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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-78257
PROSPECTUS BUDGET GROUP, INC. LOGO
OFFER TO EXCHANGE
$400,000,000 9 1/8% SENIOR NOTES DUE APRIL 1, 2006
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
FOR
ALL OUTSTANDING UNREGISTERED
9 1/8% SENIOR NOTES DUE APRIL 1, 2006
BUDGET GROUP, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JUNE 18, 1999, UNLESS EXTENDED.
---------------------
BUDGET GROUP, INC.
- issued $400,000,000 aggregate principal amount of its unregistered 9 1/8%
senior notes due April 1, 2006 on April 13, 1999, and will exchange them
as described in this prospectus for an equal amount of registered
exchange notes having the same terms.
THE NEW NOTES
- have a stated maturity of April 1, 2006;
- will receive interest payments on each April 1 and October 1, commencing
October 1, 1999;
- will be unsecured senior obligations of Budget Group, Inc.;
- will rank equally in right of repayment with all other existing and
future unsecured senior indebtedness;
- will rank senior in right of repayment to all existing and future
subordinated indebtedness;
- will be effectively subordinated to all existing and future secured
indebtedness to the extent of the value of the assets securing such
indebtedness;
- will be structurally subordinated to all the indebtedness and other
obligations, including trade payables, of our subsidiaries; and
- currently have no public market and will not be listed on any national
securities exchange.
INVESTING IN THE NEW NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 9 FOR A DISCUSSION OF THE CERTAIN FACTORS THAT YOU SHOULD CONSIDER IN
CONNECTION WITH THIS EXCHANGE OFFER AND AN INVESTMENT IN THE NEW NOTES.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
---------------------
The date of this prospectus is May 13, 1999.
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REFERENCES TO ADDITIONAL INFORMATION
This prospectus incorporates important business and financial information
about Budget Group from documents that are not included in or delivered with
this document. You can obtain documents incorporated by reference in this
prospectus (other than certain exhibits to those documents) by requesting them
in writing or by telephone from us at the following address:
Budget Group, Inc.
125 Basin Street
Suite 210
Daytona Beach, Florida 32114
Attention: Investor Relations
(904) 238-7035
YOU WILL NOT BE CHARGED FOR ANY OF THESE DOCUMENTS THAT YOU REQUEST. IF YOU
WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY JUNE 11, 1999 IN ORDER TO
RECEIVE THEM BEFORE THE EXCHANGE OFFER EXPIRES ON JUNE 18, 1999.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL BUDGET GROUP ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
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PROSPECTUS SUMMARY
This summary may not contain all the information that may be important to
you. You should read this entire prospectus before making an investment
decision. You should also read the documents incorporated by reference into this
prospectus, which are listed in the section entitled "Incorporation of Certain
Documents by Reference" on page 66. You should pay special attention to the
section entitled "Risk Factors" beginning on page 9 of this prospectus to
determine whether an investment in the new notes is appropriate for you.
In this prospectus, the terms "Budget Group," "the Company" and "we" refer
to Budget Group, Inc. and its subsidiaries as a consolidated entity, except
where it is clear that such terms mean only the parent company. "BRAC" refers to
Budget Rent a Car Corporation, a subsidiary of Budget Group. "Budget" and
"Budget Rent a Car" refer to the business of renting cars and trucks (as
applicable) under the "Budget" name, by BRAC and its franchisees.
THE COMPANY
Budget Group operates Budget Rent a Car, the world's third largest general
use car and truck rental system. We currently maintain more local market car
rental locations throughout the world than most of our major competitors and are
unique among major car rental companies in that we also rent trucks in most of
our major markets. Through our two truck rental companies, Ryder TRS and Budget
Truck Rental, we operate the nation's second and third largest consumer truck
rental companies. We also sell used cars in 27 markets nationwide through our 33
Budget Car Sales facilities. In 1998, we had revenue of $2.6 billion, EBITDA of
$761.0 million and Adjusted EBITDA of $84.0 million. On a pro forma basis and
adjusted for the offering of the old notes and certain non-recurring charges, we
had Adjusted EBITDA of $127.4 million. We define Adjusted EBITDA as EBITDA less
depreciation and interest incurred in connection with fleet vehicles financed
under fleet financing programs. Our business is organized into three principal
segments: Car Rental, Truck Rental and Car Sales.
Budget is one of only three vehicle rental systems that offer rental
vehicles throughout the world under a single brand name. We and our franchisees
operate Budget Rent a Car locations in over 120 countries. We own approximately
536 of the 970 Budget locations within the United States and 212 of the 2,170
Budget locations abroad. Our corporate-owned locations accounted for
approximately 80% of U.S. Budget Rent a Car revenue in 1998. In 1998, we
purchased 83,300 cars for our North American operations under a vehicle supply
agreement with Ford Motor Company, 90% of which were subject to repurchase
agreements that required Ford to repurchase the vehicles at guaranteed prices
after nine months in our rental fleet. Within our Car Rental segment, we also
provide rental vehicles to the insurance replacement market and operate commuter
van pooling services and airport parking facilities; our revenue from these
activities was $115.2 million in 1998. For 1998, our Car Rental segment had
revenue of $1.5 billion (54.3% of our 1998 pro forma revenue), EBITDA of $604.3
million and Adjusted EBITDA of $78.8 million.
Our combined Budget Truck Rental and Ryder TRS business is a leading
service provider in the long distance one-way market and the second largest
operator in the local market. We have 418 corporate-owned rental locations
nationwide, a network of approximately 3,730 dealer and franchised locations and
a system-wide fleet of approximately 49,000 trucks at December 31, 1998. Our
Truck Rental business also includes Cruise America, Inc., the largest
recreational vehicle rental and sales company in North America, which had
revenue of $92.7 million in 1998. Our Truck Rental segment had 1998 revenue of
$613.7 million, EBITDA of $203.0 million and Adjusted EBITDA of $55.8 million.
Pro forma for the Ryder TRS acquisition, our Truck Rental segment had 1998
revenue of $810.4 million (28.8% of our 1998 pro forma revenue), EBITDA of
$234.5 million and Adjusted EBITDA of $43.0 million.
We also operate Budget Car Sales, one of the leading independent retailers
of late model cars, sport utility vehicles and trucks in the United States. We
typically locate our used car stores in mid-sized suburban areas and maintain an
average inventory of approximately 100 vehicles per store. For 1998, our Car
Sales segment had revenue of $547.7 million (19.5% of our 1998 pro forma
revenue), EBITDA of $(17.2) million and Adjusted EBITDA of $(22.1) million.
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Budget Group was incorporated in Delaware in 1992. Our principal executive
offices are located at 125 Basin Street, Suite 210, Daytona Beach, Florida
32114, and our telephone number at that address is (904) 238-7035.
OUR FIRST QUARTER 1999 RESULTS
On April 21, 1999, we reported a net loss for the first quarter of 1999 of
$23.0 million versus a loss of $3.4 million in the first quarter of the prior
year. Revenue increased 48.8% to $678.7 million from $456.0 million in the prior
year first quarter. Operating income for the quarter was $11.3 million compared
to $34.2 million in the prior year. Prior year first quarter excludes Ryder TRS
and other acquisitions of Budget licensees, insurance replacement businesses and
new car dealerships.
Revenue for the first quarter of 1999 for the Car Rental segment increased
14.4% to $387.6 million compared to $338.8 million in 1998. Car Rental operating
income was $24.2 million compared to $36.2 million in the prior year first
quarter. First quarter 1999 operating income showed an approximate $22 million
improvement over fourth quarter 1998. Budget Rent a Car North America, which
represents 75% of this segment, saw revenue growth of 9.0% versus prior year
first quarter (up 5.3% on a same-market basis). On a same-market basis, daily
dollar average at $39.29 was essentially flat due to competitive pricing in
certain leisure markets, notwithstanding, rental days were up 6% for the
quarter.
Revenue from our international Budget operations, driven primarily by
corporate operations, saw growth of 36.7%. On a same-store basis, revenue was up
25.5%. This increase resulted from stepped up worldwide sales and marketing
efforts and the recent acquisition of key Budget licensee operations in France
and the UK.
Revenue for the Truck Rental group reached $151.5 million in the first
quarter of 1999 versus $43.2 million in 1998, which excluded Ryder TRS. Budget
Truck Rental continued to see robust volume growth of 21.0% versus prior year.
Budget truck rental rates increased over 2% as it aligned its pricing with
Ryder. Ryder's revenue was down 6.5% versus prior year pro forma and was in line
with company expectations as the two truck rental businesses are being
integrated. For the quarter, the Truck Rental group had an operating loss of
$3.7 million compared to operating income of $2.5 million in the prior year
first quarter. The year-over-year decline in reported earnings is a result of
the acquisition of Ryder TRS which has seasonal earnings.
Revenue from the Car Sales group reached $160.1 million in the first
quarter of 1999 compared to $92.0 million in the prior year. Revenue includes
proceeds from the sale of units at retail and wholesale within the group. The
first quarter of 1999 saw operating losses of $4.5 million compared to a loss of
$1.0 million in first quarter 1998. Operating results for first quarter 1999
represent a $2.9 million improvement over fourth quarter 1998, excluding
non-recurring charges. Three unprofitable locations were closed during the first
quarter of 1999, with an additional two closed in April of 1999. Units sold
retail during the first quarter increased to 7,957 compared to 4,859 units
during the prior year first quarter.
THE EXCHANGE OFFER
The exchange offer............ We are offering to exchange
- $1,000 principal amount of our registered
9 1/8% senior notes due April 1, 2006, which
we refer to as the "new notes"
for
- each $1,000 principal amount of our
unregistered 9 1/8% senior notes due April 1,
2006, which we refer to as the "old notes."
We sometimes will refer to the new notes and
the old notes together as the "notes."
Currently, $400 million principal amount of old
notes are outstanding.
Expiration date............... The exchange offer will expire at 5:00 p.m.,
New York City time, on June 18, unless we
extend it. In that case, the phrase "expira-
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tion date" will mean the latest date and time
to which we extend the exchange offer.
Procedures for participating
in the
exchange offer.............. If you wish to participate in the exchange
offer, you must complete, sign and date an
original or faxed letter of transmittal in
accordance with the instructions in the letter
of transmittal accompanying this prospectus.
Then you must mail, fax or deliver the
completed letter of transmittal together with
the old notes you wish to exchange and any
other required documentation to The Bank of New
York, which is acting as exchange agent. Its
address appears on the letter of transmittal.
By signing the letter of transmittal you will
represent to and agree with Budget Group that,
- you are acquiring the new notes in the
ordinary course of your business;
- you have no arrangement or understanding with
anyone to participate in a distribution of
the new notes;
and
- you are not an "affiliate," as defined in
Rule 405 under the Securities Act, of Budget
Group.
If you are a broker-dealer that will receive
new notes for your own account in exchange for
old notes that you acquired as a result of your
market-making or other trading activities, you
will be required to acknowledge in the letter
of transmittal that you will deliver a
prospectus in connection with any resale of
such new notes.
Resale of new notes........... We believe that you can resell and transfer
your new notes without registering them under
the Securities Act and delivering a prospectus,
if you can make the same three representations
that appear above under the heading "Procedures
for participating in the exchange offer." Our
belief is based on interpretations of the SEC
for other exchange offers that the SEC
expressed in some of the SEC's no-action
letters to other issuers in exchange offers
like ours.
We cannot guarantee that the SEC would make a
similar decision about this exchange offer. If
our belief is wrong, or if you cannot
truthfully make the representations appearing
above, and you transfer any new note issued to
you in the exchange offer without meeting the
registration and prospectus delivery
requirements of the Securities Act, or without
an exemption from such requirements, you could
incur liability under the Securities Act. We
are not indemnifying you for any such
liability.
A broker-dealer can only resell or transfer new
notes if it will deliver a prospectus.
Special procedures for
beneficial owners............. If your old notes are held through a broker,
dealer, commercial bank, trust company or other
nominee and you wish to surrender such notes,
you should contact your intermediary promptly
and instruct it to surrender your notes on your
behalf.
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Guaranteed delivery
procedures.................. If you cannot meet the expiration date
deadline, or you cannot deliver your old notes,
the letter of transmittal or any other
documentation on time, then you must surrender
your old notes according to the guaranteed
delivery procedures appearing below under "The
Exchange Offer -- Guaranteed Delivery
Procedures."
Acceptance of your old notes
and delivery of the new
notes....................... We will accept for exchange any and all old
notes that are surrendered in the exchange
offer prior to the expiration date if you
comply with the procedures of the offer. The
new notes will be delivered on the earliest
practicable date after the expiration date.
Withdrawal rights............. You may withdraw the surrender of your old
notes at any time prior to the expiration date.
U.S. federal income tax
consequences................ You will not have to pay federal income tax as
a result of your participation in the exchange
offer.
Exchange agent................ The Bank of New York is serving as the exchange
agent in connection with the exchange offer.
The Bank of New York also serves as trustee
under the indenture that governs the notes.
THE NEW NOTES
The new notes have the same financial terms and covenants as the old notes,
which are as follows:
Issuer........................ Budget Group, Inc.
Securities offered............ $400 million aggregate principal amount of
9 1/8% Senior Notes Due April 1, 2006.
Maturity...................... April 1, 2006.
Interest rate................. 9 1/8% per year.
Interest payment dates........ April 1 and October 1 of each year, commencing
October 1, 1999.
Ranking....................... The new notes will:
- be unsecured senior obligations of Budget
Group;
- rank equally in right of repayment with all
other existing and future unsecured senior
indebtedness;
- rank senior in right of repayment to all
existing and future subordinated
indebtedness;
- be effectively subordinated to all existing
and future secured indebtedness to the extent
of the value of the assets securing such
indebtedness; and
- be structurally subordinated to all the
indebtedness and other obligations, including
trade payables, of our subsidiaries.
Change of control offer....... If a change in control of Budget Group occurs,
we must give holders of notes the opportunity
to sell to us their notes at a purchase price
of 101% of their face amount, plus accrued
interest. The term "Change of Control" is
defined in the "Description of the New
Notes -- Change of Control" section of this
prospectus.
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Certain covenants............. The indenture governing the new notes contains
covenants that limit our ability and the
ability of our subsidiaries to:
- incur additional indebtedness;
- pay dividends or distributions on, or redeem
or repurchase, our capital stock;
- make investments;
- issue or sell capital stock of subsidiaries;
- engage in transactions with affiliates;
- create liens on our assets to service debt;
- transfer or sell assets;
- guarantee indebtedness;
- restrict dividend or other payments to us;
- consolidate, merge or transfer all or
substantially all of our assets and the
assets of our subsidiaries; and
- engage in sale/leaseback transactions.
These covenants are subject to important
exceptions and qualifications, which are
described in the "Description of the New Notes"
section of this prospectus.
RISK FACTORS
See "Risk Factors" immediately following this summary beginning on page 9
for a discussion of risks relating to the new notes, all of which apply to the
old notes as well.
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SUMMARY HISTORICAL AND PRO FORMA DATA OF BUDGET GROUP
The following information as of and for the years ended December 31, 1996,
1997 and 1998 is derived from the audited consolidated financial statements of
Budget Group, which reflect the pooled operations of Budget Group and Cruise
America, Inc., which was acquired by Budget Group on January 28, 1998. The pro
forma financial information is derived from the 1998 audited consolidated
financial statements of Budget Group and the unaudited consolidated financial
statements of Ryder TRS for the period from January 1, 1998 through May 31,
1998, as adjusted for various transactions. The following financial data should
be read in conjunction with the Consolidated Financial Statements and the notes
thereto and the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in our Annual Report on
Form 10-K for the year ended December 31, 1998 which is incorporated by
reference into this prospectus, as well as the other documents incorporated
herein by reference. The pro forma financial information should be read in
conjunction with the unaudited pro forma consolidated statement of operations
and the notes thereto beginning on page 17 of this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
HISTORICAL PRO FORMA(A) AS ADJUSTED(B)
------------------------------ ------------ --------------
1996 1997 1998 1998 1998
------ -------- -------- ------------ --------------
(IN MILLIONS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Vehicle rental revenue............ $276.3 $1,070.4 $1,934.7 $2,131.5 $2,131.5
Retail vehicle sales revenue...... 169.3 289.1 583.3 583.3 583.3
Royalty fees and other............ 2.2 51.9 98.2 98.2 98.2
Total operating revenue........... 447.8 1,411.4 2,616.2 2,813.0 2,813.0
Operating income.................. 47.6 171.0 206.3 201.1 233.7
Income before income taxes........ 12.9 55.6 6.6 8.4 27.9
Extraordinary item(c)............. -- -- (45.3) -- --
Net income (loss)................. 7.8 29.8 (48.9) (8.7) 3.4
Segment Revenue:(d)
Car Rental(e)..................... 313.7(f) 1,014.8 1,527.5 1,527.5 1,527.5
Truck Rental(e)................... n/a(f) 215.9 613.7 810.4 810.4
Car Sales......................... 134.1 239.4 547.7 547.7 547.7
Operating Data:
Car rental data(g):
Average rental days per
vehicle...................... 250(f) 297 294
Average fleet.................. 8,917(f) 64,554 95,425
Average monthly revenue per
unit......................... 1,350(f) 1,011 1,009
Truck rental data:
Average rental days per
vehicle...................... n/a(f) 205(h) 183(i)
Average fleet.................. n/a(f) 11,148(h) 36,439(i)
Average monthly revenue per
unit......................... n/a(f) 1,212(h) 1,268(i)
Other Data:
EBITDA(j)......................... 124.8 $ 486.6 $ 761.0 $ 792.5 $ 820.4
Depreciation-- vehicle............ 71.8 292.1 500.2 530.1 528.6
Interest-vehicle, net(k).......... 31.6 95.3 176.8 189.6 164.4
Adjusted EBITDA(j)................ 21.4 99.2 84.0 72.9 127.4
Total interest expense, net....... 34.7 115.4 190.2 192.8 205.9
Non-vehicle capital
expenditures................... 3.4 10.9 88.4 88.4 88.4
Ratio of Adjusted EBITDA to non-
vehicle interest............... 6.9x 4.9x 6.3x 3.1x
Ratio of net non-vehicle debt to
Adjusted EBITDA(l)................ 1.4x 1.6x NM 3.1x
Ratio of earnings to fixed
charges(m)..................... 1.32x 1.39x 1.06x 1.10x
</TABLE>
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<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------
HISTORICAL AS ADJUSTED(B)
---------------------------- --------------
1996 1997 1998 1998
------ -------- -------- --------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Restricted cash(n)................................. $ 66.3 $ 282.7 $ 421.5 $ 421.5
Total cash......................................... 120.3 444.2 557.7 557.7
Manufacturer receivables(o)........................ 13.9 150.2 241.0 241.0
Rental fleet, net.................................. 401.5 2,093.3 2,839.2
Retail vehicle inventory........................... 28.5 46.9 81.0
Total assets....................................... 700.4 3,689.9 5,134.1
Vehicle debt....................................... 447.5 2,367.9 3,508.9 3,120.9
Non-vehicle debt................................... 83.9 318.3 126.2 526.2
Total debt......................................... 531.4 2,686.2 3,635.1 3,647.1
Stockholders' equity............................... 120.4 458.9 650.6
</TABLE>
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(a) Reflects the full-year impact of the Ryder TRS acquisition which was
consummated on June 19, 1998 and the recapitalization transactions which
occurred in 1998 as further described in the section entitled "Pro Forma
Financial Information."
(b) Reflects the pro forma financial information referred to in (a) as adjusted
for the offering of the old notes, as further described in "Pro Forma
Financial Information," and certain one-time and restructuring charges
recorded by Budget Group during 1998. The one-time and restructuring charges
of $32.6 million ($20.2 million, net of tax) include (i) $14.9 million of
restructuring charges, largely related to severance and related costs and
location closing expenses, (ii) $1.6 million of pooling expenses, (iii) $3.2
million of impairment loss related to goodwill at Car Sales (recorded as
amortization and non-vehicle depreciation) and (iv) $12.9 million of other
charges (which includes $1.5 million recorded as depreciation -- vehicle),
net of $12.4 million of taxes.
(c) Reflects costs of the retirement of $165.0 million 9.57% senior notes of
BRAC and $175.0 million 10% senior notes of Ryder TRS. See "Pro Forma
Financial Information." Pro Forma and Pro Forma As Adjusted columns do not
include the extraordinary item as the pro forma financial information
reflects data from continuing operations.
(d) Segment revenue excludes intercompany eliminations of $58.7 million and
$72.7 million for the years ended December 31, 1997 and 1998. Revenue for
the Truck Rental segment include $49.7 million and $35.6 million of Cruise
America's retail sales for the years ended December 31, 1997 and 1998, which
are included in retail vehicle sales revenue in the Statement of Operations
Data above.
(e) Includes revenue from car or truck rentals, as appropriate, and related
products (such as insurance and loss damage waivers).
(f) Truck rental revenue data for the year ended December 31, 1996 cannot be
segregated from car rental revenue. Therefore, car rental revenue data for
the year ended December 31, 1996 include both car and truck rental data.
(g) Includes data for Budget Group's North American car rental operations
excluding Van Pool Services, our commuter van pooling company, and Premier
Car Rental, our insurance replacement rental car company.
(h) Includes data for Budget Truck Rental and Cruise America.
(i) Includes data for Budget Truck Rental, Cruise America and Ryder TRS.
(j) EBITDA consists of income before income taxes plus (i) vehicle interest
expense, net, (ii) non-vehicle interest expense (including certain debt
extinguishment costs), (iii) vehicle depreciation expense and (iv)
amortization and non-vehicle depreciation expense. Adjusted EBITDA consists
of income before income taxes plus (i) non-vehicle interest expense
(including certain debt extinguishment costs) and (ii) amortization and
non-vehicle depreciation expense. EBITDA and Adjusted EBITDA are not
presented as, and should not be considered, alternative measures of
operating results or cash flows from operations (as determined in accordance
with generally accepted accounting principles), but are presented because
they are widely accepted financial indicators of a company's ability to
incur and service
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debt. EBITDA and Adjusted EBITDA reflect certain administrative expenses not
allocated to operating segments.
(k) Consists of vehicle interest, net of interest income on restricted cash.
(l) Net non-vehicle debt consists of non-vehicle debt less unrestricted cash.
(m) Ratio of earnings to fixed charges consists of income from continuing
operations (before extraordinary items) before income taxes and fixed
charges, divided by fixed charges of interest (including amounts capitalized
and the interest factor in rental expense), amortization of debt expenses
and distributions on trust preferred securities.
(n) Restricted cash consists of funds borrowed under medium term note and
commercial paper programs not invested in rental fleet.
(o) Manufacturer receivables arise from the sale of vehicles to manufacturers
pursuant to guaranteed repurchase programs. These manufacturer receivables,
to the extent they relate to vehicles pledged as collateral under our fleet
financing facilities, are also pledged as collateral under those facilities.
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RISK FACTORS
You should carefully consider the risk factors described below before
deciding to surrender your old notes in exchange for new notes in this exchange
offer. These risks apply to both the old notes and the new notes. The risks
described below are not the only ones facing our company. Additional risks not
presently known to us or that we currently deem immaterial may also impair our
business operations.
WE HAVE A SUBSTANTIAL AMOUNT OF INDEBTEDNESS
We maintain a substantial amount of secured indebtedness to finance our
fleet purchases. At December 31, 1998, we had $3.64 billion of total outstanding
indebtedness, of which $3.59 billion was secured ($3.20 billion pro forma for
the offering of the old notes). We had $45.0 million of unsecured indebtedness
at December 31, 1998 ($445.0 million pro forma for the offering of the old
notes), and stockholders' equity of $650.6 million at that date. The offering of
the old notes represented a shift in our funding strategy, as we have begun to
utilize unsecured indebtedness to finance our fleet, rather than relying solely
on the type of secured indebtedness that we have used historically.
