser. The Stockholders
Agreement authorizes Seller to designate the purchaser of the issued and
outstanding shares of Common Stock and to cause the Common Stockholder to sell
such shares to the person so designated. All action necessary under the
Stockholders Agreement has been taken by Seller to designate Buyer as the
purchaser of such shares. All terms of the Stockholders Agreement have been
complied with by Seller and
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<PAGE> 20
Seller has not breached or defaulted under such agreement and is not aware of
any breach of or default under such agreement.
(f) Good Title to Shares and Purchase Debt. (i) Upon
consummation of the purchase and sale of the Shares at the Closing, as
contemplated by this Agreement, Seller shall deliver to Buyer good title to the
Shares, free and clear of all liens, charges, security interests, options,
claims or encumbrances of any nature whatsoever.
(ii) Upon consummation of the purchase and sale of the Purchase
Debt at the Closing, as contemplated by this Agreement, Seller and/or its
affiliates shall deliver to Buyer good title to the Purchase Debt, free and
clear of all liens, charges, security interests, options, claims or encumbrances
of any nature whatsoever.
(g) Finders' Fees. Seller has not retained, and is not subject
to the valid claim of, any finder, broker, consultant or financial advisor in
connection with the Transactions who might be entitled to a fee or commission
from Seller in connection with the Transactions, other than J.P. Morgan
Securities Inc. Seller will be solely responsible for paying all fees and
expenses that become due and payable to J.P. Morgan Securities Inc. in
connection with the Transactions.
(h) No Registration. Seller is aware that the Equity
Consideration has not been registered under the Securities Act, or under any
state securities laws. Seller is not an underwriter (within the meaning of such
term under the Securities Act) with respect to the Equity Consideration and is
purchasing the Equity
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<PAGE> 21
Consideration solely for investment, with no present intention to distribute
such Equity Consideration to any person, except in compliance with the
registration requirements under the Securities Act and the rules and regulations
promulgated thereunder, and other applicable securities laws, or pursuant to
exemptions therefrom. Buyer will not sell or otherwise dispose of the Equity
Consideration or any part thereof except in compliance with the registration
requirements under the Securities Act and the rules and regulations promulgated
thereunder, and other applicable securities laws, or pursuant to exemptions
therefrom.
SECTION 3.2 Representations and Warranties of Buyer. Buyer
represents and warrants to Seller as follows:
(a) Due Organization of Buyer and Subsidiaries. Each of Buyer
and each corporation, partnership or business entity 50% or more of the equity
interests of which are owned, directly or indirectly by Buyer (its
"Subsidiaries" and, together with Buyer, the "Buyer Entities") is a corporation,
partnership or other business entity duly organized, validly existing, and, with
respect to those Subsidiaries of Buyer that are corporations and organized under
the laws of one of the states of the United States of America or the District of
Columbia (a "U.S. Corporation"), is in good standing as a domestic corporation
under the laws of the state of its organization with all requisite corporate
power and authority to own, lease and operate its properties and to conduct its
business as presently conducted. Each Buyer Entity which is a U.S. Corporation
is duly
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<PAGE> 22
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, except where the
failure to be so qualified as required would not have a Buyer Material Adverse
Effect (as defined below). Schedule 3.2(a) lists each Subsidiary and each other
corporation, partnership or business entity in which Buyer has any equity
interest.
For purposes of this Agreement, "Buyer Material Adverse Effect"
means (i) a material adverse effect on the business, results of operations or
financial condition of the Buyer Entities taken as a whole, excluding any effect
resulting from (A) general economic conditions, (B) any occurrence or condition
affecting the vehicle rental industry generally or (C) any occurrence or
condition arising out of the execution, delivery or performance of this
Agreement and the consummation of the Transactions or the public announcement of
any thereof, or (ii) an effect which would prevent or materially hinder or delay
the ability of Buyer to perform its obligations under this Agreement or to
consummate the Transactions.
(b) Validity of Agreement; Required Stockholder Approval;
Board of Directors' Recommendation. Buyer has all necessary corporate power and
authority to enter into this Agreement and, subject to delivery to Buyer's
stockholders of prompt notice pursuant to Section 228(d) of the Delaware
General Corporation Law of the stockholder action contemplated by the Consent
Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution, delivery and
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<PAGE> 23
performance of this Agreement by Buyer and the consummation by Buyer of the
Transactions have been duly authorized by all necessary corporate action on the
part of Buyer. The Board of Directors of Buyer has duly and validly approved
and taken all corporate action required to be taken by the Board of Directors
of Buyer to render the provisions of Section 203 of the Delaware General
Corporation Law inapplicable to this Agreement, the Consent Agreement and the
consummation of the Transactions, including the adoption of the Certificate of
Designations, the issuance of the Equity Consideration and the issuance shares
of Buyer Class A Stock issuable upon conversion of the Equity Consideration to
Seller pursuant to this Agreement. The written consent of a majority of the
votes entitled to be cast, or the affirmative of a majority of the votes cast
in person or by proxy at a duly called and held meeting, by the holders of the
Buyer Class A Stock and the Buyer Class B Stock, voting together as one class
(the "Required Buyer Approval"), is the only consent or vote of the holders of
any class or series of capital stock of Buyer necessary to approve the issuance
of the shares of Buyer Class A Stock issuable upon conversion of the Equity
Consideration and no other vote of the holders of any class or series of
capital stock of Buyer is necessary to approve adoption of the Certificate of
Designations establishing the Series A Preferred Stock, the issuance of the
Equity Consideration or any other Transactions. The Board of Directors of
Buyer, acting by unanimous vote of the Board members present (which constituted
a quorum), has resolved to recommend approval by the stockholders
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<PAGE> 24
of Buyer of the issuance of the shares of Buyer Class A Stock issuable upon
conversion of the Equity Consideration and has directed that approval of the
issuance of the shares of Buyer Class A Stock issuable upon conversion of the
Equity Consideration be submitted to the Buyer's stockholders, and the Required
Buyer Approval has been obtained by Buyer by action by its stockholders by
written consent in lieu of a meeting in accordance with Section 228 of the
Delaware General Corporation Law. This Agreement has been duly executed and
delivered by Buyer and, assuming due authorization, execution and delivery by
Seller, constitutes a legal, valid and binding obligation of Buyer enforceable
against it in accordance with its terms, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
(c) Capitalization. The authorized capital stock of Buyer
consists of 17,500,000 shares of Buyer Class A Stock, 2,500,000 shares of Buyer
Class B Stock and 250,000 shares of preferred stock, par value $.01 per share
(the "Preferred Stock"). As of the date hereof, (i) 11,256,983 shares of Buyer
Class A Stock are issued and outstanding, (ii) 1,936,600 shares of Buyer Class
B Stock are issued and outstanding, (iii) 36,667 shares of Buyer Class A Stock
are held in the treasury of Buyer, (iv) no shares of Buyer Class B Stock are
held in the treasury of
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<PAGE> 25
Buyer, (v) 513,850 options to acquire shares of Buyer Class A Stock have been
issued by Buyer and are outstanding, (vi) 164,000 options to acquire shares of
Buyer Class B Stock have been issued by Buyer and are outstanding, (vii) no
shares of Preferred Stock are issued and outstanding, (viii) no shares of
Preferred Stock are held in the treasury of Buyer and (ix) no options to
acquire shares of Preferred Stock have been issued by Buyer and are
outstanding. Except for shares of Buyer Class A Stock, or securities
convertible into or exchangeable for Buyer Class A Stock, issued in connection
with the consummation and financing of the Transactions and shares of Buyer
Class A Stock and Buyer Class B Stock issuable upon exercise of options and
warrants to purchase such shares issued by Buyer and outstanding on the date
hereof, options issued to directors, officers and employees pursuant to
employee benefit plans and programs in effect on the date hereof and warrants
issued in connection with the financing of the Transactions consistent with the
provisions described in Exhibit E, the information contained in the immediately
preceding sentence will be true and correct immediately prior to the Closing.
All the outstanding shares of Buyer's capital stock are duly authorized,
validly issued, fully paid and non-assessable. When issued by Buyer as provided
in this Agreement, the Equity Consideration will be duly authorized, validly
issued, fully paid and non-assessable. The shares of Buyer Class A Stock
issuable upon conversion of the Equity Consideration have been duly authorized
and reserved for issuance upon such conversion, and, upon such conversion, will
be duly
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<PAGE> 26
authorized, validly issued, fully paid and non-assessable. Except as set forth
above, there are no shares of capital stock of Buyer authorized, issued or
outstanding. Except as set forth above or disclosed in Schedule 3.2(c), there
are no existing options, warrants, calls, preemptive rights, subscriptions or
other rights, convertible securities, agreements, arrangements or commitments
of any character, relating to the issued or unissued capital stock of Buyer
obligating any Buyer Entity to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock of, or other equity interest
in, any Buyer Entity or securities convertible into or exchangeable for such
shares or equity interests or obligations of any Buyer Entity to grant, extend
or enter into any such option, warrant, call, subscription or other right,
convertible security, agreement, arrangement or commitment. Except for the
Consent Agreement, there are no agreements or arrangements regarding voting or
transfer of any capital stock of any Buyer Entity. Except as set forth on
Schedule 3.2(c), all of the outstanding shares of capital stock of each of
Buyer's Subsidiaries are beneficially owned by Buyer, directly or indirectly,
and all such shares have been duly authorized, validly issued and are fully
paid and nonassessable and are owned by a Buyer Entity free and clear of all
liens, charges, security interests, options, claims or encumbrances of any
nature whatsoever (collectively, "Liens").
(d) Consents and Approvals; No Violations. Except as set forth
on Schedule 3.2(d) and for all filings, permits, authorizations, consents and
approvals as may be required under,
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and other applicable requirements of, the HSR Act, state and foreign
competition, antitrust and takeover laws, including applicable laws of
Australia, Brazil, Canada, Ireland, Mexico, New Zealand and Portugal and
applicable regulations of the European Union, neither the execution, delivery or
performance of this Agreement by Buyer nor the consummation by Buyer of the
Transactions will (i) conflict with or result in any breach of any provision of
the certificate of incorporation or by-laws or similar organizational documents
of any Buyer Entity, (ii) require any Buyer Entity to make any filing with, or
any Buyer Entity to obtain any permit, authorization, consent or approval of,
any Governmental Entity, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness (collectively, the "Buyer Debt
Instruments"), lease, concession agreement, franchise agreement, license,
contract, agreement or other instrument or obligation to which any of the Buyer
Entities is a party or by which any of them or any of their properties or assets
may be bound (a "Buyer Agreement") or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to any of the Buyer Entities or
any of their properties or assets, except, in the case of clauses (ii), (iii)
and (iv), for failures to make filings, or to obtain permits, authorizations,
consents or approvals, or violations, breaches,
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defaults, or rights of termination, amendment, cancellation or acceleration,
which would not have a Buyer Material Adverse Effect.
(e) SEC Reports and Financial Statements; Proxy Statement. (i)
Buyer has filed with the Securities and Exchange Commission (the "SEC"), and has
heretofore made available to Seller true and complete copies of, all forms,
reports, schedules, statements and other documents required to be filed by it
and its Subsidiaries since January 1, 1996 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") (as such documents have been amended since
the time of their filing, collectively, the "Buyer SEC Documents"). As of their
respective dates or, if amended, as of the date of the last such amendment, the
Buyer SEC Documents (i) 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 and (ii) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be, and the applicable rules and regulations of the SEC thereunder.
Each of the consolidated financial statements included in the Buyer SEC
Documents complies in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, has been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except as may
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be indicated in the notes thereto) and fairly presents in all material respects
the consolidated financial position and the consolidated results of operations
and cash flows (and changes in financial position, if any) of Buyer and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein (subject, in the case of unaudited interim financial statements, to
normal year end adjustments) (the "Financial Statements").
(ii) The Information Statement and/or Proxy Statement
(each as defined in Section 4.3) (or any amendments thereof or supplements
thereto), at the date mailed to Buyer's stockholders and, in the case of any
Proxy Statement, at the time of the Stockholders Meeting (as defined in Section
4.3), will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading, except that Buyer makes no representation or warranty as
to information provided in writing by Seller or the Company (or on their
behalf) to Buyer expressly for use in the Information Statement and/or Proxy
Statement. The Information Statement and/or Proxy Statement will comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
(f) Absence of Changes. Since September 30, 1996, except as
may be disclosed in this Agreement or in the Schedules hereto, there has not
occurred any material adverse change in the
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business, financial condition or results of operations of the Buyer Entities
taken as a whole, excluding any change resulting from (i) general economic
conditions, (ii) any occurrence or condition affecting the vehicle rental
industry generally or (iii) any occurrence or condition arising out of the
execution, delivery or performance of this Agreement and the consummation of
the Transactions or the public announcement of any thereof.
(g) Litigation. Except as disclosed in the Buyer SEC Documents
delivered to Seller prior to the date hereof, as of the date hereof, there is no
action, suit or proceeding before or by any Governmental Entity, domestic or
foreign, now pending or, to Buyer's knowledge, threatened against any Buyer
Entity which, if adversely determined, would have a Buyer Material Adverse
Effect.
(h) Title to Properties; Liens and Encumbrances. Except for
assets disposed of since September 30, 1996 in the ordinary course of business,
one of the Buyer Entities has marketable title to or a valid leasehold interest
in all of the tangible assets (i) capitalized on or included in the consolidated
balance sheet of Buyer and its Subsidiaries at September 30, 1996 included in
the Financial Statements, and (ii) acquired by a Buyer Entity after September
30, 1996 and which would be capitalized on or included in such a balance sheet
prepared as of the date hereof, subject only to (A) statutory Liens arising or
incurred in the ordinary course of Buyer's and its Subsidiaries' businesses, (B)
Liens disclosed or reflected in the Financial Statements, (C) Liens for Taxes
(as defined in Section 3.2(l)) not yet delinquent or the validity of which is
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being contested in good faith by appropriate proceedings, (D) Liens which
constitute valid leases or subleases from a Buyer Entity to a third party, (E)
Liens and defects of title set forth in Schedule 3.2(h) and (F) Liens and
defects of title that do not have a Buyer Material Adverse Effect (Liens of the
types identified in clauses (A) through (F) above being referred to as
"Permitted Liens").
(i) Material Contracts. Each written Buyer Agreement which is
filed as an exhibit to the Buyer SEC Documents (each, a "Material Buyer
Agreement") is valid and binding (except to the extent that the invalidity or
nonbinding nature of any Material Buyer Agreement would not have a Buyer
Material Adverse Effect) and (ii) no Buyer Entity is in default in the
performance of its obligations under any such Material Buyer Agreement, except
for defaults which would not have a Buyer Material Adverse Effect. The Buyer
Entities have no material unwritten agreements.
(j) Labor Matters. Except as set forth on Schedule 3.2(j) or
as disclosed in the Buyer SEC Documents filed with the SEC prior to the date
hereof, no labor dispute with employees of any Buyer Entity exists or, to
Buyer's knowledge, is threatened which would have a Buyer Material Adverse
Effect.
(k) Employee Programs. Schedule 3.2(k) sets forth, as of the
date of this Agreement:
(i) Each "employee benefit plan" as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), that is covered by ERISA and that is maintained or
otherwise contributed to
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by the Buyer Entities for the benefit of the employees of the Buyer
Entities (each a "Plan"), copies or descriptions of which have been
furnished or made available to Seller (together with the most recent
Annual Report on Form 5500 required to be filed by the Buyer Entities
in connection with any Plan);
(ii) Each material plan or arrangement not subject to
ERISA maintained, or otherwise contributed to, by the Buyer Entities
for the benefit of its U.S. employees and providing for deferred
compensation, bonuses, stock options, employee insurance coverage or
any similar compensation or welfare benefit plan (each a "Benefit
Arrangement"), copies or descriptions of which have been furnished or
made available to Seller;
(iii) Each material plan or arrangement not subject to
ERISA maintained, or otherwise contributed to, by the Buyer Entities
for the benefit of non-U.S. employees ("Foreign Employees"), other
than plans or arrangements required to be maintained, or otherwise
contributed to, pursuant to applicable laws or regulations of non-U.S.
jurisdictions, that provides for retirement benefits, termination
benefits, deferred compensation, bonuses, stock options, employee
insurance coverage or any similar compensation or welfare benefit plan
(each a "Foreign Plan" and, together with the Plans and Benefit
Arrangements, the "Employee Benefit Programs"), copies or descriptions
of which have been furnished or made available to Seller;
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(iv) Each "multiemployer plan" (as such term is defined in
Section 3(37) of ERISA) that is contributed to by the Buyer Entities,
copies or descriptions of which have been furnished or made available
to Seller; and
(v) Each written agreement with any employee of any Buyer
Entity involving an amount which in the aggregate involves in excess of
$500,000 and each collective bargaining agreement to which any Buyer
Entity is a party.
(l) Taxes. Except as set forth on Schedule 3.2(l), each Buyer
Entity and any consolidated, combined or unitary group for Tax (as defined
below) purposes of which Buyer or any of its Subsidiaries is or has been a
member has timely filed all Tax Returns required to be filed by it, has paid all
Taxes due, has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid to employees, independent contractors or
other third parties, or has provided adequate reserves in its Financial
Statements for (or otherwise has adequately provided for) any Taxes that have
not been paid except where the failure to make such filings, pay such Taxes or
provide for such reserves or Taxes would not have a Buyer Material Adverse
Effect. Except as set forth on Schedule 3.2(l), (i) there is no claim concerning
any liability of any Buyer Entity for Taxes made by any Taxing authority in
writing which has not been fully resolved, (ii) Buyer is not under audit for any
tax year, (iii) no Buyer Entity has in effect a waiver of any statute of
limitations with respect to Taxes and (iv) no Buyer Entity is obligated to make
any payments for which a deduction will be
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disallowed under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code").
As used herein, "Taxes" shall mean any taxes of any kind,
including but not limited to those on or measured by or referred to as income,
gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
value added, property or windfall profits taxes, customs, duties or similar
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
governmental authority, domestic or foreign. As used herein, "Tax Return" shall
mean any return, report or statement required to be filed with any governmental
authority with respect to Taxes.
(m) Government Licenses, Permits and Related Approvals. Except
as set forth in Schedule 3.2(m), the Buyer Entities have each license, permit,
consent, approval, authorization, qualification and order of any Governmental
Entity necessary to enable the Buyer Entities to conduct their respective
businesses as presently conducted and are in compliance with the requirements
thereunder, except where the failure to have any such license, permit, consent,
approval, authorization, qualification or order, or to be in compliance
therewith, does not have a Buyer Material Adverse Effect.
(n) Compliance. Except as set forth in Schedule 3.2(n), no
Buyer Entity is in violation of any law, rule, regulation, order, judgment or
decree applicable to any of the
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Buyer Entities or by which any of their respective properties are bound or
affected, except for any such violations which do not have a Buyer Material
Adverse Effect.
(o) Environmental Liability. Except as disclosed (i) in the
Financial Statements or the notes thereto, (ii) in the environmental reports
listed on Schedule 3.2(o) or (iii) on Schedule 3.2(o), and except for such
matters that, alone or in the aggregate, do not have a Buyer Material Adverse
Effect, to Buyer's knowledge, (i) the Buyer Entities are in compliance with all
applicable Environmental Laws (as defined below); (ii) the properties owned or
operated by the Buyer Entities (including soil, groundwater or surface features)
(the "Properties") do not contain any Hazardous Substances (as defined below) at
a level which requires remedial activity under applicable Environmental Law
where the Hazardous Substance resulted from activity of the Buyer Entities;
(iii) no Buyer Entity has received written notice of any claims or written
demands alleging that Buyer is in violation of, or liable under, any
Environmental Law; and (iv) the Buyer Entities are not subject to liability for
any off-site disposal or contamination.
For purposes of this Agreement, "Environmental Law" means any
current law, regulation, order or decree relating to pollution, contamination,
wastes, Hazardous Substances or the environment, including any regulation
pertaining to underground storage tanks and cleanup of releases from such
tanks; and "Hazardous Substance" means any substance, chemical or material that
is listed, classified under or regulated as hazardous or
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toxic or as a pollutant by any Governmental Entity pursuant to any Environmental
Law, including petroleum and petroleum products.
Seller acknowledges and agrees that the representation and
warranty contained in this Section 3.2(o) is the only representation and
warranty made by Buyer or any other person to Seller with respect to the
subject matter of this Section 3.2(o), no other representation or warranty
contained in this Agreement shall apply to such subject matter and no other
representation or warranty, express or implied, is being made by Buyer or any
other person with respect to such subject matter.
(p) Available Funds. At the Closing, Buyer will have
sufficient funds to pay the following (collectively, the "Required Payments"):
(i) the Share Purchase Price, (ii) the Purchase Price (as defined in the Common
Stock Purchase Agreement), (iii) the Purchase Price (as defined in the Budget
Stock Purchase Agreement) and (v) the amount of all Other Indebtedness (as
defined in Section 4.6) and all accrued but unpaid interest through the Closing
Date, which funds will be available at the Closing to make the Required
Payments. Buyer has obtained a binding written commitment from Credit Suisse
First Boston Corporation to obtain $225 million, pursuant to the commitment
letter attached as Exhibit E hereto.
(q) No Registration. Buyer is aware that the Shares have not
been registered under the Securities Act, or under any state securities laws.
Buyer is not an underwriter (within the meaning of such term under the
Securities Act) with respect to
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the Shares and is purchasing the Shares solely for investment, with no present
intention to distribute any such Shares to any person, and Buyer will not sell
or otherwise dispose of such Shares except in compliance with the registration
requirements under the Securities Act and the rules and regulations promulgated
thereunder, and other applicable securities laws, or pursuant to exemptions
therefrom.
(r) Registration Rights. The registration rights agreements
listed on Schedule A to the Preferred Stockholders Agreement are the only
agreements (including amendments thereof) with respect to registration rights
that have been entered into by Buyer. Such agreements have not been amended or
otherwise modified after the respective dates thereof (except for amendments
listed on such Schedule A).
(s) Finders' Fees. Buyer has not retained, and is not subject
to the valid claim of, any finder, broker, consultant or financial advisor in
connection with the Transactions who might be entitled to a fee or commission
from Buyer in connection with the Transactions, other than Credit Suisse First
Boston Corporation. Buyer will be solely responsible for paying all fees and
expenses that become due and payable to Credit Suisse First Boston Corporation
in connection with the Transactions.
(t) Other Agreement Representations and Warranties. Buyer
repeats for the benefit of Seller each of its representations and warranties
made in Section 3.2 of the Budget Stock Purchase Agreement and in Section 3.2 of
the Common Stock Purchase Agreement, respectively, which representations and
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warranties are incorporated herein by reference as if set forth in full herein.
SECTION 3.3 Representations and Warranties of Seller and
Buyer. Each of Seller and Buyer represents and warrants to the other that it is
the explicit intent of each party hereto that Seller and Buyer are making no
representation or warranty whatsoever, express or implied, including any
implied warranty as to condition, merchantability or suitability, as to the
properties, assets or future prospects or performance of the Company Entities
(as defined in the Budget Stock Purchase Agreement), the Buyer Entities or such
properties or assets and that Buyer is taking the Company Entities, and Seller
is taking the Equity Consideration, respectively, "as is" and "where is,"
except for the express representations and warranties of the Company in the
Budget Stock Purchase Agreement or in any schedule or exhibit thereto, or in
any certificate, document or other instrument contemplated thereby and
delivered in connection therewith and the express representations and
warranties of Buyer herein or in any schedule or exhibit hereto, or in any
certificate, document or other instrument contemplated hereby and delivered in
connection herewith, respectively.
SECTION 3.4 Disclosure on Schedules. Disclosure of any fact or
item in any Schedule or Exhibit referenced by a particular Section of this
Agreement shall, should the existence of the fact or item be relevant to any
other Section of this Agreement, be deemed to be disclosed with respect to such
other Section whether or not a specific cross reference appears.
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Disclosure of any fact or item in any Schedule or Exhibit shall not necessarily
mean that such fact or item, individually, would prevent or materially hinder
or delay the ability of Seller to perform its obligations under this Agreement
or to consummate the Transactions or would have a Company Material Adverse
Effect (as defined in the Budget Stock Purchase Agreement), or would have a
Buyer Material Adverse Effect, respectively.
ARTICLE IV
COVENANTS OF THE PARTIES
SECTION 4.1 Performance by Common Stockholder Under Common
Stock Purchase Agreement. Seller shall cause the Common Stockholder to sell to
Buyer, at the Closing contemplated by the Common Stock Purchase Agreement and
subject to the terms and conditions thereof, the issued and outstanding shares
of Common Stock owned by the Common Stockholder.
SECTION 4.2 Certain Obligations of Buyer With Respect to
Common Stock Purchase Agreement and Budget Stock Purchase Agreement. (a)
Subject to and in accordance with the terms and conditions of the Common Stock
Purchase Agreement and the Budget Stock Purchase Agreement, Buyer agrees with
Seller to perform all of the covenants contained in such agreements required to
be performed by Buyer and to satisfy all of the conditions contained in such
agreements to be satisfied by Buyer.
(b) Buyer shall not waive any right, breach, default or
condition under the Common Stock Purchase Agreement or under the Budget Stock
Purchase Agreement without the prior written consent of Seller, unless such
waiver by Buyer includes an
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absolute and unconditional release of Seller from any and all Buyer Losses (as
defined in Section 7.2) that may arise out of or result from the right, breach,
default or condition waived.
SECTION 4.3 Information Statement; Stockholders Meeting; Proxy
Statement. (a) As soon as practicable following the date of this Agreement,
Buyer shall prepare and file with the SEC an information statement pursuant to
Rule 14c-2 under the Exchange Act (the "Information Statement") and shall use
all reasonable efforts to have the Information Statement cleared by the SEC as
promptly as practicable. Seller shall cooperate with Buyer in the preparation
of the Information Statement. Buyer shall give Seller and its counsel the
opportunity to review and comment on the Information Statement prior to its
being filed with the SEC, shall give Seller and its counsel the opportunity to
review and comment on all amendments and supplements to the Information
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the SEC, and shall
consider in good faith all comments and suggestions of Seller or its counsel
with respect to the Information Statement, any such amendments or supplements
and any such responses or replies to comments. Buyer will provide to Seller
promptly copies of all correspondence between it or any of its representatives
and the SEC relating to the Information Statement. Seller shall furnish all
information concerning it required to be included in the Information Statement.
In addition, as promptly as practicable after the date hereof, Buyer shall
prepare a notice pursuant to Section
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228(d) of the Delaware General Corporation Law (the "Notice"). As promptly as
practicable after the date of this Agreement and consistent with applicable law,
the Information Statement and the Notice will be mailed to the stockholders of
Buyer. Buyer will advise Seller promptly after it receives notice thereof, of
the time when any filing of the Information Statement, or of any supplement or
amendment thereto, has been made, or of the issuance of any stop order with
respect to, or any request by the SEC or the National Association of Securities
Dealers, Inc. for amendment of, the Information Statement.
(b) If, for any reason, a meeting of stockholders of Buyer is
required to be held or is determined by Buyer to be advisable to be held, in
order to obtain or make effective the requisite approval of Buyer's stockholders
to the issuance of the Buyer Class A Stock issuable upon conversion of the
Equity Consideration, then Buyer, acting through its Board of Directors, shall,
in accordance with applicable law and Buyer's certificate of incorporation and
by-laws, (i) duly call, give notice of, convene and hold a special meeting of
its stockholders as soon as practicable after such determination for the purpose
of considering and taking action to approve the issuance of the shares of Buyer
Class A Stock issuable upon conversion of the Equity Consideration (the
"Stockholders Meeting") and (ii) include in the proxy statement to be sent to
the stockholders of Buyer (such proxy statement, as amended or supplemented, is
herein referred to as the "Proxy Statement") the recommendation of the Board of
Directors of Buyer that the stockholders of Buyer
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approve the issuance of the shares of Buyer Class A Stock issuable upon
conversion of the Equity Consideration, unless, in the case of this clause (ii)
only, otherwise necessary under the applicable fiduciary duties of the
directors of Buyer, as determined by the Board of Directors of Buyer, in good
faith after consultation with independent outside legal counsel. Buyer shall
take all reasonable action to solicit and obtain the Required Buyer Approval.
(c) If a Stockholders Meeting is to be held as provided in
Section 4.3(b), then Buyer promptly shall prepare and file with the SEC a Proxy
Statement and shall use all reasonable efforts to have the Proxy Statement
cleared by the SEC as promptly as practicable. Seller shall cooperate with
Buyer in the preparation of the Proxy Statement. Buyer shall give Seller and
its counsel the opportunity to review and comment on the Proxy Statement prior
to its being filed with the SEC, shall give Seller and its counsel the
opportunity to review and comment on all amendments and supplements to the
Proxy Statement and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC, and
shall consider in good faith all comments and suggestions of Seller or its
counsel with respect to the Proxy Statement, any such amendments or supplements
and any such responses or replies to comments. Buyer will provide to Seller
promptly copies of all correspondence between it or any of its representatives
and the SEC relating to the Proxy Statement. Seller shall furnish all
information concerning it required to be included in the Proxy
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Statement. As promptly as practicable after a Board of Directors' determination
that a Stockholders Meeting is necessary or advisable and consistent with
applicable law, the Proxy Statement will be mailed to the stockholders of
Buyer. Buyer will advise Seller promptly after it receives notice thereof, of
the time when any filing of the Proxy Statement, or of any supplement or
amendment thereto, has been made, or of the issuance of any stop order with
respect to, or any request by the SEC or the National Association of Securities
Dealers, Inc. for amendment of, the Proxy Statement.
SECTION 4.4 Insurance Other than Workers' Compensation. (a)
Buyer acknowledges and agrees that, effective at 12:01 a.m., Eastern time, on
the Closing Date, all insurance coverage provided by Seller for any Company
Entity shall be terminated. A list of such insurance coverage is set forth on
Schedule 4.4.
(b) Buyer shall, promptly following the Closing, cause the
Company to return to Seller, and shall not thereafter request or permit the
Company to request the issuance of, any certificates of insurance or insurance
filings regarding any Company Entity from Seller's insurers in the name of
Seller.
(c) Any unearned premiums paid by Seller on behalf of any
Company Entity will be considered fully earned as of the Closing Date. No
return premium will be due to any Company Entity for any insurance policies
listed in Schedule 4.4. From and after the Closing Date, Buyer and/or the
Company shall be solely responsible for the pursuit or handling of any existing
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claims related to any Company Entity's insurance policies whether in process or
filed after the Closing Date.
(d) From and after the Closing Date, Buyer and/or the Company
shall be solely responsible for obtaining any and all insurance coverage for or
on behalf each Company Entity, and Buyer agrees that neither Seller nor any
affiliate of Seller shall have any obligation or liability whatsoever with
respect to such insurance.
SECTION 4.5 Further Assurances. (a) Subject to Section 4.5(b),
each of Seller and Buyer shall use reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the Transactions on the Closing Date and to satisfy the conditions
contained in Section 5.1 and, in the case of Seller, in Section 5.2 or, in the
case of Buyer, in Section 5.3.
(b) Notwithstanding anything to the contrary herein, Buyer
shall, and shall cause its affiliates to, (i) promptly effect all necessary
registrations and filings, including, but not limited to, filings under the HSR
Act and submissions of information requested by any Governmental Entity,
domestic or foreign, to secure antitrust clearance for the consummation of the
Transactions and (ii) promptly take all steps (including executing agreements
and submitting to judicial or administrative orders) required by the Federal
Trade Commission or its staff, the Assistant Attorney General in charge of the
Antitrust Division of the Department of Justice or such person's staff, any
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state attorney general or its staff, or any similar foreign Governmental
Entity, to secure antitrust clearance for the consummation of the Transactions
(including by avoiding or setting aside any injunction or other order of any
court of competent jurisdiction or other Governmental Entity), including, if
required, all steps to make arrangements for, or to effect the sale or other
disposition of, particular assets or categories of assets or businesses of
Buyer or any of its affiliates, or assets or businesses of the Company
Entities, and, if required, to hold separate (including pursuant to
arrangements which restrict, limit or prohibit access to) the assets or
businesses of the Company Entities pending any such sale or other disposition.
All the actions to be taken by Buyer or its affiliates pursuant to this Section
4.5(b) will be consistent with their respective obligations under applicable
law or any agreement to which any of such persons is a party. Each of Buyer and
Seller agrees promptly to inform the other of any communication received by it
from the Federal Trade Commission, the Antitrust Division of Department of
Justice or any other Governmental Entity regarding any of the Transactions.
(c) If at any time after the Closing Date any further action
is reasonably necessary to carry out the purposes of this Agreement, the
parties hereto shall take or cause to be taken such action, including the
execution and delivery of such further instruments and documents as may be
reasonably requested by the other party for such purposes or otherwise to
consummate and give effect to the Transactions.
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SECTION 4.6 Repayment of Seller Indebtedness. (a) At the
Closing, Buyer shall:
(i) cause the Company to, immediately upon the Company's
receipt of the Purchase Price (as defined in the Budget Stock Purchase
Agreement), comply with the provisions of Section 4.5(a) of the Budget
Stock Purchase Agreement;
(ii) cause to be repaid to Seller and/or its affiliates,
respectively, including FMCC, all indebtedness owed to each such
person, under the credit facilities set forth on Schedule 4.6
(collectively, the "Facilities"), except for an amount of such
indebtedness equal to the Cancellation Amount (as defined in Section
5.2(d)) (the "Other Indebtedness") and all accrued but unpaid interest
through the Closing Date;
(iii) cause the obligations of Seller and/or its affiliates,
respectively, including FMCC, to make further extensions of credit
under each of the Facilities to be terminated; and
(iv) cause the other obligations of Seller and/or its
affiliates, respectively, including FMCC, in respect of the Facilities,
including all obligations pursuant to each letter of credit, support
agreement and other agreement or arrangement referred to on Schedule
4.6 (collectively, the "Other Arrangements"), to be terminated and
replaced by a substitute arrangement, except for the $25 million letter
of credit issued in support of the Budget Fleet Finance asset-backed
medium term note program, which shall be fully
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collateralized by a letter of credit, in form satisfactory to FMCC,
issued for the benefit of FMCC by Credit Suisse or another financial
institution acceptable to Seller, in its sole discretion.
(b) Prior to the Closing, Buyer shall file the Certificate of
Designations with the Secretary of State of the State of Delaware in accordance
with the Delaware General Corporation Law.
SECTION 4.7 Access to Information Concerning Buyer's Properties
and Records; Confidentiality. (a) During the period commencing on the date
hereof and ending on the Closing Date, Buyer shall, and shall cause the other
Buyer Entities to, upon reasonable request, afford to Seller, its counsel,
accountants and other authorized representatives reasonable access during normal
business hours to the properties, books and records of the Buyer Entities, in
order that Seller may have the opportunity to make such reasonable
investigations as it shall desire to make of the business and affairs of the
Buyer Entities. Buyer will, and will cause the other Buyer Entities and their
respective officers, employees, accountants and other agents to, furnish to
Seller such additional financial and operating data and information as Seller
may from time to time reasonably request. Seller will hold any such information
which is nonpublic in confidence in accordance with the provisions of the
existing confidentiality agreement among Seller, the Company and Buyer, as if
Buyer were the provider of confidential information thereunder.
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SECTION 4.8 Conduct of the Buyer Business. Except as
contemplated by this Agreement and in connection with the Transactions, except
with the prior written consent of Seller (which consent shall not be
unreasonably withheld or delayed) and except as set forth on Schedule 4.8,
Buyer agrees, during the period from the date hereof until the Closing Date,
that:
(a) the businesses of the Buyer Entities shall be conducted in
the ordinary and usual course consistent with past practice and each
Buyer Entity shall use reasonable efforts to preserve its business
organization intact and maintain its existing relations with material
customers, employees, creditors and business partners and with all
persons or entities with which Buyer has entered into franchise
agreements, concession agreements and material leases;
(b) no Buyer Entity shall adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other material reorganization of Buyer or any of
its Subsidiaries; and
(c) no Buyer Entity shall enter into an agreement, contract,
commitment or arrangement to do any of the foregoing, or authorize any
of the foregoing.
SECTION 4.9 No Solicitation by Seller. Neither Seller nor any
of its affiliates shall solicit, initiate or encourage the submission of any
proposal or offer from any person or engage in discussions with any person or
enter into any agreement with any person relating to the acquisition of capital
stock or a
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substantial portion of the assets of the Company Entities taken as a whole or
any merger, consolidation, share exchange or other similar transaction
involving any Company Entity. Seller will notify Buyer promptly if any person
makes any proposal, offer or inquiry with respect to any of the foregoing.
SECTION 4.10 Listing of Class A Common Stock. If required by
the principal securities exchange or securities quotation system on which the
Buyer Class A Stock is then admitted for trading, Buyer shall use its
reasonable efforts to cause the shares of Buyer Class A Stock issuable upon
conversion of the Equity Consideration to be approved for listing on such
exchange or quotation system, subject to official notice of issuance; provided
that the foregoing shall in no way limit or affect Buyer's obligation under the
Preferred Stockholders Agreement from and after the execution and delivery
thereof.
SECTION 4.11 No Registration of Certain Transfers. Buyer shall
not register the transfer (book-entry or otherwise) of any certificated or
uncertificated interest representing any of the shares of Buyer Class A Stock
or Buyer Class B Stock owned by any of the Stockholders, unless such transfer
is made in compliance with the Consent Agreement.
SECTION 4.12 Special Bonus Program. Concurrently with the
Closing, Seller shall pay to Buyer or the Company, as Buyer shall direct, an
amount in cash equal to $2,400,000 in connection with the establishment by the
Company of a special bonus program (the "Special Bonus Program") providing for
bonus payments to Company employees with an aggregate value equal to
$4,800,000.
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The Special Bonus Program shall be on such terms as Seller and Buyer shall
agree after good faith negotiations and, in any event, shall provide for broad
participation by employees of the Company (it being understood that it is the
intent of the parties that the Special Bonus Program provide incentive to
approximately 1,400 employees of the Company and that, subject to agreement
between Seller and Buyer, all or a portion of the benefits under such Special
Bonus Program may be stock options issued by Buyer); provided that Buyer may,
at its option, fund one-half of the Special Bonus Program in stock options of
Buyer.
SECTION 4.13 Cancellation of Certain Indebtedness.
Concurrently with the Closing, Seller shall, and shall cause its affiliates to,
cancel indebtedness of the Company owed to them in an aggregate principal
amount equal to the Cancellation Amount (as defined in Section 5.2(d)).
ARTICLE V
CLOSING CONDITIONS
SECTION 5.1 Conditions to Each Party's Obligations. The
respective obligations of each party to effect the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or other legal restraint or prohibition
preventing the consummation of the Transactions shall have been issued
by any court of competent jurisdiction or by any governmental or
regulatory body and still be in effect; nor shall any statute, rule,
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regulation or executive order have been promulgated or enacted by any
Governmental Entity which enjoins or otherwise prohibits or makes
illegal the consummation of the Transactions.
(b) All applicable waiting periods under the HSR Act
(including any extensions thereof) shall have expired or been
terminated, and all applicable approvals and clearances under any
other applicable merger control law or regulation shall have been
obtained, except those for which the failure to obtain such approval
or clearance would not result in a Company Material Adverse Effect (as
defined in the Budget Stock Purchase Agreement).
(c) The Required Buyer Approval shall have been obtained.
(d) The closing of the transactions contemplated by the Common
Stock Purchase Agreement shall have been consummated.
(e) The closing of the transactions contemplated by the Budget
Stock Purchase Agreement shall have been consummated.
(f) Concurrently with the Closing, Seller shall have withdrawn
its election notice to the Common Stockholder dated July 11, 1996
delivered pursuant to Section 3.3(b) of the Stockholders Agreement.
(g) Concurrently with the Closing, the shares of Series X
Preferred Stock held by the Bank shall have been
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redeemed in accordance with the terms of the Series X Preferred Stock.
(h) The Stockholders Agreement shall have been terminated.
