<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-59385
BUDGET GROUP, INC.
6,161,855 SHARES
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
$45,000,000 AGGREGATE PRINCIPAL AMOUNT
6.85% CONVERTIBLE SUBORDINATED NOTES, SERIES B, DUE 2007
This Prospectus relates to an aggregate of (i) up to 6,161,855 shares (the
"Shares") of Class A Common Stock, par value $.01 per share ("Class A Common
Stock"), of Budget Group, Inc. (the "Company"); and (ii) up to $45,000,000
aggregate principal amount of the Company's 6.85% Convertible Subordinated
Notes, Series B, due 2007 (the "Convertible Notes") which may be offered for
sale by persons (the "Selling Securityholders") who have acquired such
securities from the Company in the acquisition of a business by the Company not
involving a public offering and in certain private placement transactions. See
"Selling Securityholders". The Company will not receive any of the proceeds from
the sale of the Shares or the Convertible Notes. The Company is registering the
Shares and the Convertible Notes for sale to provide the holders thereof with
freely tradeable securities, but the registration of such Shares and Convertible
Notes does not necessarily mean that any of such Shares or Convertible Notes
will be offered or sold by the holders thereof.
The Company has two classes of Common Stock, the Class A Common Stock, par
value $.01 per share, and the Class B Common Stock, par value $.01 per share.
Holders of the Class A Common Stock are entitled to one vote per share and
holders of the Class B Common Stock are entitled to ten votes per share. The
Class A Common Stock is listed on the New York Stock Exchange (the "NYSE") under
the symbol "BD".
SEE "INVESTMENT CONSIDERATIONS" BEGINNING ON PAGE 4 FOR CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE CLASS A COMMON STOCK AND THE
CONVERTIBLE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Selling Securityholders from time to time may offer and sell the Shares
or the Convertible Notes directly or through agents or broker-dealers on terms
to be determined at the time of sale. To the extent required, the names of any
agent or broker-dealer and applicable commissions or discounts and any other
required information with respect to any particular offer will be set forth in
an accompanying Prospectus Supplement. See "Plan of Distribution". Each of the
Selling Securityholders reserves the sole right to accept or reject, in whole or
in part, any proposed purchase of the Shares or the Convertible Notes to be made
directly or through agents.
The Selling Securityholders and any agents or broker-dealers that
participate with the Selling Securityholders in the distribution of Shares or
Convertible Notes may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 (the "Securities Act"), and any commissions received by
them and any profit on the resale of the Shares or Convertible Notes may be
deemed to be underwriting commissions or discounts under the Securities Act.
The date of this Prospectus is July 30, 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference section of the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its Regional Offices
located at 7 World Trade Center, Suite 1300, New York, New York 10048, and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a World Wide Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants such as the Company which file electronically with the Commission.
In addition, the Company's Class A Common Stock currently is traded on the New
York Stock Exchange ("NYSE") and such reports, proxy and information statements
and other information concerning the Company can be inspected and copied at the
offices of the NYSE located at 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Class A Common Stock and
Convertible Notes offered hereby. This Prospectus, which is a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company, the
Class A Common Stock and the Convertible Notes, reference is made to the
Registration Statement and the exhibits and schedules filed as a part thereof.
The Company believes that all statements made herein that summarize the
provisions of any documents accurately describe the material provisions of all
such referenced documents. The Registration Statement and the exhibits and
schedules thereto may be inspected, without charge, at the public reference
section or regional offices of the Commission at the addresses indicated above.
Copies of the Registration Statement can be obtained from the public reference
section of the Commission upon payment of prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
(File No. 0-23962) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1997;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31,
1998;
(c) The Company's Current Reports on Form 8-K dated July 2, 1998,
June 19, 1998, May 28, 1998, April 6, 1998, March 4, 1998, January 28,
1998 and May 13, 1997, as amended;
(d) The consolidated balance sheets of Ryder TRS, Inc. as of December
31, 1996 and 1997 and the related consolidated statements of operations,
stockholders' equity and cash flows for the period from September 5, 1996
(date of inception) to December 31, 1996 and the year ended December 31,
1997, contained in the Company's Registration Statement on Form S-4 (File
No. 333-49679) filed on April 8, 1998;
(e) The combined balance sheet of Ryder Consumer Truck Rental (a
division of Ryder Truck Rental, Inc., a wholly-owned subsidiary of Ryder
System, Inc.) as of October 16, 1996, and the related combined statements
of earnings and changes in Ryder investment and cash flows for the period
from January 1, 1996 to October 16, 1996, contained in the Company's
Registration Statement on Form S-4 (File No. 333-49679) filed on April 8,
1998; and
(f) The description of the Common Stock of the Company included in the
Company's Registration Statement on Form 8-A, dated April 15, 1997.
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All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the securities made hereby shall be deemed to
be incorporated by reference in this Prospectus and made a part hereof from the
date of the filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other document subsequently filed with the
Commission which also is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference herein (not including
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to: Budget Group, Inc., 4225 Naperville Road, Lisle, Illinois 60532,
Attention: Executive Vice President and General Counsel, telephone (630)
955-7571.
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INVESTMENT CONSIDERATIONS
Certain matters discussed in this Prospectus are forward-looking statements
within the meaning of the federal securities laws. Although the Company believes
that the expectations reflected in such forward-looking statements are based
upon reasonable assumptions, the Company can give no assurance that its
expectations will be achieved. Prospective investors should consider carefully
the following factors, as well as the factors 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 for the year ended December
31, 1997, which Annual Report is incorporated herein by reference, in addition
to other information included in this Prospectus before purchasing any of the
shares of Class A Common Stock or the Convertible Notes.
As used in this Prospectus, unless the context otherwise requires: (i)
"TEAM" refers to the Company and its subsidiaries prior to its acquisition of
Budget Rent a Car Corporation on April 29, 1997 (the "Budget Acquisition"); (ii)
"BRACC" refers to Budget Rent a Car Corporation and its subsidiaries; (iii)
"Budget" or the "Company" refers to TEAM (including BRACC) after giving effect
to the Budget Acquisition; (iv) the "Budget System" refers to the business of
renting cars and trucks and retailing late model vehicles conducted by the
Company and its franchisees under the Budget name and (v) the "Ryder TRS
Acquisition" refers to the Company's acquisition of Ryder TRS, Inc. ("Ryder
TRS").
RISKS RELATING TO THE RYDER TRS ACQUISITION
The Company will be required to devote significant resources to the
combination and integration of the Ryder TRS business with the Company's
existing truck rental operations. The difficulties of managing such combination
and integration are increased by the necessity of coordinating the operations of
geographically diverse organizations, of integrating different strategies and
operating systems and of integrating management and operating personnel from
both businesses. The success of the Company following the Ryder TRS Acquisition
will depend on the ability of the Company's management team to: (i) manage a
significantly larger organization; (ii) maintain and further develop
relationships with Ryder TRS's independent dealers; and (iii) integrate Ryder
TRS with the Company's existing truck rental operations. There can be no
assurance that the Company's management team will be able to successfully manage
the combined truck rental operations of Ryder TRS and the Company. An inability
to successfully manage the integration of the truck rental operations of Ryder
TRS and the Company would have a material adverse effect on the Company's
financial condition and results of operations.
Pursuant to the Ryder TRS Acquisition, the Company issued 3,455,206 shares
of Class A Common Stock, paid $125 million in cash, issued warrants to purchase
Class A Common Stock with a value of up to $19 million and is obligated to
deliver a make-whole payment in the event that the market value of the Class A
Common Stock declines over stated measurement periods (two 30-day periods
ending, respectively, on June 19, 1999 and February 19, 2000). Such make-whole
payment may be made in cash or stock, at the Company's option, and could, if
made, have a dilutive effect on the earnings per share of Class A Common Stock.
SUBORDINATION OF CONVERTIBLE NOTES
The Convertible Notes are unsecured and subordinated in right of payment in
full to all existing and future senior indebtedness of the Company. As a result
of such subordination, in the event of the Company's liquidation or insolvency,
payment default with respect to senior indebtedness, a covenant default with
respect to senior indebtedness, or upon acceleration of the Convertible Notes
due to an event of default, the assets of the Company will be available to pay
obligations on the Convertible Notes only after all senior indebtedness has been
paid in full, and there may not be sufficient assets remaining to pay amounts
due on any or all of the Convertible Notes then outstanding. The Company may
from time to time incur indebtedness constituting senior indebtedness. The
Convertible Notes are also effectively subordinated in right of payment to all
indebtedness and other liabilities, including trade payables, of the Company's
subsidiaries. The Indenture (as defined herein) does not prohibit or limit the
incurrence of
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senior indebtedness or other indebtedness and other liabilities by the Company
or its subsidiaries. The incurrence of additional indebtedness and other
liabilities by the Company or its subsidiaries could adversely affect the
Company's ability to pay its obligations on the Convertible Notes. In addition,
the cash flow and ability of the Company to service debt, including the
Convertible Notes, may in the future become dependent in part upon the earnings
from the business conducted by the Company through subsidiaries and distribution
of those earnings, or upon loans or other payments of funds by those
subsidiaries to the Company. See "Description of Convertible
Notes -- Subordination."
LIMITATIONS ON REPURCHASE OF CONVERTIBLE NOTES
Upon a Change of Control (as defined herein), the Company is obligated to
offer to repurchase all Convertible Notes whereupon each holder of Convertible
Notes will have the right, at the holder's option, to accept such offer with
respect to all or a portion of such holder's Convertible Notes. If a Change of
Control were to occur, there can be no assurance that the Company would have
sufficient funds to repurchase all Convertible Notes tendered by the holders
thereof. In addition, the Company's repurchase of Convertible Notes as a result
of the occurrence of a Change of Control may be prohibited or limited by, or
create an event of default under, the terms of agreements related to borrowings
which the Company may enter into from time to time, including agreements
relating to senior indebtedness.
ABSENCE OF PUBLIC MARKET FOR THE CONVERTIBLE NOTES
There is currently no public market for the Convertible Notes, and there
can be no assurance as to the liquidity of the Convertible Notes, the ability of
any holders of Convertible Notes to sell their Convertible Notes or the prices
at which holders of the Convertible Notes would be able to sell their
Convertible Notes. The Company does not intend to list the Convertible Notes on
any securities exchange or to seek the admission thereof to trading on the New
York Stock Exchange or any other exchange or automated securities quotation
system. The Convertible Notes will be tradable in the over-the-counter market,
but any such trading may be limited and sporadic. If a market for the
Convertible Notes does develop, the Convertible Notes may trade at a discount
from their initial trading price depending on prevailing interest rates, the
market for similar securities, performance of the Company, performance of the
vehicle rental and sale industry and other factors. There can be no assurance
that there will be a liquid trading market for the Convertible Notes or that any
trading market that does develop will continue.
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THE COMPANY
THE COMPANY
The Company, through subsidiary companies and franchisees, operates the
Budget System and related transportation service businesses. The Budget System
is the third largest worldwide car and truck rental system, with over 3,200
locations and a peak fleet size during 1997 of 283,000 cars and 22,500 trucks.
The Budget System includes locations in both the airport and local (downtown and
suburban) markets in all major metropolitan areas in the United States, in many
other small and mid-size U.S. markets and in more than 120 countries worldwide.
