<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
BUDGET GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
(Budget Logo)
April 3, 1998
Dear Stockholder:
We cordially invite you to attend the 1998 Annual Meeting of Stockholders
of Budget Group, Inc. (the "Company"). The meeting will be held at the Company's
offices at 125 Basin Street, Suite 210, Daytona Beach, Florida 32114 on
Thursday, April 23, 1998, beginning at 10:00 a.m. local Daytona Beach time.
The attached Notice of Annual Meeting and Proxy Statement fully describe
the formal business to be transacted at the Annual Meeting, which includes (i)
the election of nine directors of the Company, (ii) the amendment of the
Company's Amended and Restated Certificate of Incorporation and Bylaws to
provide for the classification of the Company's Board of Directors into three
classes of directors serving staggered terms, (iii) the amendment of the
Company's 1994 Incentive Stock Option Plan as described in the accompanying
Proxy Statement and (iv) the ratification of the Board of Directors' appointment
of Arthur Andersen LLP as the Company's independent auditors for the 1998 fiscal
year.
THE BOARD OF DIRECTORS ASKS THAT YOU VOTE "FOR" THE ELECTION OF THE
DIRECTORS AND EACH OF THE OTHER PROPOSALS DESCRIBED IN THE ENCLOSED NOTICE OF
ANNUAL MEETING AND PROXY STATEMENT.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend, please complete, sign and date the enclosed
Proxy and return it in the enclosed postage prepaid envelope. If you attend the
Annual Meeting and vote in person, your Proxy will not be used. The prompt
return of your Proxy will save the expense involved in further communication.
Your Board of Directors and I look forward to seeing you at the Annual
Meeting on April 23, 1998.
Very truly yours,
/s/ Sanford Miller
SANFORD MILLER
Chairman of the Board and Chief
Executive Officer
On March 4, 1998, the Company announced that it had signed an agreement to
acquire Ryder TRS Inc., a consumer truck rental company. Additional information
relating to the acquisition of Ryder TRS is included in the Current Report on
Form 8-K dated March 4, 1998 filed by the Company with the Securities and
Exchange Commission. The accompanying Proxy Statement relates to the proposals
set forth therein and does not include any proposals relating to the acquisition
of Ryder TRS. THE BOARD EXPECTS TO HOLD A SPECIAL MEETING OF STOCKHOLDERS TO
CONSIDER CERTAIN MATTERS RELATING TO THE RYDER TRS ACQUISITION, BUT IS NOT
SOLICITING PROXIES WITH RESPECT TO THE RYDER TRS TRANSACTION AT THIS TIME.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS............... 1
PROXY STATEMENT............................................. 2
GENERAL INFORMATION....................................... 2
Solicitation and Revocability of Proxy................. 2
Quorum and Voting Requirements......................... 2
BENEFICIAL OWNERSHIP OF COMMON STOCK...................... 4
ELECTION OF DIRECTORS (PROPOSAL NO. 1).................... 6
Vote Required.......................................... 6
Information on Nominees................................ 6
Classified Board of Directors.......................... 8
Meetings of the Board of Directors..................... 8
Committees of the Board of Directors................... 8
Compensation of Directors.............................. 8
EXECUTIVE OFFICERS........................................ 9
EXECUTIVE COMPENSATION.................................... 10
Summary Compensation Table............................. 10
Option Grants During 1997 and Year-End Option Values... 10
Aggregate Option Exercises During 1997 and Year-End
Option Values......................................... 11
Executive Severance Agreements......................... 11
Compensation Committee Interlocks and Insider
Participation......................................... 11
Compensation Committee Report on Executive
Compensation.......................................... 12
Stock Performance Graph................................ 14
CERTAIN TRANSACTIONS AND RELATIONSHIPS.................... 15
Leases................................................. 15
Los Angeles Acquisition................................ 16
ValCar Acquisition..................................... 16
Tranex Credit Corporation.............................. 16
Colonial Bank.......................................... 16
CSFBC.................................................. 16
AMENDMENTS TO THE CERTIFICATE OF INCORPORATION AND BYLAWS
TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS
(PROPOSAL NO. 2)....................................... 17
Proposed Amendments.................................... 17
Class Nominees......................................... 18
Reasons for Classified Board Structure and Possible
Anti-Takeover Effect.................................. 18
Vote Required.......................................... 18
AMENDMENTS TO THE 1994 INCENTIVE STOCK OPTION PLAN
(PROPOSAL NO. 3)....................................... 18
Proposed Amendments.................................... 18
Description of the Plan................................ 19
1997 Grants Under the Plan............................. 22
Certain Federal Income Tax Consequences................ 22
Estimate of Benefits................................... 23
Vote Required.......................................... 24
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 4)....................................... 24
Vote Required.......................................... 24
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................... 25
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE... 25
ANNUAL REPORT ON FORM 10-K................................ 26
OTHER MATTERS............................................. 26
STOCKHOLDER PROPOSALS..................................... 26
ANNEX
1994 INCENTIVE STOCK OPTION PLAN WITH PROPOSED
AMENDMENTS............................................. A-1
</TABLE>
<PAGE> 4
(Budget Logo)
---------------------
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1998
---------------------
TO THE STOCKHOLDERS OF BUDGET GROUP, INC.
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Budget Group, Inc., a Delaware corporation (the "Company"),
will be held at the Company's offices at 125 Basin Street, Suite 210, Daytona
Beach, Florida 32114 on Thursday, April 23, 1998, beginning at 10:00 a.m. local
Daytona Beach time for the following purposes:
1. To elect nine directors of the Company to serve as the Company's
Board of Directors. If the proposal to establish a classified Board of
Directors (Proposal No. 2 below) is approved, the nine directors will be
elected to a classified Board of Directors, with three directors being
elected for a term of one year, three directors being elected for a term of
two years and three directors being elected for a term of three years, and
until their successors are duly elected and qualified. If the proposal to
establish a classified Board of Directors is not approved, all nine
directors will be elected for one-year terms expiring at the 1999 Annual
Meeting of Stockholders.
2. To amend the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") and Bylaws to provide
for the classification of the Company's directors into three classes
serving staggered terms, as described above.
3. To amend the Company's 1994 Incentive Stock Option Plan to increase
the total number of shares of Common Stock available for grant under such
plan to 2,250,000 shares and to provide for certain other amendments as
described in the Proxy Statement.
4. To ratify the Board of Directors' appointment of Arthur Andersen
LLP as the Company's independent auditors for the fiscal year ending
December 31, 1998.
5. To transact any other business which may properly be brought before
the Annual Meeting or any adjournments thereof.
Stockholders of record at the close of business on March 23, 1998 (the
"Stockholders") are entitled to notice of and to vote at the Annual Meeting.
During the period from April 13, 1998 until the Annual Meeting, a list of
Stockholders will be open for examination by any Stockholder during ordinary
business hours at the Company's offices at 125 Basin Street, Suite 210, Daytona
Beach, Florida 32114.
By Order of the Board of Directors,
/s/ Sanford Miller
SANFORD MILLER
Chairman of the Board and Chief
Executive Officer
Daytona Beach, Florida
April 3, 1998
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY
PROMPTLY. IF YOU ATTEND THE ANNUAL MEETING AND VOTE IN PERSON, THE PROXY WILL
NOT BE USED. IF THE PROXY IS MAILED IN THE UNITED STATES IN THE ENCLOSED
ENVELOPE, NO POSTAGE IS REQUIRED. THE PROMPT RETURN OF YOUR PROXY WILL SAVE THE
EXPENSE INVOLVED IN FURTHER COMMUNICATION.
1
<PAGE> 5
BUDGET GROUP, INC.
125 BASIN STREET
SUITE 210
DAYTONA BEACH, FLORIDA 32114
---------------------
PROXY STATEMENT
FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 1998
---------------------
GENERAL INFORMATION
SOLICITATION AND REVOCABILITY OF PROXY
This Proxy Statement is furnished to you, as a Stockholder (as defined
below) of Budget Group, Inc. (the "Company"), in connection with the
solicitation by the Company's Board of Directors (sometimes referred to herein
as the "Board") of Proxies in the accompanying form to be used at the Company's
1998 Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Company's offices at 125 Basin Street, Suite 210, Daytona Beach, Florida 32114
on Thursday, April 23, 1998, beginning at 10:00 a.m. local Daytona Beach time,
and at any subsequent time that may be necessary by the adjournment thereof.
The mailing address of the Company's principal executive offices is 125
Basin Street, Suite 210, Daytona Beach, Florida 32114. This Proxy Statement and
the enclosed Proxy are first being mailed to Stockholders on or about April 3,
1998.
All holders of record (the "Stockholders") of the Company's Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), and Class B Common
Stock, par value $.01 per share (the "Class B Common Stock") (collectively, the
"Common Stock"), at the close of business on March 23, 1998 (the "Record Date")
are entitled to vote at the Annual Meeting. If you cannot be present in person,
please complete, sign and date the enclosed Proxy and return it as soon as
possible. You may withhold your vote from any nominee for director by striking
through such nominee's name on the appropriate space on the accompanying Proxy.
You can revoke your Proxy at any time before it is voted if so desired, either
in person at the Annual Meeting or by delivery of a duly executed subsequent
Proxy or written notice of revocation to the General Counsel and Secretary of
the Company at the address of the principal office of the Company provided
above. All properly executed Proxies delivered pursuant to this solicitation,
unless previously revoked, will be voted in accordance with directions given, if
delivered in time to be voted at the Annual Meeting. If you return a signed
Proxy that does not indicate your voting preferences, the persons named on the
Proxy will vote your shares in favor of all of the proposals set forth in the
attached Notice of 1998 Annual Meeting of Stockholders.
The Company is paying all costs of the solicitation of Proxies, including
the expenses of printing and mailing to Stockholders this Proxy Statement, the
accompanying Notice of 1998 Annual Meeting of Stockholders and the Proxy. The
Company has retained MacKenzie Partners, Inc. to aid in the solicitation of
Proxies. It is estimated that the cost of these services will be approximately
$5,000 plus expenses. Proxies may be solicited personally or by telephone or
facsimile transmission. In addition, the Company will reimburse brokerage firms
and other custodians, nominees and fiduciaries representing beneficial owners of
shares of Common Stock for their expenses in forwarding solicitation materials
to beneficial owners. Proxies may also be solicited by certain of the Company's
executive officers, directors and regular employees, without additional
compensation, personally or by telephone or facsimile transmission.
QUORUM AND VOTING REQUIREMENTS
At the close of business on the Record Date, 25,565,862 shares of Class A
Common Stock and 1,936,600 shares of Class B Common Stock were outstanding and
are entitled to vote at the Annual Meeting. The holders of shares of Class A
Common Stock generally vote together with the holders of shares of Class B
2
<PAGE> 6
Common Stock as a single class on all matters, but the holders of Class A Common
Stock are entitled to one vote per share and the holders of Class B Common Stock
are entitled to ten votes per share. No cumulative voting rights are authorized
and dissenter's rights of appraisal under Delaware law or the rules of the New
York Stock Exchange are not implicated by the matters being proposed.
Votes cast by Proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections appointed for the Annual Meeting. The Inspector of
Elections will also determine whether a quorum is present for the transaction of
business. The Company's Bylaws provide that the presence in person or by Proxy
of the holders of a majority of the combined voting power of the Common Stock
issued and outstanding and entitled to vote at the Annual Meeting will
constitute a quorum for the transaction of business at the Annual Meeting.
In accordance with applicable state law and the Company's Certificate of
Incorporation and Bylaws, abstentions and broker non-votes will be counted for
purposes of determining whether a quorum is present. Broker non-votes occur when
a broker or other nominee holding shares for a beneficial owner does not vote on
a proposal because the beneficial owner has not checked the applicable box on
the Proxy. With respect to Proposal No. 1, abstentions and broker non-votes will
not count as either a vote "FOR" or "AGAINST" such Proposal. With respect to
Proposal No. 2, abstentions and broker non-votes will have the effect of a vote
"AGAINST" such Proposal. With respect to Proposal Nos. 3 and 4, abstentions will
have the effect of a vote "AGAINST" such Proposals and broker non-votes will not
be considered entitled to vote and thus will not be counted as a vote "FOR" or
"AGAINST" such Proposals.
If a quorum is present (i) those nine nominees who receive the greatest
number of votes cast for the election of directors at the Annual Meeting will
become directors of the Company at the conclusion of the tabulation of the
votes, (ii) the affirmative vote of the holders of a majority of the combined
voting power of the shares of Common Stock outstanding on the Record Date is
required to approve Proposal No. 2 and (iii) the affirmative vote of the holders
of a majority of the combined voting power of the shares of Common Stock present
in person or by Proxy at the Annual Meeting is required to approve Proposal Nos.
3 and 4.