Notwithstanding our capacity to incur additional secured and unsecured
indebtedness, our substantial indebtedness could have negative consequences for
our business, including:
- limiting our ability to obtain additional financing in the future;
- limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to
debt service;
- limiting our flexibility in reacting to changes in our industry and
changes in market conditions;
- increasing our vulnerability to a downturn in our business; and
- increasing our interest expense due to increases in prevailing interest
rates, because a substantial portion of our indebtedness bears interest
at floating rates.
We cannot assure you that we will be able to generate sufficient earnings
or to borrow sufficient funds to cover our debt service obligations. Our ability
to pay interest on the notes and meet our other debt service obligations will
depend on our future operating performance and financial results. If we are
unable to generate earnings sufficient to make scheduled payments on the notes
or to meet our other obligations, we will need to refinance these obligations,
obtain additional financing or sell assets.
If for any reason we are in default under the terms of our indebtedness,
the holders of our indebtedness will be able to declare all this indebtedness
immediately due and payable and terminate their commitments, if any, with
respect to additional funding obligations. These holders could also proceed
against their collateral, which, in the case of the vehicle financing
facilities, consists of substantially all our fleet vehicles.
OUR DEBT AGREEMENTS CONTAIN RESTRICTIONS THAT MAY AFFECT OUR ABILITY TO TAKE
CERTAIN ACTIONS
The restrictions and covenants in our existing debt agreements and in any
future financing agreements may adversely affect our ability to finance our
operations or capital needs or to engage in other business activities that may
be in our interest. Events beyond our control may affect our ability to comply
with these covenants, including covenants requiring compliance with certain
financial ratios. A breach of any of these covenants or our inability to comply
with the required financial ratios could result in a default under the notes and
other debt agreements. A significant portion of our debt may then become
immediately due and payable. We are not certain whether we would be able to
obtain sufficient funds to make these accelerated payments, including payments
on the notes.
THE NOTES ARE UNSECURED
The notes are not secured by any of our assets. Our fleet financing
facilities are secured by our vehicle fleet, related manufacturers' repurchase
obligations and restricted cash, and our credit facility is secured by a pledge
of the capital stock of our subsidiaries. If we become insolvent or are
liquidated, or if payment under
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any of these facilities is accelerated, our lenders would be entitled to
exercise the remedies available to a secured lender under applicable law and
will have a claim on such assets before the holders of the notes. We cannot
assure you that the liquidation value of our assets would be sufficient to repay
in full the indebtedness under our vehicle financing facilities, the credit
facility and our other indebtedness, including the notes.
WE ARE A HOLDING COMPANY AND ARE DEPENDENT ON OUR SUBSIDIARIES FOR CASH FLOW
We may not be able to access cash generated by our subsidiaries in order to
pay interest and principal on the notes or fulfill other cash commitments. As a
holding company with no business operations, our material assets consist only of
the stock of our subsidiaries and the proceeds raised from the sale of our
equity and debt securities. We have loaned or contributed, or intend to loan or
contribute, all of these assets to our subsidiaries. We will have to rely upon
dividends and other payments from our subsidiaries to generate the funds
necessary to pay the principal of and interest on the notes. Our subsidiaries,
however, are legally distinct from us and have no obligation, contingent or
otherwise, to pay amounts due pursuant to the notes or to make funds available
for these payments. Our subsidiaries have not guaranteed the notes. The ability
of our subsidiaries to make dividend and other payments to us is subject to,
among other things, the availability of funds, the terms of our subsidiaries'
indebtedness and applicable state laws. Our right or any right of our creditors,
including holders of the notes, to participate in the assets of any subsidiary
upon the liquidation or reorganization of that subsidiary will be subject to the
prior claims of that subsidiary's creditors, including holders of its
indebtedness and trade creditors. Accordingly, the notes will be structurally
subordinated to all existing and future indebtedness and other obligations of
our subsidiaries, including trade payables.
WE HAVE HAD NET LOSSES IN RECENT PERIODS
We incurred a net loss of $48.9 million for 1998 and a net loss of $23.0
million for the quarter ended March 31, 1999. The net loss for 1998 included (i)
an extraordinary charge of $45.3 million (after tax) relating to retirements of
indebtedness and (ii) one-time restructuring and other non-recurring charges of
$20.2 million (after tax). In 1998 and the first quarter of 1999, we had losses
before income taxes of $23.2 million and $4.5 million, respectively in our Car
Sales segment. We are evaluating various alternatives relating to Budget Car
Sales to restore its profitability, including franchising stores, closing
stores, working with a strategic partner to manage stores and other measures. We
cannot assure you that our losses will not continue in the future.
OUR BUSINESS IS HIGHLY SEASONAL
Our business is highly seasonal, particularly the leisure travel and
consumer truck rental segments, and our results of operations and cash flows
fluctuate significantly from quarter to quarter. Historically, revenues have
been stronger in the third quarter due to the overall increase in business and
leisure travel during the peak summer travel months and the increase in moving
activity during this period. The first quarter is generally weakest, when there
is limited leisure travel and a greater potential for adverse weather
conditions. The third quarter accounted for 37.2% of total revenue and 56.4% of
operating income for 1997 and 32.7% of total revenue and 76.1% of operating
income for 1998. Any occurrence that disrupts travel patterns during the summer,
or any adverse competitive conditions during this period, may materially
adversely impact our annual operating performance.
Our business practice is to increase the size of our vehicle fleet and
workforce during the spring and summer months to accommodate increased activity
during these periods and to decrease our fleet and workforce in the fall and
winter months. However, many of our operating expenses (such as rent, insurance
and administrative personnel) are fixed and cannot be reduced during the fall
and winter months when there is decreased rental demand. If we are unable to
manage successfully the size of our vehicle fleet and workforce during periods
of decreased business activity, our annual operating performance may be
materially adversely affected.
10
<PAGE> 13
OUR BUSINESS IS HIGHLY COMPETITIVE
There is intense competition in the vehicle rental industry particularly
with respect to price and service. We cannot assure you that we will be able to
compete successfully with either existing or new competitors. In any geographic
market, we may encounter competition from national, regional and local vehicle
rental companies. Our main competitors in the car rental market are Alamo, Avis,
Enterprise, Hertz and National. In our Truck Rental business, we face
competition primarily from Penske and U-Haul. Many of our competitors have
larger rental volumes, greater financial resources and a more stable customer
base than we have.
In the past, we have had to lower our rental prices in response to
industry-wide price cutting and have been unable to unilaterally raise our
prices. Moreover, when the car rental industry has experienced vehicle
oversupply competitive pressure has intensified.
The retail car sales industry is also characterized by intense competition,
consisting primarily of local new car dealerships selling new and late model
used cars. In addition to local dealerships, we may face competition from
retailers such as CarMax and AutoNation. These retailers compete on the basis of
large inventory size, no-haggle pricing and after-sale service. We cannot assure
you that we will be able to compete effectively in the retail care sales
industry.
WE HAVE NOT COMPLETED THE INTEGRATION OF OUR RECENT ACQUISITIONS
Our recent growth has been largely attributable to two major
acquisitions -- the BRAC acquisition in April 1997 and the Ryder TRS acquisition
in June 1998. We have devoted significant resources to the combination and
integration of our previously existing operations with BRAC and our Budget Truck
Rental business with Ryder TRS, and these efforts are ongoing. Completing the
integration of these acquisitions with our other businesses and achieving the
anticipated levels of cost savings involves a number of risks that could affect
our operating results. These risks include:
- the difficulty of managing a significantly larger organization;
- the diversion of management's attention from other business issues;
- the difficulty of integrating different distribution and marketing
systems, which include independent dealers, franchisees and
corporate-owned operations;
- the risk that the financial and accounting systems utilized by the
acquired businesses may not be efficiently integrated into our own
systems;
- the difficulty of attracting and retaining qualified personnel to manage
the combined business; and
- dealing with potential liabilities associated with the acquired
businesses, which liabilities may not have been disclosed and may exceed
the amount of indemnification available from the sellers.
Integration of these acquisitions has required significant investments to
build management and infrastructure to support our combined business operations.
We cannot assure you that we will be able to fully realize the benefits that we
anticipated from any acquired operations or to manage effectively the combined
business. An inability to do so could have a significant negative effect on our
financial condition and results of operations.
WE MAY BE OBLIGATED TO DELIVER A MAKE-WHOLE PAYMENT
In connection with the Ryder TRS acquisition, we issued 3,455,219 shares of
Class A common stock, paid $125.0 million in cash, issued warrants to purchase
Class A common stock with a value of up to approximately $19.0 million and are
obligated to deliver a make-whole payment (with respect to the shares of Class A
common stock issued in the acquisition) to the extent, if any, that the Class A
common stock trades below approximately $33 per share over two 30-day
measurement periods ending, respectively, on June 19, 1999 and February 19,
2000. This make-whole payment may be made in cash and/or stock, at our option.
This payment would, if made in cash, divert cash from other business purposes.
11
<PAGE> 14
WE ARE DEPENDENT ON THIRD PARTIES FOR FINANCING
We depend on third-party financing to fund our purchases of fleet vehicles.
Accordingly, the availability of financing on favorable terms is critical to our
business. We cannot assure you that we will be able to obtain financing on
favorable terms, if at all. A majority of our debt is incurred in connection
with manufacturers' vehicle repurchase programs. As a result, significant
changes in the credit programs of the vehicle manufacturers, particularly Ford
Motor Company, could significantly affect our ability to obtain this financing
on favorable terms. In addition, certain events, such as significant increases
in the damage to vehicles, could reduce the value of the collateral securing our
vehicle financing facilities and cause the acceleration of the repayment of such
debt. Our inability to obtain vehicle financing on favorable terms would have a
material adverse effect on our financial condition and operating results. We
cannot assure you that the sources of financing used in the past will remain or
that alternative financing will become available on terms acceptable to us.
WE ARE DEPENDENT ON A PRINCIPAL SUPPLIER
Ford Motor Company has been and continues to be our principal supplier of
vehicles. Under the terms of our supply agreement with Ford, we have agreed that
in the United States, Canada, and other countries outside the European Union our
leases and purchases of Ford vehicles will represent at least 70% of the total
new vehicle acquisitions by us, with a minimum purchase requirement of at least
80,000 vehicles in the United States in each model year. Shifting significant
portions of our fleet purchases to other manufacturers would require significant
advance notice and operational changes. Also, there can be no assurance that
vehicles would be available from other suppliers on competitive terms, if at
all. As a result, our financial condition and operating results could be
materially adversely affected if Ford is unable to supply our vehicles or if
there is any significant decline in the quality and customer satisfaction with
Ford vehicles.
CHANGES IN MANUFACTURERS' REPURCHASE PROGRAMS MAY AFFECT OUR BUSINESS
Our ability to resell our vehicles at a favorable price and fix our
depreciation expense in advance is dependent upon the terms of manufacturers'
repurchase programs. As of December 31, 1998, 73% of our vehicle fleet was
covered by these programs. Our ability to sell vehicles under manufacturers'
repurchase programs limits the risk of decline in residual value at the time of
disposition and enables us to fix a substantial portion of our depreciation
expense in advance. Vehicle depreciation is the largest expense in our vehicle
rental operations. In the past, automobile manufacturers have changed the terms
of these programs by, among other things, reducing the number of vehicles that
can be sold under their repurchase programs, reducing related incentives,
increasing guaranteed depreciation and reducing the mileage allowed on program
vehicles. We could be adversely affected if our vehicle suppliers make these or
other adverse changes in their repurchase programs.
WE MAY BE ADVERSELY IMPACTED BY LITIGATION WITH OUR FORMER GERMAN FRANCHISEE
In October 1998, we discontinued providing services to our German
franchisee (such as reservations and credit card processing services) after
having previously terminated the related franchise agreements for alleged
contract violations. On April 15, 1999, the Munich Regional Court of Appeal held
that we had validly terminated our license agreement with the former franchisee
effective as of May 1997. The possibility remains, however, that a higher court
in Germany could reverse the Appeal court's decision. As a result of this
dispute, we have experienced an adverse effect on our business in, and
originating from, Germany. We intend to replace the current franchisee with new
franchisees and/or corporate-owned locations. However, there is no assurance
that such replacement will be commercially successful.
OUR OPERATIONS AND FINANCIAL PERFORMANCE ARE AFFECTED BY VARIOUS TYPES OF
REGULATIONS
We are subject to various foreign, federal, state and local laws and
regulations that affect the conduct of our operations. These laws and
regulations cover matters such as the sale of loss damage waivers, vicarious
liability of vehicle owners, consumer protection, advertising, used vehicle
sales, the taxing and licensing of
12
<PAGE> 15
vehicles, franchising operations and sales, and environmental compliance and
clean-up, particularly with regard to our substantial on-site use and storage of
petroleum products. We cannot assure you that compliance with these laws and
regulations or the adoption of modified or additional laws and regulations will
not require large expenditures by us or otherwise have a significant effect on
our financial condition or results of operations.
OUR INTERNATIONAL OPERATIONS MAY BE SUBJECT TO ADDITIONAL RISKS
Our international operations are subject to adverse developments in the
foreign political and economic environment, varying governmental regulations,
foreign currency fluctuations, potential difficulties in staffing and managing
foreign operations and potential adverse tax consequences. We cannot assure you
that these factors will not have a significant effect on our financial condition
or results of operations.
OUR RECENT INVESTMENTS AND COST-CUTTING INITIATIVES MAY NOT BE SUCCESSFUL
During 1998, we expended significant capital resources on several
initiatives designed to increase our revenue and reduce our costs, and these
initiatives will continue during 1999. We expect to realize certain cost savings
and other operating efficiencies during 1999 as a result of these and other
initiatives that will be implemented in 1999. Major areas in which we will seek
to reduce our operating expenses, as well as the major assumptions we have made
in estimating our cost savings include:
- reductions in administrative, personnel and overhead expenses;
- improvements in operations and consolidations of our reservations
centers;
- improvements in our Car Rental field operations to increase vehicle
utilization;
- improvements in vehicle maintenance procedures;
- increased efficiencies in non-vehicle purchasing; and
- reduction of vehicle carrying costs through renegotiation of
manufacturers' vehicle repurchase agreements.
Our ability to achieve the cost savings mentioned above is inherently
uncertain. We may not be able to successfully implement these initiatives; cost
increases in other areas may offset the effect of these measures; implementation
of these measures may initially lead to additional costs; and events beyond our
control may cause us to otherwise fail to succeed in our cost cutting plans. In
addition, it is always possible that the implementation of our cost cutting
initiatives could adversely affect our ability to generate revenue. We cannot
assure you that we will be successful at growing our business or realizing the
cost savings that these initiatives were intended to achieve.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY THE POTENTIAL FAILURE OF COMPUTER
SYSTEMS TO RECOGNIZE THE YEAR 2000
We are dependent on business systems that may be affected by Year 2000
problems. The Year 2000 issue exists because many computer systems and
applications and non-computer systems that utilize computer technology currently
use two-digit date fields to designate a year. As the Year 2000 approaches,
certain date sensitive systems will recognize the Year 2000 as the Year 1900 or
may not recognize the date at all. This inability to properly treat or recognize
the Year 2000 may cause certain systems to process critical information
incorrectly, including our reservations and rental processing systems. A failure
in these systems could cause significant disruption in customer service levels
and therefore materially impact our financial condition and results of
operations. In addition, if we incur costs of upgrading these systems to be Year
2000 compliant that are significantly in excess of expectations, our operating
results will also be adversely affected.
We have assessed and continue to assess the impact of the Year 2000 on our
reporting systems and operations. We estimate that approximately $4 million will
be spent in 1999 specifically for Year 2000 modifications.
13
<PAGE> 16
We are also assessing the impact of the Year 2000 issue on the ability of
our significant suppliers and vendors to also maintain adequate service levels.
Finally, we are developing contingency plans which are intended to allow us to
continue operating in the event of a year 2000 failure. The contingency plans
will include performing certain processes manually, repairing affected systems
and changing suppliers and vendors as necessary. We cannot assure you that we or
the third party suppliers on whom we rely will be successful in addressing Year
2000 problems in a timely manner, if at all, or that our contingency plan will
be successful in avoiding the disruption of service.
OUR FOUNDERS HAVE SUBSTANTIAL STOCKHOLDER VOTING POWER
A large portion of the voting power of our common stock is concentrated in
the hands of three individuals, Sanford Miller, John P. Kennedy and Jeffrey D.
Congdon. These individuals own all outstanding shares of Class B common stock.
Our Class B common stock entitles its holders to ten votes per share, while our
Class A common stock entitles holders to one vote per share. The Class B common
stock beneficially owned by Messrs. Miller, Kennedy and Congdon, together with
the Class A common stock beneficially owned by these individuals, represents
approximately 40% of the combined voting power of both classes of common stock.
As a result, these three individuals are able to exert substantial influence
over the election of our Board of Directors along with other matters put to a
stockholder vote. This increases the probability that members elected by them
will continue to direct our business, policies, and management.
WE MAY NOT BE ABLE TO PURCHASE NOTES UPON A CHANGE OF CONTROL
If there is a change of control under the terms of the indenture governing
the notes, each holder of Notes may require us to purchase all or a portion of
its notes at a purchase price equal to 101% of the principal amount of the
notes, plus accrued interest. Our ability to purchase the notes upon a change of
control event will be limited by the terms of our other debt agreements. Upon a
change of control, we may be required to repay immediately the outstanding
principal, any accrued interest on and any other amounts owed by us under our
$550.0 million credit facility. We cannot assure you that we would be able to
repay amounts outstanding under our credit facility or obtain necessary consents
under such facility to purchase the notes. In order to purchase any outstanding
notes, we may have to refinance our outstanding indebtedness, which we may not
be able to do. In addition, even if we were able to refinance such indebtedness,
such financing may be on terms unfavorable to us. The term "change of control"
is defined in the "Description of the New Notes -- Certain Definitions" section
of this prospectus.
THERE IS CURRENTLY NO MARKET FOR THE NEW NOTES
The new notes are new securities for which there is currently no market. We
can give you no assurance as to the development or liquidity of any market for
the new notes. If a market for the new notes does develop, the new notes could
trade at prices that may be higher or lower than their principal amount
depending upon many factors. These factors would include:
- prevailing interest rates;
- our operating results; and
- the markets for similar securities.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the new notes. If a market for the new notes does develop, such a
market may be subject to similar disruptions.
In addition, to the extent that old notes are surrendered and accepted in
the exchange offer, the trading market for unsurrendered and surrendered but
unaccepted old notes could be adversely affected due to the limited amount, or
"float," of the old notes that are expected to remain outstanding following the
exchange offer. Generally, a lower "float" of a security could result in less
demand to purchase such security and could, therefore, result in lower prices
for such security. For the same reason, to the extent that a large amount of old
notes is not surrendered or is surrendered and not accepted in the exchange
offer, the trading market for the
14
<PAGE> 17
new notes could be adversely affected. See "Plan of Distribution" and "The
Exchange Offer" for further information regarding the distribution of the new
notes and the consequences of failure to participate in the exchange offer.
NO CASH PROCEEDS TO BUDGET GROUP FROM EXCHANGE OFFER
The exchange offer is intended to satisfy certain of our obligations under
our registration rights agreement with the initial purchasers of the old notes.
Budget Group will not receive any proceeds from the issuance of the new notes,
and we have agreed to pay for the expenses of the exchange offer. In
consideration for issuing the new notes as contemplated in this prospectus, we
will receive, in exchange, old notes in like principal amount. The form and
terms of the new notes are identical in all material respects to the form and
terms of the old notes, except as otherwise described herein under "The Exchange
Offer -- Terms of the Exchange Offer." The old notes surrendered in exchange for
the new notes will be retired and cancelled and cannot be reissued. Accordingly,
issuance of the new notes will not result in any increase in our outstanding
debt.
15
<PAGE> 18
CAPITALIZATION
The following table sets forth the capitalization of Budget Group as of
December 31, 1998 and as adjusted to give effect the issuance of the old notes
and the application of the net proceeds therefrom.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(IN MILLIONS)
<S> <C> <C>
Restricted Cash............................................. $ 421.5 $ 421.5
Total Cash.................................................. $ 557.7 $ 557.7
VEHICLE DEBT:
Asset-Backed MTN Notes.................................... $2,381.6 $1,993.6
Commercial Paper Facility(2).............................. 840.5 840.5
Other Budget Fleet Obligations(3)......................... 286.8 286.8
-------- --------
Total Vehicle Debt................................ $3,508.9 $3,120.9
NON-VEHICLE DEBT:
9 1/8% Senior Notes Due 2006.............................. -- $ 400.0
6.85% Convertible Subordinated Notes Due 2007............. 45.0 45.0
Working Capital Facility.................................. 50.0 50.0
Other Non-Vehicle Debt.................................... 31.2 31.2
-------- --------
Total Non-Vehicle Debt............................ 126.2 526.2
-------- --------
Total Debt........................................ 3,635.1 3,647.1
-------- --------
Convertible Preferred Stock(4)............................ 300.0 300.0
Stockholders' Equity...................................... 650.6 650.6
-------- --------
Total Capitalization.............................. $4,585.7 $4,597.7
======== ========
</TABLE>
- ---------------
(1) The net proceeds from the offering of the old notes were approximately $388
million. These proceeds are being used to repay a portion of outstanding
indebtedness under two series of our medium term asset-backed notes ("MTNs")
that mature in 1999 -- our BFFC 1994-A MTNs and our TFFC 1994-1 MTNs. The
BFFC 1994-A MTNs bear interest at a rate of 6.15% and mature between April
1999 and September 1999. The TFFC 1994-1 MTNs bear interest at rates ranging
from 6.38% to 6.93% and mature between June 1999 and December 1999. On April
30, 1999, $522.4 million of indebtedness was outstanding under these series
of MTNs. Pending the repayment of these MTNs, the proceeds from the offering
of the old notes have been used to temporarily reduce amounts outstanding
under our commercial paper facilities. See the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" appearing in our Annual
Report on Form 10-K for the year ended December 31, 1998 which is
incorporated by reference into this prospectus for a more detailed
discussion of our indebtedness.
(2) Our commercial paper facility (the "CP Facility") bears interest at rates
ranging from 5.45% to 5.75%.
(3) Consists of $101.5 million of vehicle debt of our international operating
subsidiaries, $60.6 million of vehicle debt of Cruise America, $58.9 million
of vehicle debt of Car Sales, $56.8 million of borrowings under an interim
facility and $9.0 million of other vehicle debt facilities.
(4) Represents company obligated mandatorily redeemable preferred securities of
Budget Group Capital Trust, one of our subsidiaries.
16
<PAGE> 19
PRO FORMA FINANCIAL INFORMATION
The Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1998, is based on the audited historical consolidated financial
statements of Budget Group and the unaudited historical financial statements of
Ryder TRS for the five months ended May 31, 1998, incorporated herein by
reference, adjusted to give effect to (i) the Ryder TRS acquisition, (ii) the
recapitalization transactions described below that occurred concurrently with
the Ryder TRS acquisition and (iii) the offering of the old notes and the
application of the net proceeds therefrom as described under "Capitalization"
above, as if they had occurred on January 1, 1998.
As consideration for our purchase of Ryder TRS, Ryder TRS stockholders
received $125.0 million in cash, 3,455,219 shares of Class A common stock and
warrants to purchase shares of Class A common stock with a value of up to $19.0
million in return for 100% of the outstanding Ryder TRS stock. We also assumed
Ryder TRS fleet debt of $347.0 million, as well as public notes of $175.0
million in connection with the Ryder TRS Acquisition.