The Budget System had approximately 509 Budget-owned locations in the United
States and 71 Budget-owned locations outside of the United States at December
31, 1997. In addition, Budget franchisees operated approximately 455
royalty-paying franchise locations in the United States and 2,171 locations
internationally at December 31, 1997.
Management's long-term strategy is to create a network of
transportation-related companies which leverage the asset base and expertise of
Budget Group. Budget Group's assets include a trade name recognized around the
world; locations for the rental, sale and maintenance of vehicles; a workforce
that is proficient in acquiring, financing, monitoring, maintaining and selling
vehicles; and advanced information systems to support these operations.
Increasing the utilization of these assets by acquiring related businesses
delivers economies of scale and increases profitability. The economies of scale
are achieved primarily in the areas of purchasing, financing, facilities
utilization and management, maintenance and advertising. In pursuit of this
strategy, the Company has substantially expanded its operations during the last
15 months, principally through its acquisitions of BRACC, Premier Car Rental LLC
("Premier Car Rental"), Cruise America, Inc. ("Cruise America") and Ryder TRS.
Budget-owned locations in the United States account for approximately 80%
of the Budget System's U.S. vehicle rental revenues, while Budget-owned
locations outside the United States account for approximately nine percent of
the Budget System's international vehicle rental revenues. Management believes
this high level of domestic corporate ownership is a competitive advantage in
the marketplace as it facilitates more consistent delivery of high quality
services and improved operations and communications, thereby strengthening the
Budget brand name among consumers.
The Budget System is one of only three vehicle rental systems that offer
rental vehicles throughout the world under a single brand name, with locations
in Europe, Canada, Latin America, the Middle East, Asia/Pacific and Africa. The
Budget System currently maintains more local market rental locations throughout
the world than most of its major competitors and is unique among major car
rental systems in that it rents trucks in most major markets worldwide. The
Budget System, including the franchisees and agents acquired as a result of the
Ryder TRS Acquisition, operates the second largest consumer truck rental
business and the third largest general use car and truck rental system in the
world.
In addition, the Company owns Cruise America, one of the largest North
American companies specializing primarily in the rental and sale of recreational
vehicles with 92 locations; Premier Car Rental, which serves the insurance
replacement market through a network of 150 locations in 17 major U.S. markets;
Budget Car Sales, Inc., one of the largest independent retailers of late model
vehicles in the United States, which operates 30 retail car sales facilities;
and VPSI, Inc., which leases vans for van pooling operations in 28 states.
THE RYDER TRS ACQUISITION
On June 19, 1998, the Company acquired Ryder TRS, the second largest
provider of truck rentals and related moving supplies and services to consumers
and light commercial users in the United States, with a fleet of approximately
29,000 trucks as of December 31, 1997. As consideration for the Ryder TRS
Acquisition, the Company issued 3,455,206 shares of Class A Common Stock, paid
$125 million in cash and issued warrants to purchase Class A Common Stock, the
value of which is capped at $19 million. In addition, the Company agreed to pay
Ryder TRS stockholders a make-whole payment, the amount of
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which will depend on the performance of the Class A Common Stock following the
Ryder TRS Acquisition. The Company also assumed approximately $522.0 million of
Ryder TRS's debt.
Ryder TRS rents trucks to both individual consumers and businesses.
Consumers rent trucks primarily to move household goods. Ryder TRS also serves a
wide range of businesses that rent light- and medium-duty trucks (i.e., trucks
with a gross vehicle weight of less than 26,000 pounds) for a variety of light
commercial applications. Commercial customers range from small local businesses,
such as florists, package delivery companies and local private moving companies,
to large national companies that rent trucks primarily for the transportation
and delivery of inventory and packages. Commercial rentals complement Ryder
TRS's consumer rentals by enabling Ryder TRS to improve utilization of its
trucks on weekdays, when consumer demand is typically lower than it is on
weekends.
The Company's management believes that business conducted by Ryder TRS will
complement and enhance Budget's truck rental business. As a result of the Ryder
TRS Acquisition, the Company, its franchisees and agents operate the second
largest consumer truck rental business and third largest general use car and
truck rental system in the world. The Ryder TRS Acquisition is expected to
result in significant cost savings, including (i) significant economies of scale
in fleet purchasing and management, vehicle maintenance and in the cost of
parts, supplies and equipment and (ii) the opportunity to consolidate fleet and
yield management systems.
The principal executive offices of the Company are located at 125 Basin
Street, Suite 210, Daytona Beach, Florida 32114 (telephone number: (904)
238-7035).
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THE OFFERING
This Prospectus relates to the sale by the securityholders listed herein
(the "Selling Securityholders") of the Company of (i) up to 246,167 shares of
Class A Common Stock (the "Secondary Shares") acquired by certain Selling
Securityholders in a private placement in connection with the Company's
acquisition of the St. Louis Budget franchise (the "St. Louis Acquisition"),
which was consummated in November 1997, (ii) up to 1,609,436 shares of Class A
Common Stock (the "Conversion Shares" and, together with the Secondary Shares,
the "Shares") issuable upon conversion of the Convertible Notes, (iii) up to
4,306,252 shares of Class A Common Stock issued to certain Selling
Securityholders in connection with the conversion of $80,000,000 aggregate
principal amount of the Company's 7.0% Convertible Subordinated Notes, Series A,
due 2007 (the "Series A Convertible Notes"), which occurred in June, 1998, and
to represent the then present value of the interest payments that such Selling
Securityholders would have otherwise received after June, 1998 had the Series A
Convertible Notes not been redeemed in full until April 29, 2000, and (iv)
$45,000,000 aggregate principal amount of the Convertible Notes which were
issued in connection with a private placement exempt from the registration
requirements of the Securities Act).
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares or the Convertible Notes by the Selling Securityholders but has agreed to
bear certain expenses of registration of the Shares and the Convertible Notes
under Federal and state securities laws. The Company is registering the Shares
and the Convertible Notes for sale to provide the holders thereof with freely
tradeable securities, but the registration of such Shares and Convertible Notes
does not necessarily mean that any of such Shares or Convertible Notes will be
offered or sold by the holders thereof.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the three months ended
March 31, 1998 was 0.88, and for the years ended December 31, 1997, 1996, 1995,
1994 and 1993 was 1.39, 1.32, 1.14, 0.94, and 0.67 respectively. The ratio for
the three months ended March 31, 1998 includes earnings and fixed charges from
BRACC.
For purposes of computing these ratios, earnings have been calculated by
adding fixed charges, excluding capitalized interest, to pre-tax income from
continuing operations. Fixed charges consist of interest costs, whether expensed
or capitalized, and amortization of debt issuance costs.
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SELLING SECURITYHOLDERS
As described herein, the Selling Securityholders are those persons who (i)
acquired shares of Class A Common Stock in the St. Louis Acquisition; (ii)
received shares of Class A Common Stock as a charitable gift from a selling
securityholder who received such shares in the St. Louis Acquisition; (iii)
received Shares of Class A Common Stock in connection with the conversion of
their Series A Convertible Notes; or (iv) purchased Convertible Notes from the
Company. The following table provides the names of and the number of shares of
Common Stock beneficially owned by each Selling Securityholder (presented on an
as-converted basis in the case of holders of the Convertible Notes). Since the
Selling Securityholders may sell all, some or none of their Shares and
Convertible Notes or, in the case of holders of Convertible Notes, convert the
same in whole or in part into Shares, no estimate can be made of the aggregate
number of Shares and Convertible Notes that are to be offered hereby or that
will be owned by each Selling Securityholder upon completion of the offering to
which this Prospectus relates. None of the Selling Securityholders has any
material relationship with the Company.
The Shares and Convertible Notes offered by this Prospectus may be offered
from time to time by the Selling Securityholders named below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
SERIES B
NUMBER OF CONVERTIBLE
NUMBER OF SHARES NOTES
SHARES WHICH MAY BE WHICH MAY BE
BENEFICIALLY OFFERED OFFERED
NAME OWNED HEREBY HEREBY
- ---- ------------ ------------ ------------
<S> <C> <C> <C>
ST. LOUIS STOCKHOLDERS:
David K. Adam(1)............................... 11,100 11,100 0
James L. Cowhey(1)(2).......................... 16,423 16,423 0
Jill Cowhey(1)................................. 1,242 1,242 0
Kathleen P. Cowhey(1).......................... 4,597 4,597 0
Kevin P. Cowhey(1)(3).......................... 11,247 11,247 0
Michael J. Cowhey(1)........................... 13,104 13,104 0
Sandra Cowhey(1)............................... 2,737 2,737 0
Sheila Cowhey(1)............................... 2,258 2,258 0
Terry J. Cowhey(1)(4).......................... 67,826 67,826 0
Peter K. Cowhey(1)(5).......................... 41,605 41,605 0
Mary Ann Morgan(1)(6).......................... 15,882 15,882 0
Michael P. Morgan(1)(7)........................ 30,927 30,927 0
Louis Waltke(1)................................ 2,258 2,258 0
Susan C. Waltke(1)(8).......................... 23,644 23,644 0
The Curators of the University of Missouri..... 306 306 0
The Saint Louis Archdiocese.................... 306 306 0
The New City School............................ 245 245 0
The St. Louis Cathedral........................ 153 153 0
The Arthritis Foundation....................... 184 184 0
The Animal Health Foundation................... 123 123 0
--------- --------- -----------
Subtotal............................. 246,167 246,167 0
--------- --------- -----------
CONVERTIBLE NOTEHOLDERS:
John Hancock Mutual Life Insurance Company..... 1,156,765 1,156,765 $ 4,500,000
John Hancock Variable Life Insurance Company... 125,538 125,538 500,000
New York Life Insurance Company................ 1,434,217 1,434,217 10,000,000
Massachusetts Mutual Life Insurance Company.... 313,847 313,847 1,250,000
Massmutual Corporate Investors................. 107,656 107,656 0
Massmutual Corporate Value Partners Limited.... 107,656 107,656 0
Massmutual Participation Investors............. 53,827 53,827 0
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
SERIES B
NUMBER OF CONVERTIBLE
NUMBER OF SHARES NOTES
SHARES WHICH MAY BE WHICH MAY BE
BENEFICIALLY OFFERED OFFERED
NAME OWNED HEREBY HEREBY
- ---- ------------ ------------ ------------
<S> <C> <C> <C>
Metropolitan Life Insurance Company............ 2,127,118 1,435,118 2,500,000
The Northwestern Mutual Life Insurance
Company...................................... 268,240 268,240 7,500,000
Signature 1A (Cayman), Ltd..................... 242,226 242,226 0
Teachers Insurance and Annuity Association of
America...................................... 357,653 357,653 10,000,000
The Travelers Insurance Company................ 55,883 55,883 1,562,500
The Travelers Indemnity Company................ 78,236 78,236 2,187,500
The Variable Annuity Life Insurance Company.... 178,826 178,826 5,000,000
--------- --------- -----------
Subtotal.................................. 6,607,688 5,915,688 $45,000,000
--------- --------- -----------
Total................................ 6,853,855 6,161,855 $45,000,000
========= ========= ===========
</TABLE>
- ---------------
(1) Includes certain shares of Class A Common Stock that were placed in escrow.
(2) Includes 4,043 shares held in trust for Lauren S. Cowhey and 1,167 shares
held in trust for Leah C. Cowhey, with respect to which Mr. Cowhey and his
wife are co-trustees.