3
<PAGE> 7
BENEFICIAL OWNERSHIP OF COMMON STOCK
Unless otherwise indicated, the following table sets forth certain
information, as of February 17, 1998, with respect to the beneficial ownership
of Common Stock by (i) each person known by the Company to beneficially own more
than 5% of either class of Common Stock, (ii) each director or nominee for
director of the Company, (iii) each executive officer of the Company named in
the Summary Compensation Table set forth under the caption "Executive
Compensation" below and (iv) all directors and executive officers as a group. As
of February 17, 1998, the Company had outstanding 25,537,948 shares of Class A
Common Stock and 1,936,600 shares of Class B Common Stock. This table also gives
effect to shares that may be acquired pursuant to options or convertible notes
as described in the footnotes below.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
--------------------------- --------------------------- PERCENT OF
NUMBER OF PERCENT OF NUMBER OF PERCENT OF TOTAL VOTING
CLASS A CLASS A CLASS B CLASS B POWER OF
SHARES SHARES SHARES SHARES COMMON STOCK
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS OWNED(A) OWNED OWNED OWNED OWNED
- ------------------------------------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sanford Miller........................... 922,700(b) 3.6% 905,800 46.8% 22.2%
Jeffrey D. Congdon....................... 532,069(c) 2.1 515,400 26.6 12.7
John P. Kennedy.......................... 523,600(d) 2.1 515,400 26.6 12.6
Ronald D. Agronin........................ 20,500(e) * -- -- *
James F. Calvano......................... 27,500(f) * -- -- *
Dr. Stephen L. Weber..................... 25,600(f) * -- -- *
Jeffrey R. Mirkin........................ 492,500(g) 1.9 -- -- 1.1
Martin P. Gregor......................... 25,905(e) * -- -- *
Alan Liker............................... 28,503(h) * -- -- *
F. Perkins Hixon......................... -- -- -- -- --
Scott R. White........................... -- -- -- -- --
Jeffrey T. Hendrickson................... -- -- -- -- --
All directors and executive officers as a
group (16 persons)..................... 2,607,258(i) 10.2 1,936,600 100.0 48.9
5% STOCKHOLDERS
---------------------------------------
Metropolitan Life Insurance Company...... 1,552,800(j) 6.1 -- -- 3.5
The Equitable Companies Incorporated..... 1,522,500(k) 6.0 -- -- 3.4
John Hancock Mutual Life Insurance
Company................................ 1,571,467(l) 6.2 -- -- 3.5
Baron Capital Group, Inc. ............... 1,499,400(m) 5.9 -- -- 3.3
State Street Research & Management
Company................................ 1,324,000(n) 5.2 -- -- 2.9
Putnam Investments, Inc. ................ 2,969,835(o) 11.6 -- -- 6.6
</TABLE>
- ---------------
* Less than 1%
(a) In determining the number and percent of shares beneficially owned by each
person, shares that may be acquired by such person pursuant to options or
convertible notes exercisable or convertible within 60 days of the date
hereof are deemed outstanding for purposes of determining the total number
of outstanding shares for such person and are not deemed outstanding for
such purpose for all other stockholders. To the best of the Company's
knowledge, except as otherwise indicated, beneficial ownership includes
sole voting and investment or dispositive power with respect to all shares.
(b) Includes (i) 905,800 shares of Class A Common Stock issuable upon
conversion of Class B Common Stock and (ii) 4,000 shares of Class A Common
Stock owned by Mr. Miller's minor children. Mr. Miller's address is 125
Basin Street, Suite 210, Daytona Beach, Florida 32114.
(c) Includes (i) 515,400 shares of Class A Common Stock issuable upon
conversion of Class B Common Stock and (ii) 16,669 shares of Class A Common
Stock owned by the Congdon Family Foundation, Inc. (the "Foundation"). Mr.
and Mrs. Congdon share voting and investment power with respect to such
shares as the President and Treasurer, and Vice President and Secretary,
respectively, of the Foundation. Mr. Congdon's address is 2445 Directors'
Row, Suite K, Indianapolis, Indiana 46241.
(d) Includes 515,400 shares of Class A Common Stock issuable upon conversion of
Class B Common Stock. Mr. Kennedy's address is 18 King's Highway, Westport,
Connecticut 06880.
4
<PAGE> 8
(e) Includes 17,500 shares of Class A Common Stock issuable upon exercise of
options granted under the Company's 1994 Directors' Stock Option Plan (the
"1994 Directors' Plan").
(f) Includes 22,500 shares of Class A Common Stock issuable upon exercise of
options granted under the 1994 Directors' Plan.
(g) Includes 470,000 shares of Class A Common Stock beneficially owned by
Budget Rent a Car of Southern California, a general partnership ("SoCal").
Mr. Mirkin shares voting and investment power with respect to such shares
as a general partner and the trustee of certain trusts which are general
partners of SoCal. Also includes 22,500 shares of Class A Common Stock
issuable upon exercise of options granted under the 1994 Directors' Plan.
(h) Includes (i) 6,003 shares of Class A Common Stock that may be acquired by
Mr. Liker from SoCal pursuant to an option granted by SoCal to Mr. Liker in
October 1995 and (ii) 22,500 shares of Class A Common Stock issuable upon
exercise of options granted under the 1994 Directors' Plan. Mr. Liker
resigned from the Board in March 1998.
(i) Includes 1,936,600 shares of Class A Common Stock issuable upon conversion
of Class B Common Stock.
(j) Includes shares of Class A Common Stock beneficially owned as follows: (i)
1,347,500 shares of Class A Common Stock issuable to Metropolitan Life
Insurance Company ("Metropolitan") upon conversion of 7.0% Convertible
Subordinated Notes due 2003 and (ii) 205,300 shares of Class A Common Stock
acquired for the benefit of Metropolitan by certain of its affiliated
investment advisors. Metropolitan's address is 334 Madison Avenue, Convent
Station, New Jersey 07961. This information is included in reliance upon a
Schedule 13G filed by Metropolitan with the Securities and Exchange
Commission (the "Commission") on January 30, 1998.
(k) Represents shares of Class A Common Stock owned by subsidiaries of The
Equitable Companies Incorporated ("The Equitable") as follows: (i) 252,600
shares of Class A Common Stock held by The Equitable Life Assurance Society
of the United States and (ii) 2,206,600 shares of Class A Common Stock held
by Alliance Capital Management L.P. The Equitable's address is 787 Seventh
Avenue, New York, New York 10019. This information is included in reliance
upon a Schedule 13G filed by The Equitable with the Commission on February
17, 1998.
(l) Represents 1,424,467 shares of Class A Common Stock beneficially owned
directly by John Hancock Mutual Life Insurance Company and 147,000 shares
beneficially owned by its indirect, wholly-owned subsidiary, John Hancock
Advisors, Inc. John Hancock Mutual Life Insurance Company's address is John
Hancock Place, 200 Clarendon Street, Boston, Massachusetts 02117. This
information is included in reliance upon a Schedule 13G filed by
Metropolitan with the Commission on January 30, 1998.
(m) Represents shares of Class A Common Stock beneficially owned by Ronald
Baron and by the following entities controlled by Mr. Baron: Baron Capital
Group, Inc., BAMCO, Inc. and Baron Capital Management, Inc. (the "Baron
Affiliates"). The address for Mr. Baron and the Baron Affiliates is 767
Fifth Avenue, 24th Floor, New York, New York 10153. This information is
included in reliance upon a Schedule 13G dated February 17, 1998 filed by
Mr. Baron and the Baron Affiliates with the Commission.
(n) State Street Research & Management Company's ("State Street") address is
One Financial Center, 30th Floor, Boston, Massachusetts 02111-2690. This
information is included in reliance upon a Schedule 13G filed by State
Street with the Commission on February 4, 1998.
(o) Represents shares of Class A Common Stock owned by subsidiaries of Putnam
Investments, Inc. ("Putnam"), which is a subsidiary of Marsh & McLennan
Companies, Inc. ("Marsh & McLennan"), as follows: (i) 2,531,735 shares of
Class A Common Stock held by Putnam Investment Management, Inc. ("PIM"), as
to which PIM has shared dispositive power and (ii) 438,100 shares of Class
A Common Stock held by The Putnam Advisory Company, Inc. ("PAC"). PAC
shares voting power with respect to 399,900 of such shares and shares
dispositive power with respect to all of such shares. The address of Marsh
& McLennan is 1166 Avenue of the Americas, New York, New York 10036. The
address of Putnam, PIM and PAC is One Post Office Square, Boston,
Massachusetts 02109. This information is included in reliance upon a
Schedule 13G filed by Marsh & McLennan, Putnam, PIM and PAC with the
Commission on February 9, 1998.
5
<PAGE> 9
ELECTION OF DIRECTORS (PROPOSAL NO. 1)
The persons named in the enclosed Proxy will vote to elect as directors the
nine nominees listed below, unless authority to vote for the election of any or
all of the nominees is withheld by marking the Proxy to that effect. All of the
nominees except for Mr. Hixon presently serve on the Board of the Company. Mr.
Mirkin has been nominated to serve as a director under the terms of an agreement
entered into by the Company in connection with its acquisition of the Budget
franchise for Los Angeles, California (the "Los Angeles Acquisition"), pursuant
to which the Company agreed to nominate and use its best efforts to elect to the
Board one person designated by the seller of that franchise, SoCal, for so long
as SoCal owns more than 250,000 shares of Class A Common Stock.
All of the nominees listed below have indicated a willingness to serve on
the Board. If any of the nominees become unable to serve or for good cause will
not serve, the persons named on the enclosed Proxy will vote as the Board
recommends for substitute nominees, vote to allow the vacancy created thereby to
remain open until filled by the Board or vote to reduce the number of directors
for the ensuing year.
VOTE REQUIRED
The nine nominees who receive the greatest number of votes cast for the
election of directors at the Annual Meeting shall become directors at the
conclusion of the tabulation of votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
NAMED BELOW.
INFORMATION ON NOMINEES
The names of the nine nominees for director, together with certain
information furnished to the Company by each individual, are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
- ---- --- --------
<S> <C> <C>
Sanford Miller.............................................. 45 1994
Jeffrey D. Congdon.......................................... 55 1994
John P. Kennedy............................................. 53 1994
Ronald D. Agronin........................................... 60 1994
James F. Calvano............................................ 61 1994
Dr. Stephen L. Weber........................................ 56 1994
Jeffrey R. Mirkin........................................... 45 1995
Martin P. Gregor............................................ 34 1996
F. Perkins Hixon............................................ 39 N/A
</TABLE>
Sanford Miller has been the Chairman of the Board of Directors and Chief
Executive Officer of the Company since April 1994. From August 1991 to August
1994, he was Vice President of Tranex Rentals of New York, Inc. ("Tranex"),
which operated the Albany and Rochester Budget franchises, and from December
1991 to August 1994, was Vice President of Capital City Leasing, Inc. ("Capital
City"), which operated the Richmond, Virginia Budget franchise. From 1989 to
1991, Mr. Miller served as Director of Marketing, Special Accounts, for Budget
Rent a Car Corporation ("BRACC"). From 1981 to 1989, Mr. Miller was an executive
officer and principal stockholder of corporations that owned and operated 30
Budget franchises that were sold to BRACC in 1989. From 1979 to 1981, he was
North East Regional Field Operation Manager for BRACC. Mr. Miller served as
President of the American Car Rental Association, a nationwide industry trade
association, in 1993 and Chairman of the Licensee Local Market Advisory Board of
the Budget System in 1989 and 1990. Mr. Miller is also a director of MoneyGram
Payment Systems, Inc. ("MoneyGram"), a provider of electronic money transfer
services, and Tranex Credit Corporation ("Tranex Credit"), a company that
provides financing for purchasers of previously owned vehicles. Mr. Miller is
the first cousin of Mr. Agronin.
Jeffrey D. Congdon was elected as a director in April 1994 and has been
Vice Chairman of the Board of Directors since January 1991. From January 1991 to
November 1997 he also served as the Company's Chief Financial Officer. Since
December 1990, he has been Secretary, Treasurer and a director of Tranex Credit.
6
<PAGE> 10
From 1980 to 1989, he was an executive officer and principal stockholder of
corporations that owned and operated 30 Budget franchises that were sold to
BRACC in 1989. From 1982 to 1996, Mr. Congdon owned and operated retail new
and/or used vehicle sales operations in Indianapolis, Indiana.
John P. Kennedy was elected as a director in April 1994 and has been the
Vice Chairman of the Board of Directors since May 1997. From August 1994 to May
1997 he was the Company's President and Chief Operating Officer. From November
1991 to August 1994, he was Chairman and President of Metro West, Inc., whose
wholly-owned subsidiary previously owned the Company's San Diego airport
operations. From November 1990 to November 1991, he was an independent
consultant to the vehicle rental industry. From July 1985 to August 1989, he
served as President of NYRAC, Inc. d/b/a Budget Rent a Car of Kennedy and La
Guardia Airports. From 1968 to 1984, he served in various capacities with Avis,
Inc. ("Avis"), including Vice President of Operations.
Ronald D. Agronin was elected as a director in April 1994. From 1993 to
March 1998, Mr. Agronin served as Vice Chairman of Black Clawson Company ("Black
Clawson"), a manufacturer of paper making machinery, and as President and Chief
Executive Officer of United Container Machinery, Inc. ("United Container
Machinery"), a corrugating machinery manufacturer. He served as Executive Vice
President and Chief Operating Officer of Black Clawson from 1987 to 1993. Mr.