SECTION 5.2 Conditions to the Obligations of Buyer. The
obligation of Buyer to effect the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions:
(a) The representations and warranties of Seller shall be true
and accurate as of the Closing Date as if made at and as of such date
(except for those representations and warranties that address matters
only as of a particular date or only with respect to a specific period
of time, which need only be true and accurate as of such date or with
respect to such period), except where the failure of such
representations and warranties to be so true and correct (without
giving effect to any exception contained therein for matters that would
or would not, as the case may be, prevent or materially hinder or delay
the ability of Seller to perform its obligations under this Agreement
and to consummate the Transactions), would not, individually or in the
aggregate, prevent or materially hinder or delay the ability of Seller
to perform its obligations under this Agreement and to consummate the
Transactions.
(b) Seller shall have performed in all material respects its
obligations hereunder required to be performed by it at or prior to
the Closing.
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(c) Seller shall have delivered to Buyer a certificate, duly
executed by a duly authorized officer, to the effect set forth in
Sections 5.2(a) and 5.2(b).
(d) Seller and/or its affiliates shall have cancelled
indebtedness of the Company owed to them in an aggregate principal
amount equal to the Cancellation Amount. For purposes hereof, the term
"Cancellation Amount" means $498 million, less the sum of (i) the
principal amount of indebtedness repaid to Seller and/or its
affiliates, including FMCC, pursuant to Section 4.5(a) of the Budget
Stock Purchase Agreement, plus (ii) the amount of the Purchase Debt.
(e) Seller and/or its affiliates, including FMCC, shall
deliver such instruments and documents as Buyer may reasonably request
to evidence the transactions contemplated by Section 5.2(d) and
Section 4.6.
(f) Seller shall have executed and delivered to Buyer the
Preferred Stockholders Agreement, substantially in the form of Exhibit
C.
SECTION 5.3 Conditions to the Obligations of Seller. The
obligation of Seller to effect the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions:
(a) The representations and warranties of Buyer shall be true
and accurate as of the Closing Date as if made at and as of such date
(except for those representations and warranties that address matters
only as of a particular date
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or only with respect to a specific period of time which need only be
true and accurate as of such date or with respect to such period),
except where the failure of such representations and warranties to be
so true and correct (without giving effect to any exception contained
therein for matters that would or would not, as the case may be, have
a Buyer Material Adverse Effect), would not, individually or in the
aggregate, have a Buyer Material Adverse Effect.
(b) Buyer shall have performed in all material respects its
obligations hereunder required to be performed by it at or prior to
the Closing.
(c) Buyer shall have delivered to Seller a certificate, duly
executed by its Chief Executive Officer or Chief Financial Officer, to
the effect set forth in Sections 5.3(a) and 5.3(b).
(d) The Company and Buyer shall have executed and delivered to
Seller a Supply Agreement, substantially in the form of Exhibit A, and
an Advertising Agreement, substantially in the form of Exhibit B.
(e) (i) Seller and/or its affiliates, including FMCC, shall
have received from the Company an amount in cash equal to the Purchase
Price (as defined in the Budget Stock Purchase Agreement), which
amount shall have been applied to repay a portion of the outstanding
indebtedness of the Company to such persons as such persons shall have
directed; (ii) Seller and/or its affiliates, respectively, including
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FMCC, shall have received an amount in cash equal to the amount of all
Other Indebtedness, which amount shall have been applied to repay the
Other Indebtedness, and shall have received an amount equal to all
accrued but unpaid interest through the Closing Date; (iii) the
obligations of Seller and/or its affiliates, respectively, including
FMCC, to make further extensions of credit under each of the Facilities
shall have been terminated; and (iv) each Other Arrangement shall have
been terminated and replaced by a substitute arrangement.
(f) Since September 30, 1996, except as may be disclosed in
this Agreement or in the Schedules hereto, there shall not have
occurred any material adverse change in the business, financial
condition or results of operations of the Buyer Entities taken as a
whole, excluding any effect resulting from (i) general economic
conditions, (ii) any occurrence or condition affecting the vehicle
rental industry generally or (iii) any occurrence or condition arising
out of the execution, delivery or performance of this Agreement and
the consummation of the Transactions or the public announcement of any
thereof.
(g) Buyer shall have executed and delivered to Seller a
Preferred Stockholders Agreement, substantially in the form of Exhibit
C.
SECTION 5.4 No Closing Unless All Transactions Occur.
Notwithstanding anything to the contrary in this Agreement or
elsewhere, the Closing shall be deemed not to
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have occurred (and any actions taken by any party hereunder in
connection with the Closing shall be unwound) unless all of the
conditions to closing contained in each of the Common Stock Purchase
Agreement and the Budget Stock Purchase Agreement shall have been
satisfied (or waived in accordance with the terms and conditions of
such agreements) and such closings under such agreements shall have
been consummated in accordance with the terms of such agreements.
ARTICLE VI
TERMINATION
SECTION 6.1 Termination. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual written consent of Buyer and Seller; or
(b) by either Buyer or Seller: (i) if the Closing shall not
have occurred on or prior to October 15, 1997 (the "Cut-off Date");
provided, however, that the right to terminate this Agreement under
this clause (i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or prior to such
date; or (ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use their best efforts
to lift), in each case permanently restraining, enjoining or otherwise
prohibiting
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the transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and non-appealable; or
(c) by Seller, if (i) the Required Buyer Approval shall not
have been obtained by reason of the failure to obtain the required
vote upon a vote at a duly held Stockholders Meeting or by a valid
written consent or (ii) Buyer shall have withdrawn or modified (in a
manner adverse to Seller) its recommendation that the stockholders of
Buyer approve the issuance of the Buyer Class A Stock issuable upon
conversion of the Equity Consideration pursuant to this Agreement.
SECTION 6.2 Effect of Termination. In the event of the
termination of this Agreement as provided in Section 6.1, written notice
thereof shall forthwith be given to the other party and this Agreement shall
forthwith become null and void, and there shall be no liability on the part of
Seller or Buyer except for its breach of this Agreement and except that the
provisions of Article VII and Article VIII shall survive any such termination.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
SECTION 7.1 Survival of Representations and Warranties. The
respective representations and warranties of Seller and Buyer contained in
Article III shall survive the Closing (subject, with respect to remedies for
breach thereof, to Section 7.5), to but not including the first anniversary of
the
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Closing Date and from and after the first anniversary of the Closing Date all
such representations and warranties shall terminate and be of no further force
or effect, except to the extent that, prior to such first anniversary of the
Closing Date, the appropriate Notice Requirement (as defined below) shall have
been complied with. Notwithstanding the preceding sentence, the representations
and warranties of Seller contained in Sections 3.1(a), 3.1(b), 3.1(e) and
3.1(f) and of Buyer contained in Sections 3.2(a), 3.2(b), 3.2(c), 3.2(k),
3.2(l) and 3.2(o) shall survive the Closing (subject, with respect to remedies
for breach thereof, to Section 7.5), to but not including the third anniversary
of the Closing Date and from and after the third anniversary of the Closing
Date all such representations and warranties shall terminate and be of no
further force or effect, except to the extent that, prior to such third
anniversary of the Closing Date, the appropriate Notice Requirement (as defined
below) shall have been complied with; provided that, notwithstanding the
foregoing, all the representations and warranties of Buyer contained in Section
3.2 (other than those contained in Section 3.2(a), 3.2(b) and 3.2(c)) shall
terminate, and no longer be of force or effect from and after the first date
after the Closing Date when Seller no longer beneficially owns any Equity
Consideration or shares of Buyer Class A Stock issuable upon conversion thereof.
For purposes of this Agreement, the term "Notice Requirement"
means the giving of written notice of the breach of a representation and
warranty (which written notice shall specify
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the particular representation and warranty the breach of which is alleged and
the particular facts underlying each such allegation) as follows:
(a) in the case of an alleged breach of a representation and
warranty of Seller under this Agreement, to Seller in accordance with
and no later than the time specified in the first sentence or second
sentence, as applicable, of this Section 7.1;
(b) in the case of an alleged breach of a representation and
warranty of the Company under the Budget Stock Purchase Agreement, to
the Company and to Seller in accordance with and no later than the time
specified in the first sentence or second sentence, as applicable, of
Section 7.1 of the Budget Stock Purchase Agreement;
(c) in the case of an alleged breach of a representation and
warranty of the Common Stockholder under the Common Stock Purchase
Agreement, to the Common Stockholder and to Seller in accordance with
and no later than the time specified in the first sentence or second
sentence, as applicable, of Section 7.1 of the Common Stock Purchase
Agreement; and
(d) in the case of an alleged breach of a representation and
warranty of Buyer under this Agreement, to Buyer in accordance with
and no later than the time specified in the first sentence or second
sentence, as applicable, of this Section 7.1.
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SECTION 7.2 Indemnification by Seller. (a) Subject to the
limitations set forth in Section 7.5 and, with respect to Taxes, Sections 7.2(b)
and (c), and subject to compliance by Buyer with the appropriate Notice
Requirement, Seller agrees to indemnify Buyer against, and agrees to protect,
save and keep harmless Buyer from payment of, and hereby assumes liability for
the payment of, all liabilities, obligations, losses, damages, claims, actions,
suits, judgments or settlements, including all costs, expenses and
disbursements, including reasonable attorneys' fees and expenses, solely to the
extent that the amount thereof is not covered by (i) insurance maintained
therefor by Seller or the Company Entities or (ii) a reserve or category of
reserves established and maintained therefor by the Company Entities (which
reserve or category of reserves shall be reflected in the information contained
in the Financial Statements (as defined in the Common Stock Purchase Agreement)
or the notes thereto (collectively, "Buyer Losses"), arising out of or resulting
from (A) any breach by Seller of a representation or warranty contained herein,
(B) any breach by the Company of a representation or warranty contained in the
Budget Stock Purchase Agreement (without giving effect to any exception
contained therein for matters that would or would not, as the case may be, have
a Company Material Adverse Effect (as defined in the Budget Stock Purchase
Agreement), except that, in the case of Section 3.1(o) of the Budget Stock
Purchase Agreement, exceptions for such matters shall be given effect), (C) any
breach by the Common Stockholder of a representation, warranty or covenant
contained
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in the Common Stock Purchase Agreement, or (D) any failure by Seller to perform
any agreement or covenant contained herein.
(b) Seller shall not be required to indemnify Buyer under
Section 7.2(a) for any Buyer Losses related to, or in respect of, Taxes, or
otherwise have any liability for any Taxes, of the Company for the taxable year
of the Company that includes the Closing Date unless, no later than 120 days
prior to the due date (including extensions) for filing any United States
federal, state or local income or franchise tax returns ("Tax Returns") of, or
that include, the Company, Buyer or the Company provides copies of such Tax
Returns to Seller for Seller's review and approval. As a condition to giving its
approval to Buyer for filing such Tax Returns, Seller may request Buyer and/or
the Company to make any changes to such Tax Returns that Seller believes are
warranted or reasonable and Buyer shall make, or cause the Company to make, such
changes to the Tax Returns unless, in the opinion of a nationally recognized
independent certified public accounting firm reasonably acceptable to Seller and
engaged by Buyer (the "Tax Arbitrator"), there is not a reasonable basis for
making such change. The decision of the Tax Arbitrator shall be final and
binding on Buyer and Seller, and the cost thereof shall be borne by the party
whose position does not prevail.
(c) Buyer shall promptly notify Seller in writing of any audit
or administrative or judicial proceeding directly or indirectly involving the
Company or a Subsidiary, which, if determined adversely to the taxpayer, could
give rise to an
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obligation for indemnification under this Section 7.2, and Seller shall have
the right at its own expense to control the conduct of such audit or proceeding
unless Buyer waives its right to indemnification under this Section 7.2 for any
Buyer Losses resulting directly or indirectly from such audit or proceeding.
Buyer also may participate in any such audit or proceeding at its own expense
and, if Seller does not assume the defense of any such audit or proceeding,
Buyer may, without any effect to its right to indemnification under this Section
7.2, defend the same in such manner as it may deem appropriate, including, but
not limited to, settling such audit or proceeding.
SECTION 7.3 Indemnification by Buyer. Subject to compliance by
Seller with the appropriate Notice Requirement, Buyer agrees to indemnify Seller
against, and agrees to protect, save and keep harmless Seller from payment of,
and hereby assumes liability for the payment of, all liabilities, obligations,
losses, damages, claims, actions, suits, judgments or settlements, including all
costs, expenses and disbursements, including reasonable attorneys' fees and
expenses (collectively, "Seller Losses"; each of Buyer Losses and Seller Losses
sometimes referred to herein as "Losses"), arising out of or resulting from (a)
any breach by Buyer of a representation or warranty contained herein (without
giving effect to any exception contained therein for matters that would or would
not, as the case may be, have a Buyer Material Adverse Effect, except that, in
the case of Section 3.2(o), exceptions for such matters shall be given
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effect) or (b) any failure by Buyer to perform any agreement or covenant
contained herein.
SECTION 7.4 Procedures for Certain Claims. (a) In order to be
entitled to indemnification under Section 7.2 or 7.3, whether or not in respect
of, arising out of or involving a Third Party Claim (as defined below), the
party seeking to be indemnified (the "Indemnified Party") shall comply with the
appropriate Notice Requirement; provided, however, that if any party is aware
of an alleged misrepresentation or breach of warranty or agreement, then the
party seeking to be indemnified shall furnish such notice to the other party
hereto promptly upon becoming so aware.
(b) In order to be entitled to indemnification under Section
7.2 or 7.3 in respect of, arising out of or involving a claim, demand or
commencement of any action (a "Third Party Claim") by any third party,
including any Governmental Entity, against Buyer or any Company Entity, on the
one hand, or Seller, on the other hand, the Indemnified Party shall notify the
other party (the "Indemnifying Party") in writing and in reasonable detail of
the Third Party Claim promptly after receipt by such Indemnified Party of
written notice of such Third Party Claim; provided, however, that the failure
to notify the Indemnifying Party shall not relieve it from any liability which
it may have under this Agreement except to the extent it has been materially
prejudiced by such failure.
(c) If a Third Party Claim shall be made and the Indemnified
Party shall notify the Indemnifying Party thereof as
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provided in this Article VII, then the Indemnifying Party shall be entitled to
participate in the defense of such Third Party Claim and, if it elects to do
so, to assume the defense thereof.
(d) After notice from the Indemnifying Party to the
Indemnified Party of its election to assume the defense of the Third Party
Claim, the Indemnifying Party shall not be liable to the Indemnified Party for
any legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof. If the Indemnifying Party assumes such
defense, the Indemnified Party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Party. The Indemnifying Party shall be
liable for the fees and expenses of counsel employed by the Indemnified Party
for any period during which the Indemnifying Party has not assumed the defense
thereof if it ultimately is found to be liable under Section 7.2 or 7.3 to
indemnify the Indemnified Party. If the Indemnifying Party chooses to defend or
prosecute any Third Party Claim, the parties hereto shall (and, in the case of
Buyer, Buyer shall cause the Company Entities to) cooperate reasonably with
each other in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the Indemnifying Party's reasonable request)
the provision to the Indemnifying Party of records and information, to the
extent not prohibited by law or any confidentiality agreement, which are
reasonably relevant to such Third Party Claim, and making employees available
on a mutually convenient basis to provide
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additional information and explanation of any material provided hereunder.
(e) Whether or not the Indemnifying Party shall have assumed
the defense of a Third Party Claim, without the Indemnifying Party's prior
written consent, the Indemnified Party shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim, unless,
in connection with such admission, settlement or compromise, the Indemnified
Party shall assume liability therefor and shall relinquish any claim it may
have to indemnification under Section 7.2 or 7.3, as the case may be. The
Indemnifying Party shall not settle any Third Party Claim without the
Indemnified Party's written consent (which consent shall not be unreasonably
withheld or delayed) if such settlement shall include injunctive or other
relief that affects or relates to the rights or obligations of such Indemnified
Party, other than the obligation to pay monetary damages where such damages
have been satisfied by the Indemnifying Party.
SECTION 7.5 Limitations on Indemnification. (a) Notwithstanding
anything in this Article VII or elsewhere to the contrary, Seller shall not be
required to indemnify Buyer for any Buyer Loss under this Article VII or
otherwise, except to the extent that (i) the breach of the particular
representations and warranties as to which indemnification is sought has
resulted in Losses, individually, in excess of $15,000 and (ii) the breach of
all such representations and warranties as to which indemnification is sought
has resulted in aggregate Losses in
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excess of $2,000,000. Seller shall not, in any event, be required to pay (x)
the first $2,000,000 of Buyer Losses or (y) any Buyer Losses to Buyer under
this Article VII or otherwise to the extent that the aggregate amount of Buyer
Losses theretofore paid by Seller exceeds $40,000,000. Notwithstanding the
foregoing provisions of this Section 7.5(a), the limitations on indemnification
contained in clause (y) of the immediately preceding sentence shall not be
applicable to any claim for indemnification under this Article VII in respect
of a breach by the Company of its representation and warranty contained in
Section 3.1(k) or Section 3.1(l) of the Budget Stock Purchase Agreement.
(b) Notwithstanding anything contained in this Article VII or
elsewhere to the contrary, Seller shall not be required to indemnify Buyer for
any Buyer Loss arising out of or resulting from a breach of the representation
and warranty contained in Section 3.1(o) of the Budget Stock Purchase Agreement,
except for any such Buyer Loss arising out of or resulting from a Third Party
Claim.
SECTION 7.6 Exclusivity of Remedy; Satisfaction of Indemnity
Obligations. (a) The provisions of this Article VII, subject to the limitations
and exclusions of this Article VII, shall be the sole and exclusive remedy, at
law or in equity, of Buyer for any Buyer Losses arising out of or resulting
from any breach by Seller of any representation or warranty contained herein,
by the Company of any representation and warranty contained in the Budget Stock
Purchase Agreement or by the Common
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Stockholder of any representation and warranty contained in the Common Stock
Purchase Agreement. In no event shall Seller be liable to Buyer for any breach
by the Company of any of its covenants contained in the Budget Stock Purchase
Agreement.
(b) In no event shall any party hereto be liable to the other
(or to any other person) for consequential, punitive or special damages arising
out of any breach of the provisions of this Agreement, the Common Stock
Purchase Agreement, or the Budget Stock Purchase Agreement.
(c) In the event Seller shall become obligated to make any
payment pursuant to Section 7.2, then Seller may, at Seller's option, either
(i) make such payment in cash in U.S. dollars or (ii) make such payment by
delivering to Buyer a number of shares of Series A Preferred Stock (rounded up
to the nearest whole share) equal to the product of (x) 0.001 multiplied by (y)
the quotient obtained by dividing (A) the amount of such payment by (B) the
Average Buyer Stock Price (as defined below). Any such delivery shall be made
by Seller's delivery to Buyer of a certificate or certificates representing the
shares of Series A Preferred Stock to be delivered, duly endorsed in blank or
accompanied by stock transfer powers duly executed in blank, with all necessary
stock transfer tax stamps attached thereto and canceled.
For purposes of this Agreement, the "Average Buyer Stock
Price" means the average of the closing prices of the Buyer Class A Stock on
the NYSE, for each trading day in the 10-consecutive trading day period
referred to below on which the
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Buyer Class A Stock is listed on the NYSE, or The Nasdaq National Market, for
each trading day in the 10-consecutive trading day period referred to below on
which the Buyer Class A Stock is not listed on the NYSE but is listed on The
Nasdaq National Market, in each case as reported in The Wall Street Journal,
for the 10 consecutive trading days immediately preceding the second trading
day prior to the date of the payment.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. All notices, requests, demands or other
communications provided herein shall be made in writing and shall be deemed to
have been duly given (unless otherwise specifically provided in any Section of
this Agreement) if delivered as follows:
If to Seller:
Ford Motor Company
The American Road
Dearborn, Michigan 48121
Attention: Secretary
Fax: (313) 337-9591
Tel: (313) 323-2260
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: David J. Sorkin, Esq.
Fax: (212) 455-2502
Tel: (212) 455-2000
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If to Buyer:
Team Rental Group, Inc.
125 Basin Street, Suite 210
Daytona Beach, Florida 32114
Attention: Chief Executive Officer
Fax: (904) 238-7461
Tel: (904) 238-7035
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: John J. Kelley, Esq.
Fax: (404) 572-5100
Tel: (404) 572-4600
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on (i) the date of
delivery if sent by messenger, (ii) on the business day following the business
day on which delivered to a recognized courier service if sent by overnight
courier, or (iii) on the fifth business day after the mailing thereof if sent
by mail. Notices may also be delivered by fax, provided that any such notice
also is delivered in a manner contemplated by clause (i), (ii) or (iii) above.
SECTION 8.2 Publicity. So long as this Agreement is in effect,
neither Seller nor Buyer shall, without the prior written consent of the other
party hereto, issue any press release or otherwise make any public announcement
with respect to this Agreement or the Transactions, except as may be required
by applicable law (including federal securities laws) if it determines in good
faith that it is appropriate to do so and provides prompt prior written notice
to the other party hereto.
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SECTION 8.3 Costs and Expenses. (a) Except as provided in
Article VII, all costs and expenses incurred in connection with this Agreement
and the consummation of the Transactions shall be paid by the party incurring
such expenses, whether or not the Transactions contemplated hereby are
consummated.
(b) If (i) (x) the Board of Directors of Buyer withdraws or
modifies (in a manner adverse to Seller) its recommendation that the
stockholders of Buyer approve the issuance of the Equity Consideration pursuant
to this Agreement and (y) the Required Buyer Approval is not obtained prior to,
or fails to remain effective through, the Cut-off Date (or, if earlier, the
termination of this Agreement) or (ii) the Stockholders Meeting shall not have
occurred prior to the Cut-off Date, then, in either such event, Buyer shall pay
to Seller within two business days after the earlier of the termination of this
Agreement and the Cut-off Date, an amount in cash in U.S. dollars and in
immediately available funds equal to $10 million.
SECTION 8.4 Amendment and Modification. This Agreement may be
amended, modified and supplemented in any and all respects by written agreement
of the parties hereto.
SECTION 8.5 Waivers and Extensions. Each party to this
Agreement may waive any right of such party or any breach or default of the
other party to this Agreement or conditions to its own obligations; provided
that such waiver will not be effective against the waiving party unless it is
in writing, is signed by such party and specifically refers to this Agreement.
Waivers
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may be made in advance or after the right waived has arisen or the breach or
default waived has occurred. Any waiver may be conditional. No waiver of any
breach of any agreement or provision herein contained shall be deemed a waiver
of any preceding or succeeding breach thereof nor of any other agreement or
provision herein contained. No waiver or extension of time for performance of
any obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
SECTION 8.6 Interpretation. (a) When a reference is made in
this Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section, Exhibit or Schedule of this Agreement unless otherwise indicated.
Titles and headings of sections of this Agreement are for convenience only and
shall not affect the construction of any provision of this Agreement. The
phrase "Schedules to this Agreement" means the disclosure schedules delivered
to Buyer or Seller, as the case may be, concurrently with the execution and
delivery hereof.
(b) The term "affiliate" means, with respect to any specified
person, another person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
such specified person.
(c) The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a person, whether through the ability to exercise voting power, by
contract or otherwise. "Controlling" and "controlled" have meanings correlative
thereto.
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(d) Whenever the words "include", "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation".
(e) The term "person" means an individual, corporation,
partnership, limited liability company, association, trust, incorporated
organization, Governmental Entity or other entity.
SECTION 8.7 Entire Agreement; Third Party Beneficiaries;
Assignment. This Agreement and the Confidentiality Agreement (including the
exhibits hereto and the documents, including the Budget Stock Purchase
Agreement and the Common Stock Purchase Agreement, and the instruments referred
to herein and therein): (a) constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
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 party. This
Agreement will be binding upon the parties and their respective successors and
assigns.
SECTION 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
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remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is 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 hereto shall
negotiate in good faith to modify this Agreement in accordance with Section 8.4
so as to effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions contemplated hereby
may be consummated as originally contemplated to the fullest extent possible.
SECTION 8.9 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Michigan without
giving effect to the principles of conflicts of law thereof, except that the
provisions of Sections 4.3(a) and 8.3(b) shall be governed by the laws of the
State of Delaware.
SECTION 8.10 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any material provision of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to the remedy of specific performance of the material
terms hereof, subject to Section 7.6(b), in addition to any other remedy at law
or equity.
SECTION 8.11 Resolution of Disputes. (a) If a dispute arises
between the parties relating to this Agreement or the Transactions, then the
procedures set forth in Sections 8.11(b) through 8.11(e) shall be implemented,
except that a party
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may seek injunctive relief from a court where appropriate in order to maintain
the status quo while such procedures are being followed.
(b) Promptly following receipt by a party of written notice
from the other of a dispute, the parties shall hold a meeting (the "Initial
Meeting"), attended by persons with decision-making authority for each party,
regarding the dispute, to attempt in good faith to negotiate a resolution of
the dispute; provided, however, that no such meeting (including any statements
made or documents exchanged by the parties at such meeting), and no subsequent
negotiations or mediation, shall be deemed to vitiate or reduce the obligations
and liabilities of the parties hereunder or be deemed a waiver by a party
hereto of any remedies to which such party would otherwise be entitled
hereunder.
(c) If, within 30 days after the Initial Meeting, the parties
have not succeeded in negotiating a resolution of the dispute, the parties
shall submit the dispute to mediation in accordance with the then-current CPR
Model Mediation Procedure for Business Disputes published by the CPR Institute
for Dispute Resolution (the "CPR") and to bear equally the out-of-pocket costs
payable to third parties of the mediation; provided that costs payable by a
party to its advisors and other representatives, including its attorneys and
any experts or consultants retained on its behalf, shall be borne solely by
such party. In connection with such mediation, the parties shall jointly
appoint a mutually acceptable mediator, seeking
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assistance in such regard from the CPR if they have been unable to agree upon
such appointment within 20 days from the submission of the dispute to mediation.
(d) The parties shall participate in good faith in the
mediation and negotiations related thereto for a period of no more than 30 days
from the date a mediator is appointed, unless the parties agree to extend such
period. If the parties are not successful in resolving the dispute through the
mediation, then the dispute shall be submitted to binding arbitration in
accordance with the Center for Public Resources for Non-Administered Arbitration
of Business Disputes, by a sole arbitrator.
(e) Mediation or arbitration shall take place in Wayne County,
Michigan unless otherwise agreed by the parties. The substantive and procedural
law of the State of Michigan shall apply to the proceedings. Punitive damages
shall not be awarded. This Section 8.11 is subject to the Federal Arbitration
Act, 9 U.S.C.A. Section 1, et seq., and judgment upon the award rendered by the
arbitrator, if any, may be entered by any court having jurisdiction thereof.
SECTION 8.12 Consent to Jurisdiction; Waiver of Jury Trial.
(a) Subject to Section 8.11, each of the parties hereto:
(i) consents to submit itself to the personal jurisdiction
of (A) the United States District Court for the Eastern District of
Michigan in the event any dispute arises out of this Agreement or any
of the transactions contemplated by this Agreement to the extent such
court
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would have jurisdiction with respect to such dispute and (B) the
Courts of the State of Michigan otherwise;
(ii) agrees that it will not attempt to deny or defeat
such personal jurisdiction or venue by motion or other request for
leave from any such court;
(iii) agrees that it will not bring any action relating to
this Agreement or any of the transactions contemplated by this
Agreement in any court other than such courts; and
(iv) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address set forth in Section 8.1 or at
such other address of which the other party shall have been notified
pursuant thereto; and
(v) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING IN RELATION TO THIS
AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
[Continued on next page.]
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SECTION 8.13 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement with legal and binding effect as of the date first
above written.
FORD MOTOR COMPANY
By:/s/ J.M. Devine
-------------------------------
Name: J.M. Devine
Title: Executive Vice President
and Chief Financial
Officer
TEAM RENTAL GROUP, INC.
By:/s/ Sanford Miller
-------------------------------
Name: Sanford Miller
Title: Chairman and Chief
Executive Officer
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<PAGE> 1
EXHIBIT 2.10
PREFERRED STOCKHOLDERS AGREEMENT
DATED AS OF __________ __, 1997
BETWEEN
FORD MOTOR COMPANY
AND
TEAM RENTAL GROUP, INC.
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS.................................... 1
SECTION 1.1. Definitions.................................................. 1
ARTICLE II
BUSINESS COMBINATIONS BETWEEN THE COMPANY AND Ford;
VOTING OF SHARES OF CLASS A COMMON STOCK....................... 8
SECTION 2.1. Purchases of Equity Securities............................... 8
SECTION 2.2. Additional Limitations....................................... 9
ARTICLE III
CONDUCT OF THE COMPANY BUSINESS....................................... 10
SECTION 3.1. Conduct of the Company Business............................... 10
SECTION 3.2. Consent Rights................................................ 12
SECTION 4.1. Transfer of Class A Common Stock.............................. 13
ARTICLE V
REGISTRATION RIGHTS................................................... 14
SECTION 5.1. Restrictive Legend............................................ 14
SECTION 5.2. Notice of Proposed Transfer................................... 15
SECTION 5.3. Request for Registration...................................... 16
SECTION 5.4. Incidental Registration....................................... 22
SECTION 5.5. Registration on Form S-3...................................... 25
SECTION 5.6. Obligations of the Company.................................... 26
SECTION 5.7. Furnish Information........................................... 35
SECTION 5.8. Expenses of Registration...................................... 35
SECTION 5.9. Underwriting Requirements..................................... 36
SECTION 5.10. Rule 144 and Rule 144A Information............................ 36
SECTION 5.11. Indemnification............................................... 37
SECTION 5.12. Lockup........................................................ 44
SECTION 5.13. Transfer of Registration Rights............................... 45
SECTION 5.14. Selection of Counsel.......................................... 45
ARTICLE VI
REPRESENTATIONS AND WARRANTIES........................................ 46
SECTION 6.1. Representations of the Company................................ 46
SECTION 6.2. Representations of Ford....................................... 48
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<PAGE> 3
Page
----
ARTICLE VII
MISCELLANEOUS............................. 51
SECTION 7.1. Notices...................................................... 51
SECTION 7.2. Costs and Expenses........................................... 52
SECTION 7.3. Amendment and Modification................................... 52
SECTION 7.4. Waivers and Extensions....................................... 53
SECTION 7.5. Interpretation............................................... 53
SECTION 7.6. Entire Agreement; Third Party
Beneficiaries; Assignment............................ 54
SECTION 7.7. Severability................................................. 54
SECTION 7.8. Governing Law................................................ 55
SECTION 7.9. Specific Performance......................................... 55
SECTION 7.10. Resolution of Disputes....................................... 55
SECTION 7.11. Consent to Jurisdiction; Waiver of
Jury Trial........................................... 55
-ii-
<PAGE> 4
INDEX OF DEFINED TERMS
Term Page
- ---- ----
Acquisition................................................................. 12
Affiliate................................................................... 1
Associate................................................................... 1
Board Action Matter......................................................... 13
Board of Directors.......................................................... 1
Business Combination........................................................ 1
Class A Common Stock........................................................ 2
Class B Common Stock........................................................ 2
Common Stock................................................................ 2
Common Stock Voting Power................................................... 3
Company .................................................................... 1
Control..................................................................... 53
Equity Security............................................................. 3
Exchange Act................................................................ 3
Existing Company Registration Rights........................................ 3
Fair Market Value........................................................... 3
Ford........................................................................ 1
Ford Affiliate.............................................................. 4
Ford's Interest............................................................. 4
Governmental Entity......................................................... 47
Holder...................................................................... 4
Indemnified party........................................................... 40
Indemnifying party.......................................................... 40
Initial Percentage.......................................................... 4
Initiating Holders.......................................................... 16
Line of Business............................................................ 4
Minimum Amount.............................................................. 5
NASD........................................................................ 35
New Security................................................................ 5
NYSE........................................................................ 3
Permitted Acquisition Transaction........................................... 5
Person...................................................................... 53
Preferred Stock............................................................. 6
Protection Period........................................................... 6
Register.................................................................... 6
Registered.................................................................. 6
Registrable Security........................................................ 6
Registration................................................................ 6
Response Notice............................................................. 12
SEC......................................................................... 7
Securities Act.............................................................. 7
Standstill Period .......................................................... 8
Subsidiary.................................................................. 8
Substantial Part............................................................ 8
To the Company's knowledge.................................................. 53
Transaction Notice.......................................................... 12
U.S. Corporation............................................................ 46
Unaffiliated Stockholders................................................... 8
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<PAGE> 5
PREFERRED STOCKHOLDERS AGREEMENT
PREFERRED STOCKHOLDERS AGREEMENT, dated as of ________ __,
1997, between FORD MOTOR COMPANY, a Delaware corporation ("Ford"), and TEAM
RENTAL GROUP, INC., a Delaware corporation (the "Company").
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Capitalized terms used herein which
are not otherwise defined have the same meaning as in the Preferred Stock
Purchase Agreement. As used in this Agreement, the following terms have the
following meanings:
(a) "Affiliate" has the same meaning as in Rule 12b-2
promulgated under the Exchange Act.
(b) "Associate" has the same meaning as in Rule 12b-2
promulgated under the Exchange Act.
(c) "Board of Directors" means the Board of Directors
of the Company.
(d) "Business Combination" means any one of the
following transactions:
(i) Any merger or consolidation of the Company
or any Subsidiary of the Company with (A) Ford or (B) any
other person (other than the Company) which is, or after such
merger or consolidation would be, an Affiliate or Associate of
Ford;
(ii) Any sale, lease, exchange, mortgage, pledge,
transfer or other disposition by the Company (in one
transaction or a series of transactions) to or with
<PAGE> 6
Ford or any Affiliate or Associate of Ford of all or a
Substantial Part of the consolidated assets of the
Company; or
(iii) The adoption of any plan or proposal for the
liquidation or dissolution of the Company proposed by
or on behalf of Ford or any Affiliate or Associate of
Ford; or
(iv) Any reclassification of securities
(including any reverse stock split), recapitalization of the
Company, or any merger or consolidation of the Company with
any Subsidiary thereof or any other transaction to which the
Company is a party (whether or not with or into or otherwise
involving Ford or any Affiliate or Associate of Ford) which
has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Company or any
Subsidiary thereof which is directly or indirectly owned by
Ford or any Affiliate or Associate of Ford
(e) "Class A Common Stock" means the Class A Common Stock, par
value $.01 per share, of the Company.
(f) "Class B Common Stock" means the Class B Common Stock, par
value $.01 per share, of the Company.
(g) "Common Stock" means the Class A Common Stock and/or the
Class B Common Stock.
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(h) "Common Stock Voting Power" means the total number of
votes which could be cast in respect of Common Stock at a properly
called stockholders meeting.
(i) "Equity Security" means any (i) Common Stock, (ii)
securities of the Company convertible into or exchangeable for Common
Stock, including the Preferred Stock, and (iii) options, rights,
warrants and similar securities issued by the Company to acquire Common
Stock.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
and the rules and regulations promulgated thereunder, as amended.
(k) "Existing Company Registration Rights" means the
registration rights described on Schedule A.
(l) "Fair Market Value" means: (i) in the case of a security,
the average of the closing sale prices during the thirty day period
immediately preceding the date in question of such security on the
Composite Tape for New York Stock Exchange ("NYSE") listed stocks or,
if such security is not quoted on the Composite Tape, on the NYSE or,
if such security is not listed on the NYSE, on the principal United
States securities exchange registered under the Exchange Act on which
such security is listed or, if such Security is not listed on any such
exchange, the average of the closing sale prices or the closing bid
quotations of such security during the thirty day period preceding the
date of determination on The Nasdaq National Market or any system then
in use or, if no such quotations are available, the fair market value
on
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<PAGE> 8
the date in question of such security as determined by the Board of
Directors in good faith; and (ii) in the case of property other than
cash or a security, the fair market value of such property on the date
in question as determined by the Board of Directors in good faith.
(m) "Ford Affiliate" means any person controlled by Ford,
controlling, or under common control with, Ford, and any person acting
in concert with Ford. Notwithstanding the foregoing, however, the
Company shall not be deemed to be an Affiliate of Ford
(n) "Ford's Interest" means the percentage of Common Stock
Voting Power represented by the shares of Class A Common Stock issuable
upon conversion of the Preferred Stock controlled directly or
indirectly by Ford and the Ford Affiliates.
(o) "Holder" shall mean any holder of Registrable
Securities.
(p) "Initial Percentage" means the percentage of Common Stock
Voting Power represented immediately after the Closing by the shares of
Class A Common Stock issuable upon conversion of the Preferred Stock
that Ford and the Ford Affiliates acquire from the Company on the
Closing Date pursuant to the Preferred Stock Purchase Agreement.
(q) "Line of Business" means, with respect to the Company, the
business of owning and operating car and truck rental locations, as
owner or licensee, parking locations, van pools, used car sales and
purchase locations, and any
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<PAGE> 9
other activities reasonably incidental to the foregoing activities,
including owning, operating and licensing computer reservation systems
relating thereto.
(r) "Minimum Amount" means Registrable Securities representing
at least 33% of the Registrable Securities comprising the Initial
Percentage; provided that, if, at any time, fewer than such amount of
Registrable Securities are held by all Holders, then the Minimum Amount
shall be the Registrable Securities held by all such Holders.
(s) "New Security" means any Equity Security issued by the
Company for cash or cash equivalents; provided that "New Security"
shall not include (i) securities issuable upon conversion of any
convertible Equity Security, (ii) securities issuable upon exercise of
any option, warrant or other similar Equity Security, (iii) securities
issuable at any time to employees, directors or consultants of the
Company, or any Subsidiary of the Company, pursuant to any employee
stock offering, plan, or arrangement approved by the Board of Directors
(or an appropriate committee thereof), and (iv) securities issuable in
connection with any stock split, stock dividend or recapitalization of
the Company.
(t) A "Permitted Acquisition Transaction" means either (i) a
tender or exchange offer for outstanding shares of Common Stock, (ii) a
Business Combination that is conditioned upon approval by Unaffiliated
Stockholders holding at least a majority of the shares of Common Stock
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<PAGE> 10
held by Unaffiliated Stockholders, or (iii) a merger following the
consummation of a tender or exchange offer described in clause (i)
above pursuant to which Unaffiliated Stockholders would receive
consideration identical to that which they would have received had they
participated in such tender or exchange offer.
(u) "Preferred Stock" means the Series A Preferred
Stock of the Company.
(v) "Protection Period" means the period commencing on the
date hereof and ending on the earliest of (i) nine months following the
date hereof, (ii) the date on which Ford's Interest is less than 50% of
the Initial Percentage and (iii) if, on the date eight months from the
date hereof (the "Eight Month Anniversary"), there shall not be pending
a request for registration pursuant to Section 5.3 (including a request
in connection with which a registration statement has been declared
effective but the Registrable Securities thereunder shall not all have
been offered or fully distributed), then, on the Eight Month
Anniversary.
(w) "Register," "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act and
the declaration or ordering of effectiveness of such registration
statement or document.
(x) "Registrable Security" shall mean (i) any Equity Security
held by Ford that was issued to Ford by the Company pursuant to, or
otherwise acquired by Ford in accordance
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<PAGE> 11
with, the terms of this Agreement or the Preferred Stock Purchase
Agreement, (ii) any Equity Security issued as (or issued upon the
conversion or exercise of any warrant, right, option or other
convertible security which is issued as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of,
a Registrable Security, and (iii) any Equity Security issued by way of
a stock split of a Registrable Security. For purposes of this
Agreement, any Registrable Securities shall cease to be Registrable
Securities when (w) a registration statement covering such Registrable
Securities has been declared effective and such Registrable Securities
have been disposed of pursuant to such effective registration
statement, (x) such Registrable Securities shall have been disposed of
pursuant to Rule 144 (or any similar provision then in effect) under
the Securities Act, (y) such Registrable Securities are sold by a
person in a transaction in which the rights under the provisions of
this Agreement are not assigned, or (z) such Registrable Securities
shall cease to be outstanding. In no event shall the Company be
required to register the Preferred Stock under the Exchange Act.
(y) "SEC" means the Securities and Exchange
Commission.