(3) Includes 4,043 shares held in trust for Brooke E. Cowhey, with respect to
which Mr. Cowhey is co-trustee with his former wife, and 1,000 shares held
in trust for Brett Cowhey.
(4) Includes 6,383 shares held in trust for Sarah P. Cowhey and 3,507 shares
held in trust for Ian P. Cowhey.
(5) Includes 5,002 shares held in trust for Matthew K. Cowhey, 2,018 shares held
in trust for Timothy J. Cowhey, and 3,488 shares held in trust for Casey M.
Cowhey.
(6) Includes 7,102 shares held in trust for Neil A. Cowhey, with respect to
which Ms. Morgan and her sister, Susan C. Waltke, are co-trustees.
(7) Includes 3,740 shares held in trust for Christian P. Morgan and 4,043 shares
held in trust for Michaela Morgan with respect to which Mr. Morgan and his
wife are co-trustees.
(8) Includes 4,043 shares held in trust for Andrew J. Waltke and 2,529 shares
held in trust for Scott A. Waltke with respect to which Ms. Waltke and her
husband are co-trustees.
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DESCRIPTION OF CONVERTIBLE NOTES
The Convertible Notes registered hereby are issued under an Indenture,
dated as of January 9, 1998 (the "Indenture"), between the Company and The Chase
Manhattan Bank, as Trustee (the "Trustee"), a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. Any
capitalized terms used herein and not defined shall have the meaning set forth
in the Indenture. References in this section to the "Company" are solely to
Budget Group, Inc. and not to its subsidiaries. The following summaries of
certain provisions of the Indenture are subject to, and are qualified in their
entirety by reference to, the detailed provisions of the Convertible Notes and
the Indenture, including the definitions therein of certain terms. Section
references below are references to Sections of the Indenture.
GENERAL
The Convertible Notes are unsecured subordinated obligations of the
Company. The aggregate principal amount of the Convertible Notes is limited to
$45 million. The Convertible Notes mature on April 29, 2007. The Convertible
Notes bear interest at the rate of 6.85% per annum, payable semiannually on
April 29 and October 29 of each year.(sec. 301)
The Convertible Notes are convertible into Class A Common Stock initially
at the respective conversion rates stated herein, subject to adjustment upon the
occurrence of certain events described under "-- Conversion Rights," at any time
prior to the close of business on the Business Day preceding the maturity date,
unless previously called for redemption or tendered for repurchase. (sec. 1301)
The Convertible Notes are redeemable under the circumstances and at the
redemption prices set forth below under "-- Optional Redemption," plus accrued
interest to the redemption date. (sec. 1101)
The Convertible Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple thereof. (sec.
302) No service charge will be made for any registration of transfer or exchange
of Convertible Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith,
other than certain exchanges listed in the Indenture. (sec. 305)
CONVERSION RIGHTS
The holder of any Convertible Note has the right, at the holder's option,
to convert any portion of the principal amount of a Convertible Note into shares
of Class A Common Stock at any time prior to the close of business on the
Business Day prior to the maturity date, unless previously redeemed or
repurchased, at the applicable Conversion Price (subject to adjustment as
described below). Each Convertible Note is convertible into such number of whole
shares of Class A Common Stock as is equal to the unpaid principal amount being
converted of Convertible Notes divided by the initial conversion price of $27.96
per share, subject to adjustment (the "Conversion Price"). The right to convert
a Convertible Note called for redemption will terminate at the close of business
on the business day prior to the Redemption Date for such Convertible Note, and
the right to convert a Convertible Note tendered for repurchase will terminate
at the close of business on the Repurchase Date for such Convertible Note unless
the Company defaults in payment of the amount due upon such redemption or
repurchase. (sec. 1301)
The right of conversion attaching to any Convertible Note may be exercised
by the holder by delivering the Convertible Note at the specified office of the
Conversion Agent (if other than the Trustee), accompanied by a duly signed and
completed notice of conversion, a copy of which may be obtained from the
Trustee. The conversion date will be the date on which the Convertible Note and
the duly signed and completed notice of conversion are so delivered. As promptly
as practicable on or after the conversion date, the Company will issue and
deliver to the Trustee a certificate or certificates for the number of full
shares of Class A Common Stock issuable upon conversion, together with payment
in lieu of any fraction of a share; such certificate will be sent by the Trustee
to the Conversion Agent (if other than the Trustee) for delivery to the holder
within five Business Days after the conversion date. Such shares of Class A
Common Stock issuable upon conversion of the Convertible Notes, in accordance
with
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<PAGE> 12
the provisions of the Indenture, will be fully paid and nonassessable. Any
Convertible Note surrendered for conversion during the period from the close of
business on any Regular Record Date next preceding any Interest Payment Date to
the opening of business on such Interest Payment Date (except Convertible Notes
(or portions thereof) called for redemption on a Redemption Date or which are
redeemable on a Repurchase Date occurring, in either case, within such period
(including any Convertible Notes or portions thereof called for redemption on a
Redemption Date that is a Record Date or Interest Payment Date, as the case may
be)) must be accompanied by payment of an amount equal to the interest payable
on such Interest Payment Date on the principal amount of Convertible Notes being
surrendered for conversion. The interest so payable on such Interest Payment
Date with respect to any Convertible Note (or portion thereof, if applicable)
which has been called for redemption on a Redemption Date, or which may be
repurchased on a Repurchase Date, occurring, in either case, during the period
from the close of business on any Record Date next preceding any Interest
Payment Date to the opening of business on such Interest Payment Date (including
any Convertible Notes (or portions thereof) called for redemption on a
Redemption Date that is a Regular Record Date or Interest Payment Date, as the
case may be), which Convertible Note (or portion thereof, if applicable) is
surrendered for conversion during such period (or on the last Business Day prior
to the Regular Record Date or Interest Payment Date in the case of a Convertible
Note (or portions thereof) called for redemption on a Regular Record Date or
Interest Payment Date, as the case may be), shall be paid to the Holder of such
Convertible Note being converted in an amount equal to the interest that would
have been payable on such Convertible Note if such Convertible Note had been
converted as of the close of business on such Interest Payment Date. The
interest so payable on such Interest Payment Date in respect of any Convertible
Note (or portion thereof, as the case may be) which has not been called for
redemption on a Redemption Date, or is not eligible for repurchase on a
Repurchase Date, occurring, in either case, during the period from the close of
business on any Record Date next preceding any Interest Payment Date to the
opening of business of such Interest Payment Date, which Convertible Note (or
portion thereof, as the case may be) is surrendered for conversion during such
period, shall be paid to the Holder of such Convertible Note as of such Regular
Record Date. Interest payable in respect of any Convertible Note surrendered for
conversion or repurchase on or after an Interest Payment Date shall be paid to
the Holder of such Convertible Note as of the next preceding Regular Record
Date, notwithstanding the exercise of the right of conversion or repurchase. As
a result of the foregoing provisions, except as provided above, Holders that
surrender Convertible Notes for conversion on a date that is not an Interest
Payment Date will not receive any interest for the period from the Interest
Payment Date next preceding the date of conversion to the date of conversion or
for any later period, even if the Convertible Notes are surrendered after a
notice of redemption (except for the payment of interest on Convertible Notes
called for redemption on a Redemption Date or to be repurchased on a Repurchase
Date between a Regular Record Date and the Interest Payment Date to which it
relates (including any Convertible Notes (or portion thereof) called for
redemption on a Redemption Date that is a Record Date or Interest Payment Date,
as the case may be), as provided above). No other payment or adjustment for
interest, or for any dividends in respect of Class A Common Stock, will be made
upon conversion. Holders of Class A Common Stock issued upon conversion will not
be entitled to receive any dividends payable to holders of Class A Common Stock
as of any record time or date before the close of business on the conversion
date. No fractional shares will be issued upon conversion but, in lieu thereof,
the Company will pay an appropriate amount in cash based on the market price of
Class A Common Stock at the close of business on the date of conversion.
(sec.sec. 101, 307, 1302 and 1303)
A Holder delivering a Convertible Note for conversion will not be required
to pay any taxes or duties in respect of the issue or delivery of Class A Common
Stock upon conversion but will be required to pay any tax or duty which may be
payable in respect of any transfer involved in the issue or delivery of the
Class A Common Stock in a name other than that of the holder of the Convertible
Note. Certificates representing shares of Class A Common Stock will not be
issued or delivered unless all taxes and duties, if any, payable by the Holder
have been paid. (sec. 1308)
The applicable Conversion Price is subject to adjustment in certain events,
including, without duplication: (a) subdivisions, combinations and
reclassifications of Class A Common Stock,
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<PAGE> 13
(b) dividends (and other distributions) payable in Class A Common Stock on
shares of Class A Common Stock, (c) the issuance to all holders of Class A
Common Stock of rights, options or warrants entitling them to subscribe for or
purchase Class A Common Stock at less than the then Current Market Price of such
Class A Common Stock (determined as provided in the Indenture) on the day after
the record date for stockholders entitled to receive such rights, options or
warrants, (d) the issuance to an Affiliate (as defined in the Indenture) of
shares of Class A Common Stock or Class B Common Stock at a net price per share
less than the then Current Market Price per share of such Class A Common Stock
or Class B Common Stock (determined as provided in the Indenture) and (e)
distributions to all holders of Class A Common Stock of evidences of
indebtedness of the Company, equity securities or assets other than shares of
Class A Common Stock, or other assets (other than ordinary cash dividends out of
earnings), or distributions to all or substantially all holders of Class A
Common Stock rights, warrants or options to subscribe to securities (other than
those referred to in clause (c)above). No adjustment in the applicable
Conversion Price shall be required in respect of any dividend or distribution if
holders of the Convertible Notes may participate therein (on a basis and with
notice that the Board of Directors determines in good faith to be fair and
appropriate) and receive the same consideration they would have received if they
had converted the Convertible Notes immediately prior to the record date with
respect to such dividend or distribution. In addition, no adjustment in the
applicable Conversion Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the applicable Conversion
Price. Except as expressly set forth in the Indenture, no adjustment in the
applicable Conversion Price shall be made because the Company issues, in
exchange for cash, property or services, shares of Class A Common Stock, or any
securities convertible into or exchangeable for shares of Class A Common Stock,
or securities (including warrants, rights and options) carrying the right to
subscribe for or purchase shares of Class A Common Stock or such convertible or
exchangeable securities (including shares of Class B Common Stock), provided
that in the case of any such issuance to an Affiliate written evidence of the
action of the Board of Directors authorizing such issuance shall be filed with
the secretary of the Company (which evidence shall include a determination by
the Board of Directors that the terms of such issuance are not less favorable to
the Company and would have been obtainable in a comparable arms'-length
transaction with a person not an Affiliate) a notice thereon shall have been
given to each holder of the Convertible Notes. (sec. 1304) The Company shall
compute any adjustments to the Conversion Price pursuant to this paragraph and
will give notice to the Holders of the Convertible Notes of any adjustments.