Agronin continues to act as a consultant to Black Clawson and United Container
Machinery on various projects. Mr. Agronin is the first cousin of Mr. Miller.
James F. Calvano was elected as a director in August 1994. Since December
1996, Mr. Calvano has been the Chairman of the Board, Chief Executive Officer
and a director of MoneyGram and from February 1996 to December 1996 he was a
consultant to MoneyGram. From June 1991 to February 1996, he was the Executive
Vice President of Marketing for Travelers Group, a subsidiary of Travelers, Inc.
From November 1993 to February 1995, he was Chief Administrative Officer of
Travelers Insurance Companies. From June 1991 to May 1993, Mr. Calvano was
President and Chief Operating Officer of New Valley Corp. Two months before he
assumed this position, New Valley Corp. suspended payments on its publicly-held
debt. An involuntary bankruptcy petition under Title 11 of the U.S. Code was
filed against New Valley Corp. in November 1991 and a voluntary bankruptcy
petition under Title 11 was filed by New Valley Corp. in March 1993. From
January 1989 to December 1990, Mr. Calvano was President and Chief Executive
Officer of Carlson Travel Group and Executive Vice President of Carlson
Companies Inc. From November 1986 to December 1988, he served as President of
Commercial Credit Corp. and Executive Vice President of Primerica Corp. Mr.
Calvano served American Express Travel Related Services Co., Inc. as its Vice
Chairman, President of Payment Systems Division, USA and President of Consumer
Financial Services Division, USA between October 1981 and November 1986. From
1972 to 1981, Mr. Calvano was employed by Avis and served in various capacities,
including President and Chief Executive Officer, Executive Vice President and
Chief Operation Officer and Group Vice President, Western Hemisphere.
Dr. Stephen L. Weber was elected as a director in April 1994. Since June
1996, Dr. Weber has been the President of San Diego State University. From
August 1995 to June 1996, he was the Interim Provost at the State University of
New York System Office. From 1988 until June 1996, he was President of State
University of New York at Oswego.
Jeffrey R. Mirkin was elected as a director in October 1995. Since 1985,
Mr. Mirkin has been the President of Budget Rent a Car of Southern California, a
franchisee of the Company in Southern California (i.e., SoCal).
Martin P. Gregor was elected as a director in December 1996. Mr. Gregor
serves as a managing director of McDonald & Company Securities, Inc., where he
began his employment as an associate in 1989.
F. Perkins Hixon has served since February 1996 as a managing director in
Credit Suisse First Boston Corporation's ("CSFBC") New York Investment Banking
Department, where he was first employed as an associate in 1985.
7
<PAGE> 11
CLASSIFIED BOARD OF DIRECTORS
If the proposed amendments to the Company's Certificate of Incorporation
and Bylaws to establish a classified Board are approved (Proposal No. 2 below),
three Class I Directors (Messrs. Miller, Calvano and Gregor) will be elected for
a three-year term expiring at the 2001 Annual Meeting of Stockholders, three
Class II Directors (Messrs. Congdon, Weber and Hixon) will be elected for a
two-year term expiring at the 2000 Annual Meeting of Stockholders and three
Class III Directors (Messrs. Kennedy, Agronin and Mirkin) will be elected for a
one-year term expiring at the 1999 Annual Meeting of Stockholders, in all cases
subject to the election and qualification of their successors. If the proposed
amendments are not approved, all nine directors will be elected for one-year
terms expiring at the 1999 Annual Meeting of Stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
During 1997, the Board of Directors of the Company held ten meetings. Each
director attended at least 75% of the meetings of the Board and the committees
on which such director served in 1997.
COMMITTEES OF THE BOARD OF DIRECTORS
From time to time the Board of Directors establishes permanent standing
committees and temporary special committees to assist the Board in carrying out
its responsibilities. The Board has established the following three standing
committees of directors:
Nominating Committee. The Nominating Committee is currently composed of
Messrs. Calvano and Gregor and Dr. Weber. This Committee is charged with respect
to the nomination of candidates for election to the Board of Directors. The
Nominating Committee will consider nominees recommended by the Company's
stockholders if the nomination is set forth in writing and delivered to the
Company's General Counsel and Secretary at 125 Basin Street, Suite 210, Daytona
Beach, Florida 32114. The Nominating Committee held one meeting in 1997.
Compensation Committee. The Compensation Committee is composed of Messrs.
Agronin and Gregor and Dr. Weber. The Compensation Committee establishes
salaries, incentives and other forms of compensation for directors, officers and
other employees of the Company, administers various incentive compensation and
benefit plans and recommends policies relating to such plans. This Committee met
two meetings in 1997.
Audit/Finance Committee. The Audit/Finance Committee is composed of
Messrs. Calvano and Gregor and Dr. Weber. This Committee reviews the Company's
accounting practices, internal accounting controls and financial results and
oversees the engagement of the Company's independent auditors. The Audit/Finance
Committee held one meeting in 1997.
COMPENSATION OF DIRECTORS
Non-employee directors ("outside directors") receive an annual retainer of
$18,000 and are eligible to participate in the Company's 1994 Directors' Stock
Option Plan. In 1997, the Company granted options to purchase an aggregate of
60,000 shares of Class A Common Stock to outside directors under the 1994
Directors' Stock Option Plan. The Company also pays the reasonable out-of-pocket
expenses of each director in connection with his attendance at each Board or
committee meeting and provides complimentary use of Budget rental vehicles to
outside directors when traveling.
8
<PAGE> 12
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the Company's
executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- ---- --- ----------------------------
<S> <C> <C>
Sanford Miller............................... 45 Chairman of the Board of Directors, Chief
Executive Officer and Director
Jeffrey D. Congdon........................... 55 Vice Chairman of the Board of Directors and
Director
John P. Kennedy.............................. 53 Vice Chairman of the Board of Directors and
Director
Robert L. Aprati............................. 53 Executive Vice President, General Counsel and
Secretary
Scott R. White............................... 34 Executive Vice President, Corporate
Development
Michael B. Clauer............................ 41 Senior Vice President and Chief Financial
Officer
Jeffrey T. Hendrickson....................... 53 Senior Vice President
</TABLE>
Each of the above executive officers was elected by the Board to hold office
until the next annual election of officers and until his successor is elected
and qualified or until his earlier resignation or removal.
For descriptions of the business experience of Messrs. Miller, Congdon and
Kennedy, see "Election of Directors."
Robert L. Aprati has been Executive Vice President, General Counsel and
Secretary of the Company since August 1997, was Senior Vice President, General
Counsel and Secretary of BRACC from January 1988 to July 1997 and was Vice
President, General Counsel and Secretary of BRACC from September 1978 to January
1988. Mr. Aprati has been a long-standing director and currently is President of
the American Car Rental Association.
Scott R. White has been Executive Vice President, Corporate Development of
the Company since February 1997. From August 1992 to February 1997, he worked in
the Investment Banking Department of CSFBC, most recently as a vice president.
Mr. White received his J.D. degree from the University of Texas School of Law in
May 1992 and is a member of the State Bar of Texas. In addition, he was a
financial analyst at The First Boston Corporation from July 1986 to July 1989.
Michael B. Clauer has been Senior Vice President and Chief Financial
Officer of the Company since November 1997. From April 1996 to November 1997, he
served as Senior Director of Finance, Strategy & Planning for the North America
National Franchise Business Units of the Pepsi-Cola Company. From September 1994
to April 1996, Mr. Clauer was the Senior Director -- Field Finance for Pepsico
International Restaurants, Inc. From June 1992 to September 1994, he served as
Senior Director -- Finance, Central Division for Pizza Hut, Inc.
Jeffrey T. Hendrickson has been Senior Vice President of the Company since
May 1997 and his responsibilities include managing the Company's U.S. vehicle
rental operations. From 1994 to 1997, Mr. Hendrickson was Senior Vice President
of Brink's Incorporated ("Brink's") responsible for Brink's worldwide air
courier services and nationwide ATM services. From 1987 to 1994, Mr. Hendrickson
was Executive Vice President of National Car Rental Systems, Inc., from 1985 to
1987 he was Senior Vice President of Basix Corporation and from 1982 to 1985 he
served as Vice President of the Chase Manhattan Corporation and President and
Director of Chase T/C Service Corp. Prior to joining the Chase Manhattan
Corporation Mr. Hendrickson served in various capacities for The Hertz
Corporation from 1971 to 1982, including Managing Director of Hertz United
Kingdom and Ireland, Vice President -- Operations, Rent-A-Car Division and
Corporate Vice President and General Manager, Truck Division. Mr. Hendrickson is
a director of Bernard C. Harris Publishing Company, Inc.
9
<PAGE> 13
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation paid by the
Company during the last three fiscal years to the Chief Executive Officer and
the four most highly compensated executive officers of the Company other than
the Chief Executive Officer (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
-------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
- --------------------------- ---- -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Sanford Miller............. 1997 $317,500 $334,000 -- 90,000 $ 17,625
Chairman of the Board 1996 208,250 -- -- 60,000 792
of Directors and Chief 1995 183,667 -- -- 30,000 --
Executive Officer
Jeffrey D. Congdon......... 1997 298,750 333,000 -- 75,000 2,855
Vice Chairman of the 1996 197,292 -- -- 52,000 1,041
Board of Directors 1995 173,333 -- -- 25,000 --
John P. Kennedy............ 1997 298,750 333,000 -- 75,000 19,455
Vice Chairman of the 1996 197,500 -- -- 52,000 1,413
Board of Directors 1995 173,333 -- -- 25,000 --
Scott R. White(3).......... 1997 139,583 -- -- 50,000 --
Executive Vice President,
Corporate Development
Jeffrey T.
Hendrickson(4)........... 1997 140,385 12,500 -- 50,000 --
Senior Vice President
</TABLE>
- ---------------
(1) While the Named Executive Officers enjoy certain perquisites, for fiscal
years 1997, 1996 and 1995 these did not exceed the lesser of $50,000 or 10%
of each Named Executive Officer's salary and bonus.
(2) Represents, for 1997, the Company's matching contribution under the
Company's 401(k) Plan in the amount of $1,875 for each of Messrs. Miller,
Congdon and Kennedy and $15,750, $980 and $17,580 of premiums on term life
insurance policies for Mr. Miller, Mr. Congdon and Mr. Kennedy,
respectively. Represents, for 1996, the Company's matching contributions
under the Company's 401(k) Plan of $792, $1,041 and $1,413 to Mr. Miller,
Mr. Congdon and Mr. Kennedy, respectively.
(3) Mr. White began his employment with the Company and commenced serving as an
executive officer on February 3, 1997.
(4) Mr. Hendrickson began his employment with the Company and commenced serving
as an executive officer on May 5, 1997.
OPTION GRANTS DURING 1997 AND YEAR-END OPTION VALUES
The following table describes the stock options granted to the Named
Executive Officers in 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME GRANTED FISCAL YEAR(4) PER SHARE DATE 5% 10%
- ---- ---------- ---------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Miller.............. 90,000(2) 6.3% $22.375 4/28/07 $3,280,187 $5,223,149
Mr. Congdon............. 75,000(2) 5.2 22.375 4/28/07 2,733,489 4,352,624
Mr. Kennedy............. 75,000(2) 5.2 22.375 4/28/07 2,733,489 4,352,624
Mr. White............... 50,000(3) 3.5 21.750 3/27/07 1,771,423 2,820,695
Mr. Hendrickson......... 50,000(3) 3.5 19.875 4/11/07 1,618,714 2,577,532
</TABLE>
10
<PAGE> 14
- ---------------
(1) Potential realizable value assumes that the stock price increases from the
date of grant until the end of the option term (10 years) at the annual rate
specified (5% and 10%). The 5% and 10% assumed annual rates of appreciation
are mandated by Commission rules and do not represent the Company's estimate
or projection of the future Common Stock price. The Company does not believe
that this method accurately illustrates the potential value of a stock
option.
(2) Represents options to purchase shares of Class B Common Stock.
(3) Represents options to purchase shares of Class A Common Stock.
(4) Options to purchase a total of 1,372,375 shares of Class A Common Stock and
240,000 shares of Class B Common Stock were granted to employees in 1997.
AGGREGATE OPTION EXERCISES DURING 1997 AND YEAR-END OPTION VALUES
The following table sets forth certain information with respect to option
exercises by the Named Executive Officers during 1997 and the value of options
owned by the Named Executive Officers at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1997 DECEMBER 31, 1997(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Miller................ 90,000 $2,899,129 -- 90,000 $-0- $1,096,875.00
Mr. Congdon............... 77,000 2,479,186 -- 75,000 -0- 914,062.50
Mr. Kennedy............... 77,000 2,479,185 -- 75,000 -0- 914,062.50
Mr. White................. -- -- -- 50,000 -0- 640,625.00
Mr. Hendrickson........... -- -- -- 50,000 -0- 734,375.00
</TABLE>
- ---------------
(1) Based upon the closing price of Class A Common Stock on December 31, 1997 of
$34.5625 per share.