The recapitalization transactions consisted of the following: (i) the
amendment and restatement of our existing $300.0 million secured revolving
credit facility to increase the facility to $550.0 million; (ii) the conversion
of $80.0 million of Series A convertible subordinated notes into 4,305,814
shares of Class A common stock, including 319,768 shares issued in lieu of
interest payments which the holders of the Series A notes agreed to forego as a
result of the early conversion; (iii) the redemption of $165.0 million of our
guaranteed senior notes; (iv) the redemption of $175.0 million of Ryder TRS's
outstanding 10% senior subordinated notes due 2006; (v) the issuance of
6,000,000 convertible preferred shares of Budget Group Capital Trust and the
application of the net proceeds therefrom; (vi) the issuance of $1.1 billion of
MTNs (the "TFFC-98 Notes") and the application of the net proceeds therefrom;
and (vii) the write-off of loan costs related to converted or retired debt.
The Pro Forma Consolidated Statement of Operations does not purport to
represent what our results of operations would have been had the Ryder TRS
acquisition, the recapitalization transactions and the offering of the old notes
occurred on the dates indicated or to predict our results of operations in the
future. This statement is qualified in its entirety by, and should be read in
conjunction with, the historical financial statements of each of Budget Group
and Ryder TRS and the notes thereto which are incorporated by reference in this
prospectus.
The Pro Forma Consolidated Statement of Operations has been prepared using
the purchase method of accounting, whereby the total cost of the Ryder TRS
acquisition was allocated to the tangible and intangible assets acquired and
liabilities assumed based upon their respective fair values at the effective
date of the Ryder TRS acquisition. Such allocations have been based on studies
and valuations which have not yet been completed. Accordingly, the allocations
reflected in the Pro Forma Consolidated Statement of Operations are preliminary
and subject to revision. However, we do not expect material changes to the
allocation of the purchase price.
The Pro Forma Consolidated Statement of Operations gives effect only to the
adjustments set forth in the accompanying notes and does not reflect any other
benefits anticipated by management as a result of the Ryder TRS acquisition, the
recapitalization transactions, the offering of the old notes and the
implementation of our business strategy.
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<PAGE> 20
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
BUDGET GROUP
ADJUSTMENTS PRO FORMA FOR THE RYDER
FOR RYDER BUDGET GROUP TRS ADJUSTMENTS
HISTORICAL HISTORICAL TRS FOR THE ADJUSTMENTS FOR ACQUISITION AND FOR THE
BUDGET RYDER ACQUISITION RYDER TRS RECAPITALIZATION RECAPITALIZATION OFFERING OF
GROUP TRS TRANSACTION ACQUISITION TRANSACTIONS TRANSACTIONS OLD NOTES
---------- ---------- ----------- ------------ ---------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenue:
Vehicle rental
revenue........... $1,934,750 $196,762 $ -- $2,131,512 $ -- $2,131,512 $ --
Retail vehicle sales
revenue........... 583,252 -- -- 583,252 -- 583,252 --
Royalty fees and
other............. 98,197 -- -- 98,197 -- 98,197 --
---------- -------- ------- ---------- -------- ---------- --------
Total
operating
revenue..... 2,616,199 196,762 -- 2,812,961 -- 2,812,961 --
---------- -------- ------- ---------- -------- ---------- --------
Operating costs and
expenses:
Depreciation --
vehicle............ 500,210 29,857 -- 530,067 -- 530,067 --
Costs of retail
vehicle sales..... 524,907 -- -- 524,907 -- 524,907 --
Direct vehicle and
operating......... 815,748 73,180 -- 888,928 -- 888,928 --
Selling, general and
administrative.... 498,075 92,441 (354) 590,162 -- 590,162 --
Restructuring and
pooling........... 16,457 -- -- 16,457 -- 16,457 --
Amortization and
non-vehicle
depreciation...... 54,526 4,979 1,805 61,310 -- 61,310 --
---------- -------- ------- ---------- -------- ---------- --------
Total
operating
costs and
expenses.... 2,409,923 200,457 1,451 2,611,831 -- 2,611,831 --
---------- -------- ------- ---------- -------- ---------- --------
Operating income
(loss).............. 206,276 (3,695) (1,451) 201,130 -- 201,130 --
---------- -------- ------- ---------- -------- ---------- --------
Other expenses:
Vehicle interest
expense........... 188,165 14,450 -- 202,615 (3,508) 199,107 (25,114)
Non-vehicle interest
expense........... 13,422 -- -- 13,422 (10,212) 3,210 38,214
Interest income --
restricted cash... (11,348) -- -- (11,348) 1,805 (9,543) --
Debt extinguishment
costs............. 9,454 -- -- 9,454 (9,454) -- --
---------- -------- ------- ---------- -------- ---------- --------
199,693 14,450 -- 214,143 (21,369) 192,774 13,100
---------- -------- ------- ---------- -------- ---------- --------
Income (loss) before
taxes............... 6,583 (18,145) (1,451) (13,013) 21,369 8,356 (13,100)
Provision (benefit)
for income taxes.... 257 (6,854) 135 (6,462) 4,802 (1,660) (4,978)
Distribution on
convertible
preferred
securities.......... 9,957 -- -- 9,957 8,733 18,690 --
---------- -------- ------- ---------- -------- ---------- --------
Net income (loss).... $ (3,631) $(11,291) $(1,586) $ (16,508) $ 7,834 $ (8,674) $ (8,122)
========== ======== ======= ========== ======== ========== ========
EBITDA............... 761,012 792,507 792,507
Adjusted EBITDA...... 83,985 71,173 72,876
Ratio of Adjusted
EBITDA to non-
vehicle interest
expense............. 6.3 5.3 22.7
Weighted average
shares
outstanding --
basic............... 32,067 33,667 35,660
========== ========== ==========
Basic EPS............ $ (0.12) $ (0.49) $ (0.24)
========== ========== ==========
Weighted average
shares outstanding--
diluted............. 32,067 33,667 35,660
========== ========== ==========
Diluted EPS.......... $ (0.12) $ (0.49) $ (0.24)
========== ========== ==========
<CAPTION>
PRO FORMA
BUDGET GROUP
------------
<S> <C>
Operating revenue:
Vehicle rental
revenue........... $2,131,512
Retail vehicle sales
revenue........... 583,252
Royalty fees and
other............. 98,197
----------
Total
operating
revenue..... 2,812,961
----------
Operating costs and
expenses:
Depreciation -- vehi 530,067
Costs of retail
vehicle sales..... 524,907
Direct vehicle and
operating......... 888,928
Selling, general and
administrative.... 590,162
Restructuring and
pooling........... 16,457
Amortization and
non-vehicle
depreciation...... 61,310
----------
Total
operating
costs and
expenses.... 2,611,831
----------
Operating income
(loss).............. 201,130
----------
Other expenses:
Vehicle interest
expense........... 173,993
Non-vehicle interest
expense........... 41,424
Interest income --
restricted cash... (9,543)
Debt extinguishment
costs............. --
----------
205,874
----------
Income (loss) before
taxes............... (4,744)
Provision (benefit)
for income taxes.... (6,638)
Distribution on
convertible
preferred
securities.......... 18,690
----------
Net income (loss).... $ (16,796)
==========
EBITDA............... 792,507
Adjusted EBITDA...... 97,990
Ratio of Adjusted
EBITDA to non-
vehicle interest
expense............. 2.4
Weighted average
shares
outstanding --
basic............... 35,660
==========
Basic EPS............ $ (0.47)
==========
Weighted average
shares outstanding--
diluted............. 35,660
==========
Diluted EPS.......... $ (0.47)
==========
</TABLE>
18
<PAGE> 21
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
(a) Reflects the elimination of management fees incurred by Ryder under an
agreement terminated in connection with the Ryder TRS acquisition.
(b) Reflects the elimination of $2,734 of amortization of Ryder's existing
intangibles and records an increase in amortization of $4,539 on the net
intangibles established through purchase accounting adjustments.
(c) Reflects a tax provision attributable to the combined group on a pro
forma basis.
(d) Reflects the decrease in vehicle interest expense attributable to:
<TABLE>
<S> <C>
Elimination of interest on Ryder TRS's 10% senior
subordinated notes due 2006............................... $ 8,679
Interest savings on the CP Facility partially refinanced
through the issuance of the TFFC-98 Notes................. 18,539
Interest savings on Ryder TRS's commercial paper facility
refinanced through the issuance of the TFFC-98 Notes...... 7,617
Elimination of amortization of loan costs on retired debt... 1,606
-------
Decrease in vehicle interest expense...................... $36,441
=======
</TABLE>
(e) Reflects the increase in vehicle interest expense attributable to:
<TABLE>
<S> <C>
Interest expense related to the TFFC-98 Notes............... $31,590
Amortization of costs incurred in connection with the
TFFC-98 Notes and the increase in the secured revolving
credit facility........................................... 1,192
Amortization of costs incurred in connection with the
issuance of the convertible preferred securities of Budget
Group Capital Trust....................................... 151
-------
Increase in vehicle interest expense...................... $32,933
=======
</TABLE>
(f) Reflects the decrease in non-vehicle interest expense attributable to:
<TABLE>
<S> <C>
Elimination of interest on Series A notes due to
conversion................................................ $ 2,608
Elimination of interest on the guaranteed senior notes...... 7,355
Elimination of amortization of loan costs on retired debt... 249
-------
Decrease in non-vehicle interest expense.................. $10,212
=======
</TABLE>
(g) Reflects the reduction in interest income due to increased utilization
of existing medium term notes.
(h) Reflects the elimination of the debt extinguishment costs.
(i) Reflects the accrual of distributions on the convertible preferred
securities of Budget Group Capital Trust.
(j) Reflects the decrease in vehicle interest expense attributable to:
<TABLE>
<S> <C>
Interest expense related to the TFFC-94 Notes............... $ 6,933
Interest expense related to the BFFC-94A Notes.............. 18,181
-------
Decrease in vehicle interest expense...................... $25,114
=======
</TABLE>
19
<PAGE> 22
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 -- (CONTINUED)
(k) Reflects the increase in non-vehicle interest expense attributable to:
<TABLE>
<S> <C>
Interest expense related to the old notes................... $36,500
Amortization of costs incurred in connection with issuance
of the old notes.......................................... 1,714
-------
Increase in non-vehicle interest expense.................. $38,214
=======
</TABLE>
20
<PAGE> 23
THE COMPANY
Budget Group operates Budget Rent a Car, the world's third largest general
use car and truck rental system. We currently maintain more local market car
rental locations throughout the world than most of our major competitors and are
unique among major car rental companies in that we also rent trucks in most of
our major markets. Through our two truck rental companies, Ryder TRS and Budget
Truck Rental, we operate the nation's second and third largest consumer truck
rental companies. We also sell used cars in 27 markets nationwide through our 33
Budget Car Sales facilities. In 1998, we had revenue of $2.6 billion, EBITDA of
$761.0 million and Adjusted EBITDA of $84.0 million. On a pro forma basis and
adjusted for the offering of the old notes and certain non-recurring charges, we
had Adjusted EBITDA of $124.2 million. We define Adjusted EBITDA as EBITDA less
depreciation and interest incurred in connection with fleet vehicles financed
under fleet financing programs. Our business is organized into three principal
segments: Car Rental, Truck Rental and Car Sales.
Budget is one of only three vehicle rental systems that offer rental
vehicles throughout the world under a single brand name. We and our franchisees
operate Budget Rent a Car locations in over 120 countries. We own approximately
536 of the 970 Budget locations within the United States and 212 of the 2,170
Budget locations abroad. Our corporate-owned locations accounted for
approximately 80% of U.S. Budget Rent a Car revenue in 1998. In 1998, we
purchased 83,300 cars for our North American operations under a vehicle supply
agreement with Ford Motor Company, 90% of which were subject to repurchase
agreements that required Ford to repurchase the vehicles at guaranteed prices
after nine months in our rental fleet. Within our Car Rental segment, we also
provide rental vehicles to the insurance replacement market and operate commuter
van pooling services and airport parking facilities; our revenue from these
activities was $115.2 million in 1998. For 1998, our Car Rental segment had
revenue of $1.5 billion (54.3% of our 1998 pro forma revenue), EBITDA of $604.3
million and Adjusted EBITDA of $78.8 million.
Our combined Budget Truck Rental and Ryder TRS business is a leading
service provider in the long distance one-way market and the second largest
operator in the local market. We have 418 corporate-owned rental locations
nationwide, a network of approximately 3,730 dealer and franchised locations and
a system-wide fleet of approximately 49,000 trucks at December 31, 1998. Our
Truck Rental business also includes Cruise America, Inc., the largest
recreational vehicle rental and sales company in North America, which had
revenue of $92.7 million in 1998. Our Truck Rental segment had 1998 revenue of
$613.7 million, EBITDA of $203.0 million and Adjusted EBITDA of $55.8 million.
Pro forma for the Ryder TRS acquisition, our Truck Rental segment had 1998
revenue of $810.4 million (28.8% of our 1998 pro forma revenue), EBITDA of
$234.5 million and Adjusted EBITDA of $43.0 million.
We also operate Budget Car Sales, one of the leading independent retailers
of late model cars, sport utility vehicles and trucks in the United States. We
typically locate our used car stores in mid-sized suburban areas and maintain an
average inventory of approximately 100 vehicles per store. For 1998, our Car
Sales segment had revenue of $547.7 million (19.5% of our 1998 pro forma
revenue), EBITDA of $(17.2) million and Adjusted EBITDA of $(22.1) million.
Budget Group was incorporated in Delaware in 1992. Our principal executive
offices are located at 125 Basin Street, Suite 210, Daytona Beach, Florida
32114, and our telephone number at that address is (904) 238-7035.
OUR FIRST QUARTER 1999 RESULTS
On April 21, 1999, we reported a net loss for the first quarter of 1999 of
$23.0 million versus a loss of $3.4 million in the first quarter of the prior
year. Revenue increased 48.8% to $678.7 million from $456.0 million in the prior
year first quarter. Operating income for the quarter was $11.3 million compared
to $34.2 million in the prior year. Prior year first quarter excludes Ryder TRS
and other acquisitions of Budget licensees, insurance replacement businesses and
new car dealerships.
Revenue for the first quarter of 1999 for the Car Rental segment increased
14.4% to $387.6 million compared to $338.8 million in 1998. Car Rental operating
income was $24.2 million compared to $36.2
21
<PAGE> 24
million in the prior year first quarter. First quarter 1999 operating income
showed an approximate $22 million improvement over fourth quarter 1998. Budget
Rent a Car North America, which represents 75% of this segment, saw revenue
growth of 9.0% versus prior year first quarter (up 5.3% on a same-market basis).
On a same-market basis, daily dollar average at $39.29 was essentially flat due
to competitive pricing in certain leisure markets, notwithstanding, rental days
were up 6% for the quarter.
Revenue from our international Budget operations, driven primarily by
corporate operations, saw growth of 36.7%. On a same-store basis, revenue was up
25.5%. This increase resulted from stepped up worldwide sales and marketing
efforts and the recent acquisition of key Budget licensee operations in France
and the UK.
Revenue for the Truck Rental group reached $151.5 million in the first
quarter of 1999 versus $43.2 million in 1998, which excluded Ryder TRS. Budget
Truck Rental continued to see robust volume growth of 21.0% versus prior year.
Budget truck rental rates increased over 2% as it aligned its pricing with
Ryder. Ryder's revenue was down 6.5% versus prior year pro forma and was in line
with company expectations as the two truck rental businesses are being
integrated. For the quarter, the Truck Rental group had an operating loss of
$3.7 million compared to operating income of $2.5 million in the prior year
first quarter. The year-over-year decline in reported earnings is a result of
the acquisition of Ryder TRS which has seasonal earnings.
Revenue from the Car Sales group reached $160.1 million in the first
quarter of 1999 compared to $92.0 million in the prior year. Revenue includes
proceeds from the sale of units at retail and wholesale within the group. The
first quarter of 1999 saw operating losses of $4.5 million compared to a loss of
$1.0 million in first quarter 1998. Operating results for first quarter 1999
represent a $2.9 million improvement over fourth quarter 1998, excluding
non-recurring charges. Three unprofitable locations were closed during the first
quarter of 1999, with an additional two closed in April of 1999. Units sold
retail during the first quarter increased to 7,957 compared to 4,859 units
during the prior year first quarter.
22
<PAGE> 25
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We sold the old notes on April 13, 1999 to Credit Suisse First Boston
Corporation, Goldman Sachs & Co. and NationsBanc Montgomery Securities LLC
pursuant to a purchase agreement. These initial purchasers subsequently sold the
old notes to:
- "qualified institutional buyers" ("QIBs"), as defined in Rule 144A under
the Securities Act, in reliance on Rule 144A; and
- persons in offshore transactions in reliance on Regulation S under the
Securities Act.
As a condition to the initial sale of the old notes, Budget Group and the
initial purchasers entered into a registration rights agreement. Pursuant to the
registration rights agreement, we agreed to:
- file with the SEC by June 14, 1999 a registration statement under the
Securities Act with respect to the issuance of the new notes in an
exchange offer; and
- use our commercially reasonable efforts to cause the registration
statement to become effective under the Securities Act on or before
August 31, 1999; and
- issue and exchange the new notes for all old notes properly surrendered
and not withdrawn before the expiration of the exchange offer.
In the event that:
- applicable interpretations of the staff of the SEC do not permit us to
effect the exchange offer; or
- for any other reason we do not consummate the exchange offer by October
11, 1999; or
- an initial purchaser notifies us within 10 business days following
consummation of the exchange offer that old notes held by it are not
eligible to be exchanged for new notes in the exchange offer; or
- any holder notifies us within 10 business days following consummation of
the exchange offer that such holder is prohibited by law or SEC policy
from participating in the exchange offer; such holder may not resell the
new notes acquired by it in the exchange offer to the public without
delivering a prospectus and the prospectus contained in the registration
statement for the exchange offer is not appropriate or available for such
resales by such holder; or such holder is a broker-dealer and holds old
notes that are part of an unsold allotment from the original sale of the
old notes,
then, we will, at our cost,
- as promptly as practicable, file a shelf registration statement covering
resales of the old notes or the new notes, as the case may be;
- use our commercially reasonable efforts to cause the shelf registration
statement to be declared effective under the Securities Act; and
- keep the shelf registration statement effective until the earliest of (A)
the time when the notes covered by the shelf registration statement can
be sold pursuant to Rule 144 without any limitations under clauses (c),
(e), (f) and (h) of Rule 144, (B) two years from the effective date and
(C) the date on which all notes registered thereunder are disposed of in
accordance therewith.
We will pay additional cash interest on the applicable notes if:
- by October 11, 1999, the exchange offer is not consummated and, if
applicable, the shelf registration statement is not declared effective;
or
- after either the registration statement or the shelf registration
statement is declared effective, such registration statement thereafter
ceases to be effective or usable (subject to certain exceptions) (each
such event referred to in the preceding clauses, a "Registration
Default");
23
<PAGE> 26
from and including the date on which any such Registration Default shall occur
to but excluding the date on which all Registration Defaults have been cured.
Subject to certain exceptions, the rate of the additional interest will be
0.50% per annum for the first 90-day period immediately following the occurrence
of a Registration Default, and such rate will increase by an additional 0.50%
per annum with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum additional interest rate of 2.0% per
annum.
We will pay such additional interest on regular interest payment dates.
Such additional interest will be in addition to any other interest payable from
time to time with respect to the notes.
A copy of the registration rights agreement has been filed as an exhibit to
the registration statement which includes this prospectus. The registration
statement is intended to satisfy some of our obligations under the registration
rights agreement and the purchase agreement.
TERMS OF THE EXCHANGE OFFER
Based on the terms and conditions in this prospectus and in the letter of
transmittal, we will issue $1,000 principal amount of new notes in exchange for
each $1,000 principal amount of outstanding old notes properly surrendered
pursuant to the exchange offer and not withdrawn prior to the expiration date.
Old notes may be surrendered only in integral multiples of $1,000. The form and
terms of the new notes are the same as the form and terms of the old notes
except that
- the new notes will be registered for the exchange offer under the
Securities Act and, therefore, the new notes will not bear legends
restricting the transfer of the new notes and
- holders of the new notes will not be entitled to any of the registration
rights of holders of old notes under the registration rights agreement,
which will terminate upon the consummation of the exchange offer.
The new notes will evidence the same indebtedness as the old notes, which
they replace, and will be issued under, and be entitled to the benefits of, the
same indenture, which authorized the issuance of the old notes. As a result,
both series of notes will be treated as a single class of debt securities under
the indenture.
As of the date of this prospectus, $400 million in aggregate principal
amount of the old notes is outstanding. All of it is registered in the name of
Cede & Co., as nominee for The Depository Trust Company ("DTC"). Solely for
reasons of administration, we have fixed the close of business on May 12, 1999
as the record date for the exchange offer for purposes of determining the
persons to whom this prospectus and the letter of transmittal will be mailed
initially. There will be no fixed record date for determining holders of the old
notes entitled to participate in this exchange offer.
In connection with the exchange offer, neither the General Corporation Law
of the State of Delaware nor the indenture governing the notes gives you any
appraisal or dissenters' rights nor any other right to seek monetary damages in
court. We intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement and the applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
related SEC rules and regulations.
For all relevant purposes we will be regarded as having accepted properly
surrendered old notes if and when we give oral or written notice of our
acceptance to the exchange agent. The exchange agent will act as agent for the
surrendering holders of old notes for the purposes of receiving the new notes
from us.
If you surrender old notes in the exchange offer, you will not be required
to pay brokerage commissions or fees. In addition, subject to the instructions
in the letter of transmittal, you will not have to pay transfer taxes for the
exchange of old notes. We will pay all charges and expenses, other than certain
applicable taxes described under "-- Fees and Expenses."
24
<PAGE> 27
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The "expiration date" is 5:00 p.m., New York City time on June 18, 1999,
unless we extend the exchange offer, in which case the expiration date is the
latest date and time to which we extend the exchange offer.
In order to extend the exchange offer, we will
- notify the exchange agent of any extension by oral or written notice and
- issue a press release or other public announcement which will include
disclosure of the approximate number of old notes deposited; such press
release or announcement would be issued prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration
date.
We reserve the right
- to delay accepting any old notes,
- to extend the exchange offer or
- if, in the opinion of counsel for us, the consummation of the exchange
offer would violate any law or interpretation of the staff of the SEC, to
terminate or amend the exchange offer by giving oral or written notice to
the exchange agent.
Any delay in acceptance, extension, termination or amendment will be
followed as soon as practicable by a press release or other public announcement.
If the exchange offer is amended in a manner determined by us to constitute
a material change, we will promptly disclose that amendment by means of a
prospectus supplement that will be distributed to the holders. We will also
extend the exchange offer for a period of five to ten business days, depending
upon the significance of the amendment and the manner of disclosure to the
holders, if the exchange offer would otherwise expire during the five to ten
business day period.
We will have no obligation to publish, advertise or otherwise communicate
any public announcement of any delay, extension, amendment or termination that
we may choose to make, other than by making a timely release to an appropriate
news agency.
INTEREST ON THE EXCHANGE NOTES
The new notes will accrue cash interest on the same terms as the old
notes -- at the rate of 9 1/8% per year from April 13, 1999, payable
semi-annually in arrears on April 1 and October 1 of each year, commencing
October 1, 1999.
RESALE OF THE NEW NOTES
We believe that you will be allowed to resell the new notes to the public
without registration under the Securities Act, and without delivering a
prospectus that satisfies the requirements of Section 10 of the Securities Act,
if you can make the three representations set forth above under "Summary -- The
Exchange Offer -- Procedures for participating in the exchange offer" on page 3.
However, if you intend to participate in a distribution of the new notes, you
must comply with the registration requirements of the Securities Act and deliver
a prospectus, unless an exemption from registration is otherwise available. In
addition, you will be subject to additional restrictions if you are an
"affiliate" of Budget Group as defined under Rule 405 of the Securities Act. You
will be required to represent to Budget Group in the letter of transmittal
accompanying this prospectus that you meet these conditions exempting you from
the registration requirements.
We base our view on interpretations by the staff of the SEC in no-action
letters issued to other issuers in exchange offers like ours. However, we have
not asked the SEC to consider this particular exchange offer in
25
<PAGE> 28
the context of a no-action letter. Therefore, you cannot be certain that the SEC
will treat it in the same way it has treated other exchange offers in the past.
