<PAGE> 1
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
FORM 10-Q
<TABLE>
<C> <S>
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
COMMISSION FILE NO.: 0-23962
BUDGET GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 59-3227576
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
125 BASIN STREET, SUITE 210, DAYTONA BEACH, FL 32114
(Address of principal executive offices)
(904) 238-7035
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No
35,956,909 shares of common stock were outstanding as of August 10, 1998,
comprised of 34,020,309 shares of the registrant's Class A common stock, par
value $0.01, and 1,936,600 shares of the registrant's Class B common stock, par
value $0.01.
The Exhibit Index, filed as a part of this report, appears on page 17.
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997..................... 3
Consolidated Statements of Operations for the Three and
Six-Month Periods Ended June 30, 1998 and 1997
(unaudited)........................................... 4
Consolidated Statement of Changes in Stockholders'
Equity for the Six-Month Period Ended June 30, 1998
(unaudited)........................................... 5
Consolidated Statements of Cash Flows for the Six-Month
Periods Ended June 30, 1998 and 1997 (unaudited)...... 6
Notes to Unaudited Consolidated Financial Statements... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 11
Item 3. Quantitative and Qualitative Disclosures about
Market Risk............................................... 15
PART II. Other Information
Item 1. Legal Proceedings................................... 15
Item 2. Changes in Securities and Use of Proceeds........... 15
Item 3. Default Upon Senior Securities...................... 16
Item 4. Submission of Matters to a Vote of Security
Holders................................................... 16
Item 5. Other Information................................... 17
Item 6. Exhibits and Reports on Form 8-K.................... 17
Signature Page.............................................. 19
</TABLE>
2
<PAGE> 3
PART I. -- FINANCIAL STATEMENTS
>ITEM 1. CONSOLIDATED BALANCE SHEET
BUDGET GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 123,922 $ 161,455
Restricted cash............................................. 458,848 282,731
Trade and vehicle receivables, net.......................... 308,196 334,018
Vehicle inventory........................................... 75,419 46,944
Revenue earning vehicles, net............................... 3,247,042 2,093,304
Property and equipment, net................................. 203,294 147,547
Prepaid expenses and other assets........................... 152,212 91,681
Intangibles, including goodwill, net........................ 812,336 532,228
---------- ----------
Total assets...................................... $5,381,269 $3,689,908
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Notes payable............................................... $3,773,429 $2,686,199
Accounts payable, accrued and other liabilities............. 581,597 434,291
Deferred income taxes....................................... 84,556 110,479
---------- ----------
Total liabilities................................. 4,439,582 3,230,969
---------- ----------
COMPANY OBLIGATED MANDATORILY REDEEMABLE SECURITIES OF
SUBSIDIARY................................................ 291,010 --
STOCKHOLDERS' EQUITY
Common stock................................................ 359 274
Additional paid-in-capital.................................. 663,839 425,222
Foreign currency translation adjustment..................... (5,475) (2,477)
Retained earnings (deficit)................................. (7,716) 36,250
Treasury stock.............................................. (330) (330)
---------- ----------
Total stockholders' equity........................ 650,677 458,939
---------- ----------
Total liabilities and stockholders' equity........ $5,381,269 $3,689,908
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE> 4
BUDGET GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE-MONTH FOR THE SIX-MONTH
PERIODS ENDED PERIODS ENDED
JUNE 30, JUNE 30,
------------------- ---------------------
1998 1997 1998 1997
-------- -------- ---------- --------
<S> <C> <C> <C> <C>
OPERATING REVENUE:
Vehicle rental.......................................... $450,141 $251,678 $ 790,096 $313,700
Retail vehicle sales.................................... 140,746 67,292 238,037 121,027
Royalty fees and other.................................. 23,465 13,174 42,204 13,755
-------- -------- ---------- --------
Total operating revenue............................ 614,352 332,144 1,070,337 448,482
OPERATING EXPENSES:
Direct vehicle and operating............................ 75,626 32,489 122,500 43,138
Depreciation -- vehicle................................. 114,746 71,331 208,842 90,683
Depreciation -- non-vehicle............................. 5,444 4,914 9,873 5,805
Cost of retail vehicle sales............................ 125,053 57,667 211,195 103,270
Advertising, promotion and selling...................... 62,512 29,176 98,135 36,345
Occupancy............................................... 33,569 24,699 65,815 30,913
Personnel............................................... 107,133 59,900 201,923 77,248
General and administrative.............................. 24,375 15,702 46,947 20,265
Merger expenses -- pooling.............................. -- -- 1,595 --
Intangible amortization................................. 5,044 2,429 8,483 2,975
-------- -------- ---------- --------
Total operating expenses........................... 553,502 298,307 975,308 410,642
-------- -------- ---------- --------
Operating income............................................ 60,850 33,837 95,029 37,840
-------- -------- ---------- --------
Other (income) expense:
Vehicle interest............................................ 38,837 22,867 73,258 31,302
Other interest, net......................................... 6,543 4,571 14,993 5,378
Interest income -- restricted cash.......................... (1,219) (1,089) (4,210) (1,812)
Debt extinguishment costs................................... 9,454 -- 9,454 --
-------- -------- ---------- --------
Total other (income) expense................................ 53,615 26,349 93,495 34,868
INCOME BEFORE INCOME TAXES.................................. 7,235 7,488 1,534 2,972
Provision for income taxes.................................. 1,833 2,925 (447) 1,710
Distributions on Trust preferred securities................. 651 -- 651 --
-------- -------- ---------- --------
INCOME BEFORE EXTRAORDINARY ITEM............................ 4,751 4,563 1,330 1,262
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT (Net of
income taxes of $26,602).................................. (45,296) -- (45,296) --
-------- -------- ---------- --------
NET INCOME (LOSS)........................................... $(40,545) $ 4,563 $ (43,966) $ 1,262
======== ======== ========== ========
NET INCOME (LOSS) PER SHARE:
BASIC: Income before extraordinary item................. $ 0.16 $ 0.24 $ 0.05 $ 0.08
======== ======== ========== ========
Extraordinary item................................. $ (1.54) $ -- $ (1.61) $ --
======== ======== ========== ========
Net income (loss).................................. $ (1.37) $ 0.24 $ (1.56) $ 0.08
======== ======== ========== ========
DILUTED: Income before extraordinary item............... $ 0.16 $ 0.20 $ 0.05 $ 0.07
======== ======== ========== ========
Extraordinary item................................. $ (1.50) $ -- $ (1.57) $ --
======== ======== ========== ========
Net income (loss).................................. $ (1.34) $ 0.20 $ (1.52) $ 0.07
======== ======== ========== ========
Weighted average number of shares outstanding:
Basic.............................................. 29,499 18,765 28,134 15,836
Diluted............................................ 30,243 22,596 28,963 17,931
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 5
BUDGET GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1998
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY TOTAL
COMMON PAID-IN TRANSLATION RETAINED TREASURY STOCKHOLDERS'
STOCK CAPITAL ADJUSTMENT EARNINGS STOCK EQUITY
------ ---------- ----------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997........ $274 $425,222 $(2,477) $36,250 $(330) $458,939
Net proceeds from stock options..... 3 1,648 1,651
Foreign currency translation........ (2,998) (2,998)
Conversion of subordinated notes.... 43 88,811 88,854
Shares issued in acquisition of
businesses........................ 39 148,158 148,197
Net loss............................ (43,966) (43,966)
---- -------- ------- ------- ----- --------
Balance at June 30, 1998............ $359 $663,839 $(5,475) $(7,716) $(330) $650,677
==== ======== ======= ======= ===== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 6
BUDGET GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX-MONTH PERIODS
ENDED JUNE 30,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ (43,966) $ 1,262
----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary item.......................................... 71,898 --
Depreciation and amortization............................... 227,198 99,423
Deferred income taxes....................................... (25,923) 2,198
Non-cash debt extinguishment costs.......................... 8,854 --
Changes in operating assets and liabilities, net of effects
from acquisitions:
Trade and vehicle receivables, net........................ 52,739 (9,991)
Vehicle inventory......................................... (7,916) (1,746)
Prepaid expenses and other assets......................... (45,260) (14,069)
Accounts payable, accrued and other liabilities........... 20,423 27,134
----------- -----------
Total adjustments................................. 302,013 102,949
----------- -----------
Net cash provided by operating activities......... 258,047 104,211
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in restricted cash balance........................... (167,467) 84,690
Proceeds from sale of revenue earning vehicles.............. 1,241,763 505,913
Purchases of revenue earning vehicles....................... (2,076,968) (1,042,658)
Proceeds from the sale of property and equipment............ 12,115 6,255
Purchases of property and equipment......................... (65,081) (7,732)
Payment for acquisitions, net of cash acquired.............. (149,411) (142,014)
----------- -----------
Net cash used in investing activities............. (1,205,049) (595,546)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from equity transactions, net...................... 1,651 175,462
Net increase in vehicle obligations......................... 790,572 257,455
Net increase in commercial paper............................ 14,313 289,912
Proceeds from other notes payable........................... 16,821 83,839
Principal payments on other notes payable................... (14,303) (179,486)
Proceeds from issuance of mandatorily redeemable securities
of subsidiary, net........................................ 291,000 --
Early redemption of notes payable........................... (190,667) --
----------- -----------
Net cash provided by financing activities......... 909,387 627,182
----------- -----------
Effect of exchange rate changes on cash..................... 82 (53)
Net increase (decrease) in cash and cash equivalents........ (37,533) 135,794
Cash and cash equivalents, beginning of period.............. 161,455 54,009
----------- -----------
Cash and cash equivalents, end of period.................... $ 123,922 $ 189,803
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE> 7
BUDGET GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Budget
Group, Inc., (the "Company"), have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The Company
believes that the accompanying consolidated financial statements contain all
adjustments (consisting of normal, recurring adjustments) that, 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.
It is suggested that these consolidated financial statements be read in
conjunction with the financial statements and the notes thereto contained in the
Company's Current Report on Form 8-K filed on and dated July 2, 1998. Operating
results for the interim periods are not necessarily indicative of the results
that may be expected for the full year ending December 31, 1998.
Certain amounts in the 1997 financial statements have been reclassified to
conform with the current year presentation.
The Company is engaged in the business of the daily rental of vehicles,
including cars, trucks, passenger vans and recreational vehicles (through both
owned and franchised operations) and the sale of new and late model used
vehicles including recreational vehicles. On April 29, 1997, pursuant to stock
purchase agreements entered into on January 13, 1997, the Company completed its
acquisition of Budget Rent a Car Corporation ("BRACC") in a purchase transaction
and changed its name (formerly Team Rental Group, Inc.) to Budget Group, Inc.
Prior to the acquisition (the "BRACC Acquisition"), the Company was the largest
United States franchisee of BRACC. On January 28, 1998, the Company completed
its acquisition of Cruise America, Inc. ("Cruise") in a stock-for-stock merger
accounted for as a pooling of interests. In connection with the merger, the
Company issued 1,623,462 shares of Class A common stock in exchange for all the
outstanding common stock of Cruise. In addition, the Company issued 111,478
options to purchase Class A common stock in exchange for all of the outstanding
options to purchase stock of Cruise.