EXECUTIVE SEVERANCE AGREEMENTS
The Company has entered into a severance agreement (the "Severance
Agreement") with each of Messrs. Miller, Congdon and Kennedy (each an
"Executive") that provides for severance payments and benefits to the Executive
if his employment is terminated under various circumstances described therein.
Under each Severance Agreement, if an Executive's employment is terminated
voluntarily by the Executive within one year after a "change in control" of the
Company or by reason of the Executive's death or "disability" or within one year
after the occurrence of certain other events constituting "good reason" or if
the Executive's employment is involuntarily terminated without "cause" (as such
terms are defined in the Severance Agreement), the Executive generally would be
entitled (i) to receive an amount equal to three times the sum of the
Executive's annual base salary rate plus certain bonus amounts, (ii) for a
36-month period after termination of employment, to continuing participation in
the Company's insurance benefit programs, to receive certain contributions (or
equivalents) under the Budget Defined Contribution Retirement Plan and to use up
to two Company cars and (iii) to receive certain other benefits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Gregor, a director nominee and an incumbent director who served on the
Company's Compensation Committee in 1997 and is expected to serve on such
Committee if elected to the Board at the Annual Meeting, is a managing director
of McDonald & Company Securities, Inc., an investment banking firm which
periodically performs services for the Company for which it receives
compensation. During 1997, McDonald & Company Securities, Inc. served as a
co-managing underwriter in connection with the Company's public offerings of
Class A Common Stock in April and October 1997 and provided financial advisory
services in connection with the Company's employee benefit plans.
11
<PAGE> 15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. The Compensation Committee is
composed entirely of directors who are not employees of the Company to ensure
that executive compensation is determined in an objective manner. In addition to
determining the salary and bonus compensation for the Company's most highly
compensated executive officers, the Compensation Committee administers the
Company's 1994 Incentive Stock Option Plan (the "Plan") and, accordingly,
determines the nature, timing and amount of option grants to executive officers
under the Plan.
Executive Officer Compensation Policy. The Company is engaged in a highly
competitive and dynamic industry and the Company's success depends in large part
upon its ability to attract, motivate, retain and reward executive officers. The
Compensation Committee endeavors to align the long-term interests of the
Company, its stockholders and its management in determining executive
compensation. The Compensation Committee believes the mutuality of interests
between the Company's executive officers and the Company's stockholders is
strengthened by increasing executive officers' ownership of Common Stock through
equity-based compensation. A significant portion of executive officer
compensation is, therefore, generally composed of stock option grants.
At least annually the Compensation Committee reviews the individual
contributions and performance of each executive officer, as well as prior
compensation granted. The Compensation Committee takes into account the Chief
Executive Officer's recommendation as well as various qualitative and
quantitative indicators of corporate and individual performance in determining
the level and composition of compensation for executive officers. In particular,
the Compensation Committee considers several financial performance measures,
including stock price, revenue growth and net income, as well as the individual
executive's work experience, level of responsibility and contribution to the
Company's long-term success. It also monitors executive compensation levels of
certain comparably sized public companies to ensure the Company's executive
compensation levels remain competitive. The Compensation Committee does not,
however, apply any specific quantitative formula in making compensation
decisions.
Executive compensation decisions in 1997 were largely considered in light
of the successful completion of the acquisition of Budget Rent a Car Corporation
("BRACC") in April 1997 and several other acquisitions throughout the year which
significantly increased the size and complexity of the Company. Considerations
included the contributions of executive officers to the successful completion of
the 1997 acquisitions, the continued compensation level of officers of acquired
companies who joined the Company in 1997 and the need to attract seasoned, new
executive officers to the Company who are able to make valuable contributions to
the integration of acquired companies and the Company's growth.
Deductibility of Executive Compensation. Proposal No. 3 set forth in the
Proxy Statement includes a proposed amendment to the Plan to allow the
Compensation Committee the opportunity to grant options under the Plan which
will be treated as "qualified performance-based compensation" under Section
162(m) of the Code. Section 162(m) provides that publicly held corporations may
not take deductions for amounts greater than $1 million that are paid annually
to executives whose pay must be disclosed separately in the Company's Proxy
Statement, unless such compensation is "qualified performance-based
compensation" which meets certain specific requirements. To date, the Company
has paid no compensation that is non-deductible by reason of Section 162(m). The
Compensation Committee supports the amendment because if approved it would
provide increased flexibility to pay compensation to executive officers that is
commensurate with their contributions to the Company's success, while better
ensuring that such compensation remains deductible.
Chief Executive Officer Compensation. The compensation of the Chief
Executive Officer, Mr. Miller, is established by the Compensation Committee and
reviewed and adjusted at least annually. Mr. Miller's compensation is
principally comprised of a base salary, a bonus and stock option awards which
are primarily tied to the Company's revenue growth, net income per share in the
prior year, stock price appreciation and other achievements in the current year.
In determining the reasonableness of the compensation awarded to Mr. Miller in
1997, the Compensation Committee applied the policies and factors discussed
above with an
12
<PAGE> 16
emphasis on Mr. Miller's contribution to the successful completion of the BRACC
and other 1997 strategic acquisitions and his continuing importance to the
strategic direction and growth of the Company.
Mr. Miller's base salary rate to June 11, 1997 was $230,000 per year. From
June 11, 1997 to December 31, 1997, Mr. Miller's base salary rate increased to
$380,000 per year. In addition, in 1997 the Company paid Mr. Miller a $333,334
bonus upon consummation of the BRACC acquisition and granted Mr. Miller an
option to purchase 90,000 shares of Class B Common Stock under the Plan with an
exercise price equal to the fair market value of the underlying stock on the
date of grant.
THE COMPENSATION COMMITTEE
Ronald D. Agronin
Martin P. Gregor
Dr. Stephen L. Weber
The Compensation Committee Report on Executive Compensation shall not be
deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933
or under the Securities Exchange Act of 1934 (together, the "Acts"), except to
the extent the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
13
<PAGE> 17
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Class A Common Stock
against the cumulative total return of the Nasdaq Composite Index, the New York
Stock Exchange Composite Index, the Standard & Poors 500 Index and the Company's
peer group index. The Company's peer group consists of Amerco, National Auto
Credit, Inc., Oxford Resources Corp., Pacific International Services Corp.,
Rollins Truck Leasing Corp. and Ryder Systems Inc. This represents a change from
the peer group previously reported by the Company, which also included PHH
Corporation. PHH Corporation stopped trading April 30, 1997 and, accordingly,
has been excluded from the Company's peer group index. The stock performance
graph assumes $100 was invested on August 18, 1994 (the date that the Class A
Common Stock was first publicly traded) and measures the return thereon at
various points based on the closing price of the Class A Common Stock on the
dates indicated.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) BGI S&P 500 Peer Group NYSE NASDAQ
<S> <C> <C> <C> <C> <C>
8/18/94 100.0000 100.0000 100.0000 100.0000 100.0000
12/31/94 100.0000 99.1580 87.2633 98.2191 101.3191
12/31/95 89.4737 132.9814 100.1113 128.9718 141.7640
12/31/96 169.7368 159.9283 118.2332 153.5481 173.9534
12/31/97 363.8158 209.5192 128.3072 200.0822 211.5890
</TABLE>
The Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under either of the Acts, except to the extent the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
14
<PAGE> 18
CERTAIN TRANSACTIONS AND RELATIONSHIPS
LEASES
Alabama. The Company's Mobile, Alabama airport service facility is leased
from Messrs. Miller and Congdon and another individual. This lease terminates
July 14, 1999 and is not subject to any renewal options. Rental payments under
the lease were approximately $64,872 in 1997. The monthly base rent will
increase to $5,732 effective July 1, 1998.
Florida. The Company's Gainesville, Florida airport service facility is
leased from Mr. and Mrs. Miller, Mr. and Mrs. Congdon and certain other
individuals. This lease terminates May 31, 1999, subject to renewal. Rental
payments under the Lease were approximately $46,489 in 1997. Monthly base rent
will increase to $4,095 effective June 1, 1998. The Company's Tallahassee,
Florida airport service facility is leased from Mr. and Mrs. Miller, Mr.
Miller's brother-in-law, who is an employee of the Company, and an unrelated
individual. This lease terminates May 31, 1999. Rental payments under the lease
were approximately $53,130 in 1997. Monthly base rent will increase to $4,680
effective June 1, 1998.
Indiana. Mr. Congdon has a 50% equity interest in Tranex Realty, an entity
that owns two retail car sales facilities in Indianapolis, Indiana which are
leased to the Company. One lease terminates in March 2004 and the other lease
terminates in November 1999, each subject to renewal. The aggregate rental
payments under the leases totaled approximately $300,000 in 1997.
New York. The Company's Rochester, New York airport facility is leased
from a partnership formed by Mr. Miller and a former employee of the Company.
This lease terminates in 2013, subject to renewal. Rental payments under the
lease were approximately $90,000 in 1997. The Company's La Guardia, New York
airport service facility is leased from Messrs. Miller, Congdon and Kennedy.
This lease terminates June 30, 1999 subject to renewal. Rental payments under
the lease were approximately $730,908 in 1997. Monthly base rent will increase
to $62,742 effective July 1, 1998. The Company is also a guarantor and
contingent sub-lessee of the Rego Park, New York rental facility, which is
leased from Mr. Miller and another individual. The lease terminates May 30, 1999
on six months prior written notice. Rental payments under the lease were
approximately $152,256 in 1997.
Ohio. The Company leases one of its Dayton, Ohio retail car sales
facilities from MCK Real Estate Corporation ("MCK"), which is owned by Messrs.
Miller, Congdon and Kennedy. This lease terminates in March 2001, subject to
renewal. Rental payments under the lease were approximately $131,885 in 1997.
Pennsylvania. The Company's Philadelphia, Pennsylvania retail vehicle
sales facility, regional administrative headquarters and vehicle maintenance
facility are leased from MCK. This lease terminates in September 2002, subject
to renewal. Rental payments under the lease were approximately $324,577 in 1997.
Virginia. The Company's Richmond, Virginia airport facility is leased from
a partnership formed by Mr. Miller and an employee of the Company (the "Richmond
Partnership"). This lease terminates in 2013, subject to renewal. Rental
payments under the lease were approximately $103,300 in 1997. The Company's
Chesterfield County, Virginia non-airport facility is also leased from the
Richmond Partnership. This lease commenced in June 1994 and terminates in May
2014, subject to renewal. Rental payments under this lease were approximately
$44,040 in 1997. The Company's Richmond, Virginia retail vehicle sales facility
is leased from MCK. This lease terminates in October 2000, subject to renewal.
Rental payments under the lease were approximately $124,218 in 1997.
All of the above leases are on a triple net basis (i.e., the Company is
responsible for the payment of taxes, insurance and utilities and for the
general maintenance of these facilities in addition to its obligations to pay
base rent). The Company believes that these leases are on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
15
<PAGE> 19
LOS ANGELES ACQUISITION
In connection with the Los Angeles Acquisition, the Company agreed to pay
SoCal a royalty equal to 5% of the monthly gross revenues derived from those
operations, subject to a minimum amount. In addition, the Company issued a note
to SoCal in the principal amount of approximately $4,750,000 (the "SoCal Note"),
assumed the obligations of SoCal under a note (the "SoCal Bank Note") in the
principal amount of approximately $4,700,000 which was secured by the personal
guaranty of Mr. Mirkin and assumed certain other indebtedness that was
personally guaranteed by Mr. Mirkin. Mr. Mirkin has been the President and Chief
Executive Officer and a general partner of SoCal since 1985 and, upon
consummation of the Los Angeles Acquisition, became a director of the Company.
The Company operates as a subfranchisee of SoCal at many locations in Southern
California and pays royalty fees to SoCal based on rental revenues for vehicles
other than trucks pursuant to a franchise agreement (the "SoCal Franchise
Agreement"). In 1997, the Company paid SoCal approximately $6,705,694 in royalty
fees (includes royalty fees paid by BRACC). Except as described above, prior to
the Los Angeles Acquisition, there was no material relationship between the
Company and SoCal. There was approximately $792,812 of other indebtedness
payable by the Company to SoCal at December 31, 1997.
On October 14, 1997, SoCal brought an action for declaratory relief in the
Superior Court of Los Angeles County naming BRACC as a defendant and seeking a
determination as to whether the Company must pay royalties on the rental of
pick-up vehicles to SoCal pursuant to the SoCal Franchise Agreement or to
Transportation & Storage Associates ("TSA"), the Company's franchisee for truck
rentals in Southern California, pursuant to the Company's subfranchise agreement
with TSA. Additionally, the Company is a named defendant in an action for
declaratory relief filed by SoCal on March 23, 1998 in the Superior Court of Los
Angeles in which SoCal is seeking a determination, given the SoCal Franchise
Agreement, as to whether the Company can operate locations of Premier Car Rental
LLC, the Company's insurance replacement company, in Southern California.
VALCAR ACQUISITION
In connection with the acquisition of ValCar Rental Sales, Inc. in August
1996, the Company assumed an unsecured revolving credit note payable to Mr.