(sec. 1305)
If any transaction shall occur, including without limitation, (1) any
recapitalization or reclassification of shares of Common Stock (other than a
change in par value, or from no par value to par value, or as a result of a
subdivision or combination of Common Stock), (2) any consolidation, merger or
amalgamation of the Company with or into another person or any merger of another
person into the Company (other than a merger that does not result in the
reclassification, conversion, exchange or cancellation of Common Stock), (3) any
sale or transfer of all or substantially all of the assets of the Company, or
(4) any compulsory share exchange, pursuant to any of which holders of shares of
Class A Common Stock or Class B Common Stock shall be entitled to receive other
securities, cash or other property, each Convertible Note then outstanding will,
with appropriate provisions satisfactory to the Majority Holders of the
Convertible Notes, become convertible only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer by a holder of the number of shares of Class A Common Stock
into which such Convertible Note was convertible immediately prior thereto
(assuming such holder of Class A Common Stock failed to exercise any rights of
election and that such Convertible Note was then convertible). (sec. 1311)
If at any time the Company makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
United States federal income tax purposes (e.g., distributions of evidence of
indebtedness or assets of the Company, but generally not stock dividends on
Common Stock or rights to subscribe for Common Stock) and, pursuant to the
anti-dilution provisions of the Indenture, the number of shares into which
Convertible Notes are convertible is increased, such increase may be deemed for
federal income tax purposes to be the payment of a taxable dividend to Holders
of Convertible Notes. See "Certain United States Federal Tax Considerations."
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<PAGE> 14
SUBORDINATION
The payment of the principal of, premium, if any, and interest on
(including any amounts payable upon the redemption or repurchase of the
Convertible Notes permitted by the Indenture) the Convertible Notes is
subordinated in right of payment, to the extent set forth in the Indenture, to
the prior payment in full of the principal of, premium, if any, interest and
other amounts in respect of all Senior Indebtedness of the Company. The
Convertible Notes also are effectively subordinated in right of payment to all
indebtedness and other liabilities of the Company's subsidiaries. As of March
31, 1998, the Company had no Senior Indebtedness outstanding, and the aggregate
amount of indebtedness and other liabilities of the Company's subsidiaries was
$3.0 billion.
Senior Indebtedness, as defined in the Indenture, means the principal of
(and premium, if any) and interest (including all interest accruing subsequent
to the commencement of any bankruptcy or similar proceeding, whether or not a
claim for post-petition interest is allowable as a claim in any such proceeding)
on, and all fees and other amounts payable in connection with, the following,
whether absolute or contingent, secured or unsecured, due or to become due,
outstanding on the date of the Indenture or thereafter created, incurred or
assumed: (A) all indebtedness of the Company (including obligations of the
Company arising from its guarantee of the indebtedness of others) to banks,
insurance companies and other financial institutions evidenced by credit or loan
agreements, notes or other written obligations; (B) all other indebtedness of
the Company (including obligations of the Company arising from its guarantee of
the indebtedness of others) other than the Convertible Notes; (C) all
Capitalized Lease Obligations (as defined in the Indenture) of the Company or in
respect of any lease or related document (including a purchase agreement) which
provides that the Company is contractually obligated to purchase or cause a
third party to purchase the leased property and thereby effectively guarantees a
minimum residual value of the leased property to the lessor and the obligations
of the Company under such lease or related document to purchase or cause a third
party to purchase such leased property; (D) all obligations of the Company
issued or assumed as the deferred purchase price of property (but excluding any
portion thereof constituting trade accounts payable arising in the ordinary
course); and (E) all obligations of the Company for the reimbursement of any
letter of credit or any amendments, renewals, extensions, modifications and
refundings; provided that Senior Indebtedness shall not include (i) any such
indebtedness or obligation if the terms of such indebtedness or obligation (or
the terms of the instrument under which or pursuant to which, it is issued)
expressly provide that such indebtedness or obligation shall not be senior in
right of payment to the Convertible Notes, or expressly provide that such
indebtedness or obligation is pari passu with or junior to the Convertible Notes
of either or both series and (ii) accounts payable of the Company to trade
creditors. (sec.sec. 101, 1201 and 1202)
Upon any acceleration of the principal due on the Convertible Notes or
payment or distribution of assets of the Company to creditors upon any
dissolution, winding up, liquidation or reorganization, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other similar
proceedings of the Company, all principal, premium, if any, and interest or
other amounts due on all Senior Indebtedness must be paid in full before the
Holders of the Convertible Notes are entitled to receive any payment.
(sec. 1203) If (i) a default in the payment of the principal of, premium, if
any, interest or other amounts due on any Senior Indebtedness occurs and is
continuing beyond any applicable period of grace or (ii) any other default
occurs and is continuing with respect to Senior Indebtedness that permits
holders of the Senior Indebtedness as to which such default relates to
accelerate the maturity thereof and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Company, any lender of Designated
Senior Indebtedness (or agent bank on behalf of such lender) or other person
permitted to give such notice under the Indenture. Payments on the Convertible
Notes may and shall be resumed (a) in the case of a payment default, upon the
date on which such default is cured or waived in accordance with the agreements
evidencing such Senior Indebtedness and (b) in case of a nonpayment default, the
earlier of (i) the date on which such nonpayment default is cured or waived or
shall have ceased to exist in accordance with the agreements evidencing such
Senior Indebtedness or any acceleration of the Senior Indebtedness shall have
been rescinded or annulled or such Senior Indebtedness shall have been
discharged or (ii) 180 days after the date on which the applicable Payment
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<PAGE> 15
Blockage Notice is received. During any 360-day period the aggregate of all
periods of payment blockage shall not exceed 180 days and there shall be a
period of at least 180 consecutive days in each 360-day period when no period of
payment blockage is in effect. No default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such default
shall have been cured for a period of not less than 60 consecutive days.
(sec. 1202)
By reason of the foregoing subordination, in the event of insolvency,
creditors of the Company who are holders of Senior Indebtedness are likely to
recover more, ratably, than the Holders of the Convertible Notes, and such
subordination may result in a reduction or elimination of payments to the
Holders of the Convertible Notes.
The Indenture does not limit the Company's ability to incur Senior
Indebtedness or any other indebtedness or the ability of any subsidiary of the
Company to incur any indebtedness or other liabilities.
OPTIONAL REDEMPTION
The Convertible Notes may not be redeemed prior to April 29, 2000.
Thereafter, the Convertible Notes may be redeemed, in whole or in part, at the
option of the Company in a minimum amount of $1,000,000 and in integral
multiples of $1,000, upon not less than 20 nor more than 60 days' prior notice
as provided under "-- Notices" below, at a price equal to the unpaid principal
amount of such Convertible Notes, together with interest accrued thereon to the
date fixed for redemption, plus the applicable redemption premium for such
Convertible Notes (expressed as a percentage of the principal amount so to be
redeemed) indicated below (such amount being referred to as the "Redemption
Price"). (sec. 1101)
The Redemption Prices for the Convertible Notes are set forth below:
<TABLE>
<CAPTION>
REDEMPTION DATE REDEMPTION PREMIUM
- --------------- ------------------
<S> <C>
April 29, 2000 to April 28, 2001............................ 4.567%
April 29, 2001 to April 28, 2002............................ 3.806%
April 29, 2002 to April 28, 2003............................ 3.044%
April 29, 2003 to April 28, 2004............................ 2.283%
April 29, 2004 to April 28, 2005............................ 1.522%
April 29, 2005 to April 28, 2006............................ 0.761%
after April 28, 2006........................................ none
</TABLE>
provided that prior to April 29, 2002, Convertible Notes may not be redeemed
unless the Closing Price per share of Class A Common Stock for a period of 10
consecutive trading days commencing 20 trading days before the date of the
Company's notice of redemption in respect of such redemption is at least 150% of
the Conversion Price then in effect.
Any Convertible Note that is converted in whole or in part into shares of
Class A Common Stock after notice of redemption and prior to the redemption date
specified therein shall be deemed to have been redeemed on the date of such
redemption to the extent of the lesser of (i) the principal amount of such
Convertible Note so converted and (ii) the principal amount of such Convertible
Note called for redemption on the date of such redemption; and, accordingly, the
principal amount of such Convertible Notes actually to be redeemed on such
redemption date shall be reduced by an amount equal to the amount that is deemed
to have been redeemed by reason of conversion as aforesaid and the aggregate
principal amount of the Convertible Notes to be redeemed on such redemption date
shall be reduced by an amount equal to the aggregate principal amount of all
Convertible Notes deemed to have been redeemed by reason of conversion as
aforesaid.
No sinking fund, financial covenants or ratios are provided for the
Convertible Notes.
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<PAGE> 16
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Promptly and in any event within 20 days after the occurrence of a Change
in Control (as defined herein), the Company shall deliver to the holders of the
Convertible Notes notice, as provided in the Indenture (the "Company Notice"),
of the occurrence of such Change of Control and an offer to repurchase all
Convertible Notes outstanding on the date therein specified (the "Repurchase
Date"), which shall be not less than 30 nor more than 60 days after the date of
such notice, at a price equal to 101% of the principal amount of the Convertible
Notes to be repurchased plus interest accrued to the Repurchase Date (the
"Repurchase Price"). (sec. 1401)
At the request and expense of the Company on or before the 10th day after
such occurrence, the Trustee shall give the Company Notice on behalf of the
Company. The Company must also deliver a copy of the Company Notice to the
Trustee and to the office of each Paying Agent. To exercise the repurchase
right, a Holder of Convertible Notes must deliver, on or before the fifth
Business Day prior to the Repurchase Date irrevocable written notice to the
Trustee or Paying Agent of the Holder's exercise of such right, together with
the Convertible Notes with respect to which the right is being exercised.
(sec. 1403)
A Change of Control shall be deemed to have occurred at such time after the
original issuance of the Old Convertible Notes as:
(i) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), excluding any "person" or "group" of which
Sanford Miller, John P. Kennedy or Jeffrey D. Congdon, or their controlled
Affiliates (as defined in the Indenture), are a substantial part (and for
such purpose Messrs. Miller, Kennedy and Congdon, and their controlled
Affiliates, shall not be deemed to be a substantial part of such person or
group unless in the aggregate they own beneficially at least 15% of the
total then outstanding voting power of the Voting Stock (as defined herein)
of the Company), (A) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than 50% of the total then
outstanding voting power of the Voting Stock of the Company or (B) has the
right or the ability by voting right, contract or otherwise to elect or
designate for election a majority of the entire Board of Directors;
(ii) (A) the Company consolidates with or merges into any other Person
(as defined in the Indenture) or conveys, transfers, sells or leases all or
substantially all of its assets as an entirety to any Person or (B) any
Person merges into the Company, in either event pursuant to a transaction
in which Voting Stock of the Company representing more than 50% of the
total voting power of the Company outstanding immediately prior to the
effectiveness thereof is reclassified or changed into or exchanged for
cash, securities or other property; provided that any consolidation,
merger, conveyance, transfer, sale or lease between the Company and any of
its Subsidiaries (including without limitation the reincorporation of the
Company in another jurisdiction) shall be excluded from the operation of
this clause (ii); or
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors, or whose
nomination for election by the shareholders of the Company, as the case may
be, was approved by a vote of 66 2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors then in office.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by virtue of the Company's or any of its employee benefit or stock
plan's filing (or being required to file after the lapse of time) a Schedule 13D
or 14D-1 (or any successor or similar schedule, form or report under the
Exchange Act) as a result of the Company or any such plan becoming the
beneficial owner of shares of capital stock of the Company entitling such person
to exercise a majority of the total voting power of the Voting Stock of the
Company. "Voting Stock" means, with respect to any person, any shares of stock
or other equity interests of any class or classes of such person whose holders
are entitled under ordinary
16
<PAGE> 17
circumstances (irrespective of whether at the time stock or other equity
interests or any other class or classes shall have or might have voting power by
reason of the happening of any contingency) to vote for the election of a
majority of the directors, managers, trustees or other governing body of such
person. (sec. 101)
The Company's ability to repurchase Convertible Notes upon the occurrence
of a Change of Control is subject to limitations. There can be no assurance that
the Company would have the financial resources or be able to arrange financing
on acceptable terms to pay the Repurchase Price for all the Convertible Notes as
to which the purchase right is exercised. Further, any offer to repurchase or
repurchase in connection with a Change of Control could, depending on the
circumstances and absent a waiver from the holders of Senior Indebtedness, be
blocked by the subordination provisions of the Convertible Notes. See
"-- Subordination." The agreement relating to the Company's current Senior
Indebtedness would limit the Company's ability to repurchase the Convertible
Notes. Failure by the Company to offer to repurchase or repurchase the
Convertible Notes when required may result in an Event of Default with respect
to the Convertible Notes (and with respect to Senior Indebtedness) whether or
not such repurchase is permitted by the subordination provisions. See "-- Events
of Default" and "Risk Factors -- Limitations on Repurchase of Convertible
Notes."