The accompanying consolidated financial statements have been restated to
include the accounts of Cruise as if the companies had combined at the beginning
of the first period presented. Prior to the merger, Cruise's fiscal year ended
on April 30. In recording the business combination, Cruise's prior year
financial statements have been restated to conform with the Company's fiscal
year end.
There were no significant transactions between the Company and Cruise prior
to the combination and immaterial adjustments were recorded to conform Cruise's
accounting policies. The results of Cruise included in the consolidated
statements of income are revenues of $3,652 and $39,713 for January 1998 and the
six months ended June 30, 1997, respectively and net losses of $1,836 and $2,239
for January 1998 and the six months ended June 30, 1997, respectively.
2. ACQUISITIONS
BRACC Acquisition -- On January 13, 1997, the Company entered into an
agreement to purchase all of the outstanding shares of BRACC in a purchase
transaction. The cash portion of the purchase price (approximately $275.0
million) was partially funded through a stock offering. The Company also issued
to Ford Motor Company, 4,500 shares of Series A convertible, non-voting
preferred stock, each share of which was converted into 1,000 shares of the
Company's Class A common stock and sold by Ford Motor Company in a public
offering in October 1997. The common shares underlying the preferred stock had a
value of approximately $105.8 million for purposes of determining the purchase
price (based on the three day period beginning on January 12) and $95.2 million
at the time of issuance. The Company also entered into the
7
<PAGE> 8
BUDGET GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
following debt financing transactions concurrently with the BRACC Acquisition:
(i) $165.0 million of guaranteed senior notes at a rate of 9.57% maturing in
2007; (ii) $45.0 million of convertible subordinated notes at a rate of 6.85%
maturing in 2007; (iii) a variable-rate commercial paper vehicle financing
facility in the amount of $900.0 million; (iv) a $500.0 million asset-backed
note vehicle financing facility maturing in 2001 and 2002, composed of a senior
note in the amount of $472.5 million bearing interest at a rate of 7.35% and a
subordinated note in the amount of $27.5 million bearing interest at a rate of
7.80%; and (v) a $300.0 million five-year secured working capital facility
bearing interest at an initial rate of 1.75% over LIBOR and secured primarily by
accounts receivable, cash and unencumbered vehicles.
Acquisition of Premier Car Rental -- On July 31, 1997, the Company
acquired, through its wholly owned subsidiary, Premier Car Rental LLC
("Premier"), the fleet and certain other assets and assumed certain liabilities
of Premier Car Rental, Inc. for approximately $87.2 million consisting of $2.0
million in cash and the refinancing of approximately $85.2 million of
outstanding indebtedness. Premier operates as its own brand and serves the
insurance replacement market.
Acquisition of St. Louis Franchise -- In October 1997, the Company
purchased the St. Louis, Missouri Budget franchisee for approximately $9.0
million, consisting of $1.0 million in cash and $8.0 million in Class A Common
Stock. This franchisee had six locations and a peak fleet of approximately 1,100
vehicles with revenue of approximately $16.0 million in 1996.
Acquisition of Ryder TRS, Inc. -- On June 19, 1998, pursuant to the
Agreement and Plan of Merger, as amended, entered into on March 4, 1998, the
Company acquired all of the outstanding stock of Ryder TRS, Inc. ("Ryder TRS"),
based in Denver, Colorado. As consideration for the Ryder TRS acquisition, the
Company issued 3,455,206 shares of Class A common stock, paid $125,000 in cash
and issued warrants to purchase Class A common stock, the value of which is
capped at $19,000. In addition, the Company agreed to pay Ryder TRS stockholders
a make-whole payment, the amount of which will depend on the performance of the
Class A common stock following the acquisition. The Company also assumed
approximately $522,000 of Ryder TRS's debt. The results of Ryder TRS are
included in the Company's results of operations from June 1, 1998 at which time
the Company effectively took control of Ryder TRS.
Acquisition of Car Dealerships -- Effective in June 1998, the Company
purchased three new car dealerships, two located in Florida and one in Indiana.
The dealerships were acquired for cash or a combination of cash and stock
aggregating $16.0 million in cash and the issuance of 445,854 shares of Class A
common stock.
If the acquisitions had occurred at the beginning of the periods presented,
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>
SIX-MONTH
PERIOD ENDED
JUNE 30,
---------------------
1998 1997
--------- ---------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Operating revenue........................................... 1,337,276 1,147,320
Loss before extraordinary item.............................. (13,456) (21,866)
Basic and diluted loss per share............................ (0.43) (0.85)
</TABLE>
Other 1998 Acquisitions -- The Company completed several small acquisitions
of Budget franchises and other related businesses through August 10, 1998. These
acquisitions are not material either individually or in the aggregate and the
Company does not expect them to have a significant impact on its financial
position or
8
<PAGE> 9
BUDGET GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
full year results of operations. The franchises were primarily located in Puerto
Rico, Canada, Austria, Spain, New Zealand, Arkansas, Ohio and California.
3. CHANGES IN CAPITAL STRUCTURE AND EARLY EXTINGUISHMENT OF DEBT
At a Special Meeting of Stockholders held on May 28, 1998, the stockholders
agreed to increase the authorized number of shares of Class A common stock to
70,000,000, agreed to increase the number of shares available for grant under
the 1994 Incentive Stock Option Plan to 4,500,000 and agreed to increase the
number of shares available under the 1994 Director's Stock Option Plan to
300,000.
Concurrent with the closing of the Ryder TRS acquisition, the Company
implemented a number of changes to its capital structure. These changes included
(i) the amendment and restatement of its existing $300,000 secured revolving
credit facility to increase such facility to $550,000, (ii) the conversion of
$80,000 of convertible subordinated notes into 4,305,814 shares of Class A
common stock, including 319,768 shares issued in lieu of interest payments which
the holders of the convertible subordinated notes will forego as a result of
early conversion, (iii) the redemption of $165,000 of guaranteed senior notes,
(iv) the issuance, by a subsidiary of the Company, of 6,000,000 shares of
remarketable term income deferrable equity securities ("High Tides") which
raised approximately $290,250, net of related fees, (v) the private placement of
$1,100,000 of medium term notes (the "TFFC-98 notes"), (vi) tendered for the
redemption of $175,000 of Ryder TRS's outstanding 10% senior subordinated notes
and (vii) repaid approximately $340,000 of Ryder TRS's outstanding commercial
paper.
The early extinguishment of the guaranteed senior notes and the Ryder TRS
10% senior subordinated notes resulted in $53,634 of prepayment premiums and the
write-off of deferred financing fees of $18,264. This has been reflected as an
extraordinary item, net of tax benefits, in the accompanying income statement.
The 319,768 shares issued to induce conversion of the convertible subordinated
notes were recorded at their fair value of $8,854 and reflected in debt
extinguishment costs in the accompanying income statement.
Proceeds from the High Tides were used by the Company's subsidiary to
invest in subordinated debentures of the Company which represents substantially
all of the subsidiary's assets. The Company ultimately used the proceeds to fund
the redemption of the guaranteed senior notes and to partially fund the
redemption of Ryder TRS's 10% senior subordinated notes. The Company has issued
a subordinated guarantee of the subsidiary's obligations under the High Tides.
The High Tides are reflected in the balance sheet as "Company Obligated
Mandatorily Redeemable Securities of Subsidiary" while dividends are reflected
in the income statement as a minority interest captioned as "Distributions on
Trust preferred securities". The High Tides accrue distributions at a rate of
6.25% per annum, have a liquidation value of $50 per share, are convertible into
the Company's Class A common stock at the rate of 1.5179 shares of Class A
common stock for each High Tide and are subject to mandatory redemption upon the
redemption of the underlying debentures due on June 15, 2028. The Company has
the right to defer interest payments due on the subordinated debentures for up
to 20 consecutive quarters which will also cause a deferral of distributions
under the High Tides. During a deferral period, the distributions will
accumulate and the Company has agreed, among other things, not to declare any
dividends on its capital stock (subject to certain exceptions).
The TFFC-98 notes bear interest, payable monthly, at rates ranging from
6.07% to 6.84% and mature at various dates and amounts ranging from January 2001
through October 2006. The TFFC-98 notes consist of $935 million in senior notes
and $165 million in subordinated notes.
4. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income". SFAS No. 130 established new standards for reporting and presenting
comprehensive income and its components in a full set of general
9
<PAGE> 10
BUDGET GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purpose financial statements. The statement is effective for fiscal years
beginning after December 15, 1997. The Company's only adjustment to arrive at
comprehensive income is the foreign currency translation adjustment. Total
comprehensive income (loss) was ($42,845) and $4,536 for the second quarter of
1998 and 1997, respectively and ($46,964) and $1,167 for the six-month periods
ended June 30, 1998 and 1997, respectively.
5. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". SFAS
No. 128 established new standards for computing and presenting earnings per
share ("EPS"). Specifically, SFAS No. 128 replaced the presentation of primary
EPS with a presentation of basic EPS, requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the diluted EPS computation.
Basic EPS is calculated by dividing net income by the weighted average
number of common shares outstanding during the period. Diluted EPS was
calculated by dividing net income available to common stockholders after assumed
conversion of dilutive securities by the sum of the weighted average number of
common shares outstanding plus all additional common shares that would have been
outstanding if potentially dilutive common shares had been issued. The following
table reconciles the income before extraordinary item and number of shares
utilized in the EPS calculations.
<TABLE>
<CAPTION>
THREE-MONTH SIX-MONTH
PERIODS ENDED PERIODS ENDED
JUNE 30, JUNE 30,
--------------- ---------------
1998 1997 1998 1997
------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Income before extraordinary item for basic and diluted
EPS....................................................... $4,751 $4,563 $1,330 $1,262
====== ====== ====== ======
Weighted average number of common shares used in basic
EPS....................................................... 29,499 18,765 28,134 15,836
Effect of dilutive securities:
Stock options............................................. 744 765 829 554
Convertible preferred stock............................... -- 3,066 -- 1,541
------ ------ ------ ------
Weighted average number of common shares and dilutive
potential common stock used in diluted EPS................ 30,243 22,596 28,963 17,931
====== ====== ====== ======
</TABLE>
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS GENERAL
GENERAL
Prior to the BRACC Acquisition, the Company was the largest Budget
franchisee in the United States and was one of the largest independent retailers
of late model automobiles in the United States. In 1994, the Company 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 leveraged management's experience and created certain operating
efficiencies between these complementary businesses.
In connection with the BRACC Acquisition, the Company changed its name to
Budget Group, Inc. In June 1998 the Company acquired Ryder TRS. The accompanying
consolidated financial statements have been restated to reflect the pooling of
interests with Cruise America, Inc. as if the companies had combined at the
beginning of the first period presented. For a further discussion of these
transactions, see Notes 1,2 and 3 to the Company's unaudited consolidated
financial statements herein.