(z) "Securities Act" means the Securities Act of 1933, and the
rules and regulations promulgated thereunder, as amended.
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<PAGE> 12
(aa) "Standstill Period" means a period of time commencing at
the Closing Date and terminating on the first anniversary of the
Closing Date.
(ab) "Subsidiary" has the same meaning as in Rule 12b-2
promulgated under the Exchange Act.
(ac) A "Substantial Part" of the Company means more than 10%
of the Fair Market Value of the total assets of the Company and its
Subsidiaries as of the end of its most recent fiscal quarter ending
prior to the time the determination is made.
(ad) "Unaffiliated Stockholders" means stockholders of the
Company other than Ford or Ford Affiliates.
ARTICLE II
BUSINESS COMBINATIONS BETWEEN THE COMPANY AND Ford;
VOTING OF SHARES OF CLASS A COMMON STOCK
SECTION 2.1. Purchases of Equity Securities. (a)
During the Standstill Period, Ford and the Ford Affiliates shall not (i)
directly or indirectly, purchase or otherwise acquire, or propose or offer to
purchase or otherwise acquire, any Equity Securities whether by tender offer,
market purchase, privately negotiated purchase, Business Combination or
otherwise, if, immediately after such purchase or acquisition, Ford's Interest
would equal or exceed the Initial Percentage, or (ii) directly or indirectly
propose or offer to enter into a Business Combination.
(b) The prohibitions contained in Section 2.1(a) shall not
apply (i) during any period in which Ford's Interest is less than 10%, (ii) to
any Permitted Acquisition Transaction following
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<PAGE> 13
(A) the commencement by any third party of (1) a bona fide tender or exchange
offer to purchase in excess of 20% of the Common Stock Voting Power that the
Board of Directors either recommends acceptance of, expresses no opinion and
remains neutral toward or is unable to take a position with respect to, (2) a
bona fide proposal to acquire all or substantially all of the assets of the
Company that the Board of Directors is actively entertaining and the
consummation of which would require approval by the Stockholders of the Company
pursuant to Section 271 of the Delaware General Corporation Law or (3) a bona
fide proposal to enter into any acquisition or other business combination
transaction with the Company that the Board of Directors is actively
entertaining, in the case of each of clauses (1) through (3), which shall not
have been approved in advance by the Company or the Board of Directors, or (B)
the Company entering into (or announcing its intention to do so) a definitive
agreement, or an agreement contemplating a definitive agreement, for any of the
transactions described in clauses (1) through (3) above, or (iii) to any
issuance and sale of New Securities by the Company to Ford or an Ford Affiliate.
SECTION 2.2. Additional Limitations. During the
Standstill Period, Ford and the Ford Affiliates shall not:
(a) other than in connection with an election contest to which
Rule 14a-11 under the Exchange Act applies, and which is initiated by a
third party or which is otherwise approved by the Board of Directors,
make, or in any way participate, directly or indirectly, in any
"solicitation"
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<PAGE> 14
of "proxies" to vote (as such terms are used in the proxy rules of the
SEC) or seek to advise, encourage or influence any person or entity
with respect to the voting of any shares of capital stock of the
Company, initiate, propose or otherwise solicit stockholders of the
Company for the approval of one or more stockholder proposals or induce
or attempt to induce any other individual, firm, corporation,
partnership or other entity to initiate any stockholder proposal;
(b) deposit any Equity Securities into a voting trust or
subject any Equity Securities to any arrangement or agreement with
respect to the voting of such securities or form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) with respect to any Equity Securities; provided that the
foregoing shall not prohibit any such action to effectuate the
provisions of Section 2.3; or
(c) except in connection with a transaction permitted by
Section 2.1(b) hereof, make any public announcement with respect to a
transaction of the type described in Section 2.1(a) hereof.
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<PAGE> 15
ARTICLE III
CONDUCT OF THE COMPANY BUSINESS
SECTION 3.1. Conduct of the Company Business. Subject
to Section 3.2, the Company agrees, during the Protection Period,
that:
(a) the Company shall not, directly or indirectly, issue or
sell Equity Securities, except (i) in connection with acquisitions of
Budget Licensees (as defined in the Supply Agreement dated __________,
1997 among the Company, Budget Rent A Car Corporation and Ford), (ii)
in transactions not required to be registered pursuant to the
Securities Act, (iii) in transactions involving the issuance of Equity
Securities (other than Common Stock), (iv) issuances to employees,
officers or directors of the Company or its subsidiaries pursuant to
compensation arrangements or benefit plans existing on the date hereof
and (v) issuances pursuant to any other option, right or warrant of the
Company outstanding on the date hereof; provided that, in the case of
any transaction permitted under clauses (i), (ii) and (iii) above,
except as required pursuant to Existing Company Registration Rights,
during the Protection Period, no holder of Common Stock issued in
connection with, or pursuant to conversion, exchange or exercise of
Equity Securities issued in connection with, such transaction (or any
transferee thereof) shall have the right to request the Company to
register such Common Stock under the Securities Act;
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<PAGE> 16
(b) the Company shall not acquire control of any person
(whether by merger, consolidation, purchase of stock or assets,
assumption of liabilities, or otherwise), or any assets or business of
any person (an "Acquisition") for cash consideration in excess of $20
million, except that the foregoing shall not prohibit any Acquisition
of a Budget Licensee; and
(c) the Company shall not make any Acquisition in a
transaction involving the issuance of Equity Securities, other than
Acquisitions within the Company's Line of Business.
SECTION 3.2. Consent Rights. If the Company desires to engage
in a transaction prohibited by Section 3.1, then the Company shall request
Ford's consent to such transaction by giving notice to Ford in writing (which
notice shall provide reasonable detail concerning the proposed transaction so
that Ford can reasonably evaluate such proposed transaction) (a "Transaction
Notice"). Ford shall have seven days from the date of its receipt of a
Transaction Notice to evaluate the proposed transaction. If Ford shall not have
notified the Company in writing (any such notice, a "Response Notice") on or
prior to the seventh day following the date of its receipt of the Transaction
Notice that Ford (i) does not consent to the proposed transaction or (ii)
requires additional time to evaluate the proposed transaction, then Ford shall
be deemed to have consented to the proposed transaction. If Ford delivers a
Response Notice and it contains the response indicated in clause (ii) above,
then such
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Response Notice shall also indicate in good faith whether consent to the
proposed action would require approval by Ford's Board of Directors or any
committee thereof (a "Board Action Matter"). If a Response Notice indicates that
the proposed transaction is a Board Action Matter, then Ford shall have 30 days
from the date of the Response Notice to notify the Company in writing that it
does not consent to the proposed transaction. If a Response Notice does not
indicate that the proposed transaction is a Board Approval Matter, then Ford
shall have 7 days from the date of the Response Notice to notify the Company in
writing that it does not consent to the proposed transaction. If no such notice
is delivered to the Company within such 30-day or 7-day period, as the case may
be, then Ford shall be deemed to have consented to the proposed transaction.
Notwithstanding anything to the contrary in this Section 3.2, Ford shall use
reasonable efforts to respond to any Transaction Notice as promptly as
practicable after its receipt thereof and shall act reasonably in withholding
its consent, provided that it shall have received information with regard to a
proposed transaction reasonable for it to be able to properly evaluate it.
ARTICLE IV
TRANSFER OF COMMON STOCK
SECTION 4.1. Transfer of Class A Common Stock. (a) Ford will
not, and will not permit any Ford Affiliate to, directly or indirectly sell,
transfer or otherwise dispose of any Equity Securities, except (i) pursuant to a
registered underwritten public offering in accordance with Article V,
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(ii) pursuant to an applicable exemption from the registration requirements of
the Securities Act, (iii) to the Company or a Subsidiary thereof, or (iv) to a
Ford Affiliate (or any Associate of Ford or a Ford Affiliate).
(b) Proposed transfers of Equity Securities that are not in
compliance with this Article IV shall be of no force or effect and the Company
shall not be required to file a registration statement under the Securities Act
in connection with such proposed transfers.
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.1. Restrictive Legend. Each certificate representing
Registrable Securities shall, except as otherwise provided in this Section 5.1
or in Section 5.2, be stamped or otherwise imprinted with a legend substantially
in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED
OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company (it being agreed that Simpson Thacher & Bartlett or
the Assistant General Counsel of Ford shall be satisfactory) the securities
being sold thereby may be publicly sold without registration under the
Securities Act.
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SECTION 5.2. Notice of Proposed Transfer. Prior to any
proposed transfer of any Registrable Securities (other than under the
circumstances described in Section 5.3, 5.4 or 5.5), the Holder thereof shall
give written notice to the Company of its intention to effect such transfer.
Each such notice shall describe the manner of the proposed transfer and, if
requested by the Company, shall be accompanied by an opinion of counsel
satisfactory to the Company (it being agreed that Simpson Thacher & Bartlett or
the Assistant General Counsel of Ford shall be satisfactory) to the effect that
the proposed transfer does not violate the terms of this Agreement and that the
proposed transfer may be effected without registration under the Securities Act,
whereupon the Holder of such security shall be entitled to transfer such
security in accordance with the terms of its notice; provided, however, that no
such opinion of counsel shall be required for a transfer to an Ford Affiliate.
Each certificate for Registrable Securities transferred as above provided shall
bear the legend set forth in Section 5.1, except that such certificate shall not
bear such legend if (i) such transfer is in accordance with the provisions of
Rule 144 (or any other rule permitting public sale without registration under
the Securities Act) or (ii) the opinion of counsel referred to above is to the
further effect that the transferee and any subsequent transferee (other than an
Affiliate of the Company) would be entitled to transfer such securities in a
public sale without registration under the Securities Act. The restrictions
provided for in this Section 5.2 shall not apply to securities that are
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not required to bear the legend prescribed by Section 5.1 in accordance with the
provisions of that Section.
SECTION 5.3. Request for Registration. (a) At any time, and
from time to time, on and after the date hereof, any of the Holders (the
"Initiating Holders") may request in a written notice that the Company file a
registration statement under the Securities Act (or a similar document pursuant
to any other statute then in effect corresponding to the Securities Act)
covering the registration of at least the Minimum Amount of Registrable
Securities in the manner specified in such notice; provided that, at the time of
such request, such Holders shall have a good faith intention to offer and sell
pursuant to such registration statement at least the Minimum Amount of
Registrable Securities. Following receipt of any notice under this Section 5.3
the Company shall (x) within ten days notify all other Holders of such request
in writing and (y) thereupon will, as expeditiously as possible, use its best
efforts to cause to be filed for registration under the Securities Act all
Registrable Securities that the Initiating Holders and such other Holders have,
within ten days after the Company has given such notice, requested to be
registered in accordance with the manner of disposition specified in such notice
by the Initiating Holders; provided, however, that, if (i) (A) the Company is in
possession of material non-public information, (B) the Board of Directors of the
Company determines in good faith that disclosure of such material non-public
information would not be in the best interests of the Company and its
stockholders and (C) the Board
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of Directors of the Company or the Chief Executive Officer or the Chief
Financial Officer of the Company determines (based on advice of counsel) that
such prohibition is necessary in order to avoid a requirement to disclose such
material non-public information, or (ii) the Company has made a public
announcement relating to an acquisition or business combination transaction
including the Company and/or one or more of its subsidiaries (A) that is
material to the Company and its subsidiaries taken as a whole (and for such
purpose no transaction shall be deemed material unless, on a pro forma basis and
after giving effect thereto, consolidated assets or consolidated revenues of the
Company and its subsidiaries as of the end of or for the most recently completed
fiscal year would be increased by at least 10%) and (B) the Board of Directors
of the Company or the Chief Executive Officer or the Chief Financial Officer of
the Company determines in good faith that offers and sales of Registrable
Securities prior to the consummation of such transaction (or such earlier date
as the Board of Directors or the Chief Executive Officer or the Chief Financial
Officer of the Company shall determine) is not in the best interests of the
Company and its stockholders, then the Company shall not be required to file a
registration statement until the earlier of (x) the second day after the
conditions in clause (i) or (ii) have ceased to exist and (y) the 30th day
following receipt by the Company of the notice from the Initiating Holders under
this Section 5.3; provided, further, that, (I) notwithstanding anything to the
contrary contained herein, the Company shall not be required to
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cause any such registration statement to be declared effective prior to the date
which is three months from the date hereof and (II) the Company shall not be
required to file more than four registration statements in response to requests
pursuant to this Section 5.3. Notwithstanding clause (II) of the second proviso
to the immediately preceding sentence, after the third month from the date
hereof, if (1) a Transaction Notice is received by Ford from the Company
pursuant to Section 3.2, (2) Ford rejects the proposal included in such
Transaction Notice and (3) within three months of the date of receipt of the
Transaction Notice (such three-month period, the "Demand Period"), the Holders
do not make a registration request under Section 5.3 (provided that such a
registration request shall be deemed to have been made by the Holders during the
Demand Period if such a registration request was already pending at the time the
Company's request was made, including a registration request in which a
registration statement has been declared effective but the Registrable
Securities thereunder shall not all have been offered or fully distributed),
then the number of registration requests that may be made by the Holders
pursuant to Section 5.3 as to which the Company will be required to pay expenses
pursuant to Section 5.8 shall be reduced by one; provided that at least one
right to make a registration request under Section 5.3 shall always be paid by
the Company; and provided, further, that any further Transaction Notice received
from the Company during any Demand Period shall not lead to a reduction of the
number of registration requests under Section 5.3 that may be made by the
Holders and shall not
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cause another Demand Period to commence whether or not Ford rejects the proposal
included by the Company in such Transaction Notice.
(b) If the Initiating Holders intend to have the Registrable
Securities distributed by means of an underwritten offering, the Company shall
include such information in the written notice referred to in clause (x) of
Section 5.3(a) above. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwritten offering and the inclusion of such
Holder's Registrable Securities in the underwritten offering to the extent
provided below. All Holders proposing to distribute Registrable Securities
through such underwritten offering shall enter into an underwriting agreement in
customary form with the underwriter or underwriters. The lead managing
underwriter shall be selected by a majority in interest of the Initiating
Holders and any co-managing underwriters shall be selected jointly by a majority
in interest of the Initiating Holders and the Company, each acting reasonably.
No Holder shall be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such Holder, the statements contained in the
registration statement that were supplied by such Holder in writing expressly
for use therein, the Registrable Securities of such Holder and such Holder's
intended method of distribution and any other representations required by law or
reasonably required by the underwriter. If any Holder of
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Registrable Securities disapproves of the terms of the underwriting, such Holder
may elect to withdraw all its Registrable Securities by written notice to the
Company, the managing underwriter and the Initiating Holders. The securities so
withdrawn also shall be withdrawn from registration.
(c) Notwithstanding any provision of this Agreement to the
contrary, the Company shall not be required to effect a registration pursuant to
this Section 5.3 during the period starting with the date of filing by the
Company of, and ending on a date 90 days following the effective date of, (i)
any other registration statement requested under this Section 5.3 or Section 5.5
or (ii) a registration statement pertaining to a public offering of securities
for the account of the Company or on behalf of the selling stockholders under
any other registration rights agreement, in each case which the Holders have
been entitled to join pursuant to Section 5.4 and, in the case of clause (ii)
only, pursuant to which the Holders have had the opportunity to sell all
Registrable Securities which the Holders desired to sell thereunder; provided
that (x) the Company shall actively employ in good faith all reasonable efforts
to cause any such registration statement referred to in clause (i) or (ii) above
to become effective as soon as possible and (y) with respect to any such
registration statement involving an underwritten offering, the 90 day period
referred to above may be reduced or waived in the discretion of the managing
underwriter for such offering.
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(d) A registration requested pursuant to this Section 5.3
shall not be deemed to have been effected pursuant to this Section 5.3 for
purposes of Section 5.8 unless (i) it has been declared effective by the SEC,
(ii) it has remained effective for the period set forth in Section 5.6(a), and
(iii) the offering of Registrable Securities pursuant to such registration is
not subject to any stop order, injunction or other order or requirement of the
SEC.
(e) Subject to the following sentence, if a requested
registration pursuant to this Section 5.3 involves an underwritten offering and
the lead managing underwriter advises the Company in writing that, in its
opinion, the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities)
exceeds the number that can reasonably be sold in such offering, the Company
will first include in such registration all the Registrable Securities requested
to be included in such registration by the Initiating Holders. In the event that
the number of Registrable Securities requested to be included in such
registration exceeds the number which, in the opinion of such lead managing
underwriter, may reasonably be sold, the number of such Registrable Securities
to be included in such registration shall not exceed the number of Registrable
Securities that the lead managing underwriter advises can reasonably be sold and
shall be allocated pro rata among all Initiating Holders on the basis of the
relative number of shares of Registrable Securities then held by each such
Holder (provided
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<PAGE> 26
that any shares hereby allocated to any such Holder that exceed such Holder's
request shall be reallocated among the remaining requesting Holders in like
manner). In the event that the number of Registrable Securities requested to be
included in such registration is less than the number which, in the opinion of
the lead managing underwriter, may reasonably be sold, the Company may include
in such registration any securities the Company wishes to sell up to the number
of securities that, in the opinion of the lead managing underwriter, may
reasonably be sold. During the Protection Period, the Company will not, except
as required pursuant to Existing Company Registration Rights, include in any
requested registration pursuant to this Section 5.3 any securities which are not
Registrable Securities (other than securities to be issued and sold by the
Company) without the prior written consent of the holders of at least a majority
of the Registrable Securities included in such registration.
SECTION 5.4. Incidental Registration. Subject to Section 5.9,
if at any time the Company determines that it shall file a registration
statement under the Securities Act (other than a registration statement on a
Form S-4 or S-8 or any successor or similar forms) on any form that also would
permit the registration of the Registrable Securities and such filing is to be
on its behalf and/or on behalf of selling holders of its securities for the
general registration of Common Stock to be sold for cash, the Company shall each
such time promptly give each Holder written notice of such determination setting
forth the date on which the Company proposes to file such registration
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statement, which date shall be no earlier than thirty days from the date of such
notice, and advising each Holder of its right to have Registrable Securities
included in such registration. Upon the written request of any Holder received
by the Company no later than fifteen days after the date of the Company's
notice, the Company shall use its best efforts to cause to be included for
registration under the Securities Act all of the Registrable Securities that
each such Holder has so requested to be registered; provided that if, at any
time after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
proceed with the proposed registration of the securities to be sold by it, the
Company may, at its election, give written notice of such determination to each
Holder of Registrable Securities and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any Holder
to request such registration to be effected as a registration under Section 5.3.
If, in the written opinion of the lead managing underwriter (or, in the case of
a non-underwritten offering, in the written opinion of the Company), the total
number of such securities to be so registered, including such Registrable
Securities, will exceed the maximum number of the Company's securities that can
reasonably be sold, then the Company shall
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include in such registration (i) first, all the securities the Company proposes
to sell for its own account or is required to register on behalf of any third
party exercising rights similar to those granted in Section 5.3(a) up to such
maximum number, and (ii) second, to the extent that the number of securities
which the Company proposes to sell for its own account or is required to
register on behalf of any third party exercising rights similar to those granted
in Section 5.3(a) is less than the number of equity securities which the Company
has been advised can reasonably be sold, all Registrable Securities requested to
be included in such registration by the Holders pursuant to this Section 5.4 and
all shares of Common Stock requested to be included by third parties exercising
the rights similar to those granted in this Section 5.4; provided that if the
number of Registrable Securities and other shares of Common Stock requested to
be included in such registration by the Holders pursuant to this Section 5.4 and
third parties exercising rights similar to those granted in this Section 5.4,
together with the number of securities to be included in such registration
pursuant to clause (i) of this Section 5.4, exceeds the number which the Company
has been advised can reasonably be sold in such offering, the number of such
Registerable Securities requested to be included in such registration by the
Holders pursuant to this Section 5.4 shall, except to the extent required under
the Existing Company Registration Rights, be limited to such extent and shall be
allocated pro rata among all such requesting Holders and third parties
exercising rights similar to those granted in this
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Section 5.4 on the basis of the relative number of Registrable Securities each
such Holder has requested to be included in such registration and the number of
shares of Equity Securities requested to be included in such registration by
such third parties.
SECTION 5.5. Registration on Form S-3. If at any time (a) any
Holder requests in writing that the Company file a registration statement on
Form S-3 or any successor thereto for a public offering of all or any portion of
the Registrable Securities held by such requesting Holder and (b) the Company is
a registrant entitled to use Form S-3 or any successor thereto, then the Company
shall use its best efforts to cause to be filed for registration under the
Securities Act on Form S-3 or any successor thereto, for public sale in
accordance with the method of disposition specified in such request, including,
without limitation, pursuant to Rule 415 under the Securities Act, the
Registrable Securities specified in such request. Whenever the Company is
required by this Section 5.5 to use its best efforts to cause to be filed for
registration Registrable Securities, each of the limitations, procedures and
requirements of Section 5.3(b), (c), (e) and (f) (including but not limited to
the requirement that the Company notify all Holders from whom a request has not
been received and provide them with the opportunity to participate in the
offering) shall apply to such registration. Any underwritten offering of
Registrable Securities pursuant to a registration statement filed under this
Section 5.5 which permits offers and sales pursuant to Rule 415
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under the Securities Act shall, in each case, be for the Minimum Amount of
Registrable Securities. Any registration requested pursuant to this Section 5.5
shall be considered a request pursuant to Section 5.3.
SECTION 5.6. Obligations of the Company. Whenever required
under Section 5.3 or Section 5.5 to use its best efforts to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as possible:
(a) prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its reasonable best
efforts to cause such registration statement to become and remain
effective for the period of the distribution contemplated thereby
determined as provided hereafter;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement, and
furnish to the Holders of the Registrable Securities copies of any such
amendments and supplements prior to their being used or filed with the
SEC;
(c) furnish to the Holders such numbers of copies of the
registration statement and the prospectus included therein (including
each preliminary prospectus and any amendments or supplements thereto
in conformity with the
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requirements of the Securities Act) and such other documents and
information as they may reasonably request and make available for
inspection by the parties referred to in Section 5.6(d) below such
financial and other information and books and records of the Company,
and cause the officers, directors, employees, counsel and independent
certified public accountants of the Company to respond to such
inquiries, as shall be reasonably necessary, in the judgment of the
respective counsel referred to in such Section, to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
(d) provide (i) the Holders of the Registrable Securities to
be included in such registration statement, (ii) the underwriters
(which term, for purposes of this Agreement, shall include a person
deemed to be an underwriter within the meaning of Section 2(11) of the
Securities Act), if any, thereof, (iii) the sales or placement agent,
if any, therefor, (iv) counsel for such underwriters or agent, and (v)
not more than one counsel for all the Holders of such Registrable
Securities, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with
the SEC, and each amendment or supplement thereto;
(e) use its best efforts to file for registration or
qualification the Registrable Securities covered by such registration
statement under such other securities or blue
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sky laws of such jurisdictions within the United States and Puerto Rico
as shall be reasonably appropriate for the distribution of the
Registrable Securities covered by the registration statement; provided,
however, that the Company shall not be required in connection therewith
or as a condition thereto to register or qualify to do business in, or
to file a general consent to service of process in any jurisdiction
wherein it would not but for the requirements of this paragraph (e) be
obligated to do so, or to take any action that would subject it to
taxation in an amount greater than it would be subject but for the
requirements of this paragraph; and provided further that the Company
shall not be required to qualify such Registrable Securities in any
jurisdiction in which the securities regulatory authority requires that
any Holder submit its Registrable Securities to the terms, provisions
and restrictions of any escrow, lockup or similar agreement(s) for
consent to sell Registrable Securities in such jurisdiction unless such
Holder agrees to do so;
(f) promptly notify the selling Holders of Registrable
Securities, the sales or placement agent, if any, therefor and the
managing underwriter or underwriters, if any, thereof and confirm such
advice in writing, (i) when such registration statement or the
prospectus included therein or any prospectus amendment or supplement
or post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when
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the same has become effective, (ii) of any comments by the SEC or by
any Blue Sky or securities commissioner or regulator of any state with
respect thereto or any request by the SEC for amendments or supplements
to such registration statement or prospectus or for additional
information, (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceedings for that purpose, (iv) if
at any time the representations and warranties of the Company contained
in any underwriting agreement or other customary agreement cease to be
true and correct in all material respects or (v) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose;
(g) use its reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of such registration
statement or any post-effective amendment thereto at the earliest
practicable date;
(h) promptly notify each Holder for whom such Registrable
Securities are covered by such registration statement, at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included or incorporated by reference in such registration
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statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make, in light of the circumstances under which
they were made, the statements therein not misleading, and at the
request of any such Holder promptly prepare and furnish to such Holder
a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to
the purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make, in light of the
circumstances under which they were made, the statements therein not
misleading;
(i) furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to Section 5.3 or
Section 5.5, if the method of distribution is by means of an
underwriting, on the date that the Registrable Securities are delivered
to the underwriters for sale pursuant to such registration, or if such
Registrable Securities are not being sold through underwriters, on the
date that the registration statement with respect to such Registrable
Securities becomes effective, (1) a signed opinion, dated such date, of
the independent legal counsel representing the Company for the purpose
of such registration, addressed to the underwriters, if any, and if
such Registrable Securities are not being sold through
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underwriters, then to the Holders making such request, as to such
matters as such underwriters or the Holders holding a majority of the
Registrable Securities included in such registration, as the case may
be, may reasonably request and as would be customary in such a
transaction; and (2) letters dated such date and the date the offering
is priced from the independent certified public accountants of the
Company, addressed to the underwriters, if any, and if such Registrable
Securities are not being sold through underwriters, then to the Holders
making such request and, if such accountants refuse to deliver such
letters to such Holders, then to the Company (i) stating that they are
independent certified public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the
financial statements and other financial data of the Company included
or incorporated by reference in the registration statement or the
prospectus, or any amendment or supplement thereto, comply as to form
in all material respects with the applicable accounting requirements of
the Securities Act and (ii) covering such other financial matters
(including information as to the period ending not more than five (5)
business days prior to the date of such letters) with respect to the
registration in respect of which such letter is being given as such
underwriters or the Holders holding a majority of the Registrable
Securities included in such registration, as the
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case may be, may reasonably request and as would be customary in such a
transaction;
(j) enter into customary agreements (including if the method
of distribution is by means of an underwriting, an underwriting
agreement in customary form, including, without limitation, customary
indemnification provisions substantially consistent with Section 5.11
and, to the extent required by the underwriters, customary lockup
provisions substantially consistent with Section 5.12) and take such
other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities to be so
included in the registration statement;
(k) use its reasonable best efforts to obtain the consent or
approval of each governmental agency or authority, whether federal,
state or local, which may be required to effect registration or the
offering or sale in connection therewith or to enable the selling
Holder or Holders to offer, or to consummate the disposition of, their
Registrable Securities;
(l) cooperate with the Holders of the Registrable Securities
and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall conform to the
requirements of The Nasdaq National Market or any securities exchange
on which the Registrable Securities are then listed or admitted to
trading and shall not bear any restrictive legends; and, in
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the case of an underwritten offering, enable such Registrable
Securities to be in such denominations and registered in such names as
the managing underwriters may request at least two business days prior
to any sale of the Registrable Securities;
(m) otherwise comply with all applicable rules and regulations
of the SEC, and make available to its security holders, as soon as
reasonably practicable, but not later than eighteen months after the
effective date of the registration statement, an earnings statement
covering the period of at least twelve months beginning with the first
full month after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act;
(n) use its reasonable best efforts to list the Registrable
Securities covered by such registration statement with any securities
exchange or quotation system on which the Class A Common Stock of the
Company is then listed or quoted; and
(o) use its best efforts to make available the executive
officers of the Company to participate with the Holders of Registrable
Securities and any underwriters in any "road shows" or other selling
efforts that may be reasonably requested by the Holders in connection
with the methods of distribution for the Registrable Securities.
For purposes of Sections 5.6(a) and 5.6(b), and with respect to (i) registration
required pursuant to Section 5.3, (A) the period
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of distribution of Registrable Securities in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it and (B) the period of
distribution of Registrable Securities in any other registration shall be deemed
to extend until the earlier of the sale of all Registrable Securities covered
thereby and 180 days (or such shorter period as may be required in the
underwriting agreement) after the effective date thereof and (ii) registrations
required pursuant to Section 5.5, the period of distribution of Registrable
Securities in any registration (firm commitment underwritten or otherwise) shall
be deemed to extend until the earlier of the sale of all Registrable Securities
covered thereby and two years after the effective date thereof.
Each Holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (h) of this Section 5.6, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by clause (h) of this
Section 5.6, and, if so directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice; provided, however,
that any period of time during which a Holder
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must discontinue disposition of Registrable Securities shall not be included in
the determination of a period of distribution for purposes of Section 5.6(a) and
Section 5.6(b).
SECTION 5.7. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Agreement
that the Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as the Company shall reasonably request and as
shall be required in connection with the action to be taken by the Company.
SECTION 5.8. Expenses of Registration. All expenses incurred in
connection with (i) each registration or attempted registration pursuant to
Section 5.4, (ii) the first three registrations effected pursuant to Section 5.3
or 5.5 and (iii) any attempted registration (or partial registration deemed not
to have been effected pursuant to Section 5.3 or 5.5 by operation of Sections
5.3(d) or (e)) occurring prior to the third registration effected pursuant to
Section 5.3 or 5.5 of this Agreement, excluding underwriters' discounts and
commission, but including without limitation all registration, filing and
qualification fees, word processing, duplicating, printers' and accounting fees
(including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance), fees of the National
Association of Securities Dealers, Inc. (the "NASD") or listing fees, all fees
and expenses of complying with state securities or blue sky laws, fees and
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disbursements of counsel for the Company, any fees and disbursements of
underwriters customarily paid by the issuers or sellers of securities, including
liability insurance if the Company so desires or if the underwriters so require,
and the reasonable fees and expenses of any special experts retained in
connection with the requested registration and other reasonable out-of-pocket
expenses of Holders, shall be paid by the Company. The foregoing provisions with
respect to expenses shall in no way limit the rights of the Holders to request
registration pursuant to Sections 5.3 and 5.5 or the number of registrations
which may be requested thereunder.
SECTION 5.9. Underwriting Requirements. In connection with any
underwritten offering, the Company shall not be required under Section 5.4 to
include Registrable Securities in such underwritten offering unless the Holders
of such Registrable Securities accept the terms of the underwriting of such
offering that have been reasonably agreed upon between the Company and the
underwriters selected by the Company.
SECTION 5.10. Rule 144 and Rule 144A Information. With a view to making
available the benefits of certain rules and regulations of the SEC which may at
any time permit the sale of the Registrable Securities to the public without
registration, at all times, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
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(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act; and
(c) furnish to each Holder of Registrable Securities forthwith
upon request a written statement by the Company as to its compliance
with the reporting requirements of such Rule 144 and of the Securities
Act and the Exchange Act, a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by
the Company as such Holder may reasonably request in availing itself of
any rule or regulation of the SEC allowing such Holder to sell any
Registrable Securities without registration.
SECTION 5.11. Indemnification. In the event any Registrable Securities
are included in a registration statement under this Agreement:
(a) The Company shall indemnify and hold harmless each Holder,
such Holder's directors and officers, and each person, if any, who
controls such Holder or participating person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any
such action or claim) to which they may become subject under the
Securities Act or otherwise,
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insofar as such losses, claims, damages or liabilities (or proceedings
in respect thereof) arise out of or are based on any untrue or alleged
untrue statement of a material fact contained in such registration
statement, preliminary prospectus, final prospectus or amendments or
supplements thereto or arise out of or are based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that the indemnity agreement contained in this
Section 5.11(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld); provided further that the Company shall not be
liable to any Holder, such Holder's directors and officers or
controlling person in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based
upon an untrue statement or alleged untrue statement or omission or
alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus or amendments or supplements
thereto, in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any
such Holder, such Holder's directors and officers or controlling
person; provided, further, that as to any preliminary prospectus or any
final prospectus this indemnity agreement shall not
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inure to the benefit of any Holder, such Holder's directors and
officers or controlling persons on account of any losses, claims,
damages or liability arising from the sale of Class A Common Stock to
any person by such Holder if such Holder or its representatives failed
to send or give a copy of the final prospectus or a prospectus
supplement, as the case may be (excluding documents incorporated by
reference therein), as the same may be amended or supplemented, to that
person within the time required by the Securities Act, and the untrue
statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact in such preliminary
prospectus or final prospectus was corrected in the final prospectus or
such prospectus supplement, as the case may be (excluding documents
incorporated by reference therein), unless such failure resulted from
non-compliance by the Company with Section 5.6(c). Such indemnity shall
remain in full force and effect regardless of any investigation made by
or on behalf of any such Holder, such Holder's directors and officers,
participating person or controlling person, and shall survive the
transfer of such securities by such Holder.
(b) Each Holder requesting or joining in a registration
severally and not jointly shall indemnify and hold harmless the
Company, each of its directors and officers and each person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities
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Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to the Holders but only with
reference to written information relating to such Holder furnished to
the Company expressly for use in connection with such registration;
provided, however, that the indemnity agreement contained in this
Section 5.11(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is
effected without the consent of such Holder (which consent shall not be
unreasonably withheld); and provided further that the liability of each
Holder hereunder shall be limited to the proportion of any such loss,
claim, damage, liability or expense that is equal to the proportion
that the net proceeds from the sale of the shares sold by such Holder
under such registration statement bears to the total net proceeds from
the sale of all securities sold thereunder, but not in any event to
exceed the net proceeds received by such Holder from the sale of
Registrable Securities covered by such registration statement.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to either of the two preceding
paragraphs, such person (the "indemnified party") shall promptly notify
the person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably
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satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such
proceeding and shall pay the reasonable fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in
respect of the legal expenses of any indemnified party in connection
with any proceeding or related proceedings in the same jurisdiction, be
liable for the fees and expenses of more than one separate firm (in
addition to any local counsel) for all such indemnified parties and
that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by the Holders, in
the case of parties indemnified pursuant to the second preceding
paragraph, and by the Company, in the case of parties indemnified
pursuant to the first preceding paragraph. The indemnifying party shall
not be liable for any settlement of any proceeding
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effected without its written consent, but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any
loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by
the second and third sentences of this paragraph, the indemnifying
party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement
is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall
not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party,
effect any settlement of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject
matter of such proceeding.
(d) If the indemnification provided for in the first or second
paragraph of this Section 5.11 is unavailable to
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an indemnified party or insufficient in respect of any losses, claims,
damages or liabilities referred to therein, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in
connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.11(d) were
determined by pro rata allocation or by any other
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method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5.11, no Holder shall be
required to contribute any amount in excess of the amount of net
proceeds received by such Holder from the sale of Registrable
Securities covered by such registration statement. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 5.11 are not exclusive and shall not limit
any right or remedies that may otherwise be available to any
indemnified party at law or in equity.
SECTION 5.12. Lockup. Each Holder shall, in connection with
any registration of the Company's securities, upon the request of the Company or
the underwriters managing any underwritten offering of such securities, agree in
writing not to effect any sale, disposition or distribution of any Registrable
Securities (other than that included in the registration) without the prior
written consent of the managing underwriter for such period of time (not to
exceed 90 days) from the effective date of such registration as the Company or
the underwriters may specify; provided, however, that, to the extent required by
the underwriters in an underwritten offering, all executive officers and
directors of the Company (other than executive officers and directors owning an
aggregate of less than 1% of the outstanding
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Common Stock as of the effective date of such registration statement) shall also
have agreed not to effect any sale, disposition or distribution of any
Registrable Securities under the circumstances and pursuant to the terms set
forth in this Section 5.12.
SECTION 5.13. Transfer of Registration Rights. The registration rights
of any Holder under this Agreement with respect to the Registrable Securities
may be transferred to any transferee of such Registrable Securities who acquires
any Registrable Securities of any Holder; provided, that (i) the transferring
Holder shall give the Company written notice at or prior to the time of such
transfer stating the name and address of the transferee and identifying the
securities with respect to which the rights under this Agreement are being
transferred, (ii) such transferee shall agree in writing, in form and substance
reasonably satisfactory to the Company, to be bound as a Holder by the
provisions of this Article V, and (iii) immediately following such transfer the
further disposition of such securities by such transferee is restricted under
the Securities Act.
SECTION 5.14. Selection of Counsel. In connection with any
registration of Registrable Securities pursuant to Sections 5.3, 5.4 and 5.5
hereof, the Holders of a majority of the Registrable Securities covered by any
such registration may select one counsel to represent all Holders of Registrable
Securities covered by such registration.
ARTICLE VI
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REPRESENTATIONS AND WARRANTIES
SECTION 6.1. Representations of the Company. The
Company represents and warrants as follows:
(a) Due Organization of the Company and its Subsidiaries. Each
of the Company and its Subsidiaries is a corporation duly organized,
validly existing, and, with respect to those Subsidiaries of the
Company organized under the laws of one of the states of the United
States of America or the District of Columbia (a "U.S. Corporation"),
is in good standing as a domestic corporation under the laws of the
state of its organization with all requisite corporate power and
authority to own, lease and operate its properties and to conduct its
business as presently conducted. Each of the Subsidiaries of the
Company which is a U.S. Corporation is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, except where the
failure to be so qualified as required would not prevent or materially
hinder or delay the ability of the Company to perform its obligations
hereunder.
(b) Validity of Agreement. The Company has all necessary
corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and
performance of this Agreement by the Company have been duly authorized
by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and,
assuming due
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authorization, execution and delivery by Ford, constitutes a legal,
valid and binding obligation of the Company enforceable against it in
accordance with its terms, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in
equity or at law).
(c) Consents and Approvals; No Violations. The execution,
delivery or performance of this Agreement by the Company will not (i)
conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws or similar organizational
documents of the Company or any of its Subsidiaries, (ii) require the
Company or any of its Subsidiaries to make any filing with, or the
Company or any of its Subsidiaries to obtain any permit, authorization,
consent or approval of, any court, arbitral tribunal, administrative
agency or commission or other governmental or other regulatory
authority, commission or agency (a "Governmental Entity"), except for
filings with any Governmental Entity in connection with an offering of
securities pursuant to Article V hereof, (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time
or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
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guarantee, other evidence of indebtedness, lease, concession agreement,
franchise agreement, license, contract, agreement or other instrument
or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may
be bound or (iv) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or any of its Subsidiaries
or any of their properties or assets, except, in the case of clauses
(ii), (iii) and (iv), for failures to make filings, or to obtain
permits, authorizations, consents or approvals, or violations,
breaches, defaults, or rights of termination, amendment, cancellation
or acceleration, which would not prevent or materially hinder or delay
the ability of the Company to perform its obligations hereunder.
(d) Litigation. There is no action, suit or proceeding before
or by any Governmental Entity, domestic or foreign, now pending or, to
the Company's knowledge, threatened against the Company or any of its
Subsidiaries which, if adversely determined, would prevent or
materially hinder or delay the ability of the Company to perform its
obligations under this Agreement.
SECTION 6.2. Representations of Ford. Ford represents
and warrants as follows:
(a) Due Organization of Ford and its Subsidiaries.
Each of Ford and its Subsidiaries is a corporation duly
organized, validly existing, and, with respect to those
Subsidiaries of Ford which are U.S. Corporations, is in good
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standing as a domestic corporation under the laws of the state of its
organization with all requisite corporate power and authority to own,
lease and operate its properties and to conduct its business as
presently conducted. Each of the Subsidiaries of Ford which is a U.S.
Corporation is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, except where the failure to be so qualified
as required would not prevent or materially hinder or delay the ability
of Ford to perform its obligations hereunder.
(b) Validity of Agreement. Ford has all necessary corporate
power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this
Agreement by Ford have been duly authorized by all necessary corporate
action on the part of Ford. This Agreement has been duly executed and
delivered by Ford and, assuming due authorization, execution and
delivery by Ford, constitutes a legal, valid and binding obligation of
Ford enforceable against it in accordance with its terms, except as
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles
(whether considered in a proceeding in equity or at law).