A broker-dealer that has bought old notes for market-making or other
trading activities has to deliver a prospectus in order to resell any new notes
it has received for its own account in the exchange. This prospectus may be used
by a broker-dealer to resell any of its exchange notes. We have agreed in the
registration rights agreement to send this prospectus to any broker-dealer that
requests copies in the letter of transmittal for a period of up to 180 days
after the registration statement relating to this exchange offer is declared
effective. See "Plan of Distribution" for more information regarding
broker-dealers.
PROCEDURES FOR TENDERING
If you wish to surrender old notes you must
- complete, sign and date the letter of transmittal, or a facsimile
thereof,
- have the signatures guaranteed if required by the letter of transmittal
and
- mail or deliver the letter of transmittal or the facsimile to the
exchange agent at the address appearing below under "-- Exchange Agent"
for receipt prior to the expiration date.
In addition, either
- certificates for such old notes must be received by the exchange agent
along with the letter of transmittal,
- a timely confirmation of a book-entry transfer of the old notes into the
exchange agent's account at DTC, pursuant to the procedure for book-entry
transfer described below, must be received by the exchange agent prior to
the expiration date or
- you must comply with the procedures described below under "-- Guaranteed
Delivery Procedures."
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK.
INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT YOU USE AN OVERNIGHT OR HAND
DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT
TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. DO NOT
SEND THE LETTER OF TRANSMITTAL OR ANY OLD NOTES TO US. YOU MAY REQUEST THAT YOUR
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE PERFORM THESE
TRANSACTIONS FOR YOU.
If you do not withdraw your surrender of old notes prior to the expiration
date, you will be regarded as agreeing to surrender the new notes in accordance
with the terms and conditions in this offer.
If you are a beneficial owner of the old notes and your old notes are held
through a broker, dealer, commercial bank, trust company or other nominee and
you want to surrender your old notes, you should contact your intermediary
promptly and instruct it to surrender the old notes on your behalf.
Signatures on a letter of transmittal or a notice of withdrawal described
below under "-- Withdrawal of Tendering," as the case may be, must generally be
guaranteed by an eligible institution. You can submit a letter of transmittal
without guarantee if you surrender your old notes (a) as a registered holder and
you have not completed the box titled "Special Delivery Instruction" on the
letter of transmittal or (b) for the account of an eligible institution. In the
event that signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantee must be made by
- a member firm of a registered national securities exchange or of the
NASD,
- a commercial bank or trust company having an office or correspondent in
the United States or
- an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act which is a member of one of the recognized
signature guarantee programs identified in the letter of transmittal.
26
<PAGE> 29
If you sign the letter of transmittal even though you are not the
registered holder of any old notes listed in the letter of transmittal, your
notes must be endorsed or accompanied by a properly completed bond power, signed
by the registered holder exactly as the registered holder's name appears on the
old notes.
In connection with any surrender of old notes in definitive certificated
form, if you sign the letter of transmittal or any old notes or bond powers in
your capacity as trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or if you are otherwise acting in a fiduciary or
representative capacity, you should indicate this when signing. Unless waived by
us, you must submit with the letter of transmittal evidence satisfactory to us
of your authority to act in the particular capacity.
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's automated tender offer
program to surrender old notes.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance and withdrawal of surrendered old notes will be determined
by us in our sole discretion, which will be final and binding.
We reserve the absolute right to reject any and all old notes not properly
surrendered. Nor will we accept any old notes if our acceptance of them would,
in the opinion of our counsel, be unlawful. We also reserve the right to waive
any defects, irregularities or conditions of surrender as to particular old
notes.
Unless waived, you must cure any defects or irregularities in connection
with surrenders of old notes within the time period we will determine. Although
we intend to notify holders of defects or irregularities in connection with
surrenders of old notes, neither we, the exchange agent nor anyone else will be
liable for failure to give such notice. Surrenders of old notes will not be
deemed to have been made until any defects or irregularities have been cured or
waived.
We do not currently intend to acquire any old notes that are not
surrendered in the exchange offer or to file a registration statement to permit
resales of any old notes that are not surrendered pursuant to the exchange
offer. We reserve the right in our sole discretion to purchase or make offers
for any old notes that remain outstanding after the expiration date. To the
extent permitted by law, we also reserve the right to purchase old notes in the
open market, in privately negotiated transactions or otherwise. The terms of any
future purchases or offers could differ from the terms of the exchange offer.
By surrendering old notes pursuant to the exchange offer, you will be
telling us that, among other things,
- you have full power and authority to surrender, sell, assign and transfer
the old notes surrendered,
- we will acquire good title to the old notes being surrendered, free and
clear of all security interests, liens, restrictions, charges,
encumbrances, conditional sale agreements or other obligations relating
to their sale or transfer, and not subject to any adverse claim when the
old notes are accepted by us,
- you are acquiring the new notes in the ordinary course of your business,
- you have no arrangement or understanding with any person to participate
in the distribution of the new notes,
- you acknowledge and agree that if you are a broker-dealer registered
under the Exchange Act or you are participating in the exchange offer for
the purposes of distributing the new notes, you must comply with the
registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale of the new notes. You cannot rely
on the position of the SEC's staff in their no-action letters,
27
<PAGE> 30
- you understand that a secondary resale transaction described above and
any resales of new notes obtained by you in exchange for old notes
acquired by you directly from us should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or Item 508 of Regulation S-K of the SEC and
- you are not an "affiliate," as defined in Rule 405 under the Securities
Act, of Budget Group.
If you are a broker-dealer and you will receive new notes for your own
account in exchange for old notes that were acquired as a result of
market-making activities or other trading activities, you will be required to
acknowledge in the letter of transmittal that you will deliver a prospectus in
connection with any resale of such new notes.
RETURN OF OLD NOTES
If any surrendered old notes are not accepted for any reason described here
or if old notes are withdrawn or are submitted for a greater principal amount
than you desire to exchange, those old notes will be returned without expense to
(a) the person who surrendered them or (b) in the case of old notes surrendered
by book-entry transfer into the exchange agent's account at DTC. The old notes
will be credited to an account maintained with DTC as promptly as practicable.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the old notes at DTC for purposes of the exchange offer within two business
days after the date of this prospectus. Any financial institution that is a
participant in DTC's systems may make book-entry delivery of old notes by
causing DTC to transfer the old notes into the exchange agent's account at DTC
in accordance with DTC's procedures for transfer. However, although delivery of
old notes may be effected through book-entry transfer at DTC, you have to
transmit the letter of transmittal with any required signature guarantees and
any other required documents to the exchange agent at the address appearing
below under "-- Exchange Agent" for its receipt on or prior to the expiration
date or pursuant to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If you wish to surrender your old notes and (a) your old notes are not
readily available so you can meet the expiration date deadline or (b) you cannot
deliver your old notes, the letter of transmittal or any other required
documents to the exchange agent prior to the expiration date, you may still
participate in the exchange offer if
- the surrender is made through an eligible institution,
- prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed notice of
guaranteed delivery substantially in the form provided by us, by
facsimile transmission, mail or hand delivery, containing the name and
address of the holder, the certificate number(s) of the old notes, if
applicable, and the principal amount of old notes surrendered. The notice
of guaranteed delivery must also state that the surrender is being made
thereby and guarantee that, within five New York Stock Exchange trading
days after the expiration date, the letter of transmittal, together with
the certificate(s) representing the old notes in proper form for transfer
or a book-entry confirmation, and any other required documents, will be
deposited by the eligible institution with the exchange agent and
- the properly executed letter of transmittal, as well as the
certificate(s) representing all surrendered old notes in proper form for
transfer or a book-entry confirmation, and all other documents required
by the letter of transmittal are received by the exchange agent within
five New York Stock Exchange trading days after the expiration date.
The exchange agent will send you a notice of guaranteed delivery upon your
request if you wish to surrender your old notes according to the guaranteed
delivery procedures set forth above.
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WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw your
surrender of old notes at any time prior to the expiration date.
To withdraw a surrender of old notes in the exchange offer, the exchange
agent must receive a written or facsimile transmission notice of withdrawal at
its address set forth herein prior to the expiration date. Any notice of
withdrawal must
- specify the name of the person having deposited the old notes to be
withdrawn,
- identify the old notes to be withdrawn, including the certificate number
or numbers, if applicable, and principal amount of the old notes and
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the old notes were tendered.
All questions as to the validity, form, eligibility and time of receipt of
notices will be determined by us, in our sole discretion, and our determination
shall be final and binding on all parties. Any old notes so withdrawn will be
deemed not to have been validly surrendered for purposes of the exchange offer,
and no new notes will be issued unless the old notes so withdrawn are validly
retendered. Properly withdrawn old notes may be resurrendered by following one
of the procedures described above under "-- Procedures for Tendering" at any
time prior to the expiration date.
EXCHANGE AGENT
The Bank of New York is the exchange agent for the exchange offer. You
should direct any questions and requests for assistance, requests for additional
copies of this prospectus or of the letter of transmittal and requests for
notice of guaranteed delivery to the exchange agent, addressed as follows:
By Mail, Hand or Overnight Delivery:
The Bank of New York
101 Barclay Street, 7E
New York, New York 10286
Reorganization Section
Attention: Denise Robinson
To confirm by telephone or for information call:
(212) 815-2791
Facsimile Transmissions (eligible institutions only):
(212) 815-4699
The Bank of New York also serves as trustee under the indenture.
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FEES AND EXPENSES
We will pay for the expenses of this exchange offer. The principal
solicitation is being made by mail. However, additional solicitation may be made
by telegraph, facsimile transmission, e-mail, telephone or in person by our
officers and regular employees.
We have not retained a dealer-manager for the exchange offer, and will not
make any payments to brokers, dealers or others soliciting acceptances of the
exchange offer. We will, however, pay the exchange agent reasonable and
customary fees and out-of-pocket expenses.
We will pay any transfer taxes applicable to the exchange of old notes. If,
however, a transfer tax is imposed for any reason other than the exchange, then
the amount of any transfer taxes will be payable by the person surrendering the
notes. If you do not submit satisfactory evidence of payment of taxes or of an
exemption with the letter of transmittal, the amount of those transfer taxes
will be billed directly to you.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the exchange offer is voluntary. You are urged to consult
your financial and tax advisors in making your decisions on what action to take.
Old notes that are not exchanged will remain "restricted securities" within
the meaning of Rule 144(a)(3)(iv) of the Securities Act. Accordingly, they may
not be offered, sold, pledged or otherwise transferred except
- to a person who the seller reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities
Act purchasing for its own account or for the account of a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A,
- in an offshore transaction complying with Rule 903 or Rule 904 of
Regulation S under the Securities Act,
- pursuant to an exemption from registration under the Securities Act
provided by Rule 144, if available,
- pursuant to an effective registration statement under the Securities Act
or
- pursuant to another available exemption from the registration
requirements of the Securities Act, and in accordance with all other
applicable securities laws.
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a result of
the exchange offer. The expenses of the exchange offer will be amortized over
the remaining term of the notes.
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DESCRIPTION OF CREDIT FACILITY
The following is only a summary of certain provisions of our $550.0 million
credit facility with certain financial institutions as lenders, Credit Suisse
First Boston, New York Branch ("CSFB"), as the Co-Syndication Agent and
Administrative Agent, and NationsBanc Montgomery Securities LLC, as the Co-
Syndication Agent and Documentation Agent (the "Credit Facility"), and does not
purport to be complete. You may request copies of these agreements at our
address set forth under "References to Additional Information."
In connection with the acquisition of Ryder TRS on June 19, 1998, we
entered into the Credit Facility. Under the Credit Facility, which expires in
2003, we may borrow up to $550.0 million. The proceeds from this facility may be
used for our general corporate purposes and for the general corporate purposes
of our subsidiaries. In addition, Letters of Credit are available which may be
used by us or our subsidiaries as credit or liquidity enhancement for commercial
paper or similar fleet financing programs or for financing for general corporate
purposes.
Our obligations under the Credit Facility are secured primarily by pledged
shares of our capital stock and the capital stock of our material subsidiaries,
cash, accounts receivable and vehicles and the Credit Facility requires
quarterly interest payments on the outstanding balance.
Borrowings under the Credit Facility bear an interest rate equal to LIBOR
plus 1.75% or prime plus 0.75%. As of December 31, 1998 our interest rate was
8.50%.
The principal amount of any borrowings is payable on June 19, 2003. If any
payments are made after the applicable payment date, the interest rate on those
amounts will increase by 2%. At any time prior to maturity we may prepay any
amount outstanding as long as the aggregate amount prepaid is a minimum of $3.0
million or $5.0 million, depending on the applicable interest rate. In addition,
if we reduce the total amount of funds available under the Credit Facility, we
will be required to immediately repay the amount outstanding that exceeds the
new maximum amount available under the Credit Facility.
If a default occurs for any reason other than for bankruptcy, all amounts
outstanding could be declared immediately due and payable and all Letter of
Credit commitments can be terminated. Defaults under the Credit Facility
include, but are not limited to (i) nonpayment of principal and interest, (ii)
breach of warranties, (iii) non-performance of covenants and obligations, (iv)
defaults on other indebtedness in excess of $15.0 million, (v) judgments
rendered against us in excess of $15.0 million, (vi) a change of control, (vii)
insolvency or (viii) impairment of security.
The Credit Facility contains certain covenants that require us to maintain
certain financial ratios and minimum net worth requirements including (i) a net
worth of at least $538.0 million plus 50% of our net income for each fiscal year
plus 50% of the net proceeds from certain sales of capital stock, (ii) a
leverage ratio ranging from 4.00 to 1.00 in 1999 to 2.75 to 1.00 in the fourth
quarter of 2001 and thereafter, and (iii) an interest coverage ratio ranging
from 3.75 to 1.00 in 1999 to 4.00 to 1.00 for the fourth quarter of 1999 and
thereafter. In addition, the covenants impose certain limitations on our ability
to (A) incur additional debt unless the additional debt falls within certain
prescribed categories, (B) incur liens on our property, revenues or assets
except liens for permitted debt, (C) make certain investments in other entities,
(D) make capital expenditures above certain prescribed dollar amounts for each
year, (E) liquidate, dissolve, consolidate with, or merge with or into any other
entity not constituting an investment and (F) sell any of our assets other than
in the ordinary course of business. We are also limited in our ability to pay
cash dividends and are required to have our material subsidiaries guarantee our
obligations under the Credit Facility.
In connection with the offering of the old notes, we amended the Credit
Facility to, among other things: (i) permit the offering; (ii) permit capital
expenditures of up to $85.0 million in 1999; (iii) permit the divestiture of
non-core assets; (iv) permit up to $100 million of working capital and
acquisition facilities for our European operations; (v) permit the payment of up
to $35 million for "make-whole" payments to the stockholders of Ryder TRS; (vi)
permit stock repurchases under certain circumstances; (vii) increase the
leverage ratio; and (viii) decrease the third quarter 1999 interest coverage
ratio.
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DESCRIPTION OF THE NEW NOTES
The form and terms of the new notes and the old notes are identical in all
material respects, except that transfer restrictions and registration rights
applicable to the old notes do not apply to the new notes.
The old notes are, and the new notes will be, issued under an indenture,
dated as of April 13, 1999, between Budget Group and The Bank of New York, as
trustee. References to the notes include the old notes and the new notes unless
the context otherwise requires. The terms of the notes include those stated in
the indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939 (sometimes referred to herein as the "TIA"). This
description of the notes contains definitions of terms, including those defined
under the subheading "-- Certain Definitions," that are used in the indenture
and are necessary to understand this section of the prospectus. In this section
the word "Company" refers only to Budget Group, Inc. and not to any of its
subsidiaries.
The following description is only a summary of the material provisions of
the indenture. We urge you to read the indenture because it, and not this
description, defines your rights as holders of the notes. We have filed a copy
of the indenture as an exhibit to the registration statement which includes this
prospectus. You may request a copy of the indenture at our address set forth
under "References to Additional Information."
BRIEF DESCRIPTION OF THE NOTES
These notes:
- are unsecured senior obligations of the Company;
- are pari passu in right of repayment with all other existing and future
unsecured Senior Indebtedness of the Company; and
- are senior in right of payment to all existing and any future
Subordinated Obligations of the Company.
PRINCIPAL, MATURITY AND INTEREST
The old notes are, and the new notes will be, issued initially in a maximum
aggregate principal amount of $400 million. The old notes are, and the new notes
will be, issued in denominations of $1,000 and any integral multiple of $1,000.
The notes will mature on April 1, 2006. Subject to our compliance with the
covenants described under the subheading "-- Certain Covenants -- Limitation on
Indebtedness" and "-- Limitation on Permitted Vehicle Indebtedness," we are
permitted to issue more notes under the indenture in an unlimited principal
amount (the "Additional Notes"). Any such Additional Notes that are actually
issued will be treated as issued and outstanding notes for all purposes of the
indenture and this "Description of the New Notes" and will vote together with
the notes as a single class on all matters, unless the context indicates
otherwise.
Interest on the notes will accrue at the rate of 9 1/8% per annum and will
be payable semiannually in arrears on April 1 and October 1, commencing on
October 1, 1999. We will make each interest payment to the holders of record of
the notes on the immediately preceding March 15 and September 15.
Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Additional interest may accrue on the notes in certain circumstances
pursuant to the registration rights agreement.
OPTIONAL REDEMPTION; MANDATORY REDEMPTION; OFFERS TO PURCHASE; OPEN MARKET
PURCHASES
We are not permitted to redeem the notes prior to their maturity. We are
also not required to make any mandatory redemption or sinking fund payments with
respect to the notes. However, under certain circumstances, we may be required
to offer to purchase the notes as described under the captions "-- Change
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of Control" and "-- Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock." We may at any time and from time to time purchase notes in
the open market or otherwise.
RANKING
Senior Indebtedness versus Notes
The indebtedness evidenced by the notes ranks pari passu in right of
payment to the Senior Indebtedness of the Company and is effectively
subordinated to all existing and future Secured Indebtedness of the Company to
the extent of the value of the assets securing such Indebtedness. As of December
31, 1998, after giving pro forma effect to the offering of the old notes and the
application of the net proceeds therefrom as described under the section
entitled "Capitalization," the Company's Senior Indebtedness would have been
approximately $450 million, of which approximately $50 million would represent
Secured Indebtedness.
Liabilities of Subsidiaries versus Notes
All our operations are conducted through our subsidiaries. Claims of
creditors of such subsidiaries, including trade creditors and creditors holding
indebtedness or guarantees issued by such subsidiaries, and claims of preferred
stockholders of such subsidiaries generally have priority with respect to the
assets and earnings of such subsidiaries over the claims of our creditors,
including holders of the notes. Accordingly, the notes are effectively
subordinated to creditors (including trade creditors) and preferred
stockholders, if any, of our subsidiaries.
At December 31, 1998, after giving pro forma effect to the offering of the
old notes, our subsidiaries had Indebtedness of approximately $3,152.1 million,
including trade payables and $3,120.9 million of Permitted Vehicle Indebtedness.
Although the indenture limits the incurrence of Indebtedness and the issuance of
preferred stock of certain of our subsidiaries, such limitation is subject to a
number of significant qualifications. Moreover, the indenture does not impose
any limitation on the incurrence by such subsidiaries of liabilities that are
not considered Indebtedness under the indenture. See "-- Certain Covenants --
Limitation on Indebtedness."
Senior Subordinated Indebtedness versus Notes
The indebtedness evidenced by the notes ranks senior in right of payment to
all future Subordinated Obligations of the Company.
BOOK-ENTRY, DELIVERY AND FORM
We will initially issue the new notes in the form of one or more global
notes (the "Global Note"). The Global Note will be deposited with, or on behalf
of, the DTC and registered in the name of the DTC or its nominee. Except as set
forth below, the Global Note may be transferred, in whole and not in part, only
to the DTC or another nominee of the DTC. You may hold your beneficial interests
in the Global Note directly through the DTC if you have an account with the DTC
or indirectly through organizations which have accounts with the DTC.
The DTC has advised the Company as follows: the DTC is a limited-purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and "a clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. The DTC was created to hold
securities of institutions that have accounts with the DTC ("participants") and
to facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The DTC's participants include securities brokers
and dealers (which may include the initial purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to the DTC's
book-entry system is also available to others such as banks, brokers, dealers
and trust companies (collectively, the "indirect
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participants") that clear through or maintain a custodial relationship with a
participant, whether directly or indirectly.
The Company expects that pursuant to procedures established by the DTC,
upon the deposit of the Global Note with the DTC, the DTC will credit, on its
book-entry registration and transfer system, the principal amount of new notes
represented by such Global Note to the accounts of participants. The accounts to
be credited shall be designated by the initial purchasers. Ownership of
beneficial interests in the Global Note will be limited to participants or
persons that may hold interests through participants. Ownership of beneficial
interests in the Global Note will be shown on, and the transfer of those
ownership interests will be effected only through, records maintained by the DTC
(with respect to participants' interests), the participants and the indirect
participants (with respect to the owners of beneficial interests in the Global
Note other than participants). The laws of some jurisdictions may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Note.
So long as the DTC, or its nominee, is the registered holder and owner of
the Global Note, the DTC or such nominee, as the case may be, will be considered
the sole legal owner and holder of any related new notes evidenced by the Global
Note for all purposes of such new notes and the indenture. Except as set forth
below, as an owner of a beneficial interest in the Global Note, you will not be
entitled to have the new notes represented by the Global Note registered in your
name, will not receive or be entitled to receive physical delivery of
certificated new notes and will not be considered to be the owner or holder of
any new notes under the Global Note. We understand that under existing industry
practice, in the event an owner of a beneficial interest in the Global Note
desires to take any action that the DTC, as the holder of the Global Note, is
entitled to take, the DTC would authorize the participants to take such action,
and the participants would authorize beneficial owners owning through such
participants to take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
We will make payments of principal of, premium, if any, and interest on new
notes represented by the Global Note registered in the name of and held by the
DTC or its nominee to the DTC or its nominee, as the case may be, as the
registered owner and holder of the Global Note.
We expect that the DTC or its nominee, upon receipt of any payment of
principal of, premium, if any, or interest on the Global Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the DTC or its nominee. We also expect that payments by
participants or indirect participants to owners of beneficial interests in the
Global Note held through such participants or indirect participants will be
governed by standing instructions and customary practices and will be the
responsibility of such participants or indirect participants. We will not have
any responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the Global Note
for any new note or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests or for any other aspect of the
relationship between the DTC and its participants or indirect participants or
the relationship between such participants or indirect participants and the
owners of beneficial interests in the Global Note owning through such
participants.
Although the DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
DTC, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
trustee nor the Company will have any responsibility or liability for the
performance by the DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
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CERTIFICATED NOTES
Subject to certain conditions, the new notes represented by the Global Note
are exchangeable for certificated new notes in definitive form of like tenor in
denominations of $1,000 and integral multiples thereof if:
(1) the DTC notifies us that it is unwilling or unable to continue as
DTC for the Global Note or the DTC ceases to be a clearing agency
registered under the Exchange Act, and, in either case, we are unable to
locate a qualified successor within 90 days;
(2) we in our discretion at any time determine not to have all the new
notes represented by the Global Note; or
(3) a default entitling the holders of the new notes to accelerate the
maturity thereof has occurred and is continuing.
Any new note that is exchangeable as above is exchangeable for certificated
new notes issuable in authorized denominations and registered in such names as
the DTC shall direct. Subject to the foregoing, the global note is not
exchangeable, except for a global note of the same aggregate denomination to be
registered in the name of the DTC or its nominee.