RESULTS OF OPERATIONS
General Operating Results. Income before extraordinary item for the second
quarter of 1998 increased $0.2 million to income of $4.8 million compared with
income of $4.6 million in 1997. The income before extraordinary item per share
for the second quarter of 1998 declined to $0.16 per diluted share from $0.20
per diluted share in 1997 due to an increase in the average number of shares
outstanding. Income before income taxes decreased $0.3 million for the second
quarter of 1998 to $7.2 million from $7.5 million for the second quarter of
1997. Income before extraordinary item for the first six months of 1998
increased $0.1 million to income of $1.3 million compared with similar income in
1997. The income before extraordinary item per share for the first six months of
1998 declined to $0.05 per diluted share from $0.07 per diluted share in 1997
again due to the increase in the average number of shares outstanding. Income
before income taxes decreased $1.4 million for the first six months of 1998 to
$1.5 million from $3.0 million for 1997. Income before taxes reflects debt
extinguishment costs of $9.5 million in the second quarter and first six months
of 1998 largely for Class A common stock issued to induce conversion of $80.0
million of convertible subordinated notes. The Company also recognized an
extraordinary loss of $45.3 million, net of income tax benefits, in the second
quarter and first six months of 1998 related to the early extinguishment of
guaranteed senior notes and Ryder TRS's 10% senior subordinated notes. See Note
3 to the Company's unaudited consolidated financial statements.
Operating Revenues. Vehicle rental revenue increased $198.5 million in the
second quarter of 1998 to $450.1 million from $251.7 million in the second
quarter of 1997. Such revenues for the first six months of 1998 increased $476.4
million to $790.1 million. These increases were due to the BRACC acquisition in
the second quarter of 1997 and the acquisition of Ryder TRS in the second
quarter of 1998, which added a significant number of locations and vehicles to
the Company's operations. Revenue from sales of vehicles increased $73.5 million
in the second quarter of 1998 to $140.7 million from $67.3 million in the second
quarter of 1997. Such revenues for the first six months of 1998 increased $117.0
million to $238.0 million. These increases were due to the addition of the car
sales operations of BRACC, new stores opened by the Company, and the acquisition
of three new car dealerships in June 1998. Royalty fees and other revenues
increased $10.3 million in the second quarter of 1998 to $23.5 million from
$13.2 million in the second quarter of 1997. Such revenues for the first six
months of 1998 increased $28.4 million to $42.2 million. These revenues largely
represent royalty and other fees from the Company's franchisees as a result of
the BRACC Acquisition and revenue from Ryder TRS's move management service.
Operating Expenses. Total operating expenses increased $255.2 million in
the second quarter of 1998 to $553.5 million from $298.3 million in the second
quarter of 1997. Such expenses for the first six months of 1998 increased $564.7
million to $975.3 million. These increases were also due to the addition of
BRACC's and Ryder TRS's operations to the Company's operations. The cost of
retail vehicle sales increased $67.4 million in the second quarter of 1998 to
$125.1 million from $57.7 million in the second quarter of 1997. Such
11
<PAGE> 12
expenses for the first six months of 1998 increased $107.9 million to $211.2
million. These increases are reflective of the car sales revenue growth with the
addition of BRACC car sales locations, the new car dealership acquisitions and
new locations opened by the Company. Amortization expense increased $2.6 million
in the second quarter of 1998 to $5.0 million from $2.4 million in the second
quarter of 1997. Such expenses for the first six months of 1998 increased $5.5
million to $8.5 million. These increases were largely due to intangibles,
including goodwill, related to the acquisitions of BRACC and Ryder TRS.
Other (Income) Expense, net. Other expense, net of interest income,
increased $27.3 million in the second quarter of 1998 to $53.6 million from
$26.3 million in the second quarter of 1997. Such expenses for the first six
months of 1998 increased $58.6 million to $93.5 million. These increase were due
to the financing of fleet and other borrowings related to the acquisitions of
BRACC and Ryder TRS, net of investment income due to the increase in cash, and
the debt extinguishment costs previously mentioned.
Provision for income taxes. The overall year to date tax provision
(including the extraordinary items) reflects the expected full year effective
rate of 38% which is higher than the statutory rate due to the effects of
non-deductible intangible amortization and the impact of state and local income
taxes net of the federal benefit. Also impacting the rate is the effect of the
distributions on trust preferred securities shown below the provision at its
gross amount while the tax benefit is included in the provision.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's operations have been funded by cash provided
from operating activities and by financing provided by banks, automobile
manufacturers' captive finance companies, leasing companies and asset-backed
notes. The material terms of the Company's financing facilities are described
below. The Company's existing indebtedness at June 30, 1998 has interest rates
ranging from 5.57% to 11.20%. The Company intends to fund its operations through
asset-backed notes and revolving credit facilities with financial institutions
for fleet financing and working capital, as well as through other similar
facilities and through placements or offerings of additional debt and/or equity
securities.
Recent Debt Placements and Retirements
Concurrent with the closing of the Ryder TRS acquisition, the Company
implemented a number of changes to its capital structure. These changes included
(i) the amendment and restatement of its existing $300,000 secured revolving
credit facility to increase such facility to $550.0 million, (ii) the conversion
of $80.0 million of convertible subordinated notes, (iii) the redemption of
$165.0 million of guaranteed senior notes, (iv) the issuance, by a subsidiary of
the Company, of 6,000,000 shares of High Tides which raised approximately $290.3
million, net of related fees, (v) the private placement of $1.1 billion of
TFFC-98 notes, (vi) tendered for the redemption of $175.0 million of Ryder TRS's
outstanding 10% senior subordinated notes and (vii) repaid approximately $340.0
million of Ryder TRS's outstanding commercial paper. The redemptions (early
extinguishments) resulted in charges totaling $45.3 million, after income tax
benefits, and the conversion premium to holders of the convertible subordinated
notes resulted in charges of $9.5 million. See Note 3 to the Company's unaudited
consolidated financial statements.
Fleet Financing Facilities
At June 30, 1998, the Company had borrowed $2.4 billion under asset-backed
medium term notes ("MTN notes") and $.9 billion under a commercial paper ("CP")
facility (collectively "Fleet notes"). The MTN notes are comprised of notes
issued in August 1994 ("TFFC-94 notes"), notes assumed in the acquisition of a
franchisee in October 1995 ("OPCO notes"), notes issued in December 1996
(TFFC-96 notes"), notes issued in April 1997 ("TFFC-97 notes"), notes assumed in
the BRACC Acquisition ("BFFC-94A notes"), and notes issued in conjunction with
the acquisition of Ryder TRS (TFFC-98 notes"). The Fleet notes are utilized
largely to finance vehicles eligible for certain manufacturers' vehicle
repurchase programs and other allowable used cars and trucks. Proceeds from the
Fleet notes that are temporarily unutilized for vehicle financing are maintained
in restricted cash accounts with the trustees. The Fleet notes
12
<PAGE> 13
are collateralized by the secured vehicles and the restricted cash accounts.
Interest rates on the Fleet notes at June 30, 1998 range from 5.57% to 7.80%.
The Company's other vehicle obligations consist of outstanding lines of
credit to purchase rental fleet and retail car sales inventory. Borrowings under
collateralized available lines of credit at June 30, 1998 consist of $186.3
million for rental vehicles and $64.5 million for retail car sales inventory
with maturity dates through October 1998. 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. Interest payments for rental fleet facilities are due monthly at
annual interest rates that range from 7.70% to 11.20% at June 30, 1998.
Management expects that 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' vehicle repurchase programs or from the sales of the
vehicles.
Medium Term Notes
The $1.1 billion TFFC-98 notes were entered into concurrently with the
acquisition of Ryder TRS and bear interest at fixed rates ranging from 6.07% to
6.84%. The TFFC-98 notes mature in from three to seven years. Proceeds from the
notes were used to refinance Ryder TRS's commercial paper and to finance certain
BRACC vehicles. Unused proceeds are reflected in restricted cash on the balance
sheet at June 30, 1998.
The $500.0 million TFFC-97 notes and CP facility were entered into
concurrently with the BRACC Acquisition. As of June 30, 1998, the CP has various
interest rates, which ranged between 5.57% and 5.75%. The TFFC-97 note facility
requires monthly interest payments at an annual rate ranging from 7.35% to
7.80%.
The TFFC-94 notes, OPCO notes and TFFC-96 notes totaled $283.2 million with
interest rates ranging from 6.29% to 7.10%.
The Company has continued to utilize borrowings under the BFFC-94A notes to
fund its fleet. The BFFC-94A notes consist of $500.0 million of senior notes
requiring monthly interest payments at LIBOR plus 0.50% (6.19% at June 30,
1998).
High Tides
The Company issued $300.0 million of High Tides and received approximately
$290.3 million in net proceeds. These funds were used to redeem the guaranteed
senior notes and to partially fund the redemption of Ryder TRS's 10% senior
subordinated notes which occurred in July 1998. The High Tides are subject to
mandatory redemption upon the redemption of the underlying debentures due on
June 15, 2028. The Company has the right to defer interest payments due on the
subordinated debentures for up to 20 consecutive quarters which will also cause
a deferral of distributions under the High Tides.
Working Capital Facility
Concurrent with the acquisition of Ryder TRS, the Company entered into an
amended and restated secured credit facility to increase its size from $300.0
million to $550.0 million. This facility requires monthly interest payments on
the outstanding balance at a rate based on LIBOR plus 1.75% (or 7.44% at June
30, 1998) and expires in 2003. The facility is secured primarily by cash,
accounts receivable and vehicles and is subject to certain covenants, the most
restrictive of which require the Company to maintain certain financial ratios
and minimum tangible net worth and restrict the payment of cash dividends. At
June 30, 1998, the Company had $367.8 million in letters of credit outstanding
under this facility.
CHANGE IN FINANCIAL CONDITION
Total assets increased $1,691.4 million from $3,689.9 million at December
31, 1997 to $5,381.3 million at June 30, 1998. This increase, largely revenue
earning vehicles of $1,153.7 million, resulted primarily from the acquisition of
Ryder TRS and seasonal increases in revenue earning vehicles. Restricted cash
increased $176.1 million largely as a result of issuing the previously mentioned
medium term notes. Trade and vehicle receivables decreased by $25.8 million due
to timing of program vehicle disposal activity which is higher in
13
<PAGE> 14
December than in June partially offset by acquisitions. Intangibles increased
due to the acquisitions. See Note 2 to the unaudited consolidated financial
statements.
Total liabilities increased by $1,208.6 million from $3,231.0 million at
December 31, 1997 to $4,439.6 million at June 30, 1998. This increase, largely
notes payable of $1,087.2 million, resulted primarily from the acquisition of
Ryder TRS and the issuance of the medium term notes. The Company obligated
mandatorily redeemable securities of subsidiary represent the High Tides issued
in June 1998. See Note 3 to the unaudited consolidated financial statements.
INFLATION
The increased acquisition cost of vehicles is the primary inflationary
factor affecting the Company's operations. Many of the Company's other operating
expenses are inflation sensitive, with increases in inflation generally
resulting in increased costs of operations. The effect of inflation-driven cost
increases on the Company's overall operating costs is not expected to be greater
for the Company than for its competitors.