(c) Consents and Approvals; No Violations. The
execution, delivery or performance of this Agreement by Ford
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will not (i) conflict with or result in any breach of any provision of
the certificate of incorporation or by-laws or similar organizational
documents of Ford or any of its Subsidiaries, (ii) require Ford or any
of its Subsidiaries to make any filing with, or Ford or any of its
Subsidiaries to obtain any permit, authorization, consent or approval
of, any Governmental Entity, except for filings with any Governmental
Entity in connection with an offering of securities pursuant to Article
V hereof, (iii) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise
to any right of termination, amendment, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, guarantee, other evidence of indebtedness, lease,
concession agreement, franchise agreement, license, contract, agreement
or other instrument or obligation to which Ford or any of its
Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Ford or
any of its Subsidiaries or any of their properties or assets, except,
in the case of clauses (ii), (iii) and (iv), for failures to make
filings, or to obtain permits, authorizations, consents or approvals,
or violations, breaches, defaults, or rights of termination, amendment,
cancellation or acceleration, which would not
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prevent or materially hinder or delay the ability of Ford to
perform its obligations hereunder.
(d) Litigation. There is no action, suit or proceeding before
or by any Governmental Entity, domestic or foreign, now pending or, to
Ford's knowledge, threatened against Ford or any of its Subsidiaries
which, if adversely determined, would prevent or materially hinder or
delay the ability of Ford to perform its obligations under this
Agreement.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Notices. All notices, requests, demands or other
communications provided herein shall be made in writing and shall be deemed to
have been duly given (unless otherwise specifically provided in any Section of
this Agreement) if delivered as follows:
If to Ford:
Ford Motor Company
The American Road
Dearborn, Michigan 48121
Attention: Secretary
Fax: (313) 337-9591
Tel: (313) 323-2260
-and-
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: David J. Sorkin, Esq.
Fax: (212) 455-2502
Tel: (212) 455-2000
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If to the Company:
Team Rental Group, Inc.
125 Basin Street, Suite 210
Daytona Beach, Florida 32114
Attention: Chief Executive Officer
Fax: (904) 238-7461
Tel: (904) 238-7035
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: John J. Kelley III, Esq.
Fax: (404) 572-5100
Tel: (404) 572-4600
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on (i) the date of delivery
if sent by messenger, (ii) on the business day following the business day on
which delivered to a recognized courier service if sent by overnight courier, or
(iii) on the fifth business day after the mailing thereof if sent by mail.
Notices may also be delivered by fax, provided that any such notice also is
delivered in a manner contemplated by clause (i), (ii) or (iii) above.
SECTION 7.2. Costs and Expenses. All costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, except as otherwise
provided in Article V.
SECTION 7.3. Amendment and Modification. This
Agreement may be amended, modified and supplemented in any and
all respects by written agreement of the parties hereto.
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SECTION 7.4. Waivers and Extensions. Each party to this Agreement may
waive any right of such party or any breach or default of the other party to
this Agreement or conditions to its own obligations; provided that such waiver
will not be effective against the waiving party unless it is in writing, is
signed by such party and specifically refers to this Agreement. Waivers may be
made in advance or after the right waived has arisen or the breach or default
waived has occurred. Any waiver may be conditional. No waiver of any breach of
any agreement or provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof nor of any other agreement or provision
herein contained. No waiver or extension of time for performance of any
obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
SECTION 7.5. Interpretation. (a) Titles and headings of sections of
this Agreement are for convenience only and shall not affect the construction of
any provision of this Agreement.
(b) Whenever the phrase "to the Company's knowledge" is used in this
Agreement, such phrase means the actual knowledge of the persons listed on
Schedule 8.6.
(c) The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract or
otherwise.
(d) The term "person" means an individual, corporation, partnership,
limited liability company, association,
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trust, incorporated organization, Governmental Entity or other entity.
SECTION 7.6. Entire Agreement; Third Party Beneficiaries; Assignment.
This Agreement: (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) is not intended to confer upon any
person other than the parties hereto and any Holder any rights or remedies
hereunder. Except as otherwise provided in Section 5.13, 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 party. This Agreement will be binding upon
the parties and their respective successors and assigns.
SECTION 7.7. 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 is 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 hereto
shall negotiate in good faith to modify this Agreement in accordance with
Section 7.3 so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in
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order that the transactions contemplated hereby may be consummated as originally
contemplated to the fullest extent possible.
SECTION 7.8. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
SECTION 7.9. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any material provision of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to the remedy of specific performance of the material
terms hereof, in addition to any other remedy at law or equity.
SECTION 7.10. Resolution of Disputes. If a dispute arises between the
parties relating to this Agreement, then the parties hereto (and Ford, as a
third party beneficiary of the provisions of this Agreement) shall implement the
procedures set forth in Section 8.11 of the Preferred Stock Purchase Agreement,
subject to the provisions thereof.
SECTION 7.11. Consent to Jurisdiction; Waiver of Jury Trial. (a)
Subject to Section 7.10, each of the parties hereto:
(i) consents to submit itself to the personal jurisdiction of
(A) the United States District Court for the Eastern District of
Michigan in the event any dispute arises out of this Agreement or any
of the transactions contemplated by this Agreement to the extent such
court
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would have jurisdiction with respect to such dispute and (B)
the Courts of the State of Michigan otherwise;
(ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction or venue by motion or other request for leave
from any such court;
(iii) agrees that it will not bring any action relating to
this Agreement or any of the transactions contemplated by this
Agreement in any court other than such courts; and
(iv) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address set forth in Section 7.1 or at
such other address of which the other party shall have been notified
pursuant thereto; and
(v) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
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<PAGE> 61
(B) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING IN RELATION TO THIS AGREEMENT
AND FOR ANY COUNTERCLAIM THEREIN.
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<PAGE> 62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TEAM RENTAL GROUP, INC.
By: /s/ Sanford Miller
-------------------------------------
Name: Sanford Miller
Title: Chairman and Chief
Executive Officer
FORD MOTOR COMPANY
By: /s/ J.M. Devine
-------------------------------------
Name: J.M. Devine
Title: Executive Vice President
and Chief Financial Officer
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<PAGE> 63
PREFERRED STOCKHOLDERS AGREEMENT
SCHEDULE A
BUYER'S OUTSTANDING REGISTRATION RIGHTS
1. Registration Rights Agreement dated as of August 25, 1994 between
buyer and the Individuals listed therein, as amended by First Amendment to
Registration Rights Agreement dated as of November 1, 1994, as amended by First
Amendment to Registration Rights Agreement, dated as of November 1, 1994.
2. Registration Rights Agreement dated as of March 8, 1995 between
Buyer and James Salatto.
3. Registration Rights Agreement dated as of October 20, 1995 between
Buyer and Budget Rent A Car of Southern California (BRAC-OPCO).
4. Registration Rights granted pursuant to Warrant dated as of April
26, 1996 to purchase 187,500 shares of Class A Common Stock Granted to
NationsBank.
5. Registration Rights Agreement dated as of December 18, 1996 between
Buyer and the holders of 7.0% Convertible Subordinated Notes due 2003.
6. Registration Rights granted pursuant to Warrant dated as of August
24, 1994 to purchase 175,000 shares of Class A Common Stock granted to Budget
Rent A Car Corporation.
<PAGE> 1
EXHIBIT 3.4
TEAM RENTAL GROUP, INC.
CERTIFICATE OF DESIGNATIONS
-------------------------------
Pursuant to Section 151
of the General Corporation Law of the State of Delaware
-------------------------------
TEAM RENTAL GROUP, INC. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify that pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, its Board of Directors, at a meeting
duly called and held on January __, 1997, adopted the following resolution,
which resolution remains in full force and effect as of the date hereof:
WHEREAS, the Board of Directors of the Corporation (the "Board of
Directors") is authorized, within the limitations and restrictions stated in the
Amended and Restated Certificate of Incorporation, to fix by resolution or
resolutions the designation of each series of preferred stock and the powers,
designations, preferences and relative participating, optional or other rights,
if any, or the qualifications, limitations or restrictions thereof, including,
without limiting the generality of the foregoing, such provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution or resolutions of the Board
<PAGE> 2
of Directors under the General Corporation Law of State of Delaware; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series:
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such
series of preferred stock on the terms and with the provisions herein set forth:
(1) Designation. The designation of a series of Preferred
Stock, par value $0.01 per share, shall be "Series A Convertible
Preferred Stock" (the "Series A Preferred Stock") consisting of 10,000
shares.
(2) Rank. The Series A Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and dissolution,
rank prior to the Class A Common Stock, par value $0.01 per share, of
the Corporation (the "Class A Common Stock") and the Class B Common
Stock, par value $0.01 per share, of the Corporation (the "Class B
Common Stock" and, together with the Class A Common Stock, the "Common
Stock"). (All equity securities of the Corporation to which the Series
A Preferred Stock ranks prior, including the Common Stock, are
collectively referred to herein as the "Junior Securities", all equity
securities of the Corporation with which the Series A Preferred Stock
ranks on a parity are collectively referred to herein as the "Parity
Securities" and all equity securities of the
-2-
<PAGE> 3
Corporation (other than convertible debt securities) to which the
Series A Preferred Stock ranks junior, whether with respect to
dividends or upon liquidation, dissolution, winding up or otherwise,
are collectively referred to herein as the "Senior Securities".) The
Series A Preferred Stock shall be subject to the creation of Junior
Securities, Parity Securities and Senior Securities.
(3) Dividends. (i) The holders of the shares of Series A
Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors, out of funds legally available for the
payment of dividends, cumulative cash dividends in respect of each such
share in such amount as the holder thereof would receive if such share
were converted into shares of Class A Common Stock pursuant to
paragraph (6) hereof immediately prior to the record date for payment
of any cash dividend on the Class A Common Stock, in preference to
dividends on Junior Securities.
(ii) All dividends paid with respect to shares of the
Series A Preferred Stock pursuant to paragraph (3)(i) shall be paid pro
rata to the holders entitled thereto.
(iii) No full dividends shall be declared by the Board of
Directors or paid or set apart for payment by the Corporation on any
Parity Securities, nor shall the Corporation make any distribution in
respect of any Parity Securities, either directly or indirectly, and
whether in cash, obligations or shares of the Corporation or other
property, unless full cumulative dividends have been or
-3-
<PAGE> 4
contemporaneously are declared and paid. If any dividends are not paid
in full, as aforesaid, upon the shares of the Series A Preferred Stock
and any other Parity Securities, all dividends or distributions
declared upon shares of the Series A Preferred Stock and any other
Parity Securities shall be declared pro rata so that the amount of
dividends or distributions declared per share of the Series A Preferred
Stock and such Parity Securities shall in all cases bear to each other
the same ratio that accrued dividends per share on the Series A
Preferred Stock and such Parity Securities bear to each other. No
interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series A Preferred
Stock or any other Parity Securities which may be in arrears. Any
dividend not paid pursuant to paragraph (3)(i) hereof or this paragraph
(3)(iii) shall be fully cumulative and shall accrue (whether or not
declared), without interest, as set forth in paragraph (3)(i) hereof.
(iv) (a) Holders of shares of the Series A Preferred Stock
shall be entitled to receive the dividends provided for in paragraph
(3)(i) hereof in preference to and in priority over any dividends upon
any of the Junior Securities.
(b) So long as any shares of the Series A Preferred Stock are
outstanding, the Board of Directors shall not declare, and the
Corporation shall not pay or set apart for payment any dividend on any
of the Junior Securities or make
-4-
<PAGE> 5
any payment on account of, or set apart for payment money for a sinking
or other similar fund for, the repurchase, redemption or other
retirement of, any of the Junior Securities or Parity Securities or any
warrants, rights or options exercisable for or convertible into any of
the Junior Securities or Parity Securities (other than the repurchase,
redemption or other retirement of debentures or other debt securities
that are convertible or exchangeable into any of the Junior Securities
or Parity Securities), or make any distribution in respect of the
Junior Securities, either directly or indirectly, and whether in cash,
obligations or shares of the Corporation or other property (other than
distributions or dividends in Junior Securities to the holders of
Junior Securities), and shall not permit any corporation or other
entity directly or indirectly controlled by the Corporation to purchase
or redeem any Class A Common Stock or any warrants, rights, calls or
options exercisable for or convertible into Class A Common Stock (other
than the repurchase, redemption or other retirement of debentures or
other debt securities that are convertible or exchangeable into Class A
Common Stock or the repurchase, redemption or other retirement of less
than 1% of the then outstanding Class A Common Stock) unless prior to
or concurrently with such declaration, payment, setting apart for
payment, repurchase, redemption or other retirement or distribution, as
the case may be, the holders of the Series A Preferred Stock have the
opportunity to
-5-
<PAGE> 6
participate therein pro rata with the holders of Class A
Common Stock.
(v) Subject to the foregoing provisions of this paragraph (3),
the Board of Directors may declare and the Corporation may pay or set
apart for payment dividends and other distributions on any of the
Junior Securities or Parity Securities, and may repurchase, redeem or
otherwise retire any of the Junior Securities or Parity Securities or
any warrants, rights or options exercisable for or convertible into any
of the Junior Securities or Parity Securities, and the holders of the
shares of the Series A Preferred Stock shall not be entitled to share
therein.
(4) Liquidation Preference. (i) In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of
the Corporation, the holders of shares of Series A Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders the same
amount that such holders would receive if such shares were converted
into shares of Class A Common Stock pursuant to paragraph (6) hereof
immediately prior to such voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, in
preference to any such payment on Junior Securities. If the assets of
the Corporation are not sufficient to pay in full the liquidation
payments payable to the holders of outstanding shares of the Series A
Preferred Stock and any Parity
-6-
<PAGE> 7
Securities, then the holders of all such shares shall share ratably in
such distribution of assets in accordance with the amount which would
be payable on such distribution if the amounts to which the holders of
outstanding shares of Series A Preferred Stock and the holders of
outstanding shares of such Parity Securities are entitled were paid in
full. Except as provided in this paragraph (4)(i), holders of Series A
Preferred Stock shall not be entitled to any distribution in the event
of liquidation, dissolution or winding up of the affairs of the
Corporation.
(ii) For the purposes of this paragraph (4), neither the
voluntary sale, conveyance, lease, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Corporation nor the
consolidation or merger of the Corporation with or into one or more
other corporations nor the consolidation or merger of one or more
corporations with or into the Corporation shall be deemed to be a
voluntary or involuntary liquidation, dissolution or winding up.
(5) Status of Shares of Series A Preferred Stock Acquired by
the Corporation. Shares of Series A Preferred Stock that have been
issued and reacquired in any manner, including shares purchased or
redeemed or exchanged or converted, shall (upon compliance with any
applicable provisions of the laws of the State of Delaware) have the
status of authorized and unissued shares of the class of
-7-
<PAGE> 8
Series A Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of the Series A
Preferred Stock.
(6) Conversion. (i) Each share of Series A Preferred Stock
shall automatically be converted into 1,000 shares of the Class A
Common Stock, subject to adjustment as provided in this paragraph (6)
(the "Conversion Number") in the event that the record ownership of
such share of Series A Preferred Stock shall be transferred to or held
by any person or entity that is not Ford Motor Company, a Delaware
corporation ("FCo."), or an affiliate of FCo. previously identified as
such to the Corporation. A pledge of shares of Series A Preferred Stock
as security for an obligation of a holder of such shares of Series A
Preferred Stock shall not be considered a transfer for purposes of this
paragraph (6)(i), unless and until record ownership of such shares is
transferred to the pledgeholder. The conversion into Class A Common
Stock shall be deemed to have occurred (whether or not certificates
representing such shares are surrendered) as of the close of business
on the date of transfer, and the person or persons entitled to receive
shares of Class A Common Stock issuable on such conversion shall be
treated for all purposes as the record holder or holders of such shares
of Class A Common Stock on that date.
(ii) Before any certificates representing shares of Class A
Common Stock shall be delivered upon conversion, the holder of shares
of Series A Preferred Stock whose shares
-8-
<PAGE> 9
have been converted into shares of Class A Common Stock shall deliver
the certificate(s) representing such shares to the Corporation or its
duly authorized agent (or if such certificates have been lost, stolen
or destroyed, such holder shall execute an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by
it in connection with such conversion), specifying the place where the
certificates representing the Class A Common Stock issued in conversion
thereof shall be sent. The endorsement of the share certificate shall
be in form satisfactory to the Corporation or such agent, as the case
may be.
(iii) The Conversion Number shall be subject to adjustment
from and after January 13, 1997 and from time to time as follows:
(a) If, from and after January 13, 1997, the
Corporation shall (w) declare or pay a dividend on its
outstanding Class A Common Stock in shares of Class A Common
Stock or make a distribution to all holders of its Class A
Common Stock in shares of Class A Common Stock, (x) subdivide
its outstanding shares of Class A Common Stock into a greater
number of shares of Class A Common Stock, (y) combine its
outstanding shares of Class A Common Stock into a smaller
number of shares of Class A Common Stock or (z) issue by
reclassification of its shares of Class A Common Stock other
securities of the Corporation, then the Conversion Number in
-9-
<PAGE> 10
effect immediately prior thereto shall be adjusted so that any
shares of Series A Preferred Stock thereafter converted shall
be entitled to receive the number and kind of shares of Class
A Common Stock or other securities that the holder would have
owned or have been entitled to receive after the happening of
any of the events described above had such shares of Series A
Preferred Stock been converted into shares of Class A Common
Stock immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made pursuant
to this paragraph (6)(iii)(a) shall become effective
immediately after the record date for the dividend payment,
subdivision, combination or issuance, if any, or, if there is
no such record date, then on the date of such event. Such
adjustments shall be made successively.
(b) In the event that, from and after January 13,
1997, the Corporation shall be a party to any transaction
(including without limitation any (i) recapitalization or
reclassification of the Class A Common Stock (other than a
change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a
subdivision or combination of the Class A Common Stock), (ii)
any consolidation or merger of the Corporation with or into
any other person or any merger of another person into the
Corporation (other than a merger which does not result in a
-10-
<PAGE> 11
reclassification, conversion, exchange or cancellation of
outstanding shares of Class A Common Stock of the
Corporation), (iii) any sale or transfer of all or
substantially all of the assets of the Corporation or (iv) any
compulsory share exchange) pursuant to which all or
substantially all of the Class A Common Stock shall be
exchanged for, converted into, acquired for or constitute
solely the right to receive cash, securities, property or
other assets, then appropriate provision shall be made as part
of the terms of such transaction whereby each share of Series
A Preferred Stock then outstanding shall thereafter be
convertible only into the kind and amount of cash, securities,
property and other assets that would have been receivable upon
such transaction by a holder of the number of shares of Class
A Common Stock into which such share of Series A Preferred
Stock might have been converted immediately prior to such
transaction. The Corporation or the person formed by such
consolidation or resulting from such merger or which acquired
such assets or which acquired the Corporation's shares, as the
case may be, shall make provisions in its certificate or
articles of incorporation or other constituent document to
establish such right. Such certificate or articles of
incorporation or other constituent document shall provide for
adjustments which, for events subsequent to the effective date
of
-11-
<PAGE> 12
such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this paragraph
(6)(ii). The above provisions shall similarly apply to
successive transactions of the type described in this
paragraph (6)(ii)(b).
(iv) The Corporation will pay any and all documentary, stamp
or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Class A Common Stock on the conversion of shares
of Series A Preferred Stock pursuant to this paragraph (6); provided,
however, that the Corporation shall not be required to pay any tax
which may be payable in respect of any registration of transfer
involved in the issue or delivery of shares of Class A Common Stock in
a name other than that of the registered holder of Series A Preferred
Stock converted, and no such issue or delivery shall be made unless and
until the person requesting such issue has paid to the Corporation the
amount of any such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(v) (a) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its
authorized but unissued Class A Common Stock or its issued Class A
Common Stock held in its treasury, or both, for the purpose of
effecting the conversion of the Series A Preferred Stock, the full
number of shares of Class A Common Stock then deliverable upon the
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<PAGE> 13
conversion of all outstanding shares of the Series A
Preferred Stock.
(7) Voting Rights. (i) The holders of record of shares of
Series A Preferred Stock shall not be entitled to any voting rights
except as hereinafter provided in this paragraph (7) or as otherwise
provided by law.
(ii) So long as any shares of the Series A Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote or
consent of the holders of at least a majority of the shares of Series A
Preferred Stock at the time outstanding, given in person or by proxy,
either in writing or by resolution adopted at an annual or special
meeting called for the purpose, at which the holders of Series A
Preferred Stock shall vote separately as a class, amend the Amended and
Restated Certificate of Incorporation of the Corporation so as to
affect materially and adversely the specified rights, preferences,
privileges or voting rights of shares of Series A Preferred Stock.
(8) Limitations. Except as may otherwise be required by law,
the shares of Series A Preferred Stock shall not have any powers,
preferences or relative, participating, optional or other special
rights other than those specifically set forth in this resolution (as
such resolution may be amended from time to time) or otherwise in the
Amended and Restated Certificate of Incorporation of the Corporation.
-13-
<PAGE> 14
IN WITNESS WHEREOF, Team Rental Group, Inc. has caused his certificate
to be executed by Sanford Miller, its Chairman of the Board and Chief Executive
Officer, and attested by John Congdon, its Chief Financial Officer and
Secretary, as of this 13th day of January, 1997.
TEAM RENTAL GROUP, INC
By: /s/ Sanford Miller
-----------------------------------
Name: Sanford Miller
Title: Chairman of the Board
and Chief Executive
Officer
Attest:
/s/ Jeffrey D. Congdon
- -----------------------------------
Name: Jeffrey D. Congdon
Title: Chief Financial Officer and
Secretary
-14-
<PAGE> 1
EXHIBIT 4.12
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of December 18, 1996, between
Team Rental Group, Inc., a Delaware corporation (the "COMPANY"), and the persons
listed on the signature pages hereof.
1. Background. The Company is a party to the several Note Purchase
Agreements dated as of December 1, 1996 (the "PURCHASE AGREEMENTS") entered into
with the Purchasers, providing for, among other things, the issuance by the
Company of $80,000,000 aggregate principal amount of its 7.0% Convertible
Subordinated Notes due 2003 (the "SECURITIES"). Certain capitalized terms are
defined in Section 3.
This Agreement provides for registration rights with respect to
Registrable Securities, but not with respect to the Securities. Prior to the
conversion of Securities into shares of Common Stock in accordance with the
respective terms of such Securities, the holder of such Securities shall be
deemed to hold Registrable Securities on an As Converted Basis for all purposes
of this Agreement.
2. Registration under Securities Act, etc.
2.1. Filing of Shelf Registration Statement. On or before May 15, 1997,
the Company shall file a "shelf" registration statement pursuant to Rule 415
under the Securities Act (the "SHELF REGISTRATION") with respect to the
Registrable Securities to be issued to the holders of the Securities upon
conversion thereof. The Company shall use its best efforts to (i) have the Shelf
Registration declared effective on or before the Target Date, and (ii) keep the
Shelf Registration continuously effective from the date the Shelf Registration
is declared effective until the Termination Date.
2.2. Registration Procedures. In connection with the Shelf Registration
filed pursuant to Section 2.1, the Company will as expeditiously as possible:
(a) subject to Section 9 hereof, prepare and file with the
Commission such amendments and supplements to such Shelf Registration
and the prospectus used in connection therewith as may be necessary to
keep such Shelf Registration effective and to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such Shelf Registration until such
time as all of such securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof
set forth in such Shelf Registration;
<PAGE> 2
2
(b) furnish to each seller of Registrable Securities covered
by such Shelf Registration such number of conformed copies of such
Shelf Registration and of each such amendment and supplement thereto
(including exhibits thereto, if requested), such number of copies of
the prospectus contained in such Shelf Registration (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 or Rule 430A under the Securities Act,
in conformity with the requirements of the Securities Act, and such
other documents, as such seller may reasonably request;
(c) use its reasonable good faith efforts to register or
qualify all Registrable Securities and other securities covered by such
Shelf Registration under such other securities or blue sky laws of such
jurisdictions as each seller of Registrable Securities shall reasonably
request, to keep such registration or qualification in effect for so
long as such Shelf Registration remains in effect, and to take any
other action which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for
any such purpose be required (i) to register or qualify to do business
as a foreign corporation in any jurisdiction wherein it would not be
obligated at the time to be so registered or qualified, (ii) to take
any action that would subject it to the service of process in suits,
other than as to matters and transactions relating to the Shelf
Registration, in any jurisdiction where it would not at the time be so
subject, or (iii) to take any action that would subject it to taxation
in any jurisdiction in an amount greater than it would be so subject
without having taken such action;
(d) use its best efforts to cause all Registrable Securities
covered by such Shelf Registration to be registered with or approved by
such other governmental agencies or authorities regulating the Company
as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities;
(e) promptly notify each seller of Registrable Securities
covered by such Shelf Registration, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such Shelf Registration, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances under which they were made, and, subject to Section 9
hereof, at the request of any such seller or holder promptly prepare to
furnish to
<PAGE> 3
3
such seller or holder a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made;
(f) notify each seller of Registrable Securities covered by
such Shelf Registration:
(i) when a Shelf Registration and any amendment
thereto has been filed with the Commission and when the Shelf
Registration or any post-effective amendment thereto has
become effective, and
(ii) of any request by the Commission for amendments
or supplements to the Shelf Registration or the prospectus
included therein or for additional information;
(g) notify each seller of Registrable Securities covered by
such Shelf Registration:
(i) of the issuance by the Commission of any stop
order suspending the effectiveness of the Shelf Registration
or the initiation of any proceedings for that purpose, and
(ii) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Registrable Securities included in the
Shelf Registration for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose;
(h) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Shelf Registration at the earliest
possible time;
(i) use its best efforts to list all Registrable Securities
covered by such Shelf Registration on any securities exchange on which
any of the Registrable Securities is then listed; and
(j) maintain on file with any securities exchange on which any
of the Registrable Securities is then listed a copy of the most recent
prospectus and otherwise use its best efforts to allow the sellers to
satisfy the prospectus delivery requirements of the Securities Act in a
manner not requiring physical delivery of a prospectus.
<PAGE> 4
4
The Company may require each holder of Registrable Securities to furnish the
Company such information regarding such holder and the distribution of such
securities as the Company may from time to time reasonably request in writing.
2.3. Underwriters. If, pursuant to written notice delivered to the
Company from time to time by holders of at least 10% of the Registrable
Securities, such holders so elect, the offer and sale of any such Registrable
Securities pursuant to the Shelf Registration may be effected in the form of an
underwritten offering. The managing underwriter or underwriters of the offering,
if it is an underwritten offering, pursuant to the Shelf Registration shall be
selected by the Company, and such underwriter, as well as the price, terms and
provisions of the offering, shall be subject to the approval of the holders of a
majority of the Registrable Securities to be so offered (such approval not to be
unreasonably withheld).
2.4. Underwritten Offerings. If requested by the underwriters for any
offering by holders of Registrable Securities pursuant to the Shelf
Registration, the Company will enter into an underwriting agreement with such
underwriters for such offering which is satisfactory in substance and form to
the Company, holders of a majority of the Registrable Securities included in
such offering and the underwriters and contains such representations and
warranties by the Company and such other terms as are generally prevailing in
agreements of this type, including without limitation indemnities to the effect
and to the extent provided in Section 2.7. The holders of the Registrable
Securities included in such offering will cooperate with the Company in the
negotiation of the underwriting agreement and will give consideration to the
reasonable requests of the Company regarding the form thereof; however, such
cooperation and consideration does not diminish the foregoing obligations of the
Company. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement. No holder of
Registrable Securities shall be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding (i) such holder, (ii) such
holder's Registrable Securities, (iii) such holder's intended method of
distribution of Registrable Securities, (iv) information supplied by such holder
in writing to the Company specifically for use in the Shelf Registration, (v)
other representations required by law and (vi) with respect to agreements with
the underwriters, such other agreements not inconsistent with this Agreement as
are reasonably requested by such underwriters and are customary for such
transactions.
2.5. Expenses. The Company shall pay all Registration Expenses incurred
in connection with the Shelf Registration and any supplements or amendments
thereto, whether or not it becomes effective, and whether all, none or some of
the Registrable Securities are sold pursuant to the Shelf Registration. Each
<PAGE> 5
5
holder of Registrable Securities selling all or a portion of such Securities
under the Shelf Registration shall pay all brokerage fees, commissions,
concessions or discounts and, if applicable, underwriting discounts and
commissions, the fees and disbursements of counsel representing such holder, and
transfer taxes, if any, relating to the sale or disposition of Registrable
Securities by such holder pursuant to the Shelf Registration.
2.6. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Shelf Registration under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such Shelf Registration, the underwriters, if any,
and their respective counsel and accountants, the opportunity to participate in
the preparation of such Shelf Registration and each prospectus included therein
or filed with the Commission, and will give each of them such access to its
books and records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such holders' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act; provided that the participation of the
accountants selected by the holders of Registrable Securities shall be limited
to a review of specified accounting issues of interest to such holders.
2.7. Indemnification. (a) Indemnification by the Company. In the event
of any registration of any securities of the Company under the Securities Act
pursuant to this Agreement, the Company will, and hereby does, indemnify and
hold harmless each seller of any Registrable Securities covered by the Shelf
Registration filed pursuant to Section 2.1 hereof, each other Person, if any,
who controls such seller within the meaning of Section 15 of the Securities Act,
each broker or dealer acting on behalf of such seller and each such seller's
directors, officers, partners, shareholders and employees (the seller, its
directors and officers and each such other Person is individually a "SELLER
INDEMNITEE"), against any losses, claims, damages or liabilities, joint or
several, to which such Seller Indemnitee may become subject under the Securities
Act or otherwise, including without limitation, the reasonable fees and expenses
of legal counsel, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such Shelf Registration, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, and the Company will
reimburse, as from time to time incurred, each Seller Indemnitee for any legal
or any other expenses reasonably incurred by such Seller Indemnitee in
<PAGE> 6
6
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such Shelf Registration, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company specifically for
use therein and, provided further that the Company shall not be liable to any
Person who participates as an underwriter, in the offering or sale of
Registrable Securities or any other Person, if any, who controls such
underwriters within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of a seller or
its respective Seller Indemnitees and shall survive the transfer of such
securities by such Seller Indemnitee. This indemnity agreement is in addition to
any liability that the Company may otherwise have.
(b) Indemnification by the Sellers. In the event of any registration of
any Registrable Securities pursuant to Section 2.1 hereof, each holder of
Registrable Securities covered by such Shelf Registration severally, but not
jointly, will indemnify and hold harmless (in the same manner and to the same
extent as set forth in Subsection (a) of this Section 2.7) the Company, each
director of the Company, each officer of the Company and each other Person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act, with respect to any statement or alleged statement in or omission or
alleged omission from such Shelf Registration, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such holder for use therein. No holder
of Registrable Securities shall be required by this Subsection (b) to pay an
amount in excess of the amount by which the total net proceeds (before deducting
expenses) received by such holder upon the sale of Registrable Securities
included in such registration exceeds the total purchase price paid to the
Company for the Securities attributable to such Registrable Securities. This
indemnity agreement is in addition
<PAGE> 7
7
to any liability that such holder of Registrable Securities may otherwise have.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding Subsections of this Section 2.7, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding Subsections of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in the
reasonable judgment of such indemnified party's counsel a conflict of interest
between such indemnified party and indemnifying parties may exist in respect of
such claim, the indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. An indemnifying
party who is not entitled to assume the defense of a claim will not be obligated
to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of such indemnified party's counsel a conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim (in which case such indemnified parties may
have separate counsel). No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation. No indemnified party shall, without the
consent of the indemnifying party, consent to the entry of any judgment or enter
into any settlement without the consent of the indemnifying party (which consent
will not be unreasonably withheld).
(d) Indemnification Payments. The indemnification required by this
Section 2.7 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
2.8. Adjustments Affecting Registrable Securities. The Company will not
effect or permit to occur any combination or
<PAGE> 8
8
subdivision of shares which at the time effected or permitted in the Company's
good faith opinion would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in any
registration of its securities contemplated by this Section 2 or the
marketability of such Registrable Securities under any such registration.
3. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
As Converted Basis: As defined in the Purchase Agreements.
Board of Directors: As defined in the Purchase Agreements.
Business Day: As defined in the Purchase Agreements.
Commission: The Securities and Exchange Commission and any successor
agency of the United States federal government having similar powers.
Common Stock: The Class A Common Stock, par value $.01 per share, of
the Company.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Person: As defined in the Purchase Agreements.
Purchase Agreements: As defined in Section 1.
Purchasers: The purchasers of Securities under the Purchase Agreements
and their successors and assigns, including all subsequent holders from time to
time of Securities.
Registrable Securities: (a) Any shares of Common Stock issued or
issuable upon conversion of Securities and (b) any securities issued or issuable
with respect to any such Securities or Common Stock by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) the Shelf Registration with respect to the sale
of such securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such Shelf
Registration, (b) they shall have been distributed to the public pursuant to
Rule 144 (or any successor provision) under the Securities Act, (c) they shall
have been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require
<PAGE> 9
9
registration or qualification of them under the Securities Act or any similar
state law then in force, or (d) they shall have ceased to be outstanding.
Registration Expenses: All expenses incident to the Company's
performance of or compliance with Section 2, including without limitation all
registration and filing fees, all fees of the National Association of Securities
Dealers, Inc., all fees and expenses of complying with securities or blue sky
laws, all word processing, duplicating and printing expenses, messenger and
delivery expenses, the reasonable fees and disbursements of counsel for the
Company and of its independent public accountants, including the expenses of any
special audits or "comfort" letters required by or incident to such performance
and compliance, premiums and other costs of policies of insurance obtained by
the Company against liabilities arising out of the public offering of the
Registrable Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes, if any, and any
expenses not permitted by law to be paid to by Company, provided that, in any
case where Registration Expenses are not to be borne by the Company, such
expenses shall not include salaries of Company personnel or general overhead
expenses of the Company, auditing fees, premiums or other expenses relating to
liability insurance required by underwriters of the Company or other expenses
for the preparation of financial statements or other data normally prepared by
the Company in the ordinary course of its business or which the Company would
have incurred in any event.
Rule 144: As defined in Section 4.
Securities: As defined in Section 1.
Securities Act: The Securities Act of 1933, as amended. Shelf
Registration: As defined in Section 2.1.
Target Date: June 30, 1997.
Termination Date: The third anniversary of the Closing Date or such
earlier date as of which the Securities shall be paid in full prior to
conversion or shall no longer constitute restricted securities under Rule 144 of
the Securities Act or all the Registrable Securities covered by the Shelf
Registration have been sold pursuant to the Shelf Registration.
4. Rule 144 and Rule 144A. The Company shall take all actions
reasonably necessary to enable holders of Registrable Securities to sell such
securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 under the Securities Act, as such
Rule may be amended from time to time ("RULE 144"), (b) Rule 144A under the
<PAGE> 10
10
Securities Act, as such Rule may be amended from time to time, or (c) any
similar rules or regulations hereafter adopted by the Commission, including,
without limiting the generality of the foregoing, filing on a timely basis all
reports required to be filed by the Exchange Act. Upon the reasonable request of
any holder of Registrable Securities, the Company will deliver to such holder a
written statement as to whether it has complied with such requirements.
5. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of (a) the holder
or holders of at least 66 2/3% of the Registrable Securities if at such time the
original purchasers of the Securities under the Purchase Agreements and their
respective affiliates in the aggregate hold at least 66 2/3% of all Registrable
Securities, and (b) otherwise the holder or holders of a majority of the
Registrable Securities. Each holder of Securities or Registrable Securities at
the time or thereafter outstanding shall be bound by any consent authorized by
this Section 5, whether or not such Securities or Registrable Securities shall
have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Securities or
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election and by prior written notice to
the Company, be treated as the holder of such Securities or Registrable
Securities for purposes of any request or other action by any holder or holders
of Securities or Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held (directly or on an As Converted Basis) by any holder or holders of
Registrable Securities contemplated by this Agreement.
7. Notices. All notices and other communications provided for hereunder
shall be in writing and shall be sent by confirmed facsimile transmission (hard
copy to be sent on the date of such transmission) or delivered by hand or sent
by a reputable overnight courier service prepaid (with confirmation of receipt)
and (a) if addressed to a party other than the Company, addressed to such party
in the manner set forth in the Purchase Agreements, or at such other address as
such party shall have furnished to the Company in writing, or (b) if addressed
to any other holder of Registrable Securities at the address that such holder
shall have furnished to the Company in writing, or, until any such other holder
so furnishes to the Company an address, then to and at the address of the last
holder of such Registrable Securities who has furnished an address to the
Company, or (c) if addressed to the Company, at 125 Basin Street, Suite 210,
Daytona Beach, Florida 32114, to the attention of Sanford Miller, or at such
other address as the Company shall have furnished to each
<PAGE> 11
11
holder of Registrable Securities at the time outstanding. Notices and other
communications hereunder shall be deemed to have been duly given if sent as
aforesaid.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit of
and enforceable by any subsequent holder of any Securities or Registrable
Securities, subject to the provisions respecting the minimum numbers or
percentages of shares of Registrable Securities required in order to be entitled
to certain rights, or take certain actions, contained herein.
9. Holdback Agreements. Notwithstanding anything in this Agreement to
the contrary, the Company may prohibit offers and sales of Registrable
Securities pursuant to the Shelf Registration at any time if
(a)(i) it is in possession of material non-public information,
(ii) the Board of Directors of the Company determines in good faith
that disclosure of such material non-public information would not be in
the best interests of the Company and its stockholders and (iii) the
Board of Directors of the Company or the Chief Executive Officer or the
Chief Financial Officer of the Company determines (based on advice of
counsel) that such prohibition is necessary in order to avoid a
requirement to disclose such material non-public information; or
(b) the Company has made a public announcement relating to an
acquisition or business combination transaction including the Company
and/or one or more of its Subsidiaries (i) that is material to the
Company and its Subsidiaries taken as a whole (and for such purpose no
transaction shall be deemed material unless, on a pro forma basis and
after giving effect thereto, consolidated assets or consolidated
revenues of the Company and its Subsidiaries as of the end of or for
the most recently completed fiscal year would be increased by at least
10%) and (ii) the Board of Directors of the Company or the Chief
Executive Officer or the Chief Financial Officer of the Company
determines in good faith that offers and sales of Registrable
Securities pursuant to the Shelf Registration prior to the consummation
of such transaction (or such earlier date as the Board of Directors or
the Chief Executive Officer or the Chief Financial Officer of the
Company shall determine) is not in the best interests of the Company
and its stockholders,
provided that during any period of prohibition neither the Company nor any other
Person to whom the Company shall have given registration rights with respect to
shares of Common Stock shall
<PAGE> 12
12
be entitled to make offers and sales of Common Stock pursuant to a registration
statement filed under the Securities Act, other than pursuant to an employee
stock purchase plan, stock option or other employee benefit plan or a dividend
re-investment plan of the Company (each period during which any prohibition of
offers and sales of Registrable Securities pursuant to the Shelf Registration is
in effect pursuant to clause (a) or (b) of this Section 9 is referred to herein
as a "SUSPENSION PERIOD").
A Suspension Period shall commence on and include the date on which the
Company provides written notice to holders of Registrable Securities covered by
the Shelf Registration that offers and sales of Registrable Securities cannot be
made thereunder in accordance with this Section 9 and shall end on the date on
which each holder of Registrable Securities covered by the Shelf Registration
either receives copies of a prospectus supplement, as contemplated by Section
2.2(b), or is advised in writing by the Company that offers and sales of
Registrable Securities pursuant to the Shelf Registration and use of the
prospectus may be resumed, provided, however, that all Suspension Periods
pursuant to clause (a) of this Section 9 in the aggregate shall not exceed 60
days during any period of twelve consecutive calendar months (nor more than 20
consecutive days for any one Suspension Period) and each Suspension Period shall
be followed by at least ten Business Days during which no Suspension Period is
in effect.
10. No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
11. Remedies. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights hereunder. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
12. Headings. The headings of this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms hereof.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
taken together shall constitute one and the same instrument.