SAME-DAY PAYMENT
The indenture requires us to make payments in respect of notes (including
principal, premium and interest) by wire transfer of immediately available funds
to the accounts specified by the holders thereof or, if no such account is
specified, by mailing a check to each such holder's registered address.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder of notes shall have the right to require that the Company
repurchase all or any portion of such holder's notes at a purchase price in cash
equal to 101% of the principal amount thereof on the date of purchase plus
accrued and unpaid interest, if any, to the date of purchase (subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date):
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power
of the Voting Stock of the Company; provided, however, that the Permitted
Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, in the aggregate a lesser percentage
of the total voting power of the Voting Stock of the Company than such
other person and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors (for the purposes of this clause (1), such other person shall be
deemed to beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the "parent
corporation"), if such other person is the beneficial owner (as first
defined in this clause (1), directly or indirectly, of more than 35% of the
voting power of the Voting Stock of such parent corporation and the
Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the board of
directors of such parent corporation);
(2) during any period of twenty-four consecutive months, individuals
who on the Issue Date constituted the Board of Directors (together with any
new directors whose election by such Board of Directors or whose nomination
for election by the stockholders of the Company was approved by a vote of
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66 2/3% of the directors of the Company then still in office who were
either directors on the Issue Date or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office; or
(3) the merger or consolidation of the Company with or into another
Person (other than a Person that is controlled by the Permitted Holders) or
the merger of another Person with or into the Company, or the sale of all
or substantially all the assets of the Company to another Person (other
than a Person that is controlled by the Permitted Holders), and, in the
case of any such merger or consolidation, the securities of the Company
that are outstanding immediately prior to such transaction and that
represent 100% of the aggregate voting power of the Voting Stock of the
Company are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving corporation that represent immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of the
surviving corporation.
Within 30 days following any Change of Control, we will mail a notice to
each holder of notes with a copy to the trustee (the "Change of Control Offer")
stating:
(1) that a Change of Control has occurred and that such holder has the
right to require us to purchase such holder's notes at a purchase price in
cash equal to 101% of the principal amount thereof on the date of purchase,
plus accrued and unpaid interest, if any, to the date of purchase (subject
to the right of holders of record on the relevant record date to receive
interest on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of
Control);
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions, as determined by us, consistent with the
covenant described under this caption, that a holder must follow in order
to have its notes purchased.
We will not be required to make a Change of Control Offer following a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture applicable to a Change of Control Offer made by us and
purchases all notes validly tendered and not withdrawn under such Change of
Control Offer.
We will comply, to the extent applicable, with the requirements of Section
14(e) of the Exchange Act and any other securities laws or regulations in
connection with the repurchase of notes as a result of a Change of Control. To
the extent that the provisions of any securities laws or regulations conflict
with the provisions of the covenant described under this caption, we will comply
with the applicable securities laws and regulations and shall not be deemed to
have breached our obligations under the covenant described under this caption by
virtue thereof.
The Change of Control purchase feature of the notes may in certain
circumstances make more difficult or discourage a sale or takeover of the
Company and, thus, the removal of incumbent management. The Change of Control
purchase feature is a result of negotiations between the Company and the initial
purchasers. We have no present intention to engage in a transaction involving a
Change of Control, although it is possible that we could decide to do so in the
future. Subject to the limitations discussed below, we could, in the future,
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect our capital structure or credit ratings.
Restrictions on our ability to Incur additional Indebtedness are contained in
the covenants described under "-- Certain Covenants -- Limitation on
Indebtedness," "-- Limitation on Permitted Vehicle Indebtedness," "-- Limitation
on Liens" and "-- Limitation on Sale/Leaseback Transactions." Such restrictions
can only be waived with the consent of the holders of a majority in principal
amount of the notes then outstanding. Except for the limitations
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contained in such covenants, however, the indenture does not contain any
covenants or provisions that may afford holders of the notes protection in the
event of a highly leveraged transaction.
The Credit Facility and other agreements pursuant to which the Company or
its Restricted Subsidiaries have Incurred Permitted Vehicle Indebtedness provide
that the occurrence of certain change of control events with respect to the
Company would constitute a default thereunder. Future indebtedness that we or
our Restricted Subsidiaries may incur may contain prohibitions on the occurrence
of certain events that would constitute a Change of Control or require the
repurchase of such indebtedness upon a Change of Control. Moreover, the exercise
by the holders of their right to require us to repurchase the notes could cause
a default under such future indebtedness, even if the Change of Control itself
does not, due to the financial effect of such repurchase on us. Finally, our
ability to pay cash to the holders of notes following the occurrence of a Change
of Control may be limited by our then existing financial resources. There can be
no assurance that sufficient funds will be available when necessary to make any
required repurchases.
The provisions under the indenture relative to our obligation to make an
offer to repurchase notes as a result of a Change of Control may be waived or
modified with the written consent of the holders of a majority in principal
amount of the notes.
CERTAIN COVENANTS
The indenture contains covenants including, among others, the following:
Limitation on Indebtedness
(a) The Company will not, and will not permit any Restricted Subsidiary to,
Incur, directly or indirectly, any Indebtedness; provided, however, that the
Company and its Restricted Subsidiaries may Incur Indebtedness if, on the date
of such Incurrence and after giving effect thereto on a pro forma basis, the
Consolidated Coverage Ratio exceeds 2.25 to 1.
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred pursuant to the Credit Facility; provided,
however, that, after giving effect to any such Incurrence, the aggregate
principal amount of such Indebtedness then outstanding does not exceed $550
million less the sum of all principal payments with respect to such
Indebtedness pursuant to paragraph (a)(3)(A) of the covenant described
under "-- Limitation on Sales of Assets and Subsidiary Stock";
(2) Indebtedness of Foreign Subsidiaries in an aggregate principal
amount that, when taken together with the principal amount of all other
Indebtedness Incurred pursuant to this clause (2) (and any Indebtedness
Incurred by Foreign Subsidiaries prior to the Issue Date to finance working
capital) and then outstanding, does not exceed $125 million;
(3) Indebtedness owed to and held by the Company or a Restricted
Subsidiary; provided, however, that (A) any subsequent issuance or transfer
of any Capital Stock which results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any subsequent transfer of such
Indebtedness (other than to the Company or a Restricted Subsidiary) shall
be deemed, in each case, to constitute the Incurrence of such Indebtedness
by the obligor thereon and (B) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all obligations with respect to the notes;
(4) the old notes and the new notes (other than any Additional Notes);
(5) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3) or (4) of this covenant);
(6) Indebtedness of a Restricted Subsidiary Incurred and outstanding
on or prior to the date on which such Subsidiary was acquired by the
Company or a Restricted Subsidiary (other than Indebted-
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ness Incurred in connection with, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or series
of related transactions pursuant to which such Subsidiary became a
Subsidiary or was acquired by the Company or a Restricted Subsidiary);
provided, however, that on the date of such acquisition and after giving
effect thereto, the Company would have been able to Incur at least $1.00 of
additional Indebtedness pursuant to paragraph (a) of this covenant;
(7) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (4), (5) or (6) or this
clause (7); provided, however, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances Indebtedness of a Subsidiary
Incurred pursuant to clause (6), such Refinancing Indebtedness shall be
Incurred only by such Subsidiary;
(8) Hedging Obligations consisting of Currency Agreements or Interest
Rate Agreements directly related to Indebtedness permitted to be Incurred
by the Company pursuant to the indenture;
(9) Permitted Vehicle Indebtedness;
(10) Indebtedness represented by Guarantees issued to airports and
airport and other governmental authorities for the construction of airport
rental or related facilities to be used by the Company or any Restricted
Subsidiary in the ordinary course of business that do not exceed for the
Company and all Restricted Subsidiaries in the aggregate $50 million at any
time outstanding;
(11) the Guarantee of any Indebtedness otherwise permitted to be
Incurred pursuant to the indenture (other than Indebtedness Incurred
pursuant to clause (6) above or Refinancing Indebtedness Incurred pursuant
to clause (7) above in respect of Indebtedness Incurred pursuant to clause
(6) above);
(12) Indebtedness of the Company or any Restricted Subsidiary
consisting of indemnification, adjustment of purchase price or similar
obligations, in each case Incurred in connection with the disposition of
any assets of the Company or any Restricted Subsidiary in a principal
amount not to exceed the gross proceeds actually received by the Company or
any Restricted Subsidiary in connection with such disposition; and
(13) Indebtedness in an aggregate principal amount which, together
with all other Indebtedness of the Company outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (1) through (12)
above or paragraph (a)) does not exceed $50 million.
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof are
used, directly or indirectly, to Refinance any Subordinated Obligations unless
such Indebtedness shall be subordinated to the notes to at least the same extent
as such Subordinated Obligations.
(d) For purposes of determining compliance with this covenant, (1) in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described above, the Company, in its sole discretion, will
classify such item of Indebtedness and only be required to include the amount
and type of such Indebtedness in one of the above clauses and (2) an item of
Indebtedness may be divided and classified in more than one of the types of
Indebtedness described above.
(e) For the purpose of determining amounts of Indebtedness outstanding
under the covenant described in this caption and for the purpose of avoiding
duplication only, Indebtedness of a Person resulting from the grant by such
Person of security interest with respect to, or from the issuance by such Person
of Guarantees (and security interests with respect thereof) of, or from the
assumption of obligations with respect to letters of credit supporting,
Indebtedness Incurred by such Person pursuant to the indenture (or Indebtedness
which such Person is otherwise permitted to Incur under the indenture) shall not
be deemed to be a separate Incurrence of Indebtedness by such Person.
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Limitation on Permitted Vehicle Indebtedness
The aggregate principal amount of outstanding Permitted Vehicle
Indebtedness as of the last calendar day of each month (the "Determination
Date") shall not exceed the net book value of the Permitted Vehicle Collateral
on such Determination Date. Notwithstanding the foregoing, if the Company is not
in compliance with the preceding sentence on any Determination Date, the Company
will not be in breach thereof so long as:
(1) within 25 days from the Determination Date (or if such day is not
a Business Day, on the next succeeding Business Day) the Company repays
sufficient Permitted Vehicle Indebtedness or deposits as collateral
additional Permitted Vehicle Collateral so that the Company would have been
in compliance as of the Determination Date assuming such repayment or
deposit had been made on such date; or
(2) the Company delivers to the trustee an Officers' Certificate
setting forth the amount of the shortfall within 25 days of such
Determination Date (or if such day is not a Business Day, on the next
succeeding Business Day) and within 45 days from the Determination Date (or
if such day is not a Business Day, on the next succeeding Business Day) the
Company (A) repays sufficient Permitted Vehicle Indebtedness, (B) deposits
as collateral additional Permitted Vehicle Collateral or (C) redesignates
sufficient Permitted Vehicle Indebtedness that is not secured by an actual
Lien on Permitted Vehicle Collateral to no longer constitute Permitted
Vehicle Indebtedness, in each case so that the Company would have been in
compliance as of the Determination Date assuming such repayment, deposit or
redesignation had been made on such date; provided, however, that, in the
case of a redesignation pursuant to clause (C) above, on the date of such
redesignation and after giving effect thereto as if such redesignated
Indebtedness were Incurred by the Company on such date, the Company would
have been able to Incur at least $1.00 of additional Indebtedness pursuant
to paragraph (a); provided further, however, that in determining whether
the Company would have been able to Incur such $1.00 of additional
Indebtedness, the Company shall be entitled to exclude an amount of such
redesignated Indebtedness equal to the amount of Indebtedness the Company
could have Incurred on such date pursuant to paragraph (b)(13) of the
covenant described under "-- Limitation on Indebtedness," and such excluded
amount shall be deemed to have been Incurred pursuant to such paragraph
(b)(13).
Limitation on Restricted Payments
(a) The Company will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time the Company
or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company is not able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Indebtedness"; or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of (without
duplication):
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the Issue
Date occurs to the end of the most recent fiscal quarter ending at least
45 days prior to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit);
plus
(B) the aggregate Net Cash Proceeds received by the Company from
the issuance or sale of, or as a capital contribution in respect of, its
Capital Stock (other than Disqualified Stock) subsequent to the Issue
Date (other than an issuance or sale to a Subsidiary of the Company and
other than an issuance or sale to an employee stock ownership plan or to
a trust established by the Company or any of its Subsidiaries for the
benefit of their employees); plus
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(C) the amount by which Indebtedness of the Company is reduced on
the Company's balance sheet upon the conversion or exchange (other than
by a Subsidiary of the Company) subsequent to the Issue Date of any
Indebtedness of the Company convertible or exchangeable for Capital
Stock (other than Disqualified Stock) of the Company (less the amount of
any cash, or the fair value of any other property, distributed by the
Company upon such conversion or exchange); plus
(D) an amount equal to the sum of (x) the net reduction in
Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances or other transfers of assets, in each
case to the Company or any Restricted Subsidiary from Unrestricted
Subsidiaries, and (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets
of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary
is designated a Restricted Subsidiary; provided, however, that the
foregoing sum shall not exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made (and treated as a
Restricted Payment) by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary.
(b) The preceding provisions will not prohibit:
(1) any Restricted Payment made by exchange for, or out of the
proceeds of the substantially concurrent sale of, or capital contribution
in respect of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary of the Company
or an employee stock ownership plan or to a trust established by the
Company or any of its Subsidiaries for the benefit of their employees);
provided, however, that (A) such Restricted Payment shall be excluded in
the calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from the calculation of amounts
under clause (3)(B) of paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness of the Company which is permitted to be Incurred pursuant
to the covenant described under "-- Limitation on Indebtedness"; provided,
however, that such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the calculation of
the amount of Restricted Payments;
(3) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; provided, however, that at the time of payment of such
dividend, no other Default shall have occurred and be continuing (or result
therefrom); provided further, however, that such dividend shall be included
in the calculation of the amount of Restricted Payments;
(4) the payment of interest to Budget Group Capital Trust to the
extent required to pay non-deferrable scheduled cash dividends on its HIGH
TIDES 6 1/4% Convertible Preferred Securities; provided, however, that (A)
no Default shall have occurred and be continuing (or would result
therefrom) and (B) Budget Group Capital Trust shall immediately apply any
such interest payment to pay such scheduled cash dividend; provided
further, however, that such interest payments shall be included in the
calculation of the amount of Restricted Payments;
(5) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of the Company or any of its Subsidiaries
from employees, former employees, directors or former directors of the
Company or any of its Subsidiaries (or permitted transferees of such
employees, former employees, directors or former directors), pursuant to
the terms of the agreements (including employment agreements) or plans (or
amendments thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or sell,
shares of such common stock; provided, however, that the aggregate amount
of such repurchases and other acquisitions shall not exceed $5 million in
any calendar year; provided further, however, that such repurchases and
other acquisitions shall be excluded in the calculation of the amount of
Restricted Payments;
(6) any purchase or defeasance of Subordinated Obligations upon a
change of control to the extent required by the indenture or other
agreement or instrument pursuant to which such Subordinated
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Obligations were issued, but only if the Company has first complied with
all its obligations under the provisions described under the caption
"-- Change of Control"; provided, however, that the amount of such purchase
or defeasance shall be excluded in the calculation of Restricted Payments;
(7) the payment of Contingent Additional Consideration (as defined in
the Ryder Merger Agreement) in an aggregate amount not to exceed the
aggregate amount of Net Available Cash received by the Company since the
Issue Date as consideration from the sale of assets of a Non-Core Business
(or the Capital Stock of a Subsidiary of the Company engaged in the conduct
of a Non-Core Business) to the extent such Net Available Cash is being
applied pursuant to clause (a)(3)(C) of the covenant described under
"-- Limitation on Sales of Assets and Subsidiary Stock"; provided, however,
that the amount of such payment shall be included in the calculation of the
amount of Restricted Payments; and
(8) Other Restricted Payments in an aggregate amount which, when taken
together with all other Restricted Payments made pursuant to this clause
(8) and then outstanding, does not exceed $35 million at any time
outstanding; provided, however, that the amount of such Restricted Payments
shall be included in the calculation of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions on its Capital Stock to the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(b) make any loans or advances to the Company or (c) transfer any of its
property or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding on
such date;
(3) any encumbrance or restriction pursuant to an agreement effecting
a Refinancing of Indebtedness Incurred pursuant to an agreement referred to
in clause (1) or (2) of this covenant or this clause (3) or contained in
any amendment to an agreement referred to in clause (1) or (2) of this
covenant or this clause (3); provided, however, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in any
such refinancing agreement or amendment are no less favorable in any
material respect to the noteholders than encumbrances and restrictions with
respect to such Restricted Subsidiary contained in such predecessor
agreements;
(4) any such encumbrance or restriction consisting of customary
non-assignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease or the property
leased thereunder;
(5) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary to the extent such restrictions restrict the
transfer of the property subject to such security agreements or
mortgages;
(6) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition
of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or
disposition;
(7) any encumbrance or restriction arising under applicable law;
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(8) any encumbrance or restriction consisting of any restriction on
the sale or other disposition of assets or property securing
Indebtedness as a result of a Lien permitted to be Incurred under
the indenture on such asset or property; and
(9) any encumbrance or restriction imposed solely upon a Foreign
Subsidiary, so long as there does not exist any Guarantee by the
Company of any Indebtedness of such Foreign Subsidiary or any of
such Foreign Subsidiary's Subsidiaries.
Limitation on Sales of Assets and Subsidiary Stock
(a) The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, consummate any Asset Disposition unless:
(1) the Company or such Restricted Subsidiary receives consideration
at the time of such Asset Disposition at least equal to the fair
market value (including as to the value of all non-cash
consideration), as determined in good faith by the Board of
Directors, of the shares and assets subject to such Asset
Disposition;
(2) at least 75% of the consideration thereof received by the Company
or such Restricted Subsidiary is in the form of cash or cash
equivalents; and
(3) an amount equal to 100% of the Net Available Cash from such by the
Company (or such Restricted Subsidiary, as the case may be)
(A) first, to the extent the Company elects (or is required by the
terms of any Indebtedness), to prepay, repay, redeem or
purchase Senior Indebtedness or Indebtedness (other than any
Disqualified Stock) of a Wholly Owned Subsidiary (in each case
other than Indebtedness owed to the Company or an Affiliate of
the Company) within one year from the later of the date of such
Asset Disposition or the receipt of such Net Available Cash;
(B) second, to the extent of the balance of such Net Available Cash
after application in accordance with clause (A), to the extent
the Company elects, to acquire Additional Assets within one
year from the later of the date of such Asset Disposition or
the receipt of such Net Available Cash;
(C) third, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), in
the case of Net Available Cash received by the Company as
consideration from the sale of assets of or the Capital Stock
of a Subsidiary of the Company engaged in the conduct of a
Non-Core Business, to the extent the Company elects, to make a
payment of Contingent Additional Consideration pursuant to
clause (8) of the covenant described under "-- Limitation on
Restricted Payments" within one year from the later of the date
of such asset disposition or the receipt of such Net Available
Cash;
(D) fourth, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A), (B) and (C),
to make an offer to the holders of the notes (and to holders of
other Senior Indebtedness designated by the Company) to
purchase notes (and such other Senior Indebtedness) pursuant to
and subject to the conditions contained in the indenture; and
(E) fifth, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A), (B), (C) and
(D), for any purpose not prohibited by the terms of the
indenture;
provided, however, that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (A) or (D) above, the
Company or such Restricted Subsidiary shall permanently retire such
Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. In the event the
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terms of the Company's Credit Facility require the Company to
permanently reduce the available credit under the facility in an amount
equal to the amount of Net Available Cash, such permanent reduction
shall constitute application of such Net Available Cash pursuant to
clause (A) above.
Notwithstanding the foregoing provisions of this covenant, the Company and
the Restricted Subsidiaries will not be required to apply any Net Available Cash
in accordance with this covenant except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this covenant exceeds $10 million. Pending application of Net Available
Cash pursuant to this covenant, such Net Available Cash shall be invested in
Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents:
(1) the assumption of Indebtedness of the Company or any Restricted
Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection
with such Asset Disposition (in which case the Company shall,
without further action, be deemed to have applied such assumed
Indebtedness in accordance with clause (A) of the preceding
paragraph); and
(2) securities received by the Company or any Restricted Subsidiary
from the transferee that are promptly converted by the Company or
such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of the
notes (and other Senior Indebtedness) pursuant to clause (a)(3)(D) above, the
Company will be required to purchase notes tendered pursuant to an offer by the
Company for the notes (and other Senior Indebtedness) at a purchase price of
100% of their principal amount without premium, plus accrued but unpaid interest
(or, in respect of such other Senior Indebtedness, such lesser price, if any, as
may be provided for by the terms of such Senior Indebtedness) in accordance with
the procedures (including prorating in the event of oversubscription) set forth
in the indenture. If the aggregate purchase price of the notes (and any other
Senior Indebtedness) tendered exceeds the Net Available Cash allotted to
purchase thereof, the Company will select the securities to be purchased on a
pro rata basis but in denominations of $1,000 or multiples thereof. The Company
shall not be required to make such an offer to purchase notes (and other Senior
Indebtedness) pursuant to this covenant if the Net Available Cash available
therefor is less than $10 million (which lesser amount shall be carried forward
for purposes of determining whether such an offer is required with respect to
the Net Available Cash from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
Limitation on Affiliate Transactions
(a) The Company will not, and will not permit any Restricted Subsidiary to,
enter into or permit to exist any transaction (including the purchase, sale,
lease or exchange of any property, employee compensation arrangements or the
rendering of any service) with, or for the benefit of, any Affiliate of the
Company (an "Affiliate Transaction") unless:
(1) the terms of the Affiliate Transaction are no less favorable to
the Company or such Restricted Subsidiary than those that could be obtained
at the time of the Affiliate Transaction in arm's-length dealings with a
Person who is not an Affiliate;
(2) if such Affiliate Transaction involves an amount in excess of $2.5
million, the terms of the Affiliate Transaction are set forth in writing
and a majority of the non-employee directors of the Company disinterested
with respect to such Affiliate Transaction have determined in good faith
that the criteria set forth in clause (1) are satisfied and have approved
the relevant Affiliate Transaction as evidenced by a Board Resolution; and
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(3) if such Affiliate Transaction involves an amount in excess of $10
million, the Board of Directors shall also have received a written opinion
from a nationally recognized investment banking firm that is not an
Affiliate of the Company to the effect that such Affiliate Transaction is
fair, from a financial standpoint, to the Company and its Restricted
Subsidiaries.
(b) The provisions of the preceding paragraph (a) shall not prohibit:
(1) any Investment (other than a Permitted Investment) or other
Restricted Payment, in each case permitted to be made pursuant to the
covenant described under "-- Limitation on Restricted Payments";
(2) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board
of Directors;
(3) the grant of stock options or similar rights to employees and
directors of the Company pursuant to plans approved by the Board of
Directors;
(4) loans or advances to employees in the ordinary course of business
in accordance with the past practices of the Company or its Restricted
Subsidiaries, but in any event not to exceed $1 million in the aggregate
outstanding at any one time;
(5) the payment of reasonable fees to directors of the Company and its
Restricted Subsidiaries who are not employees of the Company or its
Restricted Subsidiaries;
(6) any Affiliate Transaction between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries;
(7) the issuance or sale of any Capital Stock (other than Disqualified
Stock) of the Company; and
(8) transactions currently contemplated by and pursuant to agreements
as in existence on the Issue Date.
Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries
The Company shall not sell or otherwise dispose of any Capital Stock of a
Restricted Subsidiary, and shall not permit any Restricted Subsidiary, directly
or indirectly, to issue or sell or otherwise dispose of any of its Capital Stock
except:
(1) to the Company or a Wholly Owned Subsidiary;
(2) directors' qualifying shares;
(3) if, immediately after giving effect to such issuance, sale or
other disposition, neither the Company nor any of its Subsidiaries own any
Capital Stock of such Restricted Subsidiary; or
(4) if, immediately after giving effect to such issuance, sale or
other disposition, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any Investment in such Person remaining after
giving effect thereto would have been permitted to be made under the
covenant described under "-- Limitation on Restricted Payments" if made on
the date of such issuance, sale or other disposition.