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to Holders of
the Convertible Notes. The Company will comply with this rule to the extent
applicable at that time.
The foregoing provisions would not necessarily afford Holders of the
Convertible Notes protection in the event of highly leveraged or other
transactions involving the Company that may adversely affect Holders.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not, directly or indirectly, merge, consolidate or
amalgamate with any other Person or sell, lease, transfer or otherwise dispose
of all or substantially all of its assets (as an entirety) to any person,
unless: (a) the Company shall be the continuing or surviving corporation, or the
continuing, surviving or acquiring person shall be a solvent corporation
organized in the United States of America and shall expressly assume, by
supplemental indenture, the due and punctual payment of the principal, premium
(if any) and interest on the Convertible Notes and all of the other obligations
of the Company under the Indenture and the performance of every covenant of the
Indenture on the part of the Company and shall have provided for conversion
rights in accordance with the Indenture; (b) immediately after any such merger,
consolidation, amalgamation, sale, lease or other disposition and giving effect
to any concurrent transactions, no Default or Event of Default under the
Indenture shall have occurred and be continuing and the Company shall have
complied with its obligations with respect to the adjustment of the applicable
Conversion Prices of the Convertible Securities and with respect to a Change of
Control resulting from such transaction; and (c) the Company has delivered to
the Trustee an Officers' Certificate and opinion of counsel, each stating that
such consolidation, merger, amalgamation, conveyance, transfer or lease and such
supplemental indenture comply with the Indenture and that all conditions
precedent in the Indenture have been complied with. (sec. 801)
EVENTS OF DEFAULT
The following are Events of Default under the Indenture: (a) failure to pay
principal of or premium, if any, on any Convertible Note when due; (b) failure
to pay any interest on any Convertible Note when due, continuing for 30 days;
(c) failure to perform any other term, covenant or agreement with respect to a
repurchase upon a Change of Control; (d) default by the Company or any
Significant Subsidiary beyond any applicable grace period in any payment of
principal of or premium or interest on any indebtedness in excess of $10,000,000
in aggregate unpaid principal amount (other than the Convertible Notes), or in
the due performance or observance of any provision contained in any agreement
relating
17
<PAGE> 18
to such indebtedness the effect of which is (i) to cause such indebtedness to
become or be declared due and payable prior to its stated maturity or (ii) to
require the repayment or repurchase of such indebtedness prior to its stated
maturity, provided that if such default shall be remedied or cured by the
Company or waived by the holders of such indebtedness prior to an acceleration
under the Indenture, then the Event of Default under this section (d) by reason
thereof shall be deemed likewise to have been therefore remedied, cured or
waived without further action upon the part of any of the holders of the
Convertible Notes; (e) default or breach in the performance of any covenant or
warranty made by the Company in the Indenture or in any certificate or other
writing furnished pursuant to the Indenture and such default or breach shall
have continued for a period of 60 days after the Company becomes aware of such
default or breach; or (f) certain events of bankruptcy, insolvency or
reorganization relating to the Company or any "Significant Subsidiary" as
determined in accordance with Rule 1-02(w) of Regulation S-X promulgated by the
Commission under the Exchange Act. (sec.sec. 101, 501) Subject to the provisions
of the Indenture relating to the duties of the Trustee in case an Event of
Default shall occur and be continuing, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Trustee indemnity satisfactory to the Trustee. (sec. 603) Subject to such
provisions for the indemnification of the Trustee, the holders of a majority in
aggregate principal amount of the outstanding Convertible Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee. (sec. 512)
If an Event of Default (other than an Event of Default specified in
subsection (f) above) occurs and is continuing, the Holders of not less than 25%
in aggregate principal amount of the unpaid principal amount of Convertible
Notes outstanding at the time, by notice in writing to the Company, may declare
the principal of all the Convertible Notes to be due and payable immediately,
and upon any such declaration such principal and any accrued interest thereon
will become immediately due and payable. If an Event of Default specified in
subsection (f) occurs and is continuing, the principal and any accrued interest
on all of the then outstanding Convertible Notes shall ipso facto become due and
payable immediately without any declaration or other Act on the part of the
Trustee or any Holder. (sec. 502)
At any time after a declaration of acceleration has been made but before a
judgment or decree based on acceleration, the Holders of a majority in aggregate
principal amount of outstanding Convertible Notes may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the nonpayment of accelerated principal of, premium, if any, and
accrued interest on the Convertible Notes, have been cured or waived as provided
in the Indenture. (sec. 502)
No Holder of any Convertible Note will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such Holder shall have previously given to the Trustee written notice of a
continuing Event of Default and unless also the Holders of at least 25% in
aggregate principal amount of the outstanding Convertible Notes shall have made
written request, and offered indemnity satisfactory to the Trustee, to the
Trustee to institute such proceeding as trustee, and the Trustee shall not have
received from the Holders of a majority in aggregate principal amount of the
outstanding Convertible Notes a direction inconsistent with such request and
shall have failed to institute such proceeding within 60 days. (sec. 507)
However, such limitations do not apply to a suit instituted by a Holder of a
Convertible Note for the enforcement of payment of the principal of, premium, if
any, or interest on such Convertible Note on or after the respective due dates
expressed in such Convertible Note or of the right to convert such Convertible
Note in accordance with the Indenture. (sec. 508)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (sec. 1004)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made, and certain past
defaults by the Company may be waived, with the written consent of the Holders
of not less than 66 2/3% of the aggregate
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principal amount of the Convertible Notes at the time outstanding. However, no
such modification or amendment may, without the consent of the Holder of each
outstanding Convertible Note affected thereby, (a) change the Stated Maturity
(as defined in the Indenture) of the principal of, or any installment of
interest on, any Convertible Note or the amounts payable upon the redemption or
repurchase of any Convertible Note, (b) reduce the principal amount of, or the
premium, if any, or rate of interest on, any Convertible Note, (c) modify the
number or the method of calculating the rates at which the Convertible Notes are
convertible into Class A Common Stock, (d) modify the provisions with respect to
the repurchase right or conversion rights of the Holders in a manner adverse to
the Holder, (e) change the place or currency of payment of principal of,
premium, if any, or interest on, any Convertible Note, (f) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Convertible Note (including any payment of the Repurchase Price in respect of
such Convertible Note), (g) modify the obligation of the company to maintain an
office or agency in New York City, (h) except as otherwise permitted by the
Indenture or contemplated by provisions concerning consolidation, merger,
conveyance, transfer, sale or lease of all or substantially all of the property
and assets of the Company, adversely affect the right of holders to convert any
of the Convertible Notes or to require the Company to repurchase any Convertible
Note other than as provided in the Indenture, (i) modify the subordination
provisions in a manner adverse to the holders of the Convertible Notes, (j)
reduce the above-stated percentage of outstanding Convertible Notes necessary to
modify or amend the Indenture, or (k) reduce the percentage of aggregate
principal amount of outstanding Convertible Notes necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults. (sec.sec. 902 and 513)
The holders of 66 2/3% of the aggregate principal amount of the outstanding
Convertible Notes may waive compliance by the Company with certain restrictive
provisions of the Indenture. (sec. 1009) The Holders of 66 2/3% of the aggregate
principal amount of the outstanding Convertible Notes also may waive any past
default under the Indenture, except a default in the payment of principal,
premium, if any, or interest on Convertible Notes due and payable solely by
virtue of acceleration or in the redemption or repurchase of any Convertible
Note. (sec. 513)
TRANSFER AND EXCHANGE
The Company has initially appointed the Trustee as security registrar and
transfer agent, acting through its Corporate Trust Office. The Company reserves
the right to vary or terminate the appointment of the security registrar or of
any transfer agent or to appoint additional or other transfer agents or to
approve any change in the office through which any security registrar or any
transfer agent acts. (sec. 1002)
PURCHASE AND CANCELLATION
All Convertible Notes surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee. All Convertible
Notes so delivered to the Trustee shall be cancelled promptly by the Trustee.
The Company may at any time deliver to the Trustee for cancellation any
Convertible Notes previously authenticated and delivered hereunder which the
Company may have acquired in any manner whatsoever, and all Convertible Notes so
delivered shall be promptly cancelled by the Trustee. No Convertible Notes shall
be authenticated in lieu of or in exchange for any cancelled Convertible Notes,
except as expressly permitted by the Indenture. All cancelled Convertible Notes
held by the Trustee shall be destroyed by the Trustee and a certificate of
destruction delivered to the Company by the Trustee.
TITLE
The Company and the Trustee may treat the registered owner (as reflected in
the Security Register) of any Convertible Note as the absolute owner thereof
(whether or not such Convertible Note shall be overdue) for the purpose of
making payment and for all other purposes. (sec. 308)
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NOTICES
Notice to Holders of the Convertible Notes will be given by mail to the
addresses of such Holders as they appear in the Security Register. Such notices
will be deemed to have been given on the date of such mailing. (sec. 106)
Notice of a redemption of Convertible Notes will be given not less than 20
nor more than 60 days prior to the redemption date (which notice shall be
irrevocable) and will specify the redemption date. (sec. 1105)
REPLACEMENT OF CONVERTIBLE NOTES
Convertible Notes that become mutilated, destroyed, stolen or lost will be
replaced by the Company at the expense of the Holder upon delivery of the
Trustee of the mutilated Convertible Notes or evidence of the loss, theft or
destruction thereof satisfactory to the Company and the Trustee. In the case of
a lost, stolen or destroyed Convertible Note indemnity satisfactory to the
Trustee and the Company may be required at the expense of the Holder of such
Convertible Note before a replacement Convertible Note will be issued.