Congdon in the amount of $1.5 million. The note is due on demand and bears
interest at the prime rate plus 2%. Pursuant to this note, the Company made
payments to Mr. Congdon of approximately $143,198 in 1997.
TRANEX CREDIT CORPORATION
Mr. Congdon owns a 50% equity interest in and serves as Secretary and
Treasurer and a director of Tranex Credit. In 1997, the Company sold to Tranex
accounts receivable totaling approximately $1,979,460 generated pursuant to
financing arrangements extended by the Company to purchasers of vehicles sold by
the Company at its retail sales locations.
COLONIAL BANK
In 1997, Mr. Miller served as a director of Colonial Bank of Volusia County
in Ormond Beach, Florida. The Company maintains a cash management account at
that bank with an average balance during 1997 of approximately $2,500,000.
CSFBC
Mr. Hixon, a director nominee, is a managing director of CSFBC, an
investment banking firm which periodically performs services for the Company for
which it receives compensation. CSFBC and its affiliates have provided extensive
services to the Company in connection with certain of the Company's debt
facilities and public offerings of securities. Most recently, during 1997 CSFBC
acted as a lead or co-lead underwriter in connection with public offerings of
the Company's Class A Common Stock in April 1997 and October 1997 and served as
the Company's financial advisor in connection with the Company's acquisition of
BRACC in April 1997.
16
<PAGE> 20
AMENDMENTS TO THE CERTIFICATE OF INCORPORATION
AND BYLAWS TO PROVIDE FOR A CLASSIFIED
BOARD OF DIRECTORS (PROPOSAL NO. 2)
PROPOSED AMENDMENTS
The Company's Bylaws provide that the Company's directors shall be elected
at each Annual Meeting of Stockholders. Presently, there are nine directors and
the Board is not divided into classes. The Board has adopted, subject to
stockholder approval, an amendment to the Company's Certificate of Incorporation
to cause the Board of Directors to be divided into three classes with staggered
terms. The Board has also resolved to amend the Company's Bylaws consistent with
the amended Certificate of Incorporation. At the Annual Meeting, Stockholders
will be asked to consider and vote on these proposed amendments.
If Proposal No. 2 is approved, the Board will be divided into Class I,
Class II and Class III Directors, with one Class to be elected each year. The
initial term of office for the Class III Directors would expire at the 1999
Annual Meeting of Stockholders, the initial term of office for the Class II
Directors would expire at the 2000 Annual Meeting of Stockholders and the
initial term of the Class I Directors would expire at the 2001 Annual Meeting of
Stockholders. Upon the expiration of the initial staggered terms, directors
would be elected for three-year terms to succeed those directors whose terms
expire. New directors elected to fill a vacancy on the Board will serve until
the next election of the Class to which such director belongs.
If this Proposal is approved, the text of the proposed amendment to the
Certificate of Incorporation will add a new Article EIGHTH to read as follows:
"EIGHTH: Classified Board of Directors. The directors shall be
divided into three classes, designated Class I, Class II and
Class III. Each Class shall consist, as nearly as may be
possible, of one-third of the total number of directors
constituting the entire Board of Directors. The term of the
initial Class I Directors shall terminate on the date of the
2001 Annual Meeting of Stockholders; the term of the initial
Class II Directors shall terminate on the date of the 2000
Annual Meeting of Stockholders; and the term of the initial
Class III Directors shall terminate on the date of the 1999
Annual Meeting of Stockholders. At each Annual Meeting of
Stockholders beginning in 1999, successors to the Class of
directors whose term expires at that Annual Meeting of
Stockholders shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease in
directorship shall be apportioned among the Classes so as to
maintain the number of directors in each Class as nearly equal
as possible, and any additional directors of any Class elected
to fill a vacancy resulting from an increase in such class shall
hold office only until the next election of directors of that
Class by the stockholders of the corporation, but in no case
will a decrease in the number of directors shorten the term of
any incumbent director. Directors shall hold office until the
Annual Meeting of Stockholders for the year in which their terms
expire and until their successors shall be duly elected and
qualified, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of Preferred Stock issued by the
corporation shall have the right, voting separately by class or
series, to elect directors at an Annual or Special Meeting of
Stockholders, the election, term of office, filling of vacancies
and other features of such directorships shall be governed by
the terms of this Certificate of Incorporation, or the
resolution or resolutions adopted by the board of directors
creating such class or series, as the case may be, applicable
thereto, and such directors so elected shall not be divided into
classes pursuant to this Article EIGHTH unless expressly
provided by such terms."
The Company's Bylaws will also be amended by adding or deleting such
provisions as may be necessary to make the Bylaws consistent with the foregoing
amendment to the Certificate of Incorporation, including,
17
<PAGE> 21
without limitation, amendments to provide that stockholders shall not have the
ability to remove directors without cause.
CLASS NOMINEES
If Proposal No. 2 is approved, the following persons, if elected as
directors pursuant to Proposal No. 1, will be members of the Class of directors
set forth opposite their names below, to serve for the terms described above and
until their successors are duly elected and qualified or until their earlier
death, resignation or removal:
<TABLE>
<CAPTION>
NAME CLASS OF DIRECTORS
- ---- ------------------
<S> <C>
Messrs. Miller, Calvano and Gregor.......................... I
Messrs. Congdon, Weber and Hixon............................ II
Messrs. Kennedy, Agronin and Mirkin......................... III
</TABLE>
REASONS FOR CLASSIFIED BOARD STRUCTURE AND POSSIBLE ANTI-TAKEOVER EFFECT
The Board believes that a classified Board will help lend continuity and
stability to the management of the Company. Following adoption of the classified
Board structure, at any given time approximately two-thirds of the members of
the Board will generally have had experience as directors of the Company. The
Board believes that this will facilitate long-range business planning, strategic
planning and policy making. In particular, the Company believes that a
classified Board will permit the Company to more effectively represent the
interests of all of its stockholders in a variety of situations, including
responding to circumstances which might be created by demand or actions of a
single stockholder or stockholder group, than might be the case if the Board
were not classified and a measure of continuity from year to year were not
thereby assured.
The proposed classified Board amendments could discourage efforts to obtain
control of the Company. The classification of directors will have the effect of
making it more difficult for stockholders to change the composition of the Board
in a relatively short period of time since at least two Annual Meetings of
Stockholders will be required to effect a change in a majority of the members of
the Board. The delay afforded by the proposed amendments will help ensure that
the Board, if confronted with a hostile tender offer, a proxy contest or other
similar proposal, would have sufficient time to review and consider the proposal
and appropriate alternatives to the proposal and to act in what it believes to
be the best interests of the stockholders. The proposed amendments are not a
response to any specific effort of which the Company is aware to accumulate the
Company's stock or to obtain control of the Company.
VOTE REQUIRED
The proposed classified Board amendments must be approved by the
affirmative vote of a majority of the combined voting power of the shares of
Common Stock outstanding on the Record Date. Proxies will be voted in accordance
with the specifications marked thereon, and if no specification is marked, a
signed Proxy will be voted "FOR" the adoption of Proposal No. 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 2.
AMENDMENTS TO THE
1994 INCENTIVE STOCK OPTION PLAN (PROPOSAL NO. 3)
PROPOSED AMENDMENTS
The Board has approved and recommends to the Stockholders that they approve
a proposal to amend the Company's 1994 Incentive Stock Option Plan (the "Plan")
(i) to increase by 500,000 shares the number of shares of Common Stock available
for grant under the Plan such that the total number of shares of Common Stock
available for grant is 2,250,000 shares (ii) to allow each employee of the
Company selected by the committee administering the Plan (the "Committee") to
receive stock options in connection with the Special Bonus Program provided for
under the Stock Purchase Agreement dated January 13, 1997 between BRACC and the
Company (the "Special Bonus Program") and (iii) to allow the Committee to grant
options which
18
<PAGE> 22
will be treated as "qualified performance-based compensation" under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), by
limiting the number of shares for which any employee may be granted an option in
any calender year to 250,000 shares and by requiring that the Committee be
composed of only "outside directors" within the meaning of Section 162(m) of the
Code.
The Board has determined that the amendments to the Plan are in the best
interests of the Company and its stockholders. The Board believes that grants of
stock options are an effective method to attract and retain key employees and
that the availability of shares for future grants under the Plan is important to
the Company's business prospects and operations.
The proposed amendments to increase the number of shares of Common Stock
available for grant under the Plan and to allow grants to employees selected by
the Committee in connection with the Special Bonus Program are required to
implement the Special Bonus Program in accordance with the terms of the
agreements governing the BRACC acquisition. Subject to Stockholder approval of
the proposed amendments, as of April 29, 1997, the Committee granted
approximately 430,000 options to approximately 4,750 employees, including
certain non-key employees, to implement the Special Bonus Program (the "Special
Bonus Program Options"). These options were granted at an exercise price of
$22.375 per share, the fair market value of a share of the underlying Class A
Common Stock on the date of grant, and are first exercisable on April 29, 1999,
subject to acceleration upon certain events constituting a change in control of
the Company. See "1997 Grants Under the Plan" for information on option grants
in 1997 to executive officers and other employees of the Company. The Special
Bonus Program Options will be rescinded if stockholder approval of the proposed
amendments is not received at the Annual Meeting.
Aside from the grant of the Special Bonus Program Options, options to
purchase approximately 36,000 shares of Common Stock in excess of the maximum
number of shares available for grant under the Plan were granted in 1997 with
exercise prices equal to the fair market value of the underlying shares on the
date of grant (the "Additional Options"). The effectiveness of such option
grants is, therefore, also subject to stockholder approval of the proposed Plan
amendments.
The Board also deems the Plan amendment to allow grants under the Plan to
qualify as "qualified performance-based compensation" under Section 162(m) of
the Code to be in the best interests of the Company. Section 162(m) of the Code,
in relevant part, limits the Company's ability to claim a tax deduction for
compensation paid to certain key employees to the extent such compensation
exceeds $1,000,000 unless such compensation is treated as qualified
performance-based compensation. The Board believes that the opportunity to claim
tax deductions is important to the Company's operations. The amendment to limit
the number of shares for which any employee may be granted an option in any
calender year to 250,000 shares and to require that the Committee be composed of
only "outside directors" within the meaning of Section 162(m) of the Code gives
the Committee the opportunity to grant options which will be treated as
deductible performance-based compensation.
Except for such amendments, if approved by the affirmative vote of the
holders of a majority of the combined voting power of the shares of Common Stock
present in person or by Proxy at the Annual Meeting, the Plan will remain
unchanged.
DESCRIPTION OF THE PLAN
The following description of the Plan, giving effect to the proposed
amendments, is a summary and is qualified in its entirety by reference to the
text of the Plan.
Stock Subject to the Plan. The Plan provides for the issuance of either
incentive stock options within the meaning of Section 422 of the Code (the
"Incentive Options") or nonqualified stock options (intended not to qualify as
incentive stock options) (the "Nonqualified Options" and, collectively with the
Incentive Options, the "Options" for purposes of the Plan description) to
employees of the Company. Upon amendment of the Plan, the maximum number of
shares of Common Stock that may be made subject to options granted pursuant to
the Plan is 2,250,000. Prior to amendment, the maximum number of shares of
Common Stock
19
<PAGE> 23
that may be made subject to options granted pursuant to the Plan is 1,750,000.
Options granted under the Plan may relate to either Class A Common Stock or
Class B Common Stock.
Administration. The Plan is administered by a committee appointed by the
Board of Directors consisting of not fewer than two individuals who are
"non-employee" directors under Rule 16b-3 promulgated under Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and "outside
directors" under Section 162(m) of the Code (i.e., the Committee). The Committee
has the authority to grant Options under the Plan and to determine the number,
terms and conditions of all Options so granted. The Board has the right to amend
or terminate the Plan in certain circumstances, provided that any amendment or
modification must comply with applicable law, the requirements of Section 16 of
the Exchange Act, the applicable National Association of Securities Dealers,
Inc. (the "NASD") or stock exchange listing requirements and the requirements
under the Code.
The Committee determines the employees to whom Options are to be granted,
the times at which Options are granted, the number of shares of Common Stock
subject to each Option (subject to the limitation that no employee may receive
an Option to purchase more than 250,000 shares of Common Stock in a calender
year), whether each Option is an Incentive Option or a Nonqualified Option,
whether the Option is exercisable for shares of Class A Common Stock or Class B
Common Stock, the exercise price per share and the maximum term of each Option.
The Committee also has the power to interpret and construe the Plan and to
determine the terms and provisions of each agreement evidencing an Option (an
"Agreement") and to make all other determinations the Committee deems necessary
or advisable in administering the Plan.
Eligibility. Awards can be made to key employees (as determined by the
Committee) of the Company or its subsidiaries and to each other employee of the
Company selected by the Committee to implement the Special Bonus Program. In
making determinations under the Plan, the Committee may take into account the
nature of the services rendered by the respective employees, their present and
potential contributions to the success of the Company and its subsidiaries and
such other factors as the Committee deems relevant.