Notwithstanding the foregoing, the issuance or sale of shares of Capital
Stock of any Restricted Subsidiary of the Company will not violate the
provisions of the immediately preceding sentence if such shares are issued or
sold in connection with (x) the formation or capitalization of a Restricted
Subsidiary or (y) a single transaction or a series of substantially
contemporaneous transactions whereby such Restricted Subsidiary becomes a
Restricted Subsidiary of the Company by reason of the acquisition of securities
or assets from another Person.
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Limitation on Liens
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, Incur or permit to exist any Lien (the "Initial Lien")
of any nature whatsoever on any of its properties (including Capital Stock of a
Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired,
other than Permitted Liens, without effectively providing that the notes shall
be secured equally and ratably with (or prior to) the obligations so secured for
so long as such obligations are so secured.
Any Lien created for the benefit of the holders of the notes pursuant to
the preceding sentence shall provide by its terms that such Lien shall be
automatically and unconditionally released and discharged upon the release and
discharge of the Initial Lien.
Limitation on Sale/Leaseback Transactions
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale/Leaseback Transaction with respect to any property unless:
(1) the Company or such Subsidiary would be entitled to (A) Incur
Indebtedness in an amount equal to the Attributable Debt with respect to
such Sale/Leaseback Transaction pursuant to the covenant described under
"-- Limitation on Indebtedness" and (B) create a Lien on such property
securing such Attributable Debt without equally and ratably securing the
notes pursuant to the covenant described under "-- Limitation on Liens";
(2) the net proceeds received by the Company or any Restricted
Subsidiary in connection with such Sale/Leaseback Transaction are at least
equal to the fair value (as determined by the Board of Directors) of such
property; and
(3) the Company applies the proceeds of such transaction in compliance
with the covenant described under "-- Limitation on Sales of Assets and
Subsidiary Stock."
Merger and Consolidation
The Company will not consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, all or
substantially all its assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) shall expressly assume, by an
indenture supplemental thereto, executed and delivered to the trustee, in
form reasonably satisfactory to the trustee, all the obligations of the
Company under the notes and the indenture;
(2) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or
any Restricted Subsidiary as a result of such transaction as having been
Incurred by such Successor Company or such Restricted Subsidiary at the
time of such transaction), no Default shall have occurred and be
continuing;
(3) immediately after giving effect to such transaction, the Successor
Company would be able to Incur an additional $1.00 of Indebtedness pursuant
to paragraph (a) of the covenant described under "-- Limitation on
Indebtedness";
(4) immediately after giving effect to such transaction, the Successor
Company shall have Consolidated Net Worth in an amount that is not less
than the Consolidated Net Worth of the Company immediately prior to such
transaction; and
(5) the Company shall have delivered to the trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the indenture.
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The Successor Company will be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the notes.
SEC Reports
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, we will file with the
SEC and provide the trustee and noteholders with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filings of such information, documents
and reports under such Sections.
In addition, whether or not required by the SEC, we will file a copy of all
of the information and reports referred to above with the SEC for public
availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing).
DEFAULTS
Each of the following is an Event of Default:
(1) a default in the payment of interest on the notes when due,
continued for 30 days;
(2) a default in the payment of principal of any note when due at its
Stated Maturity, upon required repurchase, upon declaration or otherwise;
(3) the failure by the Company to comply with its obligations under
"-- Certain Covenants -- Merger and Consolidation" above;
(4) the failure by the Company to comply for 30 days after notice with
any of its obligations in the covenants described above under "Change of
Control" (other than a failure to purchase notes) or under "-- Certain
Covenants" under "-- Limitation on Indebtedness," "-- Limitation on
Permitted Vehicle Indebtedness," "-- Limitation on Restricted Payments,"
"-- Limitation on Restrictions on Distributions from Restricted
Subsidiaries," "-- Limitation on Sales of Assets and Subsidiary Stock"
(other than a failure to purchase notes), "-- Limitation on Affiliate
Transactions," "-- Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries," "-- Limitation on Liens," "-- Limitation on
Sale/Leaseback Transactions," or "-- SEC Reports";
(5) the failure by the Company to comply for 60 days after notice with
its other agreements contained in the indenture;
(6) Indebtedness of the Company or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $15 million (the
"cross acceleration provision");
(7) certain events of bankruptcy, insolvency or reorganization of the
Company or a Significant Subsidiary (the "bankruptcy provisions"); or
(8) any judgment or decree for the payment of money in excess of $15
million is entered against the Company or a Significant Subsidiary, remains
outstanding for a period of 60 consecutive days following such judgment and
is not discharged, waived or stayed within 10 days after notice (the
"judgment default provision");
However, a default under clauses (4), (5), (6) and (8) will not constitute an
Event of Default until the trustee or the holders of 25% in principal amount of
the outstanding notes notify the Company of the default and the Company does not
cure such default within the time specified after receipt of such notice.
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If an Event of Default occurs and is continuing, the trustee or the holders
of at least 25% in principal amount of the outstanding notes may declare the
principal of and accrued but unpaid interest on all the notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the trustee or any holders of the notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
notes may rescind any such acceleration with respect to the notes and its
consequences.
Subject to the provisions of the indenture relating to the duties of the
trustee, in case an Event of Default occurs and is continuing, the trustee will
be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the holders of the notes unless
such holders have offered to the trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no holder of a note
may pursue any remedy with respect to the indenture or the notes unless:
(1) such holder has previously given the trustee notice that an Event
of Default is continuing;
(2) holders of at least 25% in principal amount of the outstanding
notes have requested the trustee to pursue the remedy;
(3) such holders have offered the trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity; and
(5) holders of a majority in principal amount of the outstanding notes
have not given the trustee a direction inconsistent with such request
within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal amount
of the outstanding notes are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee or of
exercising any trust or power conferred on the trustee. The trustee, however,
may refuse to follow any direction that conflicts with law or the indenture or
that the trustee determines is unduly prejudicial to the rights of any other
holder of a note or that would involve the trustee in personal liability.
If a Default occurs, is continuing and is known to the trustee, the trustee
must mail to each holder of the notes notice of the Default within 90 days after
it occurs. Except in the case of a Default in the payment of principal of or
interest on any note, the trustee may withhold notice if and so long as a
committee of its trust officers determines that withholding notice is not
opposed to the interest of the holders of the notes. In addition, we are
required to deliver to the trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
that occurred during the previous year. We are required to deliver to the
trustee, within 30 days after the occurrence thereof, written notice of any
event which would constitute certain Defaults, their status and what action we
are taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the indenture may be amended with the
consent of the holders of a majority in principal amount of the notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the notes) and any past default or compliance with any
provisions may also be waived with the consent of the holders of a majority in
principal amount of the notes then outstanding. However, without the consent of
each holder of an outstanding note affected thereby, an amendment may not, among
other things:
(1) reduce the amount of notes whose holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any note;
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(3) reduce the principal of or extend the Stated Maturity of any note;
(4) make any note payable in money other than that stated in the note;
(5) impair the right of any holder of the notes to receive payment of
principal of and interest on such holder's notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such holder's notes;
(6) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions; or
(7) make any change in the ranking or priority of any note that would
adversely affect the noteholders.
Notwithstanding the preceding, without the consent of any holder of the
notes, the Company and trustee may amend or supplement the indenture or the
notes:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption by a successor corporation of the
obligations of the Company under the indenture;
(3) to provide for uncertificated notes in addition to or in place of
certificated notes (provided that the uncertificated notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated notes are described in Section 163(f)(2)(B) of
the Code);
(4) to add guarantees with respect to the notes, to secure the notes;
(5) to add to the covenants of the Company for the benefit of the
holders of the notes or to surrender any right or power conferred upon the
Company;
(6) to make any change that does not adversely affect the rights of
any holder of the notes; or
(7) to comply with any requirement of the SEC in connection with the
qualification of the indenture under the Trust Indenture Act.
The consent of the holders of the notes is not necessary under the
indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the indenture becomes effective, we are required
to mail to holders of the notes a notice briefly describing such amendment.
However, the failure to give such notice to all holders of the notes, or any
defect therein, will not impair or affect the validity of the amendment.
TRANSFER
The old notes have been and the new notes will be issued in registered form
and will be transferable only upon the surrender of the notes being transferred
for registration of transfer. We may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge payable in connection
with certain transfers and exchanges.
DEFEASANCE
At any time, we may terminate all our obligations under the notes and the
indenture ("legal defeasance"), except for certain obligations, including those
respecting the defeasance trust and obligations to register the transfer or
exchange of the notes, to replace mutilated, destroyed, lost or stolen notes and
to maintain a registrar and paying agent in respect of the notes.
In addition, at any time we may terminate our obligations under the caption
"-- Change of Control" and under the covenants described under "-- Certain
Covenants" (other than the covenant described under "-- Merger and
Consolidation"), the operation of the cross acceleration provision, the
bankruptcy provisions
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with respect to Significant Subsidiaries and the judgment default provision
described under "-- Defaults" above and the limitations contained in clauses (3)
and (4) under "-- Certain Covenants -- Merger and Consolidation" above
("covenant defeasance").
We may exercise our legal defeasance option notwithstanding our prior
exercise of our covenant defeasance option. If we exercise our legal defeasance
option, payment of the notes may not be accelerated because of an Event of
Default with respect thereto. If we exercise our covenant defeasance option,
payment of the notes may not be accelerated because of an Event of Default
specified in clause (4), (6), (7) (with respect only to Significant
Subsidiaries) or (8) under "-- Defaults" above or because of the failure of the
Company to comply with clause (3) or (4) under "-- Certain Covenants -- Merger
and Consolidation" above.
In order to exercise either of our defeasance options, we must irrevocably
deposit in trust (the "defeasance trust") with the trustee money or U.S.
Government Obligations for the payment of principal and interest on the notes to
maturity, as the case may be, and must comply with certain other conditions,
including delivery to the trustee of an Opinion of Counsel to the effect that
holders of the notes will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and defeasance and will be subject to
federal income tax on the same amounts and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable federal income tax law).
CONCERNING THE TRUSTEE
The Bank of New York is to be the trustee under the indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the notes.
The indenture contains certain limitations on the rights of the trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. Subject to the TIA, the trustee will be
permitted to engage in other transactions; provided, however, if it acquires any
conflicting interest as described in the TIA it must either eliminate such
conflict within 90 days, apply to the SEC for permission to continue or resign.
The holders of a majority in principal amount of the outstanding notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the trustee, subject to certain
exceptions. If an Event of Default occurs (and is not cured), the trustee will
be required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such provisions, the
trustee will be under no obligation to exercise any of its rights or powers
under the indenture at the request of any holder of notes, unless such holder
shall have offered to the trustee security and indemnity satisfactory to it
against any loss, liability or expense and then only to the extent required by
the terms of the indenture.
GOVERNING LAW
The indenture provides that it and the notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means:
(1) any property or assets (other than Indebtedness and Capital Stock)
to be used by the Company or a Restricted Subsidiary in a Related Business;
(2) the Capital Stock of a Person that becomes a Restricted Subsidiary
as a result of the acquisition of such Capital Stock by the Company or
another Restricted Subsidiary; or
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(3) Capital Stock constituting a minority interest in any Person that
at such time is a Restricted Subsidiary;
provided, however, that any such Restricted Subsidiary described in clauses (2)
or (3) above is primarily engaged in a Related Business.
"Adjusted EBITDA" for any period means the sum of Consolidated Net Income,
plus the following to the extent deducted in calculating such Consolidated Net
Income:
(1) all income tax expense of the Company and its consolidated
Restricted Subsidiaries;
(2) Consolidated Interest Expense;
(3) non-vehicle related depreciation and amortization expense of the
Company and its consolidated Restricted Subsidiaries; and
(4) all other non-vehicle related non-cash charges of the Company and
its Restricted Subsidiaries (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash expenditures in
any future period); in each case for such period. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and
the non-vehicle related depreciation and amortization of, a Restricted
Subsidiary shall be added to Consolidated Net Income to compute Adjusted
EBITDA only to the extent (and in the same proportion) that the net income
of such Restricted Subsidiary was included in calculating Consolidated Net
Income and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its stockholders.
"Affiliate" of any specified Person means:
(1) any other Person, directly or indirectly, controlling or
controlled by; or
(2) under direct or indirect common control with such specified
Person.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of the covenants described
under "-- Certain Covenants -- Limitation on Restricted Payments," "-- Certain
Covenants -- Limitation on Affiliate Transactions" and "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only,
"Affiliate" shall also mean any beneficial owner of Capital Stock representing
10% or more of the total voting power of the Voting Stock (on a fully diluted
basis) of the Company or of rights or warrants to purchase such Capital Stock
(whether or not currently exercisable) and any Person who would be an Affiliate
of any such beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares or shares required by applicable law to be
held by a Person other than the Company or a Restricted Subsidiary);
(2) all or substantially all the assets of any division or line of
business of the Company or any Restricted Subsidiary; or
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(3) any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or such
Restricted Subsidiary (other than, in the case of clauses (1) and (2) above
and this clause (3):
(A) the sale of inventory or Eligible Vehicles in the ordinary
course of business;
(B) a disposition by a Restricted Subsidiary to the Company or by
the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary;
(C) for purposes of the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition that constitutes a Restricted Payment permitted by the
covenant described under "-- Certain Covenants -- Limitation on
Restricted Payments" or a Permitted Investment; and
(D) a disposition of assets with a fair market value of less than
$100,000).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/ Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing:
(1) the sum of the products of numbers of years from the date of
determination to the dates of each successive scheduled principal payment
of or redemption or similar payment with respect to such Indebtedness
multiplied by the amount of such payment by
(2) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (x) the aggregate amount of Adjusted EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (y) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that:
(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or
if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, or both, Adjusted EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period,
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(2) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the
date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, Adjusted EBITDA and Consolidated Interest
Expense for such period shall be calculated on a pro forma basis as if such
discharge had occurred on the first day of such period and as if the
Company or such Restricted Subsidiary has not earned the interest income
actually earned during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise discharge such
Indebtedness,
(3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the Adjusted
EBITDA for such period shall be reduced by an amount equal to the Adjusted
EBITDA (if positive) directly attributable to the assets which are the
subject of such Asset Disposition for such period, or increased by an
amount equal to the Adjusted EBITDA (if negative), directly attributable
thereto for such period and Consolidated Interest Expense for such period
shall be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries in
connection with such Asset Disposition for such period (or, if the Capital
Stock of any Restricted Subsidiary is sold, the Consolidated Interest
Expense for such period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after
such sale),
(4) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction requiring
a calculation to be made hereunder, which constitutes all or substantially
all of a product line or an operating unit of a business, Adjusted EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first
day of such period and
(5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition, any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (3) or (4)
above if made by the Company or a Restricted Subsidiary during such period,
Adjusted EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of such
period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest of such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in excess
of 12 months).
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"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, excluding
interest accruing on Permitted Vehicle Indebtedness and interest accruing in
respect of the Company's HIGH TIDES Debentures Due 2028, plus, to the extent not
included in such total interest expense, and to the extent incurred by the
Company or its Restricted Subsidiaries, without duplication:
(1) interest expense attributable to capital leases and the interest
expense attributable to leases constituting part of a Sale/Leaseback
Transaction;
(2) amortization of debt discount and debt issuance cost;
(3) capitalized interest;
(4) non-cash interest expenses;
(5) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing;
(6) net costs associated with Hedging Obligations (including
amortization of fees);
(7) Preferred Stock dividends in respect of all Preferred Stock held
by Persons other than the Company or a Wholly Owned Subsidiary (other than
dividends payable solely in Capital Stock (other than Disqualified Stock)
of the issuer of such Preferred Stock);
(8) interest incurred in connection with Investments in discontinued
operations;
(9) interest accruing on any Indebtedness of any other Person to the
extent such Indebtedness is Guaranteed by (or secured by the assets of) the
Company or any Restricted Subsidiary; and
(10) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(1) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that:
(A) subject to the exclusion contained in clause (4) below, the
Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Person during such period to
the Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution
paid to a Restricted Subsidiary, to the limitations contained in clause
(3) below); and
(B) the Company's equity in a net loss of any such Person for such
period shall be included in determining such Consolidated Net Income;
(2) any net income (or loss) of any Person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(3) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that:
(A) subject to the exclusion contained in clause (4) below, the
Company's equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend or
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other distribution (subject, in the case of a dividend or other
distribution paid to another Restricted Subsidiary, to the limitation
contained in this clause); and
(B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(4) any gain (but not loss) realized upon the sale or other
disposition of any assets of the Company, its consolidated Subsidiaries or
any other Person (including pursuant to any sale-and-leaseback arrangement)
which is not sold or otherwise disposed of in the ordinary course of
business and any gain (but not loss) realized upon the sale or other
disposition of any Capital Stock of any Person;
(5) extraordinary gains or losses; and
(6) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described
under "Certain Covenants -- Limitation on Restricted Payments" only, there shall
be excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as the sum of:
(1) the par or stated value of all outstanding Capital Stock of the
Company plus
(2) paid-in capital or capital surplus relating to such Capital Stock
plus
(3) any retained earnings or earned surplus
less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Core Business" means the business of (a) renting worldwide for general use
passenger automobiles and trucks under the Budget and Ryder brand names, (b)
selling in the United States late model automobiles and passenger vans under the
Budget brand name and (c) franchising the foregoing rental business to other
Persons.
"Credit Facility" means the Amended and Restated Credit Agreement dated as
of June 19, 1998, among the Company, certain of its Subsidiaries, the lenders
referred to therein, Credit Suisse First Boston, as a co-syndication agent and
as Administrative Agent, and Nationsbanc Capital Markets, Inc., as a
co-syndication agent and as Documentation Agent, together with the related
documents thereto (including the revolving loans, letters of credit and any term
loans thereunder, any guarantees and security documents), as amended, extended,
renewed, restated, supplemented or otherwise modified (in whole or in part, and
without limitation as to amount, terms, conditions, covenants and other
provisions) from time to time, and any agreement (and related document)
governing Indebtedness incurred to Refinance, in whole or in part, the
borrowings and commitments then outstanding or permitted to be outstanding under
such Credit Facility or a successor Credit Facility, whether by the same or any
other lender or group of lenders.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
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"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable at the option of the holder) or upon the
happening of any event:
(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
(2) is convertible or exchangeable at the option of the holder for
Indebtedness or Disqualified Stock; or
(3) is mandatorily redeemable or must be purchased upon the occurrence
of certain events or otherwise, in whole or in part;
in each case on or prior to the first anniversary of the Stated Maturity of the
notes; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the notes shall not constitute
Disqualified Stock if:
(1) the "asset sale" or "change of control" provisions applicable to
such Capital Stock are not more favorable to the holders of such Capital
Stock than the terms applicable to the notes and described under "--
Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock"
and "-- Certain Covenants -- Change of Control"; and
(2) any such requirement only becomes operative after compliance with
such terms applicable to the notes, including the purchase of any notes
tendered pursuant thereto.
"Eligible Vehicles" shall mean the motor vehicle inventory of the Company
and its Restricted Subsidiaries, consisting of (1) passenger automobiles,
light-duty and medium-duty trucks, trailers and vans and (2) motorcycles, sport
utility vehicles, buses, truck campers and motor homes, in each case, whether
held for sale, lease or rental purposes.
"Foreign Subsidiary" means a Restricted Subsidiary that is incorporated or
formed in a jurisdiction other than the United States or a State thereof or the
District of Columbia and with respect to which more than 80% of any of its
sales, earnings or assets (determined on a consolidated basis in accordance with
GAAP) are located in, generated from or derived from operations located in
territories outside of the United States of America and jurisdictions outside
the United States of America.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in:
(1) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants;
(2) statements and pronouncements of the Financial Accounting
Standards Board; and
(3) such other statements by such other entity as approved by a
significant segment of the accounting profession.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay or to maintain financial statement conditions or otherwise); or
(2) entered into for the purpose of assuring in any other manner the
obligee of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part);
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provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(1) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(2) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(3) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business), which purchase price is due more than six months after the date
of placing such property in service or taking delivery and title thereto;
(4) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (1)
through (3) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the
tenth Business Day following payment on the letter of credit);
(5) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation preference
with respect to any Preferred Stock (but excluding, in each case, any
accrued dividends);
(6) all obligations of the type referred to in clauses (1) through (5)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(7) all obligations of the type referred to in clauses (1) through (6)
of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(8) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date; provided, however, that
(1) the amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less the
unamortized portion of the original issue discount of such Indebtedness at
such time as determined in conformity with GAAP; and
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(2) Indebtedness shall not include any liability for federal, state,
local or other taxes.
"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. In determining the amount of any
Investment in respect of any property or assets other than cash, such property
or asset shall be valued at its fair market value at the time of such Investment
(unless otherwise specified in this definition), as determined in good faith by
the Board of Directors.
For purposes of the definition of "Unrestricted Subsidiary," the definition
of "Restricted Payment" and the covenant described under "-- Certain Covenants
- -- Limitation on Restricted Payments":
(1) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of
the net assets of any Subsidiary of the Company at the time that such
Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary,
the Company shall be deemed to continue to have a permanent "Investment" in
an Unrestricted Subsidiary equal to an amount (if positive) equal to (A)
the Company's "Investment" in such Subsidiary at the time of such
redesignation less (B) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of
such Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors.
"Issue Date" means April 13, 1999, the date on which the old notes were
originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form), in each case net of:
(1) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be accrued as a liability under GAAP, as a
consequence of such Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon or other security agreement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of
the proceeds from such Asset Disposition;
(3) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries as a result of such
Asset Disposition;
(4) any portion of the purchase price from an Asset Disposition
required by the terms of such Asset Disposition to be placed in escrow
(whether as a reserve for a purchase price adjustment, for satisfaction of
indemnities or otherwise); provided, however, that upon the termination of
such escrow, Net Available
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Cash shall be increased by any portion of the funds therein released to the
Company or any Restricted Subsidiary; and
(5) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such Asset Disposition and
retained by the Company or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, printing costs, underwriters' or placement agents' fees,
discounts or commissions and brokerage, stock exchange listing, consultant and
other fees actually incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"Non-Core Business" means any business other than a Core Business.
"Permitted Holders" means each of Mr. Sanford Miller, Mr. Jeffrey D.
Congdon and Mr. John P. Kennedy.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in:
(1) the Company, a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a
Related Business;
(2) another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related
Business;
(3) Temporary Cash Investments;
(4) receivables owing to the Company or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances;
(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(6) loans or advances to employees made in the ordinary course of
business consistent with past practices of the Company or such Restricted
Subsidiary;
(7) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments;
(8) any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as permitted
pursuant to the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock"; and
(9) additional Investments in an aggregate amount which, together with
all other Investments made pursuant to this clause (9) that are
outstanding, does not exceed $25 million.