SEASONALITY
Generally, in the vehicle rental industry, revenue increases in the spring
and summer months due to the overall increase in business and leisure travel
during this season. The Company increases the size of its fleet and work force
in the Spring and Summer to accommodate increased rental activity during these
periods and decreases its fleet and work force in the Fall and Winter. However,
many of the Company's operating expenses (such as rent, insurance and
administrative personnel) are fixed and cannot be reduced during the Fall and
Winter. The retail vehicle sales business is subject to seasonal effects, with
lower sales during the Winter months.
YEAR 2000 ISSUE
The Company has assessed and continues to assess the impact of the year
2000 ("Y2K") on its reporting systems and operations (the "Y2K Issue"). The Y2K
Issue exists because many computer systems and applications currently use
two-digit date fields to designate a year. As the century date occurs, certain
date sensitive systems will recognize the year 2000 as the year 1900 or may not
recognize the date at all. This inability to properly treat or recognize the
year 2000 may cause computer systems and applications to process critical
information incorrectly.
During 1997, the Company recognized approximately $2.2 million in expenses
to modify existing computer systems and applications and estimates that an
aggregate of approximately $6.7 million will be incurred in 1998 and 1999
specifically for Y2K modification. Approximately $1.6 million was spent in 1998
through June 30. The most significant systems undergoing or to undergo
modifications are the reservation and rental transaction processing systems. A
failure in these systems could cause significant disruption in customer service
levels and therefore materially impact the Company's operating results and
financial condition. The Company expects to complete all major modification
efforts by mid-1999.
ENVIRONMENTAL MATTERS
The Company has assessed and continues to assess the impact of
environmental remediation efforts on its operations. The Company's exposure
largely relates to the clean-up and replacement of underground gasoline storage
tanks.
During 1997, the Company recognized approximately $0.7 million in expenses
related to remediation efforts and estimates that an aggregate of approximately
$3.3 million will be incurred in 1998 and 1999. Approximately $0.7 million was
spent in 1998 through June 30. Based on past experience, management expects
these estimates will be sufficient to satisfy anticipated costs of known
remediation requirements. However, due to factors such as continuing changes in
the 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
14
<PAGE> 15
and remediation are subject to uncertainty and it is difficult to predict the
amount or timing of future remediation requirements.
FORWARD LOOKING STATEMENTS
This Form 10-Q and other statements issued or made from time to time by
Budget Group, Inc. or its representatives contain statements which may
constitute "forward looking statements" under the Private Securities Litigation
Act of 1995. Those statements include statements regarding the intent, belief or
current expectations of Budget Group, Inc. and members of its management team,
as well as the assumptions on which such statements are based. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties and that
actual results may differ materially from those contemplated by such
forward-looking statements. Important factors currently known to management that
could cause actual results to differ materially from those in forward-looking
statements are set forth in the safe harbor compliance statement for
forward-looking statements included as Exhibit 99.1 and Annex A to the Company's
Annual Report on Form 10-K, and that statement is hereby incorporated by
reference in this Form 10-Q. The Company undertakes no obligation to update or
revise forward-looking statements to reflect changed assumptions, the occurrence
of unanticipated events or changes to future operating results over time.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities:
On April 1, 1998, in connection with the acquisition of Compact Rent-A-Car
Limited ("Compact"), the Company issued 127,889 shares of Class A Common Stock
to the shareholders of Compact.
On May 1, 1998, in connection with the acquisition of Transportation and
Storage Associates ("TSA"), the Company issued a convertible promissory note in
the original principal amount of $4,378,933.02 convertible into shares of Class
A Common Stock to a shareholder of TSA.
On May 8, 1998, in connection with the acquisition BVM, Inc., the Company
issued 15,218 shares of Class A Common Stock to one of the two shareholders of
BVM, Inc.
On June 1, 1998, in connection with the acquisition of Warren Wooten Ford,
Inc. ("Wooten"), the Company issued 267,579 shares of Class A Common Stock to
certain shareholders of Wooten.
On June 2, in connection with the acquisition of Carson
Chrysler-Plymouth-Dodge Jeep-Eagle, Inc. ("Carson"), the Company issued 178,275
shares of Class A Common Stock to Carson's three shareholders.
On June 19, 1998, (i) Budget Group Capital Trust issued 6,000,000 of its
6 1/4% Convertible Preferred Securities ("HIGH TIDES") to an aggregate of seven
investment banking firms for $300,000,000; (ii) Budget Group Capital Trust
issued to the Company 185,568 of its 6 1/4% Convertible Common Securities for
$9,278,400; (iii) the Company issued to Budget Group Capital Trust $309,278,400
aggregate principal amount of 6 1/4% HIGH TIDES Debentures Due 2028; and (iv)
the Company issued to the holders of its 7.0% Series A Convertible Notes Due
2007 (the "Series A Notes") an aggregate of 4,305,814 shares of Class A Common
Stock upon the conversion of such Series A Notes into Class A Common Stock.
15
<PAGE> 16
All of the foregoing issuances were made in reliance on the exemption from
the registration requirements of the Securities Act of 1933 (the "Act") provided
under Section 4(2) of the Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 Annual Meeting of Stockholders was held on April 23, 1998 in
Daytona Beach, Florida for the following purposes:
1. To elect nine directors of the Company to serve as the Company's
Board of Directors.
2. To amend the Company's Certificate of Incorporation and Bylaws to
provide for the classification of the Company's directors into three
classes serving staggered terms.
3. To approve amendments to the Company's 1994 Incentive Stock Option
Plan to increase the total number of shares of Common Stock available for
grant under such plan to 2,250,000 shares and to provide for certain other
amendments.
4. To ratify the Board of Directors' appointment of Arthur Andersen
LLP as the Company's independent auditors for the fiscal year ending
December 31, 1998.
Proxies for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934 and there was no solicitation in opposition to
management's solicitations.
All of management's nominees for directors as listed in the proxy statement
were elected with the following votes:
<TABLE>
<CAPTION>
DIRECTOR NOMINEE VOTES FOR VOTES WITHELD
- ---------------- --------- -------------
<S> <C> <C>
Sanford Miller.............................................. 40,351,354 81,889
John P. Kennedy............................................. 40,351,284 81,959
Jeffrey D. Congdon.......................................... 40,351,284 81,959
Ronald D. Agronin........................................... 40,355,489 77,754
James F. Calvano............................................ 40,355,454 77,789
Martin P. Gregor............................................ 40,351,646 81,597
F. Perkins Hixon, Jr........................................ 40,351,146 82,097
Jeffrey R. Mirkin........................................... 40,332,230 101,011
Dr. Stephen L. Weber........................................ 40,355,211 78,032
</TABLE>
The vote to amend the Company's Amended and Restated Certificate of
Incorporation and Bylaws to provide for the classification of the Company's
directors into three classes serving staggered terms was as follows:
<TABLE>
<S> <C>
Votes For................................................... 30,379,471
Votes Against............................................... 8,099,144
Votes Abstained............................................. 2,904
</TABLE>
The vote to approve amendments to the Company's 1994 Incentive Stock Option
Plan to increase the total number of shares of Common Stock available for grant
under such plan to 2,250,000 shares and to provide for certain other amendments
was as follows:
<TABLE>
<S> <C>
Votes For................................................... 39,665,772
Votes Against............................................... 765,071
Votes Abstained............................................. 2,400
</TABLE>
16
<PAGE> 17
The vote to ratify the Board of Directors' appointment of Arthur Andersen
LLP as the Company's independent auditors for the fiscal year ending December
31, 1998 was as follows:
<TABLE>
<S> <C>
Votes For................................................... 40,428,082
Votes Against............................................... 1,104
Votes Abstained............................................. 4,057
</TABLE>
A special meeting of stockholders was held on May 28, 1998 in Daytona
Beach, Florida for the following purposes:
1. To approve an amendment to the Company's Certificate of
Incorporation to increase the authorized number of shares of Class A Common
Stock which the Company may issue from 35,000,000 to 70,000,000.
2. To approve amendments to the Company's 1994 Incentive Stock Option
Plan to increase the maximum number of shares of Class A Common Stock and
Class B Common Stock available for grant under such plan to 4,500,000
shares.
3. To approve an amendment to the Company's 1994 Directors' Stock
Option Plan to increase the maximum number of shares of Class A Common
Stock available for grant under such plan to 300,000 shares.
The vote to approve an amendment to the Company's Certificate of
Incorporation to increase the authorized number of shares of Class A Common
Stock which the Company may issue from 35,000,000 to 70,000,000 was as follows:
<TABLE>
<S> <C>
Votes For................................................... 38,522,670
Votes Against............................................... 90,026
Votes Abstained............................................. 4,663
</TABLE>
The vote to approve amendments to the Company's 1994 Incentive Stock Option
Plan to increase the maximum number of shares of Class A Common Stock and Class
B Common Stock available for grant under such plan to 4,500,000 shares was as
follows:
<TABLE>
<S> <C>
Votes For................................................... 36,864,343
Votes Against............................................... 1,683,228
Votes Abstained............................................. 69,788
</TABLE>
The vote to approve an amendment to the Company's 1994 Directors' Stock
Option Plan to increase the maximum number of shares of Class A Common Stock
available for grant under such plan to 300,000 shares was as follows:
<TABLE>
<S> <C>
Votes For................................................... 37,189,777
Votes Against............................................... 1,325,077
Votes Abstained............................................. 63,503
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 3.1 Amended and Restated Certificate of Incorporation
Exhibit 3.2 Amended and Restated Bylaws
Exhibit 27 Financial Data Schedule (for SEC use only)
17
<PAGE> 18
(b) Reports on Form 8-K
In a Form 8-K dated April 6, 1998 and filed on April 8, 1998, the Company
filed under Item 5 and Item 7, supplemental consolidated financial statements
reflecting the pooled operations of the Company including Cruise America, Inc.
In a Form 8-K dated May 28, 1998 and filed May 29, 1998, the Company filed
under Item 5 and Item 7, consolidated financial statements reflecting the pooled
operations of the Company including Cruise America, Inc.
In a Form 8-K dated June 19, 1998, and filed June 30, 1998, as amended the
Company filed under Item 2 and Item 7, information pursuant to an Agreement and
Plan of Merger, as amended, whereby the Company acquired Ryder TRS, Inc.
18
<PAGE> 19
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BUDGET GROUP, INC.
--------------------------------------
(Registrant)
Dated: August 14, 1998
By: /s/ MICHAEL CLAUER
------------------------------------
Michael Clauer
Senior Vice President
Chief Financial Officer
Dated: August 14, 1998
By: /s/ THOMAS L. KRAM
------------------------------------
Thomas L. Kram
Vice President, Controller
(Principal Accounting Officer)
19
<PAGE> 1
EXHIBIT 3.1
AMENDED AND
RESTATED
CERTIFICATE OF INCORPORATION
OF
BUDGET GROUP, INC.
FIRST: Name. The name of the corporation is Budget Group,
Inc. (the "Corporation").