(sec. 306)
SATISFACTION AND DISCHARGE
The Company may discharge its payment obligations under the Indenture while
Convertible Notes remain outstanding if (a) all outstanding Convertible Notes
have become due and payable or will become due and payable at their scheduled
maturity within one year, (b) all outstanding Convertible Notes are scheduled
for redemption within one year or (c) all outstanding Convertible Notes are
delivered to the Trustee for conversion in accordance with the Indenture and in
the case of (a) or (b) above, the Company has deposited with the Trustee an
amount sufficient to pay and discharge the entire indebtedness on all
outstanding Convertible Notes on the date of their scheduled maturity or the
scheduled date of redemption. (sec. 401)
GOVERNING LAW
The Indenture and the Convertible Notes will be governed by and construed
in accordance with the laws of the State of New York. (sec. 112)
THE TRUSTEE
In case an Event of Default shall occur (and shall not be cured), the
Trustee will be required to use the degree of care of a prudent person in the
conduct of his own affairs in the exercise of its powers. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the Holders of
Convertible Notes, unless they shall have offered to the Trustee security or
indemnity satisfactory to the Trustee. (sec.sec. 601 and 603)
BOOK-ENTRY
The Convertible Notes were issued in the form of a global note (the "Global
Note") deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in the name of Cede & Co. as DTC's nominee. Owners of beneficial
interests in the Convertible Notes represented by the Global Note hold such
interests pursuant to the procedures and practices of DTC and must exercise any
rights in respect of their interests (including any right to convert or require
repurchase of their interests) in accordance with those procedures and
practices. Such beneficial owners are not Holders, and are not entitled to any
rights under the Global Note or the Indenture, and the Company and the Trustee,
and any of their respective agents, may treat DTC as the sole Holder and owner
of the Global Note.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York
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Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC holds securities that its
participants deposit with DTC. DTC also facilitates the settlement among
participants of securities transactions, such as transfer and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporation, and certain other
organizations. DTC is owned by a number of its direct participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly. The rules applicable to DTC and its
participants are on file with the Securities and Exchange Commission.
Unless and until they are exchanged in whole or in part for certificated
Convertible Notes in definitive form as set forth below, the Global Notes may
not be transferred except as a whole by DTC to a nominee of DTC, or by a nominee
of DTC to DTC or another nominee of DTC.
The Convertible Notes represented by the Global Notes will not be
exchangeable for certificated Convertible Notes, provided that if (a) DTC is at
any time unwilling, unable or ineligible to continue as depositary and a
successor depositary is not appointed by the Company within 90 days or (b) there
shall have occurred and be continuing an Event of Default with respect to the
Convertible Notes, the Company will issue individual Convertible Notes in
definitive form in exchange for the Global Notes. In addition, the Company may
at any time and in its sole discretion determine not to have Global Notes, and,
in such event, will issue individual Convertible Notes in definitive form in
exchange for the Global Notes previously representing all such Convertible
Notes. In either instance, an owner of a beneficial interest in a Global Note
will be entitled to physical delivery of Convertible Notes in definitive form
equal in principal about to such beneficial interest and to have such
Convertible Notes registered in its name. Individual Convertible Notes so issued
in definitive form will be issued in denominations of $1,000 and any larger
amount that is an integral multiple of $1,000 and will be issued in registered
form only, without coupons.
Payments of principal of and interest on the Convertible Notes will be made
by the Company through the Trustee to DTC or its nominee, as the case may be, as
the registered owner of the Global Note. Neither the Company nor the Trustee
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests of the Global
Note or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests. The Company expects that DTC, upon receipt of
any payment of principal or interest in respect of the Global Note, will credit
the accounts of the related participants with payment in amounts proportionate
to their respective holdings in principal amount of beneficial interest in the
Global Note as shown on the records of DTC. The Company also expects that
payments by participants to owners of beneficial interests in the Global Note
will be governed by standing customer instructions and customary practices, as
is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of such
participants.
So long as the Convertible Notes are represented by a Global Note, DTC or
its nominee will be the only entity that can exercise a right to redemption
pursuant to the Holder's option to elect redemption of its Convertible Notes or
the right of conversion of the Convertible Notes. Notice by participants or by
owners of beneficial interests in a Global Note held through such participants
of the exercise of the option to elect redemption, or the right of conversion,
of beneficial interests in Convertible Notes represented by the Global Note must
be transmitted to DTC in accordance with its procedures on a form required by
DTC and provided to participants. In order to ensure that DTC's nominee will
timely exercise a right to redemption, or the right of conversion, with respect
to a particular Convertible Note, the beneficial owner of such Convertible Notes
must instruct the broker or other participant through which it holds an interest
in such Convertible Notes to notify DTC of its desire to exercise a right to
redemption, or the right of conversion. Different firms have different cut-off
times for accepting instructions from their customers and, accordingly, each
beneficial owner should consult the broker or other participant through which it
holds an interest in a Convertible Note in order to ascertain the cut-off time
by which such an instruction
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must be given in order for timely notice to be delivered to DTC. The Company
will not be liable for any delay in delivery of such notice to DTC.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a summary of certain United States federal income and
estate tax considerations relating to the purchase, ownership and disposition of
the Convertible Notes and of Class A Common Stock into which the Convertible
Notes may be converted, but does not purport to be a complete analysis of all
the potential tax considerations relating thereto. This summary is based on
laws, regulations, rulings and decisions now in effect (or, in the case of
certain United States Treasury Regulations ("Treasury Regulations"), now in
proposed form), all of which are subject to change, possibly on a retroactive
basis. This summary deals only with holders that will hold Convertible Notes and
Class A Common Stock into which Convertible Notes may be converted as "capital
assets" (within the meaning of Section 1221 of the Internal Revenue Code of
1986, as amended (the "Code")) and does not address tax considerations
applicable to investors that may be subject to special tax rules, such as banks,
tax-exempt organizations, insurance companies, dealers in securities or
currencies, persons that will hold Convertible Notes as a position in a hedging
transaction, "straddle" or "conversion transaction" for tax purposes, or persons
that have a "functional currency" other than the U.S. dollar. The Company has
not sought any ruling from the Internal Revenue Service ("IRS") with respect to
the statements made and the conclusions reached in the following summary, and
there can be no assurance that the IRS will agree with such statements and
conclusions. INVESTORS CONSIDERING THE PURCHASE OF CONVERTIBLE NOTES OR CLASS A
COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
APPLICATION OF THE UNITED STATES FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF
ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX
TREATY.
UNITED STATES HOLDERS
As used herein, the term "United States Holder" means the beneficial owner
of a Convertible Note or of Class A Common Stock that for United States federal
income tax purposes is (i) a citizen or resident of the United States, (ii)
treated as a domestic corporation or domestic partnership, or (iii) an estate or
trust other than a "foreign estate" or "foreign trust" as defined in Section
7701(a)(31) of the Code.
PAYMENT OF INTEREST
Interest on a Convertible Note generally will be included in the income of
a United States Holder as ordinary income at the time such interest is received
or accrued, in accordance with such Holder's method of accounting for United
States federal income tax purposes.
MARKET DISCOUNT
If a United States Holder purchases a Convertible Note for an amount that
is less than its stated redemption price at maturity, such United States Holder
will be treated as having purchased such Convertible Note at a "market discount"
unless such market discount is less than one-fourth of one percent of the stated
redemption price of the Convertible Note at maturity, multiplied by the number
of complete years to maturity (after the United States Holder acquired the
Convertible Note).
Under the market discount rules, a United States Holder will be required to
treat any partial principal payment on a Convertible Note, or any gain realized
on the sale, exchange, retirement or other disposition of a Convertible Note, as
ordinary income to the extent of the lesser of (i) the amount of such payment or
realized gain or (ii) the market discount which has not previously been included
in income and is treated as having accrued on such Convertible Note at the time
of such payment or disposition. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
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the Convertible Note, unless the United States Holder elects to accrue market
discount on a constant yield basis. Once made, such an election is irrevocable.
A United States Holder may be required to defer the deduction of all or a
portion of the interest paid or accrued on any indebtedness incurred or
maintained to purchase or carry a Convertible Note with market discount until
the maturity of the Convertible Note or certain earlier dispositions, because a
current deduction is only allowed to the extent that the interest expense
exceeds the portion of market discount allocable to the days during the taxable
year in which the Convertible Note was held by the taxpayer. A United States
Holder may elect to include market discount in income currently as it accrues
(on either a ratable or constant yield basis), in which case the rules described
above regarding the treatment as ordinary income of gain upon the disposition of
the Convertible Note and upon the receipt of certain cash payments and regarding
the deferral of interest deductions will not apply. Generally, such currently
included market discount is treated as ordinary interest for United States
federal income tax purposes. Such an election will apply to all debt instruments
with market discount acquired by the United States Holder on or after the first
day of the taxable year to which such election applies and may be revoked only
with the consent of the IRS.
BOND PREMIUM
If a United States Holder purchases a debt instrument for an amount in
excess of its stated redemption price at maturity, such United States Holder
will be considered to have purchased the debt instrument with "amortizable bond
premium," generally equal in amount to such excess, but reduced by the value of
any conversion features attached to the debt instrument. A United States Holder
may elect to amortize bond premium using a constant yield method over the
remaining term of the debt instrument and may offset interest (including
original issue discount) otherwise required to be included in respect of the
debt instrument during any taxable year by the amortized amount for the taxable
year. Any election to amortize bond premium applies to all taxable debt
obligations then owned and thereafter acquired by the United States Holder on or
after the first day of the taxable year to which such election applies, and may
be revoked only with the consent of the IRS.
The conversion features of the Convertible Notes and the Company's option
to redeem the Convertible Notes at the Redemption Price prior to maturity will
affect a United States Holder's calculation of amortizable bond premium. As
noted in the preceding paragraph, the amount of amortizable bond premium
generally equals the excess of the United States Holder's tax basis in the debt
instrument over the debt instrument's stated redemption price at maturity, but
reduced by the value of the conversion features of the debt instrument.
Accordingly, the value of the conversion features of the Convertible Notes must
be excluded from the calculation of amortizable bond premium. Treasury
Regulations provide that the value of the conversion features of a particular
debt instrument is determined as of the time of acquisition by subtracting from
the cost of the debt instrument the assumed price at which the debt instrument
would be purchased on the open market if it did not have the conversion
features. This assumed price of the debt instrument without conversion features
is determined by comparing the yields on which debt instruments of a similar
character, but not having conversion features, are sold on the open market and
adjusting the price of the debt instrument in question to this yield. In
addition, in view of the Company's option to redeem the Convertible Notes prior
to maturity, the amount of amortizable bond premium on the Convertible Notes
will be determined by subtracting from the United States Holder's tax basis in
the Convertible Notes the applicable Redemption Price payable on the first date
on which the Convertible Notes could be redeemed (rather than the stated
redemption price at maturity). If the Company does not in fact exercise its
right to redeem the Convertible Notes on this date, the Convertible Notes will
be treated (for purposes of the bond premium rules) as having matured and then
as having been reissued for the Redemption Price at which the Convertible Notes
could have been redeemed on such date. The Convertible Notes deemed to have been
reissued will again be subject to the amortizable bond premium rules with
respect to the remaining dates on which the Convertible Notes are redeemable.
Recently issued Treasury Regulations clarify the treatment of bond premium.