"Permitted Liens" means, with respect to any Person:
(1) pledges or deposits by such Person under worker's compensation
laws, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or
deposits of cash or United States government bonds to secure surety or
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business;
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(2) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceedings or other Liens arising out of
judgments or awards against such Person with respect to which such Person
shall then be proceeding with an appeal or other proceedings for review;
(3) Liens for property taxes not yet due or payable or subject to
penalties for non-payment or which are being contested in good faith and by
appropriate proceedings;
(4) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business; provided, however, that such letters of
credit do not constitute Indebtedness;
(5) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar purposes,
or zoning or other restrictions as to the use of real property or Liens
incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect
the value of said properties or materially impair their use in the
operation of the business of such Person;
(6) Liens securing Indebtedness Incurred to finance the construction,
purchase or lease of, or repairs, improvements or additions to, property of
such Person; provided, however, that the Lien may not extend to any other
property owned by such Person or any of its Subsidiaries at the time the
Lien is Incurred, and the Indebtedness (other than any interest thereon)
secured by the Lien may not be Incurred more than 270 days after the later
of the acquisition, completion of construction, repair, improvement,
addition or commencement of full operation of the property subject to the
Lien;
(7)(A) Liens to secure Indebtedness (and related interest, fees and
other obligations) permitted under the provisions described in clause (b)
(1) under, and (B) Liens on property and assets of a Foreign Subsidiary to
secure Indebtedness (and related interest, fees and other obligations) of
such Foreign Subsidiary permitted under the provisions described in clause
(b)(2) under, "-- Certain Covenants -- Limitation on Indebtedness";
(8) Liens existing on the Issue Date;
(9) Liens on property or shares of Capital Stock of another Person at
the time such other Person becomes a Subsidiary of such Person; provided,
however, that such Liens are not created, incurred or assumed in connection
with, or in contemplation of, such other Person becoming such a Subsidiary;
provided further, however, that such Lien may not extend to any other
property owned by such Person or any of its Subsidiaries;
(10) Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition by means of a
merger or consolidation with or into such Person or a Subsidiary of such
Person; provided, however, that such Liens are not created, incurred or
assumed in connection with, or in contemplation of, such acquisition;
provided further, however, that the Liens may not extend to any other
property owned by such Person or any of its Subsidiaries;
(11) Liens securing Indebtedness or other obligations of a Subsidiary
of such Person owing to such Person or a wholly owned Subsidiary of such
Person;
(12) Liens securing Hedging Obligations so long as such Hedging
Obligations relate to Indebtedness that is, and is permitted to be under
the indenture, secured by a Lien on the same property securing such Hedging
Obligations;
(13) Liens securing Permitted Vehicle Indebtedness and covering cash
collateral deposits, vehicles and assets attributable to, or directly
associated with, vehicles, such as rental receivables and receivables
arising on the disposition of vehicles, and any other property of a type
securing Permitted Vehicle Indebtedness under an agreement as in effect on
the Issue Date;
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(14) Liens on claims against Persons renting vehicles, Persons
damaging vehicles or Persons issuing applicable insurance coverage for such
Persons arising under insurance policies entered into in the ordinary
course of business consistent with past practice;
(15) Liens securing vehicles held as inventory in the Company's car
sales business;
(16) Liens on any airport concession agreements or permits to secure
loans extended to finance tenant improvements used in connection with the
concession agreement or permit subject to such Lien;
(17) rights of set off which arise under contractual arrangements in
the ordinary course of business or which arise in financing agreements in
the ordinary course of business; and
(18) Liens to secure any Refinancing (or successive Refinancings) as a
whole, or in part, of any Indebtedness secured by any Lien referred to in
the foregoing clauses (6), (8), (9) and (10); provided, however, that:
(A) such new Lien shall be limited to all or part of the same
property that secured the original Lien (plus improvements to or on such
property); and
(B) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (x) the outstanding
principal amount or, if greater, committed amount of the Indebtedness
described under clauses (6), (8), (9) or (10) at the time the original
Lien became a Permitted Lien and (y) an amount necessary to pay any fees
and expenses, including premiums, related to such refinancing,
refunding, extension, renewal or replacement.
Notwithstanding the foregoing, "Permitted Liens" will not include any Lien
described in clauses (6), (9) or (10) above to the extent such Lien applies to
any Additional Assets acquired directly or indirectly from Net Available Cash
pursuant to the covenant described under "-- Certain Covenants -- Limitation on
Sales of Assets and Subsidiary Stock." For purposes of this definition, the term
"Indebtedness" shall be deemed to include interest on such Indebtedness.
"Permitted Vehicle Collateral" means, as of any Determination Date:
(1) the collateral securing Permitted Vehicle Indebtedness and
consisting of cash collateral deposits, Eligible Vehicles and receivables
arising from the acquisition or disposition of Eligible Vehicles; and
(2) Eligible Vehicles and receivables arising from the acquisition or
disposition of Eligible Vehicles that are not securing any Indebtedness and
that are of a type securing Permitted Vehicle Indebtedness under an
agreement as in effect on the Issue Date;
provided, however, that, in each case, such acquisition or disposition
receivables shall be included as Permitted Vehicle Collateral only to the extent
that:
(A) such receivables arise pursuant to the acceptance of vehicles
for repurchase under a repurchase agreement with a repurchase party
(provided the debt of such repurchase party has an investment grade
rating or, if the debt of such repurchase party does not have a rating,
the debt of the parent entity of such repurchase party has an investment
grade rating) as of such Determination Date providing for the repurchase
of such vehicles at a price substantially equivalent to depreciated book
value at the anticipated disposition date;
(B) such receivables are secured by a first priority lien under
applicable law (except for liens arising under applicable law) on the
related vehicles;
(C) in the case of receivables securing Permitted Vehicle
Indebtedness, the collateral value of such receivables does not exceed
the value for such receivables determined in accordance with the
provisions of any applicable investment-grade rated debt facility
designed to finance Eligible Vehicles and related receivables;
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(D) such receivables have been outstanding not in excess of 120
days; provided that in the case of this clause (D), (1) the collateral
value of such receivables shall be valued at their net book value
determined in accordance with GAAP, (2) the collateral value of such
receivables so valued shall not exceed 10% of the total net book value
of all Permitted Vehicle Collateral and (3) the collateral value of such
receivables so valued arising from any Person (or Persons which are
Affiliates of such Person) shall not exceed 2% of the total net book
value of all Permitted Vehicle Collateral; or
(E) such receivables are fully and unconditionally insured, bonded
or guaranteed by a Person with an investment grade rating.
Permitted Vehicle Collateral shall be valued (except as set forth in clause
(D)(1) above) at the net book value determined in accordance with GAAP of the
relevant Eligible Vehicles and receivables.
"Permitted Vehicle Indebtedness" means (1) Indebtedness Incurred to finance
or Refinance Eligible Vehicles and related receivables (but only to the extent
actually used to finance or Refinance Eligible Vehicles and related
receivables), (2) Indebtedness secured by Permitted Vehicle Collateral and (3)
any Indebtedness that Refinances Permitted Vehicle Indebtedness; provided,
however, that any Indebtedness redesignated pursuant to paragraph (2)(C) of the
covenant described under "-- Limitation on Permitted Vehicle Indebtedness" shall
not constitute Permitted Vehicle Indebtedness; and provided, further, that the
notes (other than any Additional Notes) shall be deemed not to constitute
Permitted Vehicle Indebtedness when issued.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"principal" of a note means the principal of the note plus the premium, if any,
payable on the note which is due or overdue or is to become due at the relevant
time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that:
(1) such Refinancing Indebtedness has a Stated Maturity no earlier
than the Stated Maturity of the Indebtedness being Refinanced;
(2) such Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being Refinanced; and
(3) such Refinancing Indebtedness has an aggregate principal amount
(or if Incurred with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced;
provided further, however, that Refinancing Indebtedness shall not include (A)
Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (B)
Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
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"Registration Rights Agreement" means the Registration Rights Agreement
dated April 8, 1999, among the Company, Credit Suisse First Boston Corporation,
Goldman, Sachs & Co. and NationsBanc Montgomery Securities LLC.
"Related Business" means any business conducted by the Company and its
Restricted Subsidiaries on the Issue Date and any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Issue Date.
"Restricted Payment" with respect to any Person means:
(1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock (including any
payment in connection with any merger or consolidation involving such
Person) or similar payment to the direct or indirect holders of its Capital
Stock (other than dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and dividends or distributions
payable solely to the Company or a Restricted Subsidiary, and other than
pro rata dividends or other distributions made by a Subsidiary that is not
a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other
than a corporation));
(2) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company held by any Person or of any
Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock);
(3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated Obligations
(other than the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of such purchase, repurchase or other
acquisition); or
(4) the making of any Investment in any Person (other than a Permitted
Investment).
In determining the amount of any Restricted Payment made in property other
than cash, such amount shall be the fair market value of such property at the
time of such Restricted Payment, as determined in good faith by the Board of
Directors.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Ryder Merger Agreement" means the Agreement and Plan of Merger, dated
March 4, 1998 (as amended on March 16, 1998 and June 19, 1998), by and among the
Borrower, BDG Corporation, Ryder TRS, Inc., Ryder Questor Partners Fund, L.P.,
Questor Side-by-Side Partners L.P. and Dearborn Capital Partners, L.P.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Indebtedness" means:
(1) Indebtedness of the Company, whether outstanding on the Issue Date
or thereafter Incurred; and
(2) accrued and unpaid interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization
relating to the Company to the extent post-filing interest is allowed in
such proceeding) in respect of (A) indebtedness of the Company for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of
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which the Company is responsible or liable unless, in the case of clauses
(1) and (2), in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are
subordinate in right of payment to the notes;
provided, however, that Senior Indebtedness shall not include:
(1) any obligation of the Company to any Subsidiary;
(2) any liability for Federal, state, local or other taxes owed or
owing by the Company;
(3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities);
(4) any Indebtedness of the Company (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior in any respect
to any other Indebtedness or other obligation of the Company; or
(5) that portion of any Indebtedness which at the time of Incurrence
is Incurred in violation of the indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the notes pursuant to a written agreement to that
effect.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company or other business entity of
which more than 50% of the total voting power of shares of Capital Stock or
other interests (including partnership interests) entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by:
(1) such Person;
(2) such Person and one or more Subsidiaries of such Person; or
(3) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following:
(1) any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the United
States of America or any agency thereof;
(2) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000
(or the foreign currency equivalent thereof) and has outstanding debt which
is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor;
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<PAGE> 66
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Group; and
(5) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of the Company that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of Directors in
the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of the Company (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments."
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation (A) the Company could Incur $1.00 of additional Indebtedness
under paragraph (a) of the covenant described under the caption "-- Certain
Covenants -- Limitation on Indebtedness" and (B) no Default shall have occurred
and be continuing. Any such designation by the Board of Directors shall be
evidenced to the trustee by promptly filing with the trustee a copy of the
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or one or more Wholly Owned Subsidiaries.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, proposed
Treasury regulations, judicial authority and administrative rulings and
practice. There can be no complete assurance that the Internal Revenue Service
(the "IRS") will agree with the conclusions stated herein, and no ruling from
the IRS has been or will be sought. Legislative, judicial or administrative
changes or interpretations may be forthcoming that could alter or modify the
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<PAGE> 67
statements set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to holders. Certain holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) may be subject to special rules not
discussed below. We recommend that each holder consult such holder's own tax
advisor as to the particular consequences of exchanging such holder's old notes
for new notes, including the applicability and effect of any state, local or
foreign tax laws.
The exchange of old notes for new notes pursuant to the exchange offer will
not be treated as an "exchange" for federal income tax purposes because the new
notes do not differ materially in kind or extent from the old notes.
Accordingly, (i) holders will not recognize taxable gain or loss upon the
receipt of new notes in exchange for old notes in the exchange offer, (ii) the
holding period for a new note received in the exchange offer will include the
holding period of the old note surrendered in exchange therefor, and (iii) the
adjusted tax basis of a new note immediately after the exchange will be the same
as the adjusted tax basis of the old note surrendered in exchange therefor.
PLAN OF DISTRIBUTION
We are not using any underwriters for this exchange offer. We are also
bearing the expenses of the exchange.
This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of any new notes
received in exchange for old notes acquired by such broker-dealer as a result of
market-making or other trading activities. Each such broker-dealer that receives
new notes for its own account in exchange for such old notes pursuant to the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. We have agreed that for a period of up to 180
days after the registration statement is declared effective, we will make this
prospectus, as amended or supplemented, available to any such broker-dealer that
requests copies of this prospectus in the letter of transmittal for use in
connection with any such resale.
We will not receive any proceeds from any sale of new notes by
broker-dealers or any other persons. New notes received by broker-dealers for
their own account pursuant to the exchange offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions or through the writing of options on the new notes, or a
combination of such methods of resale, at market prices prevailing at the time
of resale or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such new notes. Any broker-dealer that resells new notes that
were received by it for its own account pursuant to the exchange offer in
exchange for old notes acquired by such broker-dealer as a result of
market-making or other trading activities and any broker-dealer that
participates in a distribution of such new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act. Any profit on these
resales of new notes and any commissions or concessions received by any persons
may be deemed to be underwriting compensation under the Securities Act. The
letter of transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
We have agreed to pay all expenses incident to our performance of, or
compliance with, the registration rights agreement and will indemnify the
holders of old notes, including any broker-dealers, and certain parties related
to these holders, against various liabilities, including liabilities under the
Securities Act.
VALIDITY OF THE NEW NOTES
The validity of the new notes will be passed upon for us by King &
Spalding, Atlanta, Georgia.
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<PAGE> 68
EXPERTS
The consolidated balance sheets of the Company and its subsidiaries as of
December 31, 1997 and 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1998, included in the Company's Annual
Report on Form 10-K incorporated by reference in this Prospectus and elsewhere
in the registration statement, have been audited by Arthur Andersen LLP,
independent certified public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
The audited consolidated financial statements of Ryder TRS, Inc. and
Subsidiaries as of and for the year ended December 31, 1997, included in the
Annual Report on Form 10-K of Ryder TRS dated December 31, 1997, contained in
our Form 8-K, dated June 19, 1998, as amended, and incorporated by reference in
this prospectus, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in auditing and accounting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that
Budget Group has previously filed with the SEC. These documents contain
important information about Budget Group and its financial condition.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that is also incorporated or deemed
to be incorporated by reference herein, modifies or supersedes the earlier
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this prospectus.
We hereby incorporate by reference to this prospectus the following reports
filed with the SEC:
- Our Annual Report on Form 10-K for the year ended December 31, 1998;
- The audited consolidated financial statements of Ryder TRS, Inc. and
subsidiaries as of and for the year ended December 31, 1997 included in
the Annual Report on Form 10-K of Ryder TRS dated December 31, 1997 and
contained in our Form 8-K, dated June 19, 1998, as amended; and
- Our Current Reports on Form 8-K dated March 22, 1999.
In addition, all documents filed by Budget Group pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this prospectus
and prior to the termination of this exchange offer will be deemed to be
incorporated by reference into this prospectus and to be a part hereof from the
date of filing of such documents.
Documents incorporated by reference are available from Budget Group without
charge. Prospective investors may obtain documents incorporated by reference
into this prospectus by requesting them from us by telephone at (904) 238-7035
or in writing at our executive offices at Budget Group, Inc., Attention:
Investor Relations, 125 Basin Street, Suite 210, Daytona Beach, Florida 32114.
In order to ensure timely delivery of the documents, any request should be made
at least five days prior to June 18, 1999, the expiration date of the exchange
offer.
WHERE YOU CAN FIND MORE INFORMATION
Budget Group files annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy the reports,
statements or other information we file at the SEC's public
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<PAGE> 69
reference room in Washington, D.C., located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC also maintains regional offices where you can
read and copy the reports. These are located at 500 West Madison Street, Room
1400, Chicago, Illinois 60606 and at Seven World Trade Center, Suite 1300, New
York, New York 10048. You can request copies of these documents, upon payment of
photocopying fees, by writing to the SEC. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference rooms. Our
filings are also available to the public on the SEC's Internet site at
http://www.sec.gov. These documents are also available for viewing and copying
at the offices of The New York Stock Exchange at 20 Broad Street, New York, New
York 10005.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. In addition, from time to
time, we or our representatives have made or may make forward-looking
statements, orally or in writing. Such forward-looking statements may be
included in, but are not limited to, various filings made by us with the SEC and
press releases or oral statements made by management. These statements refer to
analyses and other information which are based on forecasts of future results
and estimates of amounts not yet determinable. These statements also relate to
our future prospects, developments and business strategies.
These forward-looking statements are identified by the use of terms and
phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will" and similar terms and
phrases, including references to assumptions. These statements are contained in
this prospectus and in the documents incorporated by reference into this
prospectus.
These forward-looking statements involve risks and uncertainties that may
cause our actual future activities and results of operations to be materially
different from those suggested or described in this prospectus. These risks
include, among others, the following:
- our recent losses;
- seasonality;
- competition;
- the integration of our recent acquisitions and ability to achieve cost
savings;
- our potential obligation to make a make-whole payment;
- the availability and terms of financing for our business;
- our dependence on a principal vehicle supplier;
- possible changes in manufacturers' vehicle repurchase programs;
- litigation with a former franchisee;
- the impact of various types of regulations;
- additional risks of our international operations;
- whether our investments and cost-cutting initiatives will be successful;
and
- our ability to address Year 2000 problems.
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The risks and uncertainties that may affect us are more specifically
described in the section entitled "Risk Factors" in this prospectus and in our
annual report on Form 10-K for the year ended December 31, 1998, which is
incorporated by reference into this prospectus. If one or more of these risks or
uncertainties materialize, or if our underlying assumptions prove incorrect, our
actual results may vary materially from those expected, estimated or projected.
We undertake no obligation to update our forward-looking statements or risk
factors to reflect future events or circumstances.
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- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL
CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH
DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
References to Additional
Information......................... i
Prospectus Summary.................... 1
Risk Factors.......................... 9
Capitalization........................ 16
Pro Forma Financial Information....... 17
The Company........................... 21
Our First Quarter 1999 Results........ 21
The Exchange Offer.................... 23
Description of Credit Facility........ 31
Description of the New Notes.......... 32
U.S. Federal Income Tax
Consequences........................ 64
Plan of Distribution.................. 65
Validity of the New Notes............. 65
Experts............................... 66
Incorporation of Certain Documents by
Reference........................... 66
Where You Can Find More Information... 66
Forward-Looking Statements............ 67
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
BUDGET GROUP, INC. LOGO
OFFER TO EXCHANGE
$400,000,000 9 1/8% SENIOR NOTES DUE APRIL 1, 2006
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
FOR
ALL OUTSTANDING UNREGISTERED
9 1/8% SENIOR NOTES DUE APRIL 1, 2006
---------------------
PROSPECTUS
---------------------
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 72
LETTER OF TRANSMITTAL
For
9 1/8% Senior Notes
of
BUDGET GROUP, INC.
Pursuant to the Exchange Offer in Respect of
All of its Outstanding Unregistered
9 1/8% Senior Notes Due April 1, 2006
For
Registered 9 1/8% Senior Notes Due April 1, 2006
Pursuant to the Prospectus Dated May 13, 1999
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 18,
1999 UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF
OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
TO: THE BANK OF NEW YORK, AS TRUSTEE
By Hand/Overnight Courier or Mail:
The Bank of New York
101 Barclay Street-7E
Corporate Trust Services Window
Ground Level
New York, NY 10286
Reorganization Section
Attention: Denise Robinson
By facsimile: (212) 815-4699. Call (212) 815-2791 for confirmation
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA
TELEGRAM, TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE
A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 73
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD
NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
By execution hereof, the undersigned acknowledges receipt of the Prospectus
(the "Prospectus"), dated May 13, 1999, of Budget Group, Inc., a Delaware
corporation (the "Company"), and this Letter of Transmittal and the instructions
hereto (the "Letter of Transmittal").
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its sole discretion, in which event the term "Expiration
Date" shall mean the latest time and date to which the Exchange Offer is
extended. The Company shall notify the holders of the Old Notes of any extension
by means of a press release or other public announcement prior to 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
This Letter of Transmittal is to be completed by a holder of Old Notes
either if certificates are to be forwarded herewith or if a tender of
certificates for Old Notes, if available, is to be made by book-entry transfer
to the account maintained by the Exchange Agent at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedures set forth in
"The Exchange Offer -- Book-Entry Transfer" section of the Prospectus. Holders
of Old Notes whose certificates are not readily available so you can meet the
Expiration Date deadline, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility (a "Book-Entry
Confirmation") and all other documents required by this Letter of Transmittal to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this letter in its entirety.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
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<PAGE> 74
TENDER OF NOTES
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY DTC TO THE EXCHANGE
AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
-------------------------------------------------------------------------
DTC Book-Entry Account No.:
-------------------------------------------------------------------------
Transaction Code No.:
-------------------------------------------------------------------------
If holders desire to tender Old Notes pursuant to the Exchange Offer and
(i) certificates representing such Old Notes are not lost but are not readily
available, (ii) time will not permit this Letter of Transmittal, certificates
representing such Old Notes or other required documents to reach the Exchange
Agent prior to the Expiration Date or (iii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date, such holders may
effect a tender of such Old Notes in accordance with the guaranteed delivery
procedures set forth in the Prospectus under "The Exchange Offer -- Guaranteed
Delivery Procedures."
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Holder(s) of Old Notes:
---------------------------------------------------------------
Window Ticket No. (if any):
---------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
------------------------------------------------
If Delivered by Book-Entry Transfer:
Name of Tendering Institution:
--------------------------------------------------------------------------
DTC Book-Entry Account No.:
-------------------------------------------------------------------------
Transaction Code No.:
-----------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO HOLDS OLD NOTES ACQUIRED FOR YOUR
OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES AND
WISH TO RECEIVE COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO FOR USE IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED
FOR YOUR OWN ACCOUNT IN EXCHANGE FOR SUCH OLD NOTES.
Name:
-----------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------------
Aggregate Principal Amount of Old Notes so held: $
------------------------
3
<PAGE> 75
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, list the certificate numbers and
principal amounts on a separately executed schedule and affix the schedule to
this Letter of Transmittal. Tenders of Old Notes will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof.
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES
- -------------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S)* AGGREGATE PRINCIPAL
NAME(S) AND ADDRESS(ES) OF HOLDER(S) (ATTACH SIGNED LIST IF AMOUNT TENDERED
(PLEASE FILL IN, IF BLANK) NECESSARY) (IF LESS THAN ALL)**
- -------------------------------------------------------------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
TOTAL PRINCIPAL AMOUNT
OF OLD NOTES TENDERED
- -------------------------------------------------------------------------------------------------------
* Need not be completed if by book-entry transfer.
** Need not be completed by holders who wish to tender with respect to all Old Notes listed. See
Instruction 2.
- -------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 76
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Budget Group, Inc., a Delaware
corporation (the "Company"), the aggregate principal amount of Old Notes
indicated in this Letter of Transmittal, upon the terms and subject to the
conditions set forth in the Company's Prospectus dated May 13, 1999 (the
"Prospectus"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal, which together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 principal amount of its 9 1/8% Senior Notes due April
1, 2006, which have been registered under the Securities Act of 1933, as amended
(the "New Notes"), for each $1,000 principal amount of its issued and
outstanding 9 1/8% Senior Notes due April 1, 2006, of which $400,000,000
aggregate principal amount was outstanding on the date of the Prospectus (the
"Old Notes" and, together with the New Notes, the "Notes"). The capitalized
terms not defined herein are used herein as defined in the Prospectus.
Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered hereby, the undersigned hereby sells, assigns and transfers to,
or upon the order of, the Company all right, title and interest in and to such
Old Notes as are being tendered hereby and hereby irrevocably constitutes and
appoints the Exchange Agent as attorney-in-fact of the undersigned with respect
to such Old Notes, with full power of substitution (such power of attorney being
an irrevocable power coupled with an interest), to:
(a) deliver such Old Notes in registered certificated form, or
transfer ownership of such Old Notes through book-entry transfer at the
Book-Entry Transfer Facility, to or upon the order of the Company, upon
receipt by the Exchange Agent, as the undersigned's agent, of the same
aggregate principal amount of New Notes; and
(b) receive, for the account of the Company, all benefits and
otherwise exercise, for the account of the Company, all rights of
beneficial ownership of the Old Notes tendered hereby in accordance with
the terms of the Exchange Offer.