<PAGE> 1
EXHIBIT 4.14
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT 1933. THE
TRANSFER, EXERCISE OR SURRENDER FOR EXCHANGE OF THE SECURITIES REPRESENTED
HEREBY IS SUBJECT TO THE RESTRICTIONS SET FORTH IN ARTICLE IV BELOW AND NO
TRANSFER, EXERCISE OR SURRENDER FOR EXCHANGE OF THIS WARRANT SHALL BE VALID OR
EFFECTIVE UNTIL THERE SHALL HAVE BEEN COMPLIANCE WITH THE TERMS AND CONDITIONS
OF ARTICLE IV BELOW.
TEAM RENTAL GROUP, INC.
WARRANT
Warrant No. 2-1996 No. of Shares: 187,500
Issued: April 26, 1996
THIS IS TO CERTIFY THAT, for value received, NationsBank, National
Association (South), or its assigns, is entitled to purchase from TEAM RENTAL
GROUP, INC., a Delaware corporation (the "Corporation"), at any time or from
time to time after the date hereof and prior to April 26, 2001 (the "Expiration
Date"), at the place where the Warrant Office to which reference is hereinafter
made is located, at a purchase price of $10.87 per share (such price, subject to
the adjustments, if any, set forth in Article V hereof, being hereinafter
referred to as the "Exercise Price"), 187,500 shares (such shares, subject to
the adjustments, if any, set forth in Article V hereof, are sometimes
hereinafter referred to as the "Warrant Shares") of duly authorized, validly
issued, fully paid and non-assessable shares of Class A Common stock, par value
$.01, per share (the "Class A Common Stock"), of the Corporation, and to
exercise the other rights, powers and privileges hereinafter provided, all on
the terms and conditions and pursuant to the provisions hereinafter set forth.
The holder of this Warrant shall be entitled to receive together with the
Warrant Shares, for the purchase price per share set forth above, any shares of
capital stock or securities, any convertible or exchangeable securities, and any
rights or options to subscribe for or to purchase shares of capital stock or
securities or convertible or exchangeable securities to which the holder of this
Warrant shall hereafter be entitled by reason of any transaction of the type
described in Article V hereof.
Certain terms used in this Warrant are defined in Article VI.
<PAGE> 2
ARTICLE 1.
EXERCISE OF WARRANTS
1.01. Method of Exercise; Issuance of Common Stock.
(a) To exercise this Warrant in whole or in part, the holder
hereof shall deliver to the Corporation on or after the date hereof and prior
to the Expiration Date, at the Warrant Office designated pursuant to Section
3.01:
(i) a written notice, in substantially the Form of the Exercise
Notice attached as Exhibit A hereto, of such holder's election to exercise
this Warrant, which notice shall specify the number of Warrant Shares to
be purchased;
(ii) this Warrant; and
(iii) the Exercise Price for the number of Warrant Shares to be
purchased.
(b) Payment of the Exercise Price shall be made in the manner
selected by the holder of this Warrant as set forth below:
(i) At the option of the holder hereof,
(1) by wire transfer to an account in a bank located in the
United States designated for such purpose by the Corporation, or
(2) by certified or official bank check payable to the order of
the Corporation; or
(ii) In lieu of delivering the Exercise Price as set forth in Section
1.01(b)(i), the holder of this Warrant may instruct the Corporation in writing
("Notice of Conversion") to deliver to the holder (without payment by the holder
of any Exercise Price or of any other cash or consideration) that number of
shares of Class A Common Stock equal to the quotient obtained by dividing:
(x) the value of this Warrant at the time the conversion right is
exercised (determined by subtracting the aggregate Exercise Price in
effect immediately prior to the exercise of the conversion right from the
aggregate Current Market Price of the shares of Class A Common Stock
issuable upon exercise of this Warrant immediately prior to the exercise
or the conversion right) by
(y) the Current Market Price of one share of Class A Common Stock
immediately prior to the exercise of the conversion right.
2
<PAGE> 3
The Notice of Conversion may be given by completing the appropriate box in the
Exercise Notice at the end of this Warrant. Upon receipt of the cash payment
described in Section 1.01(b)(i) or the Notice of Conversion described in
Section 1.01(b)(ii), the Corporation shall, as promptly as practicable, and in
any event within 5 days thereafter, execute and deliver or cause to be executed
and delivered, in accordance With Exercise Notice, a certificate or
certificates representing the aggregate number of Warrant Shares specified in
said notice. The certificate or certificates so delivered shall be in such
denominations as may be specified in said notice and shall be issued in the
name of such holder or such other name as shall be designated in said notice.
Such certificate or certificates shall be deemed to have been issued, and such
holder or holders or any other person so designated to be named therein shall
be deemed for all purposes to have become a holder of record of such Warrant
Shares, as of the date said notice is received by the Corporation as aforesaid.
If this Warrant shall have been exercised only in part, the Corporation shall,
at the time of delivery of said certificate or certificates, deliver to such
holder a new Warrant evidencing the rights of such holder to purchase the
remaining Warrant Shares called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant, or, at the request of such
holder, appropriate notation may be made on this Warrant and the same returned
to such holder. The Corporation shall pay all expenses, taxes and other
charges payable in connection with the preparation, issuance and delivery of
such certificates and new Warrants, except that, in case such certificates or
new Warrants shall be registered in a name or names other than the name of the
holder of this Warrant, funds sufficient to pay all stock transfer taxes which
shall be payable upon the issuance of such certificate or certificates or new
Warrants shall be paid by the holder hereof at the time of delivering the
Exercise Notice mentioned above or promptly upon receipt of a written request
of the Corporation for payment of the same.
1.02. Warrant Shares to Be Fully Paid and Non-assessable. All shares of
Class A Common Stock and other securities of the Corporation issued upon the
exercise of this Warrant shall be validly issued, fully paid and non- assessable
and, if the Class A Common Stock or other securities are then listed on a
securities exchange, shall be duly listed thereon.
1.03. No Fractional Shares to be Issued. The Corporation shall not be
required upon any exercise of this Warrant to issue a certificate representing
any fraction of a share of Class A Common Stock, but, in lieu thereof, shall pay
to the holder of this Warrant cash in an amount equal to a corresponding
fraction (calculated to tile nearest 1/100th of a share) of the Current Market
Price of the Class A Common Stock as of the date of receipt by the Corporation
of the Exercise Notice of this Warrant. Payment of such amount shall be made in
cash or by check payable to the order of the holder hereof at the time of
delivery of any certificates arising upon such exercise. Notwithstanding the
foregoing, the Corporation shall not take any action which would result in this
Warrant being exercisable for less than one share of Class A Common Stock.
1.04. Legend on Warrant Shares. Each certificate for Warrant Shares
initially issued upon exercise of this Warrant, unless at the time of exercise
such Warrant Shares are registered under the Act, shall bear the following
legend (and any additional legend required by any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed):
3
<PAGE> 4
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, or any state securities
law. The transfer of the securities represented hereby is subject to
the restrictions set forth in Article IV of the Warrant pursuant to
which such securities were issued, a copy of which Warrant is
available for inspection at the offices of Team Rental Group, Inc.,
and no transfer of such securities shall be valid or effective
unless and until there shall have been compliance with the terms and
conditions of Article IV of said Warrant."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution of the securities represented thereby
pursuant to a registration statement under the Act) shall also bear such legend
unless, in the opinion of King & Spalding or such other counsel as shall
reasonably be approved by the Corporation, (Smith Helms Mulliss & Moore, L.L.P.
hereby being approved by the Corporation) the securities represented thereby
need no longer be subject to the restrictions contained in said Article IV.
The provisions of said Article IV shall be binding upon all subsequent holders
of this Warrant and the Warrant Shares issued upon the due exercise hereof.
1.05. Acknowledgment of Continuing Obligation. The Corporation
will, at the time of any exercise of this Warrant in whole or in part, upon
request of the holder hereof, acknowledge in writing, in form reasonably
satisfactory to such holder, its continuing obligation to such holder in
respect of all rights (including, without limitation, any right to registration
of the Warrant Shares issued upon such exercise) to which such holder shall
continue to be entitled after such exercise in accordance with this Warrant;
provided, however, that the failure of such holder to make any such request
shall not affect the continuing obligations of the Corporation to such holder
in respect of such rights.
ARTICLE 11.
REPRESENTATIONS AND WARRANTIES
The Corporation hereby represents and warrants that, as of the date of
this Warrant:
(a) the Corporation is a corporation duly organized and validly
existing under the laws of the State of Delaware and has the corporate power and
authority to issue, execute and deliver this Warrant and to perform its
obligations hereunder,
(b) the issuance, execution, delivery and performance by the
Corporation of this Warrant and the issuance of the Warrant Shares upon exercise
of this Warrant in accordance with the terms hereof have been duly authorized by
all necessary corporate action on the part of the Corporation, and do not and
will not (i) violate any applicable law, statute, rule or regulation, (ii)
result in a breach of, or constitute a default under, any agreement binding upon
the Corporation
4
<PAGE> 5
or its properties, (iii) result in the creation of any lien upon the assets of
the Corporation or (iv) breach any provision of the Corporation's certificate
of incorporation or by-laws; and
(c) this Warrant has been duly issued, executed and delivered by the
Corporation and constitutes the legal, valid and binding obligation of the
Corporation enforceable against the Corporation in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity (whether
enforcement is sought by proceedings in equity or at law); the Warrant Shares,
when issued upon exercise of this Warrant in accordance with the terms hereof,
will be duly authorized, validly issued, fully paid and nonassessable shares of
Class A Common Stock with no personal liability attaching to the ownership
thereof and will not have been issued in violation of any preemptive rights
under the Delaware General Corporation Law.
ARTICLE 111.
WARRANT OFFICE; TRANSFER,
DIVISION OR COMBINATION OF WARRANTS
3.01. Warrant Office. The Corporation shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Corporation's office at 125 Basin Street, Daytona Beach, Florida 32115
and may subsequently be such other office of the Corporation or of any transfer
agent of the Class A Common Stock in the continental United States as to which
written notice has previously been given to all of the Warrantholders.
3.02. Ownership of Warrant. The Corporation may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Corporation) for all purposes and shall not be affected by any
notice to the contrary, until presentation of this Warrant for registration of
transfer as provided in this Article III.
3.03. Transfer of Warrants. The Corporation agrees to maintain at the
Warrant Office books for the registration, exchange and transfer of the
Warrants. The Corporation shall not at any time, except upon dissolution,
liquidation or winding-up of the Corporation, close such books so as to result
in preventing or delaying the exercise, exchange or transfer of this Warrant.
Subject to the provisions of Article IV, this Warrant and all rights hereunder
are transferable, in whole or in part, on said books at said office upon
surrender of this warrant at said office, together with a written assignment of
this Warrant duly executed by the holder hereof or its duly authorized agent or
attorney and funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and payment the Corporation shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denominations specified in such instrument of assignment, and this
Warrant shall promptly be canceled. A Warrant may be exercised by a new holder
for the purchase of Warrant Shares without having a new Warrant issued.
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3.04. Division or Combination of Warrants. This Warrant may be divided or
combined with other Warrants upon presentation hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Office,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the holders hereof and thereof or their
respective duly authorized agents or attorneys. Subject to compliance with
Section 3.03 as to any transfer which may be involved in such division or
combination, the Corporation shall execute and deliver a new Warrant or Warrants
in exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. All Warrants issued upon any registration of transfer or
exchange of Warrants shall be the valid obligations of the Corporation,
evidencing the same rights and entitled to the same benefits as the Warrants
surrendered upon such registration of transfer or exchange (other than the
number of Warrant Shares issuable upon exercise if the Warrants are not
exchanged or transferred in full).
3.05. Expenses of Delivery of Warrants. The Corporation shall pay all
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants hereunder.
ARTICLE IV.
RESTRICTIONS ON EXERCISE AND TRANSFER;
REGISTRATION RIGHTS
4.01. Restrictions on Exercise and Transfer. Notwithstanding any provision
contained in this Warrant to the contrary, this Warrant shall not be exercisable
or transferable and the related Warrant Shares shall not be transferable except
upon the conditions specified in this Article IV, which conditions are intended,
among other things, to ensure compliance with the provisions of the Act in
respect of the exercise or transfer of such Warrant or transfer of such Warrant
Shares. The holder of this Warrant, by its acceptance hereof, agrees that it
will not (i) transfer this Warrant prior to delivery to the Corporation of an
opinion of such holder's counsel (as such opinion and such counsel are described
in Section 4.02), if requested, or until registration of this Warrant under the
Act has become effective or (ii) transfer any Warrant Shares prior to delivery
to the Corporation of the opinion of such holder's counsel (as such opinion and
such counsel are described in Section 4.02), if requested, or until registration
of such Warrant Shares under the Act has become effective, it being agreed that
the Corporation will not request any opinion referred to in this sentence in
connection with any transfer by a holder, (w) to NationsBanc Capital Markets,
Inc., (x) to any direct or indirect parent corporation of the holder, (y) to any
wholly-owned direct or indirect subsidiary of the holder or (z) to any
wholly-owned direct or indirect subsidiary of any direct or indirect parent
corporation of the holder.
4.02. Opinion of Counsel. In connection with any exercise or transfer of
this Warrant or any transfer of the related Warrant Shares, the following
provisions shall apply.
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(a) If in the opinion of King & Spalding or such other counsel as
shall reasonably be approved by the Corporation (Smith Helms Mulliss & Moore,
L.L.P. hereby being approved by the Corporation), the proposed transfer of this
Warrant and/or the proposed transfer of such Warrant Shares may be effected
without registration (of this Warrant and/or such Warrant Shares) under the Act,
the holder of this Warrant shall be entitled to transfer this Warrant and/or
transfer such Warrant Shares in accordance with the proposed method of
disposition; provided, however, that if such method of disposition would, in
the opinion of such counsel, require that the Corporation take any action and/or
execute and file with the Commission and/or deliver to the Warrantholder or any
other person any form or document in order to establish the entitlement of the
Warrantholder to take advantage of such method of disposition, the Corporation
agrees promptly to take any such action and/or execute and file and/or deliver
any such form or document (other than registration under the Act, unless the
Warrantholder exercises its rights under Section 4.03 or 4.04 hereof).
(b) If in the opinion of such counsel the proposed transfer of this
Warrant and/or the proposed transfer of such Warrant Shares may not be effected
without registration of this Warrant and/or such Warrant Shares under the Act,
the holder of this Warrant shall not be entitled to transfer this Warrant and/or
transfer such Warrant Shares until such registration is effective.
4.03. "Piggyback" Registrations.
(a) If the Corporation at any time from time to time proposes to file
with the Commission a registration statement under the Act (other than a
registration statement on Form S-4 or S-8, or any form substituting therefor, or
filed in connection with an exchange offer with respect to any class of the
Corporation's equity securities) relating to any of its equity securities, it
will at each such time give written notice to all Warrantholders of its
intention so to do, not less than 15 days prior to each such filing. Upon the
written request of any Warrantholder or holder of Warrant Shares, the
Corporation will in good faith endeavor to cause each Warrant Share which the
Corporation has been requested to register by such Warrantholder or holder of
Warrant Shares to be included in such registration statement under the Act, all
to the extent required to permit the sale or other disposition by such
Warrantholder or holder of Warrant Shares so registered. Notwithstanding the
foregoing, if the managing underwriter or underwriters, if any, of the offering
to be effected pursuant to such registration statement delivers a written
opinion to the Warrantholders and the holders of Warrant Shares that the total
number of shares of Class A Common Stock or Class B Common Stock, par value $.01
per share ("Class B Common Stock" and together with Class A Common Stock,
"Common Stock") which they and any other persons or entities intend to include
in such offering would materially adversely affect the success of such offering,
then if such registration has been initially proposed by the Corporation the
number of Warrant Shares to be offered for the account of the Warrantholders and
the holders of Warrant Shares shall be reduced pro rata among such
Warrantholders and the holders of Warrant Shares who have requested, in
accordance with the foregoing, inclusion in such offering, on the basis of the
number of Warrant Shares held by such Warrantholders and holders, to the extent
necessary to reduce the total number of shares of Common Stock to be included in
such offering to the number recommended by such managing underwriter or excluded
in their entirety, as the case may be; provided, however, that if the number of
Warrant Shares to be offered for the account of the Warrantholders or holders of
Warrant Shares shall be
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reduced in accordance with this sentence, the Corporation shall not be
permitted to include in such registration securities of the Corporation other
than (i) securities to be issued by the Corporation, (ii) Warrant Shares held
by Warrantholders and holders of Warrant Shares and (iii) shares of Common
Stock held by the holders (other than the Warrantholders) exercising demand
registration rights. In the event that the contemplated distribution does not
involve an underwritten public offering, such determination that the inclusion
of such Warrant Shares shall materially adversely affect the success of the
offering shall be made by the Corporation in good faith in its reasonable
discretion.
(b) If all or substantially all the securities (other than the Warrant
Shares) to be registered for sale pursuant to a registration statement the
intention to file which caused a notice to be given pursuant to Section 4.03(a)
are to be offered for sale for the account of the Corporation and are to be
distributed by or through an underwriter or underwriters of recognized standing
pursuant to underwriting terms appropriate for such transactions, then each
Warrantholder or holder of Warrant Shares agrees that if such Warrantholder or
holder of Warrant Shares has made a request to register Warrant Shares pursuant
to Section 4.03(a) and such Warrant Shares have been included for sale in such
registration, such Warrantholder or holder of Warrant Shares shall forbear by
selling Warrant Shares to the public (except as part of such underwritten
registration) for a period of 5 business days prior to and 10 days following the
effective date of the registration statement to which reference is made in
Section 4.03(a).
4.04. Demand Registration. At any time after the date hereof and prior to
the Expiration Date, the Warrantholders and holders of Warrant Shares issuable
upon the exercise thereof may require the Corporation to effect the registration
of shares issued or issuable upon exercise of Warrants pursuant to this Section
4.04 on a registration statement on Form S-3 or a successor form thereto (or
such other short-form registration statement adopted by the Commission for which
the Corporation may be eligible). Notwithstanding the foregoing, if the
Corporation is not entitled to use Form S-3 or any successor form thereto for
any reason other than that the Corporation has not been subject to Section 12 or
15(d) of the Exchange Act for the required length of time, the Company shall
effect such registration under this Section 4.04 on such other registration form
available to the Corporation under the Act, including, without limitation, Form
S-1. The right to request registration under this Section 4.04 may be exercised
on only one occasion unless such request is withdrawn in accordance with the
terms hereof and shall be exercised for an aggregate of at least 30% of the
Warrant Shares (as determined as of the date hereof but as subsequently adjusted
as provided herein). A continuous or delayed registration may be demanded
pursuant to this Section 4.04. These demand registration rights may only be
exercised if the holders of a majority of the Warrants and/or Warrant Shares
(the "Majority Holders") shall give notice to the Corporation to the effect that
Warrantholders and/or holders of Warrant Shares intend to (i) transfer all or
any part of the shares issuable upon exercise of Warrants or (ii) exercise all
or any part of the Warrant and transfer all or any part of the shares issuable
upon exercise of Warrants under such circumstances that a public distribution
(within the meaning of the Act) of the Warrant Shares will be involved, in which
case the Corporation (A) within 10 days after receipt of such notice shall give
written notice of the proposed registration pursuant to this Section 4.04 to the
other Warrantholders and holders of Warrant Shares and (B) within 45 days after
receipt of such notice from such Majority Holders, shall file a registration
statement pursuant to the Act to the end that all Warrant Shares the holders of
which requested
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registration thereof either pursuant to the original notice from such Majority
Holders given pursuant to this sentence or by written notice given to the
Corporation during the 40-day period following the original notice to the
Corporation by the Majority Holders, may be sold under the Act as promptly as
is practicable thereafter.
If the managing underwriter for any offering made pursuant to this Section
4.04 (who shall be selected by Corporation, subject to the consent of the
Majority Holders, which consent shall not be unreasonably withheld) advises the
Corporation in writing that, in its opinion, the inclusion of all of the Warrant
Shares requested to be included in such registration by the Warrantholders and
holders of Warrant Shares would materially adversely affect the distribution of
all such securities, then (a) there shall be included in such registration
Warrant Shares pro rata based on the number of shares originally proposed to be
registered by each Warrantholder or holder of Warrant Shares or (b) any
Warrantholder or holder of Warrant Shares may, at its sole option, delay its
offering and sale for a period not to exceed 120 days after the effective date
of such registration as such managing underwriter shall reasonably request. In
the event of such delay, the Corporation shall use its reasonable efforts to
effect any registration or qualification under the Act and the securities or
blue sky laws of any jurisdiction as may be necessary to permit such prospective
seller to make its proposed offering and sale following the end of such period
of delay. A registration will not count as a demand registration under this
Section 4.04 until it has become effective and remained effective until the
earlier of (x) the end of the 180 day period set forth in Section 4.05(a) below
and (y) the date all of the Warrant Shares included in such registration have
been sold.
4.05. Corporation's Obligations in Registration. If and whenever the
Corporation is obligated by the provisions of this Article IV to effect the
registration of Warrant Shares under the Act, the Corporation will, as
expeditiously as possible (but subject to any delay resulting from the failure
of any Warrantholder participating in the registration to comply with Section
4.08),
(a) prepare and file with the Commission a registration statement with
respect to such Warrant Shares and use its best efforts to cause such
registration statement to become and remain effective during the period required
for the distribution of the securities covered by the registration statement;
provided, however, that in the event that the Warrant Shares covered by such
registration statement are not to be sold to or through underwriters acting for
the Corporation, the Corporation shall not be required to keep such registration
statement effective, or to prepare and file any amendment or supplement thereto,
after the expiration of 180 days following the date on which such registration
statement becomes effective under the Act or such longer period during which the
Commission requires that such registration statement be kept effective with
respect to any of the Warrant Shares so registered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Act with respect to the disposition of all
Warrant Shares covered by such registration statement, whenever the
Warrantholders for whom such Warrant Shares are registered or are to be
registered shall desire to dispose of the same, subject, however, to the proviso
contained in Section 4.03(a) and provided that
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<PAGE> 10
in any event the Corporation's obligations under this Section 4.05(b) shall
terminate on the first anniversary of the effective date of any such
registration statement;
(c) furnish to the Warrantholders or holders of Warrant Shares for
whom such Warrant Shares are registered or are to be registered such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectuses) and such other documents as such Warrantholders or
holders of Warrant Shares may reasonably request in order to facilitate the
disposition of such Warrant Shares;
(d) use its best efforts to register or qualify the Warrant Shares
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as the Warrantholders or holders of Warrant Shares
for whom such Warrant Shares are registered or are to be registered shall
reasonably request, and do any and all other acts and things to so register or
qualify which may be necessary or advisable to enable such Warrantholders to
consummate the disposition in such jurisdictions of such Warrant Shares;
(e) if at any time a prospectus relating to the Warrant Shares covered
by such registration statement is required to be delivered under the Act and any
event occurs as a result of which the prospectus included in such registration
statement as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the prospectus to
comply with the Act, the Corporation promptly will prepare and file with the
Commission an amendment or supplement which will correct such statement or
omission or an amendment which will effect such compliance and shall use its
best efforts to cause any amendment of such registration statement containing an
amended prospectus to be made effective as soon as possible; and
(f) furnish the Warrantholders or holders of Warrant Shares for whom
such Warrant Shares are or are to be registered at the time of the disposition
of Warrant Shares by such Warrantholders or holders of Warrant Shares a "comfort
letter" from the independent accountants for the Corporation and an opinion of
counsel for the Corporation, in each case in form and substance satisfactory to
the Warrantholders and holders of Warrant Shares holding a majority of the
Warrant Shares covered by the registration statement, such opinion of counsel to
be to the effect that (i) a registration statement covering such Warrant Shares
has been filed with the Commission under the Act and has been made effective by
order of the Commission, (ii) such registration statement and the prospectus
contained therein comply in all material respects with the requirements of the
Act, and nothing has come to said counsel's attention which would cause it to
believe that either such registration statement or the prospectus contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein in the light of
the circumstances under which they were made not misleading, (iii) a prospectus
meeting the requirements of the Act is available for delivery, (iv) no stop
order has been issued by the Commission suspending the effectiveness of such
registration statement and, to the best of such counsel's knowledge, no
proceedings for the issuance of such a stop order are threatened or
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contemplated and (v) there has been compliance with the applicable securities
or blue sky laws of each jurisdiction in which the Corporation shall be
required pursuant to Section 4.05(d) to register or qualify such Warrant
Shares, assuming the accuracy and completeness of the information furnished to
such counsel with respect to each filing relating to such laws.
4.06. Expiration of Warrant. If the proposed offeror of Warrant Shares,
after receiving the notification specified in Section 4.03 or 4.04, shall not
have been able after request to include Warrant Shares in a registration
statement containing a prospectus which complies with Section 1O(a)(3) of the
Act which has been effective for at least 30 days prior to the expiration of the
Warrant, the Expiration Date of the Warrant shall be tolled until such time as
the registration statement containing such a prospectus has been effective for
at least 30 days.
4.07. Payment of Registration Expenses. The costs and expenses of all
"piggy-back" and "demand" registrations and qualifications under the Act
pursuant to Section 4.03 and 4.04 hereof, and of all other actions which the
Corporation is required to take or effect pursuant to this Article IV shall be
paid by the Corporation (including without limitation all registration and
filing fees, printing expenses, fees and disbursements of counsel for the
Corporation and such Warrantholders and holders of Warrant Shares and expenses
of any special audit incident to or required in connection with any such
registration) (collectively, "Registration Expenses"); provided, however, that
the Corporation shall only be obligated to pay the fees and disbursements of
one special counsel representing the Warrantholders and holders of Warrant
Shares holding a majority of the Warrant Shares covered by each registration
statement; and provided further that the Corporation shall not be obligated to
pay the underwriters' discount or commission in respect of such Warrant Shares.
4.08. Information from Warrantholders. Notices and requests delivered by
Warrantholders and holders of Warrant Shares to the Corporation pursuant to this
Article IV shall contain such information regarding the Warrant Shares and the
intended method of disposition thereof as shall reasonably be required in
connection with the action to be taken; provided, that notwithstanding any other
provision contained herein, the Warrantholders shall not be required to exercise
Warrants in connection with any registration of Warrant Shares, except
concurrently with the consummation of the sale of such Warrant Shares and only
to the extent that such Warrant Shares are to be included in such offering.
4.09. Restrictions on Public Sale by the Corporation and Others. The
Corporation shall not effect any public sale or distribution of any of its
equity securities, or cause to be effected any other registration of such
securities (other than securities issued pursuant to an employee benefit plan),
during the five business days prior to, and during the 180-day period beginning
on the effective date of a registration statement covering the Warrant Shares
(the "Hold-Back period"), and the Corporation shall cause each holder of its
equity securities (other than securities purchased in a registered public
offering) issued after the date hereof to agree not to effect any public sale or
distribution of any such securities during such period except as part of such
registration, if permitted. The holder this Warrant and any Warrant Shares
agrees not to effect any public sale or distribution of such securities during
any Hold-Back period with respect to securities of the Corporation issued
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or agreed to be issued prior to the date hereof except pursuant to a
registration covering the Warrants or Warrant Shares effected pursuant to this
Article IV.
4.10. Corporation's Indemnification. In the event of any registration
under the Act of Warrant Shares pursuant to this Article IV, the Corporation
hereby agrees to indemnify and hold harmless each Warrantholder or holder of
Warrant Shares disposing of such Warrant Shares and each other person, if any,
who controls such Warrantholder or holder of Warrant Shares within the meaning
of Section 15 of the Act and each other person (including any underwriter) who
participates in the offering of such Warrant Shares, against any loss, claim,
damage or liability, joint or several, to which such Warrantholder, or holder of
Warrant Shares or controlling person or participating person may become subject
under the Act, the Exchange Act or other Federal or state law or regulation, at
common law or otherwise, to the extent that such loss, claim, damage or
liability (or proceeding in respect thereof) arises out of or is based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Warrant Shares were registered under
the Act, in any preliminary prospectus or final prospectus contained therein, or
in any amendment or supplement thereto, or arises out of or is based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse such Warrantholder, holder of Warrant Shares and each such
controlling person or participating person for any legal or other expense
reasonably incurred by such Warrantholder, holder of Warrant Shares or such
controlling person or participating person in connection with investigating or
defending any such loss, claim, damage, liability or proceeding; provided,
however, that the Corporation will not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, said preliminary or final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished to the Corporation by an instrument duly
executed by such Warrantholder, holder of Warrant Shares or such controlling or
participating person, as the case may be, specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which the Corporation may otherwise have.
4.11. Warrantholder's Indemnification. It shall be a condition of the
Corporation's obligation under this Article IV to effect any registration under
the Act that there shall have been delivered to the Corporation an agreement or
agreements duly executed by each Warrantholder or holder of Warrant Shares for
whom Warrant Shares are to be so registered whereby such Warrantholder and such
holder of Warrant Shares agrees to indemnify and hold harmless the Corporation,
each other person referred to in subparts (1), (2) and (3) of Section 11 (a) of
the Act in respect of such registration statement and each other person, if any,
which controls the Corporation within the meaning of Section 15 of the Act,
against any loss, claim, damage or liability,.joint or several, to which the
Corporation or such other person or such person controlling the Corporation may
become subject under the Act, the Exchange Act or other Federal or state law or
regulation, at common law or otherwise, but only to the extent that such loss,
claim, damage or liability (or proceeding in respect thereof) arises out of or
is based upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement under which such Warrant Shares
were registered under the Act, in any final prospectus contained therein or in
any amendment or supplement thereto, or
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arises out of or is basedupon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, which, in each such case, has been made in
or omitted from such registration statement, said final prospectus or said
amendment or supplement in reliance upon and in conformity with written
information furnished to the Corporation by an instrument duly executed by such
Warrantholder or holder of Warrant Shares specifically for use in the
preparation thereof; provided, that such indemnification by any Warrantholder
or holder of Warrant Shares hereunder shall be limited to the net proceeds
received by such Warrantholder or holder of Warrant Shares from the sale of his
Warrant Shares in such offering. This indemnity agreement will be in addition
to any liability which any Warrantholder may otherwise have.
4.12. Notification of and Participation in Actions. Promptly after receipt
by an indemnified party under this Article IV of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under this Article IV, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Article IV. In case
any such action is brought against any indemnified party and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so as to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Article IV for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation and as provided in the next sentence. The
indemnified party shall have the right to employ its own counsel in any such
action, but the fees and expenses of such counsel shall be at the expense of
such indemnified party, when and as incurred, unless (i) the employment of
counsel by such indemnified party has been authorized by the indemnifying party,
(ii) the indemnified party shall have received a written opinion from
independent counsel that there may be a conflict of interest between the
indemnifying party and the indemnified party in the conduct of the defense of
such action (in which case the indemnifying party shall not have the right to
direct the defense of such action on behalf of the indemnified party) or (iii)
the indemnifying party shall not in fact have employed counsel to assume the
defense of such action. With respect to any loss or liability as to which a
party is entitled to indemnification hereunder, the indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if such a proceeding is settled with such consent or if in such a
proceeding a final judgment is entered for the plaintiff, the indemnifying party
agrees to indemnify the indemnified party from and against any such loss or
liability arising out of such settlement or judgment.
4.13. Public Information. At any time when any Warrantholder or holder of
Warrant Shares so entitled desires to make sales of any Warrant Shares in
reliance on Rule 144 promulgated under the Act, the Corporation covenants and
agrees that either there will be available adequate current public information
with respect to the Corporation as required by paragraph (c) of said Rule 144 or
the Corporation will use its best efforts to make such information available
without delay if such
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information is not available. Without limiting the foregoing, the Corporation
will timely file with the Commission all reports required to be filed under
Sections 13 and 15(d) of the Exchange Act and will promptly furnish to any
Warrantholder so requesting a written statement that the Corporation has
complied with all such reporting requirements.
ARTICLE V.
ANTI-DILUTION PROVISIONS
5.01. Adjustments. The number of shares of Common Stock and other
securities purchasable under this Warrant shall be subject to adjustment from
time to time as provided in this Article V.
5.02. Effect of "Split-ups" and Stock Dividends. In case at any time or
from time to time the Corporation shall subdivide as a whole, by
reclassification, by the issuance of a stock dividend on the Common Stock
payable in Class A Common Stock, or otherwise, the number of shares of Common
Stock then outstanding into a greater number of shares of Common Stock, with or
without par value, the number of shares of Class A Common Stock which may be
purchased hereunder shall be increased proportionately. The issuance of such a
stock dividend shall be treated as a subdivision of the whole number of shares
of Common Stock outstanding immediately prior to such dividend into a number of
shares equal to such whole number of shares so outstanding plus the number of
shares issued as a stock dividend.
5.03. Effect of Certain Dividends. In case on any date the Corporation
makes a distribution to holders of its Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the surviving corporation) of evidences of its indebtedness or
assets, the number of shares of Class A Common Stock theretofore purchasable
hereunder shall be adjusted as at the close of business on said date to a number
determined by multiplying the number of shares theretofore purchasable hereunder
by a fraction, the numerator of which shall be the Current Market Price at such
date and the denominator of which shall be an amount equal to such Current
Market Price, less the fair market value (as determined in good faith by the
Board of Directors of the Corporation or a committee thereof, subject to the
provisions of Section 5.08 below) of the portion of the evidences of
indebtedness or assets so to be distributed in respect of one share of Common
Stock.
5.04. Effect of Merger or Consolidation. In case the Corporation shall,
while this Warrant remains outstanding, enter into any consolidation with or
merger into any other corporation wherein the Corporation is not the surviving
corporation, or wherein securities of a corporation other than the Corporation
are distributable to holders of Common Stock, or sell or convey its property as
an entirety or substantially as an entirety, and in connection with such
consolidation, merger, sale or conveyance, shares of stock or other securities
shall be issuable or deliverable in exchange for the Common Stock, then, as a
condition of such consolidation, merger, sale or conveyance, lawful and
adequate provision shall be made whereby the holder of this Warrant shall
thereafter be entitled to purchase pursuant to this Warrant (in lieu of the
number of shares of Class A Common Stock which
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<PAGE> 15
such holder would have been entitled to purchase immediately prior to such
consolidation, merger, sale or conveyance) the shares of stock or other
securities to which such number of shares of Class A Common Stock would have
been entitled at the time of such consolidation, merger, sale or conveyance, at
an aggregate purchase price equal to that which would have been payable if such
number of shares of Class A Common Stock had been purchased by exercise of this
Warrant immediately prior thereto. In case of any such consolidation, merger,
sale or conveyance, appropriate provision shall be made with respect to the
rights and interests thereafter of the holders of Warrants, to the end that all
the provisions of the Warrants (including without limitation the provisions of
this Article V) shall thereafter be applicable, as nearly as practicable, to
such stock or other securities thereafter deliverable upon the exercise of the
Warrants. The Corporation shall not effect any such consolidation, merger,
sale or conveyance unless prior to or simultaneously with the consummation
thereof the successor corporation (if other than the Corporation) resulting
from such consolidation or merger or purchasing or acquiring such assets shall
assume by written instrument, executed and mailed or delivered to each holder
of Warrants, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Warrantholder may be entitled to receive, which instrument shall contain the
express assumption by such successor corporation of the due and punctual
performance and observance of every provision of this Warrant to be performed
and observed by the Corporation and of all liabilities and obligations of the
Corporation hereunder.
5.05. Reorganization or Reclassification. In case of any capital
reorganization or any reclassification of the capital stock of the Corporation
(except as provided in Section 5.02) while this Warrant remains outstanding,
then, as a condition of such capital reorganization or reclassification, lawful
and adequate provision shall be made whereby the holder of this Warrant shall
thereafter be entitled to purchase pursuant to this Warrant (in lieu of the
number of shares of Class A Common Stock specified in the first paragraph of
this Warrant which such holder would have been entitled to purchase immediately
prior to such reorganization or reclassification) the shares of stock of any
class or classes or other securities or property to which such number of shares
of Class A Common Stock would have been entitled at the time of such
reorganization or reclassification, at an aggregate purchase price equal to that
which would have been payable if such number of shares of Class A Common Stock
specified in the first paragraph of this Warrant had been purchased immediately
prior to such reorganization or reclassification. In case of any such capital
reorganization or reclassification, appropriate provision shall be made with
respect to the rights and interests thereafter of the holders of the Warrants,
to the end that all the provisions of the Warrants (including without limitation
the provisions of this Article V) shall thereafter be applicable, as nearly as
practicable, to such stock or other securities or property thereafter
deliverable upon the exercise of the Warrants.
5.06. Effect of Below Market Issuances. In case the Corporation shall at
any time after the date hereof issue shares of Common Stock, rights, options or
warrants containing the right to subscribe for or purchase shares of Common
Stock or securities convertible into or exchangeable for Common Stock (excluding
(i) shares or convertible securities issued in any of the transactions described
in Section 5.02, 5.03, 5.04 or 5.05 above and (ii) Excluded Securities) for a
price per share of Common Stock in the case of the issuance of Common Stock, or
for a price per share of Common Stock initially deliverable upon exercise,
conversion or exchange of such securities, less than the then
15
<PAGE> 16
Current Market Price per share of Common Stock on the date the Corporation
fixed the offering price of such additional shares, the number of Warrant
Shares thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
upon exercise of each warrant by a fraction, of which the numerator shall be
the number of shares of Common Stock outstanding on such date plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the denominator shall be the number of shares of Common Stock
outstanding on such date plus the number of shares which the aggregate offering
price of the total number of shares of Common Stock so offered would purchase
at the then Current Market Price per share of Common Stock at such record date.
For purposes of this Section 5.06, if the Corporation issues Common Stock or
rights, options or warrants for consideration other than cash, then the value
of the consideration so received shall be equal to the fair value thereof as
determined in good faith by the Board of Directors or a committee thereof,
subject to the provisions of Section 5.08 below. In the case of any rights,
options or warrants, the Corporation shall allocate among the shares of Common
Stock issuable thereunder the amount of consideration if any, received by the
Corporation in respect of the issuance of such rights, options or warrants.
Such adjustment shall be made whenever such shares of Common Stock or such
rights, options, warrants or convertible or exchangeable securities are issued,
and shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event. No adjustment of the
number of shares of Class A Common Stock purchasable hereunder shall be made
upon the issuance of any Common Stock or other securities which are issued
pursuant to the exercise of any rights, options or warrants or upon the
conversion or exchange of any convertible or exchangeable securities if any
such adjustment shall previously been made upon the issuance of such rights,
options, warrants or convertible or exchangeable securities. If at any time
after the adjustment of the number of shares of Class A Common Stock issuable
hereunder on the basis of the issuance of any rights, options, warrants or
convertible or exchangeable securities, such rights, options or warrants or the
right to convert or exchange such convertible or exchangeable securities shall
expire prior to the exercise thereof, such adjustment shall be annulled and
rescinded.
5.07. Statement of Adjustment of Unit; Accountants' Certificate. Upon
each adjustment of the number of shares of Class A Common Stock purchasable
hereunder, and in the event of any change in the fights of the holder of this
Warrant by reason of other events herein set forth, then and in each case, the
Corporation will promptly (i) prepare a schedule setting forth the adjusted
number of shares purchasable hereunder, or specifying the other shares of stock,
securities or assets and the amount thereof receivable as a result of such
change in rights, setting forth the adjusted Exercise Price and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based, and (ii) obtain a certificate of a firm of independent
certified public accountants of recognized national standing selected by the
Corporation's Board of Directors or committee thereof (who may be the regular
auditors of the Corporation) that, based upon the form of Warrant and a review
of the aforementioned Schedule prepared by the Corporation, such computations
were made in accordance with the provisions of the Warrants. The Corporation
will promptly mail a copy of such Schedule and of such accountants' certificate
to the registered holder of this Warrant.