SECOND: Registered Office and Agent. The address of the
registered office of the Corporation in the State of Delaware is 1209 Orange
Street, Wilmington, New Castle County, Delaware 19801. The name of the
registered agent at such address is The Corporation Trust Company.
THIRD: Purposes. The purposes for which the Corporation is
formed are to engage in any lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law and to possess and exercise
all of the powers and privileges granted by such law and any other law of
Delaware.
FOURTH: A. Authorized Capital
The Corporation is authorized to issue 72,750,000 shares of
capital stock, consisting of 72,500,000 shares of common stock, par value $.01
per share (the "Common Stock"), and 250,000 shares of preferred stock, par value
$.01 per share (the "Preferred Stock"). Of the shares of Common Stock,
70,000,000
<PAGE> 2
shares shall be designated "Class A Common Stock" and 2,500,000 shares shall be
designated "Class B Common Stock." The rights, preferences, privileges and
restrictions granted and imposed upon the Preferred Stock, Class A Common Stock
and Class B Common Stock are set out hereinbelow.
B. Preferred Stock
The Preferred Stock may be issued from time to time in one or
more series with such designations, preferences, and relative participating,
optional or other special rights and qualifications, limitations or restrictions
adopted by the Board of Directors providing for the issuance of such Preferred
Stock or series thereof; and the Board of Directors is hereby expressly granted
the authority to fix by resolution or resolutions such designations and powers,
preferences and rights and such qualifications, limitations or restrictions
which are permitted by Section 151 of the General Corporation Law of Delaware,
as amended from time to time, in respect of any class or classes of stock or any
series of any class of stock of the Corporation that may be desired, including,
but not by way of limitation, the number, distinctive name and serial
designation of such class or series; any dividends payable and the rate, time
for and priority of payment thereof; whether such dividends shall be cumulative
or not; any participating or other special rights with respect to the payment of
dividends; any conversion, exchange, purchase or other privilege to acquire
shares of any other class or series of the Preferred Stock or Common Stock of
the Corporation; any
- 2 -
<PAGE> 3
voting power; and any redemption and liquidation price or preference.
C. Class A Common Stock.
The shares of Class A Common Stock and shares of Class B Common
Stock shall be identical in all respects and shall have equal rights and
privileges except as expressly set forth in this paragraph C and in paragraph D
of this Article FOURTH. Upon dissolution of the Corporation, shares of Class A
Common Stock and Class B Common Stock are entitled to share ratably in the
assets thereof that may be available for distribution after satisfaction of
creditors and the payment of any liquidation preference of any outstanding
shares of Preferred Stock.
1. Dividends.
(a) Subject to the rights of the holders of the Preferred Stock,
if any, such dividends or distributions as may be determined by the Board of
Directors of the Corporation from time to time may be declared and paid or made
upon shares of Class A Common Stock out of any source at the time lawfully
available for the payment of dividends; provided that (subject to subparagraphs
(b) and (c) below of this paragraph C.1.) identical dividends or distributions
are declared and paid concurrently on shares of Class B Common Stock. If
dividends or distributions are declared and paid upon shares of Class B Common
Stock (subject to subparagraphs (b) and (c) below of this paragraph C.1.),
identical dividends or distributions shall be declared and paid concurrently on
shares of Class A Common Stock.
- 3 -
<PAGE> 4
(b) No dividend may be declared and paid in shares of Class A
Common Stock unless (i) the dividend is payable only to holders of shares of
Class A Common Stock and (ii) a dividend payable to holders of Class B Common
Stock is declared and paid concurrently in the same number of shares of Class B
Common Stock per outstanding share of Class B Common Stock as the number of
shares of Class A Common Stock declared and paid per outstanding share of Class
A Common Stock.
(c) No dividend may be declared and paid in Class B Common Stock
unless (i) the dividend is payable only to holders of Class B Common Stock and
(ii) a dividend payable to holders of shares of Class A Common Stock is
declared and paid concurrently in the same number of shares of Class A Common
Stock per outstanding share of Class A Common Stock as the number of shares of
Class B Common Stock declared and paid per outstanding share of Class B Common
Stock.
2. Stock Combinations and Subdivisions. Shares of Class A Common
Stock shall not be combined or subdivided unless at the same time there is a
proportionate combination or subdivision of shares of Class B Common Stock. If
shares of Class B Common Stock are combined or subdivided, a proportionate
combination or subdivision of shares of Class A Common Stock shall be made at
the same time.
3. Voting. Except as may otherwise be required by law, the holders
of shares of Class A Common Stock shall vote together with the holders of Class
B Common Stock as a
- 4 -
<PAGE> 5
single class, provided that the holders of Class A Common Stock will have one
(1) vote per share and the holders of Class B Common Stock shall have ten (10)
votes per share.
D. Class B Common Stock.
1. Dividends and Distributions. Subject to the provisions of
paragraph C.1. of this Article FOURTH, dividends and distributions may be
declared and paid or made upon shares of Class B Common Stock as may be
permitted by applicable law.
2. Stock Combinations and Subdivisions. Subject to the provisions of
paragraph C.2. of this Article FOURTH, shares of Class B Common Stock may be
combined or subdivided in such manner as may be permitted by applicable law.
3. Voting. Subject to the provisions of paragraph C.3. of this
Article FOURTH, shares of Class B Common Stock shall have ten (10) votes per
share on all matters that may be submitted to a vote or consent of the
shareholders.
4. Conversion.
(a) Each holder of record of shares of Class B Common Stock may,
in such holder's sole discretion and at such holder's option, convert any whole
number or all of such holder's shares of Class B Common Stock into fully paid
and nonassessable shares of Class A Common Stock at the rate of one (1) share
of Class A Common Stock for each share of Class B Common Stock surrendered for
conversion. Any such conversion may be effected by any holder of Class B Common
Stock by surrendering such holder's certificate or certificates for the shares
of Class B
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<PAGE> 6
Common Stock to be converted, duly endorsed, at the office of the Corporation
or any transfer agent for Class B Common Stock, together with a written notice
to the Corporation at such office that such holder elects to convert all or a
specified number of shares of Class B Common Stock and stating the name or
names in which such holder desires the certificate or certificates for such
shares of Class A Common Stock to be issued. Promptly thereafter, unless
otherwise prohibited by law, the Corporation shall issue and deliver to such
holder or such holder's nominee or nominees, a certificate or certificates for
the number of shares of Class A Common Stock to which such holder shall be
entitled as aforesaid. Such conversion shall be deemed to have been made at
the close of business on the day of such surrender 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.
(b) Each share of Class B Common Stock shall automatically be
converted into one share of Class A Common Stock in the event that the
beneficial or record ownership of such share of Class B Common Stock shall be
transferred (including, without limitation, by way of gift, settlement, will or
intestacy) to any person or entity that is not then a record or beneficial
holder of shares of Class B Common Stock. A pledge of shares of Class B Common
Stock as security for an obligation of a holder of such shares of Class B
Common Stock shall not be
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<PAGE> 7
considered a transfer for purposes of this paragraph D.4(b), unless and until
beneficial 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.
(c) Before any shares of Class A Common Stock shall be delivered
upon conversion, the holder of shares of Class B Common Stock whose shares 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 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.
(d) The number of shares of Class A Common Stock into which the
shares of Class B Common Stock may be converted shall be subject to adjustment
from time to time in the event of
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<PAGE> 8
any capital reorganization, reclassification of stock of the Corporation,
consolidation or merger of the Corporation with or into another corporation, or
sale or conveyance of all or substantially all of the assets of the Corporation
to another corporation or other entity or person. Each share of Class B Common
Stock shall thereafter be convertible into such kind and amount of securities
or other assets, or both, as are issuable or distributable in respect of each
share of Class A Common Stock. In any such case, appropriate adjustments shall
be made by the Board of Directors of the Corporation in the application of the
provisions herein set forth with respect to the rights and interests thereafter
of the holders of Class B Common Stock to the end that the provisions set forth
herein shall thereafter be applicable, as nearly as reasonably may be, in
relation to any securities or other assets thereafter deliverable on conversion
of shares of Class B Common Stock.
(e) The Corporation shall, at all times, reserve and keep available out
of the authorized and unissued shares of Class A Common Stock, solely for the
purpose of effecting the conversion of the outstanding shares of Class B Common
Stock, such number of shares of Class A Common Stock as shall from time to time
be sufficient to effect conversion of all outstanding shares of Class B Common
Stock and if, at any time, the number of authorized and unissued shares of Class
A Common Stock shall not be sufficient to effect conversion of the then
outstanding shares of Class B Common Stock, the Corporation shall take such
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<PAGE> 9
corporate action as may be necessary to increase the number of authorized
and unissued shares of Class A Common Stock to such number as shall be
sufficient for such purposes.
(f) The Corporation shall pay any and all issue and other taxes that
may be payable in respect of any issue or delivery of shares of Class A Common
Stock on conversion of shares of Class B Common Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of the issue of any shares of Class A Common Stock in a name other
than that in which the shares of Class B Common Stock so converted was
registered, 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.
(g) If any shares of capital stock to be reserved for the purpose of
conversion of shares of Class B Common Stock require registration or listing
with, or approval of, or inclusion in any governmental authority, stock exchange
or other regulatory body, or any automated quotation system of a national
securities association, under any federal or state law or regulation or
otherwise, before such shares may be validly issued or delivered upon
conversion, the Corporation will in good faith and as expeditiously as possible
endeavor to secure such registration, listing, approval or inclusion, as the
case may be.
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<PAGE> 10
(h) All shares of Class A Common Stock which may be issued upon
conversion of shares of Class B Common Stock will upon issuance by the
Corporation be validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issuance thereof.
(i) All certificates representing shares of Class B Common
Stock surrendered for conversion shall be appropriately canceled on the books
of the Corporation, and the number of authorized shares of Class B Common
Stock shall be reduced by the number of shares so converted.
(j) In case the Corporation shall take a record of the holders
of its shares of Class A Common Stock for the purpose of:
(1) entitling them to receive a dividend, or any other
distribution, payable otherwise than in cash; or
(2) entitling them to receive rights to acquire any
security issued by the Corporation; or
(3) any proposed reclassification, reorganization,
consolidation, merger, conveyance or voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, and in any such case, the Corporation shall cause to be mailed to the
holders of record of the outstanding shares of Class B Common Stock at least
ten (10) days prior to the date hereinafter specified, a notice stating the
date on which (x) a
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<PAGE> 11
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up is to take place and the
day, if any is to be fixed, as of which record holders of shares of Class A
Common Stock shall be entitled to exchange their shares of Class A Common Stock
for securities or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
(k) So long as any shares of Class B Common Stock are
outstanding, the Corporation shall not, without first obtaining the approval by
vote or written consent, in the manner provided by law, of the holders of (i)
at least a majority of the total number of shares of Class A Common Stock
outstanding, voting separately as a class, and (ii) at least sixty percent
(60%) of the total number of shares of Class B Common Stock outstanding, voting
separately as a class, (A) alter or change the rights or privileges of shares
of the Common Stock; (B) amend any provision of Section C or this Section D of
this Article FOURTH; or (C) effect any reclassification or recapitalization of
the Corporation's outstanding Common Stock.