The undersigned hereby represents and warrants to the Company that the
undersigned has full power and authority to tender, sell, assign and transfer
the Old Notes tendered hereby and that the Company will acquire good, marketable
and unencumbered title thereto, free and clear of all security interests, liens,
restrictions, charges, encumbrances, conditional sale agreements or other
obligations relating to their sale or transfer, and not subject to any adverse
claim when the same are accepted by the Company. The undersigned hereby further
represents that any New Notes acquired in exchange for Old Notes tendered hereby
will have been acquired in the ordinary course of business of the person
receiving such New Notes, whether or not such person is the undersigned, that
neither the holder of such Old Notes nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such New Notes and the undersigned acknowledges and agrees that any person
who is a broker-dealer registered under the Exchange Act or is participating in
the Exchange Offer for the purposes of distributing the New Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
of 1933 (the "Securities Act") in connection with a secondary resale of the New
Notes acquired by such person and cannot rely on the position of the staff of
the Securities and Exchange Commission (the "SEC") set forth in certain
no-action letters, and the undersigned further understands that such secondary
resale transaction and any resales of New Notes obtained by the undersigned in
exchange for Old Notes acquired by such holder directly from the Company should
be covered by an effective registration statement containing the selling
security holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the SEC, and the undersigned further represents that neither
the holder of such Old Notes nor any such other person is an "affiliate", as
defined in Rule 405 under the Securities Act, of the Company. The undersigned
has read and agrees to all of the terms of the Exchange Offer.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties, that the New Notes issued in exchange for the
Old Notes pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the provisions
of the Securities Act), provided that such New Notes are acquired in the
ordinary course of such holders' business and such holders have no arrangement
with any person to
5
<PAGE> 77
participate in the distribution of such New Notes. However, the Company does not
intend to request the SEC to consider, and the SEC has not considered, the
Exchange Offer in the context of a no-action letter, and there can be no
assurance that the staff of the SEC would make a similar determination with
respect to the Exchange Offer as in other circumstances.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes and has no arrangement or understanding to participate in a distribution
of New Notes. If any holder is an affiliate of the Company, is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holder (i) could not rely on the applicable interpretations of the staff of
the SEC and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. If
the undersigned is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes acquired as a result of market-making or other
trading activities (a "Participating Broker-Dealer"), it hereby represents and
warrants to the Company that the Old Notes to be exchanged for the New Notes
were acquired by it as a result of market-making or other trading activities and
agrees that it will deliver a prospectus in connection with any resale of such
New Notes; however, by so agreeing and by delivering a prospectus, such
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed that, subject to the provisions of the registration
rights agreement executed in connection with the sale of the Old Notes, the
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of New Notes
received in exchange for Old Notes which were acquired by such Participating
Broker-Dealer for its own account as a result of market-making or other trading
activities, for a period ending 180 days after the Expiration Date or, earlier,
when all such New Notes have been disposed of by such Participating
Broker-Dealer. In that regard, each Participating Broker-Dealer by tendering
such Old Notes and executing this Letter of Transmittal, agrees that, upon
receipt of notice from the Company of the occurrence of any event or the
discovery of any fact which makes any statement contained or incorporated by
reference in the Prospectus untrue in any material respect or which causes the
Prospectus to omit to state a material fact necessary in order to make the
statements contained or incorporated by reference therein, in light of the
circumstances under which they were made, not misleading, such Participating
Broker-Dealer will suspend the sale of New Notes pursuant to the Prospectus
until the Company has amended or supplemented the Prospectus to correct such
misstatement or omission and has furnished copies of the amended or supplemented
Prospectus to the Participating Broker-Dealer or the Company has given notice
that the sale of the New Notes may be resumed, as the case may be. If the
Company gives such notice to suspend the sale of the New Notes, it shall extend
the 180-day period referred to above during which Participating Broker-Dealers
are entitled to use the Prospectus in connection with the resale of New Notes by
the number of days during the period from and including the date of the giving
of such notice to and including the date when Participating Broker-Dealers shall
have received copies of the supplemented or amended Prospectus necessary to
permit resales of the New Notes or to and including the date on which the
Company has given notice that the sale of New Notes may be resumed, as the case
may be.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter of Transmittal and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer -- Withdrawal of Tenders" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please send the New Notes (and, if
6
<PAGE> 78
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the box entitled
"Description of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE TENDERED
THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE.
7
<PAGE> 79
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF
OLD NOTES REGARDLESS OF WHETHER OLD NOTES ARE
BEING PHYSICALLY DELIVERED HEREWITH)
If a holder is tendering any Old Notes, this Letter of Transmittal must be
signed by the holder(s) as the name(s) appear(s) on the certificate(s) for the
Old Notes or on a securities position listing or by any person(s) authorized to
become (a) holder(s) by endorsements and documents transmitted herewith. If
signature is by a trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity, please set forth full
title. See Instruction 3.
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
Signature(s) of Owner
Date:
- ---------------
Date:
- ---------------
Name(s):
- --------------------------------------------------------------------------------
------------------------------------------------------------------------
(Please Print)
Capacity:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
-------------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone No.:
- -------------------------------------------------------------------------------
Social Security No.:
- --------------------------------------------------------------------------------
SIGNATURE GUARANTEE (SEE INSTRUCTION 3 HEREIN)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
- --------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
- --------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number (including area code) of
Firm)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Printed Name)
- --------------------------------------------------------------------------------
(Title)
Date:
- ---------------------------
8
<PAGE> 80
---------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged
and/or New Notes are to be issued in the name of and sent to someone other
than the person or persons whose signature(s) appear(s) above on this
Letter of Transmittal, or if Old Notes delivered by book-entry transfer
which are not accepted for exchange are to be returned by credit to an
account maintained at the Book-Entry Transfer Facility other than the
account indicated above.
Issue: New Notes and/or Old Notes to:
Name(s):
---------------------------------------------------
(Please Type or Print)
---------------------------------------------------------------
(Please Type or Print)
Address:
----------------------------------------------------
(Please Type or Print)
---------------------------------------------------------------
(Zip Code)
Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below.
---------------------------------------------------------------
(Book Entry Transfer Facility
Account Number, if applicable)
---------------------------------------------------------------
---------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged
and/or New Notes are to be sent to someone other than the person or
persons whose signature(s) appear(s) above on this Letter of Transmittal
or to such person or persons at an address other than shown above in the
box entitled "Description of Old Notes" on this Letter of Transmittal.
Mail: New Notes and/or Old Notes to:
Name(s):
---------------------------------------------------
(Please Type or Print)
---------------------------------------------------------------
(Please Type or Print)
Address:
----------------------------------------------------
(Please Type or Print)
---------------------------------------------------------------
(Zip Code)
---------------------------------------------------------------
9
<PAGE> 81
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer of Budget Group, Inc.
to exchange $400,000,000 of its 9 1/8% Senior Notes due April 1, 2006 which have
been registered under the Securities Act of 1933 for all of its outstanding
unregistered 9 1/8% Senior Notes due April 1, 2006
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by holders of Old
Notes either if certificates are to be forwarded herewith or if tenders are to
be made pursuant to the procedures for delivery by book-entry transfer set forth
in "The Exchange Offer -- Book-Entry Transfer" section of the Prospectus.
Certificates for all physically tendered Old Notes, or Book-Entry Confirmation
of tendered Old Notes, as the case may be, as well as a properly completed and
duly executed Letter of Transmittal (or manually signed facsimile hereof) and
any other documents required by this Letter of Transmittal, must be received by
the Exchange Agent at the address set forth herein on or prior to the Expiration
Date, or the tendering holder must comply with the guaranteed delivery
procedures set forth below. Old Notes may only be tendered in a principal amount
of $1,000 and any integral multiple thereof.
Holders of Old Notes whose certificates for Old Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined below), (ii) prior to the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form
provided by the Company (by telegram, telex, facsimile transmission, mail or
hand delivery), setting forth the name and address of the holder of Old Notes
and the amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that within five New York Stock Exchange ("NYSE")
trading days after the Expiration Date, the certificates for all physically
tendered Old Notes, or a Book-Entry Confirmation of such Old Notes, and any
other documents required by this Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) a properly executed
Letter of Transmittal, as well as the certificates for all physically tendered
Old Notes in proper form for transfer or Book-Entry Confirmation of such Old
Notes, as the case may be, and all other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within five NYSE trading
days after the Expiration Date.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS,
BUT THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY
THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS
USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. DO NOT SEND THIS
LETTER OF TRANSMITTAL OR ANY OLD NOTES TO THE COMPANY.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF OLD NOTES WHO TENDER BY
BOOK-ENTRY TRANSFER); WITHDRAWAL RIGHTS. Tenders of Old Notes will be accepted
only in the principal amount of $1,000 and integral multiples thereof. If less
than all of the Old Notes evidenced by a submitted certificate are to be
tendered, the tendering holder(s) should fill in the aggregate principal amount
of Old Notes to be tendered in the box above entitled "Description of Old
Notes -- Aggregate Principal Amount Tendered." A reissued certificate
representing the balance of nontendered Old Notes will be sent to such tendering
holder, unless otherwise provided in the appropriate box on this Letter of
Transmittal, promptly after the Expiration Date. ALL OF THE OLD NOTES DELIVERED
TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE
INDICATED.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to the Expiration Date. In order for a withdrawal to be
effective prior to that time, a written or facsimile transmission
10
<PAGE> 82
notice of withdrawal must be timely received by the Exchange Agent at one of its
addresses set forth above prior to the Expiration Date. Any such notice of
withdrawal must specify the name of the person having deposited the Old Notes to
be withdrawn, the aggregate principal amount of Old Notes to be withdrawn and
(if certificates for such Old Notes have been tendered) the name of the
registered holder of the Old Notes as set forth on the certificate for the Old
Notes, if different from that of the person who tendered such Old Notes. If
certificates for the Old Notes have been delivered or otherwise identified to
the Exchange Agent, then prior to the physical release of such certificates for
the Old Notes, the tendering holder must submit the serial numbers shown on the
particular certificates for the Old Notes to be withdrawn and the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution, except
in the case of Old Notes tendered for the account of an Eligible Institution. If
Old Notes have been tendered pursuant to the procedures for book-entry transfer
set forth in "The Exchange Offer -- Book-Entry Transfer" section of the
Prospectus, the notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawal
of Old Notes, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written or facsimile transmission.
Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly
withdrawn will not be deemed to have been validly tendered for purposes of the
Exchange Offer, and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes may
be retendered at any subsequent time on or prior to the Expiration Date by
following the procedures described in the Prospectus under "The Exchange
Offer -- Procedures for Tendering."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any employees, agents, affiliates or assigns of the
Company, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give such notification. Any Old Notes which have been
tendered but which are withdrawn will be returned to the holder thereof without
cost to such holder as promptly as practicable after withdrawal.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the holder
of the Old Notes tendered hereby, the signature must correspond exactly with the
name as written on the face of the certificates or on a securities position
listing without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different names on several
certificates or securities positions listings, it will be necessary to complete,
sign and submit as many separate copies of this Letter of Transmittal as there
are different registrations.
When this Letter of Transmittal is signed by the holder or holders of the
Old Notes specified herein and tendered hereby, no endorsements of certificates
or separate bond powers are required. If, however, the New Notes are to be
issued, or any nontendered Old Notes are to be reissued, to a person other than
the holder, then endorsements of any certificates transmitted hereby or separate
bond powers are required. Signatures on such certificate(s) must be guaranteed
by an Eligible Institution.
In connection with any tender of Old Notes in definitive certificated form,
if this Letter of Transmittal is signed by a person other than the registered
holder or holders of any certificate(s) specified herein, such certificate(s)
must be endorsed or accompanied by appropriate bond powers, in either case
signed exactly as the name or names of the registered holder or holders
appear(s) on the certificate(s), and the signatures on such certificate(s) must
be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted.
11
<PAGE> 83
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF
A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST COMPANY
HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER OF TRANSMITTAL NEED NOT BE GUARANTEED BY AN
ELIGIBLE INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (I) BY A HOLDER OF
OLD NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES) WHO HAS NOT COMPLETED
THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY
INSTRUCTIONS" ON THIS LETTER OR (II) FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders of Old
Notes should indicate in the applicable box the name and address to which New
Notes issued pursuant to the Exchange Offer and/or substitute certificates
evidencing Old Notes not exchanged are to be issued or sent, if different from
the name or address of the person signing this Letter of Transmittal. In the
case of issuance in a different name, the Employer Identification or Social
Security Number of the person named must also be indicated. A holder of Old
Notes tendering Old Notes by book-entry transfer may request that Old Notes not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such holder may designate hereon. If no such instructions are given,
such Old Notes not exchanged will be returned to the name or address of the
person signing this Letter of Transmittal or credited to the account listed
beneath the box entitled "Description of Old Notes," as the case may be.
5. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If, however, New Notes and/or substitute Old Notes not exchanged
are to be delivered to, or are to be registered or issued in the name of, any
person other than the holder of the Old Notes tendered hereby, or if tendered
Old Notes are registered in the name of any person other than the person signing
this Letter of Transmittal, or if a transfer tax is imposed for any reason other
than the transfer of Old Notes to the Company or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly to
such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 5, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER OF
TRANSMITTAL.
6. DETERMINATION OF VALIDITY. The Company will determine, in its sole
discretion, all questions as to the form of documents, validity, eligibility
(including time of receipt) and acceptance for exchange of any tender of Old
Notes, which determination shall be final and binding on all parties. The
Company reserves the absolute right to reject any and all tenders determined by
it not to be in proper form or the acceptance of which, or exchange for which,
may, in the view of counsel to the Company, be unlawful. The Company also
reserves the absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer set forth in the Prospectus under the caption
"The Exchange Offer" or any conditions or irregularity in any tender of Old
Notes of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders.
The Company's interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Old Notes will be deemed to have been validly
made until all irregularities with respect to such tender have been cured or
waived. Although the Company intends to notify holders of defects or
irregularities with respect to tenders of Old Notes, neither the Company, any
employees, agents, affiliates or assigns of the Company, the Exchange Agent, nor
any other
12
<PAGE> 84
person shall be under any duty to give notification of any irregularities in
tenders or incur any liability for failure to give such notification.
7. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter of Transmittal, hereby waive any right to receive
notice of the acceptance of their Old Notes for exchange.
8. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange
Agent, at the address and telephone number indicated above.
13
<PAGE> 85
NOTICE OF GUARANTEED DELIVERY
for
9 1/8% Senior Notes Due April 1, 2006
of
BUDGET GROUP, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Budget Group, Inc., a Delaware corporation (the "Company"),
made pursuant to the Prospectus, dated May 13, 1999 (the "Prospectus"), if
certificates for the outstanding 9 1/8% Senior Notes due April 1, 2006 of the
Company (the "Old Notes") are not readily available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach The Bank of New York, as Trustee (the
"Exchange Agent") on or prior to 5:00 p.m., New York City time, on the
Expiration Date (as defined below) of the Exchange Offer. This Notice of
Guaranteed Delivery may be delivered or transmitted by telegram, telex,
facsimile transmission, mail or hand delivery to the Exchange Agent as set forth
below. See "The Exchange Offer -- Procedures for Tendering" in the Prospectus.
Capitalized terms used herein but not defined herein have the respective
meanings given to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE
18, 1999 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
The Exchange Agent:
THE BANK OF NEW YORK, AS TRUSTEE
By Hand/Overnight Courier or Mail:
The Bank of New York
101 Barclay Street-7E
Corporate Trust Services Window
Ground Level
New York, NY 10286
Reorganization Section
Attention: Denise Robinson
By facsimile: (212) 815-4699. Call (212) 815-2791 for confirmation
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA TELEGRAM,
TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 86
LADIES AND GENTLEMEN:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the aggregate principal
amount of Old Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
- ------------------------------------------------------
Signature(s) of Owner(s) or Authorized Signatory:
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
Principal Amount of Old Notes Tendered:*
-----------------------------------------------------
Certificate No(s). of Old Notes (if available):
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
Date:
-----------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
Name(s) of Holder(s):
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
Address:
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
Area Code and Telephone No.:
-----------------------------------------------------
-----------------------------------------------------
If Old Notes will be delivered by book-entry transfer at The Depository Trust
Company, insert Depository Account No.:
-----------------------------------------------------
- ------------------------------------------------------
2
<PAGE> 87
- --------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
This Notice of Guaranteed Delivery must be signed by the holder(s) of Old
Notes exactly as its (their) name(s) appear on certificates for Old Notes
or on a security position listing as the owner of Old Notes, or by
person(s) authorized to become holder(s) by endorsements and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person
must provide the following information.
- --------------------------------------------------------------------------------
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Capacity:
--------------------------------------------------------------------------
Address(es):
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Do not send Old Notes with this form. Notes should be sent to the Exchange
Agent together with a properly completed and duly executed Letter of
Transmittal.
- --------------------------------------------------------------------------------
3
<PAGE> 88
- --------------------------------------------------------------------------------
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or a correspondent in
the United States, hereby (a) represents that each holder of Old Notes on
whose behalf this tender is being made "own(s)" the Old Notes covered
hereby within the meaning of Rule 14e-4 under the Securities Exchange Act
of 1934, as amended, (b) represents that such tender of Old Notes complies
with such Rule 14e-4, and (c) guarantees that, within five New York Stock
Exchange trading days after the Expiration Date, a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof), together
with certificates representing the Old Notes covered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes
into the Exchange Agent's account at The Depository Trust Company,
pursuant to the procedure for book-entry transfer set forth in the
Prospectus) and required documents will be deposited by the undersigned
with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of
Transmittal and Old Notes tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in
financial loss to the undersigned.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Name of Firm: --------------------------------------------
(Authorized Signature)
-------------------------------------------- Name:
Address: -------------------------------------------
(Please Print)
--------------------------------------------
Title:
-------------------------------------------- --------------------------------------------
(Zip Code)
Area Code and Telephone No.: Date:
-------------------------------------------- --------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
4
<PAGE> 89
BUDGET GROUP, INC.
OFFER FOR ALL OUTSTANDING UNREGISTERED 9 1/8% SENIOR NOTES
DUE APRIL 1, 2006 IN EXCHANGE FOR $400,000,000 PRINCIPAL
AMOUNT OF 9 1/8% SENIOR NOTES DUE APRIL 1, 2006
REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 18,
1999, UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE").
To Our Clients:
Enclosed for your consideration is a Prospectus dated May 13, 1999 (as the
same may be amended or supplemented from time to time, the "Prospectus") and a
form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Budget Group, Inc. (the "Company") to exchange
$400,000,000 in aggregate principal amount of its unregistered 9 1/8% Senior
Notes due April 1, 2006 (the "Old Notes") for $400,000,000 in aggregate
principal amount of its 9 1/8% Senior Notes due April 1, 2006 registered under
the Securities Act of 1933 (the "New Notes") upon the terms and conditions set
forth in the Prospectus and the Letter of Transmittal.
The material is being forwarded to you as the beneficial owner of Old Notes
held by us for your account or benefit but not registered in your name. A tender
of the Old Notes pursuant to the Exchange Offer may be made only by us as the
registered holder of the Old Notes, and pursuant to your instructions.
Therefore, the Company urges beneficial owners of Old Notes registered in the
name of a broker, dealer, commercial bank, trust company or other nominee to
contact such holder promptly if they wish to tender Old Notes in the Exchange
Offer.
Accordingly, we request instructions as to whether you wish us to tender
any or all Old Notes held by us for your account or benefit, pursuant to the
terms and conditions set forth in the Prospectus and Letter of Transmittal. We
urge you to read carefully the Prospectus and Letter of Transmittal before
instructing us to tender your Old Notes pursuant to the Exchange Offer.
Your instructions to us should be forwarded as promptly as practicable in
order to permit us to tender Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City Time, on June 18, 1999, unless extended (the "Expiration Date").
Old Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to
the procedures described in the Prospectus, at any time prior to the Expiration
Date.
If you wish to have us tender any or all of your Old Notes held by us for
your account or benefit, please so instruct us by completing, executing and
returning to us the instruction form that appears below. The accompanying Letter
of Transmittal is furnished to you for informational purposes only and may not
be used by you to tender Old Notes held by us and registered in our name for
your account or benefit.
<PAGE> 90
INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Budget
Group, Inc. with respect to their Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, upon and subject to the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated below:
AGGREGATE PRINCIPAL AMOUNT OF OLD
NOTES
$
--------------------------------------
[ ] Please DO NOT tender any Old Notes
held by you for my account
Dated:
- -------------------------------------- ,
1999
- --------------------------------------
- --------------------------------------
Signature(s)
- --------------------------------------
- --------------------------------------
Please Print Name(s) here
- --------------------------------------
- --------------------------------------
Address(es)
- --------------------------------------
Area Code(s) and Telephone Number(s)
- --------------------------------------
Tax Identification or Social Security
No(s)
None of the Old Notes held by us for your account will be tendered unless we
receive written instructions from you to do so. Unless a specific instruction is
given in the space provided, your signature(s) hereon shall constitute an
instruction to us to tender all the Old Notes held by us for your account.
<PAGE> 91
BUDGET GROUP, INC.
OFFER FOR ALL OUTSTANDING UNREGISTERED 9 1/8% SENIOR NOTES DUE
APRIL 1, 2006 IN EXCHANGE FOR $400,000,000 PRINCIPAL AMOUNT OF 9 1/8%
SENIOR NOTES DUE APRIL 1, 2006 REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON JUNE 18,
1999, UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE").
To Brokers, Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated May 13, 1999 (as the
same may be amended or supplemented from time to time, the "Prospectus") and a
form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Budget Group, Inc. (the "Company") to exchange
$400,000,000 in aggregate principal amount of its unregistered 9 1/8% Senior
Notes due April 1, 2006 (the "New Notes") for $400,000,000 in aggregate
principal amount of its 9 1/8% Senior Notes due April 1, 2006 registered under
the Securities Act of 1933 (the "Old Notes").
We are asking you to contact your clients for whom you hold Old Notes
registered in your name or in the name of your nominee. In addition, we ask you
to contact your clients who, to your knowledge, hold Old Notes registered in
their own name. The Company will not pay any fees or commissions to any broker,
dealer or other person in connection with the solicitation of tenders pursuant
to the Exchange Offer. You will, however, be reimbursed by the Company for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Company will pay all transfer taxes, if
any, applicable to the tender of Old Notes to it or its order, except as
otherwise provided in the Prospectus and the Letter of Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the tender
of Old Notes and for the information of your clients;
3. A form of letter that may be sent to your clients for whose
accounts you hold Old Notes registered in your name or the name of your
nominee; with space provided for obtaining the clients' instructions with
regard to the Exchange Offer;
4. A form of Notice of Guaranteed Delivery; and
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City Time, on June 18, 1999, unless extended (the "Expiration
Date"). Old Notes tendered pursuant to the Exchange Offer may be withdrawn,
subject to the procedures described in the Prospectus, at any time prior to the
Expiration Date.
In all cases, exchanges of Old Notes for New Notes accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of (a) certificates representing such Old Notes or a confirmation
of a book-entry transfer of such Old Notes, as the case may be, (b) the Letter
of Transmittal (or a facsimile thereof) promptly completed and duly executed
with any required signature guarantees, and (c) any other documents required by
the Letter of Transmittal.
Holders who wish to tender their Old Notes and (a) whose Old Notes are not
immediately available, (b) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the
<PAGE> 92
Exchange Agent prior to the Expiration Date or (c) who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
by following the guaranteed delivery procedures described in the Prospectus
under "The Exchange Offer -- Guaranteed Delivery Procedures."
To tender Old Notes, certificates for Old Notes, a duly executed and
properly completed Letter of Transmittal or a facsimile thereof, together with
any other required documents, must be received by the Exchange Agent as provided
in the Prospectus and the Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
Exchange Agent, The Bank of New York, by calling (212) 815-2791.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO
THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
<PAGE> 93
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<S> <C> <C>
1. An individual's account. The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable savings The grantor-
trust account (grantor is trustee(1)
also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under State law
8. Sole proprietorship account The owner(4)
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<S> <C> <C>
9. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- -----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 94
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
Section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under Section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more, and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
- Payments described in Section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under Section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE FORM W-9 TO AVOID POSSIBLE ERRONEOUS
BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under Sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividends, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- If you falsify
certifications or affirmations, you are subject to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