5.08. Other Dilutive Events; Disputes under Section 5.03 or 5.06. If any
event shall occur as to which the other provisions of this Article V are not
strictly applicable but the failure to make
16
<PAGE> 17
any adjustment would not, in the reasonable opinion of the holders owning a
majority of the Warrants, fairly protect the subscription rights represented by
this Warrant in accordance with the essential intent and principles hereof,
then, in each such case, if the Corporation and such holders fail to agree on
the adjustment to be made under this Section 5.08 within 30 days after written
notice to the Corporation by the holders owning a majority of the Warrants or,
if the holders owning a majority of the Warranty notify the Corporation that
they wish to dispute any determination made by the Board of Directors of the
Corporation or a committee thereof under Section 5.03 or 5.06 above, then an
independent firm of investment bankers mutually acceptable to the Corporation
and such holders shall be retained by, and at the expense of, the Corporation
and shall give their opinion upon the adjustment, if any, on a basis consistent
with the essential intent and principles established in this Article V,
necessary to preserve, without dilution, the economic value of this Warrant
measured in terms of the economic value hereof immediately prior to such event.
Upon receipt of such opinion, the Corporation shall promptly mail a copy
thereof to the Holder of this Warrant and shall make the adjustments, if any,
described therein.
5.09. Determinations by the Board of Directors. All determinations by the
Board of Directors of the Corporation or committee thereof under the provisions
of this Warrant shall be made, in good faith with due regard to the interests of
the holder of this Warrant and the other holders of securities of the
Corporation and in accordance with good financial practice, and all valuations
made by the Board of Directors of the Corporation under the terms of this
Warrant shall be made with due regard to any market quotations of securities
involved in, or related to, the subject of such valuation.
5.10. Notifications by the Corporation. In case at any time the
Corporation proposes:
(i) to pay any dividend or to make any distribution to the holders
of the Common Stock,
(ii) to make an offer for subscription to the holders of Common
Stock of additional shares of stock of any class or other rights or to
grant to the holders of Common Stock generally any rights or options,
(iii) to effect any stock split, stock distribution, reorganization
or reclassification of the Corporation or any of the capital stock of the
Corporation, or consolidation or merger of the Corporation with, or sale
or transfer of all or substantially all of its assets to, another
corporation,
(iv) to effect a voluntary or involuntary dissolution, liquidation
or winding-up of the Corporation, or
(v) to take any other action which would require an adjustment
pursuant to Article V,
then, in any one or more such cases, the Corporation shall give written notice
to the registered holder of this Warrant of the date on which (A) the transfer
books of the Corporation shall close or a record
17
<PAGE> 18
shall be taken for such dividend, distribution, subscription rights or grant,
(B) a record shall be taken to determine stockholders entitled to notice of and
to vote at any meeting of stockholders at which any such proposed
reorganization, reclassification, consolidation, merger, sale or transfer of
assets, dissolution, liquidation or winding-up is to be considered, or (C) such
reorganization, reclassification, consolidation, merger, sale or transfer of
assets, dissolution, liquidation or winding-up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to vote on or exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale or transfer of assets,
dissolution, liquidation or winding-up, as the case may be. Such written notice
shall be given not less than 10 days and not more than 90 days prior to such
date on which the transfer books of the Corporation shall close or a record
shall be taken or any event shall occur, as the case may be, and such notice may
state that any such action will be taken only if certain events specified in
such notice (such as the clearing of proxy material by the Commission or an
affirmative vote of stockholders) occur prior thereto.
5.11. Adjustment of Exercise Price; De Minimis Adjustments. Whenever the
number of Warrant Shares purchasable upon the exercise of each Warrant is
adjusted, as herein provided, the Exercise Price payable upon exercise of each
Warrant shall be adjusted by multiplying such Exercise Price immediately prior
to such adjustment by a fraction, of which the numerator shall be the number of
Warrant Shares purchasable upon the exercise of each Warrant immediately prior
to such adjustment, and of which the denominator shall be the number of Warrant
Shares purchasable immediately thereafter. No adjustment in the number of
Warrant Shares purchasable hereunder shall be required unless such adjustment
would result in an increase or decrease of at least $.05 of the Exercise Price;
provided, however, that any adjustments which by reason of this Section 5.11
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations shall be made to the nearest cent or
the nearest one-thousandth of a share, as the case may be.
ARTICLE VI.
CERTAIN DEFINITIONS
For all purposes of this Warrant, unless the context otherwise requires,
the following terms shall have the following respective meanings:
"Act": the Securities Act of 1933, or any similar Federal statute, and the
rules and regulations of the commission promulgated thereunder, all as the same
shall be in effect at the time.
"Commission": the Securities and Exchange Commission or any other Federal
agency then administering the Act.
18
<PAGE> 19
"Corporation": Team Rental Group, Inc., a Delaware corporation, and any
other corporation assuming or required to assume the Warrants pursuant to
Section 5.04.
"Current Market Price" per share of Common Stock at any date: the average
of the daily market prices over a period of 20 consecutive business days before
such date. The market price for each such business day shall be (i) the last
reported sale price on such day on the New York Stock Exchange or American Stock
Exchange if the Common Stock is then listed or admitted to trading thereon, or,
if no sale takes place on such day on any such exchange, the average of the
closing BID and asked prices on such day as officially quoted on any such
exchange, or (ii) if the Common Stock is not then listed or admitted to trading
on any such stock exchange, the market price for each such business day shall be
the last reported sales price on the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ"), or any similar system of
automated dissemination of quotations of securities prices then in use, if so
quoted, or (iii) if not quoted in clause (ii), the average of the closing bid
and asked prices on such day in the over-the-counter market, as reported
through NASDAQ, or, if such prices are not at the time so reported, as
furnished by any member of the National Association of Securities Dealers,
Inc. selected by the Corporation. If and so long a there shall be no exchange
or over-the-counter market for the Common Stock during the 20-day period prior
to the date on which Current Market Price is to be determined, the Current
Market Price shall be deemed to be the greater of the Exercise Price or such
price, if any, at which the most recent issue and sale by the Corporation of
Common Stock (except any issue and sale of Exclude Securities) in an arm's
length transaction took place; provided, however, that in case the Corporation
makes an underwritten public offering of shares of Common Stock, for purposes
of the adjustment, if any, pursuant to Article V, the Current Market Price
with respect to such shares shall be deemed to be the price to the public
shown in the final prospectus used in connection with such public offering.
"Directors' Plan": the Corporation's 1994 Directors' Stock Option Plan as
in effect on the date of issuance of this Warrant, as from time to time amended
and supplemented, or other similar plan from time to time available to the
directors of the Corporation and its subsidiaries generally.
"Equity security" or "equity securities": as such term is defined by the
Exchange Act or the rules and regulations of the Commission promulgated
thereunder.
"Exchange Act": the Securities Exchange Act of 1934, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect at the time.
"Excluded Securities": (i) the Warrants, (ii) Warrant Shares, (iii) any
options to purchase shares of Common Stock granted to employees of the
Corporation and its subsidiaries pursuant to the Incentive Stock Option Plan not
to exceed 500,000 shares in the aggregate and shares of the Common Stock issued
upon exercise of such stock options not to exceed 500,000 shares in the
aggregate and (iv) any options to purchase shares of Common Stock granted to
directors of the Corporation or its subsidiaries pursuant to the Directors' Plan
not to exceed 50,000 shares in the aggregate and shares of Common Stock issued
upon exercise of such options.
19
<PAGE> 20
"Exercise Price": the amount per share set forth in the certification on
page 1 of this Warrant, as adjusted pursuant to Section 5.11 hereof.
"Expiration Date": see the certification on page 1 of this Warrant.
"Hold-Back Period": see Section 4.09.
"Incentive Stock Option Plan": the Corporation's 1994 Incentive Stock
Option Plan as in effect on the date of issuance of this Warrant as from time to
time amended and supplemented, or other similar plans from time to time
available to employees of the Corporation and its subsidiaries generally or to
management employees of the Corporation and its subsidiaries.
"Initial Exercise Date": see the certification on page 1 of this Warrant.
"outstanding": when used with reference to the Common Stock at any date,
all issued shares of the Common Stock at such date, except shares then held in
the treasury of the Corporation or held of record by any subsidiary of the
Corporation.
"person": any individual, corporation, partnership, trust, unincorporated
organization and any government, and any political subdivision, instrumentality
or agency thereof.
"Registration Expenses": see Section 4.07.
"Warrant Office": see Section 3.01.
"Warrant Shares": the shares of the Class A Common Stock and any other
securities purchasable or purchased by the Warrantholders upon the exercise of
the Warrants.
"Warrantholder": the registered holder of a Warrant or Warrants or any
related Warrant Shares.
"Warrants": the warrants (of which this Warrant is one) originally issued
by the Corporation to NationsBank, National Association (South) evidencing the
right initially to purchase an appregate of 187,500 shares of the Class A Common
Stock of the Corporation, and all warrants issued in substitution, combination
or subdivision of any thereof.
ARTICLE VII.
CERTAIN COVENANTS OF THE CORPORATION
The Corporation covenants and agrees that:
20
<PAGE> 21
(a) it will reserve and set apart and have at all times, free from
preemptive rights, a number of shares authorized but unissued Class A Common
stock or other securities or property deliverable upon the exercise of the
Warrants sufficient to enable it at any time to fulfill all its obligations
thereunder;
(b) if any shares of the Class A Common Stock or other securities required
to be reserved for the purposes of exercise of this Warrant require registration
with or approval of any governmental authority under any Federal law (other than
the Act) or under any state law before such shares or other securities may be
issued upon exercise of this Warrant, the Corporation will at its expense, as
expeditiously as possible, cause such shares or other securities to be duly
registered or approved, as the case may be;
(c) if and so long as the Class A Common Stock is listed on any securities
exchange (as defined in the Exchange Act), it will, at its expense, obtain and
maintain the approval for listing upon official notice of issuance of all shares
of Class A Common Stock issuable upon the exercise of the Warrants at the time
outstanding and maintain the listing of such shares after their issuance; and
the Corporation will so list on such securities exchange and will register under
the Exchange Act (or any similar statute then in effect), and will maintain such
listing of, any other securities that at any time are issuable upon exercise of
the Warrants if, and at the time that, any securities of the same class shall be
listed on such securities exchange by the Corporation;
(d) it will take any action which may be necessary in order that the
Corporation may validly and legally issue fully paid and nonassessable Warrant
Shares at the Exercise Price;
(e) all Warrant Shares will, upon issuance in accordance with the terms of
this Warrant, be fully paid and nonassessable, free from preemptive rights, free
from all taxes with respect to the issuance thereof and from all liens, charges
and security interests created by the Corporation, and
(f) this Warrant shall be binding upon any corporation succeeding to the
Corporation by merger, consolidation or acquisition of all or substantially
all of the Corporation's property and assets.
ARTICLE VIII.
MISCELLANEOUS
8.01. Entire Agreement. This Warrant contains the entire agreement between
the Warrantholder and the Corporation with respect to the purchase of the
Warrant Shares and the related transactions and supersedes all prior
arrangements or understandings with respect thereto.
8.02. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware (without regard to principles
of conflicts of law).
21
<PAGE> 22
8.03. Waiver and Amendment. Any term or provision of this Warrant may be
waived at any time by the party which is entitled to the benefits thereof and
any term or provision of this Warrant may be amended or supplemented at any time
by agreement of the Warrantholder and the Corporation, except that any waiver of
any term or condition, or any amendment or supplementation, of this Warrant must
be in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Warrant shall not in any way affect, limit or waive a party's
rights hereunder at any time to enforce strict compliance thereafter with every
term or condition of this Warrant.
8.04. Illegality. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
8.05. Filing of Warrant. A copy of this Warrant shall be filed in the
minute book and among the records of the Corporation.
8.06. Notice. Any notice or other document required or permitted to be
given or delivered to the Warrantholders shall be delivered at, or sent by
certified or registered mail to, each such holder at the last address shown on
the books of the Corporation maintained at the Warrant Office for the
registration and transfer of the Warrants or at any more recent address of which
any Warrantholder shall have notified the Corporation in writing. Any notice or
other document required or permitted to be given or delivered to holders of
record of outstanding Warrant Shares shall be delivered at, or sent by certified
or registered mail to, each such holder at such holder's address as the same
appears on the stock records of the Corporation. Any notice or other document
required or permitted to be given or delivered to the Corporation, other than
such notice or documents required to be delivered to the Warrant Office, shall
be delivered at, or sent by certified or registered mail to, the office of the
Corporation at Suite 210, 125 Basin Street, Daytona Beach, Florida 32114,
Attention: Corporate Secretary or such other address within the continental
United States of America as shall have been furnished by the Corporation to the
Warrantholders and the holders of record of Warrant Shares.
8.07. Limitation of Liability; Not Stockholders. Except as expressly
provided herein, no provision of this Warrant shall be construed as conferring
upon the holder hereof the right to vote, consent, receive dividends or receive
notice in respect of meetings of stockholders for the election of directors of
the Corporation or any other matter whatsoever as a stockholder of the
Corporation. No provision hereof, in the absence of affirmative action by the
holder hereof to-purchase shares of Common Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the purchase price of any Warrant Shares or as a
stockholder of the Corporation, whether such liability is asserted by the
Corporation or by creditors of the Corporation.
8.08. Loss, Destruction, Etc. of Warrants. Upon receipt of evidence
satisfactory to the Corporation of the loss, theft, mutilation or destruction of
any Warrant, and in the case of any such
22
<PAGE> 23
loss, theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Corporation, or in the event
of such mutilation upon surrender and cancellation of the Warrant, the
Corporation will make and deliver a new Warrant, of like tenor, in lieu of such
lost, stolen, destroyed or mutilated Warrant; provided, however, that the
original recipient of this Warrant shall not be required to provide any such
bond of indemnity. Any Warrant issued under the provisions of this Section 8.08
in lieu of any Warrant alleged to be lost, destroyed or stolen, or in lieu of
any mutilated Warrant, shall constitute an original contractual obligation on
the part of the Corporation.
8.09. Specific Performance. The Warrantholders shall have the right to
specific performance by the Corporation of the provisions of this Warrant. The
Corporation hereby irrevocably waives, to the extent that it may do so under
applicable law, any defense based on the adequacy of a remedy at law which may
be asserted as a bar to the remedy of specific performance in any action brought
against the Corporation for specific performance of this Warrant by the
Warrantholders.
IN WITNESS WHEREOF, the parties have caused this Warrant to be duly
executed, as of the date first above written.
TEAM RENTAL GROUP, INC.
By:
--------------------------------------
Name:
Title:
NATIONSBANK, NATIONAL ASSOCIATION (SOUTH)
By:
--------------------------------------
Name:
Title:
23
<PAGE> 24
Exhibit A
NOTICE OF EXERCISE FORM
(To be executed only upon partial
or full exercise of the within Warrant)
The undersigned registered Holder of the within Warrant irrevocably
exercises the within Warrant for and purchases ________ shares of Class A
Common Stock of Team Rental Group, Inc. and
[Make appropriate selection by placing an "X" in the box and completing
the blank associated with that box]
/ / (a) agrees to make payment therefor in the amount of $_____________
/ / (b) pursuant to Section 1.01 (b)(ii) of the within Warrant
instructs and agrees that _____ shares of Class A Common Stock
of Team Rental Group, Inc. be withheld in payment therefor,
all at the price and on the terms and conditions specified in the within
Warrant and requests that a certificate (or_______ certificates in
denominations of __________ shares) for the shares of Class A Common
Stock of Team Rental Group, Inc. hereby purchased be issued in the name of and
delivered to [choose one] (a) the undersigned or (b)_______________ whose
address is _________ and if such shares of Class A Common Stock shall not
include all the shares of Class A Common Stock issuable as provided in the with
in Warrant, that a new Warrant of like tenor for the number of shares of Class
A Common Stock of Team Rental Group, Inc. not being purchased hereunder be
issued in the name of and delivered to [choose one] (a) the undersigned or
(b) ___________ whose address is _________________.
Dated:_________________ 19__
By:
________________________________________
(Signature of Registered Holder)
A-1
<PAGE> 25
loss, theft or destruction upon delivery of a bond of indemnity in such form
and amount as shall be reasonably satisfactory to the Corporation, or in the
event of such mutilation upon surrender and cancellation of the Warrant, the
Corporation will make and deliver a new Warrant, of like tenor, in lieu of such
lost, stolen, destroyed or mutilated Warrant; provided, however, that the
original recipient of this Warrant shall not be required to provide any such
bond of indemnity. Any Warrant issued under the provisions of this Section
8.08 in lieu of any Warrant alleged to be lost, destroyed or stolen, or in lieu
of any mutilated Warrant, shall constitute an original contractual obligation
on the part of the Corporation.
8.09. Specific Performance. The Warrantholders shall have the right
to specific performance by the Corporation of the provisions of this Warrant.
The Corporation hereby irrevocably waives, to the extent that it may do so
under applicable law, any defense based on the adequacy of a remedy at law
which may be asserted as a bar to the remedy of specific performance in any
action brought against the Corporation for specific performance of this Warrant
by the Warrantholders.
IN WITNESS WHEREOF, the parties have caused this Warrant to be duly
executed, as of the date first above written.
TEAM RENTAL GROUP, INC.
By: /s/ Sanford Miller
-------------------------------
Name: Sanford Miller
Title: Chairman & CEO
NATIONSBANK, NATIONAL ASSOCIATION (SOUTH)
By: /s/ John Miller
-------------------------------
Name: John Miller
Title: Vice President
23
<PAGE> 1
EXHIBIT 10.20
================================================================================
TEAM RENTAL GROUP, INC.
-----------------------
NOTE PURCHASE AGREEMENT
-----------------------
7.0% Convertible Subordinated Notes due 2003
Dated as of December 1, 1996
================================================================================
[Exhibits B, C-1 and C-2 are photocopies of the opinions as delivered.]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. ISSUANCE OF NOTES............................................................ 1
1.1. Authorization; Conversion of Notes into Class A
Shares; Etc............................................................ 1
1.2. Purchase and Sale of Notes; the Closing ............................... 1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............................... 2
2.1. Organization, Qualification, Authorization,
Capital Stock ......................................................... 2
2.2. Business, Properties and Other Information ............................ 3
2.3. Incorporation, Good Standing and Ownership of
Subsidiaries .......................................................... 4
2.4. Financial Statements .................................................. 4
2.5. Compliance with Laws, Other Instruments, Etc .......................... 5
2.6. No Defaults Under Existing Debt ....................................... 5
2.7. Governmental Authorizations, Etc ...................................... 6
2.8. Litigation; Observance of Statutes, Regulations
and Orders ............................................................ 6
2.9. Taxes ................................................................. 6
2.10. Title to Properties .................................................. 6
2.11. Licenses, Permits, Etc ............................................... 7
2.12. Compliance with ERISA ................................................ 7
2.13. Private Offering ..................................................... 8
2.14. Use of Proceeds; Margin Regulations .................................. 8
2.15. Investment Company Act and Holding Company Status, Etc ............... 9
2.16. Environmental Matters ................................................ 9
2.17. Solvency ............................................................. 10
2.18. Registration Rights .................................................. 10
2.19. Other Agreements ..................................................... 10
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ............................. 11
3.1. Purchase of Notes ..................................................... 11
3.2. Source of Funds ....................................................... 11
4. CONDITIONS OF CLOSING ....................................................... 12
4.1. Proceedings ........................................................... 12
4.2. Representations and Warranties; No Default ............................ 13
4.3. Opinions of Counsel ................................................... 13
4.4. Registration Rights Agreement ......................................... 13
4.5. Private Placement Number .............................................. 13
4.6. Legality .............................................................. 13
4.7. Payment of Fees ....................................................... 14
4.8. Sale of Notes to Other Purchasers ..................................... 14
5. PREPAYMENTS OF NOTES; PURCHASE OF NOTES ..................................... 14
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
5.1. Optional Prepayment .................................................... 14
5.2. Notice of Optional Prepayment .......................................... 15
5.3. Prepayment in Connection with a Change of Control ...................... 15
5.4. Prepayment in Connection with Failure to Register ...................... 16
5.5. Partial Prepayments Pro Rata ........................................... 16
5.6. Purchase of Notes ...................................................... 16
6. FINANCIAL STATEMENTS AND INFORMATION ........................................ 16
7. [INTENTIONALLY OMITTED.] .................................................... 18
8. COVENANTS ................................................................... 18
8.1. Payment of Principal, Interest and Premium, Etc ........................ 18
8.2. To Keep Books; Payment of Taxes; Maintenance of
Properties; Etc ........................................................ 18
8.3. Limitation on Restricted Payments, Etc ................................. 19
8.4. Consolidation, Merger or Disposition of Assets
as an Entirety ......................................................... 21
9. DEFINITIONS ................................................................. 21
9.1. Definitions ............................................................ 21
9.2. Accounting Terms ....................................................... 30
10.EVENTS OF DEFAULT; REMEDIES ................................................. 31
10.1. Events of Default; Acceleration of Maturity and
Rescission ............................................................ 31
10.2. Suits for Enforcement ................................................. 33
10.3. Remedies Cumulative ................................................... 33
10.4. Remedies Not Waived ................................................... 34
11. CONVERSION AND EXCHANGE OF NOTES; ANTIDILUTION PROVISIONS .................. 34
11.1. Conversion of Notes ................................................... 34
11.2. Antidilution Provisions; Accrued Interest and
Fractional Shares; Mechanics of Conversion; No
Impairment; Etc ....................................................... 34
12. SUBORDINATION OF NOTES ..................................................... 41
12.1. General .............................................................. 41
12.2. Distribution on Dissolution, Liquidation and
Reorganization; Subrogation .......................................... 41
12.3. No Payment in Event of Default on Senior Indebtedness ................ 43
12.4. Payments Permitted ................................................... 44
12.5. Modification of Terms of Senior Indebtedness ......................... 44
13. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES;
RESTRICTIVE LEGENDS TRANSFER RESTRICTIONS .................................. 44
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
14. LOST, ETC., NOTES .......................................................... 45
15. AMENDMENT AND WAIVER ....................................................... 46
16. HOME OFFICE PAYMENT ........................................................ 47
17. LIABILITIES OF THE PURCHASER ............................................... 47
18. CERTAIN TAXES .............................................................. 47
19. MISCELLANEOUS .............................................................. 48
19.1. Expenses ............................................................. 48
19.2. Reliance on and Survival of Representations .......................... 49
19.3. Successors and Assigns ............................................... 49
19.4. Communications ....................................................... 49
19.5. Consent to Jurisdiction; Service of Process;
Waiver of Jury Trial ................................................. 50
19.6. Indemnification ...................................................... 50
19.7. Governing Law ........................................................ 51
19.8. Headings ............................................................. 51
19.9. Counterparts ......................................................... 51
</TABLE>
SCHEDULE I -- Names and Addresses of Purchasers
EXHIBIT A -- FORM OF NOTE
EXHIBIT B -- FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS
EXHIBIT C-1 -- FORM OF OPINION OF TRANSACTION COUNSEL
TO THE COMPANY
EXHIBIT C-2 -- FORM OF OPINION OF COUNSEL TO THE COMPANY
EXHIBIT D -- FORM OF REGISTRATION RIGHTS AGREEMENT
SCHEDULE 2.1 -- OUTSTANDING CONVERTIBLE SECURITIES,
OPTIONS, ETC.
SCHEDULE 2.3 -- SUBSIDIARIES
SCHEDULE 2.6 -- EXISTING DEBT
SCHEDULE 2.8 -- LITIGATION
SCHEDULE 2.11 -- LICENSES, PERMITS
SCHEDULE 2.16 -- ENVIRONMENTAL MATTERS
SCHEDULE 2.18 -- REGISTRATION RIGHTS
(iii)
<PAGE> 5
TEAM RENTAL GROUP, INC.
125 Basin Street, Suite 210
Daytona Beach, FL 32114
NOTE PURCHASE AGREEMENT
As of December 1, 1996
TO THE PURCHASER WHOSE NAME
APPEARS IN THE ACCEPTANCE
FORM AT THE END HEREOF
Ladies and Gentlemen:
TEAM RENTAL GROUP, INC., a Delaware corporation (the "COMPANY"), hereby
agrees with you as follows:
1. ISSUANCE OF NOTES.
1.1. AUTHORIZATION; CONVERSION OF NOTES INTO CLASS A SHARES; ETC.
The Company has duly authorized the issue and sale of $80,000,000 aggregate
principal amount of its 7.0% Convertible Subordinated Notes due 2003 (the
"NOTES"), each such Note to be substantially in the form of Exhibit A attached
hereto. As used herein, the term "NOTES" means all notes originally issued
pursuant to this Agreement and the other agreements referred to in Section 2.19
and all notes delivered in substitution or exchange for any such notes and,
where applicable, includes the singular number as well as the plural. Certain
capitalized and other terms used in this Agreement are defined in Section 9.
As provided in Section 11, the Notes are convertible into shares of the
Class A Common Stock, par value $.01 per share, of the Company (the "CLASS A
SHARES") at an initial Conversion Price of $20.07 per share. The Company is
obligated to file a Shelf Registration (as defined in the Registration Rights
Agreement referred to below) in respect of Class A Shares issuable upon
conversion of the Notes. Under circumstances described in Exhibit A, the
interest rate on the Notes is subject to adjustment from time to time if such
Shelf Registration has not become effective.
1.2. PURCHASE AND SALE OF NOTES; THE CLOSING.
Subject to the terms and conditions hereof, the Company hereby agrees to
sell to you, and you agree to purchase from the Company, the aggregate principal
amount of Notes as set forth opposite your name in Schedule I attached hereto,
at a purchase price equal to 100% of the principal amount of each Note being
purchased by you. The closing of such purchase shall be held at 10:00 A.M.,
New York time, on December 18, 1996 or on such later
<PAGE> 6
2
Business Day as may be agreed to by you and the Company (the "CLOSING DATE"), at
the offices of Willkie Farr & Gallagher, 153 East 53rd Street, New York, NY
10022.
On the Closing Date, the Company will deliver to you one or more Notes,
dated the Closing Date and registered in your name or in the name of one or more
of your nominees, in any denominations (in a minimum amount of $500,000) and in
the aggregate principal amount to be purchased by you, all as you may specify by
timely notice to the Company (or, in the absence of such notice, one Note
registered in your name), in each case against your delivery to the Company of
immediately available funds in the amount of the purchase price of such Notes,
such delivery to be by wire transfer to American National Bank, Jacksonville,
Florida, ABA No. 063005440, for credit to Tomoka State Bank, Account No.
408019258-01, for the account of Team Rental Group, Inc., Account No. 1006320.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you as follows:
2.1. ORGANIZATION, QUALIFICATION, AUTHORIZATION, CAPITAL STOCK.
A. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to own or hold under lease the property it purports to own
or hold under lease, to transact the business it transacts, to execute and
deliver this Agreement, the Notes and the Registration Rights Agreement and to
perform the provisions hereof and thereof. The Company is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which the
character of the properties owned or held under lease by it or the nature of the
business transacted by it requires such qualification, except where the failure
to be so qualified individually and in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
B. The execution, delivery and performance of this Agreement, the Notes and
the Registration Rights Agreement have been duly authorized by all necessary
action on the part of the Company. This Agreement is, and the Notes and the
Registration Rights Agreement when executed and delivered by the Company will
be, legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as enforceability may
be limited by bankruptcy, insolvency or other similar laws relating to or
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and except as enforceability of the
indemnity provisions
<PAGE> 7
3
contained in the Registration Rights Agreement may be limited by public policy
considerations.
C. The authorized capital stock of the Company consists of:
20,000,000 shares of Common Stock, of which 17,500,000 shares are Class A
Shares and 2,500,000 shares are Class B Common Stock, par value $.01 per share
(the "CLASS B SHARES"), and 250,000 shares of Preferred Stock, par value $.01
per share; and 9,314,183 Class A Shares, 1,936,600 Class B Shares and no
shares of Preferred Stock are issued and outstanding. All of such issued and
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable. Except as described in Schedule 2.1, as of the Closing Date the
Company will have no outstanding securities (other than the Notes) convertible
into or exchangeable for any shares of its capital stock or any preemptive or
other rights to subscribe for or to purchase, or any options for the purchase
of, or any agreements providing for the issuance (contingent or otherwise) of,
any calls, commitments or claims of any character relating to, any shares of
its capital stock or any securities convertible into or exchangeable for any
shares of its capital stock. As of the Closing Date, all Class A Shares
initially issuable upon conversion of the Notes will have been reserved for
issuance (as of December 17, 1996, at least 3,986,049 Class A Shares are
deemed to be so issuable) upon such conversion and, when so issued, will be
fully paid and nonassessable.
2.2. BUSINESS, PROPERTIES AND OTHER INFORMATION.
The Company is subject to the reporting requirements of the Exchange Act
and has delivered to you copies of the following reports and proxy statement
filed with the Commission:
A. its Annual Report on Form 10-K for its fiscal year ended December
31, 1995, filed pursuant to Section 13(a) of said Act;
B. its Quarterly Reports on Form 10-Q for its fiscal quarters ended
March 31, June 30 and September 30, 1996, each filed pursuant to Section
13(a) of said Act;
C. its Current Reports on Form 8-K dated as of February 27, 1996 (as
amended), February 29, 1996, August 1, 1996 and November 26, 1996; and
D. the Proxy Statement for its 1996 Annual Meeting of Stockholders,
filed pursuant to Section 14 of said Act.
Said reports and proxy statement comprise all reports and proxy statements
required to be filed by the Company with the Commission under the Exchange Act
since December 31, 1995 and are collectively called the "SEC REPORTS", which
term shall also include on the Closing Date all further reports and proxy
<PAGE> 8
4
statements which the Company may theretofore have furnished to you pursuant to
Section 6D.
None of the SEC Reports listed above contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which they
were made, not misleading. The Company knows of no facts not disclosed in the
SEC Reports listed above which, so far as the Company can now foresee, could
reasonably be expected to have a Material Adverse Effect.
2.3. INCORPORATION, GOOD STANDING AND OWNERSHIP OF SUBSIDIARIES.
Schedule 2.3 is a complete and correct list of Subsidiaries of the Company,
showing, as to each Subsidiary, the correct name thereof, the jurisdiction of
its organization and the percentage of shares of each class of securities of
such Subsidiary owned by the Company and each other Subsidiary of the Company.
All of the outstanding shares of each of the Subsidiaries shown in Schedule 2.3
as being owned by the Company and its Subsidiaries have been validly issued, are
fully paid and nonassessable and, except as set forth in Schedule 2.3, are owned
by the Company or another Subsidiary free and clear of any Lien. No shares of
the Company are owned by any of its Subsidiaries.
Each Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and is
duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which the character of the properties owned or held under lease
by it or nature of the business transacted by it requires such qualification,
except where the failure to be so qualified individually and in the aggregate
could not reasonably be expected to have a Material Adverse Effect. Each
Subsidiary has the corporate power and authority to own or hold under lease the
property it purports to own or hold under lease and to transact the business it
transacts.
2.4. FINANCIAL STATEMENTS.
The Company has delivered to you copies of
A. the consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1993, December 31, 1994 and December 31,
1995 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows of the Company and its Subsidiaries
for the fiscal years ending on such dates, all with reports thereon of
Deloitte & Touche LLP, independent public accountants; and
<PAGE> 9
5
B. the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of September 30, 1996 and the related consolidated
statements of operations and cash flows of the Company and its
Subsidiaries for the fiscal quarter and nine-month period then ended.
All such financial statements (including any related schedules and notes)
present fairly the consolidated financial condition of the Company and its
Subsidiaries as of the respective dates of such consolidated balance sheets and
the consolidated results of their operations for the periods ended on said dates
and have been prepared in accordance with GAAP consistently applied by the
Company and its Subsidiaries throughout the periods involved (subject to normal
year-end audit adjustments). There has been no material adverse change in the
assets, liabilities, financial condition or results of operations of the Company
and its Subsidiaries since December 31, 1995 from that set forth in the
financial statements as of and for the fiscal year ended on said date.
2.5. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this Agreement,
the Notes and the Registration Rights Agreement will not: (A) conflict with the
Certificate of Incorporation or by-laws of the Company or any Subsidiary; (B)
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company or any Subsidiary
under, any indenture, mortgage, deed of trust, bank loan or credit agreement, or
any other agreement or instrument to which the Company or any Subsidiary is a
party or by which their respective properties may be bound or affected; or (C)
conflict with or result in a breach of any of the terms, conditions or
provisions of any Order of any court, arbitrator or Governmental Body applicable
to the Company or any Subsidiary or violate any provision of any law, statute,
rule or regulation of any Governmental Body applicable to the Company or any
Subsidiary.
As used in this Agreement, the term "GOVERNMENTAL BODY" includes any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign; and the term "ORDER"
includes any written order, writ, injunction, decree, judgment, award, penalty,
determination, direction or demand.
2.6. NO DEFAULTS UNDER EXISTING DEBT.
Schedule 2.6 is a complete and correct list of all outstanding Debt of the
Company and each Subsidiary as of the dates therein stated, showing as to each
item the obligor, the obligee, the aggregate principal amount outstanding and
the final maturity date and a brief description of any security therefor.
All such Debt is Senior Indebtedness, except as indicated in
<PAGE> 10
6
Schedule 2.6. Neither the Company nor any Subsidiary is in default (whether or
not waived) in the performance or observance of any of the material terms,
covenants or conditions contained in any instrument evidencing any Debt and no
event has occurred and is continuing which, with the giving of notice or the
lapse of time or both, would become such a default.
2.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration or filing with,
any Governmental Body is required to be obtained by the Company in connection
with the performance of this Agreement, the Notes or the Registration Rights
Agreement except as contemplated herein or therein.
2.8. LITIGATION; OBSERVANCE OF STATUTES, REGULATIONS AND ORDERS.
Except as set forth in Schedule 2.8, there are no actions, suits or
proceedings (including counterclaims) pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary or any property of the
Company or any Subsidiary in any court or before any arbitrator of any kind or
before or by any Governmental Body, except actions, suits or proceedings which
in the aggregate, if adversely determined, could not be reasonably expected to
have a Material Adverse Effect.
Neither the Company nor any Subsidiary is in default under any Order of any
court, arbitrator or Governmental Body or is in violation of any statute, rule
or regulation of any Governmental Body, except for possible defaults or
violations which, in the aggregate, could not be reasonably expected to have a
Material Adverse Effect.
2.9. TAXES.
The Company and its Subsidiaries have filed all tax returns in all
jurisdictions in which such returns are required to have been filed by them and
have paid all taxes, assessments, fees and governmental charges due and payable
with respect to such returns to the extent the same have become due and payable
and before they have become delinquent, other than those being contested in good
faith by appropriate means and with respect to which the Company or a
Subsidiary, as the case may be, has set aside on its books adequate reserves in
conformity with GAAP.
2.10. TITLE TO PROPERTIES.
The Company and each Subsidiary has good and marketable title to their
respective real properties and own free and clear of any Liens their respective
other properties reflected in the consolidated balance sheet as at December 31,
1995, described in Section 2.4A, or purported to have been acquired by the
Company
<PAGE> 11
7
or such Subsidiary after said date (other than properties and assets disposed of
in the ordinary course of business).
2.11. LICENSES, PERMITS, ETC.
The Company and its Subsidiaries own or possess all licenses, permits,
franchises, authorizations, patents, proprietary software, copyrights,
trademarks and trade names, or rights thereto, material to the conduct of the
businesses of the Company and its Subsidiaries taken as a whole, without known
conflict with the rights of others, and, except as set forth on Schedule 2.11,
there are no written agreements providing for the expiration or termination of
any of the same prior to the final maturity of the Notes.
2.12. COMPLIANCE WITH ERISA.
A. The Company and each ERISA Affiliate have operated and administered each
Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to any Plan other than such
liabilities as would not be individually or in the aggregate material, and to
the Company's knowledge, no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not be individually or in the aggregate
Material.
B. The present value of the aggregate benefit liabilities under each of the
Plans (other than Multiemployer Plans), determined as of the end of such Plan's
most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "BENEFIT LIABILITIES" has the
meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE" and
"PRESENT VALUE" have the meaning specified in section 3 of ERISA.
C. The Company and its ERISA Affiliates have not incurred withdrawal
liabilities under Section 4201 of ERISA and are not subject to contingent
withdrawal liabilities under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate are Material.
<PAGE> 12
8
D. The expected postretirement benefit obligation (determined as of the
last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material.
E. The execution and delivery of this Agreement and the issuance and sale
of the Notes hereunder will not involve any transaction that is subject to the
prohibitions of section 406(a) of ERISA or in connection with which a tax could
be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company in the first sentence of this Subsection E is made in reliance
upon and subject to the accuracy of your representation in Section 3.2 as to the
sources of the funds used to pay the purchase price of the Notes to be purchased
by you.
2.13. PRIVATE OFFERING.
Neither the Company nor anyone acting on its behalf has offered the Notes
or any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than you, the other purchasers listed in Schedule I and not more
than eight other institutional investors. Neither the Company nor anyone acting
on its behalf has taken, or will take, any action which would cause an exemption
from the registration requirements of Section 5 of the Securities Act to be
inapplicable to the issuance or sale of the Notes or the Class A Shares issuable
upon conversion of the Notes.
2.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will use the proceeds of the issuance of the Notes to repay
existing Debt, to fund the expansion of its retail car sales operations and for
general corporate purposes. No part of the proceeds from the sale of the Notes
hereunder will be used, and no part of the proceeds of such existing Debt was
used, directly or indirectly, for the purpose of buying or carrying any margin
stock within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System (12 CFR 207, as amended), or for the purpose of buying or
carrying or trading in any securities under such circumstances as to involve the
Company in a violation of Regulation X of said Board (12 CFR 224) or to involve
any broker or dealer in a violation of Regulation T of said Board (12 CFR 220).
Margin stock does not constitute any of the assets of the Company and its
Subsidiaries, and the Company does not presently intend that margin stock will
constitute more than 20% of such assets. As used in this Section, the terms
"MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall have the meanings
assigned to them in the aforementioned Regulation G.
<PAGE> 13
9
2.15. INVESTMENT COMPANY ACT AND HOLDING COMPANY STATUS, ETC.
Neither the Company nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the Public Utility Holding Company
Act of 1935, as amended, or the Federal Power Act, as amended.
2.16. ENVIRONMENTAL MATTERS.
A. The operations of the Company and its Subsidiaries comply with all
Environmental Laws and all other applicable Requirements of Law concerning
environmental health and safety, except where the failure so to comply
individually and in the aggregate could not be reasonably expected to have a
Material Adverse Effect.
B. In addition and without limitation to the foregoing, except as set
forth on Schedule 2.16:
(1) neither the Company nor any Subsidiary, nor any property or
operations currently owned or leased by the Company or any Subsidiary, is
subject to, and no property or operations formerly owned or leased by the
Company or any Subsidiary during such period of ownership or lease were to
the Company's knowledge subject to, any Order from or agreement with any
court, arbitrator or Governmental Body of competent jurisdiction or
subject to any judicial or docketed administrative proceeding respecting
(x) any Environmental Law or any other environmental or health or safety
Requirement of Law, (y) any action required to clean up, remove, treat or
in any other way address Contaminants in the environment or (z) any
written claim under any Environmental Law arising from the release or
threatened release of a Contaminant into the environment;
(2) all necessary authorizations, consents, permissions, licenses and
agreements required by Environmental Laws (collectively "ENVIRONMENTAL
CONSENTS") have been lawfully obtained by the Company and its Subsidiaries
except Environmental Consents the failure of which to obtain could not
reasonably be expected to have a Material Adverse Effect, and all
Environmental Consents are valid and subsisting and are in full force and
effect;
(3) the Company and its Subsidiaries have complied in all material
respects with all conditions attaching to Environmental Consents (whether
such conditions are expressly imposed or implied by statute) and the
Company is not aware of any circumstances which would render it
impossible for the Company or any Subsidiary to comply with such
conditions in the future;
(4) neither the Company nor any Subsidiary has received any written
notice, Order, correspondence or
<PAGE> 14
10
communication from any Governmental Body in respect of any Environmental
Consent revoking, suspending, modifying or varying the same, or
threatening to do so, and the Company does not know of any reason for
any Environmental Consent to be revoked, suspended, modified or varied;
(5) neither the Company nor any Subsidiary has received any written
communication in any form from any Governmental Body in respect of any
violation of any Environmental Law; and the Company is not aware of any
circumstances which would be reasonably expected to give rise to such a
communication being received, or of any intention on the part of any
competent authority to deliver any such communication;
(6) to the Company's knowledge, no site owned or occupied by the
Company or any Subsidiary has been used for the deposit of waste during
the ownership or occupation of the Company or any Subsidiary except for
such usage in accordance with Environmental Law or pursuant to all
requisite material consents thereunder;
(7) to the Company's knowledge, all Contaminants produced in the
course of the businesses of the Company and its Subsidiaries have been
lawfully disposed of; and
(8) to the Company's knowledge, the Company and its Subsidiaries have
at all times supplied to the competent authorities such information as is
required by Environmental Laws, and all such information given was correct
at the time such information was supplied.