Options. The purchase price per share of Common Stock under each Option is
determined by the Committee and set forth in the applicable Agreement, but may
not be less than the fair market value of the Common Stock on the date the
Option is granted. Fair market value is calculated as the last sales price
reported for the Common Stock on the trading day immediately preceding the date
of grant as reported by on the national securities exchange on which the Common
Stock is listed. The term of each Option may be for such period as the Committee
determines, but not more than 10 years from the date on which the Option is
granted. No Incentive Option can be granted to an employee who, at the time the
Incentive Option is granted, owns, or is considered as owning within the meaning
of Section 424(d) of the Code, stock possessing more than 10% of the total
combined voting power of all classes of equity securities of the Company or of a
subsidiary, unless at the time the Incentive Option is granted, the option price
is at least 110% of such fair market value of the Common Stock subject to the
Incentive Option and the Incentive Option by its terms is not exercisable after
the expiration of 5 years from the date it is granted. Subsequent to the grant
of an Option but before its expiration, the Committee may accelerate the
exercise period in whole or in part (without reducing the term of such Option).
No Option is exercisable before six months after it is granted or may be
exercised as to fewer than 100 shares of Common Stock or, if less, the total
number of shares of Common Stock remaining unexercised under the Option.
Payment of the Option purchase price may be made (i) in cash, (ii) in whole
shares of Common Stock currently owned by the holder, (iii) in a combination of
cash and Common Stock or (iv) upon delivery of a written exercise notice,
including irrevocable instructions to the Company to deliver the stock
certificates issuable upon exercise of the Option directly to a broker named in
the notice that has agreed to participate in a "cashless" exercise on behalf of
the optionee.
Termination of Employment. If the optionee ceases to be an employee of the
Company in certain circumstances, the optionee may, at any time within a period
of 90 days following the date of such termination, exercise such Option to the
extent that the Option was exercisable on the date the optionee ceased to be an
employee. If the optionee ceases to be an employee by reason of retirement under
the
20
<PAGE> 24
Company's retirement plan, then the optionee may, at any time within a period of
90 days following the date of such termination, exercise each Option held by the
optionee on such date to the full extent of the Option.
If the optionee's employment terminates by reason of death or permanent and
total disability, each outstanding Option granted to such employee under the
Plan will become immediately exercisable in full in respect of the aggregate
number of shares covered thereby for a period of one year following the date of
the optionee's death or disability.
If the optionee ceases to be an employee for any reason other than
termination with consent, retirement, death or disability, each Option
immediately terminates and may not be exercised thereafter.
Additional Provisions. In the event of a stock split, stock dividend,
stock combination, recapitalization, merger, consolidation or other similar
transaction which affects the character or amount of the outstanding Common
Stock, the purchase price of each Option will be equitably adjusted. The number
of shares subject to such Option, and the number of shares for which Options may
be granted under the Plan, also shall be appropriately adjusted.
The aggregate fair market value, determined as of the date an Incentive
Option is granted, of the shares with respect to which Incentive Options are
exercisable for the first time by an employee during any calendar year shall not
exceed $100,000. If an Incentive Option is granted pursuant to which the
aggregate fair market value of shares with respect to which it first becomes
exercisable in any calendar year by an employee exceeds this $100,000
limitation, the portion of such Option which is in excess of the $100,000
limitation shall be treated as a Nonqualified Option pursuant to Section
422(d)(1) of the Code. If an employee is eligible to participate in any other
stock option plan of the Company or a subsidiary which is also intended to
comply with the provisions of Section 422 of the Code, the $100,000 limitation
shall apply to the aggregate number of shares for which Incentive Options may be
granted under all such plans.
Change in Control. All outstanding Incentive Options and Nonqualified
Options held by all optionees pursuant to the Plan become immediately
exercisable in full upon the occurrence of: (i) the sale by the Company of all
or substantially all its assets, or all or substantially all the assets of its
subsidiaries, taken as a whole; (ii) an election of new directors if immediately
following such election a majority of the Board of Directors consists of persons
who were not nominated by the Board or nominating committee thereof to stand for
election as directors in such election; or (iii) any of the following events,
if, immediately following such event, a majority of the Board of Directors
consists of persons who were not directors immediately prior to the date of such
event: (a) the sale of 50% or more of the outstanding shares of Common Stock of
the Company in a single transaction or related series of transactions; (b) the
consummation of a tender offer (by a party other than the Company) for more than
50% of the outstanding shares of Common Stock of the Company; or (c) subject to
the provision described below, the consummation of a merger or consolidation
involving the Company. In the event of a merger or consolidation to which the
Company is a party but is not the surviving company, the Committee, in its
discretion, may vote to negate and give no effect to the acceleration of the
Options, provided that the executed agreement of merger or consolidation
provides that the optionee will receive the same merger consideration as the
optionee would have received had the Options been accelerated and exercised in
full prior to the merger or consolidation.
21
<PAGE> 25
1997 GRANTS UNDER THE PLAN
The following table sets forth the awards granted under the Plan to the
Named Executive Officers and to the executive officers and other employees,
respectively, as a group during the year ended December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
NAME AND POSITION GRANTED IN 1997(1)
- ----------------- ------------------
<S> <C>
Sanford Miller.............................................. 90,000(2)
Chairman of the Board of Directors, Chief Executive
Officer and Director
Jeffrey D. Congdon.......................................... 75,000(2)
Vice Chairman of the Board of Directors and Director
John P. Kennedy............................................. 75,000(2)
Vice Chairman of the Board of Directors and Director
Scott R. White.............................................. 50,000(3)
Executive Vice President, Corporate Development
Jeffrey T. Hendrickson...................................... 50,000(4)
Senior Vice President
Executive officers as a group (seven persons)............... 430,000(5)
Other employees as a group.................................. 1,182,375(6)
</TABLE>
- ---------------
(1) All options granted in 1997 were granted at an exercise price equal to the
fair market value of the underlying shares of Class A or Class B Common
Stock, as the case may be, on the date of grant. Unless otherwise indicated,
all options granted in 1997 become exercisable 18 months after the date of
grant, subject to acceleration upon certain events constituting a change in
control of the Company.
(2) Options to purchase shares of Class B Common Stock at $22.375 per share
granted as of April 29, 1997.
(3) Options to purchase Class A Common Stock at $21.75 per share granted as of
March 27, 1997.
(4) Options to purchase Class A Common Stock at $19.875 per share granted as of
April 11, 1997.
(5) Includes options to purchase (i) 240,000 shares of Class B Common Stock and
50,000 shares of Class A Common Stock at $22.375 per share granted as of
April 29, 1997, (ii) 50,000 shares of Class A Common Stock at $21.75 per
share granted as of March 27, 1997, (iii) 50,000 shares of Class A Common
Stock at $19.875 per share granted as of April 11, 1997 and (iv) 40,000
shares of Class A Common Stock at $34.25 granted as of November 17, 1997.
(6) Options to purchase Class A Common Stock under the Plan with exercise prices
ranging from $19.875 to $36.438 that were granted to approximately 6,227
employees, including all current officers who are not executive officers,
and become exercisable 24 months after the date of grant, subject to
acceleration upon certain events constituting a change in control of the
Company. Such options include the Special Bonus Program Options.
As of December 31, 1997, options to purchase a total of 1,431,585 of Class
A Common Stock and 240,000 shares of Class B Common Stock with exercise prices
ranging from $9.50 to $36.438 per share were outstanding under the Plan.
On March 23, 1998, the closing sales price of the Class A Common Stock on
the New York Stock Exchange was $38.9375.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The rules concerning the federal income tax consequences with respect to
Options granted and to be granted pursuant to the Plan are technical. Moreover,
the applicable statutory provisions are subject to change, as are their
interpretations and applications, which may vary in individual circumstances.
Therefore, the following discussion is designed to provide a general description
of certain of the federal income tax consequences associated with the Options.
The following discussion does not set forth (i) any federal tax consequences
other than income tax consequences or (ii) any state, local or foreign tax
consequences that may apply.
22
<PAGE> 26
Incentive Options. In general an employee will not recognize taxable
income upon either the grant or the exercise of an Incentive Option, and the
Company will not be entitled to take an income tax deduction at either such
time. For purposes of the alternative minimum tax, however, the employee will be
required to treat an amount equal to the difference between the fair market
value of the Common Stock on the date of exercise over the option price as an
item of adjustment in computing the employee's alternative minimum taxable
income. If the employee does not dispose of the Common Stock received pursuant
to the exercise of the Incentive Option within either (i) two years after the
date of the grant of the Incentive Option or (ii) one year after the date on
which such Common Stock is transferred to the employee, a subsequent disposition
of the Common Stock will result in long-term capital gain or loss to the
employee.
If the employee disposes of the Common Stock acquired upon exercise of the
Incentive Option within either of the above-mentioned time periods, then in the
year of such disposition, the employee generally will recognize ordinary income,
and the Company will be entitled to an income tax deduction, in an amount equal
to the lesser of (i) the excess of the fair market value of the Common Stock on
the date of exercise over the option price or (ii) the amount realized upon
disposition over the adjusted basis of the Common Stock. Any gain in excess of
such amount recognized by the employee as ordinary income would be taxed to the
employee as short-term or long-term capital gain (depending on the applicable
holding period). If the employee disposes of Common Stock which was acquired
through the exercise of the Incentive Option in the same year as such exercise,
no adjustment to the employee's alternative minimum taxable income is required.
Nonqualified Options. An employee will not recognize any taxable income
upon the grant of a Nonqualified Option, and the Company will not be entitled to
take an income tax deduction at the time of such grant. Upon the exercise of a
Nonqualified Option, the employee generally will recognize ordinary income and
the Company will be entitled to take an income tax deduction in an amount equal
to the excess of the fair market value of the Common Stock on the date of
exercise over the option price. Upon a subsequent sale of the Common Stock by
the employee, the employee will recognize short-term or long-term capital gain
or loss.
In addition, (i) if the exercisability or vesting of any Option, whether
Incentive or Nonqualified, is accelerated because of a change in control under
the Plan, a portion of the compensation relating to the Option may constitute a
parachute payment under Section 280G of the Code, pursuant to which the Company
is disallowed any income tax deduction for excess parachute payment, and in
connection with which an employee receiving excess parachute payments may be
subject to an excise tax under Section 4999 of the Code and (ii) special rules
apply to an employee who exercises a Nonqualified Option by paying the option
price, in whole or in part, with shares of Common Stock.
ESTIMATE OF BENEFITS
The Plan is not subject to any of the requirements of the Employee
Retirement Income Security Act of 1974 ("ERISA"). The Plan is not, nor is it
intended to be, "qualified" under Section 401(a) of the Code.
On February 26, 1998, the Compensation Committee granted, subject to
stockholder approval at a Special Meeting of Stockholders of an amendment to the
Plan to increase the maximum number of shares of Common Stock that may be made
subject to stock options granted under the Plan and a corresponding amendment to
the Certificate of Incorporation to increase the authorized shares of Common
Stock available for issuance, options to purchase an aggregate 1,150,000 shares
of Common Stock at an exercise price of $30.875 per share, the fair market value
of the Class A Common Stock on the date of grant, to certain eligible employees
(the "February 26, 1998 Options"). Such options vest at the rate of 20% per year
over a five-year period.
23
<PAGE> 27
The following table details the number of February 26, 1998 Options granted
to each of the Named Executive Officers, all executive officers as a group and
all employees, including all current officers who are not executive officers, as
a group:
FEBRUARY 26, 1998 OPTION GRANTS
<TABLE>
<CAPTION>
NUMBER OF FEBRUARY 26,
NAME AND POSITION 1998 OPTIONS GRANTED
- ----------------- ----------------------
<S> <C>
Sanford Miller.............................................. 115,000(1)
Chairman of the Board of Directors and Chief Executive
Officer
Jeffrey D. Congdon.......................................... 95,000(1)
Vice Chairman of the Board of Directors
John P. Kennedy............................................. 95,000(1)
Vice Chairman of the Board of Directors
Scott R. White.............................................. 50,000(2)
Executive Vice President, Corporate Development
Jeffrey T. Henderickson..................................... 50,000(2)
Senior Vice President
Executive officers as a group (seven persons)............... 490,000(3)
Other employees as a group (approximately 1,500 persons).... 660,000(2)
</TABLE>
- ---------------
(1) Represents options to purchase Class B Common Stock.
(2) Represents options to purchase Class A Common Stock.
(3) Represents options to purchase 305,000 shares of Class B Common Stock and
185,000 shares of Class A Common Stock.
Aside from the Special Bonus Program Options, the Additional Options and
the February 26, 1998 Options, the number of stock options that will be awarded
under the Plan in the future is not currently determinable. Information on
grants of the Special Bonus Program Options and the Additional Options is
included in the table presented under "1997 Grants Under the Plan," above.
VOTE REQUIRED
The proposed amendments to the Plan must be approved by the affirmative
vote of a majority of the combined voting power of the shares of Common Stock
present in person or by Proxy at the Annual Meeting. Proxies will be voted in
accordance with the specifications marked thereon, and if no specification is
marked, a signed Proxy will be voted "FOR" the adoption of Proposal No. 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 3.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS (PROPOSAL NO. 4)
It is proposed that the Stockholders ratify the appointment by the Board
upon the recommendation of the Nominating Committee of Arthur Andersen LLP as
independent auditors for the Company for the fiscal year ending December 31,
1998. The Company expects representatives of Arthur Andersen LLP to be present
at the Annual Meeting at which time they will respond to appropriate questions
submitted by stockholders and may make such statements as they may desire.