These regulations describe the constant yield method under which such premium is
amortized and provide that the
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resulting offset to interest income generally can be taken into account only as
a United States Holder takes the corresponding interest income into account
under such United States Holder's regular accounting method. If the bond premium
allocable to an accrual period exceeds the qualified stated interest allocable
to such period, the excess is treated by the United States Holder as a bond
premium deduction. However, the bond premium deduction for the accrual period is
limited to the amount by which the United States Holder's total interest
inclusions on the debt instrument in prior accrual periods exceed the total
amount treated by such Holder as a bond premium deduction on the debt instrument
in prior accrual periods. Any amounts not deductible in an accrual period may be
carried forward to the next accrual period and treated as bond premium allocable
to that period. In the case of instruments that may be redeemed prior to
maturity, the regulations provide that the premium is calculated by assuming
that the issuer or holder will exercise or not exercise its redemption rights in
the manner that maximizes the holder's yield. The regulations are effective for
debt instruments acquired on or after March 2, 1998. If a United States Holder
elects to amortize bond premium for the taxable year containing such effective
date, the regulations will apply to all the United States Holder's debt
instruments held on or after the first day of that taxable year.
SALE, EXCHANGE OR REDEMPTION OF THE CONVERTIBLE NOTES
Upon the sale, exchange or redemption of a Convertible Note, a United
States Holder generally will recognize capital gain or loss equal to the
difference between (i) the amount of cash proceeds and the fair market value of
any property received on the sale, exchange or redemption (except to the extent
such amount is attributable to accrued interest income, which is taxable as
ordinary income) and (ii) such Holder's adjusted tax basis in the Convertible
Note. For purposes of determining gain or loss, a United States Holder's
adjusted tax basis in a Convertible Note generally will equal the cost of the
Convertible Note to such Holder, increased by accrued market discount, if any,
if the United States Holder has included such market discount in income, reduced
by any principal payments received by such Holder, and reduced by amortizable
bond premium, if any, taken with respect to such Convertible Note. The tax rate
applicable to such a capital gain will depend, among other things, upon the
United States Holder's holding period for the Convertible Notes that are sold,
exchanged or redeemed.
CONVERSION OF THE CONVERTIBLE NOTES
A United States Holder generally will not recognize any income, gain or
loss upon conversion of a Convertible Note into Class A Common Stock except to
the extent of ordinary income recognized with respect to accrued and unpaid
interest on the Convertible Note at that time. A United States Holder also will
recognize capital gain or loss upon the receipt of cash in lieu of a fractional
share of Class A Common Stock equal to the amount of cash received less the
Holder's tax basis in such fractional share. Such Holder's tax basis in the
Class A Common Stock received on conversion of a Convertible Note will be the
same as such Holder's adjusted tax basis in the Convertible Note at the time of
conversion (reduced by any basis allocable to a fractional share interest), and
the holding period for the Class A Common Stock received on conversion will
generally include the holding period of the Convertible Note converted.
DIVIDENDS
Dividends paid on the Class A Common Stock generally will be included in
the income of a United States Holder as ordinary income to the extent of the
Company's current or accumulated earnings and profits, then as a tax-free return
of capital to the extent of a United States Holder's tax basis in the Class A
Common Stock and thereafter as gain from the sale or exchange of such stock.
In general, a dividend distribution to a corporate United States Holder
will qualify for the 70% dividends received deduction if the Holder owns less
than 20% of the voting power and value of the Company's stock (other than
certain non-voting, non-convertible, non-participating preferred stock). A
corporate United States Holder that owns 20% or more of the voting power and
value of the Company's stock (other than certain non-voting, non-convertible,
non-participating preferred stock) generally will
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qualify for an 80% dividends received deduction. The dividends received
deduction is subject, however, to certain holding period, taxable income and
other limitations.
SALE OF CLASS A COMMON STOCK
Upon the sale or exchange of Class A Common Stock, a United States Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash and the fair market value of any property received upon
the sale or exchange and (ii) such Holder's adjusted tax basis in the Class A
Common Stock. The tax rate applicable to such capital gain will depend, among
other things, upon the Holder's holding period for the Shares of Class A Common
Stock that are sold or exchanged. A United States Holder's basis and holding
period in Class A Common Stock received upon conversion of a Convertible Note
are determined as discussed above under "-- Conversion of the Convertible
Notes."
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of the Convertible Notes as having received a constructive distribution
from the Company in the event that the conversion ratio of the Convertible Notes
were adjusted if (i) as a result of such adjustment, the proportionate interest
(measured by the quantum of Class A Common Stock into or for which the
Convertible Notes are convertible or exchangeable) of the holders of the
Convertible Notes in the assets or earnings and profits of the Company were
increased, and (ii) the adjustment was not made pursuant to a bona fide,
reasonable anti-dilution formula. An adjustment in the conversion ratio would
not be considered made pursuant to such formula if the adjustment was made to
compensate for certain taxable distributions with respect to the Class A Common
Stock. Thus, under certain circumstances, a reduction in the conversion price
for the holders my result in deemed dividend income to holders to the extent of
the Company's current or accumulated earnings and profits.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Convertible Note, payments of
dividends on Class A Common Stock, payments of the proceeds of the sale of a
Convertible Note and payments of the proceeds of the sale of Class A Common
Stock, and a 31% backup withholding tax may apply to such payments if the United
States Holder (i) fails to furnish or certify his correct taxpayer
identification number to the payor in the manner required, (ii) is notified by
the IRS that he has failed to report payments of interest and dividends
properly, or (iii) under certain circumstances, fails to certify that he has not
been notified by the IRS that he is subject to backup withholding for failure to
report interest and dividend payments. Any amounts withheld under the backup
withholding rules from a payment to a United States Holder will be allowed as a
credit against such Holder's United States federal income tax and may entitle
the Holder to a refund, provided that the required information is furnished to
the IRS.
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means any beneficial
owner of a Convertible Note or Class A Common Stock that is not a United States
Holder. The rules governing the United States federal income and estate taxation
of a Non-United States Holder are complex and no attempt will be made herein to
provide more than a summary of such rules. NON-UNITED STATES HOLDERS SHOULD
CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE THE EFFECT OF FEDERAL, STATE,
LOCAL AND FOREIGN TAX LAWS, INCLUDING TREATIES, WITH REGARD TO AN INVESTMENT IN
THE CONVERTIBLE NOTES AND CLASS A COMMON STOCK, INCLUDING ANY REPORTING
REQUIREMENTS.
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PAYMENT OF INTEREST
Generally, payment of interest on a Convertible Note by the Company or any
Paying Agent to a Non-United States Holder will qualify for the "portfolio
interest exemption" and therefore will not be subject to United States federal
income tax or withholding tax, provided that such interest income is not
effectively connected with a United States trade or business of the Non-United
States Holder and provided that the Non-United States Holder (i) does not
actually or constructively own 10% or more of the combined voting power of all
classes of stock of the Company entitled to vote, (ii) is not a controlled
foreign corporation related to the Company actually or constructively through
stock ownership, (iii) is not a bank receiving interest on a loan entered into
in the ordinary course of business and (iv) either (a) provides a Form W-8 (or a
suitable substitute form) signed under penalties of perjury that includes its
name and address and certifies as to its non-United States status in compliance
with applicable law and regulations, or (b) a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business holds the Convertible Note and provides
a statement to the Company or its agent under penalties of perjury in which it
certifies that such a Form W-8 (or a suitable substitute) has been received by
it from the Non-United States Holder or qualifying intermediary and furnishes
the Company or its agent with a copy thereof.
Recently released Treasury Regulations provide alternative methods for
satisfying the certification requirements described in clause (iv) above. The
Treasury Regulations generally are effective for payments made after December
31, 1998, subject to certain transition rules. Non-United States Holders are
urged to consult their own tax advisors regarding the new Treasury Regulations.
Except to the extent that an applicable treaty otherwise provides, a
Non-United States Holder generally will be taxed in the same manner as a United
States Holder with respect to interest if the interest income is effectively
connected with a United States trade or business of the Non-United States
Holder. Effectively connected interest received by a corporate Non-United States
Holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or, if applicable, a lower treaty rate).
Even though such effectively connected interest is subject to income tax, and
may be subject to the branch profits tax, it is not subject to withholding tax
if the Holder delivers IRS Form 4224 to the payor.
Interest income of a Non-United States Holder that is not effectively
connected with a United States trade or business and that does not qualify for
the portfolio interest exemption described above will generally be subject to a
withholding tax at a 30% rate (or, if applicable, a lower treaty rate).
SALE, EXCHANGE OR REDEMPTION OF THE CONVERTIBLE NOTES
A Non-United States Holder of a Convertible Note will generally not be
subject to United States federal income tax or withholding tax on any gain
realized on the sale, exchange or redemption of a Convertible Note (including
the receipt of cash in lieu of fractional shares upon conversion of a
Convertible Note into Class A Common Stock) unless (1) the gain is effectively
connected with a United States trade or business of the Non-United States
Holder, (2) in the case of a Non-United States Holder who is an individual, such
Holder is present in the United States for a period or periods aggregating 183
days or more during the taxable year of the disposition, and either such Holder
has a "tax home" in the United States or the disposition is attributable to an
office or other fixed place of business maintained by such Holder in the United
States, (3) the Holder is subject to tax pursuant to the provisions of the Code
applicable to certain United States expatriates, or (4) the Company is a United
States real property holding corporation (see discussion under "United States
Foreign Investment in Real Property Tax Act" below).
CONVERSION OF THE CONVERTIBLE NOTES
In general, no United States federal income tax or withholding tax will be
imposed upon the conversion of a Convertible Note into Class A Common Stock by a
Non-United States Holder except with respect to the receipt of cash in lieu of
fractional shares by Non-United States Holders upon conversion of
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a Convertible Note where any of the conditions described above under "Non-United
States Holders -- Sale, Exchange or Redemption of the Convertible Notes" is
satisfied.
SALE OR EXCHANGE OF CLASS A COMMON STOCK
A Non-United States Holder generally will not be subject to United States
federal income tax or withholding tax on the sale or exchange of Class A Common
Stock unless any of the conditions described above under "Non-United States
Holders -- Sale, Exchange or Redemption of the Convertible Notes" is satisfied.
DIVIDENDS
Dividends paid (or deemed paid, as described above under "United States
Holders -- Dividends") on Class A Common Stock to a Non-United States Holder
(excluding dividends that are effectively connected with the conduct of a trade
or business in the United States by such Holder and are taxable as described
below) will be subject to United States federal withholding tax at a 30% rate
(or lower rate provided under any applicable income tax treaty). Except to the
extent that an applicable tax treaty otherwise provides, a Non-United States
Holder will be taxed in the same manner as a United States Holder on dividends
paid (or deemed paid) that are effectively connected with the conduct of a trade
or business in the United States by the Non-United States Holder. If such
Non-United States Holder is a foreign corporation, it may also be subject to a
United States branch profits tax on such effectively connected income at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
Even though such effectively connected dividends are subject to income tax, and
may be subject to the branch profits tax, they will not be subject to U.S.
withholding tax if the Holder delivers IRS Form 4224 to the payor.
Under currently applicable Treasury Regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above and for purposes of determining the applicability of
a tax treaty rate. Under recently issued Treasury Regulations, however,
Non-United States Holders of Class A Common Stock who wish to claim the benefit
of an applicable treaty rate would be required to satisfy certain certification
requirements. The new Treasury Regulations are generally effective for payments
made after December 31, 1998. Non-United States Holders are urged to consult
their own tax advisors regarding the new Treasury Regulations.