2.17. SOLVENCY.
The Company is, and after giving effect to the issuance of the Notes on the
Closing Date will be, a "solvent institution", as said term is used in Section
1405(c) of the New York Insurance Law, whose "obligations . . . are not in
default as to principal or interest", as said terms are used in said Section
1405(c).
2.18. REGISTRATION RIGHTS.
Except as set forth in Schedule 2.18 and as contemplated by this Agreement
and the Registration Rights Agreement no Person has the right to cause the
Company to effect the registration under the Securities Act of any shares of
Common Stock or any other securities (including securities evidencing Debt) of
the Company.
2.19. OTHER AGREEMENTS.
Concurrently with the execution and delivery of this Agreement, the Company
is entering into Note Purchase Agreements
<PAGE> 15
11
identical to this Agreement (except as to the identity of the purchasers and the
aggregate principal amount and series of Notes to be purchased) with the other
purchasers named in Schedule I. The sales to you and said other purchasers are
to be separate and several sales.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
You represent and warrant to the Company as follows:
3.1. PURCHASE OF NOTES.
You are acquiring the Notes being purchased by you on the Closing Date
without a view to the resale or distribution thereof, provided that the
disposition of your property shall at all times be within your control. You
understand that the Notes have not been registered under the Securities Act and
may be resold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available, and that the Company is
not required to register the Notes.
You have had the opportunity to ask management of the Company questions
regarding the business and financial condition of the Company and the offering
of the Notes.
3.2. SOURCE OF FUNDS.
At least one of the following statements is an accurate representation as
to each source of funds (a "SOURCE") to be used by you to pay the purchase price
of the Notes to be purchased by you hereunder:
A. the Source is an "insurance company general account", as such term
is defined in Prohibited Transaction Exemption ("PTE") 95-60 (issued July
12, 1995), and there is no plan with respect to which the aggregate amount
of such general account's reserves and liabilities for the contracts held
by or on behalf of such plan and all other plans maintained by the same
employer (and affiliates thereof as defined in section V(a)(1) of PTE
95-60) or by the same employee organization (in each case determined in
accordance with PTE 95-60) exceeds or will exceed 10% of the total of all
reserves and liabilities of such general account (determined in accordance
with PTE 95-60, exclusive of separate account liabilities, plus any
applicable surplus) as of the Closing Date; or
B. the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (b), no employee benefit plan or group
of plans maintained by the
<PAGE> 16
12
same employer or employee organization beneficially owns more than
10% of all assets allocated to such pooled separate account or collective
investment fund; or
C. the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of
such employer or by the same employee organization and managed by such
QPAM, exceed 20% of the total client assets managed by such QPAM, the
conditions of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a person controlling or controlled by the QPAM
(applying the definition of "control" in section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Company in
writing pursuant to this Subsection C; or
D. the Source is a governmental plan; or
E. the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to
this Subsection E; or
F. the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
As used in this Section 3.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in section 3 of ERISA.
4. CONDITIONS OF CLOSING.
Your obligation to purchase and pay for the Notes to be purchased by you
hereunder is subject to the satisfaction on or before the Closing Date of the
following conditions:
4.1. PROCEEDINGS.
All corporate and other proceedings taken or to be taken in connection with
the transactions contemplated hereby and all documents and papers incident
thereto shall be satisfactory in form and substance to you, and you and your
special counsel shall have received all such counterpart originals or certified
<PAGE> 17
13
or other copies of such documents and papers as you may reasonably request
related thereto.
4.2. REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
The representations and warranties contained in Section 2 shall (except as
expressly affected by the transactions contemplated hereby) be true on and as of
the Closing Date as if made on and as of the Closing Date; the Company shall
have performed all agreements to be performed by it under this Agreement on or
before the Closing Date; there shall exist on the Closing Date no Default or
Event of Default; since September 30, 1996, the Company shall not have made any
Restricted Payment that would have been prohibited by Section 8.3 if said
Section had been in effect at all times since that date or consolidated with,
merged with or into, or sold, leased or otherwise disposed of its properties as
an entirety or substantially as an entirety to any Person, whether or not
permitted by Section 8.4; and the Company shall have delivered to you an
Officer's Certificate, dated the Closing Date, to each such effect.
4.3. OPINIONS OF COUNSEL.
You shall have received from (A) Willkie Farr & Gallagher, who are acting
as your special counsel in connection with the transactions contemplated hereby,
(B) King & Spalding, counsel to the Company in connection with such
transactions, and (C) Kenneth M. Lipowitz Esq., counsel for the Company,
opinions substantially in the respective forms of Exhibits B, C-1 and C-2
attached hereto, each dated the Closing Date and addressed to you. Each such
opinion shall also cover such other customary legal matters as you may
reasonably request. The Company hereby instructs its counsel to deliver such
opinion to you.
4.4. REGISTRATION RIGHTS AGREEMENT.
A Registration Rights Agreement, substantially in the form of Exhibit D
attached hereto (the "REGISTRATION RIGHTS AGREEMENT"), shall have been executed
and delivered and shall be in full force and effect.
4.5. PRIVATE PLACEMENT NUMBER.
The Notes shall have been assigned a Private Placement Number by Standard
& Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation
Office of the National Association of Securities Commissioners).
4.6. LEGALITY.
On the Closing Date, the Notes to be purchased by you hereunder shall be a
legal investment for you under the laws of each jurisdiction to which you may be
subject (without resort, unless you so choose, to any so-called basket or leeway
provision
<PAGE> 18
14
of said laws, such as Section 1405(a)(8) of the Insurance Law of the State of
New York), and you shall have received such certificates or other evidence as
you may reasonably request demonstrating the legality of such purchase under
such laws.
4.7. PAYMENT OF FEES.
The Company shall have paid the fees and disbursements of your special
counsel as contemplated by the second paragraph of Section 19.1.
4.8. SALE OF NOTES TO OTHER PURCHASERS.
The Company shall sell to the other purchasers referred to in Section 2.19
the Notes respectively to be purchased by them pursuant to the other agreements
referred to in said Section.
5. PREPAYMENTS OF NOTES; PURCHASE OF NOTES.
In addition to the payment of the entire unpaid principal amount of the
Notes at the final maturity thereof, the Company may make optional prepayments
in respect of the Notes and under certain circumstances may be required to offer
to prepay Notes, all as hereinafter provided.
5.1. OPTIONAL PREPAYMENT.
Upon notice given as provided in Section 5.2, the Company may at any time
on or after December 1, 1999 prepay the Notes as a whole, or from time to time
in part (in a minimum amount of $1,000,000 and otherwise in integral multiples
of $100,000), in each case at the principal amount to be prepaid, together with
interest accrued thereon to the date fixed for such prepayment, plus the
applicable prepayment premium (expressed as a percentage of the principal amount
so to be prepaid) indicated below:
<TABLE>
<CAPTION>
Prepayment Date Prepayment Premium
--------------- ------------------
<S> <C>
December 1, 1999 to November 30, 2000 3.50%
December 1, 2000 to November 30, 2001 2.333%
December 1, 2001 to November 30, 2002 1.170%
December 1, 2002 and thereafter 0.000%
</TABLE>
provided that prior to December 1, 2001 Notes may not be prepaid pursuant to
this Section unless the Closing Price per Class A Share for a period of 10
consecutive Trading Days commencing 20 Trading Days before the date of the
Company's notice pursuant to Section 5.2 in respect of such prepayment was at
least 150% of the Conversion Price then in effect.
<PAGE> 19
15
5.2. NOTICE OF OPTIONAL PREPAYMENT.
The Company shall call Notes for prepayment pursuant to Section 5.1 by
giving written notice thereof to each holder of the Notes, which notice shall be
given not less than 30 nor more than 60 days prior to the date fixed for such
prepayment and shall specify the principal amount so to be prepaid and the date
fixed for such prepayment and the prepayment premium in respect of such
prepayment. Each notice of a prepayment to be made prior to December 1, 2001
shall be accompanied by a certificate of a Senior Financial Officer showing the
Closing Price for each of the relevant Trading Days as required by Section 5.1.
Notice of prepayment having been so given, the aggregate principal amount
of the Notes so to be prepaid as specified in such notice, together with
interest accrued thereon to the date fixed for such prepayment, plus the
prepayment premium with respect thereto shall become due and payable on the
specified prepayment date.
5.3. PREPAYMENT IN CONNECTION WITH A CHANGE OF CONTROL.
Promptly and in any event within 20 days after the occurrence of a Change
of Control, the Company will give written notice thereof to the holders of all
outstanding Notes, which notice shall (a) refer specifically to this Section
5.3, (b) describe the Change of Control in reasonable detail and specify the
Change of Control Prepayment Date and the Response Date (as respectively defined
below) in respect thereof and (c) offer to prepay all Notes at the price
specified below on the date therein specified (the "CHANGE OF CONTROL PREPAYMENT
DATE"), which shall be a Business Day not less than 30 nor more than 60 days
after the date of such notice. Each holder of a Note will notify the Company of
such holder's acceptance (indicating the aggregate principal amount of notes to
be prepaid) or rejection of such offer by giving written notice of such
acceptance or rejection to the Company at least five days prior to the Change of
Control Prepayment Date (the "RESPONSE DATE"), except that the failure by any
such holder to respond in writing to such offer on or before the Response Date
shall be deemed to be a rejection of such offer by such holder in respect of
such Change of Control.
On the Change of Control Prepayment Date the Company will prepay all of the
Notes held by the holders as to which such offer has been accepted, at the
principal amount of each such Note, together with interest accrued thereon to
the Change of Control Prepayment Date, plus a premium equal to 1% of such
principal amount.
If any holder shall reject such offer, such holder shall be deemed to have
waived its rights under this Section 5.3 to require prepayment of all Notes held
by such holder in respect of such Change of Control but not in respect of any
subsequent Change of Control.
<PAGE> 20
16
5.4. PREPAYMENT IN CONNECTION WITH FAILURE TO REGISTER.
If the Shelf Registration (as defined in the Registration Rights Agreement)
has not been declared effective on or before December 31, 1997, the Company will
give immediate written notice thereof to the holders of all outstanding Notes,
which notice shall (a) refer specifically to this Section 5.4, (b) specify the
Registration Failure Prepayment Date and the Response Date (as respectively
defined below) in respect thereof and (c) offer to prepay all Notes at the price
specified below on the date therein specified (the "REGISTRATION FAILURE
PREPAYMENT DATE"), which shall be January 30, 1998. Each holder of a Note will
notify the Company of such holder's acceptance (indicating the aggregate
principal amount of notes to be prepaid) or rejection of such offer by giving
written notice of such acceptance or rejection to the Company on or before
January 23, 1998 (the "RESPONSE DATE"), except that the failure by any such
holder to respond in writing to such offer on or before the Response Date shall
be deemed to be a rejection of such offer by such holder in respect of such
failure to register.
On the Registration Failure Prepayment Date the Company will prepay all of
the Notes held by the holders as to which such offer has been accepted, at the
principal amount of each such Note, together with interest accrued thereon to
the Registration Failure Prepayment Date, but without prepayment premium.
If any holder shall reject such offer, such holder shall be deemed to have
waived its rights under this Section 5.4 to require prepayment of all Notes held
by such holder in respect of such failure to register.
5.5. PARTIAL PREPAYMENTS PRO RATA.
Upon any prepayment of less than all of the outstanding Notes pursuant to
Section 5.1, the principal amount so prepaid shall be allocated to all Notes at
the time outstanding ratably in proportion to the respective unpaid principal
amounts thereof.
5.6. PURCHASE OF NOTES.
The Company will not, and will not permit any of its Subsidiaries to,
acquire directly or indirectly by purchase or prepayment or otherwise any of the
outstanding Notes except by way of payment or prepayment in accordance with the
provisions of the Notes and of this Agreement.
6. FINANCIAL STATEMENTS AND INFORMATION.
The Company will furnish to you, so long as you and the other purchasers
listed on Schedule I, shall in the aggregate, continue to hold any combination
of Notes (on an As Converted Basis) or Class A Shares representing at least 25%
of the Class A
<PAGE> 21
17
Shares initially issuable upon conversion of all Notes (subject to adjustment
from time to time pursuant to Section 11.2):
A. promptly upon their becoming publicly available and in any event
within 105 days after the end of each fiscal year of the Company, copies
of a consolidated balance sheet of the Company and its Subsidiaries as of
the end of such fiscal year and the related consolidated statements of
operations, cash flows and changes in stockholders' equity of the Company
and its Subsidiaries for such fiscal year, all in reasonable detail and
stating in comparative form the respective consolidated figures as of the
end of and for the previous fiscal year and all accompanied by a report of
independent public accountants of recognized national standing selected by
the Company, which report shall state that such financial statements have
been prepared in accordance with GAAP, provided that the delivery within
the time period specified above of the Company's Annual Report on Form
10-K for such fiscal year (together with the Company's annual report to
stockholders, if any, prepared pursuant to Rule 14a-3 under the Exchange
Act) prepared in accordance with the requirements therefor and filed with
the Commission, together with the accountant's certificate described in
Subsection C below, shall be deemed to satisfy the requirements of this
Section 6A; and
B. promptly upon their becoming publicly available and in any event
within 45 days after the end of each fiscal quarter (other than the last
fiscal quarter) in each fiscal year of the Company, copies of an unaudited
consolidated balance sheet of the Company and its Subsidiaries as of the
last day of such fiscal quarter and the related unaudited consolidated
statements of operations, cash flows and changes in stockholders' equity
of the Company and its Subsidiaries for such fiscal quarter and the period
from the beginning of the then current fiscal year to the end of such
fiscal quarter, all in reasonable detail and stating in comparative form
the consolidated figures for the corresponding date and period in the
previous fiscal year, and all certified by a Senior Financial Officer to
present fairly in all material respects the information contained therein,
in each case in accordance with GAAP, subject to normal year-end audit
adjustments, provided that delivery within the time period specified above
of copies of the Company's Quarterly Report on Form 10-Q prepared in
compliance with the requirements therefor and filed with the Commission
shall be deemed to satisfy the requirements of this Section 6B;
C. concurrently with each delivery of financial statements or reports
required to be furnished pursuant to Subsections A and B above, a
certificate of a Senior Financial Officer stating that, based upon such
examination or investigation and review of this Agreement as in the
<PAGE> 22
18
opinion of the signer is necessary to enable the signer to express an
informed opinion with respect thereto, no Default or Event of Default has
occurred during such period, or, if any Default or Event of Default shall
have occurred, specifying all of the same and the nature and period of
existence thereof and what action the Company has taken, is taking or
proposes to take with respect thereto; and
D. promptly upon their becoming publicly available,
(1) copies of all other financial statements sent or made
available by the Company or a Subsidiary to its equity or other
security holders (other than the Company or another Subsidiary), all
regular and periodic reports and proxy statements, and all
registration statements and prospectuses, if any, filed by the
Company or any Subsidiary with any securities exchange or with the
Commission, and
(2) copies of all press releases and other statements made
available generally by the Company or any Subsidiary to the public
relating to financial matters or to other Material developments in
the business of the Company or any Subsidiary.
The Company also agrees to provide, at any time that it is not subject to
Section 13 or 15(d) of the Exchange Act to any prospective transferee of a Note
designated by a holder thereof information satisfying the requirements of
subsection (d)(4)(i) of Rule 144A of the Commission or any similar rule then in
effect.
7. [INTENTIONALLY OMITTED.]
8. COVENANTS.
The Company covenants and agrees that so long as any of the Notes shall be
outstanding:
8.1. PAYMENT OF PRINCIPAL, INTEREST AND PREMIUM, ETC.
The Company will duly and punctually pay the principal of, interest and
premium, if any, on, the Notes in accordance with the terms of the Notes and
this Agreement.
8.2. TO KEEP BOOKS; PAYMENT OF TAXES; MAINTENANCE OF PROPERTIES; ETC.
The Company will, and will cause each Subsidiary to,
A. keep proper books of record and account, and keep appropriate
reserves, all in accordance with GAAP;
<PAGE> 23
19
B. pay and discharge or cause to be paid and discharged all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or upon any of its property, real, personal or mixed, or
upon any part thereof, when due and so long as the same can be paid
without interest or penalty, as well as all lawful claims for labor,
materials and supplies which, if unpaid, could by law become a Lien upon
its property, provided that neither the Company nor any Subsidiary shall
be required to pay any such tax, assessment, charge, levy or claim if the
amount, applicability or validity thereof shall be contested on a timely
basis in good faith by appropriate proceedings (so long as the enforcement
of any Lien arising out of such nonpayment shall be stayed during any
proceedings) and if appropriate reserves, to the extent required by GAAP,
shall have been made therefor; and
C. maintain and keep, or cause to be maintained and kept, its
material properties in good repair, working order and condition (other
than ordinary wear and tear), so that the business carried on in
connection therewith may be properly and advantageously conducted at all
times, provided that nothing in this Subsection shall prevent the Company
or any Subsidiary from discontinuing the operation and the maintenance of
any such properties if such discontinuance is, in the opinion of the
Company, in the best interest of the Company and its Subsidiaries taken as
a whole.
8.3. LIMITATION ON RESTRICTED PAYMENTS, ETC.
The Company will not, and will not permit any Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on or in
respect of, or make any distribution to the holders of, Capital Stock of the
Company, (ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company (other than the BRAC Warrant), (iii) declare or pay
any dividend or make any distribution on or in respect of, or make any
distribution to holders of, Capital Stock of any Subsidiary (other than with
respect to any such Capital Stock held by the Company or any Wholly Owned
Subsidiary) or purchase, redeem or otherwise acquire or retire for value any
Capital Stock of any Subsidiary (other than such Capital Stock held by the
Company or any Wholly Owned Subsidiary), or (iv) purchase, repurchase, redeem,
defease or otherwise acquire or retire for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment, any Subordinated
Obligations (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, or other acquisition or retirement being
herein referred to as a "RESTRICTED PAYMENT")
<PAGE> 24
20
unless on the date of declaration and on the date of payment of such Restricted
Payment, and after giving effect thereto,
A. no Default or Event of Default shall have occurred and be
continuing, and
B. the aggregate amount of all Restricted Payments made or declared,
directly or indirectly, during the period from October 1, 1996 to and
including the date of such payment or declaration (the "COMPUTATION
PERIOD") would not exceed the sum of
(1) $5,000,000 plus
(2) 10% of cumulative Consolidated Net Income (or minus 100% of
any Consolidated Net Loss) for the Computation Period, plus
(3) the aggregate Net Cash Proceeds received by the Company
after the Closing Date from the issuance of shares of its Capital
Stock of any class (other than to a Subsidiary or an employee stock
ownership plan or similar trust), plus
(4) the aggregate Net Cash Proceeds received by the Company
after the Closing Date from the issuance of its Capital Stock (other
than Redeemable Capital Stock or Exchangeable Capital Stock) to an
employee stock ownership plan (provided that if such employee stock
ownership plan issues any Debt to finance its purchase of such
Capital Stock, such Net Cash Proceeds shall only be included to the
extent of any increase in the consolidated net worth of the Company
and its Subsidiaries resulting from principal repayments made by
such employee stock ownership plan with respect to such Debt), plus
(5) the amount by which consolidated Debt of the Company and
its Subsidiaries is reduced on the Company's consolidated balance
sheet upon the conversion or exchange (other than by a Subsidiary)
after the Closing Date of any Debt of the Company or any of its
Subsidiaries convertible or exchangeable for Capital Stock (other
than Redeemable Capital Stock or Exchangeable Capital Stock) of the
Company (less the amount of any cash, or other property, distributed
by the Company or any of its Subsidiaries upon such conversion or
exchange).
The Company will not declare any dividend or other Restricted Payment in
respect of its Common Stock of any class payable more than 90 days after the
declaration date.
<PAGE> 25
21
8.4. CONSOLIDATION, MERGER OR DISPOSITION OF ASSETS AS AN ENTIRETY.
The Company will not, directly or indirectly, merge, consolidate or
amalgamate with any other Person or sell, lease, transfer or otherwise dispose
of all or substantially all of its assets (as an entirety) to any Person, unless
A. the Company shall be the continuing or surviving corporation, or
the continuing, surviving or acquiring Person shall be a solvent
corporation, partnership or trust organized in the United States of
America and shall expressly assume in writing (in a form reasonably
satisfactory to the Required Holders) the due and punctual payment of the
principal, premium (if any) and interest on the Notes and all of the other
obligations of the Company under this Agreement and the Registration
Rights Agreement, and
B. immediately after any such merger, consolidation, amalgamation,
sale, lease or other disposition and giving effect to any concurrent
transactions, no Default or Event of Default shall have occurred and be
continuing and the Company shall have complied with its obligations under
Section 11.2 resulting from such transaction.
9. DEFINITIONS.
9.1. DEFINITIONS.
Except as otherwise specified or as the context may otherwise require, the
following terms shall have the respective meanings set forth below whenever used
in this Agreement and shall include the singular as well as the plural:
"AFFILIATE" of any specified Person means any other Person which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such Person. Notwithstanding the foregoing, in
no event shall you or any of your Affiliates or any other holder of any Notes be
deemed to be an Affiliate of the Company solely by reason of the ownership of
the Notes or the Class A Shares acquired upon the conversion of the Notes.
"APPLICABLE RATE" has the meaning specified in Exhibit A.
"AS CONVERTED BASIS" means, when used in reference to Notes, whether at the
time of a determination of the number of Class A Shares or otherwise, that
number of Class A Shares into which such Notes may then be converted based upon
the conversion rights of the Notes as adjusted pursuant to Section 11.2.
<PAGE> 26
22
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee of directors lawfully exercising the relevant powers of said Board or
Directors.
"BRAC WARRANT" shall mean the warrant issued by the Company to Budget Rent
A Car Corporation on August 24, 1994 to purchase 175,000 Class A Shares.
"BUSINESS DAY" means any day other than a Saturday or Sunday or a day on
which commercial banks are required or authorized by law to be closed in New
York, New York.
"CAPITAL STOCK" means, with respect to any corporation, any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests (however designated) in stock issued by that
corporation.
"CAPITALIZED LEASE OBLIGATIONS" means, with respect to any Person, all
outstanding obligations of such Person in respect of any rental obligation which
is required to be capitalized on the face of a balance sheet of such Person
under GAAP, taken at the capitalized amount thereof accounted for as
indebtedness (net of interest expense) in accordance with GAAP.
"CHANGE OF CONTROL" means such time as
(i) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), excluding any "person" or "group" of which
Sandy Miller, John D. Kennedy or Jeffrey D. Cogdon, or their controlled
Affiliates, are a substantial part (and for such purpose Messrs. Miller,
Kennedy and Cogdon, and their controlled Affiliates, shall not be deemed
to be a substantial part of such person or group unless in the aggregate
they own beneficially at least 15% of the total then outstanding voting
power of the Voting Stock of the Company), (A) becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50%
of the total then outstanding voting power of the Voting Stock of the
Company or (B) has the right or the ability by voting right, contract or
otherwise to elect or designate for election a majority of the entire
Board of Directors;
(ii) (A) the Company consolidates with or merges into any other
Person or conveys, transfers, sells or leases all or substantially all of
its assets as an entirety to any Person or (B) any Person merges into the
Company, in either event pursuant to a transaction in which Voting Stock
of the Company representing more than 50% of the total voting power of the
Company outstanding immediately prior to the effectiveness thereof is
reclassified or changed into or exchanged for cash, securities or other
property; provided that any consolidation, merger, conveyance, transfer,
sale or lease between the Company and any of its Subsidiaries
<PAGE> 27
23
(including without limitation the reincorporation of the Company in
another jurisdiction) shall be excluded from the operation of this clause
(ii); or
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors, or whose
nomination for election by the shareholders of the Company, as the case
may be, was approved by a vote of 66 2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors then in
office.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by virtue of the Company's or any of its employee benefit or stock
plan's filing (or being required to file after the lapse of time) a Schedule 13D
or 14D-1 (or any successor or similar schedule, form or report under the
Exchange Act) as a result of the Company or any such plan becoming the
beneficial owner of shares of capital stock of the Company entitling such person
to exercise a majority of the total voting power of the Voting Stock of the
Company.
"CLASS A SHARES" has the meaning specified in Section 1.1.
"CLASS B SHARES" has the meaning specified in Section 2.1.
"CLOSING DATE" has the meaning specified in Section 1.2.
"CLOSING PRICE" on any Trading Day with respect to the per share price of
Class A Shares means the last reported sales price regular way or, in case no
such reported sale takes place on such Trading Day, (i) the reported closing bid
price regular way on the Nasdaq Stock Market's National Market if the Class A
Shares are listed or admitted to trading on such National Market, or (ii) if the
Class A Shares are not listed or admitted to trading on the Nasdaq Stock
Market's National Market, the average of the reported closing bid and asked
prices regular way on the principal national securities exchange on which the
Class A Shares are listed or admitted to trading or, if not listed or admitted
to trading on any national securities exchange, the closing bid price in the
over-the-counter market as furnished by any New York Stock Exchange member firm
that is selected from time to time by the Company for that purpose and is
reasonably acceptable to the Majority Holders.
"CODE" means the Internal Revenue Code of 1986, as amended.
<PAGE> 28
24
"COMMISSION" means the Securities and Exchange Commission and any successor
agency of the United States federal government having similar powers.
"CONSOLIDATED NET INCOME (LOSS)" for any period shall mean the net income
(loss) of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, excluding
A. the proceeds of any life insurance policy,
B. any gains arising from (i) the sale or other disposition of any
assets (other than current assets) to the extent that the aggregate amount
of the gains during such period exceeds the aggregate amount of the losses
during such period from the sale, abandonment or other disposition of
assets (other than current assets), (ii) any write-up of assets or (iii)
the acquisition of outstanding securities of the Company or any
Subsidiary,
C. any amount representing any interest in the undistributed
earnings of any other Person (other than a Subsidiary),
D. any earnings, prior to the date of acquisition, of any Person
acquired in any manner, and any earnings of any Subsidiary prior to its
becoming a Subsidiary,
E. any earnings of a successor to or transferee of the assets of the
Company prior to its becoming such successor or transferee,
F. any deferred credit (or amortization of a deferred credit)
arising from the acquisition of any Person, and
G. any extraordinary gains not covered by clause B above.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special or toxic waste, petroleum or
petroleum-derived substance or waste, or any constituent of any such substance
or waste regulated under any Environmental Law.
"CONTROL" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing; it being understood that Budget Rent A Car Corporation, merely by
virtue of being a franchisor, shall not be deemed to control the Company or any
of its other franchisees.
<PAGE> 29
25
"CONVERSION PRICE" has the meaning specified in Section 11.1.
"DEBT" of any person means, without duplication,
A. the principal of and premium, if any, in respect of (1)
indebtedness of such person for money borrowed and (2) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for
the payment of which such person is responsible or liable;
B. all Capitalized Lease Obligations of such person;
C. all obligations of such person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such
person and all obligations of such person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
D. all obligations of such person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses A
through C above) entered into in the ordinary course of business of such
person to the extent such letters of credit are not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the
third Business Day following receipt by such person of a demand for
reimbursement following payment on the letter of credit);
E. all obligations of such person with respect to the redemption,
repayment or other repurchase of any Redeemable Capital Stock or
Exchangeable Capital Stock (but excluding any accrued dividends);
F. all obligations of the type referred to in clauses A through E
above of other persons and all dividends of other persons for the payment
of which, in either case, such person is responsible or liable as obligor,
guarantor or otherwise, including any guarantees of such obligations and
dividends; and
G. all obligations of the type referred to in clauses A through F of
other persons secured by any Lien on any property or asset of such person
(whether or not such obligation is assumed by such person), the amount of
such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured.
The amount of Debt of any person at any date shall be the outstanding balance at
such date of all unconditional obligations
<PAGE> 30
26
as described above and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations
referred to above at such date.
"DEFAULT" means an event which, with the lapse of time and/or the giving of
notice, would constitute an Event of Default.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment, or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under section 414
of the Code.
"EVENT OF DEFAULT" has the meaning specified in Section 10.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXCHANGEABLE CAPITAL STOCK" means any Capital Stock which is exchangeable
or convertible into another security (other than Capital Stock of the Company
which is neither Exchangeable Capital Stock nor Redeemable Capital Stock).
"GAAP" means generally accepted accounting principles from time to time in
the United States.
"GOVERNMENTAL BODY" has the meaning specified in Section 2.5.
"LIEN" means any mortgage, pledge, security interest, conditional sale or
other title retention agreement or other similar lien.
"MAJORITY HOLDERS" means the holder or holders of at least a majority of
the aggregate unpaid principal amount of the Notes at the time outstanding.
"MATERIAL" means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of the Company and its
Subsidiaries taken as a whole.
<PAGE> 31
27
"MATERIAL ADVERSE EFFECT" means, with respect to an action or event or
group of actions or events, a material adverse effect on (A) the business,
properties or condition (financial or other) of the Company and its Subsidiaries
taken as a whole, (B) the ability of the Company to perform its obligations
under this Agreement and the other Transaction Documents or (C) the legality,
validity or enforceability of this Agreement or the other Transaction Documents.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as such
term is defined in section 4001(a)(3) of ERISA).
"NET CASH PROCEEDS" with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"NON-PAYMENT DEFAULT" means, at any time when the Company has outstanding
obligations constituting Senior Indebtedness, the occurrence or existence of any
event, circumstance, condition or state of facts that, by the terms of such
Senior Indebtedness, permits one or more holders of such obligations (or a
trustee or agent on behalf of the holders thereof) to declare such obligations
immediately due and payable prior to the date on which they would otherwise
become due and payable, other than a Payment Default.
"NOTES" has the meaning specified in Section 1.1.
"NOTE REGISTER" has the meaning specified in Section 13.
"OBLIGATION" of any Person means any obligation of such Person to pay
principal, premium, interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Company,
whether or not a claim for such post-petition interest is allowed in such
proceeding), penalties, reimbursement or indemnification amounts, fees, expenses
or other amounts.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial Officer
or of any other officer of the Company whose responsibilities extend to the
subject matter of such certificate.
"ORDER" has the meaning specified in Section 2.5.
"PAYMENT DEFAULT" means a default in the payment of any principal of or
premium, if any, interest or sinking fund on, or other payment Obligation of the
Company constituting, Senior
<PAGE> 32
28
Indebtedness when due, whether at maturity of any such payment or by declaration
of acceleration, call for redemption or otherwise.
"PERSON" or "PERSON" means and includes an individual, a partnership, a
joint venture, a corporation, a limited liability company, a trust, an
association, a joint-stock company, an unincorporated organization and a
government or any department or agency thereof.
"PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued
by the United States Department of Labor.
"REDEEMABLE CAPITAL STOCK" means, any Capital Stock that by its terms or
otherwise is required to be redeemed on or prior to the first anniversary of the
Stated Maturity of the Notes or is redeemable at the option of the holder
thereof at any time on or prior to the first anniversary of the Stated Maturity
of the Notes; provided that such Redeemable Capital Stock shall not include any
Capital Stock redeemable upon a Change of Control and provided further that such
redemption rights are subordinate to the Company's obligation to prepay Notes
upon a Change of Control pursuant to Section 5.3.
"REGISTRATION RIGHTS AGREEMENT" has the meaning specified in Section 4.4.
"REQUIRED HOLDERS" means the holder or holders of at least 66 2/3% of the
aggregate unpaid principal amount of the Notes at the time outstanding.
"REQUIREMENT OF LAW" means, as to any Person, each law, rule or regulation,
including Environmental Laws and ERISA, or Order, decree or other determination
of an arbitrator or a court or other Governmental Body applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"RESTRICTED PAYMENT" has the meaning specified in Section 8.3.
"SEC REPORTS" means the meaning specified in Section 2.2.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
<PAGE> 33
29
"SENIOR FINANCIAL OFFICER" means the chief financial officer, principal
accounting officer, treasurer or controller of the Company.
"SENIOR INDEBTEDNESS" means the principal of (and premium, if any) and
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) on, and all fees and
other amounts payable and obligations owing in connection with, the following,
whether absolute or contingent, secured or unsecured, due or to become due,
outstanding on the date of this Agreement or thereafter created, incurred or
assumed: (A) all indebtedness of the Company (including obligations of the
Company arising from its guarantee of the indebtedness of others) to banks,
insurance companies and other financial institutions evidenced by credit or loan
agreements, notes or other written obligations, (B) all other indebtedness of
the Company (including obligations of the Company arising from its guarantee of
the indebtedness of others) other than the Notes, (C) all Capitalized Lease
Obligations of the Company or in respect of any lease or related document
(including a purchase agreement) which provides that the Company is
contractually obligated to purchase or cause a third party to purchase the
leased property and thereby effectively guarantees a minimum residual value of
the leased property to the lessor and the obligations of the Company under such
lease or related document to purchase or cause a third party to purchase such
leased property; (D) all obligations of the Company issued or assumed as the
deferred purchase price of property (but excluding any portion thereof
constituting trade accounts payable arising in the ordinary course) and (E) all
obligations of the Company for the reimbursement of any letter of credit or any
amendment, renewals, extensions, modifications and refundings; provided that
Senior Indebtedness shall not include (i) any such indebtedness or obligation if
the terms of such indebtedness or obligation (or the terms of the instrument
under which or pursuant to which, it is issued) expressly provide that such
indebtedness or obligation shall not be senior in right of payment to the Notes,
or expressly provide that such indebtedness or obligation is pari passu with or
junior to the Notes and (ii) accounts payable of the Company to trade creditors.
"STATED MATURITY" when used with respect to any Note or any installment of
interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"SUBORDINATED OBLIGATION" means, at any date, any Debt of the Company which
is subordinate or junior in right of payment to the Notes.
"SUBSIDIARY" of any Person means any corporation or other entity a majority
of the total combined voting power of all classes of Voting Stock of which
shall, at the time as of which
<PAGE> 34
30
any determination is being made, be owned by such Person and/or one or more of
its Subsidiaries. Except as otherwise expressly indicated herein, references to
Subsidiaries shall mean Subsidiaries of the Company.
"TRADING DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday,
other than any day on which securities are not traded on the applicable
securities exchange or in the applicable securities market.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes and the
Registration Rights Agreement.
"U.S. GOVERNMENT OBLIGATIONS" means securities that are (A) direct
obligations of the United States of America for the payment of which is full
faith and credit is pledged or (B) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
"VOTING STOCK" means, with respect to any Person, any shares of stock or
other equity interests of any class or classes of such Person whose holders are
entitled under ordinary circumstances (irrespective of whether at the time stock
or other equity interests of any other class or classes shall have or might have
voting power by reason of the happening of any contingency) to vote for the
election of a majority of the directors, managers, trustees or other governing
body of such Person.
"WHOLLY OWNED SUBSIDIARY" means a Subsidiary all the Capital Stock of which
(other than directors' qualifying shares) is owned by the Company or another
Wholly Owned Subsidiary.
9.2. ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined in this
Agreement have the meanings respectively given to them in accordance with GAAP.
Except as otherwise specifically provided herein, all computations made
<PAGE> 35
31
pursuant to this Agreement shall be made in accordance with GAAP and all balance
sheets and other financial statements with respect thereto shall be prepared in
accordance with GAAP consistently applied. Except as otherwise expressly
provided, any consolidated financial statement or financial computation shall be
done in accordance with GAAP; and, if at the time that any such statement or
computation is required to be made the Company shall not have any Subsidiary,
such terms shall mean a financial statement or a financial computation, as the
case may be, with respect to the Company only.
10. EVENTS OF DEFAULT; REMEDIES.
10.1. EVENTS OF DEFAULT; ACCELERATION OF MATURITY AND RESCISSION.
If any of the following Events of Default (each an "Event of Default")
shall occur and be continuing for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise):
A. default shall be made in the due and punctual payment of any
principal of or premium, if any, on any Note when and as the same shall
become due and payable, whether at Stated Maturity, by acceleration, by
notice of prepayment or otherwise; or
B. default shall be made in the due and punctual payment of any
interest on any Note when and as the same shall become due and payable
and such default shall have continued for a period of 30 days; or
C. default shall be made in the due performance or observance of any
term, covenant or agreement contained in Section 5.3 or 5.4; or
D. the Company or any Subsidiary shall default beyond any applicable
grace period in any payment of principal of or premium or interest on any
Debt in excess of $10,000,000 in aggregate unpaid principal amount (other
than the Notes) or in the due performance or observance of any provision
contained in any agreement relating to such Debt the effect of which is
(1) to cause such Debt to become or be declared due and payable prior to
its stated maturity or (2) to require the repayment or repurchase of such
Debt prior to its stated maturity, provided that if such default shall be
remedied or cured by the Company or waived by the holders of such Debt
prior to an acceleration under this Agreement, then the Event of Default
hereunder by reason thereof shall be deemed likewise to have been
thereupon remedied, cured or waived without further action upon the part
of any of the holders of the Notes; or
<PAGE> 36
32
E. default or breach shall be made in the performance of any covenant
or warranty made by the Company in this Agreement or any other Transaction
Document or in any certificate or other writing furnished pursuant hereto
or thereto and such default or breach shall have continued for a period of
60 days after the Company becomes aware of such default or breach; or
F. the Company shall (1) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property, (2)
admit in writing its inability to pay its debts as such debts become due,
(3) make a general assignment for the benefit of its creditors, (4)
commence a voluntary case under any law relating to bankruptcy, insolvency
or reorganization, (5) file a petition seeking to take advantage of any
other law providing for the relief of debtors, or (6) fail to controvert
in a timely or appropriate manner (but within 30 days in any event), or
acquiesce in writing to, any petition filed against it in an involuntary
case under any law relating to bankruptcy, insolvency or reorganization;
or
G. a proceeding or case shall be commenced against the Company,
without the application or consent of the Company in any court of
competent jurisdiction seeking (1) its liquidation, reorganization,
dissolution or winding up, or composition or readjustment of its debts,
(2) the appointment of a trustee, receiver, custodian, liquidator,
encumbrancer or the like of it or of all or any substantial part of its
assets or (3) similar relief in respect of it under any law providing for
the relief of debtors, and such proceeding or case shall continue
undismissed, or unstayed and in effect, for a period of 60 days; or an
order for relief shall be entered in an involuntary case under any law
relating to bankruptcy, insolvency or reorganization against the Company;
then (i) upon the occurrence of any Event of Default described in Subsection F
or G, the unpaid principal amount of all Notes, together with the interest
accrued thereon, shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by the Company, or (ii) upon the occurrence and during
the continuance of any other Event of Default, the holders of at least 25% of
the unpaid principal amount of the Notes at the time may, by written notice to
the Company, declare the unpaid principal amount of all Notes to be, and the
same shall forthwith become, due and payable, together with the interest accrued
thereon, without presentment, further demand, protest or other requirements of
any kind, all of which are hereby expressly waived by the Company.