VOTE REQUIRED
The Company is requesting approval of the Board's ratification of Arthur
Andersen LLP as the Company's independent auditors by the affirmative vote of a
majority of the combined voting power of the shares of Common Stock present in
person or by Proxy at the Annual Meeting. Proxies will be voted in accordance
with the specifications marked thereon, and if no specification is marked, a
signed Proxy will be voted "FOR" the adoption of Proposal No. 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 4.
24
<PAGE> 28
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On November 26, 1996, the Company appointed Arthur Andersen LLP as its
independent accounting firm for the remainder of 1996. The Company's
Audit/Finance Committee recommended the appointment, which was approved by the
Board. Concurrently, the Board elected to dismiss Deloitte & Touche LLP ("D&T"),
the Company's former independent accounting firm. The report of D&T on the
Company's financial statements for the two years ended December 31, 1995
contained no adverse opinion or disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles. Since the
Company's inception, D&T's reports on the Company's financial statements did not
contain an adverse opinion or a disclaimer of opinion, nor were the opinions
qualified or modified as to uncertainty, audit scope or accounting principles,
nor were there any events of the type requiring disclosure under Item
304(a)(1)(v) of Regulation S-K under the Securities Act.
With regard to Item 304(a)(1)(iv) of Regulation S-K, the Company has
previously reported the following: (i) on February 2, 1996, the Company
announced that it would restate its financial statements for all periods since
its initial public offering in 1994. This restatement resulted from a change in
the accounting treatment of a common stock warrant issued to BRACC concurrently
with the Company's initial public offering in August 1994. This change in
accounting treatment was the subject of numerous discussions between officers of
the Company and representatives of D&T (including discussions between D&T and
the Audit/Finance Committee of the Company's Board, which occurred in January
1996), and was approved by the Audit/Finance Committee and announced to the
public on February 2, 1996. The Company believes this matter was resolved to the
satisfaction of D&T; and (ii) in late 1995, the Company received funds from a
vehicle manufacturer that it accounted for in a manner similar to funds it had
received from a manufacturer in 1993. In March 1996, D&T advised the Company
that it did not deem the 1995 transaction analogous to the 1993 transaction. D&T
discussed this matter with officers of the Company. The Company issued its
financial statements in accordance with the recommendation of D&T. In connection
with resolution of the matter described in this paragraph, neither the Board of
Directors nor any committee thereof formally discussed this matter with D&T.
The Company believes that this matter was resolved to the satisfaction of
D&T. The Company has provided D&T with a copy of the disclosures contained
herein and D&T has indicated in a letter to the Commission that it agrees with
these disclosures. A copy of such letter is filed as Exhibit 16 to the Current
Report on Form 8-K previously filed by the Company relating to this matter.
Neither the Company nor anyone acting on its behalf consulted with Arthur
Andersen LLP regarding any of the matters referred to in Item 304(a)(2) of
Regulation S-K prior to its appointment.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than 10% of a
registered class of the Company's equity securities to file with the Commission
initial reports of ownership and statements of changes in ownership of Common
Stock and other equity securities of the Company. Based solely upon a review of
such reports furnished to the Company and certain representations of such
persons, all such persons complied with the Section 16(a) reporting requirements
except as follows: (i) the initial statement of beneficial ownership on Form 3
required to be filed by Mr. Hendrickson upon his becoming an executive officer
of the Company was inadvertently not filed when due in April 1997 and a Form 5
indicating such event was filed at year end; (ii) the sale of shares received
upon exercise of options reportable on Form 4 required to have been filed in
November 1997 for Messrs. Miller, Kennedy, Congdon and Agronin were reported on
Form 5 filed for the fiscal year ended December 1997; (iii) the exercise of an
option to purchase shares by Mr. Liker and the sale of the shares in the
Company's October 1, 1997 public offering received upon exercise of the call,
reportable on Form 4 in November 1997, were reported on a Form 5 for the fiscal
year ended December 31, 1997; and (iv) the sale of shares by Mr. Mirkin to Mr.
Liker pursuant to the call exercise by Mr. Liker and sale of shares
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<PAGE> 29
in the Company's public offering conducted October 1, 1997, reportable on Form 4
for November 1997, were reported on a Form 5 for the fiscal year ended December
31, 1997.
ANNUAL REPORT ON FORM 10-K
The Company will provide without charge a copy of its Annual Report on Form
10-K for the year ended December 31, 1997, including the financial statements
and financial statement schedules, as filed with the Commission (without
exhibits), upon the written request of any stockholder. Copies of exhibits to
the Annual Report on Form 10-K will be furnished (upon payment of the Company's
reasonable expenses in furnishing such exhibits) upon request to the General
Counsel and Secretary, Budget Group, Inc., 125 Basin Street, Suite 210, Daytona
Beach, Florida 32114.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters which are
to be brought before the meeting. If any other matters are presented for proper
action, it is the intention of the persons named in the Proxy to vote in
accordance with their discretion pursuant to the terms of the Proxy.
STOCKHOLDER PROPOSALS
Any stockholder satisfying the Commission requirements and wishing to
submit a proposal to be included in the Proxy Statement for the 1999 Annual
Meeting of Stockholders should submit the proposal in writing to the General
Counsel and Secretary, Budget Group, Inc., 125 Basin Street, Suite 210, Daytona
Beach, Florida 32114. The Company must receive a proposal by November 22, 1998
in order to consider it for inclusion in the Proxy Statement for the 1999 Annual
Meeting of Stockholders.
By Order of the Board of Directors,
SANFORD MILLER
Chairman of the Board and Chief
Executive Officer
Daytona Beach, Florida
April 3, 1998
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<PAGE> 30
ANNEX
1994 INCENTIVE STOCK OPTION PLAN
WITH PROPOSED AMENDMENTS
Sentences or clauses contained in the proposed amendments are set forth in all
capital letters
1. Purpose. The purpose of this plan is to advance the interests of BUDGET
GROUP, INC., FORMERLY KNOWN AS TEAM RENTAL GROUP, INC., by providing an
opportunity to selected key employees of the Company and its Subsidiaries to
purchase shares of Common Stock through the exercise of options granted pursuant
to this Plan, which may be either Incentive Options or Nonqualified Options. By
encouraging such stock ownership, the Company seeks to establish as close an
identity as feasible between the interests of the Company and its Subsidiaries
and those of such key employees and also seek to attract, retain, motivate and
reward employees of superior ability, training and experience.
2. Definitions
(1) Board means the Board of Directors of the Company.
(2) Code means the Internal Revenue Code of 1986 and regulations
thereunder, as amended from time to time.
(3) Committee means the committee appointed by the Board responsible
for administering the Plan in accordance with Section 5.
(4) Common Stock means the Class A Common Stock, par value $.01 per
share, and the Class B Common Stock, par value $.01 per share, of the
Company.
(5) Company means BUDGET GROUP, INC., FORMERLY KNOWN AS TEAM RENTAL
GROUP, INC., a Delaware corporation.
(6) Director means each individual who is serving as a member of the
Board as of the time of reference.
(7) Employee means an employee of the Company or any Subsidiary within
the meaning of Code Section 3401(c); "key employee" means a salaried
Employee who is determined by the Committee to be eligible to be granted
Options under the Plan.
(8) Exchange Act means the Securities Exchange Act of 1934 and the
rules and regulations promulgated pursuant thereto, as amended from time to
time.
(9) Incentive Option means a stock option intended to qualify as an
"incentive stock option" within the meaning of Code Section 422 and
designated as such.
(10) Nonqualified Option means a stock option not intended to be an
Incentive Option and designated as a nonqualified stock option, the federal
income tax treatment of which is determined generally under Code Section
83.
(11) Option means either an Incentive Option or a Nonqualified Option
granted pursuant to this Plan.
(12) Plan means this BUDGET GROUP, INC. 1994 Incentive Stock Option
Plan as set forth herein, and as amended from time to time.
(13) Securities Act means the Securities Act of 1933 and rules and
regulations promulgated pursuant thereto, as amended from time to time.
(14) Subsidiary means a "subsidiary" of the Company within the meaning
of Code Section 424(f), which generally is defined as any corporation
(other than the Company) in an unbroken chain of corporations beginning
with the Company if, at the relevant time, each of the corporations other
than the
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last corporation in the unbroken chain owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain.
3. Effective Date. This Plan was approved and adopted by the Board on
April 25, 1994. The effective date of the Plan is April 25, 1994, the date on
which the Plan was approved by the stockholders of the Company.
4. Stock Subject to Plan. THE MAXIMUM AGGREGATE NUMBER OF SHARES OF COMMON
STOCK THAT MAY BE MADE SUBJECT TO OPTIONS GRANTED HEREUNDER IS 2,250,000 SHARES,
WHICH NUMBER SHALL BE ADJUSTED IN ACCORDANCE WITH SECTION 9 IN THE EVENT OF ANY
CHANGE IN THE COMPANY'S CAPITAL STRUCTURE. Shares of Common Stock issued
pursuant to the Plan may consist, in whole or in part, of either authorized and
unissued shares or issued shares held in the Company's treasury. Any shares
subject to an Option that for any reason expires or is terminated unexercised as
to such shares may again be the subject of an Option under the Plan.
5. Administration. THE PLAN SHALL BE ADMINISTERED BY A COMMITTEE APPOINTED
BY THE BOARD CONSISTING OF NO FEWER THAN TWO INDIVIDUALS WHO ARE DIRECTORS, NONE
OF WHOM ARE EMPLOYEES AND ALL OF WHOM ARE BOTH "NON-EMPLOYEE DIRECTORS" UNDER
RULE 16B-3 PURSUANT TO SECTION 16 OF THE EXCHANGE ACT AND "OUTSIDE DIRECTORS"
WITHIN THE MEANING OF SECTION 162(M) OF THE CODE. The Board shall have the
discretion to remove and appoint members of the Committee from time to time. The
Committee shall have full power and discretion, subject to the express
provisions of the Plan, (i) to determine the Key Employees to whom Options are
to be granted, the time or times at which Options are to be granted, the number
of shares of common stock to be made subject to each Option, whether each Option
is to be an Incentive Option or a Nonqualified Option, the exercise price per
share under each Option, and the maximum term of each option, PROVIDED THAT NO
OPTION SHALL BE GRANTED TO ANY EMPLOYEE IN ANY CALENDAR YEAR TO PURCHASE MORE
THAN 250,000 SHARES OF COMMON STOCK; (ii) to interpret and construe the Plan and
to prescribe, amend and rescind rules and regulations for its administration;
(iii) to determine the terms and provisions of each option agreement evidencing
an Option; and (iv) to make all other determinations the Committee deems
necessary or advisable for administering the Plan. All decisions of the
Committee shall be made by a majority of its members, which shall constitute a
quorum, and shall be reflected in minutes of its meetings.
6. Eligibility. Options may be granted to such Employees who are key
employees as the Committee selects. A Director who is not an Employee is not
eligible to receive Options pursuant to this Plan. NOTWITHSTANDING THE
FOREGOING, OPTIONS MAY BE GRANTED TO ANY EMPLOYEE SELECTED BY THE COMMITTEE IN
CONNECTION WITH THE IMPLEMENTATION OF THE SPECIAL BONUS PROGRAM PROVIDED FOR
UNDER SECTION 4.7 OF THE BUDGET STOCK PURCHASE AGREEMENT DATED AS OF JANUARY 13,
1997 BETWEEN BUDGET RENT A CAR CORPORATION AND THE COMPANY.
7. Terms and Conditions of Options. Options granted pursuant to the Plan
shall be evidenced by stock option agreements in such form and containing such
terms and conditions as the Committee shall determine. If an Employee to whom an
Option is granted does not execute an option agreement evidencing that Option in
the form prescribed by the Committee within the later of (i) thirty days from
the date of grant of the Option or (ii) ten days after the Employee's receipt of
an option agreement from the Company, the Option shall be void and of no further
force or effect. Each Option agreement evidencing an Option shall contain among
its terms and conditions the following:
(1) Price. Subject to the conditions on Incentive Options contained
in Section 8(2), if applicable, the purchase price per share of Common
Stock payable upon the exercise of each Option granted hereunder shall be
as determined by the Committee in its discretion but shall not be less than
the fair market value of the Common Stock on the day the Option is
granted.The fair market value of Common Stock shall be determined as
follows:
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(i) if the Common Stock is listed on a national securities exchange
or is a National Association of Securities Dealers Automated Quotation
("NASDAQ") National Market System security, the last reported sale price
on such exchange or system on the trading day immediately preceding the
date of a grant hereunder; or
(ii) if the Common Stock is not so listed, the mean of the last bid
and asked prices reported by NASDAQ, or if no such reports are
available, by the National Quotation Bureau Incorporated on the trading
day immediately preceding the date of a grant hereunder.