FIFTH: Additional Powers of Board of Directors. The Board of
Directors shall have power, without shareholder action, to make by-laws for the
Corporation and to amend, alter or repeal any by-laws.
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<PAGE> 12
SIXTH: Voting by Ballot. Elections of Directors need not be by
ballot unless the by-laws of the Corporation provide otherwise.
SEVENTH: Limited Liability of Directors. The directors of the
Corporation shall be entitled to the full benefits of all limitations on the
liability of directors generally that are now or hereafter become available
under the Delaware General Corporation Law. Without limiting the generality of
the foregoing, no director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability: (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for any 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 or (iv)
for any transaction from which the director derived an improper personal
benefit. Any repeal or modification of this Article SEVENTH shall be prospective
only, and shall not affect, to the detriment of any director, any limitation on
the personal liability of a director of the Corporation existing at the time of
such repeal or modification.
EIGHTH: Classified Board of Directors. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
Class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. The term of the
initial Class I Directors shall terminate on the date of the 2001 Annual Meeting
of Stockholders; the term of the initial Class II Directors shall terminate on
the date of the 2000 Annual Meeting of Stockholders; and the term of the initial
Class III Directors shall terminate on the date of the 1999 Annual Meeting of
Stockholders. At each Annual Meeting of Stockholders beginning in 1999,
successors to the Class of directors whose term expires at that Annual Meeting
of Stockholders shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease in directorship shall be
apportioned among the Classes so as to maintain the number of directors in each
Class as nearly equal as possible, and any additional directors of any Class
elected to fill a vacancy resulting from an increase in such class shall hold
office only until the next election of directors of that Class by the
stockholders of the Corporation, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. Directors shall hold
office until the Annual Meeting of Stockholders for the year in which their
terms expire and until their successors shall be duly elected and qualified,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
Notwithstanding the foregoing, whenever the holders of any one or more classes
or series of Preferred Stock issued by the corporation shall have the right,
voting separately by class or series, to elect directors at an Annual or
Special Meeting of Stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation, or the resolution or resolutions
adopted by the board of directors creating such class or series, as the case
may be, applicable thereto, and such directors so elected shall not be divided
into classes pursuant to this Article EIGHTH unless expressly provided by such
terms.
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<PAGE> 1
EXHIBIT 3.2
=======================================
AMENDED AND RESTATED BY-LAWS
OF
BUDGET GROUP, INC.
=======================================
<PAGE> 2
AMENDED AND RESTATED BY-LAWS
OF
BUDGET GROUP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE I
OFFICES
1.01. Registered Office ............................................... 1
1.02. Other Offices ................................................... 1
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.01 Annual Meetings ................................................ 1
2.02 Special Meetings ............................................... 1
2.03 Notice of Meetings ............................................. 2
2.04 Waiver of Notice ............................................... 2
2.05 Adjournments ................................................... 2
2.06 Quorum ......................................................... 3
2.07 Voting ......................................................... 3
2.08 Proxies ........................................................ 3
2.09 Stockholders' Consent in Lieu of Meeting ....................... 3
ARTICLE III
BOARD OF DIRECTORS
3.01 General Powers ................................................. 4
3.02 Number and Term of Directors ................................... 4
3.03 Resignation .................................................... 4
3.04 Removal ........................................................ 4
3.05 Vacancies ...................................................... 5
3.06 Meetings ....................................................... 5
3.07 Committees of the Board ........................................ 6
3.08 Directors' Consent in Lieu of Meeting .......................... 7
3.09 Action by Means of Telephone or Similar
Communications Equipment ..................................... 7
3.10 Compensation ................................................... 8
</TABLE>
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<PAGE> 3
<TABLE>
ARTICLE IV
OFFICERS
<S> <C> <C>
4.01. Officers............................................ 8
4.02. Authority and Duties................................ 8
4.03. Term of Office, Resignation and Removal............. 8
4.04. Vacancies........................................... 9
4.05. The Chairman........................................ 9
4.06. The Chief Executive Officer......................... 9
4.07. The President....................................... 9
4.08. The Chief Operating Officer......................... 9
4.09. Vice Presidents..................................... 10
4.10. The Secretary....................................... 10
4.11. Assistant Secretaries............................... 10
4.12. The Chief Financial Officer......................... 10
4.13. Other Officers...................................... 11
ARTICLE V
CHECKS, DRAFTS, NOTES AND PROXIES
5.01. Checks, Drafts and Notes............................ 11
5.02. Execution of Proxies................................ 11
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
6.01. Certificates Evidencing Shares...................... 12
6.02. Stock Ledger........................................ 12
6.03. Transfers of Shares................................. 12
6.04. Addresses of Stockholders........................... 12
6.05. Lost, Destroyed and Mutilated Certificates.......... 13
6.06. Regulations; Transfer Agent and Registrar........... 13
6.07. Fixing Date for Determination of
Stockholders of Record............................ 13
ARTICLE VII
SEAL
7.01. Seal................................................ 13
</TABLE>
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<PAGE> 4
<TABLE>
ARTICLE VIII
FISCAL YEAR
<S> <C> <C>
8.01. Fiscal Year......................................... 14
ARTICLE IX
INDEMNIFICATION AND INSURANCE
9.01. Indemnification..................................... 14
9.02. Insurance for Indemnification....................... 16
ARTICLE X
AMENDMENTS
10.01. Amendments.......................................... 17
</TABLE>
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<PAGE> 5
AMENDED AND RESTATED
BY-LAWS
OF
BUDGET GROUP, INC.
ARTICLE I
OFFICES
SECTION 1.01. Registered Office. The registered office of Budget Group,
Inc. (the "Corporation") in the State of Delaware shall be at the principal
office of The Corporation Trust Company in the City of Wilmington, County of New
Castle, and the registered agent in charge thereof shall be The Corporation
Trust Company.
SECTION 1.02. Other Offices. The Corporation may also have an office or
offices at any other place or places within or without the State of Delaware as
the Board of Directors of the Corporation (the "Board") may from time to time
determine or the business of the Corporation may from time to time require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01. Annual Meetings. The annual meeting of stockholders of the
Corporation for the election of directors of the Corporation ("Directors"), and
for the transaction of such other business as may properly come before such
meeting, shall be held at such place, date and time as shall be fixed by the
Board and designated in the notice or waiver of notice of such annual meeting;
provided, however, that no annual meeting of stockholders need be held if all
actions, including the election of Directors, required by the General
Corporation Law of the State of Delaware (the "General Corporation Law") to be
taken at such annual meeting are taken by written consent in lieu of meeting
pursuant to Section 2.09 hereof.
SECTION 2.02. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called by the Board or the Chairman of the Board,
the Chief Executive Officer, the President or the Secretary of the Corporation
or by the recordholders of at least a majority of the combined voting power of
the shares of capital stock of the Corporation issued and
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<PAGE> 6
outstanding and entitled to vote thereat ("Shares"), to be held at such place,
date and time as shall be designated in the notice or waiver of notice thereof.
SECTION 2.03. Notice of Meetings. (a) Except as otherwise provided by
law, written notice of each annual or special meeting of stockholders stating
the place, date and time of such meeting and, in the case of a special meeting,
the purpose or purposes for which such meeting is to be held, shall be given
personally or by first-class mail (airmail in the case of international
communications) to each recordholder of Shares (a "Stockholder") entitled to
vote thereat, not less than 10 nor more than 60 days before the date of such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the Stockholder at such
Stockholder's address as it appears on the records of the Corporation. If,
prior to the time of mailing, the Secretary of the Corporation (the "Secretary")
shall have received from any Stockholder a written request that notices intended
for such Stockholder are to be mailed to some address other than the address
that appears on the records of the Corporation, notices intended for such
Stockholder shall be mailed to the address designated in such request.
(b) Notice of a special meeting of Stockholders may be given by the person
or persons calling the meeting, or, upon the written request of such person or
persons, such notice shall be given by the Secretary on behalf of such person or
persons. If the person or persons calling a special meeting of Stockholders
give notice thereof, such person or persons shall deliver a copy of such notice
to the Secretary. Each request to the Secretary for the giving of notice of a
special meeting of Stockholders shall state the purpose or purposes of such
meeting.
SECTION 2.04. Waiver of Notice. Notice of any annual or special meeting of
Stockholders need not be given to any Stockholder who files a written waiver of
notice with the Secretary, signed by the person entitled to notice, whether
before or after such meeting. Neither the business to be transacted at, nor the
purpose of, any meeting of Stockholders need be specified in any written waiver
of notice thereof. Attendance of a Stockholder at a meeting, in person or by
proxy, shall constitute a waiver of notice of such meeting, except when such
Stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the grounds that
the notice of such meeting was inadequate or improperly given.
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<PAGE> 7
SECTION 2.05. Adjournments. Whenever a meeting of Stockholders, annual
or special, is adjourned to another date, time or place, notice need not be
given of the adjourned meeting if the date, time and place thereof are
announced at the meeting at which the adjournment is taken. If the adjournment
is for more than 30 days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Stockholder entitled to vote thereat. At the adjourned meeting,
any business may be transacted which might have been transacted at the original
meeting.
SECTION 2.06. Quorum. Except as otherwise provided by law or the
Certificate of Incorporation of the Corporation, including any amendment or
restatement thereof (the "Certificate of Incorporation"), the presence in
person or by proxy of the recordholders of a majority of the combined voting
power of the Shares entitled to vote at a meeting of Stockholders shall
constitute a quorum for the transaction of business at such meeting. If,
however, such quorum shall not be present in person or by proxy at any meeting
of Stockholders, the Stockholders entitled to vote thereat may adjourn the
meeting from time to time in accordance with Section 2.05 hereof until a quorum
shall be present in person or by proxy.
SECTION 2.07. Voting. Each Stockholder shall be entitled to one vote
for every Share of Class A Common Stock held of record by such Stockholder and
each Stockholder shall be entitled to ten votes for every Share of Class B
Common Stock held of record by such Stockholder. The number of votes to which
Shares of other classes of capital stock that may from time to time be
authorized and issued by the Corporation shall be as set forth in the
Certificate of Incorporation. Except as otherwise provided by law or the
Certificate of Incorporation, the vote of a majority of the combined voting
power of the Shares represented in person or by proxy at any meeting at which a
quorum is present shall decide any question brought before such meeting.
SECTION 2.08. Proxies. Each Stockholder entitled to vote at a meeting
of Stockholders or to express, in writing, consent to or dissent from any
action of Stockholders without a meeting may authorize another person or
persons to act for such Stockholder by proxy. Such proxy shall be filed with
the Secretary before such meeting of Stockholders or such action of
Stockholders without a meeting, at such time as the Board may require. No proxy
shall be voted or acted upon more than three years from its date, unless the
proxy provides for a longer period.