<PAGE> 37
33
The provisions of this Section are subject, however, to the condition that
if, at any time after any Note shall have become declared due and payable, the
Company shall pay all arrears of interest on the Notes and all payments on
account of the principal of and premium (if any) on the Notes which shall have
become due otherwise than by acceleration (with interest on such principal,
premium (if any) and, to the extent permitted by law, on overdue payments of
interest, at the respective rates specified in the Notes with respect to overdue
payments) and an additional amount sufficient to reimburse the holders of the
Notes for the reasonable costs and expenses incurred in connection with any such
declaration, and all Events of Default (other than nonpayment of principal of,
premium, if any, and accrued interest on Notes due and payable solely by virtue
of acceleration) shall be remedied or waived pursuant to Section 15, then, and
in every such case, the Majority Holders, by written notice to the Company, may
rescind and annul any such acceleration of Notes and its consequences; but no
such action shall affect any subsequent Default or Event of Default or impair
any right consequent thereon.
10.2. SUITS FOR ENFORCEMENT.
If any Event of Default shall have occurred and be continuing, the holder
of any of the Notes may proceed to protect and enforce its rights, either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant or agreement contained in this Agreement or in the
other Transaction Documents or in aid of the exercise of any power granted in
this Agreement or in the other Transaction Documents, or the holder of any Note
may proceed to enforce the payment of all sums due upon such Note or to enforce
any other legal or equitable right of the holder of such Note.
Without limiting the generality of Section 19.1, the Company covenants
that, if default shall be made in the making of any payment due under any Note
or in the performance or observance of any agreement contained in this Agreement
or the other Transaction Documents, the Company will pay to each holder of Notes
such further amounts, to the extent lawful, as shall be sufficient to pay all
costs and expenses of collection or of otherwise enforcing such holder's rights
under this Agreement or the other Transaction Documents, including counsel fees.
10.3. REMEDIES CUMULATIVE.
No remedy herein conferred upon you or the holder of any Note is intended
to be exclusive of any other remedy and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
<PAGE> 38
34
10.4. REMEDIES NOT WAIVED.
No course of dealing between the Company and you or the holder of any Note
and no delay or failure in exercising any rights hereunder or under any other
Transaction Document in respect of such Note shall operate as a waiver of any of
your rights or the rights of any holder of such Note.
11. CONVERSION AND EXCHANGE OF NOTES; ANTIDILUTION PROVISIONS.
11.1. CONVERSION OF NOTES.
Each Note will be convertible, in whole or in part, at any time at the
option of the holder thereof, into such number of whole Class A Shares as is
equal to the unpaid principal amount being converted of such Note divided by the
conversion price of $20.07 per share, subject to adjustment as described in
Section 11.2 (the "CONVERSION PRICE"). The Company will pay to the holder of
each Note being so converted all accrued and unpaid interest on such Note (or
portion thereof being converted) to the date of such conversion. Notes called
for prepayment pursuant to Section 5.1 will not be convertible after the close
of business on the Business Day preceding the date fixed for such prepayment,
unless the Company defaults in payment of the amount due upon such prepayment.
11.2. ANTIDILUTION PROVISIONS; ACCRUED INTEREST AND FRACTIONAL SHARES;
MECHANICS OF CONVERSION; NO IMPAIRMENT; ETC.
A. The Conversion Price is subject to adjustment from time to time as
follows:
(1) In case the Company shall (a) subdivide its outstanding shares of
Class A Shares into a greater number of shares or (b) combine its
outstanding Class A Shares into a smaller number of shares, the Conversion
Price in effect immediately prior to such action shall be adjusted so that
the holder of any security thereafter surrendered for conversion shall be
entitled to receive the number of shares of Class A Shares which such
holder would have received or been entitled to receive immediately
following such action had such security been converted immediately prior
thereto. An adjustment made pursuant to this clause (1) shall become
effective immediately.
(2) In case the Company shall pay a dividend or make a distribution
on Class A Shares in Class A Shares, on the day after the record date for
the determination of holders entitled to receive such dividend or
distribution, the Conversion Price shall be adjusted to a price, computed
to the nearest cent, so that the same shall be reduced to the product of:
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35
(a) the Conversion Price in effect immediately prior to the
record date for the determination of holders entitled to receive
such dividend or distribution multiplied by a fraction, of which
(b) the numerator shall be the number of Class A Shares
outstanding at the close of business on the date fixed for such
determination, and of which
(c) the denominator shall be the sum of such number of Class A
Shares and the total number of Class A Shares constituting such
dividend or other distribution.
Such adjustment shall become effective immediately, except as
provided in clause (7) below, on the day after the record date for the
determination of holders entitled to receive such dividend or
distribution. For the purposes of this clause (2), the number of Class A
Shares at any time outstanding shall not include shares held in the
treasury of the Company. The Company shall not pay any dividend or make
any distribution on Class A Shares held in the treasury of the Company.
(3) In case the Company shall issue rights, warrants or options to
all holders of Class A Shares entitling them (for a period expiring within
45 days after the record date therefor) to subscribe for or purchase Class
A Shares at a price per share less than the Current Market Price per share
(as determined pursuant to clause (6) below) of the Class A Shares on the
day after the record date for the determination of holders entitled to
receive such rights, warrants or options, the Conversion Price shall be
adjusted to a price, computed to the nearest cent, so that it shall equal
the price determined by multiplying:
(a) the Conversion Price in effect immediately prior to the
date of issuance of such rights, warrants or options by a fraction,
of which
(b) the numerator shall be (i) the number of Class A Shares
outstanding on the date of issuance of such rights, warrants or
options immediately prior to such issuance, plus (ii) the number of
Class A Shares which the aggregate offering price of the total
number of Class A Shares so offered for subscription or purchase
would purchase at such Current Market Price (determined by
multiplying such total number of Class A Shares by the sum of the
exercise price of such rights, warrants or options plus the fair
market value of any consideration paid to the Company for such
rights, warrants or options and dividing the product so obtained by
such Current Market Price), and of which
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36
(c) the denominator shall be (i) the number of Class A Shares
outstanding on the date of issuance of such rights, warrants or
options, immediately prior to such issuance, plus (ii) the number of
additional Class A Shares which are so offered for subscription or
purchase.
Such adjustment shall become effective immediately, except as provided in
clause (7) below, on the day after the record date for the determination
of holders entitled to receive such rights, warrants or options. For the
purposes of this clause (3), the number of Class A Shares at any time
outstanding shall not include shares held in the treasury of the Company.
The Company shall not issue any rights, warrants or options in respect of
Class A Shares held in the treasury of the Company.
(4) In case the Company shall issue to an Affiliate Class A Shares
at a net price per share less than the Current Market Price per share (as
determined pursuant to clause (6) below), on the date the Company fixes
the offering price of such additional shares, the Conversion Price shall
be reduced so that it shall equal the price determined by multiplying:
(a) such Conversion Price in effect immediately prior thereto
by a fraction, of which
(b) the numerator shall be (i) the number of Class A Shares
outstanding immediately prior to the issuance of such additional
shares, plus (ii) the number of Class A Shares which the aggregate
offering price of the total number of Class A Shares so offered
would purchase at the Current Market Price, and of which
(c) the denominator shall be the number of Class A Shares that
would be outstanding immediately after the issuance of such
additional shares.
Such adjustment shall become effective immediately after the issuance of
such Class A Shares. An adjustment shall be made successively whenever
such an issuance is made. For the purposes of this clause (4), the number
of Class A Shares at any time outstanding shall not include shares held in
the treasury of the Company. This clause (4) shall not apply to Class A
Shares issued to any Affiliate under bona fide benefits plans adopted by
the Board of Directors for the benefit of the Company's directors,
employees, consultants and advisers and approved by the holders of Class A
Shares if required by law.
(5) In case the Company shall distribute to all or substantially all
holders of Class A Shares documents or
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37
instruments evidencing indebtedness, equity securities (including
equity interests in a Subsidiary) other than Class A Shares, or other
assets (other than ordinary cash dividends out of earnings), or shall
distribute to all or substantially all holders of Class A Shares rights,
warrants or options to subscribe to securities (other than those referred
to in clause (3) above), then in each such case the Company shall pay to
the holder of each Note such holder's pro rata share, on an As Converted
Basis in respect of such Note, of such distributions.
(6) For the purpose of any computation under clause (3) or (4)
above, the "CURRENT MARKET PRICE" per Class A Share on any date of
determination shall be deemed to be the average of the last sale prices of
a Class A Share for the ten consecutive Trading Days selected by the
Company commencing not more than 20 Trading Days before the day (the
"BENCHMARK DATE") which is the earlier of (a) such date of determination
and (b) the day immediately preceding the "ex" date with respect to the
issuance or distribution requiring such computation, and ending not later
than the Benchmark Date. For purposes of this clause (6), the term "'EX'
DATE", when used with respect to any issuance or distribution, means the
first date on which the Class A Shares trade regular way on the principal
national securities exchange on which the Class A Shares are listed or
admitted to trading (or if not so listed or admitted on The Nasdaq Stock
Market or a similar organization if The Nasdaq Stock Market is no longer
reporting trading information) without the right to receive such issuance
or distribution.
(7) In any case in which this Section 11.2 shall require that an
adjustment be made on the day after a record date, the Company may elect
to defer the effectiveness of such adjustment (but in no event until a
date later than the effective time of the event giving rise to such
adjustment), in which case the Company shall, with respect to any Note
converted after such record date and before such adjustment shall have
become effective (a) defer making any cash payment or issuing to the
holder of such Note the number of Class A Shares and other capital stock
of the Company issuable upon such conversion in excess of the number of
Class A Shares and other capital stock of the Company issuable thereupon
only on the basis of the Conversion Price prior to adjustment, and (b) not
later than five Business Days after such adjustment shall have become
effective, pay to such holder the appropriate cash payment and issue to
such holder the additional Class A Shares and other capital stock of the
Company issuable on such conversion.
(8) No adjustment in the Conversion Price shall be required in
respect of any dividend or distribution if holders of the Notes may
participate therein (on a basis and
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38
with notice that the Board of Directors determines in good faith to
be fair and appropriate) and receive the same consideration they would
have received if they had converted the Notes immediately prior to the
record date with respect to such dividend or distribution. In addition, no
adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Conversion Price, provided that any adjustment which by reason of this
clause (8) is not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(9) Except as expressly set forth in this Section 11.2, no adjustment
in the Conversion Price shall be made because the Company issues, in
exchange for cash, property or services, Class A Shares, or any securities
convertible into or exchangeable for Class A Shares, or securities
(including warrants, rights and options) carrying the right to subscribe
for or purchase Class A Shares or such convertible or exchangeable
securities (including Class B Shares).
(10) Whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly give each holder of Notes a notice of such
adjustment accompanied by a copy of a certificate signed by a Senior
Financial Officer setting forth the Conversion Price after such adjustment
and setting forth in reasonable detail the facts requiring such adjustment
and the calculations on which the adjustment is based.
(11) At its option, the Company may make such reduction in the
Conversion Price, in addition to those otherwise required by this Section
11.2, as the Board of Directors deems advisable to avoid or diminish any
income tax to holders of Class A Shares resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes; provided that any such reduction
shall not be effective until written evidence of the action of the Board
of Directors authorizing such reduction shall be filed with the secretary
of the Company and notice thereof shall have been given to each holder of
Notes.
(12) Notwithstanding any other provision of this Section 11.2, no
adjustment to the Conversion Price shall reduce the Conversion Price below
the then par value per share of the Class A Shares, and any such purported
adjustment shall instead reduce the Conversion Price to such par value.
The Company hereby covenants not to take any action (i) to increase the
par value per share of the Class A Shares or (ii) that would or does
result in any adjustment
<PAGE> 43
39
in the Conversion Price that, if made without giving effect to the
previous sentence, would cause the Conversion Price to be less than the
then par value per share of the Class A Shares.
B. If any transaction shall occur, including without limitation (1) any
recapitalization or reclassification of shares of Common Stock (other than a
change in par value, or from no par value to par value, or as a result of a
subdivision or combination of Common Stock), (2) any consolidation, merger or
amalgamation of the Company with or into another person or any merger of another
person into the Company (other than a merger that does not result in a
reclassification, conversion, exchange or cancellation of Common Stock), (3) any
sale or transfer of all or substantially all of the assets of the Company, or
(4) any compulsory share exchange, pursuant to any of which holders of Class A
Shares or Class B Shares shall be entitled to receive other securities, cash or
other property, then appropriate provision satisfactory to the Majority Holders
shall be made so that the holder of each Note then outstanding shall have the
right thereafter to convert such Note only into the kind and amount of the
securities, cash or other property that would have been receivable upon such
recapitalization, reclassification, consolidation, merger, amalgamation, sale,
transfer, or share exchange by a holder of the number of Class A Shares issuable
upon conversion of such Note immediately prior to such recapitalization,
reclassification, consolidation, merger, amalgamation, sale, transfer or share
exchange, after giving effect to any adjustment in the Conversion Price in
accordance with this Section 11.2, assuming such holder of Class A Shares is not
a company formed by such consolidation or amalgamation or resulting from such
merger or that acquires such assets or that acquires the Company's shares, as
the case may be (the "CONSTITUENT PERSON"), and the Company shall not enter into
any such consolidation, merger, amalgamation or sale, unless the Constituent
Person shall make provisions in its certificate or articles of incorporation or
other constituent document to establish such right. Such certificate or articles
of incorporation or other constituent document shall provide for adjustments
that, for events subsequent to the effective date of such certificate or
articles of incorporation or other constituent documents, shall be as nearly
equivalent as may be practicable to the relevant adjustments provided for in
this Section 11.2. Prior to the occurrence of any such transaction, the Company
may prepay the Notes pursuant to Section 5.1, if such prepayment is then
permitted by said Section.
C. Interest shall cease to accrue on the Notes surrendered for conversion
into Class A Shares pursuant to Section 11.1. No fractional Class A Shares shall
be issued upon conversion of any Note. In lieu of any fractional shares to which
the holder of any Note would otherwise be entitled, the Company shall, after
aggregation of all fractional share interests held by each holder, pay cash
equal to such remaining
<PAGE> 44
40
fractional interest multiplied by the fair market value (determined in good
faith by the Board of Directors and described in a resolution of the Board of
Directors) of such share at the time of conversion.
D. Before any holder of a Note shall be entitled to convert the same into
Class A Shares pursuant to Section 11.1 and to receive certificates therefor,
such holder shall surrender such Note to be converted at the office of the
Company where the Note Register is maintained pursuant to Section 13 or at the
place of payment named in such Note, and shall give written notice to the
Company at such office or place of payment that such holder elects to convert
the same. Such conversion pursuant to Section 11.1 shall be deemed to have been
made immediately prior to the close of business on the date of such surrender
and the person or persons entitled to receive the Class A Shares issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such Class A Shares on such date. The Company shall, within five
Business Days after such surrender, issue and deliver at such office or place of
payment to the holder of such Note (or to any other person specified in the
notice delivered by such holder), a certificate or certificates for the number
of Class A Shares to which such holder shall be entitled as aforesaid and a
check payable to such holder for any cash amounts payable as the result of a
conversion into fractional Class A Shares. In case any Note shall be surrendered
for conversion of only a part of the unpaid principal amount thereof, the
Company shall deliver within five Business Days at such office or place of
payment a new Note or Notes, as may be requested by such holder and payable to
such holder, in the same aggregate unpaid principal amount as the unpaid
principal amount of the Note so surrendered which is not being converted.
Notwithstanding the foregoing, the Company shall not be obligated to issue
certificates evidencing the Class A Shares issuable upon conversion of any Notes
unless such Note is either delivered to the Company or the Company shall have
received evidence pursuant to Section 14 that such Note has been lost, stolen,
destroyed or mutilated and an indemnity satisfactory to the Company pursuant to
said Section. The issuance of certificates of Class A Shares issuable upon
conversion of Notes shall be made without charge to the converting holder for
any tax imposed in respect of the issuance thereof, provided that the Company
shall not be required to pay any tax which may be payable with respect to any
transfer involved in the issue and delivery of any certificate in a name other
than that of the holder of the Notes being converted, and provided further that
the Company in no event shall be required to pay any income taxes which may be
incurred by any holder upon such conversion or transfer.
E. The Company will not, through any reorganization, transfer of assets,
consolidation, merger, amalgamation, dissolution, issue or sale of securities or
any other action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company,
<PAGE> 45
41
but will at all times in good faith assist in the carrying out of all of the
provisions of this Section 11 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of the Notes against impairment.
F. The Company will at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Class A Shares, for the
purpose of effecting the conversion of Notes, the full number of Class A Shares
then issuable upon the conversion of all outstanding Notes. The Company
covenants that all Class A Shares issued upon conversion of Notes will upon
issue be fully paid and nonassessable and, except as provided in Subsection D
above, the Company will pay all taxes and charges with respect to the issue
thereof.
12. SUBORDINATION OF NOTES.
12.1. GENERAL.
Notwithstanding any provision of this Agreement or the Notes to the
contrary, payments of the principal of and premium, if any, and interest on the
Notes shall be subordinate and junior in right of payment to the prior payment
in full of all Senior Indebtedness to the extent and in the manner provided in
this Section.
12.2. DISTRIBUTION ON DISSOLUTION, LIQUIDATION AND REORGANIZATION;
SUBROGATION.
Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization of the Company, whether in bankruptcy,
insolvency, reorganization or receivership proceeding or upon an assignment for
the benefit of creditors or any other marshalling of the assets and liabilities
of the Company or otherwise (subject to the power of a court of competent
jurisdiction to make other equitable provision reflecting the rights conferred
in this Section 12 upon the Senior Indebtedness and the holders thereof, with
respect to the Notes and the holders thereof, by a lawful plan of reorganization
under applicable bankruptcy law),
A. the holders of all Senior Indebtedness shall be entitled to
receive payment in full of the principal thereof, premium, if any, and
the interest due thereon before the holders of the Notes are entitled to
receive any payment upon the principal of or premium, if any, or interest
on the Notes;
B. any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to which the
holders of the Notes would be entitled except for the provisions of this
Section 12 shall be paid by the liquidating trustee or agent or other
person
<PAGE> 46
42
making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly to
the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Indebtedness may have
been issued, ratably according to the aggregate amounts remaining unpaid
on account of the principal of, premium, if any, and interest on the
Senior Indebtedness held or represented by each, to the extent necessary
to make payments in full of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness; and
C. in the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, shall be received by the holders of the
Notes before all Senior Indebtedness is paid in full, such payment or
distribution shall be held in trust for and paid over to the holders of
such Senior Indebtedness, or their representative or representatives or to
the trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness may have been issued, ratably
as aforesaid, for application to the payment of all Senior Indebtedness
remaining unpaid until all such Senior Indebtedness shall have been paid
in full, after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the holders of
the Notes shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distribution of cash, property or securities
of the Company applicable to Senior Indebtedness until the principal of,
premium, if any, and interest on the Notes shall be paid in full and no such
payments or distributions to the holders of the Notes of cash, property or
securities otherwise distributable to the holders of Senior Indebtedness shall,
as between the Company, its creditors other than the holders of Senior
Indebtedness and the holders of the Notes, be deemed to be a payment by the
Company to or on account of the Notes. It is understood that the provisions of
this Section 12 are and are intended solely for the purpose of defining the
relative rights of the holders of the Notes, on the one hand, and the holders of
Senior Indebtedness on the other hand. Nothing contained in this Section 12 or
elsewhere in this Agreement or in the Notes is intended to or shall impair, as
between the Company, its creditors other than the holders of Senior Indebtedness
and the holders of the Notes, as the case may be, the obligations of the
Company, which are unconditional and absolute, to pay to the holders of the
Notes principal of, premium, if any, and interest on the Notes as and when the
same shall become due and payable in accordance with their terms, or to affect
the relative rights of the holders of the Notes and
<PAGE> 47
43
creditors of the Company other than the holders of Senior Indebtedness, nor
shall anything herein or in the Notes prevent holders of any Note from
exercising all remedies otherwise permitted by applicable law upon default under
this Agreement, subject to the rights, if any, under this Section 12 of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
If any holder of Notes does not file a proper claim or proof of debt in the
form required in any proceeding referred to above prior to 30 days before the
expiration of the time to file such claim in such proceeding, then the holder of
any Senior Indebtedness is hereby authorized, and has the right, to file an
appropriate claim or claims for or on behalf of such holder of Notes.
12.3. NO PAYMENT IN EVENT OF DEFAULT ON SENIOR INDEBTEDNESS.
In the event that any Payment Default shall have occurred and be
continuing, then no payment on account of any principal, premium (if any),
interest, or prepayment of the Notes shall be made unless and until such Payment
Default shall have been cured or waived or shall have ceased to exist or all
amounts then due and payable in respect of Senior Indebtedness shall have been
paid in full, or provision shall have been made for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior
Indebtedness.
In the event that any Non-Payment Default shall have occurred with respect
to any Senior Indebtedness and be continuing, then, upon the receipt by the
holder of the Notes of written notice of such Non-Payment Default from a holder
of such Senior Indebtedness or a representative thereof, no payment on account
of any principal, premium (if any) or interest in respect of the Notes shall be
made during the period (the "PAYMENT BLOCKAGE PERIOD") commencing on the date of
such receipt of such written notice and ending on the earlier of (i) the date on
which such Non-Payment Default shall have been cured or waived or shall have
ceased to exist or any acceleration of the Senior Indebtedness to which such
Non-Payment Default relates shall have been rescinded or annulled or such Senior
Indebtedness shall have been discharged and (ii) the 180th day after the date of
such receipt of such written notice. During any 360-day period the aggregate of
all Payment Blockage Periods shall not exceed 180 days and there shall be a
period of at least 180 consecutive days in each 360-day period when no Payment
Blockage Period is in effect. For all purposes of this paragraph, no Payment
Default or Non-Payment Default that existed or was continuing on the date of
commencement of any Payment Blockage Period shall be, or be made, the basis for
the commencement of a subsequent Payment Blockage Period by holders of Senior
Indebtedness or their representatives unless such Payment Default or Non-Payment
<PAGE> 48
44
Default shall have been cured for a period of not less than 60 consecutive days.
If notwithstanding the foregoing the Company shall make any payment to the
holder of any Note prohibited by the foregoing provisions of this Section, and
if such fact shall, at or prior to the time of such payment, be actually known
to such holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with respect
to which Section 12.2 would be applied.
12.4. PAYMENTS PERMITTED.
Nothing contained in this Agreement or in any of the Notes shall affect
the obligation of the Company to make, or prevent the Company from making, at
any time, except as provided in Sections 12.2 and 12.3, payments of principal
of, premium, if any, or interest on the Notes.
12.5. MODIFICATION OF TERMS OF SENIOR INDEBTEDNESS.
Any renewal or extension of the time of payment of any Senior Indebtedness
or the exercise by the holders of Senior Indebtedness of any of their rights
under any instrument creating or evidencing Senior Indebtedness, including
without limitation the waiver of defaults thereunder, may be made or done all
without notice to or assent from the holders of the Notes.
No compromise, alteration, amendment, modification, extension, renewal or
other change of, or waiver, consent or other action in respect of, any liability
or obligation under or in respect of, or of any of the terms, covenants or
conditions of any indenture or other instrument under which any Senior
Indebtedness or of such Senior Indebtedness, whether or not such release is in
accordance with the provisions of any applicable document, shall in any way
alter or affect any of the provisions of this Section 12 or of the Notes
relating to the subordination thereof.
13. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; RESTRICTIVE LEGENDS
TRANSFER RESTRICTIONS.
The Company will keep at the Company's principal office, or at such other
office or agency in the United States as the Company may from time to time
designate in writing to the holders of the Notes, a register (the "NOTE
REGISTER") in which, subject to such reasonable regulations as it may prescribe,
but at its expense (other than transfer taxes, if any), it will provide for the
registration and transfer of Notes.
Whenever a Note shall be surrendered either at such office of the Company
or at the place of payment named in such
<PAGE> 49
45
Note, for transfer or exchange, within five Business Days thereafter the Company
will execute and deliver in exchange therefor a new Note or Notes, as may be
requested by such holder, in the aggregate unpaid principal amount as the series
and unpaid principal amount of the Note so surrendered. Each such new Note shall
be payable to such Person as such holder may request. Each Note presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or such holder's attorney duly authorized in writing. Any
Note issued in exchange for any other Note or upon transfer thereof shall carry
the rights to unpaid interest and interest to accrue which were carried by the
Note so exchanged or transferred, and neither gain nor loss of interest shall
result from any such transfer or exchange. Any transfer tax relating to
such transaction shall be paid by the holder requesting the exchange.
The Company and any agent of the Company may deem and treat the Person in
whose name any Note is registered as the owner and holder of such Note for the
purpose of receiving payment of the principal of and premium, if any, and
interest on such Note and for all other purposes whatsoever, whether or not such
Note be overdue and the Company shall not be affected by notice to the contrary.
The certificates evidencing the Notes and any Class A Shares issuable upon
conversion of the Notes shall bear at the time of issuance a legend in
substantially the following form:
"This security has not been registered under the Securities Act of
1933, as amended, or applicable state securities laws, and this
security may not be sold, transferred or otherwise disposed of in
the absence of such registration or an exemption therefrom under
said Act and laws and the respective rules and regulations
thereunder. The transferability of this security is also subject to
restrictions contained in a Note Purchase Agreement and a
Registration Rights Agreement which agreements the Company will
furnish to the holder of this security upon request."
14. LOST, ETC., NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Note, and (in case of loss,
theft or destruction) of indemnity satisfactory to it, and upon surrender and
cancellation of such Note, if mutilated, within five Business Days thereafter
the Company will deliver in lieu of such Note a new Note in a like unpaid
principal amount, dated as of the date to which interest has been paid thereon
or dated the date of the lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon. In the case of you, or any other
<PAGE> 50
46
institutional investor holder of a Note having (individually or as a member of
an affiliated group) at least $1,000,000 in total assets, your or such holder's
unsecured agreement of indemnity shall be deemed satisfactory to the Company.
15. AMENDMENT AND WAIVER.
A. Any provision of this Agreement or the other Transaction Documents may,
with the consent of the Company, be amended or waived (either generally or in a
particular instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the Required Holders,
provided that
(1) no such amendment or waiver shall
(a) change the rate or time of payment of interest on any of
the Notes, change the number or the method of calculating the number
of Class A Shares that may be purchased upon conversion of any Note
or the Conversion Price in respect of such Class A Shares, or modify
Section 16, without the consent of the holder of each Note so
affected,
(b) modify any of the provisions of this Agreement with respect
to the payment or prepayment or purchase of Notes, or change the
percentage of the principal amount of the Notes the holders of which
are required with respect to any such amendment or to effectuate any
such waiver, or to accelerate any Note or Notes, without the consent
of the holders of all of the Notes then outstanding, or
(c) be effective prior to the Closing Date without your
consent, and
(2) no such waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon.
B. Any amendment or waiver pursuant to Subsection A above shall apply
equally to all of the holders of the Notes and shall be binding upon them, upon
each future holder of any such Note and upon the Company, in each case whether
or not a notation thereof shall have been placed on any Note.
C. The Company will not solicit, request or negotiate for or with respect
to any proposed waiver or amendment of any of the provisions of this Agreement
or the other Transaction Documents unless each holder of a Note affected thereby
shall be informed thereof by the Company and shall be afforded the opportunity
of considering the same and shall be supplied by the Company with sufficient
information to enable it to make an informed decision with respect thereto.
Executed or true and
<PAGE> 51
47
correct copies of any amendment or waiver effected pursuant to the provisions of
this Section shall be delivered by the Company to each holder of Notes forthwith
following the date on which the same shall have become effective. Neither the
Company nor any of its Affiliates will directly or indirectly pay or cause to be
paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, to any holder of a Note as consideration for or as an
inducement to the entering into by such holder of any such amendment or waiver
unless such remuneration is concurrently paid ratably to the holders of all of
the Notes then outstanding.
D. For purposes of determining whether the holders of outstanding Notes of
the requisite percentage of unpaid principal amount at any time have taken any
action authorized by this Section or otherwise by this Agreement, any Notes
owned by the Company, any Subsidiary or any Affiliate of the Company shall be
deemed not outstanding.
16. HOME OFFICE PAYMENT.
Notwithstanding anything to the contrary in this Agreement or the
Transaction Documents, so long as you or any nominee designated by you shall be
the holder of any Note, the Company shall pay all amounts which become due and
payable on such Note by wire or electronic funds transfer of immediately
available funds to you at your address set forth in Schedule I on the date any
such amounts become due, or at such other place in the United States and in such
other manner as you may designate by notice to the Company, without presentation
or surrender of such Note. You agree that prior to the sale, transfer or other
disposition of any Note, you will make notation thereon of the portion of the
principal amount prepaid and the date to which interest has been paid thereon,
or surrender the same in exchange for a Note or Notes of the same series
aggregating the same principal amount as the unpaid principal amount of the Note
so surrendered. The Company agrees that the provisions of this Section shall
inure to the benefit of any other institutional investor holder of a Note (or
nominee thereof) who shall have agreed to comply with the requirements of this
Section.
17. LIABILITIES OF THE PURCHASER.
Neither this Agreement nor any disposition of any of the Notes shall be
deemed to create any liability or obligation of you or any other holder of any
of the Notes to enforce any provision hereof or of any of the other Transaction
Documents for the benefit or on behalf of any other Person who may be the holder
of any of the Notes.
18. CERTAIN TAXES.
The Company agrees to pay all stamp, documentary or similar taxes which may
be payable in respect of the execution
<PAGE> 52
48
and delivery of this Agreement or the other Transaction Documents (but not the
transfer of any Note) or of any amendment of, or waiver or consent under or with
respect to, this Agreement or any of the other Transaction Documents and will
save you and all subsequent holders harmless against any loss or liability
resulting from nonpayment or delay in payment of any such tax. The obligations
of the Company under this Section shall survive the payment or conversion of the
Notes.
19. MISCELLANEOUS.
19.1. EXPENSES.
The Company agrees, whether or not the transactions hereby contemplated
shall be consummated, to pay all reasonable expenses incident to such
transactions (including all document production costs and other expenses, the
fees and disbursements of your special counsel for their services with relation
to such transactions the expenses of obtaining a private placement number for
the Notes and all out-of-pocket expenses in connection with the shipping to and
from your office or the office of your nominee of the Notes and upon any
exchange or substitution pursuant to the provisions of this Agreement or the
other Transaction Documents), and to reimburse you for any reasonable
out-of-pocket expenses in connection therewith. The Company also agrees to pay
all reasonable expenses incurred by you (including reasonable counsel and
financial adviser fees) in connection with the enforcement and collection of the
Notes, the enforcement of this Agreement or the other Transaction Documents,
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement or the transactions contemplated
hereby or by reason of any holder's having acquired any Note, including without
limitation costs and expenses incurred in any bankruptcy case, and in connection
with any amendment or requested amendment of, or waiver or consent or requested
waiver or consent under or with respect to, this Agreement or any of the other
Transaction Documents, whether or not the same shall become effective. The
obligations of the Company under this Section and Section 10.2 shall survive the
payment or conversion of the Notes.
In furtherance of the foregoing, on the Closing Date the Company will pay
or cause to be paid the reasonable fees and disbursements of your special
counsel which are reflected in the statement of such special counsel submitted
to the Company on or prior to the Closing Date. The Company will also pay,
promptly upon receipt of supplemental statements therefor, additional fees, if
any, and disbursements of such special counsel in connection with the
transactions hereby contemplated (including disbursements unposted as of the
Closing Date).
<PAGE> 53
49
19.2. RELIANCE ON AND SURVIVAL OF REPRESENTATIONS.
All agreements, representations and warranties of the Company or any
Subsidiary contained herein and in any certificates or other instruments
delivered pursuant to this Agreement shall (A) be deemed to have been relied
upon by you, notwithstanding any investigation heretofore or hereafter made by
you or on your behalf, and (B) shall survive the execution and delivery of this
Agreement and the delivery of the Notes to you, and shall continue in effect so
long as any Note is outstanding and thereafter as provided in Sections 18, 19.1
and 19.6.
19.3. SUCCESSORS AND ASSIGNS.
This Agreement shall bind and inure to the benefit of and be enforceable by
the Company and its permitted successors and assigns hereunder, you and your
successors and assigns, and, in addition, shall inure to the benefit of and be
enforceable by all holders from time to time of the Notes, provided that the
benefits of Sections 6, 7, 14 (as to satisfactory indemnity) and 16 shall be
limited as provided therein.
19.4. COMMUNICATIONS.
Except as otherwise specifically provided herein, all notices and other
communications provided for in this Agreement shall be in writing and shall be
sent by confirmed facsimile transmission (hard copy to be sent by overnight mail
on the date of such transmission) or delivered by hand or sent by a reputable
overnight courier service prepaid (with confirmation of receipt)
A. if to the Company, at the address set forth at the beginning of
this Agreement, to the attention of Sanford Miller, or at such other
address as the Company may hereafter designate by notice to you and to
each other holder of a Note at the time outstanding,
B. if to you, at your address as set forth in Schedule I or at such
other address as you may hereafter designate by notice to the Company, or
C. if to any other holder of a Note, at the address of such holder
as it appears on the Note Register.
Any notice or other communication herein provided to be given to the
holders of all outstanding Notes shall be deemed to have been duly given if sent
as aforesaid to each of the registered holders of the Notes at the time
outstanding at the address for such purpose of such holder as it appears on
Schedule I or the Note Register, as the case may be.
<PAGE> 54
50
19.5. CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL.
A. The Company irrevocably submits to the non-exclusive in personam
jurisdiction of any New York State or federal court sitting in the Borough of
Manhattan, The City of New York, over any suit, action or proceeding arising out
of or relating to this Agreement or the other Transaction Documents. To the
fullest extent permitted by applicable law, the Company irrevocably waives and
agrees not to assert, by way of motion, as a defense or otherwise, any claim
that it is not subject to the in personam jurisdiction of any such court, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
B. The Company consents to process being served in any suit, action or
proceeding of the nature referred to in Subsection A above by mailing a copy
thereof by registered or certified mail, postage prepaid, return receipt
requested, to the Company at its address specified in Section 19.4 or at such
other address of which you shall then have been notified pursuant to said
Section. The Company agrees that such service upon receipt (1) shall be deemed
in every respect effective service of process upon it in any such suit, action
or proceeding and (2) shall, to the fullest extent permitted by applicable law,
be taken and held to be valid personal service upon and personal delivery to the
Company. Notices hereunder shall be conclusively presumed received as evidenced
by a delivery receipt furnished by the United States Postal Service or any
reputable commercial delivery service.
C. Nothing in this Section 19.5 shall affect the right of any holder of
Notes to serve process in any manner permitted by law, or limit any right that
the holders of any of the Notes may have to bring proceedings against the
Company in the courts of any appropriate jurisdiction or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
D. THE COMPANY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH
RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN
CONNECTION HEREWITH OR THEREWITH.
19.6. INDEMNIFICATION.
The Company agrees, to the fullest extent permitted by applicable law, to
indemnify, exonerate and hold you and each of your officers, directors,
employees and agents (collectively the "INDEMNITEES" and individually an
"INDEMNITEE") free and harmless from and against any and all actions, causes of
action, suits, losses, liabilities and damages, and expenses in connection
therewith, including without limitation reasonable counsel fees
<PAGE> 55
51
and disbursements (collectively the "INDEMNIFIED LIABILITIES") incurred by the
Indemnitees or any of them as a result of, or arising out of, or relating to,
any transaction financed or to be financed in whole or in part directly or
indirectly with proceeds from the sale of any of the Notes or the execution,
delivery, performance or enforcement of this Agreement, any other Transaction
Document or any instrument contemplated hereby by any of the Indemnitees, except
as to any Indemnitee for any such Indemnified Liabilities arising on account of
such Indemnitee's gross negligence or willful misconduct; and if and to the
extent the foregoing undertaking may be unenforceable for any reason, the
Company agrees to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. The obligations of the Company under this Section shall survive payment or
conversion of the Notes.
19.7. GOVERNING LAW.
This Agreement and the Notes shall be governed by and construed in
accordance with the laws of the State of New York.
19.8. HEADINGS.
The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect any of the terms hereof.
19.9. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same instrument.
<PAGE> 56
52
If you are in agreement with the foregoing, please sign the form of
acceptance in the space below provided, whereupon this Agreement shall become a
binding agreement between you and the Company.
Very truly yours,
TEAM RENTAL GROUP, INC.
By SANFORD MILLER
Chief Executive Officer
The foregoing Agreement is
hereby accepted as of the
date first above written.
[The forms of signatures by each of the Purchasers, as they appear on the
respective Note Purchase Agreements, are set forth below.]
METROPOLITAN LIFE INSURANCE COMPANY
By MICHAEL J. MAZZOLA
Assistant Vice President
By THOMAS C. HOI
Associate General Counsel
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By JOHN P. SHEA
Senior Investment Officer
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
By JOHN P. SHEA
Vice President - Investments
<PAGE> 57
SIGNATURE 1A (CAYMAN), LTD.
By JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY, PORTFOLIO ADVISER
By GEORGE H. BRAUN
Vice President
NEW YORK LIFE INSURANCE COMPANY
By STEVEN M. BENEVENTO
Assistant Vice President
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By JOHN B. JOYCE
Managing Director
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
By MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,
ITS INVESTMENT MANAGER
By JOHN B. JOYCE
Managing Director
MASSMUTUAL PARTICIPATION INVESTORS
By JOHN B. JOYCE
Vice President
MASSMUTUAL CORPORATE INVESTORS
By JOHN B. JOYCE
Vice President
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF TEAM RENTAL GROUP, INC.
<TABLE>
<CAPTION>
State of Names Under Which
Subsidiary Incorporation It Does Business
- ------------------------------------ ------------- ----------------
<S> <C> <C>
Arizona Rent-A-Car Systems, Inc. Delaware Budget Rent a Car of Arizona
BRAC SOCAL Funding Corporation (1) Delaware
Capital City Leasing, Inc. Florida Budget Rent a Car of Richmond
Virginia
Dayton Auto Lease Company, Inc. Ohio
Don Kremer, Inc. (2) Ohio Budget Rent a Car of Dayton
Fort Wayne Rental Group, Inc. (3) Delaware
IN Motors VI, LLC(4) Indiana
Lee-Al, Inc. (5) California Budget Rent a Car of San Diego
MacKay Car & Truck Rentals, Inc. North Budget Rent a Car of North
Carolina Carolina
TCS Properties, LLC Indiana
Team Car Sales, Inc. Indiana
Metro West, Inc. Delaware
Team Car Sales of Charlotte, Inc. Delaware
Team Car Sales of Dayton, Inc. Delaware
Team Car Sales of Philadelphia, Inc. Delaware
Team Car Sales of Richmond, Inc. Delaware
Team Car Sales of San Diego, Inc. Delaware
Team Car Sales of Southern California, Delaware
Inc.
Team Fleet Financing Corporation Delaware
Team Fleet Realty Services, Inc. Delaware
Team Fleet Services Corporation Delaware
Team Rental of Cincinnati, Inc. Delaware Budget Rent a Car of Cincinnati
Team Rental of Connecticut, Inc. Delaware Budget Rent a Car of Connecticut;
Budget Rent a Car of Hartford
Team Rental of Ft. Wayne, Inc. Delaware Budget Rent a Car of Ft. Wayne
Team Rental of Philadelphia, Inc. Delaware Budget Rent a Car of Philadelphia
Team Rental of Pittsburgh, Inc. Delaware Budget Rent a Car of Pittsburgh
Team Rental of Rochester, Inc. Delaware Budget Rent a Car of Rochester, NY
Team Rental of Southern California, Inc. Delaware Budget Rent a Car of Southern
California
Tranex Rentals of New York, Inc. New York Budget Rent a Car of Albany, NY
ValCar Rental Car Sales, Inc. Indiana
</TABLE>
20
<PAGE> 2
<TABLE>
<S> <C> <C>
VPSI, Inc. Delaware Van Pool Services, Inc.
Westeam Enterprise, Inc. California Budget Car and Truck Rentals of
San Deigo County
</TABLE>
21
<PAGE> 1
[LOGO] KPMG Peat Marwick LLP
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of
Budget Rent a Car Corporation:
We consent to the inclusion of our report herein and to the reference to our
firm under the heading "Experts" in the prospectus of Team Rental Group, Inc.
dated February 12, 1997.
KPMG Peat Marwick LLP
February 11, 1997
Chicago, Illinois