CERTAIN UNITED STATES FEDERAL ESTATE TAX CONSIDERATIONS
A Convertible Note beneficially owned by an individual who is not a citizen
or resident of the United States at the time of death will not be included in
the decedent's gross estate for United States federal estate tax purposes,
provided that such non-United States Holder did not at the time of death
actually or constructively own 10% or more of the combined voting power of all
classes of stock of the Company entitled to vote, and provided that, at the time
of death, payments with respect to such Convertible Note would not have been
effectively connected with the conduct by such Non-United States Holder of a
trade or business within the United States.
Class A Common Stock actually or beneficially held (other than through a
foreign corporation) by a Non-United States Holder at the time of his or her
death (or previously transferred subject to certain retained rights or powers)
will be subject to United States federal estate tax unless otherwise provided by
an applicable estate tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
United States information reporting requirements and backup withholding tax
will not apply to payments on a Convertible Note to a Non-United States Holder
if the statement described in "Non-United States Holders -- Payment of Interest"
is duly provided by such Holder, provided that the payor does not have actual
knowledge that the Holder is a United States person.
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Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of a Convertible Note or any
payment of the proceeds of the sale of Class A Common Stock effected outside the
United States by a foreign office of a "broker" (as defined in applicable
Treasury Regulations), unless such broker (i) is a United States person, (ii)
derives 50% or more of its gross income for certain periods from the conduct of
a trade or business in the United States or (iii) is a controlled foreign
corporation as to the United States. Payment of the proceeds of any such sale
effected outside the United States by a foreign office of any broker that is
described in (i), (ii) or (iii) of the preceding sentence will not be subject to
backup withholding tax, but will be subject to information reporting
requirements unless such broker has documentary evidence in its records that the
beneficial owner is a Non-United States Holder and certain other conditions are
met, or the beneficial owner otherwise establishes an exemption. Payment of the
proceeds of any such sale to or through the United States office of a broker is
subject to information reporting and backup withholding requirements, unless the
beneficial owner of the Convertible Note provides the statement described in
"Non-United States Holders -- Payment of Interest" or otherwise establishes an
exemption.
Recently released Treasury Regulations make certain modifications to the
withholding, backup withholding and information reporting rules described above.
The new Treasury Regulations will generally be effective for payments made after
December 31, 1998, subject to certain transition rules. Prospective investors
are urged to consult their own tax advisors regarding the new Treasury
Regulations.
UNITED STATES FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT
Under the Foreign Investment in Real Property Tax Act ("FIRPTA"), any
person who acquires a "United States real property interest" (as described
below) from a foreign person must deduct and withhold a tax equal to 10% of the
amount realized by the foreign transferor. In addition, a foreign person who
disposes of a United States real property interest generally is required to
recognize gain or loss that is subject to United States federal income tax. A
"United States real property interest" generally includes any interest (other
than an interest solely as a creditor) in a United States corporation unless it
is established under specific procedures that the corporation is not (and was
not for the prior five-year period) a "United States real property holding
corporation". The Company does not believe that it is a United States real
property holding corporation as of the date hereof, although it has not
conducted or obtained an appraisal of its assets to determine whether it is now
or will be a United States real property holding corporation. If it is not
established that the Company is not a United States real property holding
corporation, then, unless an exemption applies, both the Class A Common Stock
and the Convertible Notes would be treated as United States real property
interests. As discussed below, however, an exemption should apply to the Class A
Common Stock and the Convertible Notes except with respect to a Non-United
States Holder whose beneficial ownership of Class A Common Stock or Convertible
Notes exceeds 5% of the total fair market value of the Class A Common Stock.
An interest in a United States corporation generally will not be treated as
a United States real property interest if, at any time during the calendar year,
any class of stock of the corporation is "regularly traded" on an established
securities market (the "regularly-traded exemption"). The Company believes that
the Company's Class A Common Stock is regularly traded on an established
securities market within the meaning of the applicable regulations, although
there can be no assurance that the Class A Common Stock will remain regularly
traded. The remainder of this discussion assumes that the Class A Common Stock
is and will remain regularly traded on an established securities market.
The regularly-traded exemption is not available to a regularly traded
interest (such as the Class A Common Stock) if such interest is owned by a
person who beneficially owns (actually or constructively) more than 5% of the
total fair market value of that class of interests at any time during the
five-year period ending on the date of disposition of such interest or other
applicable determination date. Accordingly, except with respect to a sale or
other disposition of Class A Common Stock by a Non-United States Holder whose
aggregate beneficial ownership has exceeded that 5% threshold, no withholding or
income taxation under the FIRPTA rules should be required with respect to the
sale, exchange or other disposition of Class A Common Stock by a Non-United
States Holder.
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The regularly-traded exemption will apply to a "non-regularly traded class
of interests" in a United States corporation that is convertible into a
regularly traded class of interests in the corporation unless, on the date such
non-regularly traded interest was acquired by its present holder, such interest
had a fair market value greater than the fair market value on that date of 5% of
the regularly traded class of the corporation's stock into which it is
convertible. (Interests of a non-regularly traded class acquired over a period
of time will be aggregated and valued as of the date of the subsequent
acquisition for purposes of applying the 5% test described above.) Accordingly,
except with respect to the sale, exchange, conversion or redemption of the
Convertible Notes by a Non-United States Holder whose aggregate actual or
constructive ownership of such Convertible Notes on an applicable determination
date had a fair market value greater than 5% of the Class A Common Stock, no
withholding or income taxation under the FIRPTA rules should be required with
respect to the sale, exchange, conversion or redemption of Convertible Notes by
a Non-United States Holder. The foregoing discussion assumes that the
Convertible Notes constitute interests that are nonregularly traded interests
convertible into a regularly traded class of interests. If the Convertible Notes
were to become regularly traded, the regularly-traded exemption might not apply
to Convertible Notes owned by a person who beneficially owns (actually or
constructively) more than 5% of the total fair market value of the Convertible
Notes at any time during the five year period ending on the date of disposition
of the Convertible Notes or other applicable determination date.
Any investor that may approach or exceed any of the 5% ownership thresholds
discussed above, either alone or in conjunction with related persons, should
consult its own tax advisor concerning the United States tax consequences that
may result. A Non-United States Holder who sells or otherwise disposes of
Convertible Notes may be required to inform its transferee whether such
Convertible Notes constitute a United States real property interest.
PLAN OF DISTRIBUTION
This Prospectus relates to the sale by the Selling Securityholders of (i)
up to 246,167 shares of Class A Common Stock of the Company acquired by certain
Selling Securityholders in connection with the Company's acquisition of the St.
Louis Budget franchise (the "St. Louis Acquisition"), which was consummated in
November 1997, (ii) up to 1,609,436 shares of Class A Common Stock issuable upon
conversion of the Convertible Notes, (iii) up to 4,306,252 shares of Class A
Common Stock issued to certain Selling Securityholders in connection with the
conversion of the Series A Convertible Notes, which occurred in June, 1998, and
to represent the then present value of the interest payments that such Selling
Securityholders would have otherwise received after June, 1998 had the Series A
Convertible Notes not been redeemed in full until April 29, 2000, and (iv)
$45,000,000 aggregate principal amount of Convertible Notes. The Company is
registering the Shares and the Convertible Notes for sale to provide the holders
thereof with freely tradeable securities, but the registration of such shares or
notes does not necessarily mean that any of such shares or notes will be issued
by the Company or offered or sold by the holders thereof.
The Shares and Convertible Notes may be sold from time to time to
purchasers directly by any of the Selling Securityholders. Alternatively, the
Selling Securityholders may from time to time offer the Shares and Convertible
Notes through dealers or agents, who may receive compensation in the form of
commissions from the Selling Securityholders and/or the purchasers of Shares and
Convertible Notes for whom they may act as agent. Without limiting the
foregoing, such sales may be in the form of secondary distributions, exchange
distributions, block trades, ordinary brokerage transactions or a combination of
such methods of sale. The Selling Securityholders and any dealers or agents that
participate in the distribution of Shares and Convertible Notes may be deemed to
be "underwriters" within the meaning of the Securities Act and any profit on the
sale of Shares and Convertible Notes by them and any commissions received by any
such dealers or agents might be deemed to be underwriting commissions under the
Securities Act.
At a time a particular offer of Shares or Convertible Notes is made, a
Prospectus Supplement, if required, will be distributed that will set forth the
name and names of any dealers or agents and any
29
<PAGE> 30
commissions and other terms constituting compensation from the Selling
Securityholders and any other required information. The Shares and Convertible
Notes may be sold from time to time at varying prices determined at the time of
sale or at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the Shares and Convertible Notes may be sold only through registered
or licensed brokers or dealers. In addition, in certain states, the Shares and
Convertible Notes may not be sold unless they have been registered or qualified
for sale in such state or an exemption from such registration or qualification
requirement is available and is complied with.
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<PAGE> 31
LEGAL MATTERS
The validity of the shares of the Class A Common Stock and Convertible
Notes offered hereby has been passed upon for the Company by King & Spalding,
Atlanta, Georgia.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
as of December 31, 1996 and 1997, and for each of the three years in the period
ended December 31, 1997, after restatement for the 1998 pooling of interests
with Cruise America, Inc., included in the Company's Current Report on Form 8-K
filed on July 2, 1998 and incorporated by reference in this Prospectus, have
been audited by Arthur Andersen LLP, independent certified public accountants,
as indicated in their report with respect thereto and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements for the year ended December 31, 1995
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 have been audited by Deloitte &
Touche LLP, independent auditors, a stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of BRACC as of December 31, 1995 and
1996 and for each of the years in the three-year period ended December 31, 1996
have been incorporated by reference in this Prospectus in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference elsewhere herein and upon the authority of said firm
as experts in accounting and auditing.
The consolidated balance sheets of Ryder TRS, Inc. and Subsidiaries as of
December 31, 1996 and 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for the period from September 5,
1996 (date of inception) to December 31, 1996 and the year ended December 31,
1997, included in the Company's Registration Statement on Form S-4 (SEC File No.
333-49679) and incorporated by reference in this Prospectus, have been
incorporated herein in reliance upon the report of PricewaterhouseCoopers LLP
independent accountants, given upon the authority of that firm as experts in
accounting and auditing.
The combined balance sheet of Ryder Consumer Truck Rental (a division of
Ryder Truck Rental, Inc., a wholly-owned subsidiary of Ryder System, Inc.) as of
October 16, 1996, and the related combined statements of earnings and changes in
Ryder investment and cash flows for the period from January 1, 1996 to October
16, 1996, included in the Company's Registration Statement on Form S-4 (SEC File
No. 333-49679) have been incorporated by reference in this Prospectus in
reliance on the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information.................... 2
Incorporation of Certain Documents by
Reference.............................. 2
Investment Considerations................ 4
The Company.............................. 6
The Offering............................. 8
Use of Proceeds.......................... 8
Ratio of Earnings to Fixed Charges....... 8
Selling Securityholders.................. 9
Description of Convertible Notes......... 11
Certain United States Federal Tax
Considerations......................... 22
Plan of Distribution..................... 29
Legal Matters............................ 31
Experts.................................. 31
</TABLE>
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6,161,855 SHARES
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
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$45,000,000
AGGREGATE PRINCIPAL AMOUNT
6.85% CONVERTIBLE
SUBORDINATED NOTES,
SERIES B, DUE 2007
BUDGET GROUP, INC.
July 30, 1998
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