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<PAGE> 8
SECTION 2.09. Stockholders' Consent in Lieu of Meeting. Any action
required by the General Corporation Law to be taken at any annual or special
meeting of Stockholders, and any action which may be taken at any annual or
special meeting of Stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the recordholders of Shares having not less than the
minimum number of votes necessary to authorize or take such action at a meeting
at which the recordholders of all Shares entitled to vote thereon were present
and voted.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. General Powers. The business and affairs of the
Corporation shall be managed by the Board, which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by law,
the Certificate of Incorporation or these By-laws directed or required to be
exercised or done by Stockholders.
SECTION 3.02. Number and Term of Directors. Subject to the rights of
the holders of any series of Preferred Stock to elect additional directors, the
number of Directors shall be three or such other number as shall be fixed from
time to time by the Board. Directors need not be Stockholders. The Directors
shall be and are divided into three classes, designated Class I, Class II and
Class III. Each Class shall consist, as nearly as may be possible, of one-third
of the total number of Directors constituting the entire Board. The term of the
initial Class I Directors shall terminate on the date of the 2001 Annual
Meeting of Stockholders; the term of the initial Class II Directors shall
terminate on the date of the 2000 Annual Meeting of Stockholders; and the term
of the initial Class III Directors shall terminate on the date of the 1999
Annual Meeting of Stockholders. At each annual meeting of Stockholders
beginning in 1999, successors to the Class of Directors whose term expires at
that annual meeting of Stockholders shall be elected for a three-year term. If
the number of Directors is changed, any increase or decrease in Directorship
shall be apportioned among the Classes so as to maintain the number of
Directors in each Class as nearly equal as possible, and any additional
Directors of any Class elected to fill a vacancy resulting from an increase in
such class shall hold office only until the next election of Directors of that
Class by the stockholders of the corporation, but in no case will a decrease in
the number of Directors shorten the term of any incumbent Director. Directors
shall hold office until the annual meeting of Stockholders for the year in
which their terms expire and until their successors shall be duly elected and
qualified, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Notwithstanding the foregoing,
whenever the holders of any one or more classes or series of Preferred Stock
issued by the Corporation shall have the right, voting separately by class or
series, to elect Directors at an annual or special meeting of Stockholders, the
election, term of office, filling of vacancies and other features of such
Directorships shall be governed by the terms of the Corporation's Certificate
of Incorporation.
SECTION 3.03. Resignation. Any Director may resign at any time by
giving written notice to the Board, the Chairman of the Board of the
Corporation (the "Chairman") or the Secretary. Such resignation shall take
effect at the time specified in such notice or, if the time be not specified,
upon receipt thereof by the Board, the Chairman or the Secretary, as the case
may be. Unless otherwise specified therein, acceptance of such resignation
shall not be necessary to make it effective.
SECTION 3.04. Removal. Subject to the rights of the holders of any
series of Preferred Stock then outstanding, any or all of the Directors may be
removed from office at any time for cause by vote of the recordholders of a
majority of the combined voting power of the Shares then entitled to vote at an
election of Directors, or by
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<PAGE> 9
written consent of the recordholders of Shares pursuant to Section 2.09 hereof.
SECTION 3.05. Vacancies. Subject to the rights of the holders of any
series of Preferred Stock then outstanding to fill Director vacancies, vacancies
occurring on the Board for any reason, including, without limitation, vacancies
occurring as a result of the creation of new directorships that increase the
number of Directors, may be filled by such vote or written consent or by vote
of the Board or by written consent of the Directors pursuant to Section 3.08
hereof. If the number of Directors then in office is less than a quorum, such
other vacancies may be filled by vote of a majority of the Directors then in
office or by written consent of all such Directors pursuant to Section 3.08
hereof. Unless earlier removed pursuant to Section 3.04 hereof, each Director
chosen in accordance with this Section 3.05 shall hold office until the next
annual election of Directors by the Stockholders and until his successor shall
be elected and qualified.
SECTION 3.06. Meetings. (a) Annual Meetings. As soon as practicable
after each annual election of Directors by the Stockholders, the Board shall
meet for the purpose of organization and the transaction of other business,
unless it shall have transacted all such business by written consent pursuant
to Section 3.08 hereof.
(b) Other Meetings. Other meetings of the Board shall be held at such
times as the Chairman, the President of the Corporation (the "President"), the
Secretary or a majority of the Board shall from time to time determine.
(c) Notice of Meetings. The Secretary shall give written notice to each
Director of each meeting of the Board, which notice shall state the place, date,
time and purpose of such meeting. Notice of each such meeting shall be given to
each Director, if by mail, addressed to him at his residence or usual place of
business, at least two days before the day on which such meeting is to be held,
or shall be sent to him at such place by telecopy, telegraph, cable, or other
form of recorded communication, or be delivered personally or by telephone not
later than the day before the day on which such meeting is to be held. A
written waiver of notice, signed by the Director entitled to notice, whether
before of after the time of the meeting referred to in such waiver, shall be
deemed equivalent to notice. Neither
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<PAGE> 10
the business to be transacted at, nor the purpose of any meeting of the Board
need be specified in any written waiver of notice thereof. Attendance of a
Director at a meeting of the Board shall constitute a waiver of notice of such
meeting, except as provided by law.
(d) Place of Meetings. The Board may hold its meetings at such place or
places within or without the State of Delaware as the Board or the Chairman may
from time to time determine, or as shall be designated in the respective
notices or waivers of notice of such meetings.
(e) Quorum and Manner of Acting. One-third of the total number of
Directors then in office (but in no event less than two if the total number of
directorships, including vacancies, is greater than one and in no event a
number less than one-third of the total number of directorships, including
vacancies) shall be present at any meeting of the Board in order to constitute
a quorum for the transaction of business at such meeting, and the vote of a
majority of those Directors present at any such meeting at which a quorum is
present shall be necessary for the passage of any resolution or act of the
Board, except as otherwise expressly required by law, the Certificate of
Incorporation or these By-laws. In the absence of a quorum for any such
meeting, a majority of the Directors present thereat may adjourn such meeting
from time to time until a quorum shall be present.
(f) Organization. At each meeting of the Board, one of the following
shall act as chairman of the meeting and preside, in the following order of
precedence:
(i) the Chairman;
(ii) Chief Executive Officer;
(iii) the President; or
(iv) any Director chosen by a majority of the Directors present.
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary, if an Assistant Secretary is present) whom the chairman of
the meeting shall appoint shall act as secretary of such meeting and keep the
minutes thereof.
SECTION 3.07. Committees of the Board. The Board may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more
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Directors. The Board may designate one or more Directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of such committee. In the absence or disqualfication of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another Director to act at the meeting in the place of any
such absent or disqualfied member. Any committee of the Board, to the extent
provided in the resolution of the Board designating such committee, shall have
and may exercise all the powers and authority of the Board in the management of
the business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
that no such committee shall have such power or authority in reference to
amending the Certificate of Incorporation (except that such a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board as provided in Section 151(a)
of the General Corporation Law, fix the designations and any of the preferences
or rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes of stock of
the Corporation or fix the number of shares of any series of stock or authorize
the increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation under Section 251 or 252 of the General Corporation Law,
recommending to the Stockholders the sale, lease or exchange of all or
substantially all the Corporation's property and assets, recommending to the
Stockholders a dissolution of the Corporation or the revocation of a
dissolution, or amending these By-laws; provided further, however, that, unless
expressly so provided in the resolution of the Board designating such committee,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law. Each committee
of the Board shall keep regular minutes of its proceedings and report the same
to the Board when so requested by the Board.
SECTION 3.08. Directors' Consent in Lieu of Meeting. Any action required
or permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by all
the members of the Board or such committee and such consent is filed with the
minutes of the proceedings of the Board or such committee.
-7-
<PAGE> 12
SECTION 3.09. Action by Means of Telephone or Similar Communications
Equipment. Any one or more members of the Board, or of any committee thereof,
may participate in a meeting of the Board or such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
a meeting by such means shall constitute presence in person at such meeting.
SECTION 3.10. Compensation. Unless otherwise restricted by the
Certificate of Incorporation, the Board may determine the compensation of
Directors. In addition, as determined by the Board, Directors may be reimbursed
by the Corporation for their expenses, if any, in the performance of their
duties as Directors. No such compensation or reimbursement shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV
OFFICERS
SECTION 4.01. Officers. The officers of the Corporation shall be the
Chairman, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer and the Secretary and may include one or
more Vice Presidents and one or more Assistant Secretaries. Any two or more
offices may be held by the same person.
SECTION 4.02. Authority and Duties. All officers shall have such
authority and perform such duties in the management of the Corporation as may
provided in these By-laws or, to the extent not so provided, by resolution of
the Board.
SECTION 4.03. Term of Office, Resignation and Removal. (a) Each officer
shall hold office until his successor has been appointed and qualified or his
earlier death or resignation or removal in the manner hereinafter provided.
(b) Any officer may resign at any time by giving written notice to the
Board, the Chairman, the President or the Secretary. Such resignation shall
take effect at the time specified in such notice or, if the time be not
specified, upon receipt thereof by the Board, the Chairman, the President or the
Secretary, as the case may be. Unless otherwise specified therein, acceptance
of such resignation shall not be necessary to make it effective.
-8-
<PAGE> 13
(c) All officers and agents appointed by the Board shall be subject to
removal, with or without cause, at any time by the Board or by the action of
the recordholders of a majority of the combined voting power of the Shares
entitled to vote thereon.
SECTION 4.04. Vacancies. Any vacancy occurring in any office of the
Corporation, for any reason, shall be filled by action of the Board. Unless
earlier removed pursuant to Section 4.03 hereof, any officer appointed by the
Board to fill any such vacancy shall serve only until such time as the
unexpired term of his predecessor expires unless reappointed by the Board.
SECTION 4.05. The Chairman. The Chairman shall have the power to call
special meetings of Stockholders, to call special meetings of the Board and, if
present, to preside at all meetings of Stockholders and all meetings of the
Board. The Chairman shall perform all duties incident to the office of Chairman
of the Board and all such other duties as may from time to time be assigned to
him by the Board or these By-laws.
SECTION 4.06 The Chief Executive Officer. The chief executive officer
(the "Chief Executive Officer") shall be the most senior officer of the
Corporation and shall generally direct the business and affairs of the
Corporation, subject to supervision and direction by the Board, and shall see
that all orders and resolutions of the Board are carried into effect. The Chief
Executive Officer shall perform all duties incident to the office of Chief
Executive Officer and all such other duties as may from time to time be
assigned to him by the Board or these By-laws.
SECTION 4.07 The President. The President shall have general and
active management and control of the business and affairs of the Corporation,
subject to supervision and direction by the Chief Executive Officer and the
Board, and shall see that all orders and resolutions of the Board and orders of
the Chief Executive Officer are carried into effect. The President shall
perform all duties incident to the office of President and all such other
duties as may from time to time be assigned to him by the Chief Executive
Officer or these By-laws.