(2) Number of Shares and Kind of Option. Each option agreement shall
specify the number of shares to which it pertains and shall specify whether
the Option is a Nonqualified Option or an Incentive Option.
(3) Terms of Exercise. Subject to the conditions on Incentive Options
contained in Section 8(2), if applicable, and to Section 10, each Option
shall be exercisable for the full amount or for any part thereof and at
such intervals or in such installments as the Committee may determine at
the time it grants such Option; provided, however, that (i) no Option shall
be exercised as to fewer than 100 shares of Common Stock or, if less, the
total number of shares of Common Stock remaining unexercised under the
Option, and (ii) no Option shall be exercisable with respect to any shares
earlier than six months from the date the Option is granted or later than
ten years after the date the Option is granted, except to the extent
permitted in the event of the death or disability of the holder of a
Nonqualified Option under Section 7(7).
(4) Notice of Exercise and Payment. An Option shall be exercisable
only by delivery of a written notice to the Company's Treasurer, or any
other officer of the Company the Committee designates to receive such
notices, specifying the number of shares of Common Stock for which the
Option is being exercised. If the shares of Common Stock acquired upon
exercise of an Option are not at the time of exercise effectively
registered under the Securities Act, the optionee shall provide to the
Company, as a condition to the optionee's exercise of the Option, a letter,
in form and substance satisfactory to the Company, to the effect that the
shares are being purchased for the optionee's own account for investment
and not with a view to distribution or resale, and to such other effects as
the Company deems necessary or appropriate to comply with federal and
applicable state securities laws. Payment shall be made in full at the time
the Option is exercised. Payment shall be made by:
(i) cash;
(ii) delivery and assignment to the Company of shares of Common
Stock owned by the optionee;
(iii) a combination of (i) and (ii); or
(iv) delivery of a written exercise notice, including irrevocable
instructions to the Company to deliver the stock certificates issuable
upon exercise of the Option directly to a broker named in the notice
that has agreed to participate in a "cashless" exercise on behalf of the
optionee.
Upon the optionee's satisfaction of all conditions required for the exercise of
the Option and payment in full of the purchase price for the shares being
acquired, the Company shall, within a reasonable period of time following such
exercise, deliver a certificate representing the shares of Common Stock so
acquired; provided, that the Company may postpone issuance and delivery of
shares upon any exercise of an Option to the extent necessary or advisable to
comply with applicable exchange listing requirements, National Association of
Securities Dealers, Inc. ("NASD") requirements, or federal or state securities
laws.
(5) Withholding Taxes. The Company's obligation to deliver shares of
Common Stock upon exercise of an Option, in whole or in part, shall be
subject to the optionee's satisfaction of all applicable federal, state and
local tax withholding obligations.
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(6) Nontransferability of Option. No Option shall be transferable by
the optionee otherwise than by will or the laws of descent and distribution
and shall be exercisable during the optionee's lifetime only by the
optionee (or the optionee's guardian or legal representative).
(7) Termination of Options. Each option agreement evidencing an
Option shall contain provisions for the termination of the Option if the
optionee ceases for any reason to be an Employee, which provisions shall be
no more favorable to the optionee than the following:
(i) Termination With Consent. If the optionee ceases to be an
Employee and the Company or Subsidiary that is the Employee's primary
employer at the time of termination consents in writing to the
optionee's exercise of an Option following such termination, then the
optionee may, at any time within a period of 90 days following the date
of such termination, exercise such Option to the extent that the Option
was exercisable on the date the optionee ceased to be an Employee;
(ii) Retirement. If the optionee ceases to be an Employee by
reason of retirement under one or more of the Company's (or
Subsidiary's) retirement plans including, without limitation, early
retirement, then the optionee may, at any time within a period of 90
days following the date of such termination, exercise each Option held
by the optionee on such date to the full extent of the Option;
(iii) Death or Disability. In the event of the Optionee's death or
disability (within the meaning of Code Section 22(e)(3)) either (x)
while an Employee or (y) with respect only to Nonqualified Options,
while eligible to exercise a Nonqualified Option under Subsections
7(7)(i) or (ii) above, then the optionee (or the optionee's legal
representative, executor, administrator, or person acquiring an Option
by bequest or inheritance) may, at any time within a period of one year
following the date of the optionee's death or commencement of
disability, exercise each Option held by the optionee on such date to
the full extent of the Option; and
(iv) Other Termination. If the optionee ceases to be an Employee
for any reason other than those enumerated in Subsections 7(7)(i)
through (iii) above, each Option granted to the optionee to the extent
outstanding on the date of such termination of employment, shall
terminate immediately on such termination of employment and may not be
exercised thereafter;
provided, however, that no Option may be exercised to any extent by anyone after
the date of expiration of the Option's term, except that a Nonqualified Option
shall remain exercisable as provided in Subsection 7(7)(iii) regardless of the
Option's term.
(8) Legends. Any restriction on transfer of shares of Common Stock
provided in this Plan or in the option agreement evidencing any Option
shall be noted or referred to conspicuously on each certificate evidencing
such shares.
8. Restrictions on Incentive Options. Incentive Options (but not
Nonqualified Options) granted under this Plan shall be subject to the following
restrictions:
(1) Limitation on Number of Shares. The aggregate fair market value,
determined as of the date an Incentive Option is granted, of the shares
with respect to which Incentive Options are exercisable for the first time
by an Employee during any calendar year shall not exceed $100,000. If an
Incentive Option is granted pursuant to which the aggregate fair market
value of shares with respect to which it first become exercisable in any
calendar year by an Employee exceeds the aforementioned $100,000
limitation, the portion of such Option which is in excess of the $100,000
limitation shall be treated as a Nonqualified Option pursuant to Code
Section 422(d)(1). In the event that an Employee is eligible to participate
in any other stock option plan of the Company or a Subsidiary which is also
intended to comply with the provisions of Code Section 422, the $100,000
limitation shall apply to the aggregate number of shares for which
Incentive Options may be granted under all such plans.
(2) 10% Stockholder. If an Employee to whom an Incentive Option is
granted pursuant to the provisions of the Plan is on the date of grant the
owner of stock (as determined under Code Section 424(d)) possessing more
than 10% of the total combined voting power of all classes of stock of the
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<PAGE> 34
Company or a Subsidiary, then the following special provisions shall be
applicable to the Incentive Option granted to such individual:
(i) The Option price per share subject to such Incentive Option
shall not be less than 110% of the fair market value of one share on the
date of grant; and
(ii) The Incentive Option shall not have a term in excess of five
(5) years from its date of grant.
9. Adjustment for Changes in Capitalization. Appropriate and equitable
adjustment shall be made in the maximum number of shares of Common Stock subject
to the Plan under Section 4 and, subject to Section 10, in the number, kind and
option price of shares of Common Stock subject to then outstanding Options to
give effect to any changes in the outstanding Common Stock by reason of any
stock dividend, stock split, stock combination, merger, consolidation,
reorganization, recapitalization or any other change in the capital structure of
the Company affecting the Common Stock after the effective date of the Plan.
10. Change in Control; Merger, Etc.
(1) Change in Control. Upon the occurrence of any of the events
listed below, all outstanding Incentive Options and Nonqualified Options
held by all optionees pursuant to this Plan shall become immediately
exercisable in full. The events are as follows:
(i) The sale by the Company of all or substantially all of its
assets, or all or substantially all of the assets of its Subsidiaries,
taken as a whole;
(ii) Any of the following events if, immediately following such
event, a majority of the Directors consists of persons who were not
Directors immediately prior to the date of such event:
(a) the sale of 50% or more of the outstanding shares of Common
Stock of the Company in a single transaction or related series of
transactions;
(b) the consummation of a tender offer (by a party other than
the Company) for more than 50% of the outstanding shares of Common
Stock of the Company; or
(c) subject to Section 10(2) below, the consummation of a merger
or consolidation involving the Company; or
(iii) An election of new Directors if immediately following such
election a majority of the Directors consists of persons who were not
nominated by the Board or nominating committee thereof to stand for
election as Directors in such election.
(2) Where Company Does Not Survive. In the event of a merger or
consolidation to which the Company is a party but is not the surviving
company, the Committee in its discretion may vote to negate and give no
effect to the acceleration of Options pursuant to Section 10(1)(ii)(c), but
only if and to the extent that an executed agreement of merger or
consolidation provides that the optionee holding such an Option shall
receive the same merger consideration as the optionee would have received
as a stockholder of the Company had the exercisability of the Option been
accelerated in accordance with Section 10(1)(ii)(c) and had the optionee,
immediately prior to the merger or consolidation, exercised the Option for
the full number of shares subject thereto, paid the exercise price in full,
and satisfied all other conditions for the exercise of the Option.
(3) Liquidation or Dissolution. The provisions of Section 9 and
Subsections 10(1) and (2) shall not cause any Option to terminate other
than in accordance with other applicable provisions of the Plan. However,
in the event of the liquidation or dissolution of the Company, each
outstanding Option shall terminate, except to the extent otherwise
specifically provided in the option agreement evidencing the Option.
11. Rights of Optionees. No Employee shall have a right to be granted an
Option or, having received an Option, a right again to be granted an Option. An
optionee shall have no rights as a stockholder with respect to any shares of
Common Stock covered by his or her Option until the date the Option has been
exercised and
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<PAGE> 35
the full purchase price for such shares has been received by the Company.
Nothing in this Plan or in any Option granted pursuant to the Plan shall confer
on any individual any right to continue in the employ of the Company or any
Subsidiary or interfere in any way with the right of the Company or any
Subsidiary to terminate or modify the terms or conditions of the employment of
the Option holder.
12. Amendment and Termination of the Plan. Unless sooner terminated by the
Board, the Plan shall terminate, so that no Options may be granted pursuant to
it thereafter, on April 24, 2004. The Board may at any time amend, suspend or
terminate the Plan in its discretion without further action on the part of the
stockholders of the Company, except that:
(1) no such amendment, suspension or termination of the Plan shall
adversely affect or impair any then outstanding Option without the consent
of the optionee holding the Option; and
(2) any such amendment, suspension or termination that requires
approval by the stockholders of the Company to comply with applicable
provisions of the Code, rules promulgated pursuant to Section 16 of the
Exchange Act, applicable state law or NASD or exchange listing requirements
shall be subject to approval by the stockholders of the Company within the
applicable time period prescribed thereunder, and shall be null and void if
such approval is not obtained.
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APPENDIX
BUDGET GROUP, INC.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS ON APRIL 23, 1998
The undersigned hereby appoints SANFORD MILLER and JOHN P. KENNEDY, and each
of them, Proxies, with full power of substitution and resubstitution, for and in
the name of the undersigned, to vote all shares of stock of Budget Group, Inc.
(the "Company"), which the undersigned would be entitled to vote if personally
present at the 1998 Annual Meeting of Stockholders (the "Annual Meeting") to be
held on Thursday, April 23, 1998, beginning at 10:00 a.m. local time at the
Company's offices at 125 Basin Street, Suite 210, Daytona Beach, Florida 32114
and at any adjournment thereof, upon the matters described in the accompanying
Notice of 1998 Annual Meeting and Proxy Statement, receipt of which is hereby
acknowledged, and upon any other business that may properly come before the
meeting or any adjournment thereof. Said Proxies are directed to vote on the
matters described in the Notice of 1998 Annual Meeting and Proxy Statement as
follows, and otherwise in their discretion upon such other business as may
properly come before the meeting or any adjournment thereof.
<TABLE>
<S> <C> <C> <C>
Proposal No. 1 To elect nine (9) directors to the Board of Directors, as follows:
Sanford Miller Ronald D. Agronin Jeffrey R. Mirkin
Jeffrey D. Congdon James F. Calvano Dr. Stephen L. Weber
John P. Kennedy Martin P. Gregor F. Perkins Hixon, Jr.
[ ] FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees listed
below)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE)
Proposal No. 2 To amend the Company's Amended and Restated Certificate and the Company's Bylaws to
provide for the classification of the Board of Directors into three Classes of directors
serving staggered terms.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal No. 3 To amend the Company's 1994 Incentive Stock Option Plan as set forth in the Proxy
Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal No. 4 To ratify the action of the Board of Directors of the Company appointing Arthur Anderson
LLP as the Company's independent auditors for the year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" ALL PROPOSALS. IF ANY OTHER MATTERS ARE PROPERLY PRESENTED AT THE
ANNUAL MEETING FOR ACTION TO BE TAKEN THEREUNDER, THIS PROXY WILL BE VOTED ON
SUCH MATTERS BY THE PERSONS NAMED AS PROXIES HEREIN IN ACCORDANCE WITH THEIR
BEST JUDGMENT.
Date: , 1998
--------------------------
-------------------------------------
(Signature)
-------------------------------------
(Signature)
-------------------------------------
(Name(s))
Please sign exactly as your name or
names appear hereon. Where more than
one owner is shown above, each should
sign. When signing in a fiduciary or
representative capacity, please give
full title. If this Proxy is submitted
by a corporation, limited liability
company or partnership, it should be
executed in the full entity name by a
duly authorized officer, member or
partner, as the case may be.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. IF YOU
ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY.