SECTION 4.08 The Chief Operating Officer. The chief operating officer
(the "Chief Operating Officer") shall be generally responsible for the
day-to-day conduct of the Corporation's business, subject to supervision and
direction by the Chief Executive Officer and President, and shall see that all
orders of the Chief Executive Officer and President are carried into effect.
The Chief Operating Officer shall perform all
-9-
<PAGE> 14
duties incident to the office of Chief Operating Officer and all such other
duties as may from time to time be assigned to him by the Chief Executive
Officer, the President or these By-laws.
SECTION 4.09 Vice Presidents. Vice Presidents, if any, in order of
their seniority or in any other order determined by the Board, shall generally
assist the President and perform such other duties as the Board or the
President shall prescribe, and in the absence or disability of the President,
shall perform the duties and exercise the powers of the President.
SECTION 4.10. The Secretary. The Secretary shall, to the extent
practicable, attend all meetings of the Board and all meetings of Stockholders
and shall record all votes and the minutes of all proceedings in a book to be
kept for that purpose, and shall perform the same duties for any committee of
the Board when so requested by such committee. He shall give or cause to be
given notice of all meetings of Stockholders and of the Board, shall perform
such other duties as may be prescribed by the Board, the Chairman or the
President and shall act under the supervision of the Chairman. He shall keep in
safe custody the seal of the Corporation and affix the same to any instrument
that requires that the seal be affixed to it and which shall have been duly
authorized for signature in the name of the Corporation and, when so affixed,
the seal shall be attested by his signature or by the signature of the Chief
Financial Officer of the Corporation (the "Chief Financial Officer") or an
Assistant Secretary of the Corporation. He shall keep in safe custody the
certificate books and stockholder records and such other books and records of
the Corporation as the Board, the Chairman, the Chief Executive Officer or the
President may direct and shall perform all other duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
by the Board, the Chairman, the Chief Executive Officer or the President.
SECTION 4.11 Assistant Secretaries. Assistant Secretaries of the
Corporation ("Assistant Secretaries"), if any, in order of their seniority or
in any other order determined by the Board, shall generally assist the
Secretary and perform such other duties as the Board or the Secretary shall
prescribe, and, in the absence or disability of the Secretary, shall perform
the duties and exercise the powers of the Secretary.
SECTION 4.12 The Chief Financial Officer. The Chief Financial Officer
shall have the care and custody of all the funds of the Corporation and shall
deposit such funds in such banks or other depositories as the Board, or any
officer or officers, or any officer and agent jointly, duly authorized by
-10-
<PAGE> 15
the Board, shall, from time to time, direct or approve. He shall disburse the
funds of the Corporation under the supervision and direction of the Board, the
Chief Executive Officer, the Chief Operating Officer and the President. He
shall keep a full and accurate account of all moneys received and paid on
account of the Corporation and shall render a statement of his accounts
whenever the Board, the Chairman, the Chief Executive Officer or the President
shall so request. The Chief Financial Officer shall also be the principal
accounting officer of the Corporation, unless the Board shall assign such
duties to another officer. He shall perform all other necessary actions and
duties in connection with the administration of the financial affairs of the
Corporation and shall generally perform all the duties usually appertaining to
the office of treasurer of a corporation. When required by the Board, he shall
give bonds for the faithful discharge of his duties in such sums and with such
sureties as the Board shall approve.
SECTION 4.13 Other Officers. The Board may designate and appoint by
resolution such other officers, including without limitation a treasurer,
assistant treasurers and a controller, as they determine to be in the best
interests of the Corporation. The duties and obligations of each such officer
shall be as set forth in the resolution designating and appointing such officer.
ARTICLE V
CHECKS, DRAFTS, NOTES AND PROXIES
SECTION 5.01. Checks, Drafts and Notes. All checks, drafts and other orders
for the payment of money, notes and other evidences of indebtedness issued in
the name of the Corporation shall be signed by such officer or officers, agent
or agents of the Corporation and in such manner as shall be determined, from
time to time, by resolution of the Board.
SECTION 5.02. Execution of Proxies. The Chairman, the Chief Executive
Officer or the President, or, in the absence or disability of any of them, any
Vice President, may authorize, from time to time, the execution and issuance of
proxies to vote shares of stock or other securities of other corporations held
of record by the Corporation and the execution of consents to action taken or to
be taken by any such corporation. All such proxies and consents, unless
otherwise authorized by the Board, shall be signed in the name of the
Corporation by the Chairman, the Chief Executive Officer, the President or any
Vice President.
-11-
<PAGE> 16
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
SECTION 6.01. Certificates Evidencing Shares. Shares may, but need not
be, represented by certificates in such from or forms as shall be approved by
the Board. Certificates shall be issued in consecutive order and shall be
numbered in the order of their issue, and shall be signed by the Chairman, the
President or any Vice President and by the Secretary or any Assistant Secretary.
Any signature on the certificate may be a facsimile. In the event any such
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to hold such office or to be employed by the
Corporation before such certificate is issued, such certificate may be issued
by the Corporation with the same effect as if such officer had held such
office on the date of issue.
SECTION 6.02 Stock Ledger. A stock ledger in one or more counterparts
shall be kept by the Secretary or by a registrar duly appointed by the
Corporation, in which shall be recorded the name and address of each person,
firm or corporation owning the Shares evidenced by each certificate evidencing
Shares issued by the Corporation, the number of Shares evidenced by each such
certificate, the date of issuance thereof and, in the case of cancellation, the
date of cancellation. Except as otherwise expressly required by law, the person
in whose name Shares stand on the stock ledger of the Corporation shall be
deemed the owner and recordholder thereof for all purposes.
SECTION 6.03 Transfers of Shares. Registration of transfers of Shares
shall be made only in the stock ledger of the Corporation upon request of the
registered holder of such shares, of his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary or with the
registrar of the Corporation, and upon the surrender of the certificate or
certificates evidencing such Shares properly endorsed or accompained by a
stock power duly executed, together with such proof of the authenticity of
signatures as the Corporation may reasonably required.
SECTION 6.04 Addresses of Stockholders. Each Stockholder shall
designate to the Secretary an address at which notices of meetings and
all other corporate notices may be served or mailed to such Stockholder, and, if
any Stockholder shall fail to so designate such an address, corporate notices
may be served upon such Stockholder by mail directed to the mailing address, if
any, as the same appears in the stock ledger of the Corporation or at the last
known mailing address of such Stockholder.
-12-
<PAGE> 17
SECTION 6.05. Lost, Destroyed and Mutilated Certificates. Each
recordholder of Shares shall promptly notify the Corporation of any loss,
destruction or mutilation of any certificate or certificates evidencing any
Share or Shares of which he is the recordholder. The Board may, in its
discretion, cause the Corporation or its transfer agent to issue a new
certificate in place of any certificate theretofore issued by it and alleged to
have been mutilated, lost, stolen or destroyed, upon the surrender of the
mutilated certificate or, in the case of loss, theft or destruction of the
certificate, upon satisfactory proof of such loss, theft or destruction, and the
Board may, in its discretion, require the recordholder of the Shares evidenced
by the lost, stolen or destroyed certificate or his legal representative to give
the Corporation a bond sufficient to indemnify the Corporation against any claim
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
SECTION 6.06. Regulations; Transfer Agent and Registrar. The Board may
make such other rules and regulations as it may deem expedient, not inconsistent
with these By-laws, concerning the issue, transfer and registration of
certificates evidencing Shares including, without limitation, the appointment of
one or more transfer agents and one or more registrars.
SECTION 6.07. Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the Stockholders entitled to notice
of or to vote at any meeting of Stockholders or any adjournment thereof, or to
express consent to, or to dissent from, corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board may fix, in advance, a record date, which shall not be
more than 60 nor less than 10 days before the date of such meeting, nor more
than 60 days prior to any other such action. A determination of the
Stockholders entitled to notice of or to vote at a meeting of Stockholders
shall apply to any adjournment of such meeting; provided, however, that the
Board may fix a new record date for the adjourned meeting.
ARTICLE VII
SEAL
SECTION 7.01. Seal. The Board may approve and adopt a corporate seal,
which shall be in the form of a circle and shall
-13-
<PAGE> 18
bear the full name of the Corporation, the year of its incorporation and the
words "Corporate Seal Delaware".
ARTICLE VIII
FISCAL YEAR
SECTION 8.01. Fiscal Year. The fiscal year of the Corporation shall end
on the thirty-first day of December of each year unless changed by resolution of
the Board.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
SECTION 9.01. Indemnification. (a) The Corporation shall indemnify any
person 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) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or
-14-
<PAGE> 19
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 9.01 (a) and (b) of these
By-laws, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under Section 9,01 (a) and (b) of these By-laws
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in Section 9.01 (a) and (b) of
these By-laws. Such determination shall be made (i) by the Board by a majority
vote of a quorum consisting of directors who were not parties to such action,
suite or proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders of the
Corporation.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation pursuant to this Article IX. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the Board deems appropriate.
-15-
<PAGE> 20
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, other Sections of this Article IX shall not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any law, by-law, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in an official
capacity and as to action in another capacity while holding such office.
(g) For purposes of this Article IX, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article IX with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(h) For purposes of this Article IX, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves service by, such director, officer, employee or
agent with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
IX.
(i) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article IX shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
SECTION 9.02. Insurance for Indemnification. The Corporation may purchase
and maintain insurance on behalf of any
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<PAGE> 21
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against such liability
under the provisions of Section 145 of the General Corporation Law.
ARTICLE X
AMENDMENTS
SECTION 10.01. Amendments. The Board may adopt, amend or repeal the
Corporation's By-laws unless (a) the Certificate of Incorporation or the
General Corporation Law reserves this power exclusively to the Stockholders in
whole or in part; or (b) the Stockholders in adopting, amending or repealing a
particular By-law expressly provide that the Board may not amend or repeal that
By-law. The Stockholders of the Corporation may adopt, amend or repeal the
Corporation's By-laws even though the By-laws may also be adopted, amended or
repealed by its Board.
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUDGET GROUP, INC. FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 1998 AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 582,770
<SECURITIES> 0
<RECEIVABLES> 308,196
<ALLOWANCES> 0<F1>
<INVENTORY> 3,322,461
<CURRENT-ASSETS> 4,213,427
<PP&E> 203,294
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 5,381,269
<CURRENT-LIABILITIES> 666,153
<BONDS> 3,773,429
291,010
0
<COMMON> 359
<OTHER-SE> 650,318
<TOTAL-LIABILITY-AND-EQUITY> 5,381,269
<SALES> 1,070,337
<TOTAL-REVENUES> 1,070,337
<CGS> 211,195
<TOTAL-COSTS> 764,113
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93,495
<INCOME-PRETAX> 1,534
<INCOME-TAX> (447)
<INCOME-CONTINUING> 1,330
<DISCONTINUED> 0
<EXTRAORDINARY> (45,296)
<CHANGES> 0
<NET-INCOME> (43,966)
<EPS-PRIMARY> (1.56)
<EPS-DILUTED> (1.52)
<FN>
<F1>RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE
BALANCE SHEET.
<F2>PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON
THE BALANCE SHEET.
</FN>
</TABLE>
